Schlang v. Key Airlines, Inc.

• Decision Date: 24 July 1992
• Docket Number: No. CV-S-86-838 RDF.,CV-S-86-838 RDF.
• Citation: 794 F. Supp. 1493
• Parties: Lawrence H. SCHLANG and Olen Rae Goodwin, Plaintiffs, v. KEY AIRLINES, INC., a Delaware Corporation, Bain Investments, Inc., a Massachusetts Corporation, Presidential Airways, Inc., a Delaware Corporation, Coleman Andrews, James Bridges, William F. Swaim, Jr., Thomas Kolfenbach, Sean Deaton, Steven W. Wilson, Donald Kyker, Jointly and Severally, and Does I-X, Defendants.
• Court: U.S. District Court — District of Nevada

794 F. Supp. 1493

Lawrence H. SCHLANG and Olen Rae Goodwin, Plaintiffs, v. KEY AIRLINES, INC., a Delaware Corporation, Bain Investments, Inc., a Massachusetts Corporation, Presidential Airways, Inc., a Delaware Corporation, Coleman Andrews, James Bridges, William F. Swaim, Jr., Thomas Kolfenbach, Sean Deaton, Steven W. Wilson, Donald Kyker, Jointly and Severally, and Does I-X, Defendants.

No. CV-S-86-838 RDF.

United States District Court, D. Nevada.

July 24, 1992.

COPYRIGHT MATERIAL OMITTED

Jack E. Kennedy and Sherry Bowers, Reno, Nev., for plaintiffs.

Thomas P. Brown, Los Angeles, Cal., Michael L. Lowry, Atlanta, Ga., for defendants.

DECISION

ROGER D. FOLEY, District Judge.

INTRODUCTION

Lawrence H. Schlang and Olen Rae Goodwin ("Plaintiffs") initiated this action against (1) three corporations — Key Airlines, Bain Investments and Presidential Airways; (2) six individuals — Coleman Andrews, James Bridges, William Swaim, Jr., Thomas Kolfenbach, Sean Deaton, Steven Wilson, Donald Kyker. Plaintiffs alleged violations of (1) the Railway Labor Act ("RLA"), 45 U.S.C. §§ 155-188; (2) the False Claims Act; and (3) retaliatory discharge in violation of both the RLA and state public policy; (4) breach of Plaintiffs' express and implied contracts of employment; (5) breach of the implied covenant of good faith and fair dealing; and (6) breach of contract for failure to pay bonuses, incentives and profit-sharing. Additionally, Plaintiff SCHLANG alleged defamation. On March 13, 1987, this court granted motions to dismiss Defendants PRESIDENTIAL AIRWAYS and BAIN INVESTMENTS, INC. from this action. Additionally, this court granted Defendants' motion for summary judgment for alleged violations of the False Claims Act.

After transcripts of testimony and arguments of counsel were prepared and both parties' post-trial briefs were filed, the case was submitted to the Court for decision in September, 1991.

The following recitation provides a brief orientation to this case. Key Airlines ("Key"), is a supplemental air carrier as defined by the Federal Air Regulations ("FARs"). A supplemental carrier is essentially a contract charter service, and therefore does not sell tickets to the general public. Key first hired Plaintiff GOODWIN in 1983, and then furloughed him in 1984. He rejoined Key in October 1984, at a salary of $36,000 per annum, later raised to $37,000 per annum, and continued in Key's employ until March 5, 1986. Plaintiff SCHLANG joined Key in May 1985 and worked for Key until March 5, 1986. His salary was $35,000 per annum.

In the spring of 1985, Key considered a change in their pilots' compensation package. In addition to a new pay schedule, management considered a system of bonuses, incentives and profitsharing. Plaintiff GOODWIN learned of these proposed changes in a May 1985 pilots' meeting. Plaintiff SCHLANG heard similar representations in his May 1985 job interview. By September 1985, however, Key made it clear that the pilots would not receive any bonuses, incentives or profit shares.

Twenty-one (21) Key pilots sent a letter dated September 5, 1985 to Defendant BRIDGES, Key's chief executive officer, that stated that these pilots were forming a pilots' union "for the purposes of negotiating a contract covering the working conditions of all cockpit crewmembers." Plaintiff GOODWIN was the union's interim chairman, and Plaintiff SCHLANG was on the union's bargaining committee. Plaintiffs claim they formed this union to address Key's unsafe practices. Defendants contend that the pilots organized themselves because of their dissatisfaction with their admittedly low salaries.

Key Airlines, Inc. is a wholly owned subsidiary of WorldCorp., Inc. and does business in the State of Nevada and other states and, during the relevant time period in this action, was authorized by the Federal Aviation Administration to operate as a supplemental air carrier.

During Plaintiffs' employment at Key Airlines, the individual Defendants held the following positions at Key Airlines: Coleman Andrews was the Chairman of the Board of Directors, and was very active in the day-to-day affairs of Key and was also the Chief Executive Officer of Key's parent corporation, World Corp. James Bridges was the Chief Executive Officer. William Swaim was the Vice President and General Manager of Operations. Beginning in February, 1986, Thomas Kolfenbach was the Director of Operations. Sean Deaton was the Operations Control Center Manager. Steven W. Wilson was the Chief Pilot of Operations. Donald Kyker was the Flight Manager.

During Plaintiffs' employment at Key Airlines, Plaintiffs were not represented by a union.

On September 5, 1985, the first meeting of the Key Airlines Pilot Association (KAPA) took place and at that time Plaintiff Schlang was appointed Chairman of KAPA's Negotiating Committee and Plaintiff Goodwin was elected KAPA's interim Chairman. A written communication of such information from KAPA to Key Airlines was received by Key Airlines shortly thereafter.

On October 20, 1985, a petition was sent to the National Mediation Board ("NMB") requesting that KAPA be certified as the legal collective bargaining agent for Key Airlines pilots and its flight engineers as well.

During the time they were employed at Key Airlines, Plaintiffs reported to Key Airlines alleged violations of the Federal Aviation Regulations (FARs) by Key Airlines and by entering them in Key Airlines' flight log books.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

Breach of Express or Implied Contract for Employment:

(a.) Verbal Statements:

Pursuant to Nevada law, if a written contract does not exist, a presumption arises that employment is at will. Brooks v. Hilton Casinos Inc., 959 F.2d 757, 759 (9th Cir.1992); American Bank Stationery v. Farmer, 106 Nev. 698, 701, 799 P.2d 1100 (1990); Vancheri v. GNLV Corp., 105 Nev. 417, 420, 777 P.2d 366 (1989). Consequently, as long as an employer does not violate state public policy, an employer may terminate an at-will employee "whenever and for whatever cause...." Smith v. Cladianos, 104 Nev. 67, 68, 752 P.2d 233 (1988); Vancheri, 105 Nev. at 421, 777 P.2d 366; K-Mart Corp. v. Ponsock, 103 Nev. 39, 47, 732 P.2d 1364 (1987).

An employee may rebut the presumption that his employment is at-will if he proves "by a preponderance of the evidence that there was an express or implied contract between his employer and himself that his employer would fire him only for cause." Farmer, 106 Nev. at 701, 799 P.2d 1100. To meet this burden, the employee must offer more than his subjective belief that he would be terminated only for just cause. See Brooks at 762 (Based on employees' testimony that they understood, assumed, or had the impression that satisfactory performance guaranteed their jobs, the court refused to find that the parties created anything other than an at-will contract stating, "a generalized understanding of job security based on satisfactory performance cannot create an implied contract of employment."); Bally's Grand Employees' Federal Credit Union v. Wallen, 105 Nev. 553, 556, 779 P.2d 956 (1989) (The court held that plaintiff's testimony that she "understood" that as long as she performed her duties she would retain her job "was insufficient as a matter of law to establish an intention on the part of the employer to create anything other than an at-will employment contract."); Vancheri, 105 Nev. at 421, 777 P.2d 366.

Plaintiff GOODWIN testified that neither Captain Johnston or Captain Heseltine notified him that he was an at-will employee, and that he assumed that once he was on the seniority list, as long as he "kept doing a reasonable job that he would maintain his job." Plaintiffs offered no evidence that any Key personnel ever told them that their reasonable performance guaranteed their job. Accordingly, Plaintiffs' testimony merely reflects their subjective belief and is legally insufficient to establish that they entered into anything other than an at-will employment contract.

(b.) Written Statements

Plaintiffs contend that a memorandum from Defendant BRIDGES to all Key employees contained statements that rebut the at-will presumption. The disputed memo, entitled "KeyAir Basic Beliefs", states in pertinent part:

One of the key responsibilities of any leadership position is to establish a set of values and to guard those values against all compromises. Your executive management team has established such a set of values for KeyAir.

Over time, you will consistently hear us refer to KeyAir basic beliefs. They will become an integral part of all future management training and I have attached a copy for perusal....

All of our managers owe our employees certain basic dignities.... No employee should be subjected to disciplinary action with no appeal process to higher levels of management if he or she feels that they have been treated fairly.

However, standardized disciplinary procedures alone cannot convert at-will employment into employment terminable for just cause only. Brooks at 760 (Disciplinary procedures are a generic feature of many employment relationships and therefore are insufficient as a matter of Nevada law to rebut the presumption of at-will employment.); Vancheri, 105 Nev. at 422, 777 P.2d 366 ("If we were to hold that the establishment of standard disciplinary procedures for employees is, in and of itself, sufficient to convert an at-will employee to an employee who can be fired only for cause, employers would be reluctant to continue to establish them."). Additionally, nothing in the above document alters Key's ability to terminate an employee at will. An employee may challenge a disciplinary action, but Key is under no obligation to alter its decision. See Sands Regent v. Valgardson, 105 Nev. 436, 439, 777 P.2d 898 (1989).

Neither Plaintiff had a written contract of employment with Key.

At no time, either prior to or during their employment at Key, was either Plaintiff told that...