Incalza v. Fendi North America, Inc.

• Decision Date: 06 March 2007
• Docket Number: No. 04-57119.,04-57119.
• Citation: 479 F.3d 1005
• Parties: Giancarlo INCALZA, Plaintiff-Appellee, v. FENDI NORTH AMERICA, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

479 F.3d 1005

Giancarlo INCALZA, Plaintiff-Appellee, v. FENDI NORTH AMERICA, INC., Defendant-Appellant.

No. 04-57119.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 7, 2006.

Filed March 6, 2007.

Gene C. Schaerr, Winston & Strawn LLP, Washington, D.C. and Laura R. Petroff and Jennifer Rappoport, Winston & Strawn LLP, Los Angeles, CA, for the appellant.

Carney R. Shegerian and Donald Conway, Shegerian & Associates, Inc., Beverly Hills, CA, for the appellee.

Appeal from the United States District Court for the Central District of California; Margaret M. Morrow, District Judge, Presiding. D.C. No. CV-03-06720-MMM.

Before: REINHARDT, BRUNETTI, and KOZINSKI, Circuit Judges.

REINHARDT, Circuit Judge:

We consider whether, in this case, the Immigration Reform and Control Act of 1986 (IRCA) preempts California labor laws that forbid employers from firing an employee without good cause. We also consider whether the district court abused its discretion in denying defendant's motion for a new trial. In both instances, our answer is No.

I. FACTUAL AND PROCEDURAL HISTORY

In June of 1990, Giancarlo Incalza, a native and citizen of Italy with two years of business education, began working as a sales associate for Fendi in Rome. Approximately six months after his employment started, Fendi offered him a sales position in its New York City store. Paola Fendi, the head of the company, assured him that his employment would be secure as long as he continued to perform well. Incalza accepted the offer and moved to the United States on an E-1 visa secured with Fendi's assistance.

Incalza worked at Fendi's New York store from 1990 until 2000. During this period, the company renewed his visa several times. Management also made further assurances to him regarding his job security.

In August, 2000, Incalza was promoted to manager of Fendi's Beverly Hills store. During his tenure in Beverly Hills, he consistently received positive performance reviews. There was considerable evidence, however, that his supervisor, Robert King, did not like him and would have liked to replace him.

In mid-2002, French nationals purchased a majority interest in Fendi. In January, 2003, Fendi's immigration counsel, Andrew Lerner, advised his client that, because the company was now French-owned, the E-1 visas issued to Italian nationals were no longer valid. Lerner explained that this affected two employees: Incalza and Mauricio Graziani. He also informed Fendi that H1-B visas were probably available to both Graziani and Incalza. He told the company that Graziani and Incalza were essentially in the same situation, although he thought that Graziani might have a slightly easier time obtaining an H1-B visa because he had some post-secondary education and had previously received an H1-B visa. Lerner was unaware at the time that Incalza also had two years of post-secondary education. In any event, he explained that, for a fee, the company could get a determination within fifteen days regarding whether the two employees would be able to qualify for H1-B visas. Lerner did not provide any advice regarding whether or not to terminate either Incalza or Graziani.

Although Lerner offered to investigate further, Fendi did not accept his offer. Instead, it requested that he file an H1-B petition on behalf of Graziani, but not Incalza. Graziani was granted an H1-B visa, and remained on Fendi's payroll without interruption.

King, in the presence of the human resources director, fired Incalza on January 20, 2003, telling him, falsely, that nothing could be done to remedy his visa problems. Incalza then requested that he be allowed to take an unpaid leave of absence. He explained that he was planning to marry his fiancée, an American citizen, the following month and would be eligible for a green card. King, however, repeated that the immigration problem could not be resolved, and that a leave of absence was not an option.

Incalza then wrote Fendi a letter on February 28, 2003, asking that it give him back his former job once his visa issue was resolved. In a follow-up phone conversation, the human resources director told Incalza that Fendi would not re-hire him. Incalza then married his fiancée on March 27, 2003 and received work authorization as the spouse of an American citizen in April. At the time of his marriage, Fendi still had not filled his position. In early April, Fendi hired Grace Varella, a non-Italian, as manager of the Beverly Hills store.

Incalza filed an action in California Superior Court claiming that he was wrongfully terminated 1) in violation of an implied contract that he would be fired only for good cause, and 2) because of his Italian heritage, in violation of the Fair Employment and Housing Act, CAL. GOV'T CODE §§ 12900-12960.¹ Fendi removed the case to federal court on the basis of diversity jurisdiction, and filed a motion for summary judgment. It argued that Incalza's claims lacked merit because it was compelled by IRCA to terminate him when it discovered that his E-1 visa was no longer valid. It further argued that California law, to the extent it required a different result, was preempted. The district court denied the motion.

At the trial, Incalza introduced evidence that 1) Fendi's policy is not to terminate employees without good cause, 2) the custom of the fashion industry is not to terminate employees without good cause, 3) Incalza was employed at Fendi for thirteen years, and 4) Fendi management gave Incalza oral assurances of continued employment.

A four-day jury trial followed. The jury found for Incalza on the implied contract claim, but for Fendi on the discrimination claim. It awarded Incalza $1,088,440. The jury was instructed that Fendi could discharge an employee in good faith and for a fair reason, but that it should find for Incalza if it found that the stated reason was simply a pretext. Fendi moved for a new trial, and the district court denied the motion. Fendi appealed.

II. DISCUSSION

A. Conflict Preemption

California law provides remedies to workers who are terminated in violation of an express or implied agreement that they will not be discharged without good cause. Guz v. Bechtel Nat'l, Inc., 24 Cal.4th 317, 100 Cal.Rptr.2d 352, 8 P.3d 1089, 1100-01 (2000). The California legislature has made clear that this rule applies to illegal immigrants as well as other employees. Under California law, "[a]ll protections, rights, and remedies available under state law, except any reinstatement remedy prohibited by federal law, are available to all individuals regardless of immigration status who have applied for employment, or who are or who have been employed, in this state." CAL. CIV. CODE § 3339(a); CAL. LAB.CODE § 1171.5(a); CAL. GOV'T CODE § 7285(a). Additionally, California law provides that "[f]or purposes of enforcing state labor, employment, civil rights, and employee housing laws, a person's immigration status is irrelevant to the issue of liability, and in proceedings or discovery undertaken to enforce those state laws no inquiry shall be permitted into a person's immigration status except where the person seeking to make this inquiry has shown by clear and convincing evidence that this inquiry is necessary in order to comply with federal immigration law." CAL. CIV. CODE § 3339(b); CAL. LAB.CODE § 1171.5(b); CAL. GOV'T CODE § 7285(b).

Federal law, however, forbids employers from knowingly employing unauthorized aliens. Specifically, under IRCA, it is "unlawful for a person or other entity, after hiring an alien for employment in accordance with [the Act], to continue to employ the alien in the United States knowing the alien is (or has become) an unauthorized alien with respect to such employment." 8 U.S.C. § 1324a(a)(2).

Conflict preemption² occurs when either 1) it is not "possible to comply with the state law without triggering federal enforcement action," Jones v. Rath Packing Co., 430 U.S. 519, 540, 97 S.Ct. 1305, 51 L.Ed.2d 604 (1977), or 2) state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress," Volt Info. Science, Inc. v. Bd. of Trs. of the Leland Stanford Junior Univ., 489 U.S. 468, 477, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) (quoting Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941)). Tension between federal and state law is not enough to establish conflict preemption. Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 256, 104 S.Ct. 615, 78 L.Ed.2d 443 (1984). We find preemption only in "those situations where conflicts will necessarily arise." Goldstein v. California, 412 U.S. 546, 554, 93 S.Ct. 2303, 37 L.Ed.2d 163 (1973). A "hypothetical conflict is not a sufficient basis for preemption." Total TV v. Palmer Communications, Inc., 69 F.3d 298, 304 (9th Cir.1995).

The parties agree that there is no conflict between California law and IRCA as applied to an employer who is required to terminate an employee by IRCA and does so in order to comply with that statute. Under such circumstances, the employer can obey both laws because compliance with IRCA provides good cause, as defined by California law, for terminating unauthorized aliens. The point of contention that primarily divides the parties is whether federal and state law conflict when an employer who is required by federal law to terminate an unlawful alien does so, not because of IRCA, but for reasons that are unlawful under state law, and is required to pay damages for the violation of state law. The district court agreed with Incalza and held that state and federal law do not conflict under such circumstances because California law requires only that the employer pay damages for the violation of state law, not that it employ an alien in violation of federal law. Thus, the district court ruled, the employer can obey both laws by terminating the employee, as required by federal law, and, where the motive for the termination...