McCauley v. Thygerson, 83-2028

• Decision Date: 24 April 1984
• Docket Number: No. 83-2028,83-2028
• Citation: 732 F.2d 978
• Parties: 116 L.R.R.M. (BNA) 2602, 235 U.S.App.D.C. 376, 1 Indiv.Empl.Rts.Cas. 371 Michael R. McCAULEY, Appellant, v. Kenneth J. THYGERSON, President, Federal Home Loan Mortg. Corp., et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 978

732 F.2d 978

116 L.R.R.M. (BNA) 2602, 235 U.S.App.D.C. 376,

1 Indiv.Empl.Rts.Cas. 371

Michael R. McCAULEY, Appellant, v. Kenneth J. THYGERSON, President, Federal Home Loan Mortg.

Corp., et al.

No. 83-2028.

United States Court of Appeals, District of Columbia Circuit.

Argued March 9, 1984.

Decided April 24, 1984.

Appeal from the United States District Court for the District of Columbia (D.C. Civil Action No. 83-01333).

JePhunneh Lawrence, Washington, D.C., for appellant.

Mark C. Ellenberg, Washington, D.C., with whom Mary M. Kearney, Washington, D.C., was on the brief, for appellees.

Before WRIGHT, BORK and STARR, Circuit Judges.

Opinion for the court PER CURIAM.

PER CURIAM:

This case arises out of a decision of the Federal Home Loan Mortgage Corporation (FHLMC) in December 1982 to discharge appellant Michael R. McCauley from his position as systems analyst for FHLMC. McCauley brought an action in the District Court seeking $4.5 million in damages for breach of contract and deprivation of due process in violation of the Fifth Amendment to the Constitution. In our judgment this case presents two issues. First, did isolated oral representations by an FHLMC official that McCauley would be terminated only for "cause" give rise to an implied contract to that effect, and did FHLMC's decision to dismiss McCauley violate this agreement. Second, did FHLMC's decision to terminate McCauley constitute a deprivation of his employment rights without due process of law. The District Court, answering both questions in the negative, dismissed McCauley's complaint for failure to state a claim upon which relief could be granted. See Memorandum Order, D.D.C. Civil Action No. 83-1333 (August 19, 1983), Record Excerpts (RE) 1. We affirm.

I. BACKGROUND

FHLMC hired McCauley in April 1979 as a systems analyst. At that time he signed FHLMC's standard employment application. His application bore the following notation immediately above the signature line: "I understand and agree that my employment is for no definite period and may be terminated without prior notice." See Addendum A to brief for appellees. Apparently McCauley served satisfactorily for several years. On December 16, 1982, however, he was discharged for reasons not entirely clear from the record.

On December 28, 1982 McCauley invoked the grievance procedure established by Section 205 of FHLMC's Personnel Policy Manual. When an employee files a written grievance, a grievance committee undertakes an independent investigation, conducts a full hearing at which plaintiff's counsel can appear, and then issues a written report containing the committee's factual findings. After investigation and a hearing at which McCauley's counsel presented his client's case, the grievance committee found that the discharge should be sustained. Kenneth J. Thygerson, president of FHLMC, so notified McCauley by letter dated January 28, 1983.

Four months later, McCauley filed in the District Court a complaint that sought $4.5 million in damages. He based this action on two theories. First, he claimed that his dismissal breached an implied term of his employment contract. McCauley premised this claim on certain purported oral representations by an unspecified official of FHLMC that McCauley would be dismissed only "for cause." These representations, McCauley asserted, gave rise to an implied contract to that effect, and the dismissal violated this agreement. Second, he claimed that the Due Process Clause of the Fifth Amendment guaranteed him a pre-termination grievance hearing.

The District Court dismissed McCauley's complaint for failure to state a claim upon which relief could be granted. See Fed.R.Civ.P. 12(b)(6). The court found that well-settled principles of federal employment relations law precluded McCauley's breach of contract cause of action. Relying primarily on Kizas v. Webster, 707 F.2d 524, 535 (D.C.Cir.1983), the court held that McCauley's suit was barred because "[f]ederal workers may not seek redress of employment disputes on the basis of breach of contract * * *." Memorandum Order at 1, RE 1. Crucial to this decision, of course, was the court's finding that FHLMC is a part of the federal government. See Memorandum Opinion at 2 n. 1, RE 2. The court dismissed McCauley's due process claim on the ground that the post-termination grievance proceeding afforded McCauley all the process he was due under the Constitution. On appeal McCauley challenges both determinations.

II. ANALYSIS

The Breach of Contract Claim. McCauley asserts an implied contractual right to continued employment with FHLMC absent cause for termination. The source of this right is far from certain. McCauley's employment application, and FHLMC policy, make clear the "at will" status of McCauley's employment, and thus do not support the existence of such a contractual right. See Addendum A to brief for appellees; Affidavit of Richard E. Battle, p 2 (June 6, 1983), Exhibit 1 to Defendant's Motion to Dismiss (stating that employees serve at the pleasure of FHLMC). Nor do extrinsic sources such as basic civil service requirements create such an employment right for McCauley. Congress explicitly exempted FHLMC from civil service requirements, see 12 U.S.C. Sec. 1452(b)(9) (1982), and FHLMC employees thus receive no civil service protection against dismissal without cause. And McCauley points to no other statute, regulation, or consistent FHLMC practice, see Ashton v. Civiletti, 613 F.2d 923, 928-929 (D.C.Cir.1979), that creates for FHLMC employees any protection against dismissal without cause.

To support his claim McCauley instead points to an unnamed FHLMC official's oral representations that McCauley would not be terminated without cause. In essence McCauley is making a promissory estoppel argument; putting the best face on his position, his argument amounts to a claim that these oral representations should reasonably have been expected to, and in fact did, induce McCauley to rely on them to his detriment.

On review of the District Court's dismissal for failure to state a claim on which relief can be granted, we take all of appellant's factual allegations--including the alleged oral representations--as true. See Scheuer v. Rhodes, 416 U.S. 232, 236-238, 94 S.Ct. 1683, 1686-87, 40 L.Ed.2d 90 (1974). These alleged oral representations do not, however, suffice to support a claim for relief on the facts of this case. Even if McCauley could make the additional required showing of detrimental reliance, he would still confront the formidable obstacle that FHLMC's status as a "government corporation" places in the path of his recovery.

Principles of promissory estoppel apply less broadly against the federal government than they might in situations involving only private actors. Kizas v. Webster, supra, 707 F.2d at 535 ("courts have consistently refused to give effect to government-fostered expectations that, had they arisen in the private sector, might well have formed the basis for a contract or an estoppel"); Shaw v. United States, 640 F.2d 1254, 1260 (Ct.Cl.1981) ("Federal officials who by act or word generate expectations in the persons they employ, and then disappoint them, do not ipso facto create a contract liability running from the Federal Government to the employee, as they might if the employer were not the government"). This limited scope of estoppel is a consequence of the basic principle that federal government employees serve by appointment, not contract, and their employment rights "must be determined by reference to the statutes and regulations governing [terms of employment] rather than to ordinary contract principles." United States v. Larionoff, 431 U.S. 864, 869, 97 S.Ct. 2150, 2154, 53 L.Ed.2d 48 (1977). Promises of employment terms that contravene or otherwise exceed terms specified in statutes or regulations will not in most cases bind the federal government unless the federal official making the promise acted within the scope of his or her authority in doing so. National Treasury Employees Union v. Reagan, 663 F.2d 239, 249 (D.C.Cir.1981); Molton, Allen & Williams, Inc. v. Harris, 613 F.2d 1176, 1179 (D.C.Cir.1980).

In this case McCauley has alleged no facts that would bring him within the narrow scope of permissible promissory estoppel against the federal government. Congress granted FHLMC an exemption from the employee security provisions of the civil service laws, see 12 U.S.C. Sec. 1452(b)(9), and FHLMC has, as the District Court noted, adopted a firm policy that all FHLMC employees (except the corporation's president) serve at the pleasure of FHLMC. See Memorandum Order at 2, RE 2. The oral representations on which McCauley relies contravene this firm policy, and McCauley has made no allegation that the FHLMC official making these representations had authority to waive this FHLMC rule. Indeed, there are no indications that any FHLMC official possesses such authority. Accordingly, McCauley's complaint will not support a claim of promissory estoppel against the federal government.

McCauley seeks to avoid this impediment by arguing that FHLMC should not be considered a federal government entity for purposes of employment relations and thus broader notions of promissory estoppel should apply here. This argument seeks to exploit FHLMC's somewhat ambiguous status as a "government corporation," an entity neither wholly in the public sphere nor wholly in the private sphere....