# Appendix — Federated Department Stores, Inc. v. Cancellier

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1982
- **Citation:** 459 U.S. 859

## Text

*

INDEX TO APPENDIX
Aprenpix A

Opinion of the Court of Appeals
(672 F. 2d 1312)

Aprenvix B
Order of the Court of Appeals on
Denial of Rehearing ....

Appenpix C
Petition of Federated Department Stores, Inc.,
d/b/a I. Magnin For Rehearing with a Suggestion
of the Appropriateness of Rehearing En Banc ....
Aprenpix D
Excerpts from Plaintiffs’ Complaint, Pretrial State-
ment and Argument to the Jury
1. Excerpts from Plaintiffs’ Complaint
2. Excerpts from Plaintiffs’ Pretrial Statement ..
3. Excerpts from Plaintiffs’ Argument to the
Jury

Aprenvix E
Excerpts from Plaintiffs’ and Defendant’s Opening
Briefs on Appeal to the Ninth Circuit
1. Statement of Facts in Plaintiffs’ Brief
2. Statement of Facts in Defendant’s Brief

Aprenpix F
Defendant’s and Plaintiffs’ Proposed Jury Instrue-
tions on ADEA Liability and Objections of Both
Parties
1. Defendant's Proposed Jury Instruction No. 22
2. Plaintiffs’ Proposed Jury Intsruction No. 36
3. Defendant's Objection
4. Plaintiffs’ Objection
Apprenpix G
Instructions Inserted in Instruction No. 21
1. Instruction No. 34
2. Instruction No. 35

C- 1

D- 1
D. 7

D-10

Appendiz A-l
Appendix A
Philip D. CANCELLIER, John W. Costello and
Zelma Smith Ritter,
Plaintiffs-A ppellants/Cross-Appellees,
v.

FEDERATED DEPARTMENT STORES

d/b/a I. Magnin,
Defendant-Appellee/Cross- Appellant.

Nos. 81-4154, 81-4165.

United States Court of Appeals,
Ninth Circuit.

Argued and Submitted Dee. 16, 1981.
Decided March 30, 1982.

Robert S. Daggett, Brobeck, Phleger & Harrison, San
Francisco, Cal., argued, for plaintiffs-appellants/cross-
appellees (sic); Donald D. Connors, Brobeck, Phleger &
Harrison, San Francisco, Cal., on brief.

Maureen McClain, Littler, Mendelson, Fastiff & Tichy,
San Francisco, Cal., for defendant-Appellee/cross-appel-
lant (sic).

Appeal from the United States District Court for the
Northern District of California.

Before SNEED and PREGERSON, Circuit Judges, and
EAST*, District Judge.

*sitting by designation.

A-2 Appendiz

SNEED, Circuit Judge:

The plaintiffs below and appellants here, Philip D. Can-
celier, John W. Costello, and Zelma Smith Ritter, are form-
er employees of I. Magnin, the defendant below and
cross-appellant here. They won a jury verdict in the dis-
trict court totalling $1.9 million, plus court-awarded attor-
neys’ fees of $400,000, on their claims under the Age
Discrimination in Employment Act (ADEA), 29 U.S.C.
§§ 621-634 (1976 & Supp. II 1978) and pendent state claims.
They appeal denial of their motions for reinstatement and
for an injunction against I. Magnin. I Magnin cross-appeals
the judgment primarily on grounds of improper ADEA
instructions, use of a general verdict, and an erroneous
award of compensatory and punitive damages for breach
of the implied covenant.’ We affirm.

1. I. Magnin also includes numerous other grounds in its appeal
‘neluding failure to instruct on constructive discharge, failure to
properly instruct on the method of calculating ADEA and breach
of contract damages, partisan conduct, incorrect evidentiary rul-
ings, incorrect award of attorneys’ fees, failure to grant I.
nin’s motions for new trial or remittitur, and failure to grant I.
Magnin’s pretrial motion for separate trials.

L
FACTS

Plaintiffs-appellants are former executives of I. Magnin.
Cancellier was vice president for stores and operations.
Costello was divisional merchandise manager for acces-
sories. Ritter was a buyer of sportswear. In early 1978 they
were terminated after having been employed at I. Magnin
for twenty-five, seventeen, and eighteen years, respectively.
In July 1979 they brought this action in the United States
District Court for the Northern District of California alleg-
ing that their terminations violated the ADEA. They
sought back pay, liquidated damages, reinstatement to their
former positions, and an injunction against further age
discrimination at I. Magnin. Appellants also raised claims

Appendiz A3
under California law for breach of employment contract and
breach of the implied covenant of good faith and fair deal-
ing. Costello sought additional relief claiming fraud in
connection with a promise of future employment at I. Mag-
nin.

After a six-week trial the jury returned general verdicts
in favor of Cancellier in the amount of $800,000, Costello
in the amount of $600,000, and Ritter in the amount of
$500,000. The jury also returned verdicts in favor of I.
Magnin on Costello’s fraud claims. Both sides appeal. For
convenience, I. Magnin’s cross-appeal is discussed first.

IL.

I. MAGNIN’S CROSS-APPEAL

A. ADEA “Determining Factor” Standard
The ADEA makes it unlawful for an employer to dis-
charge any individual because of such individual’s age. 29
U.S.C. § 623(a) (1976). In Kelly v. American Standard, Inc.,
640 F.2d 974, 984-85 (9th Cir. 1981), this court set out the
requirements for a proper jury instruction on age discrim-
ination. We adopted the “determining factor” test estab-
lished in Laugesen v. Anaconda, 510 F.2d 307, 317 (6th
Cir. 1975), and restated as a but for” test in Loeb v.
Textron, 600 F.2d 1003, 1019 (Ist Cir. 1979). We rejected
the argument that plaintiff must prove age was the sole
factor in his discharge, and upheld a jury instruction stat-
ing that plaintiff has the burden of proving that one of the
reasons he was terminated was becanse of his age, and that
he should prevail if this factor “made a difference” in de-
termining whether the plaintiff was retained or discharged.”

2. The jury instruction summarized in Kelly is set out at
greater length below.
INSTRUCTION NO. 9
The plaintiff has the burden of proving:
(1) that one of the reasons he was terminated was because
of his age; and
(2) that as a result of the termination, he has suffered

A4 Appendiz
[1,2] The essence of a proper jury instruction under
Kelly is that it require the jury to focus on the marginal
effect of the age factor. Age need not be the sole factor in
a discharge or other discriminatory practice. Conversely,
it is not enough that age discrimination be present or even
that it figure in the decision to fire; age must “make a
difference” between termination and retention of the em-
ployee in the sense that, but for the presence of age dis-
crimination, the employee would not have been discharged.
[3] Here the district judge instructed the jury that
“Talge must be a determining factor in an employer's
personnel policies or practices before violation of the Act
occurs.” The district judge completely failed to give any
guidance as to the meaning of “determining factor” in law-
suits under the ADEA, or to refer to the Laugesen and
Loeb test we adopted in Kelly v. American Standard, Inc.
This was error. The words “determining factor” are not
self-explanatory. In general, fair application of the Act
requires the trial judge to formulate precisely what em-
ployer conduct the ADEA redresses and what employer
conduct it leaves undisturbed. Because the attribute with
which the statute is concerned comes to each of us in time,
it will inevitably be present in a multitude of employee
discharges. It will be a factor in many and a determining
factor in some. It is only this last group that can obtain
Title 29, Section 623(f), United States Code, provides that

it shall not be unlawful for an employer to discharge any
individual from his employment, or classify his employees in
any way, for good cause or where the discharge or classifica-
tion is based on reasonable factors other than age.

Ton ace tintvaniel Gat aty ent Ulloa eas tno Sats
in defendant’s decision to terminate the plaintiff’s em pe
ment; but plaintiff is nevertheless entitled to recover
such factor was his age and if, in fact, it made a difference
im determining whether or not the plaintiff was retained or
discharged .

See Kelly v. American Standard, Inc., 640 F.2d 974, 984-85 (9th
Cir. 1981).

Appendiz A-5
relief under the ADEA, even though, in the broad sense, it
aims to benefit the entire aged employment force.

[4] [However, a careful reading of the transcript and
record convinces us that in this case the instruction does
not require reversal. Giving it was harmless error. There
is little or no indication in the proceedings that the outcome
would have changed if the Kelly jury instruction had been
given. This case was not decided by a hairsbreadth. There
was ample evidence that consideration of age “made a dif-
ference” in the termination of Cancellier, Costello, and
Ritter. Moreover, it was conceded at oral argument that
the challenged instruction was fashioned by the judge from
language submitted by I. Magnin. While we are extremely
reluctant to affirm verdicts based on jury instructions dif-
ferent from those approved in Kelly or their equivalent,“
we find that on the facts of this case refusing a new trial
is consistent with substantial justice. Fed.R.Civ.P.61 ; Gins-
burg v. Ginsburg, 276 F.2d 94, 96 n.2 (9th Cir. 1960); 7
J. Moore & J. Lucas, Moore’s Federal Practice 961.11 &
n.la (2d ed. 1979). The instruction aproved in Kelly ade-
quately protects against mistaken inferences either that
age must be the sole factor in the discharge, or that age
may be less than a “but for” cause of the discharge. It is
strongly preferred. Here, however, we find the error
harmless.] [See Amendment, Appendix B.]

B. Use of General Verdict

I. Magnin contends that the district court committed
reversible error by using simple general verdict forms with-
out requiring special interrogatories or any breakdown of
the verdict by source of damages.* Thus, I. Magnin con-
tends, the possibility of punitive damages not recoverable

3. See note 2 supra.
4. The ADEA'’s proscription against age discrimination is
diate dheunch Glande badeetin Oe tae tae Mone

A-6 Appendiz
under the ADEA in this lawsuit“ or of duplicative damages
in the pendent state claims requires a new trial.

[5,6] Submission of special interrogatories is a matter
committed to the discretion of the district judge. Fed. R.
Civ.P. 49(b); Monsma v. Central Mutual Insurance Co.,
392 F.2d 49 (9th Cir. 1968); 5A J. Moore & J. Lucas,
Moore’s Federal Practice ſ 49.04 & n.3 (2d ed. 1981). A jury

Act, 29 U.S.C. §§ 201-219 A at 39 UDO 4 emt t

SY das L.. ) that
The provisions of this — 4 — ae
ance with the powers, wo Fey — gel
sections 211(b), 216 pepe oo for ope me thereof), and
217 of this title, and subsection (e) of this section. Any act
rohibited under section 623 of this title shall be deemed to
a prohibited act under section 215 of this title. Amounts
owing to a person as a result of a violation of this
shall be deemed to be unpaid minimum wages or unpaid over-
time compensation for purposes of section 216 and 217 of this
title: Provided, That e
only in cases of willful vi tions of this chapter . .
1 ime compensation snd ——

mum wages or “an

equal amount as liquidated damages.

Thus, an employer who violates the ADEA is liable for back

Inc., 640 F.2d 974, 978 (9th Cir. 1981). The award of liquidated
damages is in effect a substitute for punitive damages and is in-
tended to deter intentional violations of the ADEA. Id. at 979;
Dean v. American Security Insurance Co., 559 F.2d 1036, 1039-40
(5th Cir. 1977), cert. denied, 434 U.S. 1066, 98 S.Ct. 1243, 55 L.Ed.
2d 767 67 (1978); Douglas v American Cyanamid Co., 472 F.Supp.
298, 303 (D. Conn. 1979).

U
Co., 605 F.2d 128, 129-30 (4th Cir. 1979) ; Dean v. American Secu-
rity Insurance Co., supra, although some federal district courts
have held punitive damages are available, see, e. g., Kennedy v.
Mountain States Telephone & Telegraph Co., 449 F.Supp. 1008,
1009-11 (D.Colo. 1978). See also Kelly v. American Standard, Inc.,
640 F.2d at 983 & n.14 (citing cases). iti

Appendiz A-7
generally is not required to itemize the components that
enter into an award of damages. Neal v. Saga Shipping Co.,
407 F.2d 481, 489 (5th Cir.), cert denied, 395 U.S. 986, 89
S.Ct. 2143, 23 L.Ed.2d 775 (1969), cited in Frito-Lay, Inc.
v. Local 137, International Brotherhood of Teamsters, 623
F.2d 1354, 1365 (9th Cir. 1980), cert. denied, 449 U.S. 1013,
101 S.Ct. 571, 66 L.Ed.2d 472 (1981), and cert. denied, 448
U.S. 1112, 101 S.Ct. 922, 66 L.Ed.2d 841 (1981) (district
court sitting as trier of fact not required to itemize damage
award).

[7] When state claims for breach of the implied cove-
nant of good faith and fair dealing are joined to claims of
age discrimination under the ADEA, however, review of
jury verdicts presents special difficulty to appellate courts.
A general verdict may conceal punitive damages which may
not be allowed under the ADEA. If the state claims are
flawed, the entire verdict may have to be reversed. For
these reasons, a separate verdict for each claim and a sep-
arate verdict on punitive damages is strongly preferred.

[8] Nevertheless, failure to submit special interroga-
tories was not an abuse of discretion. See supra p. 1317.
The amounts awarded here are consistent with a reasonable
award on the ADEA and pendent state claims. We find no
reversible error. I. Magnin’s claim that it is impossible to
tell which plaintiffs prevailed on which of their claims is
unpersuasive. The court submitted general verdict forms
in favor of the defendant on each claim. The jury returned
general verdict forms in favor of I. Magnin on Costello’s
fraud claim and Costello’s negligent misrepresentation
claim; clearly, all other claims were resolved in favor of
the plaintiffs. The verdict is clear as to which plaintiffs
prevailed on which claims.

C. Tort Damages for Breach of the Implied Covenant
Breach of the implied covenant

A-8 Appendiz

I. Magnin contends that a claim for breach of the implied
covenant under the circumstances here is contrary to Cali-
fornia law. The contention is without merit.

[9,10] California law recognizes an implied covenant
of good faith and fair dealing in certain contracts that
neither party will do anything to deprive the other of the
benefit of the contract. See, e.g., Gruenberg v. Aetna Insur-
ance Co., 9 Cal.3d 566, 578, 108 Cal.Rptr. 480, 510 P.2d 1032
(1973) (en bane); Comunale v. Traders d General Insur-
ance Co., 50 Cal.2d 654, 658, 328 P.2d 198 (1958). California
courts have recently applied the duty created by the implied
covenant to the situation where the employee alleges no
more than long service and the existence of personnel poli-
cies or oral representations showing an implied promise
by the employer not to act arbitrarily in dealing with its
employees. Such claims sound in both contract and tort and
may give rise to emotional distress damages and punitive
damages. Pugh v. See’s Candies, Inc., 116 Cal.App.3d 311,
171 Cal.Rptr. 917 (1981); Cleary v. American Air Lines,
111 Cal.App.3d 443, 168 Cal.Rptr. 722 (1980) (alternative
holding). See Tameny v. Atlantic Richfield Co., 27 Cal.3d
167, 179 n.12, 164 Cal.Rptr. 839, 610 P.2d 1330 (1980)
(dicta). Cf. Note, Defining Public Policy Torts in At-Will
Dismissals, 34 Stan.L.Rev. 153 (1981) (arguing against
application of implied covenant to employment context).

Preemption

[11-13] The ADEA does not preempt the award of tort
damages on pendent state claims. Kelly v. American Stand-
ard, Inc., 640 F. 2d 974, 983 (9th Cir. 1981) (upholding emo-
tional distress damages under state age discrimination
statute). The award of tort damages on state claims here
did not duplicate ADEA relief. Plaintiffs’ ADEA claims
were based on age discrimination in firing. Plaintiffs’ con-

Appendiz A-9
tract and covenant claims were based on I. Magnin’s obli-
gation not to deal arbitrarily or unfairly in terminating
plaintiffs’ employment, an obligation created by I. Magnin’s
personnel policies and the fact of long service by the em-
ployee.* Punitive and emotional distress damages for this
violation, unavailable under the ADEA,’ do not duplicate
the ADEA award for back pay, lost benefits, and liquidated
damages. While the wisdom of allowing open-ended state
claims for breach of the implied covenant to coexist with
ADEA claims whose financial redress Congress has care-
fully limited to specific damage elements, see 29 U.S.C.
§ 626(b) (1976); Kelly v. American Standard, Inc., 640
F.2d at 983 n.14, is arguable, it is for Congress, not us, to
decide whether state common law remedies trench too
closely on the federal scheme. Pendent jurisdiction, of
course, is a doctrine of discretion. We recognize that in
appropriate circumstances dismissal of the state claims
without prejudice is proper. United Mineworkers v. Gibbs,
383 U.S. 715, 726-27, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218
(1966). Such circumstances may exist, for example, where
the trial judge finds that the state issues predominate in
terms of the comprehensiveness of the remedy sought, or
that there is a sufficient likelihood of jury confusion in
treating divergent legal theories of relief to justify separat-
ing state and federal claims. Id.

Notice
[14] I. Magnin contends that it did not have notice of
plaintiffs’ claims for tort (as opposed to contract) dam-

6. These claims do not depend on age. Thus, while the require-
ment of long service makes it more likely that successful plaintiffs
will be advanced in years, claims by plaintiffs who are outside the
ADEA-protected age range of from forty to seventy years are
certainly possible—e.g., a suit by a thirty-seven year old plaintiff
with twenty years of service.

7. See note 4 supra.

A-10 Appendiz
ages flowing from a breach of the implied covenant. Al-
though the general verdict prevents us from determining
with certainty the amount of punitive damages, they neces-
sarily make up a significant portion of the award.* But the
complaint alleging breach of the covenant implied in each
plaintiff's employment contract was sufficient notice of
plaintiffs’ claim. No specifie prayer for emotional distress
or punitive damages is needed. A final judgment must
grant the relief to which the prevailing party is entitled,
“even if such party has not demanded such relief in his
pleadings.” Fed.R.Civ.P. 54(¢). Moreover, plaintiffs’ pre-
trial statement itemized the emotional distress and punitive
damages sought. On these facts, I. Magnin’s claim of in-
adequate notice is without merit.

Pumitive damages

[15,16] A jury may award punitive damages if it finds
by a preponderance of the evidence that defendant was
guilty of malice, oppression, or fraud. Cal.Civ.Code § 3294
(West 1981); Egan v. Mutual of Omaha Insurance Co., 24
Cal.3d 809, 819, 169 Cal.Rptr. 691, 620 P.2d 141 (1979). It
is a question for the jury whether defendant’s conduct was
fraudulent, malicious, or oppressive. Id. at 821, 169 Cal.

after deductions of $70,000, $22,500, and $47,500 for severance pay
earnings,

supra. Actual damages may have been higher. See De-
— —— 58

Appendiz A-ll

Rptr. 691, 620 P.2d 141. The evidence before the jury ade-
quately supported a finding against I. Magnin on the issue
of punitive damages.

D. Other Alleged Errors

I. Magnin’s additional claims of error are without merit.“
A thorough review of the record below establishes that the
trial was fairly and properly conducted.

III.

APPEAL OF CANCELLIER, COSTELLO,
AND RITTER

A. Reinstatement and Injunction

[17, 18] The ADEA provides that in any action
brought to enforce [the Act] the court shall have jurisdic-
tion to grant such legal or equitable relief as may be appro-
priate ... including without limitation judgments compel-
ling employment, reinstatement or promotion ... 29
U.S.C. § 626(b) (1976). Reinstatement is not a mandatory
remedy ; it lies within the discretion of the trial court after
careful consideration of the particular facts of the case.
Combes v. Griffin Television, Inc., 421 F.Supp. 841, 846
(W.D.Ok1.1976). Ordinarily a verdict for plaintiff on the
age discrimination claim is res judicata on plaintiff’s equit-
able reinstatement claim. Cleverly v. Western Electric Co.,
450 F.Supp. 507, 511 (W.D.Mo.1978), aff’d, 594 F.2d 638
(8th Cir. 1979). However, courts have refused to grant re-
instatement where the employer continued a reduction in
force for permissible business reasons, id., or where dis-
cord and antagonism between the parties made it prefer-
able to fashion relief from other available remedies,
Combes v. Griffin Television, Inc., supra, at 846-47.

[19] Damages in lieu of reinstatement may be awarded

9. See note 1 supra.

A-12 Appendiz

in addition to liquidated damages. However, the value of re-
instatement is often speculative.” Thus, availability of a
substantial liquidated damages award may be a proper con-
sideration in denying additional damages in lieu of rein-
statement. Loeb v. Textron, Inc., 600 F.2d 1003, 1021-23 (1st
Cir. 1979).

[20] The trial judge in this case denied reinstatement
because he found evidence of acrimony in the record and
because he was “fully satisfied that [the verdict] has made
the plaintiffs whole.” Clerk’s Record 124. The court noted
the testimony of an I. Magnin officer who referred to plain-
tiff Ritter as a “cancer.” I. Magnin’s numerous attacks dur-
ing the trial on plaintiffs’ abilities support the trial judge’s
conclusion that plaintiffs and I. Magnin could no longer
“eo-exist in a business relationship that would be produc-
tive to the consumer, community or to the business itself.”
Clerk’s Record 125. By virtue of his position in conducting
the trial, the judge was peculiarly well-situated to observe
the demeanor of plaintiffs and defendants in making this
determination. Moreover, in view of the substantial verdict
the judge did not abuse his discretion in finding that it had
made the plaintiffs whole.

[21] Like the reinstatement remedy, injunctive relief is
available under the ADEA when appropriate. The trial
judge found that the $2.3 million judgment against I. Magin,
including attorneys’ fees, was sufficient to discourage I.
Magnin from practicing age discrimination in the future.
This finding was not an abuse of discretion.

B. Attorneys’ Fees on Appeal
[22] A grant of fees on appeal is within the discretion

10. A possible exception would be cases involving the breach of
employment contracts of specified duration.

Appendiz 4-13
of the appellate court. Kelly v. American Standard, Inc., 640
F.2d 974, 986 (9th Cir. 1981). Although plaintiffs did not
prevail on their reinstatement and injunction elaims, an
award of fees on appeal in some amount is appropriate to
reflect successful defense of the verdict below. See id; Clev-
erly v. Western Electric Co., 594 F.2d 638, 642 (8th Cir.
1979) (fees awarded to plaintiff denied reinstatement). We
remand to the district court for a determination of the
proper amount.

IV.

CONCLUSION

While the instructions approved in Kelly v. American
Standard, Inc., supra, and separate verdict forms for each
claim, as well as a separate verdict form for punitive dam-
ages, are preferred, the trial judge did not commit reversi-
ble error in instructing the jury on “determining factor”
under the ADEA, in using a genera! verdict, or in allowing
tort damages on pendent state claims. Nor was denial of
plaintiffs’ motions for reinstatement and for injunctive re-
lief against continuing age discrimination at I. Magnin an
abuse of discretion. Plaintiffs are entitled to reasonable at-
torneys’ fees in light of the outcome on appeal. The judge-
ment of the district court is affirmed.

AFFTRMED.

Appendix B-1

Appendix B

Filed—May 27 1982

Phillip B. Winberry
Clerk, U.S. Court of Appeals

In the

United States Court of Appeals
For the Ninth Circuit

Nos. 81-4154, 81-4165

Pau D. Cancetuer, Jonx W. CosrxILo
and ZeLma Smita Ritter,

Plaintiff s-Appellees/Cross-A ppellants,
v.

FrDEnATRD DepartTMENT Stores d/b/a I. Maxx,
Defendant-Appellant/Cross-Appellee.
ORDER

Before: SNEED and PREGERSON, Circuit Judges
and EAST“, District Judge

The panel as constituted in the above case has voted to
amend its March 30, 1982 opinion by inserting in place of
the paragraph beginning on page 4, line 12, and ending on
page 5, line 2, of the slip opinion the following paragraphs :
An erroneous ruling which relates to the substantial
rights of a party is grounds for reversal unless it
affirmatively appears from the whole record that it
was not prejudicial. McCandless v. United States, 298
U.S. 342, 347-48 (1936). This is especially true of an

*Honorable William G. East, Senior United States District Judge
for the District of Oregon, sitting by designation.

Appendiz
error in jury instructions. Fillippon v. Albion Vein
Slate Co., 250 U.S. 76, 82 (1919). However, a careful
reading of the transcript and record convinces us that
in this case the instruction does not require reversal.
Giving it was harmless error.

There is no indication in the proceedings that the
outcome would have changed if the Kelly jury instruc-
tion had been given; to the contrary, it affirmatively
appears from the record that the instruction did not
prejudice defendant. This case was not decided by a
hairsbreadth. There was ample evidence that consider-
ation of age “made a difference” in the termination of
Cancellier, Costello, and Ritter. Cf. Van Domelen v.
Westinghouse Electric Corp., 382 F.2d 385, 387 (9th
Cir. 1967) (ample evidence of forbearance); TSS
Sportswear, Limited v. Swank Shop (Guam), Inc., 380
F.2d 512, 522, 523 (9th Cir. 1967) (overwhelu.ing sup-
port in record for result below). Unlike the instruc-
tions given in cases requiring reversal, which affirma-
tively stated an erroneous version of the law, United
States v. River Rouge Improvement Co., 269 U.S. 411,
420-21 (1926); Fillipon, supra at 83-84, or forbade the
jury to consider what it properly should have con-
sidered, McCandless, supra at 345, the trial judge’s
instruction here was merely an unelaborated version
of the correct standard. Significantly, the challenged
instruction was fashioned by the judge from language
submitted by I. Magnin.

While we are extremely reluctant to affirm verdicts
based on jury instructions different from those ap-
proved in Kelly or their equivalent,“ we find that on
the facts of this case refusing a new trial is consistent
with substantial justice. Fed. R. Civ. P. 61; Ginsburg

Appendiz B38
v. Ginsburg, 276 F.2d 94, 96 n.2 (9th Cir. 1960); 7 J.
Moore & J. Lucas, Moore’s Federal Practice N 61.11 &
n.la (2d ed. 1979). The instruction approved in Kelly
adequately protects against mistaken inferences either
that age must be the sole factor in the discharge, or
that age may be less than a “but for” cause of the
discharge. It is strongly preferred. Here, however,
where the record convincingly rebuts any presumption
of prejudice, we find the error harmiess.

With the opinion so amended, the pane! has voted unani-
mously to deny the petition for rehearing and to reject the
suggestion for rehearing en banc.

The full court has been advised of the suggestion for en
bane rehearing, and no judge of the court has requested a
vote on the suggestion. Fed. R. App. P. 35(b).

The petition for rehearing is denied and the suggestion
for a rehearing en banc is rejected.

Appendiz C-1
Appendix C
In the
United States Court of Appeals
For the Ninth Circuit

Nos. 81-4154, 81-4165

Phu D. Canceiumer, Jonn W. Costetto
and Zxl uA Surru Rirrer,

Plaintiffs-Appellants/Oross-Appellees,

V.

Feperatep DepartTMENT Stores d/b/a I. Maaxix,
Defendant-A ppellee/Cross-Appellant.
PETITION OF
DEFENDANT-APPELLEE/CROSS-APPELLANT
FEDERATED DEPARTMENT STORES, INC.
d/b/a I. MAGNIN
FOR REHEARING WITH A SUGGESTION
OF THE APPROPRIATENESS
OF REHEARING EN BANC

PRELIMINARY STATEMENT AND CERTIFICATE
OF COUNSEL

I. Magnin respectfully petitions for rehearing, and sug-
gests the appropriateness of rehearing en banc, of a single
issue, viz., was not the error’ committed by the district
court in instructing the jury prejudicial to Magnin’s sub-
stantial rights, rather than harmless as the opinion says?
That question has never been briefed or argued anywhere
in the litigation, yet the holding of the Panel on it is the

1. After careful discussion of the ADEA liability instruction
the court below gave the jury, the Court said (Op., p. 3), “This was
error.“

C-2 Appendiz
sole foundation for this Court’s judgment against Magnin.
Both sides assumed in their briefs and at the argument
that if Magnin’s contentions about error in the jury instruc-
tions were accepted by the Court, as they were in the
opinion, that the judgment would be reversed. Plaintiffs
confined themselves to submitting that the instruction on
liability for age discrimination under the ADEA was in
all respects correct (see Pl. Resp. Br., p. 11). Hence the
Court has yet to hear from counsel on whether the errors
of the district court, emphatic yet careful discussion of
which takes up the bulk of the opinion, were prejudicial
or harmless.’

We certify“ to our belief that the decision of the Panel
filed March 30, 1982:

(1) While holding emphatically that the court below
committed error by “completely fail(ing) to give (the
jury) any guidance as to the meaning of (the) ‘deter-
mining factor’” finding the jury had to make before
returning any ADEA verdict for plaintiffs, and hold-
ing just as emphatically that the district court went
against the strong preference of the law in this Cir-
cuit in permitting the jury to find for plaintiffs on
general verdicts rather than submitting separate ver-
dicts on the state and federal claims (and on punitive

2. While the Court used the flat of error when it

Appendiz C-3
damages), the Panel also decided that what occurred
was harmless error requiring no new trial—and we
submit that in so deciding the Panel overlooked de-
cisions of both this Court and the Supreme Court on
the test for prejudicial or harmless error in jury in-
structions ;

(2) While the opinion treats in the traditional fash-
ion as separate issues (a) the error of the Court
below in instructing the jury and (b) the unwisdom
of permitting the jury to return general verdicts which
lumped decision of federal and state claims together,
in so doing the Panel overlooked the cumulative effect
of both errors and that “their cumulative effect was
prejudicial,” Gordon Mailloux Ent. v. Fireman’s Ins.
Co. of Newark, N. J., 366 F.2d 740, 742 (9 Cir. 1966),
Northern Pacific Railway v. Herman, 478 F.2d 1167
(9 Cir. 1973), because the jury in this case, spurned
in its plea for further instruction on age discrimina-
tion under ADEA, inevitably found that I. Magnin
violated ADEA not upon the federal standard which
governs ADEA liability, but upon a different, preju-
dicial standard of California law for liability for em-
ployee terminations the jury thought to be unfair; and

(3) In treating the errors as harmless and hence
to require no new trial—through an opinion which
treated them as separate and distinct for purposes of
traditional appellate review and analysis rather than
as errors which cumulated or coagulated at the trial
into overall prejudicial error—the decision has created
a dangerous new doctrine of harmless error for ADEA
age discrimination cases and thus failed to accomplish
its implicit statement of purpose to clarify the law in
this Cirenit for ADEA cases tried to District Court
juries in the future.

C4 Appendiz
THE UNBRIEFED AND UNARGUED RATIONALE
FOR THE JUDGMENT AGAINST MAGNIN—
AND HOW THE ERRORS THE COURT FOUND
COMBINED WITH EACH OTHER TO PREJUDICE
MAGNIN’S SUBSTANTIAL SUBSTANTIVE RIGHTS

The judgment of this Court against Magnin, as we
stated at the outset, rests upon the ultimate conclusion that
the errors the court below committed were harmless. Since
both sides assumed in both their briefs and arguments that
the error Magnin claimed in the ADEA instructions would
be reversible error, the question of reversible or harmless
error has never been addressed by counsel, yet the ultimate
conclusion and judgment of the Court rests upon it.

Although the opinion insists that the District Courts
refrain in the future from giving the ADEA liability in-
structions the court below gave the jury here and give,
instead, an instruction conforming with Kelly, and warns
no less pointedly of the future consequences of failure to
submit separate jury verdicts on federal, state and punitive
damage claims, we believe that the opinion also has created
a new doctrine of harmless error for federal age discrimina-
tion cases under the ADEA which will be just as dangerous
in future age litigation in the District Courts as the errors
the opinion so capably identifies and discusses. There should
be no special rules for ADEA cases, of course. And this
means not only that there must be no special body of law
creating new or unfamiliar obstacles to recovery for viola-
tion of ADEA but also that settled law on determination of
the harmless or prejudicial nature of error in civil cases,
and the right to a new trial for a litigant whose substantial
rights have been prejudiced on matters of substance, must
be applied equally to federal age cases as in all other civil
litigation. There is nothing in ADEA, which admittedly

Appendiz C-5
intrigues with new questions over an “attribute *** which
*** comes to each of us in time,“ to inspire a new doctrine
of harmless error to brush aside errors of the magnitude
found by the Court here—no matter how this Court views,
or the District Courts in other cases may view, the weight
of the evidence against the defendant. There is nothing
in the ADEA to justify or require a departure from settled
principles which would have entitled I. Magnin to a new
trial in another kind of case as a result of the prejudice to
its substantial rights from the errors here.

It is for these reasons that we suggest, with deference,
the appropriateness of rehearing en banc.

The opinion of the Court and the judgment it entered
stand in sharp contrast with each other. The opinion of
the Panel“ identifies and discusses the missteps of the
district court in language more powerful than that used
by the Court in other cases to reverse a judgment. Each
of Magnin’s main submissions on appeal is upheld in the
opinion. We have no doubt that the discussion in the opinion
of “determining factor” and the need for separate verdicts
will be a landmark and the source of governing law in
this Circuit and elsewhere for years to come in jury trials
of age discrimination cases, but its view that the errors on
those matters were harmless in this case is likely to be
dangerous. Before turning to the way in which Magnin’s
submissions adopted by the Court show reversible error
when viewed together as they occurred at the trial rather
than separately in the traditional manner of an appellate
opinion, we take the language of the opinion itself to de-

C-6 Appendiz
scribe what occurred and the reasons the Panel gave in
warning that what occurred must not occur again in an
ADEA jury case in this Circuit.
The Error in the Determining Factor Instructions“

The opinion says (pp. 3-5):

“Here the district judge instructed the jury that

‘(a)ge must be a determining factor in an employer’s
personnel policies or practices before violation of the
Act occurs.’ The district judge completely failed to
give any guidance as to the meaning of ‘determining
factor’ in lawsuits under the ADEA, or to refer to the
Laugesen and Loeb test we adopted in Kelly v. Ameri-
can Standards, Inc. This was error. The words deter-
mining factor’ are not self-explanatory. In general,
fair application of the Act requires the trial judge to
formulate precisely what employer conduct the ADEA
redresses and what employer conduct it leaves undis-
turbed. Because the attribute with which the statute
is concerned comes to each of us in time, it will inevi-
tably be present in a multitude of discharges. It will be
a factor in many and a determining factor in some. It
is only this last group that can obtain relief under the
ADEA, even though, in the broad sense, it aims to ben-
efit the entire aged employment force.***
%s While we are extremely reluctant to affirm ver-
dicts based on jury instructions different from those
approved in Kelly or their equivalent, we find that on
the facts of this case refusing a new trial is consistent
with substantial justice. Fed. R. Civ. P. 61; Ginsburg
v. Ginsburg, 276 F.2d 94 (9th Cir. 1960); 7 J. Moore
& J. Lucas, Moore’s Federal Practice { 61.11 & n.1 (2d
ed. 1979). The instruction approved in Kelly ade-
quately protects against mistaken inferences either
that age must be the sole factor in the discharge, or
that age may be less than a “but for” cause of the
discharge. It is strongly preferred.”

6. Emphasis in matter quoted here has been supplied.

Appendiz C-7
Error in Permitting the Jury to Return General Verdicts
The Court said (Op, p. 5):

“When state claims for breach of the implied cove-
nant of good faith and fair dealing are joined to claims
of age discrimination under the ADEA, however,
review of jury verdicts presents special difficulty to
appellate courts. A general verdict may conceal puni-
tive damages which may not be allowed under the
ADEA. If the state claims are flawed, the entire ver-
dict may have to be reversed. For these reasons, a
separate verdict for each claim and a separate verdict

on punitive damages is strongly preferred.”

The Cumulative Prejudicial Effect of These Errors: The
State Claims Truly Flaw the ADEA Verdict Here

Simply put, the erroneous instructions, which “com-
pletely failed to give any guidance as to the meaning of
‘determining factor’,” permitted the jury to find, and the
record shows the jury did find, damages against Magnin
for ADEA age discrimination upon a California law stand-
ard for recovery of tort damage for breach of an implied
covenant of fair dealing different and looser than what is
required to recover for violation of the federal statute;
and since the form of verdict makes it impossible to hold
that the jury did not substitute the implied covenant lia-
bility standard in deciding the ADEA age case, as separate
verdicts might have done, the error must be regarded by
this Court as prejudicial to Magnin’s substantial rights and
hence to require reversal.

We do not here explicate again the content and short-
comings of the ADEA determining factor instruction given
by the district court, because the words of the opinion
quoted above do that exactly. But we do call urgent atten-

C-8 Appendiz
tion to the instructions the district court gave the jury on
breach of the implied covenant (R. Tr. 4086-4087) :

“This duty of good faith and fair dealing forbids
either party from doing anything which will interfere
with the right of the other to receive the benefits of
the agreement. The implied duty imposes on each party
the obligation to do everything that the contract pre-
supposes they will do to accomplish its purposes.

Liability for an employer’s breach of the duty of
good faith and fair dealing is imposed for failure of
the employer to act in good faith and to deal fairly
rather than arbitrarily in the performance of its obli-
gations under an employment contract so as not to
frustrate the purpose of the employment contract or
to deny to the employee the benefits of such a contract.

“Tt is not necessary to prove actual dishonesty, fraud
or concealment in order for a plaintiff to recover dam-
ages for breach of the implied duty of good faith and
fair dealing.

“Each plaintiff contends that I. Magnin breached its
covenant of good faith and fair dealing. If you find
that a plaintiff failed to prove that I. Magnin breached
its covenant of good faith and fair dealing, then you
must return a verdict for defendant I. Magnin on that
plaintiff’s breach of covenant claim.

“If you find that a plaintiff has proved by a pre-
ponderance of the evidence that I. Magnin did, in fact,
breach its covenant of good faith and fair dealing, then
you may return a verdict for that plaintiff on his or
her breach of covenant claim.”

Within minutes after the jury retired, this occurred (Rtr.
4108) :
“T just received a note, dated 1/15/81, 13:30 hours,
from the jury, that reads as follows:
The jury in C 79-1591 RPA requests review of
your interpretation of ADEA.’
J interpret that to mean that they want a reread of

Appendiz C-

“Accordingly, I am going to reread the following
instructions, which—as given by me. I’m going to give
them to you in the order in which they were given by
me. And they’re marked Defendant’s 21, Plaintiffs’ 34,
Plaintiffs’ 35, Defendant’s 21, as amended, and that’s it.

“Do you wish me to repeat them.?

“Ms. De Oddone: No, Your Honor, I have it.

“The Court: Mr. Connors?

I'm sorry. I thought you had them in front of you.

“Mr. Connors: No. I think I know what they are.

“The Court: They’re the Age Discrimination In Em-
ployment Act of 67, order and burden of proof under
ADEA, demotion in violation of ADEA, Age Discrim-
ination in Employment Act of 1967.”

Then (id. at 4109-4110) the district court reread to the jury
the very instructions this Court has held “completely failed
to give any guidance as to the meaning ‘determining factor’
in lawsuits under the ADEA.” And, the opinion holds, “This
was error” (Op., p. 3).

If the district court, amply warned by the jury’s note,
had submitted verdicts to the jury on ADEA and the im-
plied covenant claims separately, then it would be possible
for the reviewing Court to believe that the jury might have
applied the ADEA standard of Kelly, even though not
instructed upon it, and not the looser California liability
standard for implied covenant claims. The opinion teaches
plainly that jury resort to the California implied covenant
standard in deciding the federal ADEA case would be a
misstatement and misshaping of federal law,“ and that is

C-10 Appendiz

The conclusion is rational, probable and comfortable that
the trial jury, whose dismay or confusion over the correct
ADEA determining factor standard was meticulously ex-
pressed to the court below on the record, simply applied—
because no other guidance was given—the different stand-
ard for breach of the implied covenant to hold Magnin
liable in damages for age discrimination under the ADEA,
in the language of the covenant instructions, “for failure
to act in good faith and to deal fairly” with plaintiffs.
Lacking any explanation at all of the meaning of the stand-
ard for liability on the federal age claim—a state of affairs
emphatically declared by both the opinion of this Court
and the jury's note to the district judge the jury’s verdict
in this case, we submit, could not have been founded on
any standard other than the state law instruction that
liability might be imposed if the jury regarded plaintiffs’
terminations as unfair.

That prejudiced Magnin’s substantial rights* and such
is the standard for reversible error, as we now show.

THE STANDARD FOR TESTING FOR REVERSIBLE
OR HARMLESS ERROR IN JURY INSTRUCTIONS:
ERROR IN INSTRUCTIONS ON SUBSTANCE
IS PRESUMED PREJUDICIAL

The opinion cites as sole authority for the holding that
the ADEA instructions were only harmless error, F.R. Civ.
P., Rule 61; Ginsburg v. Ginsburg, 276 F.2d 94 (9 Cir.
1960) ; and Moore’s Federal Practice, and for its separately

8. One such right is found in the award here of nearly half
million dollars in attorneys’ fees against Magnin. The right to fees
exists only under ADEA. The award of fees in this case is tanta-
mount to recovery of attorneys’ fees under California law which
provides no such right.

Appendiz C-11
discussed and reasoned holding that issues over jury verdict
forms are committed to the discretion of the district judge,
Rule 49(b); Monsma v. Central Mutual Insurance Com-
pany, 392 F.2d 49 (9 Cir. 1968) ; and Moore.“ Moore point-
edly includes in the cited discussion, as a caveat (5A
Moore’s Federal Practice para. 49.04, p. 49-38, 2d.ed. 1981) :

“When a general verdict is to be returned, the charge

of the court must necessarily be more comprehensive
than that where only a special verdict is returned.”

The cited decision of this Court in Ginsburg illustrates
the standard for determining whether error is harmless or
prejudicial in a much different kind of case. The defendant
filed a notice of appeal from an order denying his motion
for a new trial and to set aside the judgment, but no appeal
from the judgment itself was taken. This Court applied 28
U.S.C. See. 2111 (“the court shall give judgment *** without
regard to errors or defects which do not affect the sub-
stantial rights of the parties”) in holding that the defendant
would be deemed to have filed a notice of appeal from the
judgment. The citation to Moore provides, in addition to
the caveat, a general discussion of Section 2111, and parallel
language in Rule 61, as applied to “niceties of form.”

Determination of the harmless or reversible nature of
error in jury instructions on substance, however, is a dif-
ferent matter, as decisions of this Court and the Supreme
Court not cited in the opinion show. Nothing in Rule 61,
Section 2111 (formerly Judicial Code See. 269, 28 U.S.C.

C-12 Appendiz

Sec. 391) or case authority calls upon a reviewing court to
determine what a jury in a new trial might do.” The inquiry
is what the jury which decided the case on appeal could be
said to have done or not done.

The Advisory Committee Notes on Rule 61, after first
confirming its lineage from Section 2111 (formerly Sec.
391) and also from Section 777, direct the reader to the
decision in McCandless v. United States, 298 U.S. 342
(1936), where the Court held rejection of certain evidence
to require reversal. The Court said (298 U.S. at 347-348) :

“Tn this situation Section 269 is not controlling. That
section simply requires that judgment on review shall
be given after an examination of the entire record
‘without regard to technical errors, defects, or excep-
tions which do not affect the substantial rights of the
parties.’ This, as the language plainly shows, does not
change the well-settled rule that an erroneous ruling
which relates to the substantial rights of a party is
ground for reversal unless it affirmatively appears from
the whole record that it was not prejudicial. United
States v. River Rouge Co., 269 U.S. 411, 421; Fillippon
v. Albion Vein Slate Co., 250 U.S. 76, 82; Williams v.
Great Southern Lumber Co., 277 U.S. 19, 26” (Under-

scoring in original.)

Accord: United States v. River Rouge Co., 269 U.S, 411
(1926) ; Kotteakos v. United States, 328 U.S. 750 (1946) ;

10. See Traynor, The Riddle of Harmless Error (Ohio Univ.
Press 1970), p. 27.

11. 328 U.S. at 765:

Appendiz C-13
and, especially, Fillippon v. Albion Vein Slate Co., 250 U.S.
76 (1919).

Just as the decisions of the Supreme Court distinguish
carefully between technical, formal matters and matters of
substance in deciding whether an error at trial was preju-
dicial or harmless, so do decisions * this Court not cited
in the opinion. We have already cited Gordon Mailloux Ent.
v. Fireman’s Ins. Co. of Newark, N.J., supra, on the coagu-
lation of one or more harmless errors into error which is
prejudicial overall, Even more closely in point are the de-
cisions of this Court in Almaraz v. Universal Marine Corp.,
472 F.2d 123 (9 Cir. 1973), Northern Pacific Railway v.
Herman, 478 F.2d 1167 (9 Cir. 1971), and Pollock v. Koeh-
ring Co., 540 F.2d 425 (9 Cir. 1976). Almaraz, a longshore-
man’s action for injuries received in unloading cargo, holds
(472 F. ad at 124):

“The defendant objected to this charge (i.e., on con-
tributory negligence), arguing that the instruction

12. US. at 81-82:

:
.
f
2
2
4
2
4
i
;
4

to the jury in that it excluded a material element that
needed to be considered in determining whether
should be held guilty of contributory negligence under the

C-14 Appendiz
failed to provide a standard against which the jury
could measure Almaraz’s behavior. We agree.
“Although the trial judge informed the jury that
Almaraz should have exercised ordinary care, he did
not state that the standard of conduct required to avoid
negligence was that of a reasonably prudent person
under similar circumstances. This failure allowed the
jury to employ any standard it might choose: a friend,
a juror or even Almaraz as the standard. We hold that
this omission constituted reversible error.”

In Northern Pacific Railway, the Court applied the test
of Fillippon v. Albion Vein Slate Co., supra, for harmless
or prejudicial error in jury instructions and held (478 F. 2d
at 1171):

“After reading the entire instruction it appears to
this court that the instruction was confusing and left
the jury with the mistaken impression that estoppel
was a complete defense to both of plaintiff’s causes of
action, and it was not, The instruction is prejudicial
because it is confusing and inconsistent on a material
issue and could possibly mislead the jury.

“Error in a specific instruction is not cured by gen-
eral statements which set out the respective conten-
tions. See United States v. Natt McDougall Co., 381
F.2d 686 (9th Cir. 1967). But even in the general in-
structions the trial court did not make it clear that
either of plaintiff’s theories would support recovery.

“Erroneous instructions in a jury trial are presump-
tively injurious and are grounds for reversal unless it
affirmatively appears on the record that the error was
harmless. Fillippon v. Albion Vein Slate Co., 250 U.S.
76, 39 S.Ct. 435, 63 L.Ed. 853 (1919). As this Court
said in Pacific Greyhound Lines v. Zane, 160 F. 2d 731
(9th Cir. 1947) :

“ ‘Nothing in the record enables us to ascertain
upon which theory of fraud the jury may have

Appendiz 0-15
rested its general verdict. The presence of these
conflicting instructions provides no assurance that
the error did not materially affect the jury’s ver-
dict. Id. at 737.’

“Since there is nothing in this record which affirma-
tively shows upon what theory the jury based its gen-
eral verdict for defe:mdant, the case must be reversed
and remanded.”

And in Pollock, where the Panel included Judge East, the
Court held (540 F.2d at 426-427) :

“The only question before us is whether this error
requires reversal. Both parties to this appeal have cited
California law on the issue. If it applied, Henderson
would dictate reversal. Although we look to state law
for the correct substance of jury instructions, the
question whether an incorrect instruction is prejudi-
cially erroneous is a procedural one requiring appli-
cation of federal law. Lones v. Detroit, Toledo and
Ironton Ry. Co., 398 F.2d 914, 920 (6th Cir. 1968),
cert. denied, 393 U.S. 1063, 89 S.Ct. 714, 21 L.Ed.2d 705
(1969) ; accord, Seltzer v. Chesley, 512 F.2d 1030, 1035
(9th Cir. 1975); see Rule 51, Fed.R.Civ.P.

“Our inquiry is, therefore, whether, looking to the
instructions as a whole, the substance of the applicable
law was fairly and correctly covered. Bolden v. Kansas
City Southern Ry. Co., 468 F. 2d 580 (5th Cir. 1972).
In making this inquiry, we note that both inconsistent
or equivocal instructions and incorrect statements of
the law may be prejudicially erroneous. Bollenbach v.
United States, 326 U.S. 607, 612, 66 S.Ct. 402, 90 L.Ed.
350 (1946); United States v. Neilson, 471 F.2d 905,
908 (9th Cir. 1973); Bolden v. Kansas City Southern
Ry. Co., supra, 468 F. 2d 580; Ratay v. Lincoln National
Life Ins. Co., 378 F.2d 209 (3d Cir.), cert. denied, 389
U.S. 973, 88 S.Ct. 472, 19 L.Ed.2d 465 (1967). We also
note that the portions of the instructions read shortly

C-16 Appendiz

before the jury retires are critical. Norfleet v. Isthmian
Lines, Inc., 355 F. 2d 359, 362 (2d Cir. 1966).

“We hold, consistent with the state court in Hender-
son, that the instructions in this case require reversal.
Taken as a whole, they were both erroneous and in-
consistent.

CONCLUSION

The opinion filed March 30, 1982, holds emphatically that
the trial of this case, surely to be viewed in later years as a
landmark in age discrimination litigation burgeoning today
as Title VII cases did ten years ago, was affected with
errors so profound as to move the Panel to state explicitly
in its opinion how the errors it found are to be avoided by
the District Courts in future ADEA jury trials. We re-
spectfully submit that in its analysis of the errors below
as separate things and its conclusion that the errors viewed
separately were harmless, the Panel either overlooked
decisions of the Supreme Court and this Court on the appli-
cation of Rule 61 and Section 2111 to error in jury instruc-
tions on liability compounded and amplified by submission
of a general verdict,"* or that the Panel decided not to follow
this body of law for reasons not stated in its opinion.

13. See Traynor, op. cit. supra, p. 74:
“Tf an instruction relates to a substantial Sepene ot De

pellant’s case, an appellate court would not find it highly p
able that the error did not influence the verdict.”

14. A possibility which the authors of Moore’s Federal Practice
explicitly recognize in the passage cited by the Panel in its dis-
— tha farm of villas hewn supra, p. 10.

Appendiz 0

The errors found by the Court in its opinion of March

30, 1982, were prejudicial, not harmless, and I. Magnin is

entitled to reversal of the judgment appealed from and to
an order remanding for a new trial.

Respectfully submitted,
Rosert S. Daccetr

Dowatp D. Coxxons, Jr.

James H. Quik
CRY A. WaTERMAN

Broseck, PHLEGER AND Harrison
Attorneys for Defendant-Appellee/
Cross-Appellant Federated
Department Stores, Inc.,

d/b/a I, Magnin

Appendiz D-1
Appendix D-1
Excerpts From Plaintiffs’ Complaint
I
NATURE OF THE CASE

This is an action brought by three retailing executives,
PHILIP D. CANCELLIER, JOHN W. COSTELLO, and
ZELMA SMITH RITTER, against their former employer,
FEDERATED DEPARTMENT STORES, INC., doing
business as I. MAGNIN, alleging that they were unlaw-
fully terminated as a result of their former employer’s
policies and practices of discrimination on the basis of age.
In addition, each plaintiff alleges claims for damages for
breach of the employment agreement between defendant
and himself/herself. Plaintiff COSTELLO also alleges a

claim for damages for deceit.

VI
FIRST CLAIM FOR RELIEF

A. Plaintiff PHILIP D. CANCELLIER.

Plaintiff CANCELLIER was hired as department man-
ager with regional responsibilities by I. Magnin in April,
1953. After a seven month break in service between Novem-
ber, 1959, and June 9, 1960, plaintiff CANCELLIER re-
turned to I. MAGNIN as a fine shoe buyer and was sub-
sequently promoted Vice-President of the Southern Region
in 1968, and then to increasingly more responsible positions
within I. Magnin culminating with his appointment in 1975
as Vice-President Stores/Operations covering 23 retail
stores, which was the position he held at the time of his
termination.

On May 1, 1978, after a total of 25 vears of wholly satis-
factory, competent, and diligent performance to his em-

D-2 Appendiz
ployer’s profit, plaintiff CANCELLIER was terminated
by defendant on the basis of his age.

VII

In terminating plaintiff CANCELLIER, defendant will-
fully, knowingly, and intentionally discriminated against
him on the basis of his age.

eo „ eo

IX
B. Plaintiff JOHN COSTELLO.

Plaintiff COSTELLO was hired as a special executive
trainee by I. Magnin on July 10, 1961, and was subsequently
promoted to increasingly more responsible positions within
I. Magnin, culminating with his appointment in 1975 as
Divisional Merchandise Manager-Accessories responsible
for 23 retail stores, which was the position he held at time
of his termination.

On May 1, 1978, after approximately 17 years of wholly
satisfactory, competent, and diligent performance to his
employer’s profit, plaintiff COSTELLO was terminated by
defendant on the basis of his age.

In terminating plaintiff, defendant willfully, knowingly
and intentionally discriminated against him on the basis
of his age.

X
C. Plaintiff ZELMA SMITH RITTER.

Plaintiff RITTER was hired as a salesperson by I. Mag-
nin in August, 1959, and soon thereafter was promoted to
Assistant Buyer, then Buyer on February 1, 1961, and was
subsequently promoted to increasingly more responsible
buying positions, culminating with the position of Buver-

Appendiz D-3
Sports Apparel for 23 retail stores, which was the position
she held at the time of her termination.

On January 6, 1978, after 18 years of wholly satisfactory,
competent, and diligent performance to her employer’s
profit, plaintiff RITTER was terminated by defendant on
the basis of her age.

In terminating plaintiff RITTER, defendant willfully,
knowingly and intentionally discriminated against her on
the basis of her age.

XIII

The acts, policies and practices of defendant alleged
herein violate Section 4 of the ADEA, 29 U.S.C. § 623, and
Section 15 of the FLSA, 29 U.S.C. § 215.

XVIII
SECOND CLAIM FOR RELIEF

The allegations of Paragraphs I through V and the alle-
gations of Paragraphs VI through XVII of the First Claim
for Relief are realleged and incorporated herein by refer-
ence as though fully set forth.

xx

In 1977, in the City and County of San Francisco, Cali-
fornia, each plaintiff and the defendant entered inio an
employment agreement contained in several writings, in-
cluding, but not limited to, the Personnel Policies and Pro-
cedures Manual, the Retirement Income and Thrift Incen-
tive Plan, the Executives Deferred Compensation Plan, the
Employee Stock Ownership Plan, the employee handbook,
and the Supplementary Retirement Plan for executives.

D-4 Appendiz
Defendant’s Personnel Policies and Procedures Manual
states at Index No. 40-10-3:

B. Age:
1. It is the policy of I. Magnin to conform to State and
Federal laws regarding age discrimination.”

XI

Taken together, this total employment agreement con-
stitutes an express agreement on the part of defendant not
to terminate the employment of any of the plaintiffs for
so long as his/her job performance was satisfactory or
not detrimental to the interests of the Company and, in any
case, not to terminate any of the plaintiffs on the basis of
age. Each plaintiff understood said total employment agree-
ment to have this effect.

XXV

THIRD CLAIM FOR RELIEF
The allegations of Paragraph I through V, the allega-
tions of Paragraph VI through XVII of the First Claim
for Relief, and the allegations of Paragraph XVIII through
XXIV of the Second Claim for Relief are realleged and
incorporated herein by reference as though fully set forth.

XXVII

Beginning in approximately January, 1978, and culmi-
nating with his termination on or about May 1, 1978, de-
fendant breached its implied covenant of good faith and fair
dealing with regard to plaintiff CANCELLIER by termi-
nating his position and transferring the work to younger
employees, attempting to camouflage this breach by making

Appendiz D-5
a sham offer in bad faith of alternative employment, and
by terminating him without regard to or compliance with
the requirements of the employment agreement, all with
the object of replacing plaintiff CANCELLIER with
younger personnel, reducing salary costs, and avoiding its
obligation to pay plaintiff CANCELLIER benefits under
the Supplementary Retirement Plan for executive em-

ployees.

XXVIII

Beginning in approximately May of 1977 and continuing
until his termination by defendant on or about May 1, 1978,
defendant breached its implied covenant of good faith and
fair dealing with respect to plaintiff COSTELLO by
promising, without intent to perform, that if there was
any change in his job assignment, he would be given an-
other assignment at the same divisional level without loss
of salary, by terminating him without offering him another
assignment although openings existed for which he was
qualified, by failing to appraise plaintiff COSTELLO for
his 1977 work in accordance with the appraisal procedure
for divisional merchandise managers and buyers carried
out in March and April of 1978, and by terminating plain-
tiff COSTELLO without regard to or compliance with the
requirements of the employment agreement, all with the
object of replacing plaintiff COSTELLO with younger per-
sonnel, reducing salary costs, and avoiding its obligation
to pay benefits to plaintiff COSTELLO under the Supple-
mentary Retirement Plan for executives.

XXIX

Commencing in approximately April, 1977, and continu-
ing until her termination on or about January 6, 1978,
defendant breached its covenant of good faith and fair

D4 Appendiæ

dealing with respect to plaintiff RITTER by harassing
her and making false statements about her performance
through her supervisor, by giving her until January 31,
1978, to improve but terminating her prior 20 that date,
and by terminating her without complying with the re-
quirements of the employment agreement, all with the
object of preventing her from performing her duties and
of forcing her to quit her employment in order to replace
her with younger personnel, to reduce salary costs, and to
avoid its obligation to pay benefits to plaintiff RITTER
under the Supplementary Retirement Plan for executive
employees. When plaintiff RITTER refused to quit her
employment, defendant discharged her in breach of its
implied covenant of good faith and fair dealing.

Appendiz D-7
Appendix
Excerpts From Plaintiffs’ Pretrial Statement
e. Substance Of The Action

Cancellier, Costello and Ritter had lengths of service
with I. Magnin ranging from approximately 25 years to 17
years at the time each was discharged in early, 1978. At
the time of termination, each was an executive employee
at Defendant’s San Francisco location; each was over 50
years of age and each was satisfactorily performing his
or her job responsibilities. All Plaintiffs, because of both
their substantial years of service with the Company and
their ages, were potentially eligible to receive extensive
retirement benefits under the Defendant’s supplementary
retirement plan. Each Plaintiff was subject to executive
personnel policies and appraisal procedures which required
that they be terminated only if their performance was
unsatisfactory and only if they had received a warning
and ample opportunity to improve. The policies further
preclude the taking of any employment action on the basis
of age.

The Complaint raises three basic claims. First, all Plain-
tiffs contend that they were discriminated against on the
basis of their ages and in furtherance of Defendant’s goal
to staff executive positions with younger individuals
deemed promotable by the Company and costing the De-
fendant substantially less in salary and potential retirement
benefits. All Plaintiffs claim that their discharges were also
taken in furtherance of Defendant’s goal to attract a youth
market through staffing with younger personnel.

Cancellier, Costello and Ritter contend that they were
terminated without regard to the personnel policies and
appraisal procedures promulgated by Defendant to induce
employees to remain with the Company. This claim is
predicated upon the California legal doctrine that such

—

Ds Appendiz
personnel policies create enforceable” contractual obliga-
tions as well as give rise to an implied covenant of good

d. Undisputed Facts
0 „ o

9. Defendant had certain personnel and appraisal pro-
cedures applicable to executive employees in effect at the
time that each Plaintiff's employment was terminated.
Those policies established procedures governing the man-
ner in which employment could be terminated, required
that involuntary terminations occur only for unsatisfactory
work performance or other cause and mandated that all
employment determinations be made without regard to an
employee's age.

„ * *
e. Disputed Factual Issues

1. Was Cancellier’s age a determining factor in his dis-
charge.

Defendant has posed as a disputed fact whether or not
Cancellier was discharged, either constructively or directly,
or whether he quit his employment after being told that
his job was no longer available to him and after being
offered two alternate job positions which were concededly
demotions. Plaintiffs, however, do not believe that the fact
of Cancellier’s discharge can reasonably be viewed as a
disputed one in light of admissions contained in Defend-
ant’s documents proving that Cancellier’s termination was
involuntary.

2. Was Costello’s age a determining factor in his dis-
charge.

3. Was Ritter’s age a determining factor in her dis-
charge.

Appendir D- 9

4. Was Defendant's claimed reorganization of the Vice-
President of Stores positions utilized as a pretext for
terminating Cancellier due to his age.

5. Are the reasons now given by Defendant for its posi-
tion that there were problems in the work performance of
each of the Plaintiffs pretext for its determinations to
terminate each Plaintiff due to uis or her age.

6. Did Defendant have a policy of age discrimination
and/or did Defendant practice a pattern of age discrim-
ination.

7. Did Defendant violate its personnel policies and pro-
cedures and its appraisal procedures in terminating Can-
cellier even though his job performance was adequate and
in the absence of any warning or opportunity to improve
his work performance.

8. Did Defendant violate its personnel policies and pro-
cedures as well as its appraisal procedures in terminating
Costello even though his job performance was adequate and
in the absence of any warning or opportunity to improve
his work performance.

9. Did Defendant violate its personnel policies and pro-
cedures as well as its appraisal procedures in terminating
Ritter even though her job performance was adequate and
without according the required warning or opportunity to
improve her work performance.

10. Did Defendant violate its personnel policies in tak-
ing adverse employment action against each of the Plain-
tiffs on the basis of their ages.

D-10 Appendiz
Appendix D-3
Excerpts From Plaintiffs’ Argument to the Jury
R. T. 3967 :2-3989 :6 ; 4026 :6-4028:17)

Ms. McClain: Ladies and gentlement of the jury, several
weeks ago, you will recall that we started out talking about
a framework that you would have in front of you as we
reviewed the evidence in the case.

I'd like you to think back now with me to that framework
that the plaintiff have shown by strong, convincing evi-
dence of that framework on each of the claims the plaintiffs
have presented to you.

I think you will see, as we go through the framework,
that we discussed a long time ago, and piece with me the evi-
dence, that they were wronged in precisely the manner in
which they alleged they had been wronged.

You have one advantage the plaintiffs did not have when
they commenced this lawsuit, and when they were in those
painful, confusing days following their terminations after
25 years of employment, after 18 years of employment,
after 17 years of employment: you have seen documents
the plaintiffs did not know existed at the time of their termi-
nation. Those documents, in the defendant’s own hand,
prove, more loudly and more clearly than reams of testi-
mony, what actually occurred in this case.

Let’s look at each of those claims with particular con-
centration on those documents in the defendant's own hands.

Let's turn to the age claim first:

As you have heard, as we’ve progressed through this
case, there is a Federal law prohibiting age discrimination.
It prohibits the adverse employment action against an
individual within the protected category because of that
individual’s age. Each of the plaintiffs before you are
within the age categories protected by the Act.

Appendix D-11

Now, the Act is not limited to specific employment actions,
such as discharge. It prohibits adversely affecting an em-
ployment of an individual because of that individual’s age.
You will hear during the instructions that such adverse
action can include demotion.

e 0 „

The plaintiffs bear the burden, ladies and gentlemen,
of showing you that it is more likely than not that their age
was a cause of their discharge.

Let’s look at the defendant’s own documents when posing
that inquiry: was age a cause of the defendant’s—of the
plaintiffs’ discharge.

Let’s start with plaintiff’s Exhibit 1, and I think, as we
follow through the documents that have been presented
to you, we will see that there was a decade, at least, of age
discrimination at Federated Department Stores, with par-
ticular applicability to I. Magnin.

8 @ *

There's one other concept that was explored in plaintiff’s
Exhibit 1, and I think continued throughout the decade.
And that is this concept of promotability.

Once the defendant finds that an executive is old and
non-promotable, regardless of how well that executive is
doing, then, I submit the evidence shows that that executive
is on his or her way out to make room for a younger, pro-
motable individual, because that executive costs Federated
Department Stores too much money, because that executive
is just of little use, regardless of the years of service,
regardless of how well that executive is doing.

os @ @
Ladies and gentlemen, each of the plaintiffs in this action
was stamped, was classified with his or her age. And that
stamping, coupled with the determination that they were

D-12 Appendix
no longer of use to the company, because they were not

promotable, resulted in events leading inalterably to their
discharges.
> > *

Mr. Cancellier was stamped in the beginning of 1977,
when he was determined not to be promotable to a principal
level. And, from that stamping, everything else followed.

Mr. Costello was stamped when he was determined to
be good but career and not promotable beyond this level.

You will recall that, while Mr. Costello’s supervisors said,
“The jury is still out. I haven't determined how he’s really
performing in that job,” in 1976, a search was already
underway for Mr. Costello’s replacement.

Job performance one way or the other was not important,
ladies and gentlemen. What was important was that non-
promotability.

Mrs. Ritter, too. “Never a DMM.”

You recall those fateful words, written by Mr. Hughes,
although you will also recall that he did not, to his current
recollection, discuss “Never.” He discussed every other
matter in that note, except the “Never.”

In any event, Mrs. Ritter was determined to be non-
promotable, and, thereafter, her career took a decided turn
for the worse.

Each of those plaintiffs were considered in conjunction
with their age.

7 . 8

Let's talk about another side of an age claim, and that
is a word called “pretext,” ladies and gentlemen.

The Defendant can come forward, and will come forward,
undoubtedly, and argue to you that there were reasons for
what happened to each of these Plaintiffs.

You can look at those reasons, and it’s within your
province to say, they are so inconsistent as to be unbe-

Appendix D-13
lievable. They are incredible. Or they mask the Defendant’s
real motives. They aren’t really what was going on.

Let's look at some of chose reasons that were presented
during the course of testimony from Mr. Cancellier, Mrs.
Ritter, and Mr. Costello. And I think we will see that any
consistency, nonsensicalness, run rampant throughout those
reasons.

Let’s start with Mr. Cancellier.

The inconsistencies regarding what happened to Mr.
Cancellier among the chief decision makers at I. Magnin and
Federated and stunning.

Mr. Hughes told you in lengthy testimony over and over
again that the Company had no intention of terminating
Mr. Cancellier in late 1977; they were just busily finding
a place for him in the Company.

Mr. Anderson told you that, well, Federated did indeed
write him a note saying Mr. Cancellier will be terminated
on or about February 1. Terminated didn’t mean fired. It
meant terminated from that position

The first example, ladies and gentlemen, of a series of
incredible meanings applied to words by the defendants.

Mr. Wechsler told you in the last day of testimony that
Mr. Anderson was indeed contemplating terminating Mr.
Cancellier in 1977. Wouldn’t you think if they had a real
reason for doing something to Mr. Cancellier that they
would have their stories straight on that issue?

Mr. Hughes said that Mr. Cancellier had an option of
remaining in his current staff position. Mr. Anderson said
that that option wasn’t presented to him.

Ladies and gentlemen, what happened with respect to
Mr. Cancellier is precisely what the documents say hap-
pened. And the proof of what happened to Mr. Cancellier
is Mr. Hughes’ note, “Position P.C. out in six months,”
written in September of 1977 following that determination

D-14 Appendix

that Mr. Cancellier was non-promotable to a principal posi-
tion. And anything that happened after that note, Position
P. C. out in six months,” was pretext. It was set up. It
was a mask to get rid of Mr. Cancellier in as painless a way
as possible to the Company.

They may have been looking for a single head of stores
on and off. Undoubtedly they were, but what happened in
September of 1977 is that they saw a way to use that single
head of stores search to ease Mr. Cancellier out of the
Company. When they offered those two conceded demotions
to Mr. Cancellier in 1978, Mr. Anderson told you that they
were possibilities; that they were couched in vague terms.

Ladies and gentlemen, Mr. Hughes and Mr. Anderson
did everything possible to convince Mr. Cancellier that those
jobs weren’t really there because they wanted him out.
That is the meaning of “Position P.C. out in six months.”

The pretext, ladies and gentlemen, continued to the trial
of this matter. How many days were taken in telling you
that Mr. Cancellier really quit, after all. He really meant
to leave. It was a voluntary action.

Do you recall Mr. Taylor getting on the stand just days
before this trial closed and telling you with a straight face
that notwithstanding the fact that every single personnel
‘document referred to the action severing Mr. Cancellier’s
employment as a termination, Mr. Cancellier quit. Ladies
and gentlemen, that is a classic example of pretext.

What really happened is that Mr. Cancellier left. Mr.
Neloms assumed his responsibilities, or to use Mr. Ander-
son’s term, “substantially his responsibilities.” And Mr.
Chesler continued to do the same old thing. They may not
have had ultimate responsibility. They may not have had a
line going up to them on that organizational chart, but day
to day those job functions continued to be performed be-
cause no single head of stores ever came upon the scene.

Appendiz D-15

Look at their reasons give to you, ladies and gentlemen,
for an adverse action affecting Mr. Cancellier’s job with
the Company after twenty-five years.

Mr. Wechsler told you that the biggest complainer about
Mr. Cancellier was Mr. Wittick. Mr. Wittick told you that
he had one five-minute conversation with Mr. Anderson and
Mr. Hughes at Mr. Hughes’ insistence during which he was
asked whether there were any problems with Mr. Cancellier.
What the defendant has presented to you as the reasons for
getting rid of this employee after twenty-five years of em-
ployment is office gossip, ladies and gentlemen, and nothing
more.

Let's turn to Mr. Costello. The inconsistencies and the
pretext is just as clear in Mr. Costello’s case. The defendant
never did get it straight whether it was the numbers or
some people problems that Mr. Costello was experiencing.

In 1977 Mr. Fox told you that Mr. Costello had some
erratic behavior, but in the early part of the year his sta-
tistics were good. If you look at that review in the defend-
ant’s own handwriting, in their own personnel appraisal
system, you will find that Mr. Costello received good grades
for people relations and that his overall review was average
to above average. Ladies and gentlemen, «»at is hardly the
picture of someone who is in trouble. And it is hardly the
picture of telling something that they are in trouble; aver-
age to above average.

What happened is that after that determination of non-
promotability, it didn’t matter what Mr. Costello did. It
didn’t matter that his division was number one in the com-
pany in gross merchandise margin percent. It didn’t matter
that his sales and profits had consistently increased from
the beginning of his taking over that divisional. It didn’t
matter that in the last year of his tenure as a divisional
merchandise manager he was better than seven other divi-

sions in sales growth.

D-16 Appendiz

What does the defendant tell you about all those figures?
The defendant tells you that somehow they just weren’t
good enough. Ladies and gentlemen, those figures and the
job evaluation done in April of 1977 of average to above
average tell you in documents, in objective evidence, that
Mr. Costello was indeed doing a very good job.

Let’s take Mrs. Ritter. The pretext is glaring in Mrs.
Ritter’s case.

You heard witness after witness of the defendant tell
vou that people at I. Magnin swore. It is a tough business.
Ladies and gentlemen.

In December of 1976, after probably swearing for seven-
teen years, Mrs. Ritter was summoned in to Mr. Benham and
Mr. Hughes’ presence, given a sheaf of papers involving
two instances, the Amanda Burton incident and some other
incident, and told that she had better start getting along
with Mr. Benham. The defendant tells you that that was a
warning meeting. Mrs. Ritter told you that it was a discus-
sion to see how things could be resolved.

Let’s take the defendant’s view for a moment, that of a
warning meeting.

Let’s assume that Mrs. Ritter was given a warning on
profanity in December of 1976. Ladies and gentlemen, that
warning fulfilled its purpose. Mr. Benham told you in his
testimony that no further instances occurred. You warn
somebody; they do what you tell them to do and then what
happens? You have to find another reason for your plan to
get rid of the individual.

There is one other instance of profanity that has been
presented to you after the December 1976 flurry of doeu-
mentation, and that is Mrs. Dirks. Do you recall Mrs. Dirks?

Mrs. Dirks couldn’t remember in her deposition whether
or not swearing even occurred. All she remembered was
there was some kind of a scene in Phoenix. She couldn’t

Appendiz D-17
even remember when it occurred. Her recollection was mi-
raculously refreshed on the stand and she said upon reflect-
ing she thought perhaps the word “shit” had been used.

Ladies and gentlemen, Mrs. Dirks didn’t recall what the
underlying incident was, and nobody else recalled much
about what happened. If you look at the testimony of de-
fendant’s witnesses, you will find it is riddled with incon-
sistency about that Dirks instance.

Mrs. Dirks said that she talked to Mr. Somers, Mr. An-
derson and Mr. Chesler about this terrible thing that had
befallen her. Mr. Anderson said he never talked to Mrs.
Dirks. Mr. Hughes talked to Mrs. Dirks. Mr. Wechsler said
he did talk to Mrs. Dirks. Mr. Somers in his deposition
said he didn’t talk to Mrs. Dirks, but on the stand testifying
before you he said he did talk to Mrs. Dirks.

Now, the reason for those inconsistencies is because noth-
ing of importance happened in Phoenix in 1977. Nobody
could remember what occurred. But it was something that
could be used in the final analysis to get rid of a buyer who
had been there for eighteen long dedicated years of employ-
ment.

What happened when Mrs. Ritter cleaned up the pro-
fanity when she went along with the warning that Mr. Ben-
ham gave her in 1976?

Mr. Benham was directed by Mr. Hughes to get objective
performance documents. Do you recall Mr. Benham’s ob-
jective performance documents? Do you recall the review
he performed in March of 1977 where notwithstanding the
fact that 20 out of 23 categories were average or above
average, the overall summary was checked between average
and below average.

Do you recall his testimony that the Sherman business
that Mrs. Ritter was developing in 1977 shouldn’t be counted
in her figures? “Just leave that out, because she didn’t have

D-18 Appendiz

that in 1975. Never mind that. A bunch of other things were
taken away and no longer her responsibility then. Let’s
take out the Sherman figures anyway.”

If you put the Sherman figures back in and you find that
during that last review preceding Mrs. Ritter’s termination
she did better than her division in gross merchandise mar-
gin percent, in sales growth, and in profit growth.

Where did Mr. Benham get lagging behind the division?
You heard Mr. Foo, defendant’s own witness—one of de-
fendant’s own witnesses say that, indeed, if you looked at
the figures and you compared what actually happened with
what actually happened, it would appear the division was
lagging behind Mrs. Ritter. What happened at the end of
1977 to Mrs. Ritter? Another flurry of activity about order
writing, some comments about mail order catalogs, when
you have seen, ladies and gentlemen, over and over again
that Mrs. Ritter had the best performance in each of those
mail order catalogs.

And then there was something about Kimberly. Do you
recall that? Kimberly people were complaining in new
York. There were difficulties with Kimberly orders.

Kimberly went out of business, ladies and gentlemen, in
1978. There probably was diffieulty with Kimberly’s orders.

And then there was a Stanley Sherman complaint, some
discussions with Mr. Sherman.

This is a volatile business, ladies and gentlemen. Mr.
Sherman didn’t tell you what happened. You got the de-
fendant’s interpretation of what happened.

In any event, it is a volatile business where people talk,
where people gossip, and that is what you got from Mrs.
Ritter’s termination as well. Gossip.

Let’s turn to the second claim presented by each of the
plaintiffs in this matter, and that is a claim that their con-
tractual relationship with I. Magnin has been breached

in their discharges.

Appendiz D-19

Ladies and gentlemen, each of these plaintiffs had a
long standing employment relationship with I. Magnin. They
were employed for years and years and years with good
evaluations on I, Magnin’s own personnel policies.

You heard Mr. Hughes talk about the performance ap-
praisal system and about the termination policies. You
heard what he said about the reasons for those documents
being in effect. They are distributed to employees, ladies
and gentlemen, because they are a benefit to both the com-
pany and the employee. The company gets an employee who
remains, who builds up experience over the years, and the
employee gets a sense of security, a sense of knowing that
he or she will not be terminated unless he or she receives
fair warning; unless he or she receives a fair evaluation
of work performance; unless he or she is given an oppor-
tunity to improve.

With respect to each of these plaintiffs, ladies and gentle-
men, the defendant made a mockery out of its performance
appraisals and its policies and procedures which it intended
the employees to rely upon. Each one of them was evaluated
as being a good employee. Each one of them did not know
that there was anything affecting his or her employment
status, because the boxes checked on that performance
appraisal told them that they were doing a good to better
than good job.

There is a third claim that each of the plaintiffs raise in
this action, and that is a claim of an implied covenant of
good faith and fair dealing.

Because of their long-standing relationship, ladies and
gentlemen, and because the defendant recognized obliga-
tions to these employees in the forms of those personnel
policies, it had an obligation to deal fairly with them, to
treat them honestly and above board and with direct ap-
proach.

D-20 Appendiz

We don’t need to go over the pretext again to detail those
facts. But it is clear, ladies and gentlemen, is it not, that
each of these plaintiffs was dealt with in a malicious, in an
unfeeling, in a manner that didn’t recognize their service to
the company.

Ms. Me Clain: Ladies and gentlemen, there have been
exactly some five weeks of trial. Have vou vet to hear an
explanation for the constant reference to age throughout
the defendant’s documents? Have you yet to hear a consis-
tent explanation as to why the plaintiffs were terminated,
other than the defendant thought it was a good idea, and it’s
within the defendant’s business judgment to make those
kind of conclusions?

Defendant has told you there is a straw upon which
plaintiffs rest their case of age discrimination, and that
straw is plaintiff’s Exhibit 1.

Ladies and gentlemen, plaintiff’s Exhibit 1 is the start of
document after document after document commenting upon
age in the context of personnel decisions. Not a fact of life,
ladies and gentlemen, that needs to be looked at.

It was a fact of life at I. Magnin that, in every area of
employment determinations, age was considered.

>. * „

Ladies and gentlemen, every key executive at I. Magnin
was classified by his or her age, and that chart was used in
personnel decision-making.

Age was indeed a fact of life at I. Magnin. It was the
basis for employment determinations.

Pick up plaintiff’s Exhibit 11 and leaf through letters
from business careers. You will find, time and time again,
the youth of employees is referred to.

Look at Mr. Anderson’s speech. Look at what happened

Appendaz D-21
over those years and ask yourself whether age was a factor
that was ignored by I. Magnin, or whether indeed—

Mr. Connors: If your honor please, I did not refer to
business careers. I thought this was rebuttal and not new
argument.

The Court: Well, it is rebuttal, but I think it’s within the
scope of rebuttal, Mr. Connors. I will allow it.

Mr. Connors: All right.

Ms. Me Clain: —or whether indeed age was the overall
consideration for employment determinations. * * *

Appendiz E-1
Appendix E-1
Statement of Facts in Plaintiffs’ Opening Brief
(Pages 3-23)
B. Statement Of Facts Relevant To
The Issues Presented For Review
Two facets of the trial record demonstrate Plaintiffs’
entitlement to injunctive relief and reinstatement: Feder-
ated’s age discrimination policy and the employment histo-
ries of Cancellier, Costello and Ritter. Each facet will be
examined in this section of the brief, an examination which
will demonstrate that the Plaintiffs will not be made whole
and the purposes of the ADELA will not be effectuated until
these three individuals are returned to work at I. Magnin
and the Company is told to cease its discriminatory policy
and practices.
1. Federated’s Policy Of Age
Discrimination At I. Magnin
An examination of the 1970’s demonstrates Defendant’s
consistent pronouncement and application of age diserimi-
nation in employment policies and decisions. Often, age
discrimination was correlated with the I. Magnin goal to
attract a “youth market” and its desire te lower the median
age of executive employees through the replacement of
older, capable emplovees whe were deemed to have reached
their career positions with “bright,” “voung,” “aggressive”
Ross Anderson, I. Magnin Chief Executive Officer {irom
1972 throumh 1979. testified that the development of a youth
market was a “consistent objective” for mamy years T.
Trial Tramseript, Vol. 20, pp. 3349, 3874, 3440-9441). Former
I. Magnin Divisional Merchandise Manager rie Steiner
testified : One of the mann concerns we ha as management
was that we were not attracting young cusiamers imte the

E.2 Appendiz
store.” (RT, Trial Transcript, Vol. 15, p. 2402). Because
of that concern and at the request of upper I. Magnin man-
agement, Steiner prepared, in the Fall of 1969, a document
analyzing staffing needs of certain departments selling
goods bought by Ms. Ritter (Id., pp. 2390-2391, 2402). That
report contained such conclusions as:
We need an influx of new, younger-thinking people
who can merchandise and sell in tune with the 70's.
Here, also, we need that ‘ageless’ salesperson of 30
to 45, who relates more effectively to both customer
and merchandise.
San Francisco particularly has too many super-
annuated salespeople. This could and should be a much
younger department in both setting and selling.

(Plaintiffs’ Trial Exhibit No. 46, pp. 10, 12 and 19).

In a five, and in part ten, year projection of I. Magnin’s
business and personnel needs prepared in 1970 and entitled
“Orgamization and Key Manpower Plan (1970-1975),” Fed-
erated reiterated its merchandising goal to “project a more
modern appeal to the youth market” (Plaintiffs’ Trial
Exhibit 1, p. 7820).

Once again, the age of I. Magnin employees was related
to the goal of achieving appeal to a youth market. In a
section of the report analyzing executive personnel, Feder
ated compared in graph form the median age of I. Magnin
key exeeutives with that of otmer divisions and noted that
the I. Magnin median age of 48 was “substantially higher
than the Federated median”. The report documented Fed-
erated’s concern that with such age grouping I. Magnin
could not accomplish its merchandising goals and suggested
a solution to the problem. The corporate report reads:

A more subtle question relates to the implications of
this age distribution upon Magnin’s goa) to have in-
creasing impact in the youth market. An aging study

Appendiz E-3
of the rest of Magnin’s management might disclose
the need for the planned introduction of younger per-
sonnel—particularly in the merchandising and sales

(Plaintiffs’ Trial Exhibit 1, pp. 7834-7835 [emphasis
added).

The 1970-1975 Organization and Key Manpower Plan
presented other themes concerning executive personnel
decisions which were to be reiterated by I. Magnin through-
out the decade. The report, for example, phrased a concern
that the retirement benefits might not be adequate for such
a “relatively high age grouping,” commented that L Magnin
had a small number of “promotable” key executives and
expressed a need to identify “high potential talent” as back
up candidates for key executives (Id., p. 7835). The Feder-
ated report contains other references to an individual’s
age, at times correlated with an assessment of the individ-
ual’s future potential. About executive Loma Petersen, for
example, it was written, Because of age (59), she has, of
course, reached her potential” (Id., p. 7935).

Throughout the decade, Federated and I. Magnin man
agers emphasized age in hiring and reeruitment. For ten
years, Federated officials in charge of executive placement
utilized a form entitled “Personnel Specitication Sheet”
for recording information abeut a vacant executive posi-
tion. The form contained seven categories, admitted by
Federated Vice-President J. L. Tonner to be the “most
important aspects” of information needed tw conduct an
executive search. The categories were: position title, date
required, salary range, responsibilities, to whom the posi-
tion reported, background and “desirable age” ( Plaintiffs’

E-4 Appendiz
Trial Exhibit 7; RT, Trial Transcript, Vol. 15, pp. 2430-
2431).*

During the 1970’s, both I. Magnin and other Federated
divisions utilized a New York firm known as “Business
Careers” for executive recruitment. Samples of corre-
spondence between I. Magnin executives and Business
Careers personnel were introduced at trial. The corre-
spondence shows a consistent, repeated emphasis upon the
youth, ambition and growth potential of candidates for hire
(Plaintiffs’ Trial Exhibit 11). Excerpts from the I. Magnin-
Business Careers correspondence are:

Russell is a bright, young man who is supposed to
be one of che comers in the business.

(Letter from Business Careers President Mines to
the then Vice President of Personnel at I. Magnin,
Charles Gray, dated June 13, 1974).

This [Bruce Downard] is an exceptionally bright,
personable, ambitious young man with tremendous
advancement potential.

(Letter from Business Careers Senior Vice Presi-
dent Leo Brody to Charles Gray dated July 11, 1974).

He [Aguiar] is a most unusual man. Young, bright,
definitely a comer, .. .

(Letter from Mines to Charles Gray dated July 26,
1974).

... Blair is a talented and aggressive young man

(June 6, 1975 letter from Business Careers to John
Schumacher, then President of I. Magnin).

Rest assured, Mr. Hughes, that we shal! continue to
recommend to you outstanding young men with Fash-
ion Management experience as we have in the past.

4. The Personnel Specification Sheet was changed two months

before trial in this matter to delete the category “desirable age”
(Id., p. 2430).

Appendiz E-5

(Letter from Business Careers Vice President Brody
to William Hughes, then Vice President of Personnel
at I. Magnin dated July 28, 1975).

Joka is a ‘young man on the move’ and potentially
senior managemer.t material.

(Letter from Brody to Hughes dated November 9,
1977). '

(Plaintiffs’ Trial Exhibit 11).

Plaintiffs’ Trial Exhibit 11, containing over 100 pages of
references to “young” candidates for executive positions
is perhaps best summarized in the July 22, 1974 letter
written from then Vice President of Personnel for I.
Magnin, Charles W. Gray, to Barbara Cohen, Placement
Manager for Business Careers, in which Gray accepts
Cohen’s invitation to talk to a potential candidate with the
following words: “We have nothing specific to talk about,
but want to meet all the bright, young ones that we can.”
(Plaintiffs’ Trial Exhibit 11; emphasis added).

In the first half of the decade, I. Magnin implemented its
“planned introduction of younger personnel” in the sales
and merchandising areas, an implementation admitted by
Chief Executive Officer Ross Anderson at trial (RT, Trial
Transcript, Vol. 20, pp. 3440-3441). Young employees were
hired to sell to young customers; older employees were,
acording to Anderson, “transferred” (Id., p. 3441). Older
employees were derided by I. Magnin management. Neal
Fox, John Costello’s immediate supervisor at the time of
Costello’s termination, labeled a 50-year old shoe buyer
“an old shoe dog” and referred to a handbag buyer in her
early 50’s as “menopausal” and as buying handbags which

E-6 Appendiz
“looked as old as she did” (RT, Trial Transcript, Vol. 7,
pp. 845-848) .*

Lydia Dresnek, a co-buyer in Plaintiff Zelma Smith’s
division during the early 1970’s, attested to a September
1973 conversation with her Divisional Merchandise Man-
ager, David Mosson, during which Mosson called his buyers
“old biddies,” announced that “management wants to get
rid of the old biddies” and concluded that “new blood” was
needed. Even though Mosson reassured Dresnek, who was
45 at the time of the conversation, that her tanned, young
look would protect her, approximately two years later
Dresnek resigned because of the conversation and what
she felt was “branding” on the basis of age (RT, Trial
Transcript, Vol. 11, pp. 1616-1621).*

By October 1975 Ross Anderson was able to announce
to the Federated Board of Directors, in a speech and slide
program, that I. Magnin had made progress in attracting
a youth market and in staffing with the young. Anderson’s
presentation contained the following description of I.
Magnin junior departments :

Here is our Junior presentation: The Young Deliv-
ery Service. Denims by JAG. Every bright, fresh, new
look for the young, the fashion informed. Staffed by
the young, the fashion informed. Young, bright, bouncy

Appendiz E-7
(RT, Trial Transcript, Vol. 4, pp. 322-325; Plaintiffs’
Exhibit 34, pp. 2-3; [emphasis added}).

In the latter half of the decade, Federated turned its
attention to three problems first delineated in the 1970-
1975 Organization and Key Manpower Plan: the high me-
dian age of I. Magnin executives, the smal] number of
promotable executives and the need to identify backup
candidates for executive positions. In August 1976 Fed-
erated implemented a systematic study of such problems
in the form of the Human Assets Inventory, a review of
executives performed on two documents, an organizational
chart and a summary of performance, potential and readi-
ness (Plaintiffs’ Trial Exhibits 14-18).’

7. The Human Assets Inventory encompassed an analysis of
Cee pees S Sy ene Pe Divisional Mer-
chandise Managers and Vice Presidents. I. personnel

officials developed a conceptually similar device for the review of
Buyers (RT, Trial Transcript, Vol. 2, pp. 65-66).

Human Assets Inventory reviews of I. Magnin key execu-
tives were completed by William Hughes, the Vice Presi-
dent or Senior Vice President of Personnel from July
1975 through April 1978, anproved by Chief Executive
Officer Ross Anderson and forwarded under the label
“highly confidential” to Federated officials (RT, Trial
Transcript, Vol. 2, pp. 57-58, 66-69). Each executive was
evaluated in accordance with performance levels and pro-
motional potential and placed on an overall organization
chart.

The organization chart, characterized by Bernard Klayf,
Federated Executive Vice-President, as “useful” in “suc-
cession planning,” contained all relevant information to the
Federated decision-making process: the individual’s posi-
tion, length of service, salary, the time in the position and,
in the upper left-hand corner of each block, the employee’s

E-8 Appendiz
age (RT, Trial Transcript, Vol. 16, pp. 2553, 2608-2609;
Plaintiffs’ Trial Exhibits 17 and 18).

Philip Cancellier’s block on the Human Assets Inventory
organization chart prepared in March 1977, a year before
his termination, illustrates the succession plen~ing imple-
mented through this system. The block shows Cancellier's
position of Vice President-Stores, his unbroken length of
service of 17 years, his salary level of $70,000 and his age
in 1977, 50. One of the individuals identified as a high poten-
tial backup for Cancellier’s position, Henry Neloms, then
age 3, in fact substantially assumed Cancellier’s job duties
in mid-1978 (Plaintiffs’ Trial Exhibit 17; RT, Trial Tran-
seript, Vol. 20, p. 3379).“

2. The Plaintiffs’ Work Histories; The
Application Of Federated’s Age
Discrimination Policy To Them And
To Others
a. Philip Cancellier

Philip Cancellier commenced working for I. Magnin in
1953 at age 26; he was terminated effective May 1, 1978
at age 51. Except for an approximate six-month break in
service in 1959, he was employed by I. Magnin for 25 years,
working his way up from a Department Manager position

8. Ages were placed on the Human Assets Organization Charts
2988 r „*

RNA and determine retirees’ replace-
ments. When ae ee SO we Beene of Soe
the 30’s, 40’s and 50’s, Hughes stated if you're going to 2
age

Appendiz E-9
to V.ce President-Stores/Operations, with overall operating
responsibility for some 22 I. Magnin locations throughout
the United States. Throughout his career, Cancellier gained
wide exposure to both merchandising and operating aspects
of retailing in positions ranging from Assistant Buyer,
Buyer, Store Manager, Divisional Merchandise Manager
to the Vice President posts held during the last 10 years
of his career (RT, Trial Transcript, Vol. 3, pp. 242-258).

During his career with I. Magnin, Cancellier was con-
sistently evaluated as a strong, aggressive executive who
“got the job done”. In the Organization and Key Man-
power Plan prepared in 1970, Cancellier, then in his early
40’s, was evaluated as a “fine young man—good for I.
Magnin-Federated. Will be encouraged.” and was labeled
“energetic, a doer” (Plaintiffs’ Trial Exhibit 1, p. 7851).
During the last five years of his employment, Cancellier
was evaluated by Ross Anderson, one of the individuals
responsible for the decision to terminate Cancellier in
early 1978 (Answer to Interrogatory No. 1, Plaintiffs’,
Trial Exhibit 57). Anderson rated Cancellier as good to
excellent in performance appraisals completed in each of
the four years preceding his termination (Plaintiffs’ Trial
Exhibits 30-33). In April 1973, Cancellier received an
overall rating of good and was called “aggressive and
dedicated to his job” (Plaintiffs’ Trial Exhibit 30). In
1974, Cancellier was rated as excellent and labeled by
Anderson “a bull-dog in pursuit in the operating elements
of his job”. In a review performed in early 1976, Cancellier
received an overall rating of above average with the com-
ment “a dedicated and able executive”. In the last evalu-
ation performed before his termination, Cancellier received
an overall rating of between average and above average
(Plaintiffs’ Trial Exhibit 33).

E-10 Appendiz

Unbeknownst to Cancellier and completely apart from the
written appraisal system performed on an annual basis,
Cancellier was also a subject of the Human Assets Inven-
tory. In the first such review dated September 30, 1976,
Cancellier’s performance was rated in the upper 25% or
“very good”; he was evaluated as “promotable” within
three years (Plaintiffs’ Trial Exhibit 4, p. 7843; Plaintiffs’
Trial Exhibit 14, p. 7287). In a span of just six months,
questions were raised as to whether Cancellier’s perform-
ance should be evaluated on the Human Assets Inventory
as “very good” or “satisfactory to good” with the apparent
only difference being a February 1977 decision that Can-
cellier was no longer deemed promotable to a priacipal
position (Plaintiffs’ Trial Exhibits 15 and 16).

Cancellier’s termination was foreshadowed in a March
31, 1977 Federated memorandum stating that he was “no
longer seen as a potential principal” and further noting
that Henry Neloms, the 33-year-old individual who eventu-
ally took over Cancellier’s duties, was “considered a re-
placement for Cancellier” (Plaintiffs’ Trial Exhibit 5). On
September 9, 1977, Hughes met with Ross Anderson to
discuss various personnel matters. His notes of that meet-
ing contain the following phrase about Cancellier and
Neloms: Will position P.C.—out in 6 mo. . Hank to
second spot in stores.” (RT, Trial Transcript, Vol. 2,
pp. 133-140; Plaintiffs’ Trial Exhibit 19).°

On January 3, 1978, Personnel Vice President Hughes,
Chief Exectiive Officer Anderson and President Norman

Describing himself as an avid notetaker, Hughes testified
that routinely and regulary tok notes of meeting
Pat hao eee, HT, Fe Val 1 p. 87
testimony — t Norman Weehs-
ler, “Mr. AT meeting. He's a historian.’’
(RT, Trial Transcript, Vol. 21, p. 3811).

Appendix E-11
Wechsler met. Hughes’ notes from that meeting contain
the following comments about Mr. Cancellier's future with
the Company: “Phil C.—not a principal—dead end here
. . . Age 50. Maximum potential!” (RT, Trial Transcript
Vol. 2, pp. 142-143; Plaintiffs’ Exhibit 20).

On January 5, 1978, Cancellier, for the first time, became
aware of the decision to terminate his employment. With-
out warning, he was told by Ross Anderson that he was
no longer considered for a Federated principal position, he
could no longer continue to perform his responsibilities,
he could possibly request one of two alternate positions,
both of which were demotions and neither of which were
then available, or he could leave the Company (RT, Trial
Transcript, Vol. 2, p. 142; Vol. 4, pp. 284-288; Vol. 19, pp.
3149-3156; Vol. 21, p. 3796). Telling his supervisors that
he was being offered only one real alternative, that of
“leaving” the Company, Cancellier ceased working for
I. Magnin effective May 1, 1978 (RT, Trial Transcript,
Vol. 4, pp. 300-301). In June 1978 Norman Chesler, then
an I. Magnin Vice President, related to Cancellier Presi-
dent Wechsler’s statement regarding why Cancellier was
terminated. Wechsler was quoted by Chesler as saying:
“The people at Federated wanted them to get a lot of
young people around here and he [Wechsler] was sorry
he [Cancellier] was no longer there.” (RT, Trial Tran-
script, Vol. 4, p. 329).

10. Chesler, who was still a Vice President at I. Magnin at the
time of trial in this matter, testified regarding his version of the
conversation with Wechsler. Chesler admitted that the ver-
sation concerned Cancellier’s leaving the Company and quoted

I guess we all have to go along one of these
script, Vol. 19, pp. 3311-3312).

E
:
;
2
:
J
7
4

E-12 Appendiz
b. John Costello

John Costello, who started with I. Magnin in 1961 as
an Executive Trainee, held the position of Divisional
Merchandise Manager, Division V (Accessories), at the
time of his termination on May 1, 1978 at age 54 (RT,
Trial Transcript, Vol. 7, pp. 759-763).

From September 1975 when Costello assumed responsi-
bility for Division V, through 1977, the last full year of
Costello’s employment, Division V, either singly or in a
tie with one other division, led all other I. Magnin divisions
in the area of gross merchandise margin percent, a meas-
urement of the percent of profits to dollars (RT, Trial
Transcript, Vol. 13, pp. 1875-1876; Plaintiffs’ Trial Exhi-
bits 39-A through 39-D). Costello consistently increased
the sales of Division V each year, starting from slightly
over $12 million in 1975 to approximately 614.4 million
at the end of 1977 (Plaintiffs“ Trial Exhibit 39-1).

From 1976 to 1977, Division V experienced a 12.1% in-
crease in sales growth; Costello outproduced seven of the
eleven divisions in this figure the year preceding his termi-
nation (RT, Trial Transcript, Vol. 7, pp. 834-835; Vol. 13,
pp. 1916-1917). Division V also exhibited consistent growth
in the area of gross merchandise margin profit dollars, the
dollars available to run the business (RT, Trial Transcript,
Vol. 13, p. 1875). In the year preceding Costello’s termina-
tion, Division V experienced a 9.89% increase in gross
merchandise profit dollars over 1976; a figure that was
average when compared to the performance of other divi-
sions during that same period (Id., p. 1919). In sum, in
every year in which Costello was responsible for Division
V, he inereased sales and profit; in each year Division V

Appendiz E-13
led the Company in gross merchandise margin percent (RT,
Trial Transcript, Vol. 13, pp. 1915-1921)."

John Costello received two written appraisals of his
performance as the Accessories Divisional; both rated his
overall performance as between average and above average,
defined by I. Magnin’s employment policies as meeting
“minimum requirements of position-adequate” [average]
and meeting “requirements of position without weakness”
[above average] (Plaintiffs’ Trial Exhibits 36 and 37).
Indeed, written personnel policies generated by Vice Presi-
dent Hughes to provide a “meaningful executive appraisal
system” specifically stated that personnel rated as average
were not “to be considered in any way as marginal per-
formers” (Plaintiffs’ Trial Exhibit 13, pp. 413 and 415).”

John Costello, like Philip Cancellier, was labeled non-
promotable, a characterization appearing in a January 1976
Federated memorandum stating “John Costello” “good but
career in this level” with “career” being a phrase used to
denote non-promotability in the Human Assets Inventory
scheme (Plaintiffs’ Trial Exhibit 2; Plaintiffs’ Trial Exhibit

E-14 Appendiz

3534; Plaintiffs’ Trial Exhibit 3). The only determination
which had been reached about Costello at that time was that
he was “not promotable” (Plaintiffs’ Trial Exhibit 22, p.
7840).

In April 1977 Fox, Anderson, Wechsler and Hughes dis-
cussed Divisional Merchandise Managers. It was decided to
remove Costello from his position; Hughes’ notes of that
meeting contain a reference to Costello’s age. The notation
of the discussion on Costello starts “Costello 53> ”; the
reference being to Costello’s age and characterized by
Hughes at trial as a “doodle” (RT, Trial Transcript, Vol.
2, pp. 156-167; Plaintiff’s Trial Exhibit 23).

Hughes’ notes of the April 1977 discussion also record a
plan of withholding from Costello the knowledge that he
was to be removed from the Divisional job because of I.
Magnin’s concerns that Costello might precipitiously leave
the position before a replacement had been found. The plan
was to tell Costello about the availability of a new position
in the I. Magnin hierarchy, a position which Defendant's
officials knew would be filled by another individual (RT,
Trial Transcript, Vol. 2, pp. 168-170; Vol. 7, pp. 790-792;
Vol. 21, pp. 3774-3775). Hughes’ note reads: “ — hint at
future—but don't tell yet. ‘We need replacement first’—
if pressed — we have another job same level.” (Plaintiffs’
Trial Exhibit 23).

In late January 1978 and only because Costello presented
an income verification form for a bank loan did I. Magnin
officials tell Costello of their April 1977 decision to termi-
nate him (RT, Trial Transeript, Vol. 2, pp. 175-176; Vol. 7,
pp. 803-805).

ce. Zelma Smith Ritter

Zelma Smith Ritter had worked for I. Magnin over 18
years at the time of her termination on January 6, 1978 at

Appendix E-15
age 52. Starting as a Salesperson, Ritter became an Assist-
ant Buyer and thereafter a Buyer of coats and suits, an
area in which Ritter specialized throughout her career
(RT, Trial Transcript, Vol. 5, pp. 461-462).

From 1973 through 1976, and despite several changes in
her buying responsibilities, Ritter consistently improved
her departments’ performance in sales and gross margin
dollars. Ritter’s sales volume in 1973 was approximately
$1.96 million; in 1976 sales had increased to approximately
$3.6 million. In the area of gross margin dollars, Ritter
improved from a 1973 figure of approximately $860,000 to a
1976 figure of $1.58 million (RT, Trial Transcript, Vol. 5,
pp. 512-520; Plaintiffs’ Trial Exhibits 42-A and 42-B).

In 1977, Ritter was transferred from Division III to
Division II with a change from responsibility over five
departments (three for one-half year) in 1976 to responsi-
bility for only three departments in 1977. The realignment
allowed more concentration on the development of business
for Stanley Sherman goods (RT, Trial Transcript, Vol. 5,
pp. 546-547). With less volume, Ritter managed to keep
her sales and gross margin dollars relatively stable in 1976
and 1977 ; if comparative figures are utilized, Ritter experi-
enced a 7.7% growth in sales during the year preceding her
termination and a 9.1% increase in gross murgin dollars
(RT, Trial Transcript, Vol. 5, pp. 547-549; Plaintiffs’ Trial
Exhibits 42-A and 42-B).

In early 1977, Ritter was evaluated by her then super-
visor, Robert Benham, as having an 8% net sales increase
in 1976 over 1975 (Plaintiffs’ Trial Exhibit 41, p. 129; RT,
Trial Transcript, Vol. 16, pp. 2528-2529). The 8% inerease
in net sales was almost double that experienced by Ms.
Ritter’s division as a whole, which showed only a 4.7%
increase in that area (Id., pp. 2528, 2532-2533). Again,

E-16 Appendiz

comparing 1976 to 1975, Ritter outstripped her division in
the area of gross merchandise margin dollars with Ritter's
departments showing an increase of 5.6% and the division
having an increase of only 2.6% (Id, pp. 2532-2534). In
the area of gross merchandise margin percent, the division
experienced a decline which was greater than that of Ms.
Ritter’s departments (Id., pp. 2535-2537). Ritter out pro-
duced the division in each measure of performance even
though her responsibilities were reduced in 1976 (Id., pp.
2531-2532).

In 1975, Ritter produced 15% of the total division's sales,
a figure increased to 16.2% in 1976. In 1977, the last year of
her employment, Ritter contributed 20.4% of her division’s
sales even though she was only one of nine Buyers, a per-
centage contribution almost double that which would be
expected of equally proportionate contributions from all
Buyers (RT, Trial Transcript, Vol. 5, pp. 549-550). A major
portion of Ritter’s responsibilities during the year preced-
ing her termination was the development of the Stanley
Sherman business; that development was additionally an
objective of Ritter’s immediate supervisor, Divisional Alvin
Somers. Following Ritter’s termination, Somers and his
division were praised in a written performance evaluation
for having attained the goal of developing a strong Stanley
Sherman business (RT, Trial Transcript, Vol. 15, pp. 2348-
2354).

In a written performance appraisal dated April 5, 1976,
Benham evaluated Ritter’s performance as above average
and wrote, “a strong experienced buyer in an otherwise
green division” (Defendant’s Trial Exhibit ZSR-4). Shortly
after that evaluation, Zelma Ritter, like her co-Plaintiffs,
was labeled “non-promotable”. Hughes’ notes of a meeting

Appendix E- 17
with Anderson and Wechsler held on April 16, 1976 record
the conclusion that Ritter would not be promoted to a
Divisional position with the words “never as a DMM” (RT,
Trial Transcript, Vol. 3, pp. 186-189; Plaintiffs’ Exhibit
25). The I. Magnin officials also discussed that two Buyers
would be required to replace Ritter. Finally, Hughes’
notations indicate a concern with Ritter’s salary level; the
note states: “Must level w/her.! Re: comp and position Y /
slow or no later increases.” (RT, Trial Transcript, Vol. 3,
pp. 187-188, 191; Plaintiffs’ Exhibit 25).

In December 1976, following the determination of non-
promotability, Benham prepared a memo criticizing Ritter
for the use of profanity and emotionalism (RT, Trial
Transcript, Vol. 16, p. 2487).

As in the case of her co-Plaintiffs, a Hughes document
exists showing notation of Ritter’s age in conjunction with
a discussion of her future employment with I. Magnin. On
December 22, 1976, a Hughes memorandum of a conversa-
tion with Benham regarding Ritter states “Discussed need
for objective performance documents.”; that notation is
accompanied by a calculation of Ritter’s age and length
of service (RT, Trial Transcript, Vol. 3, pp. 202-203; Plain-
tiffs’ Trial Exhibit 26).

Following the Hughes-Benham discussion of the need
for “objective performance documents,” Benham prepared
the last review received by Ritter prior to her discharge.
That review, dated March 15, 1977, gave Ritter an overall
rating of between average and below average even though

13. Testimony from Defendant’s own witnesses established that
retailing is a aggressive business (RT, Trial Transcript,
Vol. 16, p. 2518). -nine year old Store Manager, Lucy Zahran

at trial that she had sworn and lost her temper while on
I. Magnin business but had never been criticized for either action
by her employer (RT, Trial Transcript, Vol. 17, pp. 2917-2918).

E-18 Appendix

Ritter received an average, above average or excellent
rating in 20 of the 23 categories set forth in the review
(Plaintiffs’ Trial Exhibit 41). That review also speaks of
Ritter’s “lagging behind the division” even though Ritter
surpassed the division in each of the three categories mea
suring merchandise perforn, ance (Id., p. 127; see discussion,
supra, pp. 18-19).

In February 1977 Ritter was transferred to Somers’ divi-
sion; within weeks of that transfer, Somers began to criti-
cize Ritter for the manner in which she performed the
routine aspects of her job and commenced a course of
harassment, including shouting and calling her “stupid,”
that was to continue until the time of her discharge (RT,
Trial Transcript, Voi. 5, pp. 528-540). In October and
December, 1977, both Somers and Hughes again asked
Ritter wether she would resign; when she refused, she
was discharged effective January 6, 1978 (RT, Trial Tran-
script, Vol. 6, pp. 556-558). She was replaced by three
younger buyers (RT, Trial Transcript, Vol. 10, pp. 1309-
1310).

d. Other Similarly-Situated Executives

In 1976, the year the Human Assets Inventory was in-
troduced, Federated also instituted the Supplementary
Retirement Plan under which an executive, making at least
$30,000 per year, could qualify to receive additional retire-
ment benefits guaranteeing a payment level of at least
40% of the individuai’s salary, defined as the average of
the three highest years of compensation in the five years
preceding retirement. The plan was unfunded; there were

both length of service and age requirements for qualifica-
tion. Those executive employees earning at least $30,000

Appendiz E-19
per year who had both long tenure and higher age were
thus potential recipients of the 40% guarantee ( Plaintiffs’
Trial Exhibits 28 and 29).

From the inception of the plan to the time of trial, only
three individuals had ever qualified for receipt of supple-
mentary retirement benefits (RT, Trial Transcript, Vol. 12,
pp. 1737-1738). In a statistical analysis of the involuntary
terminations occurring during the period 1976 through 1979
among persons in Plaintiffs’ age group potentially qualified
to receive the supplementary benefits because they were
executives earning at least $30,000 per year, it was found
that the likelihood of such terminations occurring by chance
was less than 1 in 100 (RT, Trial Transcript, Vol. 10, pp.
1385-1386).

Each Plaintiff's length of service and age were considered
in conjunction with the decision to terminate employment.
In the December 1976 Hughes note containing a calculation
of Ritter’s age, there also appears a calculation of Ritter’s
length of service (Plaintiffs“ Trial Exhibit 26, RT, Trial
Transcript, Vol. 3, p. 203). In the April 1977 Hughes note
regarding Costello’s future with the Company, Costello’s
length of service appears immediately following his age
(Plaintiffs’ Trial Exhibit 23, p. 7011). In October 1977
Hughes directed an official of the Personnel Department,
William Taylor, to prepare a listing of benefits which would
be available to Cancellier if he were terminated at age 50.
The memorandum received by Hughes notes “SRP - cov-
erage ceases” (Plaintiffs’ Trial Exhibit 84, p 231). Absent
termination, Ritter would have been entitled to receive Sup-
plementary Retirement Plan benefits in 1984; Cancellier
would have qualified in 1985; Costello would have been
eligible in 1986 ( Plaintiffs’ Trial Exhibits 67, 68 and 69).

E-20 Appendiz

In 1970, at the time the Federated Organization and Key
Manpower Plan commented upon the “high median age” of
I. Magnin executives, 68% of I. Magnin employees in job
classifications held by the Plaintiffs (Vice Presidents, Divi-
sional Merchandise Managers and Buyers) were 40 years of
age or older. At the end of the decade which began with the
announcement that Federated should consider the “planned
introduction of younger personnel” at I. Magnin, 67% of
individuals in those three positions were under the age of
40 (Plaintiffs’ Trial Exhibit 49; RT, Trial Transcript, Vol.
10, pp. 1371-1373).

Appendiz E-21
Appendix E-2
Statement of Facts ia Defendant’s Opening Brief
(Pages 8-19) and Addendum (Pages 1-6)

(b) ADDITIONAL FACTS RELEVANT TO THE SEP-
ARATE EMPLOYMENT SITUATIONS OF EACH
PLAINTIFF AND TO THE GROSSLY EXCESSIVE
VERDICTS RETURNED BY THE JURY.

(i) Cancellier.

The verdict (CR 530) in favor of Cancellier, who was
earning $70,000 per year in one of the positions eliminated
by management reorganization, was 6.7 times greater than
his maximum recoverable ADEA back salary loss at the
time of trial. This windfall was awarded to an employee
who left to pursue personal business interests in spite of I.
Magnin’s offers of continued employment in two other posi-
tions of somewhat reduced responsibility at $60,000 per
year. (RT 3355-56; Defendant’s Trial Exhibit (“D.T.Ex.”]
PC 12.) These opportunities were offered to Cancellier out
of consideration for his length of service (he was hired in
May of 1953 and, after leaving to go into business for him-
self in 1959, rehired in June of 1960), and in recognition of
his continuing value as an executive, notwithstanding the
performance difficulties that in part had contributed to the
elimination of his position as the supervisor of operations
for I. Magnin’s 22 branch stores. Cancellier flatly rejected
the possibility of continued employment and instead negoti-
ated for and received from I. Magnin a $70,000 severance
payment.”

11. Prior to leaving Cancellier had shared direct su
responsibility for the stores with Norman Chesler, then the 6

old Vice President of Stores/Merchandising. (RT, 3294; D.T.Ex.
PC-8.) Chesler’s position also was eliminated by the same man-
agement reorganization, but he elected to continue employment with

E-22 Appendiz

The principal facts and events which led to what I.
Magnin submits was Cancellier’s voluntary resignation are
as follows. Beginning in 1976, R

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_0391%3A2. Public record. Not legal advice.