Aitken v. Reed

• Decision Date: 16 January 1998
• Docket Number: No. 19718-9-II,19718-9-II
• Court: Washington Court of Appeals
• Parties: Jack M. AITKEN, a single person, Appellant, v. Betty J. REED and William Reed, et ux., et al.; the State of Washington Department of General Administration; the State of Washington Division of Savings and Loan Associations, Respondents.

Page 474

89 Wn.App. 474

949 P.2d 441

Jack M. AITKEN, a single person, Appellant, v. Betty J. REED and William Reed, et ux., et al.; the State of Washington Department of General Administration; the State of Washington Division of Savings and Loan Associations, Respondents.

No. 19718-9-II.

Court of Appeals of Washington Division 2.

Jan. 16, 1998.

Michael Patrick Lynch, Assistant Attorney General, Olympia, for Respondents.

Paul Alexander Lindenmuth, Law Offices of Neil J. Hoff, Tacoma, for Appellant.

ARMSTRONG, Judge.

TAPCO credit union fired Jack Aitken, its CEO, after Betty Reed, the State Supervisor of Savings and Loans and Credit Unions, told TAPCO's Board of Directors that she would remove him pursuant to her statutory authority if the Board did not. For several years, Reed had questioned TAPCO's bookkeeping method of carrying losses in the value of mutual funds owned by TAPCO. During the dispute, Aitken criticized Reed's policy on how the stock losses should be carried on TAPCO's books. Ultimately, Reed believed that Aitken was violating her written directives and falsifying TAPCO's books. Thus, her ultimatum to the Board.

Aitken sued Reed and the State, alleging claims for retaliation against protected speech, discrimination on the basis of age and gender, denial of property and liberty interests without due process of law, defamation, tortious interference with a contractual relationship, and outrage. Aitken appeals a summary judgment in favor of Reed and the State. We affirm.

FACTS

Jack Aitken was the long-time CEO of the TAPCO credit union. In October 1989, he was dismissed by the TAPCO Board of Directors. He was fired after Betty Reed, the State Supervisor of Savings and Loans and Credit Unions, had repeatedly lobbied the TAPCO Board for a "change" in the management of TAPCO.

Reed attended the meeting when the Board decided to fire Aitken and told the Board she intended to remove Aitken pursuant to her statutory authority if the Board did not. Reed also gave the Board a draft of the charges she intended to file against Aitken. Aitken was not permitted to be present for the Board's repeated meetings with Reed, though he normally attended Board meetings.

The trouble started on "Black Monday" in September 1987, when the stock market plunged. At the time, TAPCO Meeting with the managers of a number of credit unions to discuss the problem, Reed addressed the group as, "[W]ell, boys[,] this is what [you're] going to do...." She then directed the credit unions to carry the mutual fund investments at the lesser of the current market value or the purchase price. Given the decline in the market value, this directive forced the credit unions to list these investments as substantial losses, and to mark such losses off against the "undivided profits." ¹

had approximately 12 percent of its assets invested in mutual funds. The amount of the investment put TAPCO in violation of WAC 419-36-090, which requires a credit union to get State approval to invest more than 10 percent in stocks. TAPCO had not gotten approval for its investment and TAPCO suffered a substantial loss in the value of its mutual funds on "Black Monday."

But Reed permitted credit unions to individually request exemptions from this policy. TAPCO requested such an exemption, and was told that it could set up a "contra" reserve account to the regular reserves. ² Reed claims that she made clear that this was a one-time exemption. Aitken denies this.

In October 1988, state regulators audited TAPCO. The regulators gave TAPCO a CAMEL rating of 2. ³ At the end of 1988, TAPCO submitted its year-end Financial and Statistical Report, which showed that Aitken had increased the special reserve by $119,068.48.

Concerned about this increase, Reed contacted Aitken in In March 1989, Aitken wrote Reed and asked for another exemption from carrying its mutual fund losses against undivided profits. Reed denied the request.

January 1989 and directed TAPCO to book the mutual fund losses to the undivided profits instead of to the contra reserve account. Reed also sent a letter to all credit union managers in March 1989, dictating that all mutual fund losses were to be accounted for against the undivided profits.

Aitken then talked to a fellow credit union manager about the problem, who in turn contacted the President of the Washington Credit Union League, Bruce Rourillard. Rourillard in turn wrote Reed a letter suggesting alternatives to marking the funds off against undivided profits.

Worried that TAPCO might declare a dividend at the end of March 1989 even though it did not have sufficient undivided profits, Reed asked to meet with the Board at their March 30 meeting. This request was denied. Reed claims that Aitken assured her that her concerns would be passed on to the Board and that no dividend would be declared at the meeting. Reed hand-delivered a letter, either on the date of this meeting or the day after, ⁴ instructing Aitken to charge the mutual fund losses to the undivided profits, and reminding him that a dividend could only be declared out of the undivided profits.

At this meeting the Board declared a dividend. The Board based the dividend on an incorrect estimate of earnings. In fact, if TAPCO had recorded its mutual fund losses as directed by Reed, it would not have had sufficient undivided profits to pay the dividend. Because of this, Aitken charged off an additional $49,000 to the contra reserve account so that the credit union could pay the dividend that the Board had declared. Reed used this incident as the basis for the first of her draft charges against Aitken in October 1989.

Reed met with the TAPCO Board on April 27, 1989. At that meeting, Reed presented the Board with a cease and In June 1989, Reed received a phone call from an accountant at TAPCO, Lisa Olthoff. Olthoff told Reed that Aitken was improperly accounting for losses being sustained by its wholly owned subsidiary, CUSO. TAPCO's independent auditors had learned that TAPCO was not transferring CUSO's losses, which should have been entered against undivided profits, to its own books. The auditors had instructed Aitken to immediately enter the CUSO losses on TAPCO's books against undivided profits. But, according to Olthoff, Aitken then told her not to enter the losses. Reed ordered Aitken to mark these losses off against the undivided profits instead of against the regular reserves, which are normally utilized for loan losses. This incident constituted the second of the draft charges against Aitken.

desist order directing TAPCO to account for the mutual fund losses as she had directed. Reed also suggested that "a change" was required in the management of the credit union.

Also in June, Reed ordered a new audit of the credit union. This examination, which Aitken contends was motivated by an effort to provide a rationale for his removal, concluded that TAPCO was in financial trouble and gave TAPCO a CAMEL rating of 4. Aitken disputed these results and sent two letters to Reed responding to the exam results.

During this same period, Reed had several phone conversations with TAPCO attorney Steve Levy and TAPCO Board Chairman John Roller, urging them to change TAPCO's management. Finally, after Reed presented her draft charges, the Board voted to remove Aitken in October 1989.

During a subsequent wrongful-termination suit against TAPCO, Aitken learned of Reed's role in his termination. Aitken then instituted a civil suit against Reed, alleging violations of his constitutional rights and state law tort claims. The constitutional claims, filed under 42 U.S.C. § 1983, included retaliation against protected speech in

violation of the First Amendment, and denials of a property interest without due process of law, of a liberty interest without due process of law, and of a "substantive" due process right to be free of age and gender discrimination, in violation of the Fourteenth Amendment. Aitken also alleged claims for defamation, tortious interference with a contractual relationship, outrage, and age and gender discrimination under Chapter 49.60 RCW. Summary judgment was granted for Reed on all claims.

ANALYSIS

In reviewing a summary judgment, we engage in the same inquiry as the trial court. Wilson v. Steinbach, 98 Wash.2d 434, 437, 656 P.2d 1030 (1982). Summary judgment may be granted if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Weyerhaeuser Co. v. Aetna Cas. & Sur. Co., 123 Wash.2d 891, 897, 874 P.2d 142 (1994). A material fact is one upon which the outcome of the litigation depends. Clements v. Travelers Indem. Co., 121 Wash.2d 243, 249, 850 P.2d 1298 (1993). In ruling on the motion, we consider the facts in the light most favorable to the nonmoving party. Clements, 121 Wash.2d at 249, 850 P.2d 1298.

Section 1983: Retaliation Against Protected Free Speech

The parties agree that an analysis similar to that conducted in a public employment context is appropriate, since public employment cases often concern Section 1983 property and liberty interests similar to those asserted by Aitken. ⁵

To establish a prima facie case of retaliation against protected speech, Aitken must demonstrate that his speech was protected by the First Amendment and that the speech was a substantial or motivating factor in Reed's decisions adverse to him. White v. State, 131 Wash.2d 1, 10, 929 P.2d 396 (1997). Because Aitken has not presented evidence sufficient to survive a summary judgment that his speech was a substantial factor in Reed's alleged retaliation, we address only this element.

Aitken claims that he was punished because of (1) several conversations with Reed in which he expressed disagreement with her policy on reserving the mutual fund losses, and (2) the Rourillard letter of March 24, 1989, which also questioned the policy. Although the letter was not written by Aitken, Reed was apparently aware that...