Mackey v. Pioneer Nat. Bank

Decision Date31 January 1989
Docket Number87-3818,Nos. 87-3810,s. 87-3810
Citation867 F.2d 520
Parties, 113 Lab.Cas. P 56,103, 13 Fed.R.Serv.3d 638 Marvin MACKEY, Lillian Mackey, husband and wife, Plaintiffs-Appellants, v. PIONEER NATIONAL BANK, a national banking corporation; Paul Campbell, Marie Campbell, husband and wife, Defendants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

David H. Putney, Putney Law Offices, Yakima, Wash., for plaintiffs-appellants.

Gary E. Lofland, Lofland & Associates, Yakima, Wash., for defendants-appellees.

Appeal from the United States District Court for the Eastern District of Washington.

Before BEEZER, HALL and WIGGINS, Circuit Judges.

WIGGINS, Circuit Judge:

Marvin Mackey ("Mackey") appeals summary judgment for Pioneer National Bank ("Pioneer") in an action for breach of employment contract, negligent misrepresentation, and interference with business relationship, arising from his being forced to resign as Executive Vice President of Pioneer. Mackey claims that the district court abused its discretion in limiting discovery and erred in ruling that the National Bank Act, 12 U.S.C. Sec. 24 (Fifth) (1982), offered a complete defense to both his contract and tort claims. Pioneer cross appeals, claiming that the district court erred in failing to assess Rule 11 sanctions against Mackey. We affirm.


Pioneer National Bank is a national banking corporation organized under the National Bank Act of 1864. 12 U.S.C. Sec. 21 (1982). Paul Campbell is its President and Chief Executive Officer. Marvin Mackey was hired as Senior Vice President on June 1, 1985, and became Executive Vice President on November 14, 1985. In a letter to Mackey, dated May 20, 1985, Campbell wrote "Just as the rest of us, you will be subject [to] all of the policies and procedures, rules and regulations of the bank now in force and hereafter passed." Mackey was also given a personnel manual which stated that:

In order to preserve the greatest freedom of association, however, employment and compensation can be terminated with or without cause and with or without notice at any time, at the option of either Pioneer National Bank or the staff member. No bank representative has authority to enter into any agreement for employment for a specific period of time or make any agreement contrary to the foregoing.

In July 1986 Mackey was accused of sexual harassment by a female employee of the bank. Pioneer's investigation led to a resolution of that complaint and resulted in a disciplinary letter being written to Mackey. In mid-July 1986 Mackey made disparaging remarks about Pioneer's President to the bank's outside auditors. Once this became known, the Executive Committee of the Board of Directors ordered Mackey's termination. The Executive Committee acted unanimously to fire Mackey. The full Board of Directors ratified the Executive Committee's action on August 14, 1986. CR 31, Exh. B, 1. Mackey later chose to resign.

Section 3.3 of Pioneer's by-laws provided that "[t]he Board of Directors may appoint Mackey filed his action in Yakima County Superior Court on November 4, 1986. Counsel for Pioneer had earlier informed Mackey and his counsel that any claims for wrongful discharge were preempted by the National Bank Act and that they would pursue sanctions if an action was initiated. The action was removed to federal court on November 24, 1986. Pioneer filed for summary judgment and Mackey responded by requesting additional time to engage in discovery. The district court granted this request. The court allowed Mackey to discover "whether the Board of Pioneer National Bank knew and approved of [his] termination." The court ordered that discovery be completed before February 1, 1987. The matter was reheard on March 2, 1987. Summary judgment was granted to Pioneer and the order was entered on March 31, 1987. Mackey timely appealed on April 17, 1987. We have jurisdiction pursuant to 28 U.S.C. Sec. 1291 (1982).

                from time to time, from its own members, other committees of one or more persons, for such purposes and such powers as the Board may determine."    On May 8, 1986, the full Board of Directors passed a resolution creating an executive committee, consisting of the Chairman of the Board, the Vice Chairman, and the President of the bank.  Certain functions were excluded from the mandate of the Executive Committee, but the termination of officers or employees was not one of these.  Mackey attended the board meeting which created the Executive Committee
A. Jurisdiction

We must first decide whether the district court had jurisdiction in this matter. Pioneer removed this action from state court based on the federal claim raised by Mackey in his complaint under the group health plan provisions of the 1986 Comprehensive Omnibus Budget Reconciliation Act ("COBRA"), Pub.L. No. 99-272, tit. X, 100 Stat. 227 (1986) (codified at 29 U.S.C. Secs. 1161-1168 (Supp.IV 1986)). After removal, and before summary judgment on Mackey's contract and tort claims, this cause of action was dismissed. Yet the ultimate lack of merit of the federal claim does not mean that the claim was insubstantial for purposes of conferring jurisdiction. 13B C. Wright, A. Miller & E. Cooper, Federal Practice & Procedure Sec. 3564, at 73 (2d ed. 1984). We find that the COBRA claim was not "absolutely devoid of merit" or "obviously frivolous," so as to have denied the district court jurisdiction. Hagans v. Lavine, 415 U.S. 528, 536-37, 94 S.Ct. 1372, 1378-79, 39 L.Ed.2d 577 (1974) (citations omitted).

It was not then an abuse of discretion for the district court to entertain Mackey's pendent state claims in contract and tort. See McCarthy v. Mayo, 827 F.2d 1310, 1317 (9th Cir.1987). These causes of action unquestionably arose from a "common nucleus of operative fact," United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966), that is, Mackey's termination. These claims would, "without regard to their federal or state character," be expected to be tried in "one judicial proceeding...." Id. We conclude, on the facts of this case, that retention of jurisdiction well served the purposes of judicial economy and efficiency. See Hagans, 415 U.S. at 536-37, 94 S.Ct. at 1378-79. The district court properly had jurisdiction over the claims before us on appeal.

B. Premature Summary Judgment

Mackey claims that summary judgment was premature because he had insufficient time to conduct discovery concerning the actions of Pioneer's Executive Committee and Board of Directors. We review for an abuse of discretion a district court's refusal to permit further discovery before ruling on a summary judgment motion. Landmark Dev. Corp. v. Chambers Corp., 752 F.2d 369, 373 (9th Cir.1985); British Airways Bd. v. Boeing Co., 585 F.2d 946, 954 (9th Cir.1978), cert. denied, 440 U.S. 981, 99 S.Ct. 1790, 60 L.Ed.2d 241 (1979).

The district court granted one extension to Mackey to conduct his discovery. It imposed, however, a deadline of February 1, 1987. Under Fed.R.Civ.P. 56(f), the district court may refuse to grant the party's application for summary judgment if the opposing party needs time to discover central facts. Rule 56(f) requires affidavits Mackey failed to avail himself of Rule 56(f). Mackey had been granted an additional month to conduct the limited discovery authorized by the court. A movant cannot complain if it fails diligently to pursue discovery before summary judgment. Brae, 790 F.2d at 1443; Frederick S. Wyle P.C. v. Texaco, Inc., 764 F.2d 604, 612 (9th Cir.1985). It was not an abuse of discretion for the district court to proceed to summary judgment in this case.

setting forth particular facts expected from the movant's discovery. Brae Transp., Inc. v. Coopers & Lybrand, 790 F.2d 1439, 1443 (9th Cir.1986). A Rule 56(f) motion must show how additional discovery would preclude summary judgment and why a party cannot immediately provide "specific facts" demonstrating a genuine issue of material fact. Fed.R.Civ.P. 56(e), (f).

C. National Bank Act Defense
1. Issues Raised First Time on Appeal

Pioneer argues that Mackey failed to raise before the district court issues involving construction of the Pioneer board's by-laws and whether the board could have dismissed Mackey at pleasure if he had not been hired by the board. The general rule is that an issue will not be considered for the first time on appeal unless a party shows exceptional circumstances why the issue was not raised below. Taylor v. Sentry Life Ins. Co., 729 F.2d 652, 655-56 (9th Cir.1984).

It is clear, however, that Mackey presented these issues to the district court in oral argument. Whether the National Bank Act is a defense to Mackey's contract and tort claims is an issue squarely before this court.

2. The Defense

A district court's grant of a motion for summary judgment is reviewed by the appellate court de novo. The general standard an appellate court applies in reviewing the grant of such a motion is the same as that applied by the district court initially under Fed.R.Civ.P. 56(c). Allen v. A.H. Robins Co., Inc., 752 F.2d 1365, 1368 (9th Cir.1985). Rule 56(c) states that summary judgment is proper when the pleadings and discovery, read in the light most favorable to the non-moving party, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

The National Bank Act provides that a national banking association will have the power "[t]o elect or appoint directors, and by its board of directors to appoint a president, vice president, cashier, and other officers, define their duties, require bonds of them and fix the penalty thereof, dismiss such officers or any of them at pleasure, and appoint others to fill their places." 12 U.S.C. Sec. 24 (Fifth) (1982). This provision has been consistently interpreted to mean that the...

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