Palm v. L. A. Dep't of Water & Power

• Decision Date: 10 May 2018
• Docket Number: No. 16-55691,16-55691
• Citation: 889 F.3d 1081
• Parties: Richard A. PALM, Plaintiff-Appellant, v. LOS ANGELES DEPARTMENT OF WATER AND POWER, a government agency; James Graden, an individual; Mark Ashford, an individual, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

889 F.3d 1081

Richard A. PALM, Plaintiff-Appellant,

v.LOS ANGELES DEPARTMENT OF WATER AND POWER, a government agency; James Graden, an individual; Mark Ashford, an individual, Defendants-Appellees.

No. 16-55691

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 6, 2017 Pasadena, California

Filed May 10, 2018

Allen B. Felahy (argued) and Franklin L. Ferguson Jr., Felahy Trial Lawyers APC, Los Angeles, California, for Plaintiff-Appellant.

Kristine A. Moon (argued), Deputy City Attorney; Anat Ehrlich, Assistant City Attorney; Joseph A. Brajevich, General Counsel, Water and Power; Michael N. Feuer, City Attorney; Office of the City Attorney, Los Angeles, California; for Defendants-Appellees.

Before: Paul J. Kelly, Jr.,^* Consuelo M. Callahan, and Carlos T. Bea, Circuit Judges.

OPINION

CALLAHAN, Circuit Judge:

Richard Palm appeals from the district court’s dismissal of his 42 U.S.C. § 1983 civil rights action. Palm claims that his employer, the Los Angeles Department of Water and Power ("LADWP"), terminated his employment in a probationary promotional position without due process of law in violation of the Fourteenth Amendment. We reject Palm’s claim because we hold that Palm lacked a constitutionally protected property interest in his probationary position.

I.

Plaintiff-Appellant Palm began working for Defendant-Appellee LADWP as a Steam Plant Assistant in 1987. On December 31, 2012, Palm was promoted to Steam Plant Maintenance Supervisor, which commenced a six-month probationary period in the new position. Palm thereafter allegedly made several complaints to his immediate supervisor, Defendant-Appellee James Graden, about LADWP’s noncompliance with state and federal health, safety, and labor laws. Among other things, Palm alleges that Graden unlawfully altered Palm’s time records. When Palm confronted Graden, Graden allegedly reproached him and threatened repercussions if Palm did not drop the issue.

After working in his probationary position for five months, Palm was given the choice of either "forced resignation" or termination from the probationary position. Palm chose to resign his position as Supervisor, after which he returned to his permanent job as Steam Plant Assistant. Palm then initiated an action against LADWP and Graden in California superior court, claiming whistleblower retaliation in violation of California Labor Code § 1102.5.¹ The superior court sustained a demurrer on the state law claim, but allowed Palm to amend his complaint to assert a civil rights claim for Monell liability under 42 U.S.C. § 1983. LADWP then removed the action to federal district court. The district court granted LADWP’s motion to dismiss the Monell claim, but allowed Palm to amend his complaint again.

In his third amended complaint ("TAC"), Palm added Defendant-Appellee Mark Ashford, a Plant Manager, to his action, and introduced another new claim: that LADWP, Graden, and Ashford had retaliated against him for exercising his First Amendment rights. LADWP filed a motion to dismiss the TAC for failure to state a claim upon which relief can be granted ( Fed. R. Civ. P. 12(b)(6) ), which the court granted with prejudice. The court held that Palm failed to plead a plausible free speech claim because Palm’s speech was not a matter of public concern.

Palm then sought leave to amend his complaint a fourth time to assert another new theory, and the one that is before us on appeal: that Defendants' threatened termination of Palm from his probationary position violated his Fifth and Fourteenth Amendment due process rights. The district court denied him leave to amend. The court found that amendment would be futile because Palm could not state a due process claim. First, the court summarily dismissed Palm’s Fifth Amendment claim on the ground that Defendants are not federal actors. Second, the court determined that Palm could not state a Fourteenth Amendment claim because he lacked a property interest in his probationary position. The court then dismissed Palm’s action with prejudice.

Undeterred, Palm filed a motion for reconsideration, which the district court denied because it found no clear error in its decision dismissing the action. See Fed. R. Civ. P. 60(b). Indeed, the court deemed it plain that Palm lacked a property interest in his probationary position.

Palm timely appealed the district court’s orders granting LADWP’s motion to dismiss, denying him leave to amend his TAC, and denying his motion for reconsideration.

II.

A.

We review an order granting a motion to dismiss for failure to state a claim de novo. Faulkner v. ADT Sec. Servs., Inc. , 706 F.3d 1017, 1019 (9th Cir. 2013). We review a denial of a motion for reconsideration and denial of leave to amend for abuse of discretion. Smith v. Pac. Props. & Dev. Corp. , 358 F.3d 1097, 1100 (9th Cir. 2004). That said, "[w]hether such a denial rests on an inaccurate view of the law and is therefore an abuse of discretion requires us to review the underlying legal determination de novo ." Id. (citation omitted). Finally, we review questions of state law de novo. McGraw v. City of Huntington Beach , 882 F.2d 384, 387–88 (9th Cir. 1989).

B.

Palm’s appeal focuses on his claim under the Fourteenth Amendment.² To prevail, Palm must demonstrate a constitutionally protected property interest in his probationary position. See Nozzi v. Hous. Auth. , 806 F.3d 1178, 1190–91 (9th Cir. 2015) (citing Bd. of Regents of State Colleges v. Roth , 408 U.S. 564, 569–70, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972) ). "It is well settled that the procedural due process protections of the Fourteenth Amendment apply only to deprivations of property interests, the existence and dimensions of which ‘are defined by existing rules or understandings that stem from an independent source such as state law.’ " McGraw , 882 F.2d at 389 (quoting Roth , 408 U.S. at 577, 92 S.Ct. 2701 ). "A [state] law establishes a property interest in employment if it restricts the grounds on which an employee may be discharged." Dorr v. Cnty. of Butte , 795 F.2d 875, 878 (9th Cir. 1986) (internal quotation marks omitted). "If discharge can only be for ‘just cause,’ an employee has a right to continued employment until there is just cause to dismiss him." Id. (internal quotation marks and alteration omitted). Whether a property interest exists is therefore informed by the process involved in terminating an employee, rather than any talismanic labels applied to a particular position—e.g., whether it is permanent or probationary. Indeed, "an important factor in deciding the property interest question is to determine whether the applicable state law restricts the grounds on which an employee may be discharged such that even a probationary employee could have a reasonable expectation of continued employment."³ McGraw , 882 F.2d at 390 (emphasis added; internal quotation marks omitted).

Because the City of Los Angeles is the employer in this case, our review of "applicable state law" turns on an analysis of the City’s charter and applicable personnel rules.⁴ See id . In interpreting these authorities, we apply California law governing rules of statutory instruction. Id. at 387–88. "In California, the fundamental rules of statutory construction apply in interpreting municipal enactments." Id. at 388 (citing DeYoung v. City of San Diego , 147 Cal. App. 3d 11, 17–18, 194 Cal.Rptr. 722 (1983) ).

In construing the [enactments] we must first ascertain the intent of the City Council so as to effectuate the purpose of the law, and then give the relevant provisions a reasonable and common sense interpretation consistent with the apparent purpose and intention of the local lawmakers. Additionally, significance should be attributed to every word, phrase, sentence and part of an act in pursuance of the legislative purpose, as the various parts of a statutory enactment must be harmonized by considering the particular clause or section in the context of the statutory framework as a whole.

Id. (citing DeYoung , 147 Cal. App. 3d at 17–18, 194 Cal.Rptr. 722 ) (internal citation omitted).

The texts of the Los Angeles Charter and Los Angeles Civil Service Rules indicate that probationary positions held by city employees are not vested with a protected property interest. Section 1016(a) of the Los Angeles Charter provides that "[n]o person in the classified civil service shall be discharged ... except for cause...." Los Angeles Charter & Admin. Code § 1016(a) (effective Apr. 8, 2011). At first blush, the "for cause" condition rings of a property interest in civil service positions. But not all civil service positions are alike, as reflected by the section titled "Termination During Probation." See id. § 1011(b). That provision, § 1011(b), establishes a distinct procedure for probationary employment. It provides that "[a]t or before the expiration of the probationary period, the appointing authority may terminate the probationary employee by delivering written notice of termination to the employee assigning in writing the reasons for the termination." Id. Critically, § 1011(b) does not require that "discharge can only be for ‘just cause.’ " Dorr , 795 F.2d at 878 (internal quotation marks omitted). Instead, it allows LADWP to terminate probationary employment based only on a subjective finding that the employee has demonstrated unsatisfactory performance—a fact that cuts sharply against a finding of a property interest in the probationary position. Id. at 878 (collecting cases). Indeed, in Dorr , we observed that "[t]he power of the appointing authority to determine, on a purely subjective basis , whether a probationary employee has performed satisfactorily undercuts any expectation of continued employment that might otherwise arise by virtue of the requirement that disciplinary dismissal be grounded upon objectively reasonable cause." Id. (emphasis added).

Section 1.26 of the Civil Service Rules similarly explains that "PROBATIONARY PERIOD means the...