650 F.2d 1093 (9th Cir. 1981), 79-4414, Bollow v. Federal Reserve Bank of San Francisco

Docket Nº:CA No. 79-4414.
Citation:650 F.2d 1093
Party Name:William R. BOLLOW, Plaintiff-Appellant, v. FEDERAL RESERVE BANK OF SAN FRANCISCO, Board of Governors of the Federal Reserve System, Louis E. Reilly, Does I through XX, Inclusive, Defendants- Appellees.
Case Date:July 13, 1981
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 1093

650 F.2d 1093 (9th Cir. 1981)

William R. BOLLOW, Plaintiff-Appellant,

v.

FEDERAL RESERVE BANK OF SAN FRANCISCO, Board of Governors of

the Federal Reserve System, Louis E. Reilly, Does

I through XX, Inclusive, Defendants- Appellees.

CA No. 79-4414.

United States Court of Appeals, Ninth Circuit

July 13, 1981

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

Argued and Submitted Feb. 10, 1981.

As Modified on Denial of Rehearing and Rehearing En Banc Oct. 9, 1981.

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William R. Bollow, pro se.

Donald D. Connors, Jr., George C. Stoll, San Francisco, Cal., argued for defendants-appellees; James L. Meeder, Brobeck, Phleger & Harrison, George C. Stoll, San Francisco, Cal., on brief.

Appeal from the United States District Court for the Northern District of California.

Before TRASK and KENNEDY, Circuit Judges, and BONSAL, [*] District Judge.

TRASK, Circuit Judge:

Appellant Bollow was terminated by the Federal Reserve Bank of San Francisco (the Bank) after eleven years of employment as a regulatory attorney specializing in the Bank Holding Company Act. Bollow alleges breach of contract, constitutional, and tort claims against the Bank and several of its officers. He also alleges that he was fired because he uncovered allegedly illegal regulatory activity on the part of the Bank and the Federal Reserve Board (the Board). The Bank contends that it had authority to dismiss Bollow by virtue of 12 U.S.C. § 341, Fifth. The district judge granted summary judgment in favor of all defendants. We affirm.

I

On October 28, 1975, Bollow was involved in an altercation with a Bank secretary, during which he shouted profanities and used abusive language. This incident was observed by Bollow's immediate superior, Reilly, Vice-President and General Counsel to the Bank, who determined that it justified Bollow's immediate dismissal. Accordingly, on the following day Reilly requested that Bollow resign because of his inability to get along with other Bank employees, as evidenced by the shouting altercation and other similar incidents involving Bollow. When Bollow refused to resign, Reilly informed him that he was to be terminated immediately.

On October 30, Bollow met with the Senior Vice-President of the Bank, Sims, to discuss his termination. Sims declined to overrule Reilly's decision to dismiss Bollow, although he did postpone Bollow's dismissal for two weeks. Bollow stopped working at the Bank in early November following an exit interview with the Bank's Personnel Officer, Murray.

On November 25, pursuant to a suggestion by Sims, Bollow submitted a written appeal to the Bank President, Balles. At about this time, the Bank Ombudsman, Langhorne, commenced an independent review of the circumstances of Bollow's termination. On December 15, Langhorne informed Balles that she found the termination to have been "implemented fairly and within the established personnel policy of the Bank." On January 13, 1976, Bollow was told in a meeting with Balles and Murray that the decision to terminate him was final.

Bollow then filed suit in the district court against Reilly, the Bank, the Board, and twenty Doe defendants. He alleged various breach of contract and tort claims, as well as violations of his constitutional due process rights. The court granted summary judgment in favor of the Board on the ground that it was actually and legally uninvolved in Bollow's termination. It rendered summary judgment in favor of Reilly and the Bank on the grounds that the termination of Bollow without a hearing violated none of his statutory or contractual rights and implicated no constitutionally protected property or liberty interest. Appeal was

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properly taken from these judgments, and this court has jurisdiction pursuant to 28 U.S.C. § 1291.

II

The statutory provision that governs dismissal of Federal Reserve Bank employees is section Four, Fifth of the Federal Reserve Act of 1913 (the Act):

(A) Federal reserve bank shall have power

Fifth. To appoint by its board of directors a president, vice presidents, and such officers and employees as are not otherwise provided for in this Act, to define their duties, require bonds for them and fix the penalty thereof, and to dismiss at pleasure such officers and employees.

12 U.S.C. § 341, Fifth (emphasis added).

Bollow contends that the dismissal "at pleasure" language of this statute refers only to the power of reserve banks to terminate an officer or employee without consulting the Board, and that the process rights of reserve bank employees must be determined by reference to state law. 1 Bollow asserts that under California law he was considered an "at-will" employeee entitled to a hearing before being terminated. 2

The only reported opinion construing section Four, Fifth is Armano v. Federal Reserve Bank of Boston, 468 F.Supp. 674 (D.Mass.1979). In Armano, the plaintiff alleged that the bank had breached its employment contract with him by terminating him without just cause. Id. at 675. The court found that reserve banks are strictly limited to the powers expressly granted them by the Act, and that "a contract that binds the Bank by requiring just cause for dismissal prevents the Bank from exercising its express power (under section Four, Fifth) to dismiss an employee at pleasure." Id. at 676. Accordingly, the court held the contract void and unenforceable because the bank lacked authority to enter into it. Id. 3 Thus, the court read section Four, Fifth as limiting the powers of reserve banks as well as restricting the rights of employees: No process rights are conferred on reserve bank employees by section Four, Fifth, and efforts to confer such rights as, for example, by contract are void as violative of the statute.

Language from two other cases not cited by the Armano court lends analogous support to its construction of section Four, Fifth. In construing a statute which provides that Air Force reserve officers may be discharged "at the pleasure" of the President, the Fifth Circuit in Sims v. Fox, 505 F.2d 857 (5th Cir. 1974) (en banc), cert. denied, 421 U.S. 1011, 95 S.Ct. 2415, 44 L.Ed.2d 678 (1975) stated the following:

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Neither has (the officer) pointed to any express terms in his contract or to any governmental regulation that might have led him to believe he had a right (to remain in the Air Force). An Air Force contract or regulation cannot grant that which Congress has specifically withheld. The Air Force must act within the authority delegated to it by Congress or, in certain cases, by the President. Any "regulations" or "contracts" attempted in excess of that authority would be void.

Id. at 862 (dicta). In Ventetuolo v. Burke, 470 F.Supp. 887 (D.R.I.1978), aff'd, 596 F.2d 476, 481-82 (1st Cir. 1979), the plaintiff was given explicit assurances by his supervisor that he could retain his job as long as funding for it were available, despite the fact that the governing statute provided that the plaintiff served "at the pleasure" of the commissioner. 470 F.Supp. at 891-92. The court held:

These discussions do not establish a legal entitlement to continued employment binding on the Commissioner. (The supervisor) lacked both actual and apparent authority to promise employment for an indefinite period of time, conditioned only on the availability of federal funds. Such a promise would abrogate the commissioner's statutory authority to terminate at will.

Id. at 892.

Based on the foregoing authorities, we conclude that no process or tenure rights are conferred on reserve bank employees by section Four, Fifth. See also Field v. Boyle, 503 F.2d 774, 777-78 (7th Cir.1974). We further conclude, based on the same authorities, that attempts to create such rights by reference to independent sources are violative of the statute and void thereunder. Assuming that Bollow would indeed have been entitled to certain process rights under California law, such law when applied to reserve bank employees conflicts with section Four, Fifth. In such circumstances, the federal statute must control. U.S.Const., Art. VI, cl. 2. Accordingly, we hold that the district court did not err in refusing to apply California law to Bollow's termination.

Bollow also argues that, notwithstanding section Four, Fifth, the Bank was required to comply with its published personnel manual, and that it failed to do so. The district judge found that the Bank substantially complied with the manual procedures for discharging employees for misconduct. This finding is adequately supported by the record. Thus, even if we assume that the Bank's authority to discharge employees pursuant to section Four, Fifth is somehow limited by the personnel manual, we find that the Bank has complied with the requirements of the manual.

III

Bollow next contends that his termination by the Bank deprived him of due process of law in violation of the fifth amendment. To invoke the process guarantees of the Constitution, however, Bollow must first show that the Bank deprived him of a property or a liberty interest.

A

To have a property interest in a governmental benefit, including employment, an individual must have an entitlement to the benefit. Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972). Such entitlements are created by "rules or understandings" that stem from an independent source, such as relevant statutes, regulations, and ordinances, or express or implied contracts. Id; Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972).

Bollow identifies three possible sources for his entitlement to continued employment at the Bank:

1. "Custom, practice, and policy"...

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