860 F.2d 1188 (3rd Cir. 1988), 87-3530, Kelley v. TYK Refractories Co.

Docket Nº:Roger P. KELLEY, Appellant in 87-3530
Citation:860 F.2d 1188
Case Date:October 28, 1988
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

Page 1188

860 F.2d 1188 (3rd Cir. 1988)

Roger P. KELLEY, Appellant in 87-3530


TYK REFRACTORIES COMPANY, Formerly TYK Swank Refractories Company.



TYK REFRACTORIES COMPANY, Formerly TYK Swank Refractories Company.


Nos. 87-3530, 87-3577.

United States Court of Appeals, Third Circuit

October 28, 1988

Argued June 20, 1988.

Rehearing Denied Nov. 29, 1988.

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Ronald G. Backer (argued), Rothman, Gordon, Foreman and Groudine, P.A., Pittsburgh, Pa., for appellant cross appellee.

Richard S. Meyer (argued), Dilworth, Paxson, Kalish and Kauffman, Philadelphia, Pa., for appellee cross appellant.

Before GIBBONS, Chief Judge, and HIGGINBOTHAM, and HUNTER, Circuit Judges.


A. LEON HIGGINBOTHAM, Jr., Circuit Judge.

Roger P. Kelley appeals from an order granting a final judgment in favor of his employer, TYK Refractories, Co., Inc., ("TYK") on its motion for summary judgment on Kelley's action alleging employment discrimination in violation of 42 U.S.C. Sec. 1981 (1982) ("Sec. 1981"). TYK cross-appeals from the district court's decision to remand Kelley's pendent state law claims to the Pennsylvania Court of Common Pleas for Allegheny County. We must determine whether the district court correctly held that certain factual findings regarding Kelley's termination made by the Pennsylvania Unemployment Compensation Board must be given collateral estoppel effect so as to preclude litigation of his Sec. 1981 claim in federal court. We conclude that under Pennsylvania law, issue preclusion does not apply in the circumstances of this case. We will therefore reverse the district court's order granting summary judgment for TYK. We will dismiss TYK's cross-appeal for lack of appellate jurisdiction.

I. Factual Background and Prior Proceedings

TYK, which produces refractory products used in the steel industry, is a wholly owned subsidiary of Tokyo Yogyo, a Japanese trading company that purchased the company in April, 1982. Kelley, a white, male U.S. citizen, accepted a position as Chief Operating Officer and Executive Vice-President of TYK in October, 1982. A letter of employment from TYK entitled him to two types of TYK stock options at specified times, as well as a salary, fringe benefits, and executive perquisites. Joint Appendix ("Jt.App.") at 37-38. Kelley contends that he was induced to accept the position by the promises that he would have the authority to manage the company according to American customs, laws, and business principles, and that he would be promoted to president within one year, with a substantial increase in salary. Id. at 10, 15, 17 (Complaint at paragraphs 5, 22, 28). Kelley avers that, having undertaken the job, he was asked by TYK, including specifically TYK's President Tomito, not only to institute Japanese business customs, such as morning chanting sessions during which company slogans were chanted in unison, but also to discriminate against older employees,

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to engage in unfair labor practices in dealings with the employees' bargaining agent, and to deprive workers of overtime and vacations, all in violation of numerous federal and state laws, among them the Fair Labor Standards Act, 29 U.S.C. Secs. 201-219 (1982), the National Labor Relations Act, 29 U.S.C. Secs. 151-187 (1982), and the Pennsylvania Minimum Wage Act of 1968, 43 Pa.C.S.A. Secs. 333.101-.115 (Purdon 1964 & Supp.1988). Jt.App. at 12-17 (Complaint, paragraphs 8-28). Kelley also alleged that TYK insisted that particular employees be fired in order to replace them with younger, Japanese males. Jt.App. at 27. Kelley alleged that TYK terminated Kelley's employment on October 11, 1983, and replaced him with a Japanese individual. Id. at 17, 27. In Count V of his complaint, Kelley contended that TYK discharged him and denied the exercise of his stock options because he is a white American citizen, and thereby violated his rights under 42 U.S.C. Sec. 1981 (1982). 1 Jt.App. at 27.

In November 1983, Kelley filed a claim for benefits under the Pennsylvania Unemployment Compensation Law, 43 Pa.Stat.Ann. Sec. 802(e) (Purdon 1983), which the Office of Employment Security initially denied. Jt.App. at 173 (Decision of the Unemployment Compensation Board of Review). Kelley appealed that decision, and on February 24, 1984, a four-hour hearing on his appeal was held before an unemployment compensation referee. The referee made the following factual findings:

  1. [Kelley] attended a meeting on October 4, 1983, with senior company officials which was called for the purpose of discussing a memorandum drafted by the claimant enumerating his complaints. Claimant was dissatisfied with the results of the meeting and, after one of the senior officials agreed with the claimant's assessment that there appeared to be little room for further negotiation, the claimant removed his company lapel pin and stated, "I'm leaving." He thereupon left the room and did not return thereafter to work.

  2. [Kelley] did not intend by his actions of October 4, 1983, to resign his job. He eventually may have reached that decision but he had not reached that point as of October 4, 1983.

  3. On October 6, 1983, [Kelley] received a letter from the company stating that his resignation was being accepted. He immediately notified the company that it was not his intention to resign his job.

  4. If [Kelley] had not separated from his employment he would not have been allowed by the company to continue to operate as Chief Operating Officer but instead would have been restricted to functioning as Sales Manager.

    Id. at 171 (Referee's Decision). The referee determined that Kelley's separation was involuntary, that it would be treated as a discharge, and that Kelley was not disqualified under Sec. 402(b) of the Unemployment Compensation Law, 43 Pa.Stat.Ann. Sec. 801 (Purdon 1983). Jt.App. at 172. 2 The referee stated further that, under Sec. 402(e), the only just cause for discharge is willful misconduct on Kelley's part. Since TYK did not allege willful misconduct, the referee concluded that Kelley was entitled to benefits. Id. at 172. The referee did not discuss whether discrimination based on race or national origin contributed to Kelley's discharge. 3

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    TYK appealed the referee's decision to the Unemployment Compensation Board of Review. That tribunal, on July 17, 1984, without taking further evidence or conducting a hearing, determined that the referee's findings were erroneous and substituted the following pertinent findings of fact:

  5. [Kelley] attended a meeting on October 4, 1983, with senior company officials which was called for the purpose of discussing a memorandum drafted by [Kelley] enumerating his complaints. [Kelley] was dissatisfied with the results of the meeting, and, after one of the senior officials agreed with [Kelley's] assessment that there appeared to be little room for further negotiations. [Kelley] removed his company pin and stated, I'm leaving.

  6. Since [Kelley] communicated with his superiors through an interpreter, he was asked if he meant he was resigning. His response was that he did not use the word resign, but that he was leaving.

  7. [Kelley] did not return for three days and did not report to anyone that he would be off or that he was taking vacation time.

    Id. at 173 (Decision of the Unemployment Compensation Board of Review). 4 Based on the findings of fact the Board adopted, it concluded that Kelley was not discharged but that he had voluntarily terminated his employment, and had not borne his burden of showing cause of a necessitous and compelling nature for doing so. The Board found that Kelley's "behavior evidence[d] an intent to voluntarily terminate.... Even though Claimant has denied his intention to resign on more than one occasion, his protestations are not consistent with his manifest behavior." Id. at 174 (Decision of the Unemployment Compensation Board of Review). Based upon these factual findings, the Board concluded that, "[h]aving voluntarily terminated, [Kelley] did not have a necessitous and compelling cause to do so. Even if [Kelley] had been restricted to Sales Manager, his salary and perquisites would have been unaffected. So that, the change of responsibility [did] not justify his termination." Id. at 174.

    On August 17, 1984, following the decision of the Unemployment Compensation Board of Review, Kelley filed an eight-count complaint in the Court of Common Pleas of Allegheny County, alleging state claims including wrongful discharge, breach of contract, intentional infliction of emotional distress, estoppel and outrageous conduct. Jt.App. at 7 (Complaint). Kelley also included a claim stating a violation of his federal civil rights, specifically 42 U.S.C. Sec. 1981. Id. at 27-28. TYK sought and obtained removal of the case to the United States District Court of the Western District of Pennsylvania based on his federal claim.

    Following the removal, on October 31, 1984, TYK moved for summary judgment on all counts of Kelley's complaint. Id. at 57 (Defendant's Motion for Summary Judgment, or in the Alternative for Partial Dismissal). 5 Supporting this motion was a copy of the Board's decision and an affidavit of TYK's counsel averring that Kelley had fully litigated the nature of his discharge before the Board, which had concluded that Kelley had voluntarily terminated his employment without cause of a necessitous and compelling nature. Id. at 61-63 (Affidavit in Support of Motion for

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    Summary Judgment). On July 22, 1984, the district court stayed all proceedings pending the outcome of Kelley's state appeal on his unemployment compensation claim.

    Kelley petitioned the Commonwealth Court for review of the Board's decision on November 30, 1984. In a July...

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