Cancellier v. Federated Dept. Stores

Decision Date30 March 1982
Docket NumberNos. 81-4154,81-4165,s. 81-4154
Citation28 FEP Cases 1151,672 F.2d 1312
Parties115 L.R.R.M. (BNA) 4111, 28 Fair Empl.Prac.Cas. 1151, 28 Empl. Prac. Dec. P 32,639, 29 Empl. Prac. Dec. P 32,878 Philip D. CANCELLIER, John W. Costello and Zelma Smith Ritter, Plaintiffs-Appellants/Cross-Appellees, v. FEDERATED DEPARTMENT STORES d/b/a I. Magnin, Defendant-Appellee/Cross-Appellant.
CourtU.S. Court of Appeals — Ninth Circuit

Robert S. Daggett, Brobeck, Phleger & Harrison, San Francisco, Cal., argued, for plaintiffs-appellants/cross-appellees; Donald D. Connors, Brobeck, Phleger & Harrison, San Francisco, Cal., on brief.

Maureen McClain, Littler, Mendelson, Fastiff & Tichy, San Francisco, Cal., for defendant-appellee/cross-appellant.

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

Before SNEED and PREGERSON, Circuit Judges, and EAST *, District Judge.

SNEED, Circuit Judge:

The plaintiffs below and appellants here, Philip D. Cancellier, John W. Costello, and Zelma Smith Ritter, are former employees of I. Magnin, the defendant below and cross-appellant here. They won a jury verdict in the district court totalling $1.9 million, plus court-awarded attorneys' fees of $400,000, on their claims under the Age Discrimination in Employment Act (ADEA), 29 U.S.C. §§ 621-634 (1976 & Supp. II 1978) and pendent state claims. They appeal denial of their motions for reinstatement and for an injunction against I. Magnin. I. Magnin cross-appeals the judgment primarily on grounds of improper ADEA instructions, use of a general verdict, and an erroneous award of compensatory and punitive damages for breach of the implied covenant. 1 We affirm.

I. FACTS

Plaintiffs-appellants are former executives of I. Magnin. Cancellier was vice president for stores and operations. Costello was divisional merchandise manager for accessories. Ritter was a buyer of sportswear. In early 1978 they were terminated after having been employed at I. Magnin for twenty-five, seventeen, and eighteen years, respectively. In July 1979 they brought this action in the United States District Court for the Northern District of California alleging that their terminations violated the ADEA. They sought back pay, liquidated damages, reinstatement to their former positions, and an injunction against further age discrimination at I. Magnin. Appellants also raised claims under California law for breach of employment contract and breach of the implied covenant of good faith and fair dealing. Costello sought additional relief claiming fraud in connection with a promise of future employment at I. Magnin.

After a six-week trial the jury returned general verdicts in favor of Cancellier in the amount of $800,000, Costello in the amount of $600,000, and Ritter in the amount of $500,000. The jury also returned verdicts in favor of I. Magnin on Costello's fraud claims. Both sides appeal. For convenience, I. Magnin's cross-appeal is discussed first.

II.

I. MAGNIN'S CROSS-APPEAL

A. ADEA "Determining Factor" Standard

The ADEA makes it unlawful for an employer to discharge any individual because of such individual's age. 29 U.S.C. § 623(a) (1976). In Kelly v. American Standard, Inc., 640 F.2d 974, 984-85 (9th Cir. 1981), this court set out the requirements for a proper jury instruction on age discrimination. We adopted the "determining factor" test established in Laugesen v. Anaconda, 510 F.2d 307, 317 (6th Cir. 1975), and restated as a "but for" test in Loeb v. Textron, 600 F.2d 1003, 1019 (1st Cir. 1979). We rejected the argument that plaintiff must prove age was the sole factor in his discharge, and upheld a jury instruction stating that plaintiff has the burden of proving that one of the reasons he was terminated was because of his age, and that he should prevail if this factor "made a difference" in determining whether the plaintiff was retained or discharged. 2

The essence of a proper jury instruction under Kelly is that it require the jury to focus on the marginal effect of the age factor. Age need not be the sole factor in a discharge or other discriminatory practice. Conversely, it is not enough that age discrimination be present or even that it figure in the decision to fire; age must "make a difference" between termination and retention of the employee in the sense that, but for the presence of age discrimination, the employee would not have been discharged.

Here the district judge instructed the jury that "(a)ge must be a determining factor in an employer's personnel policies or practices before violation of the Act occurs." The district judge completely failed to give any guidance as to the meaning of "determining factor" in lawsuits under the ADEA, or to refer to the Laugesen and Loeb test we adopted in Kelly v. American Standard, Inc. This was error. The words "determining factor" are not self-explanatory. In general, fair application of the Act requires the trial judge to formulate precisely what employer conduct the ADEA redresses and what employer conduct it leaves undisturbed. Because the attribute with which the statute is concerned comes to each of us in time, it will inevitably be present in a multitude of employee discharges. It will be a factor in many and a determining factor in some. It is only this last group that can obtain relief under the ADEA, even though, in the broad sense, it aims to benefit the entire aged employment force.

However, a careful reading of the transcript and record convinces us that in this case the instruction does not require reversal. Giving it was harmless error. There is little or no indication in the proceedings that the outcome would have changed if the Kelly jury instruction had been given. This case was not decided by a hairsbreadth. There was ample evidence that consideration of age "made a difference" in the termination of Cancellier, Costello, and Ritter. Moreover, it was conceded at oral argument that the challenged instruction was fashioned by the judge from language submitted by I. Magnin. While we are extremely reluctant to affirm verdicts based on jury instructions different from those approved in Kelly or their equivalent, 3 we find that on the facts of this case refusing a new trial is consistent with substantial justice. Fed.R.Civ.P. 61; Ginsburg v. Ginsburg, 276 F.2d 94, 96 n.2 (9th Cir. 1960); 7 J. Moore & J. Lucas, Moore's Federal Practice P 61.11 & n.1a (2d ed. 1979). The instruction approved in Kelly adequately protects against mistaken inferences either that age must be the sole factor in the discharge, or that age may be less than a "but for" cause of the discharge. It is strongly preferred. Here, however,

we find the error harmless.

B. Use of General Verdict

I. Magnin contends that the district court committed reversible error by using simple general verdict forms without requiring special interrogatories or any breakdown of the verdict by source of damages. 4 Thus, I. Magnin contends, the possibility of punitive damages not recoverable under the ADEA in this lawsuit 5 or of duplicative damages in the pendent state claims requires a new trial.

Submission of special interrogatories is a matter committed to the discretion of the district judge. Fed.R.Civ.P. 49(b); Monsma v. Central Mutual Insurance Co., 392 F.2d 49 (9th Cir. 1968); 5A J. Moore & J. Lucas, Moore's Federal Practice P 49.04 & n.3 (2d ed. 1981). A jury generally is not required to itemize the components that enter into an award of damages. Neal v. Saga Shipping Co., 407 F.2d 481, 489 (5th Cir.), cert. denied, 395 U.S. 986, 89 S.Ct. 2143, 23 L.Ed.2d 775 (1969), cited in Frito-Lay, Inc. v. Local 137, International Brotherhood of Teamsters, 623 F.2d 1354, 1365 (9th Cir. 1980), cert. denied, 449 U.S. 1013, 101 S.Ct. 571, 66 L.Ed.2d 472 (1981), and cert. denied, 448 U.S. 1112, 101 S.Ct. 922, 66 L.Ed.2d 841 (1981) (district court sitting as trier of fact not required to itemize damage award).

When state claims for breach of the implied covenant of good faith and fair dealing are joined to claims of age discrimination under the ADEA, however, review of jury verdicts presents special difficulty to appellate courts. A general verdict may conceal punitive damages which may not be allowed under the ADEA. If the state claims are flawed, the entire verdict may have to be reversed. For these reasons, a separate verdict for each claim and a separate verdict on punitive damages is strongly preferred.

Nevertheless, failure to submit special interrogatories was not an abuse of discretion. See supra p. 1317. The amounts awarded here are consistent with a reasonable award on the ADEA and pendent state claims. We find no reversible error. I. Magnin's claim that it is impossible to tell which plaintiffs prevailed on which of their claims is unpersuasive. The court submitted general verdict forms in favor of the defendant on each claim. The jury returned general verdict forms in favor of I. Magnin on Costello's fraud claim and Costello's negligent misrepresentation claim; clearly, all other claims were resolved in favor of the plaintiffs. The verdict is clear as to which plaintiffs prevailed on which claims.

C. Tort Damages for Breach of the Implied Covenant

Breach of the implied covenant

I. Magnin contends that a claim for breach of the implied covenant under the circumstances here is contrary to California law. The contention is without merit.

California law recognizes an implied covenant of good faith and fair dealing in certain contracts that neither party will do anything to deprive the other of the benefit of the contract. See, e.g., Gruenberg v. Aetna Insurance Co., 9 Cal.3d 566, 578, 108 Cal.Rptr. 480, 510 P.2d 1032 (1973) (en banc); Comunale v. Traders & General Insurance Co., 50 Cal.2d 654, 658, 328 P.2d 198 (1958). California courts have recently applied the duty created by the implied covenant to the situation where the employee alleges no more than long service...

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