Petition for Writ of Certiorari — Aalgaard v. Merchants National Bank, Inc.

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oO) Supreme Court, U.S,

FILED

90-19 QR JUN 19 199)

OFFICE OF THE CLERK

In the Supreme Court

OF THE

United States

OCTOBER TERM, 1990

ROBERT G. AALGAARD,

Petitioner,

VS.

MERCHANTS NATIONAL BANK, INC.,

THOMAS BOLTON, JR., Louis FAvRE, et al.,

Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE COURT OF APPEAL OF CALIFORNIA,

THIRD APPELLATE DISTRICT

RICHARD J. CHIURAZZI

State Bar No. 84316

MASTAGNI, HOLSTEDT &

CHIURAZZI

1912 I Street, Suite 102

Sacramento, CA 95814

(916) 446-4692

Attorneys for Petitioner

BOWNE OF SAN FRANCISCO. INC. + 190 NINTH ST. «+ S.F.. CA 94103 + (415) 864-2300

QUESTION PRESENTED FOR REVIEW

Whether an action for age discrimination under the California

Fair Employment and Housing Act is pre-empted by § 24 (Fifth)

of the National Bank Act.

TABLE OF CONTENTS

Page

QUESTION PRESENTED FOR REVIEW............ l

JURISDICTION OF THE COURT .................. l

A. AN ACTION FOR AGE DISCRIMINATION

UNDER THE CALIFORNIA FAIR EMPLOY-

MENT AND HOUSING ACT IS NOT PRE-

EMPTED BY §24 (FIFTH) OF THE NA-

Vee GE FUE oon nns cdeccrecucaedes tes 5

1. The National Bank Act Neither Contains Ex-

plicit Preemptive Language Nor Otherwise Indi-

cates A Congressional Intent To Usurp The

Entire Field Relating To National Banks ...... 5

2. The California Fair Employment and Housing

Act Does Not Conflict With Federal Law..... 9

CPR «vos c4s00biennesbnsdyeaneeeeeeeeal 15

SUNT Sse sos 06's 6 badd denne sae eee A-i

iii

TABLE OF AUTHORITIES

Cases

Page

Aalgaard v. Merchants National Bank (1990) 224 Cal. App.

eee ESE S hp b'es 004.0600 6. 10, 11, 12, 15

Adams v. Leatherbury 88 So. 2d 510 (1980) ............ 13

Anderson National Bank v. Luckett, 321 U.S. 233, 248, 88

EE FO ee 6

Bailey v. Container Corporation of America 590 F.Supp. 629

ES SS EE rn 13

Belknap, Inc. v. Hale 463 U.S. 491, 77 L.Ed. 2d 798 103

CEL Lich i vw hagscuacacccsecsesss 14

Brown v. Hotel Employees, 468 U.S. 491, 501, 82 L.Ed. 2d

CMD pens cnsencsseavescacsecs 9,14

Chmiel v. Beverly Wilshire Hotel 873 F. 2d 1283 (1989) 13

Copeland v. Melrose National Bank of New York, 229 A.D.

311, 312, 241 N.Y.S. 429, 430 (App.Div.), Aff'd, 245

Pa OE MOOD cae cea cccccnceccess 9

Davis v. Elmira Savings Bank 161 U.S. 275, 282 (1896) .. 7

De Canas, et al v. Bica, et al. 424 U.S. 351 (1975) ...... 7,8

Farmer v. Carpenters 430 U.S. 290, 51 L.Ed. 2d 338, 97

i, Mocha LAS SEONG eh 008 66st eee ececss 14

Fisher v. Quaker Oats Company 559 A. 2d 1 (1989) ..... 13

Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S.

132, 142-143, 10 L.Ed. 2d 248, 83 S.Ct. 1210 (1963) ...6,8,9

Hillman v. Consumers Power Company 282 N.W. 2d 422

ES ee 12

Hines v. Davidowitz, 312 U.S. 52, 67, 85 L.Ed. 581, 61 S.Ct.

cia tans kessseecevesss 6

In Re Sweeney 113 B.R. 359, 364 (1990) .............. 13

Jones v. Rath Packing Company, 430 U.S. 519, 525, 51

Rees SU, ME, EOD CEDEED soci ccc cecceeenn 6

Kemper v. First National Bank in Newton, 94 Ill. App. 3d

169, 49 Ill. Dec. 799, 801, 418 N.E. 2d 819, 821 (1981) 9

TABLE OF AUTHORITIES

CASES

Page

Kozlowsky v. West Minster National Bank, 6 Cal. App. 3d

593, 596-97, 86 Cal. Rptr. 52, 54 (1970) ............. 9

Linn v. United Plant Guard Workers 383 U.S. 53, 15 L.Ed.

Be Sy OO PT TE 6 nh ox ce cceneccccssnccces 14

Maine Human Rights Commission v. Kennebec Water

Power Company 468 A. 2d 307 (1983)............... 13

Malone v. White Motcr Corporation, 435 U.S. 497, 504, 55

L.Ed. 2d 443, 98 S.Ct. 1185 (1978) ................. 5

Maryland v. Louisiana, 451 U.S. 725, 746, 68 L.Ed. 2d 576,

§ <p RRR RRS pre) rae ey nara 6

Mason v. Midwestern Fidelity Corporation 589 F.Supp. 751

CE atic bE OC waa Chee SakSeWeGhaGh ee A k'.0566 66 13

McClellan v. Chipman, 164 U.S. 347 (1896)............ 7

McGeehan v. Bank of N.H., 123 N.H. 83, 455 A.2d 1055,

RE ee nT ne oy ee ee eS eee 9

Morton v. Mancari 417 U.S. 535, 550 41 L.Ed. 2d 290, 94

ee ee ee eh aes 12

National Resources Defense Council v. U.S.E.P.A., 824

Nee einen cae ce ciwakesawen ese 12

National State Bank, Elizabeth, N.J. v. Long (1980) 630 F.

EEE Died NRE MCMERAEE OREM ASbS ONNERE DEERE 4s 7

Rankin v. Tygar, 190 F. 795, 798-99 (8th Cir. 1912) ..... 9

Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 91 L.Ed.

Ce RS EE ee ere 6, 8

Sears, Roebuck and Company v. Carpenters 436 U.S. 180,

56 L.Ed. 2d 209, 98 S.Ct. 1745 (1978)............... 14

Shaw v. Delta Airlines, Inc., 463 U.S. 85, 95, 77 L.Ed. 2d

ey ee I CLS hob ond eee abeence nan 5

Simpson v. Alaska State Commission For Human Rights

ee Ut BOOT EE Guns Wad wwbtswabanddwaudakeas 13

TABLE OF AUTHORITIES

CASES

Page

Van Slyke v. Metropolitan National Bank, 155 Minn. 319,

Se a EE Ie IN noob ecensskdsceveceee 9

Yellow Freight System, Inc. v. Donnelly (1990) 110 S.Ct.

err ery ee tee Te Te ETT TEE Ie TT Tee 14

Statutes

Fgh Sot >} Ff | PPR ere rrrrrT TTT

ee IS 6 ns 465 0000 oes 6046 keusbass ene l

Ee rere ee 12

29 USC § 623, 630, subdivisions (a) and (b) ........... 12

a cnc canakschccdebneeeaes 13

42 U.S.C. Section 2000 et. 90g. ... 6... ccc ccc cee ees 14

California Government Code § 12941 ........ 2, 4, 10, 11, A-8

California Labor Code Section 2805(a) ................ 7,8

Section 525 (b) of the Bankruptcy Code ............... 13

Other Authorities

California Fair Employment and Housing Act ..... 2, 3, 4,9, 14

Kaufman, Crisis in the Court, 10 Cal.Lawyer 28, August,

PO PancUubhweuwccddaup sb ubndeebebeeantpas eae sne 16

a u@Siy

No.

In the Supreme Court

OF THE

United States

ROBERT G. AALGAARD,

Plaintiff{/Appeliant,

VS.

MERCHANTS NATIONAL BANK, INC.,

THOMAS BOLTON, JR., Louis FAVRE, et al.,

Defendants/Appellees.

WRIT OF CERTIORARI

QUESTION PRESENTED FOR REVIEW

Whether an action for age discrimination under the California

Fair Employment and Housing Act is pre-empted by § 24 (Fifth)

of the National Bank Act.

JURISDICTION OF THE COURT

This action is properly before the Court pursuant to 29 U.S.C.

§ 2101 (c), since this is a Petition for Writ of Certiorari in a civil

action within ninety (90) days after entry of judgment or decree

by the California Court of Appeal, Third Appellate District, in

this matter. The Court of Appeal, rendered their decision and

entered judgment against Appellant on October 10, 1990. (See

Appendix, Exhibit A.) On January 4, 1991, the Supreme Court of

the State of California denied Appellant’s Petition for review.

(See Appendix, Exhibit B.) On March 29, 1991, Appellant filed a

Motion for Extension of Time to file a Writ of Certiorari before

this Court. On April 2, 1991, Appellant's Motion for Extension of

Time was granted by this Court giving Appellant until April 19,

1991 to file this Writ.

Pursuant to Rule 10.1(c) of the Supreme Court Rules of the

Court, the decision of the California Court of Appeal, Third

Appellate District, has decided an important question of federal

law, which has not been, but should be, settled by this Court.

Namely, whether an action for age discrimination under the

California Fair Employment and Housing Act is pre-empted by

§ 24 (Fifth) of the National Bank Act.

Ill

STATUTES INVOLVED IN THIS CASE

1. 12 U.S.C. §24. Corporate powers of associations. (See

Appendix. )

2. California Government Code § 12941. Discrimination on

basis of age. (See Appendix.)

STATEMENT OF THE CASE

Appellant, ROBERT G. AALGAARD, was hired by Appel-

lees, MERCHANTS NATIONAL BANK, INC., (hereinafter

referred to as “BANK”), on January 9, 1956, at the age of

twenty-seven (27). After thirty (30) years of loyal and devoted

service during which period he worked his way up from the

position of clerk to cashier, along with other titles and responsibil-

ities, he was terminated on November 22, 1985, without prior

notice or warning.

On December 22, 1986, Appellant filed a Complaint in the

Sacramento County Superior Court naming as defendants, the

BANK, its President, THOMAS M. BOLTON, JR., and Execu-

tive Vice President, LOUIS FAVRE, alleging causes of action for

age discrimination in violation of the California Fair Employment

and Housing Act, and breach of implied Covenant of Good Faith

and Fair Dealing.

On November 24, 1986, all three (3) Appellees demurred to

the Complaint on the basis of federal pre-emption. Judge Warren

overruled the demurrer on December 17, 1986. The Superior

Court’s decision was upheld by the Court of Appeal.

On July 23, 1987, Appellees moved for a summary judgment

on the basis of federal preemption. Judge Warren denied the

motion as to the age discrimination claim, and with respect to the

wrongful termination claim treated the motion as one for judg-

ment on a pleading, granting it without leave to amend as to the

individual defendants and with leave to amend as to the BANK.

On September 8, 1987, Appellant filed an Amended Complaint

for Age Discrimination and (solely against the BANK) breach of

Implied Covenant of Good Faith and Fair Dealing and breach of

an Implied in Fact Covenant Not to Discharge but for Good

Cause.

On September 16, 1987, Appellees demurred to the latter

two (2) causes of action on the basis of federal pre-emption, and

moved to strike the punitive damages allegations on the latter

two (2) causes of action. On October 14, 1987, Judge Warren

again overruled Appellees’ Demurrer and the Motion to Strike

was denied.

On November 25, 1987, Appellees again filed a Motion for

Summary Judgment on all claims; among the grounds was the

hydra of federal pre-emption. On December 27, 1987, Judge

Anthony DeCristoforo denied the Motion on procedural grounds.

On March 4, 1988, Appellant filed a Second Amended Complaint

to add the count of conspiracy to interfere with contractual nghts.

On September 23, 1988, Appellees again moved for Summary

Judgment on all the claims. On November 1, 1988, Judge

DeCristoforo granted Appellees’ Summary Judgment to each and

every Cause of Action.

On May 30, 1989, Appellant appealed the decision of Judge

DeCristoforo to the Third District Court of Appeal for the State

of California on the ground that the Court committed reversible

error in granting Appellees’ Summary Judgment. On October 10,

1990, the Third District Court of Appeal affirmed the Judgment

of the Trial Court and held that an action against a national

banking association with less than twenty (20) employees and its

officers, for age discrimination under the California statute (Gov-

ernment Code § 12941) and for violation of employment cove-

nants under California Law is pre-empted by § 24, Fifth of the

National Bank Act.

ARGUMENT

A. AN ACTION FOR AGE DISCRIMINATION UNDER

THE CALIFORNIA FAIR EMPLOYMENT AND HOUS-

ING ACT IS NOT PRE-EMPTED BY § 24 (FIFTH) OF

THE NATIONAL BANK ACT.

INTRODUCTION

This case presents a significant issue concerning the coverage of

California’s age discrimination statute which is of great impor-

tance not only to the Appellant, but to the California Fair

Employment and Housing Commission and thousands of banking

employees throughout California and the nation. This Court is

being asked to decide whether an action for age discrimination

under the California Fair Employment and Housing Act (herein-

after referred to as “FEHA”) is pre-empted by § 24 (Fifth) of

the National Bank Act. Because of the broad definition given to

the term “officers” under the National Bank Act, a ruling in favor

of pre-emption would deprive thousands of California citizens of

the protection afforded by California’s anti-discrimination and

anti-retaliation statute.

Appellant maintains that there is no conflict between the

National Bank Act and California’s anti-discrimination statutes,

and that a ruling of pre-emption would both run counter to

congressional intent—as manifested in legislation enacted long

after the National Bank Act—and would deprive thousands of

California’s citizens of the protection provided by state law.

The Third District Court of Appeal for the State of California

in this case held that national banks doing business in California

are exempt from state law prohibiting illegal discrimination in

employment practices. According to the Court of Appeal, a

national bank is subject to the Federal National Bank Act which

authorizes national banks to both hire officers and to “dismiss

such officers or any of them at pleasure.” As characterized by the

Court of Appeal, this “at pleasure” language represents complete

federal pre-emption of the employment practices of national

banks, to the exclusion of all state statutes prohibiting discrimina-

tion on the basis on age, race, sex or other specified status.

In fact, pre-emption has never been a favored doctrine, and the

courts have been reluctant to apply it absent a clear showing that

such application cannot be avoided. The Appellant shall show

that there is no conflict between the National Bank Act and

California’s laws prohibiting unlawful employment practices.

Under the rules of pre-emption and the circumstances of this

case, this Court must find that compliance with California’s anti-

discrimination law is not irreconcilable with Appellees’ ability to

function as a national bank. Appellant will also show that Appel-

lees have failed to demonstrate a basis for the application of pre-

emption. What the Court of Appeal’s decision does is grant legal

immunity from the minimum standards of conduct established by

California law, and applicable to all other business employers in

that state. Such a grant of immunity cannot be justified under the

doctrine of pre-emption, and would constitute an unnecessary and

unwise retreat from California’s well established public policy of

eliminating illegal discrimination and harassment from the work

place.

1. The National Bank Act Neither Contains Explicit Pre-

emptive Language Nor Otherwise Indicates A Congres-

sional Intent To Usurp The Entire Field Relating To

National Banks.

In determining whether a State statute is pre-empted by federal

law and therefore invalid under the Supremacy Clause of the

Constitution, the Court’s sole task is to ascertain the intent of

Congress. (See Shaw v. Delta Airlines, Inc., 463 U.S. 85, 95, 77

L.Ed. 2d 490, 103 S.Ct. 2890 (1983); Malone v. White Motor

Corporation, 435 U.S. 497, 504, 55 L.Ed. 2d 443, 98 S.Ct. 1185

(1978).) Federal law may supersede state law in several different

ways. First, when acting within constitutional limits, Congress is

empowered to pre-empt state law by so stating in expressed terms.

(Jones v. Rath Packing Company, 430 U.S. 519, 525, 51 L.Ed. 2d

604, 97 S.Ct. 1305 (1977).) Second, congressional intent to pre-

empt state law in a particular area may be inferred when the

scheme of federal regulation is sufficiently comprehensive to

make reasonable the inference that Congress “left no room” for

supplementary state regulation. (Rice v. Santa Fe Elevator Corp.,

331 U.S. 218, 230, 91 L.Ed. 1447 67, S.Ct. 1146 (1947).) Third,

in those areas where Congress has not completely displaced state

regulation, federal law may nonetheless pre-empt state law to the

extent it actually conflicts with federal law. Such actual conflict

between state and federal law exists when “compliance with both

federal and state regulations is a physical impossibility,” (Florida

Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-143, 10

L.Ed. 2d 248, 83 S.Ct. 1210 (1963).), or when the state law

“stands as an obstacle to the accomplishment and execution of

the full purposes and objectives of Congress.” (Hines v. Davido-

witz, 312 U.S. 52, 67, 85 L.Ed. 581, 61 S.Ct. 399 (1941).)

Nevertheless, pre-emption is not to be lightly presumed. (Mary-

land v. Louisiana, 451 U.S. 725, 746, 68 L.Ed. 2d 576, 101 S.Ct.

2114 (1981).)

These pre-emption principles are no less applicable in the field

of national banks. Section 24 (Fifth) of the National Bank Act,

the provision involved in this case, neither contains explicit pre-

emptive language nor otherwise indicates a congressional intent to

usurp the entire field relating to national banks. This Court “has

often pointed out that national banks are subject to state laws,

unless those laws infringe the national banking laws or impose an

undue burden on the performance of the banks functions.”

(Anderson National Bank v. Luckett, 321 U.S. 233, 248, 88 L.Ed.

692, (1943)).

Normally, federal legislation does not pre-empt a field tradi-

tionally within a state’s police powers, unless that is the clear and

manifest purpose of Congress. (Rice, supra, at 230.)

In the area of banking, regulation has traditionally been one of

duel control by both Congress and the states since the passage of

the National Bank Act. Although the commerce clause gives

Congress the potential power to regulate national banks to the

exclusion of all state control, Congress has generally permitted

both state and federal regulation, and it has usually been left to

the courts to delineate the proper boundaries of state and federal

supervision. “The judicial test has been a tolerant one.” (National

State Bank, Elizabeth, N.J. v. Long, 630 F.2d 981, 985 (1980).)

Thus, in McClellan v. Chipman, 164 U.S. 347, at 356 (1896)

this court held that national banks “.. . are governed in the daily

course of business far more by the laws of the state than of the

nation.”

Only when state legislation “conflicts with the laws of the

United States and either frustrates the purpose of the national

legislation or impairs the efficiencies of these agencies of the

federal government to discharge the duties for the performance of

which they were created...” must it be pre-empted. (Davis v.

Elmira Savings Bank, 161 U.S. 275, 283 (1896).)

In the area of traditional state police powers and their exercise,

both Congress and the courts have been careful to avoid pre-

emption whenever possible. For example, in De Canas, et al v.

Bica, et all., 424 U.S. 351 (1975), this Court considered and

rejected a challenge to California Labor Code Section 2805(a),

which prohibited employers in California from knowingly employ-

ing illegal aliens if such employment would have an adverse effect

on lawful resident workers.

Although this Court recognized that “power to regulate immi-

gration is unquestionable exclusively a federal power,” it held

however, that California’s law was not pre-empted, stating in

relevant part:

“In this case, we cannot conclude that pre-emption is re-

quired either because ‘the nature of the... subject matter

{regulation of employment of illegal aliens] permits no other

conclusion,’ or because “Congress has unmistakenly so or-

dained’ that result.”

“States possess broad authority under their police powers to

regulate the employment relationship to protect workers

within the State. Child Labor laws, minimum and other

wages laws, laws affecting occupational health and safety,

and workmens compensation laws are only a few examples.

California’s attempt in § 2805(a) to prohibit the knowing

ernployment by California employers of persons not entitled

to lawful residence in the United States, let alone to work

here, is certainly within the mainsteam of such police power

regulation. . .” (Emphasis added, at page 356.)

The Court went on to state:

“Of course, even state regulation designed to protect vital

State interests must give way to paramount federal legisla-

tion. But we will not presume that Congress, in enacting the

INA, intended to oust state authority to regulate the employ-

ment relationship covered by § 2805(a) in a manner consis-

tent with pertinent federal laws. Only a demonstration that

complete ouster of state law—including state power to

promogate laws not in conflict with federal laws—was ‘‘the

clear and manifest purpose of Congress’ ’ would justify that

conclusion. Florida Lime & Avocado Growers v. Paul, supra,

at 146, quoting Rice v. Santa Fe Elevator Corporation, 331

U.S. 218, 230 (1947). (Emphasis added at pp. 357-358.)

Absent an intent to preclude even harmonious state regulation,

the final test to be applied, according to this Court, is whether the

state law in question “... ‘stands as an obstacle to the accom-

plishment and execution of the full purposes and objectives of

Congress’...” enacting the federal legislation involved. (De

Canas at 363, quoting Florida Lime & Avocado Growers v. Paul,

373 US., at 141.)

Given the above tests and the judicial history of the National

Bank Act, this Court can only conclude that the Act is not a

comprehensive statutory scheme occupying the entire field relat-

ing to national banks. Consequently, there is no convincing reason

why this Court should set aside the general presumption against

pre-emption of state police regulations.

<< al

2. The California Fair Employment and Housing Act

Does Not Conflict With Federal Law.

Absent expressed language or implied congressional intent to

occupy the field, state law may be displaced only to the extent

that it actually conflicts with federal law. (Brown v. Hotel

Employees, 468 U.S. 491, 501, 82 L.Ed. 2d 373, 104 S.Ct. 3179

(1984).) Such actual conflict between state and federal law exists

only when “compliance with both federal and state law regula-

tions in a physical impossibility,” Florida Lime & Avocado Grow-

ers, Inc., supra, at 142-143, or when state law “stands as an

obstacle to the full purpose and objectives of Congress.” Hines,

supra at 67.

Section 24 (Fifth) of the National Bank Act provides that a

National Banking Association will have the power “[t]o elect or

appoint directors, and by its Board of Directors to appoint a

president or vice president, cashier, and other officers, define their

duties, require bonds of them and fix the penalty thereof, dismiss

such officers or any of them at pleasure, and appoint others to fill

their places.” (12 U.S.C. § 24 (Fifth).)

Section 24 (Fifth) has been consistently interpreted to mean

that the Board of Directors of a national bank may dismiss an

officer without liability for the breach of the agreement to employ.

(See, e.g., Rankin v. Tygar, 190 F. 795, 798-99 (8th Cir. 1912);

Kozlowsky v. West Minster National Bank, 6 Cal. App. 3d 593,

596-97, 86 Cal. Rptr. 52, 54 (1970); Copeland v. Melrose

National Bank of New York, 229 A.D. 311, 312, 241 N.Y.S. 429,

430 (App.Div.), Aff'd, 245 N.Y. 632, 173 N.E. 898 (1930); Van

Slyke v. Metropolitan National Bank, 155 Minn. 319, 193 N.W.

470, 471 (1923).) Furthermore, the courts have held that an

agreement which attempts to circumvent the complete discretion

of a national bank’s Board of Directors to terminate an officer at

will is void as against public policy. (McGeehan v. Bank of N.H.,

123 N.H. 83, 455 A.2d 1055, 1055 (1983); Kemper v. First

National Bank in Newton, 94 Ill. App. 3d 169, 49 Ill. Dec. 799,

801, 418 N.E. 2d 819, 821 (1981); Copeland, Id. at 312.)

In contrast, the California Fair Employment and Housing Act

provides in relevant part that “[i]t is an unlawful employment

practice for an employer... to discharge, dismiss, reduce, sus-

pend, or demote, any individual over the age of forty on the

ground of age, except in cases where the law compels and

provides for such action. (Government Code § 12941 (a).)

Therefore, the question to be resolved by this Court is whether

the California age discrimination statute conflicts with § 24

(Fifth) of the National Bank Act.

The Court of Appeal in this case stated that a “long line of

cases supports the proposition that employment rights of officers

of national banking association which conflict with the right of

Board of Directors to dismiss them at pleasure are pre-empted by

§ 24 (Fifth) whether those rights arise by virtue of an agreement

or are imposed by state law, and whether framed as contractual or

tortious causes of action.” (Aalgaard v. Merchants National Bank

(1990) 224 Cal. App. 3d 674, 692.) The Court of Appeal then

held that “[f]or the same reasons, we conclude that the age

discrimination cause of action is also pre-empted by Section 24

(Fifth).” (Aalgaard, Id. at 692.) The Court of Appeal’s holding

is erroneous and ignores the fact that California’s age discrimina-

tion cause of action is statutory and obtains its authority from a

federal statute. The Court also failed to consider a// of California

Government Code § 12941 with sufficient care.

The Court of Appeal initially noted that § 24 (Fifth) empowers

the board of directors of a national bank to “dismiss [ designated ]

officers or any of them at pleasure. . .” while California Govern-

ment Codes Section 12941 makes it an“... unlawful employ-

ment practice for an employer... to discharge, dismiss, reduce,

suspend, or demote, any individual over the age of forty (40) on

the grounds of age except in cases where the law compels or

provides for such action. . .” (Aalgaard, at 7633.) Thus, the Court

concluded that the federal and state provisions were in conflict,

and that the former therefore pre-empted the latter.

However, in addition to the portion of that provision cited in

the Court’s opinion, § 12941(a) goes on to state in relevant part:

“This section shall not be construed to make unlawful the

rejection or termination of employment where the individual

applicant or employee failed to meet bonafide requirements for

the job or position sought or held... nor shall this section pre-

clude such physical and medical examinations of applicants and

employees as an employer may make or have made to determine

fitness for the job position sought or held.” (Emphasis added. )

Furthermore, subsection (b) of § 12941 states in relevant part:

“This section shall not limit the right of an employer . . . to select

or refer the better qualified person from among all applicants for a

job. The burden of proving a violation of this section shall be upon

the person or persons claiming that the violation occurred.”

Section 12941, when read carefully and in its entirety, in no

way limits or inhibits a national bank from making any personnel

decisions regarding its officers, provided only that such decisions

are not being made on the basis of age, rather than job perform-

ance and the “bonafide requirements for the job.” Thus, in any

situation where a banks’ board of directors might be compelled to

fire or demote an employee for reasons genuinely connected to the

bank’s fiscal integrity or a need to protect public confidence in it,

there is not a single word in § 12941—or any other California

anti-discrimination statute— that would inhibit or prevent a bank

from taking the necessary action.

The second flaw in the Court of Appeal’s analysis is its failure

to explain why national banks must be allowed to make employ-

ment decisions with immunity from state anti-discrimination

statutes in order to properly function as national banks. In other

words, the Court never explained why “in order to ensure the

fiscal integrity of national banks and to instill public confidence in

those financial institutions,” Aalgaard at 7634, national banks

must be allowed to discriminate on the basis of age, race, or sex

with immunity.

It seems reasonable to ask then, in what way does granting a

bank the freedom to discriminate on the basis of age, race, or sex,

contribute to its “financial stability and fiscal integrity?” Further-

more, just how does a grant of legal immunity that allows banks

to discharge employees for unlawful reasons “instill public confi-

dence in those financial institutions?” Although the term “at

pleasure” is indeed very broad, it cannot be read to free banks

from the minimum legal standards that apply to everyone else.

The final flaw in the Court of Appeal’s decision is its failure to

cxpiain why state anti-discrimination statutes constitute an irrec-

oncilable obstacle to a national bank’s freedom of action, even

while it was concluding, although somewhat reluctantly, that

federal anti-discrimination statutes do apply to national banks

having more then twenty (20) employees (Aalgaard, at 7635.)

Congress enacted the Age Discrimination and Employment

Act of 1967 (29 USC § 621 et seq., hereinafter referred to as

“ADEA”) banning age discrimination by employers employing

more than twenty (20) person in industries affecting commerce.

(29 USC § 623, 630, subdivisions (a) and (b).) The ADEA

provides no exception for National Banks (or any other former

federally chartered financial institution) and since it was enacted

long after the National Bank Act, under “familiarly statutory

interpretation, when their is such a conflict, the most recent and

more specific congressional pronouncement will prevail over a

prior, more generalized statue.” (National Resources Defense

Council v. U.S.E.P.A., 824 F.2d 1258, 1278 (1987); Morton v.

Mancari 417 U.S. 535, 550 41 L.Ed. 2d 290, 94 S.Ct. 2474

(1974).)

Even the Court of Appeal agreed that “[b]y implication,

Congress arguably has decreed that national banks with twenty

(20) or more employees are bound by the federal age discrimina-

tion statute.” (Aalgaard, Id. at 694.) However, the Court of

Appeal erred when it held that “[b]ut as to national banks with

less than twenty (20) employees, the National Bank Act and the

federal discrimination statute are not irreconcilable. Thus, a

repeal by implication cannot be asserted as to exempted small

national banks because there is no conflict as to them between

§ 24, Fifth of the National Bank Act and the federal Age

Discrimination and Employment Act. As to those small! national

banks, the board of directors still retain the power to dismiss their

officers “at pleasure” without regard to age, a power conferred by

a federal statute which has never been repealed. Consequently,

the extant federal statute prevails and a conflicting state statute

cannot be applied to small national banks having less than twenty

(20) employees.” (Aalgaard, supra at 694.) The Court of Ap-

peal’s conclusion is contrary to congressional intent.

A careful review of the ADEA reveals that Congress expressly

anticipated and encouraged state regulations regarding age dis-

crimination. 29 USC § 633 (a) specifically states that the federal

law will not affect the jurisdiction of state agencies performing

“like functions,” and 29 USC § 633 (b) gives state proceedings

certain priorities over federal actions in this area.

Numerous state and federal courts have held that state age

discrimination statutes are not pre-empted by the ADEA. (See,

Simpson v. Alaska State Commission For Human Rights 608

F.2d 1171 (1979) [ADEA does not pre-empt state age discrimi-

nation statue which contains no age limitation]; Hillman v.

Consumers Power Company 282 N.W. 2d 422 (1979) [ADEA

does not pre-empt state age discrimination statute which provides

greater remedies]; Fisher v. Quaker Oats Company 559 A. 2d |

(1989) [ADEA does not pre-empt state age discrimination

statute which provides a longer statute of limitations]; Maine

Human Rights Commission v. Kennebec Water Power Company

468 A. 2d 307 (1983) [ADEA does not pre-empt state age

discrimination statute which contains no age limitation]; Adams

v. Leatherbury 88 So. 2d 510 (1980) [ADEA does not pre-empt

State age discrimination statute as it applies to pilots working on

enrolled vessels]; Bailey v. Container Corporation of America 590

F.Supp. 629 (1984) [ADEA does not pre-empt state age dis-

crimination statute]; Mason v. Midwestern Fidelity Corporation

589 F.Supp. 751 (1984) [ADEA does not pre-empt state age

discrimination statute which permits compensatory and punitive

damages]; Chmiel v. Beverly Wilshire Hotel 873 F. 2d 1283

(1989) [ADEA does not pre-empt state age discrimination

statute ].)

In addition, the Federal Bankruptcy Court for the Northern

District of Ohio recently held that Section 24 (Fifth) does not

pre-empt Section 525 (b) of the Bankruptcy Code which prohib-

its employment discrimination based on an employee filing bank-

ruptcy. (Jn Re Sweeney 113 B.R. 359, 364 (1990).) The Court in

Sweeney stated that § 24 (Fifth) of the National Bank Act must

be construed and harmonized with the dictates of the more recent

ADEA which precludes discrimination. (Sweeney, Id. at 364)

Therefore, there is no logic whatsoever to the argument the

state laws prohibiting discrimination are irreconcilable with the

National Bank Act, and thus must be pre-empted even as very

similar federal laws on the same subject continue to apply.

Furthermore, this Court has been very hesitant to deprive states

of their ability to retain jurisdiction over employment related

matters. (See, Belknap, Inc. v. Hale 463 U.S. 491, 77 L.Ed. 2d

798 103 S.Ct. 31 72 (1983) [NLRA does not pre-empt state

breach of contract actions by strike replacements]; Sears, Roe-

buck and Company v. Carpenters 436 U.S. 180, 56 L.Ed. 2d 209,

98 S.Ct. 1745 (1978) [NLRA does not pre-empt state trespass

action]; Farmer v. Carpenters 430 U.S. 290, 51 L.Ed. 2d 338, 97

S.Ct. 1056 (1977) [NLRA does not pre-empt state tort remedies

for intentional infliction of emotional stress]; Linn v. United Plant

Guard Workers 383 U.S. 53, 15 L.Ed. 2d 582, 86 S.Ct. 657

(1966) [NLRA does not pre-empt state defamation action];

Brown v. Hotel Employees 468 U.S. 491, 82 L.Ed. 2d 373, 104

S.Ct. 3179 (1984) [Section 7 of NLRA does not pre-empt New

Jersey Casino Control Act].)

While the “at pleasure” language of Section 24 (Fifth) is

indeed quite broad, and clearly intended to give banks wide

latitude in removing individuals who might harm their operations

or undermine public confidence and their integrity, that “at

pleasure” language simply cannot be stretched to protect illegal

conduct.

In fact, California’s anti-discrimination law in no way conflicts

with or frustrates institutions governed by the National Bank Act.

Federal anti-discrimination statutes already prohibit the same

illegal conduct barred by the California Fair Employment and

Housing Act. The Court of Appeal concedes that national banks

are subject to the federal ADEA. The Court of Appeal must also

concede that jurisdiction of Title VII of the Civil Rights Act of

1954 (42 U.S.C. Section 2000 et. seq.) which, like the California

law, prohibits employment discrimination on a bases of “race,

color, religion, sex, or national origin.” Moreover, any such

actions against national banks, even if based on federal law, can

be brought in either federal or state courts. (Yellow Freight

System, Inc. v. Donnelly (1990) 110 S.Ct. 1566.)

Since it is true, therefore, that a national bank can be sued in

either federal or state court under federal anti-discrimination law,

then what is there about virtually identical state statues that make

them irreconcilable with doing business under the National Bank

Act? Being unable to answer this privotal question, the Court of

Appeal’s attempt to secure immunity from state discrimination

law for national banks must fail, and the normal presumptions

favoring the validity and application of state and police statutes

must govern.

CONCLUSION

California has a strong and clearly stated public policy against

illegal discrimination in employment. This public policy is set

forth in both the statues and case law. The legislature clearly

wanted this public policy to be given the greatest possible latitude

in any judicial review of actions brought pursuant to the FEHA.

The most important and critical error in the Court of Appeal’s

decision is its refusal to recognize this strong public policy in both

state and federal law against discrimination in employment. In

seeking to justify total freedom from all state law constraints

under the “at pleasure” language of Section 24 (Fifth), the Court

of Appeal attempts to ignore a substantial body of state and

federal law upholding the basic principal that the power to hire

and fire has clear legal limits. Those limits do not permit the

exercise of the power to hire and fire for unlawful reasons, even

when justified by a claimed need “to ensure the fiscal integrity of

national banks and to instill public confidence in those financial

institutions.” (Aalgaard, supra, at 7634.)

In the guise of serving one public policy—a need for sound and

efficient national banks—the Court of Appeal attempts to ignore

the far more important and pervasive public policy against unlaw-

ful discrimination. The Court of Appeal’s attempt to tur the

language of Section 24 (Fifth) into a grant of legal immunity

from state law cannot be allowed to succeed.

Although the “at pleasure” language of Section 24 (Fifth)

gives banks very broad powers, those powers are not unlimited.

Section 24 (Fifth) can be read to give banks the considerable

freedom to discharge officers for good reasons, bad reasons, or no

reasons at all, but it cannot be read to authorize discharges that

are unlawful, in that they are discriminatory and therefore violate

public policy and state law.

If the Court of Appeal’s decision in this case is allowed to

stand, and Section 24 (Fifth) is held to pre-empt state age

discrimination statutes, national banks would be free to operate

immune from state employment laws, all in the name of the “at

pleasure” language of Section 24 (Fifth). Literally thousands of

bank “officers” throughout this country could be terminated

based solely on their age: As explained by former California

Supreme Court Justice, Marcus Kaufman, eliminating whole

classes of legitimate litigation from the court system is “short-

sided and inappropriate . . . the whole purpose of a judicial system

is to provide a mechanism for the peaceful resolution of genuine

disputes and redress legitimate grievances.” (See Kaufman, Cri-

sis in the Court, 10 Cal. Lawyer 28, August, 1990.)

In conclusion, California, like the majority of states havea

strong public policy favoring equal treatment in employment.

That policy, as set forth in the FEHA, in no way conflicts with

federal law or Section 24 (Fifth) of the National Bank Act. For

that reason, application of the doctrine of pre-emption is neither

justified nor required. Therefore, Appellant respectfully requests,

that this Court grant Appellant’s Writ of Certiorari.

Dated:

MASTAGNI, HOLSTEDT & CHIURAZZI

Richard J. Chiurazzi

Attorney for Appellant

A-1

APPENDIX

Ill

STATUTES INVOLVED IN THIS CASE

1. 12 U.S.C. §24. Corporate powers of associations. (See

Appendix. )

Upon duly making and filing articles of association and an

organization certificate the [a national banking] association shall

become, as from the date of the execution of its organization

certificate, a body corporate, and as such, -and in the name

designated in the organization certificate, it shall have power—

First. To adopt and use a corporate seal.

Second. To have succession from the date of the approval of

this Act [enacted Feb. 25, 1927], or from the date of its

organization if organized after such date of approval until such

time as it be dissolved by the act of its shareholders owning two-

thirds of its stock, or until its franchise becomes forfeited by

reason of violation of law, or until terminated by either a general

or a special Act of Congress or until its affairs be placed in the

hands of a receiver and finally wound up by him.

Third. To make contracts.

Fourth. To sue and be sued, complain and defend, in any

court of law and equity, as fully as natural persons.

Fifth. To elect or appoint directors, and by its board of

directors to appoint a president, vice president, cashier, and other

officers, define their duties, require bonds of them and fix the

penalty thereof, dismiss such officers or any of them at pleasure,

and appoint others to fill their places.

Sixth. To prescribe by its board of directors, by-laws not

inconsistent with law, regulating the manner in which its stock

shall be transferred, its directors elected or appointed, its officers

appointed, its property transferred, its general business conducted,

and the privileges granted to it by law exercised and enjoyed.

Seventh. To exercise by its board of directors or duly autho-

rized officers or agents, subject to law, all such incidental powers

A-2

as shall be necessary to carry on the business of banking; by

discounting and negotiating promissory notes, drafts, bills of

exchange, and other evidences of debt; by receiving deposits; by

buying and selling exchange, coin, and bullion; by loaning money

on personal security; and by obtaining, issuing, and circulating

notes according to the provisions of this title. The business of

dealing in securities and stock by the association shall be limited

to purchasing and selling such securities and stock without

recourse, solely upon the order, and for the account of, customers,

and in no case for its own account, and the association shall not

underwrite any issue of securities or stock: Provided, That the

association may purchase for its own account investment securi-

ties under such limitations and restrictions as the Comptroller of

the Currency may by regulation prescribe. In no event shall the

total amount of the investment securities of any one obligor or

maker, held by the association for its own account, exceed at any

time 10 per centum of its capital stock actually paid in and

unimpaired and 10 per centum of its unimpaired surplus fund,

except that this limitation shall not require any association to

dispose of any securities lawfully held by it on the date of the

enactment of the Banking Act of 1935 [enacted Aug. 23, 1935].

As used in this section the term “investment securities” shall

mean marketable obligations, evidencing indebtedness of any

person, copartnership, association, or corporation in the form of

bonds, notes and/or debentures commonly known as investment

securities under such further definition of the term “investment

securities” as may be regulation be prescribed by the Comptroller

of the Currency. Except as hereinafter provided or otherwise

permitted by law, nothing herein contained shall authorize the

purchase by the association for its own account of any shares of

stock of any corporation. The limitations and restrictions herein

contained as to dealing in, underwriting and purchasing for its

own account, investment securities shall not apply to obligations

of the United States, or general obligations of any State or of any

political subdivision thereof, or obligations of the Washington

Metropolitan Area Transit Authority which are guaranteed by the

Secretary of Transportation under section 9 of the National

Capital Transportation Act of 1969 [D.C. Code], or obligations

issued under authority of the Federal Farm Loan Act, as

A-3

amended, or issued by the thirteen banks for cooperatives or any

of them or the Federal Home Loan Banks, or obligations which

are insured by the Secretary of Housing and Urban Development

under title XI of the National Housing Act [12 USC §§ 1749aaa

et seq.] or obligations which are insured by the Secretary of

Housing and Urban Development (hereafter in this sentence

referred to as the “Secretary”) pursuant to section 207 of the

National Housing Act [12 USC § 1713], if the debentures to be

issued in payment of such insured obligations are guaranteed as to

principal and interest by the United States, or obligations, partici-

pation, or other instruments of or issued by the Federal National

Mortgage Association or the Government National Mortgage

Association, or mortgages, obligations, or other securities which

are or ever have been sold by the Federal Home Loan Mortgage

Corporation pursuant to section 305 or section 306 of the Federal

Home Loan Mortgage Corporation Act [12 USC § 1454 or

§ 1455], or obligations of the Federal Financing Bank or obliga-

tions or other instruments, or securities of the Student Loan

Marketing Association, or obligations of the Environmental Fi-

nancing Authority, or such obligations of any local public agency

(as defined in section 110(h) of the Housing Act of 1949 [42

USC § 1460(h)]) as are secured by an agreement between the

local public agency and the Secretary in which the local public

agency agrees to borrow from said Secretary, and said Secretary

agrees to lend to said local public agency, monies in an aggregate

amount which (together with any other monies irrevocably com-

mitted to the payment of interest on such obligations) will suffice

to pay, when due, the interest on and all installments (including

the final installment) of the principal of such obligations, which

monies under the terms of said agreement are required to be used

for such payments, or such obligations of a public housing agency

(as defined in the United States Housing Act of 1937, as

amended [42 USC §§ 1401 et seq.]) as are secured (1) by an

agreement between the public housing agency and the Secretary

in which the public housing agency agrees to borrow from the

Secretary, and the Secretary agrees to lend to the public housing

agency, prior to the maturity of such obligations, monies in an

amount which (together with any other monies irrevocably com-

mitted to the payment of interest on such obligations) will suffice

A-4

to pay the principal of such obligations with interest to maturity

thereon, which monies under the terms of said agreement are

required to be used for the purpose of paying the principal of and

the interest on such obligations at their maturity, (2) by a pledge

of annual contributions under an annual contributions contract

between such public housing agency and the Secretary if such

contract shall contain the covenant by the Secretary which is

authorized by subsection (b) of section 22 [section 6(g) (42

USC § 1437d(g))] of the United States Housing Act of 1937, as

amended, and_if the maximum sum and the maximum period

specified in such contract pursuant to said subsection 22(b) shall

not be less than the annual amount and the period for payment

which are requisite to provide for the payment when due of all

installments of principal and interest on such obligations, or (3)

by a pledge of both annual contributions under an annual contri-

butions contract coniaining the covenant by the Secretary which

is authorized by section 6(g) of the United States Housing Act of

1937 [42 USC § 1437d(g)], and a loan under an agreement

between the local public housing agency and the Secretary in

which the public housing agency agrees to borrow from the

Secretary, and the Secretary agrees to lend the public housing

agency, prior to the maturity of the obligations involved, moneys

in an amount which (together with any other moneys irrevocably

committed under the annual contributions contract to the pay-

ment of principal and interest on such obligations) will suffice to

provide for the payment when due of all installments of principal

and interest on such obligations, which moneys under the terms of

the agreement are required to be used for the purpose of paying

the principal and interest on such obligations at their maturity:

Provided, That in carrying on the business commonly known as

the safedeposit business the association shall not invest in the

capital stock of a corporation organized under the law of any State

to conduct a safe-deposit business in an amount in excess of 15

per centum of the capital stock of the association actually paid in

and unimpaired and 15 per centum of its unimpaired surplus. The

limitations and restrictions herein contained as to dealing in and

underwriting investment securities shall not apply to obligations

issued by the International Bank for Reconstruction and Develop-

ment, the Inter-American Development Bank, the Asian Devel-

A-5

opment Bank, the African Development Bank, or the Inter-

American Investment Corporation, or obligations issued by any

State or political subdivision or any agency of a State or political

subdivision for housing, university, or dormitory purposes, which

are at the time eligible for purchase by a national bank for its own

account, nor to bonds, notes or other obligations issued by the

Tennessee Valley Authority or by the United States Postal

Service: Provided, That no associations shall hold obligations

issued by any of said organizations as a result of underwriting,

dealing, or purchasing for its own account (and for this purpose

obligations as to which it is under commitment shall be deemed

to be held by it) in a total amount exceeding at any one time 10

per centum of its capital stock actually paid in and unimpaired

and 10 per centum of its unimpaired surplus fund. Notwithstand-

ing any other provision in this paragraph, the association may

purchase for its own account shares of stock issued by a corpora-

tion authorized to be created pursuant to title IX of the Housing

and Urban Development Act of 1968 [42 USC §§ 3931 et seq. ],

and may make investments in partnership, limited partnership, or

joint venture formed pursuant to section 907(a) or 907(c) of that

Act [42 USC § 3937(a) or (c)]. Notwithstanding any other

provision of this paragraph, the association may purchase for its

own account shares of stock issued by any State housing corpora-

tion incorporated in the State in which the association is located

and may make investments in loans and commitments for loans to

any such corporation: Provided, That in no event shall the total

amount of such stock held for its own account and such invest-

ments in loans and commitments made by the association exceed

at any time 5 per centum of its capital stock actually paid in and

unimpaired plus 5 per centum of its unimpaired surplus fund.

Notwithstanding any other provision in this paragraph, the associ-

ation may purchase for its own account shares of stock issued by a

corporation organized solely for the purpose of making loans to

farmers and ranchers for agricultural purposes, including the

breeding, raising, fattening, or marketing of livestock. However,

unless the association owns at least 80 per centum of the stock of

such agricultural credit corporation the amount invested by the

association at any one time in the stock of such corporation shall

not exceed 20 per centum of the unimpaired capital and surplus of

A-6

the association: Provided further, That notwithstanding any other

provision of this paragraph, the association may purchase for its

own account shares of stock of a bank insured by the Federal

Deposit Insurance Corporation or a holding company which owns

or controls such an insured bank if the stock of such bank or

company is owned exclusively (except to the extent directors’

qualifying shares are required by law) by depository institutions

and such bank or company and all subsidiaries thereof are

engaged exclusively in providing services for other depository

institutions and their officers, directors, and employees, but in no

event shall the total amount of such stock held by the association

in any bank or holding company exceed at any time 10 per

centum of the associations capital stock and paid in and

unimpaired surplus and in no event shall the purchase of such

stock result in an association’s acquiring more than 5 per centum

of any class of voting securities of such bank or company. The

limitations and restrictions contained in this paragraph as to an

association purchasing for its own account investment securities

shall not apply to securities that (A) are offered and sold

pursuant to section 4(5) of the Securities Act of 1933 (15 U.S.C.

77d(5)); or (B) are mortgage related securities (as that term is

defined in section 3(a)(41) of the Securities Exchange Act of

1934 (15 U.S.C. 78c(a)(41)), subject to such regulations as the

Comptroller of the Currency may prescribe, including regulations

prescribing minimum size of the issue (at the time of initial

distribution) or minimum aggregate sales prices, or both.

A national banking association may deal in, underwrite, and

purchase for such association’s own account qualified Canadian

government obligations to the same extent that such association

may deal in, underwrite, and purchase for such association’s own

account obligations of the United States or general obligations of

any State or of any political subdivision thereof. For purposes of

this paragraph—

(1) the term “qualified Canadian government obligations”

means any debt obligation which is backed by Canada, any

Province of Canada, or any political subdivision of any such

Province to a degree which is comparable to the liability of

the United States, any State, or any political subdivision

A-7

thereof for any obligation which is backed by the full faith

and credit of the United States, such State, or such political

subdivision, and such term includes any debt obligation of

any agent of Canada or any such Province or any political

subdivision of such Province if—

(A) the obligation of the agent is assumed in such

agent’s capacity as agent for Canada or such Province or

such political subdivision; and (B) Canada, such Prov-

ince, or such political subdivision on whose behalf such

agent is acting with respect to such obligation is ulti-

mately and unconditionally liable for such obligation;

and

(2) the term “Province of Canada” means a Province of

Canada and includes the Yukon Territory and the Northwest

Territories and their successors.

Eighth. To contribute to community funds, or to charitable,

philanthropic, or benevolent instrumentalities conductive to pub-

lic welfare, such sums as its board of directors may deem

expedient and in the interests of the association, if it is located in

2 State the laws of which do not expressly prohibit State banking

institutions from contributing to such funds or instrumentalities.

Ninth. To issue and sell securities which are guaranteed

»ursuant to section 306(g) of the National Housing Act [12 USC

§ *721(g)].

Tem: To invest in tangible personal property, including,

without limitation, vehicles, manufactured homes, machinery,

equipment, or furniture, for lease financing transactions on a net

lease basis, but such investment may not exceed 10 percent of the

assets of the association.

(As amended Mar. 31, 1980, P.L. 96-221, Title VII, Part A,

§ 711, 94 Stat. 189 Aug. 13, 1981, P.L. 97-35, Title XIII, Subtitle

B, Part 3, § 1342(a), 95 Stat. 743; Oct. 15, 1982, P.L. 97-320,

Title IV, Par A, § 404(b), 96 Stat. 1511; Jan. 12, 1983, P.L. 97-

457, § 18, 96 Stat. 2509; Oct. 3, 1984, P.L. 98-440, Title I,

§ 105(c), 98 Stat. 1691; S. No. 2416, Title II, § 211(a), incorpo-

rated in Act Oct. 12, 1984, P.L. 98-473, Title I, § 101(1) in part,

A-8

98 Stat. 1885; Aug. 10, 1987, P.L. 100-86, Title I, § 108, 101 Stat.

579; Sept. 28, 1988, P.L. 100-449, Title III, § 308, 102 Stat.

1877.)

2. California Government Code § 12941. Discrimination on

basis of age.

(a) It is unlawful employment practice for an employer to

refuse to hire or employ, or to discharge, dismiss, reduce, suspend,

or demote, any individual over the age of 40 on the ground of age,

except in cases where the law compels or provides for such action.

This section shall not be construed to make unlawful the rejection

or termination of employment where the individual applicant or

employee failed to meet bona fide requirements for the job or

position sought or held, or to require any changes in any bona fide

retirement or pension programs or existing collective-bargaining

agreements during the life of the contract, or until January 1,

1980, whichever occurs first, nor shall this section preclude such

physical and medical examinations of applicants and employees

as an employer may make or have made to determine fitness for

the job or position sought or held.

Promotions within the existing staff, hiring or promotion on the

basis of experience and training, rehiring on the basis of seniority

and prior service with the employer, or hiring under an established

recruiting program from high schools, colleges, universities, and

trade schools shall not, in and of themselves, constitute a violation

of this section.

(b) This section shall not limit the right of an employer,

‘employment agency, or labor union to select or refer the better

qualified person from among all applicants for a job. The burden

of proving a violation of this section shall be upon the person or

persons claiming the violation occurred.

Added stats 1980 ch 992 § 4; Amended Stats 1981 ch 625 § 3.

ee een ln rans i a Hig a tr

A-|

Exhibit A

Certified For Publication*

In the Court of Appeal of the

State of California

Third Appellate District

(Sacramento)

Robert G. Aalgaard,

Plaintiff and Appellant,

¥.

Merchants National Bank, Inc., et al.,

Defendants and Respondents.

C005605

(Super. Ct. No. 343504)

[ Filed October 10, 1990]

APPEAL from a judgment of the Superior Court of Sacra-

mento County, Anthony De Cristoforo, Jr., Judge. Affirmed.

Mastagni, Holstedt & Chiurazzi and Richard J. Chiurazzi for

Plaintiff and Appellant.

Hubbert, Shanley & Lee and N. Paul Shanley for Defendants

and Respondents.

The central question in this appeal is whether an action against

a national banking association with less than 20 employees, and

its officers, for age discrimination under the California statute

(Gov. Code, § 12941) and for violation of employment covenants

under California law is pre-empted by section 24, fifth, of the

National Bank Act. (12 U.S.C. § 24, Fifth [§ 24, Fifth].) We

hold that it is.

* Pursuant to California Rules of Court, rules 976(b) and 976.1, this

opinion is certified for publication with the exception of part IV.

A-2

Under the act, “a national banking association . . . shal! have

power... [{]] To elect or appoint directors, and by its board of

directors to appoint a president, vice president, cashier, and other

Officers, define their duties,... dismiss such officers or any of

them at pleasure, and appoint others to fill their places.” (§ 24

(Fifth.) Under the California statute, however, an employer may

not “discharge [or] dismiss... any individual over the age of 40

on the ground of age, except in cases where the law compels or

provides for such action.” (Gov. Code, § 12941, subd. (a).) In

addition, under California decisional law, an employer’s breach of

the implied covenant of good faith and fair dealing gives rise to a

cause of action for breach of contract. (Newman v. Emerson

Radio Corp. (1989) 48 Cal.3d 973; Foley v. Interactive Data

Corp. (1988) 47 Cal.3d 654.) Similarly, an employer’s breach of

an implied contract not to discharge except for good cause also

gives rise to a cause of action for breach of contract. (Koehrer v.

Superior Court (1986) 181 Cal.App.3d 1155; Pugh v. See’s

Candies, Inc. (1981) 116 Cal.App.3d 311.) The issue is whether

these state-based causes of action are pre-empted by the federal

statute.

Following his separation from employment as the cashier of

defendant Merchants National Bank, Inc. (Bank), plaintiff Rob-

ert G. Aalgaard brought this action against the Bank and two of

its officers. By the time of his second amended complaint the

action had evolved into one for a violation of the state age

discrimination statute (Gov. Code, § 12941), a tortious breach of

the covenant of good faith and fair dealing implied in his employ-

ment contract with the Bank,’ a breach of an implied covenant to

discharge him only for good cause, and a conspiracy to interfere

with his contractual relationship with defendant Bank. The corpo-

' Following the decisions in Foley and Newman, a breach of this

covenant is actionable only in contract in the employment context. We

will assume for sake of argument that the plaintiff has sufficiently

alleged a contractual claim on this cause of action. For convenience, we

shall refer to this as a “Foley covenant.”

A-3

rate and individual defendants’ repeatedly and unsuccessfully

asserted below that all four causes of action were pre-empted by

§ 24 (Fifth). They further contended that there was no triable

controversy concerning the fact that they did not breach any

covenant of good faith or fair dealing, that there was no implied

covenant not to discharge except for good cause, that the individ-

ual defendants did not participate in any conspiracy and in any

event were protected by the manager’s privilege, that there was no

Outrageous conduct warranting the award of punitive damages,

and that plaintiff could not recover any mental suffering because

of the exclusionary provisions of the Workers’ Compensation Act.

Following a third summary judgment motion incorporating these

arguments yet one more time, the trial court granted the motion

without specifying the basis in its order. From the transcript of the

hearing on the motion, however, it is clear the court based its

ruling solely on the pre-emption issue. The trial judge stated, “I

do think the Federal Statute is specific. And I think it fits right

here. And I think the Board can terminate at it[s] pleasure. And

that’s what they did. . . . So for that reason, I’m going to go ahead

and grant the summary judgments.”

The plaintiff's appeal challenges all the bases of the defendants’

motion. We first conclude that the cause of action for conspiracy

to interfere with plaintiff's contractual relationship with the Bank

is barred by the manager’s privilege. The remaining three causes

of action, we next conclude, are pre-empted by § 24 (Fifth).

Accordingly, we reject plaintiffs challenges and affirm the

judgment.

PROCEDURAL HISTORY OF PLAINTIFF'S ACTION

Plaintiff's initial complaint, which contained causes of action

only for age discrimination and breach of the Foley covenant, was

filed in September 1986. The defendant demurred to it in Novem-

? The individual defendants are Thomas M. Bolton, Jr., the Bank’s

president and a member of its board of directors, and Louis Favre, the

Bank’s executive vice-president.

A-4

ber 1986 on the basis of federal pre-emption. Judge Warren

overruled the demurrer in December 1986. The defendants then

moved for summary judgment on this basis in August 1987.

Judge Warren denied the motion as to the age discrimination

claim, and—with respect to the Foley claim—treated the motion

as one for judgment on the pleadings, granting it without leave to

amend as to the individual defendants and with leave to amend as

to the Bank. The plaintiff next filed an amended complaint for age

discrimination and (solely against, the Bank) breach of the Foley

and Pugh covenants. The Bank (and, unaccountably, the individ-

ual defendants who were not part of the claims) demurred in

October 1987 to the two latter causes of action on the basis of

pre-emption. Judge Warren again overruled. Undaunted, the

defendants moved for summary judgment in January 1988 on all

claims; among the grounds was the hydra of pre-emption. Judge

Anthony DeCristoforo denied the motion on procedural grounds.

The plaintiff filed a second amended complaint in March 1988 to

add the count for conspiracy to interfere with contractual rights.

The defendants brought the successful summary judgment mo-

tion (styling it as a renewed motion) before Judge DeCristoforo

in November 1988. This appeal followed.

THE SCOPE OF REVIEW ON APPEAL

FROM THIS MOTION

“Since a summary judgment motion raises only questions of

law regarding the construction and effect of the supporting and

opposing papers, we independently review them on appeal, apply-

ing the same three-step analysis required of the trial court....

First, we identify the issues framed by the pleadings since it is

these allegations to which the motion must respond by establish-

ing a complete defense or otherwise showing there is no factual

basis for relief on any theory reasonably contemplated by the

opponents’s pleading ....[{]] [Second], we determine whether

the moving party’s showing has established facts which negate the

opponent’s claim and justify a judgment in [the] movant’s favor

...- [9] When a summary judgment motion prima facie justifies

a judgment, the third and final step is to determine whether the

asec —

A-5

opposition demonstrates the existence of a triable, material fac-

tual issue.” (AARTS Productions, Inc. v. Crocker National Bank

(1986) 179 Cal.App.3d 1061, 1064-1065 [citations omitted ].)

As we shall ultimately demonstrate, there are few material

factual issues relevant to the questions of law raised in this appeal.

But to be orderly, we shall follow the AARTS paradigm.

Ill

THE COMPLAINT AND THE SUMMARY

JUDGMENT PAPERS

For purposes of his age discrimination cause of action, plaintiff

alleged that he was first hired by the Bank in January 1956. By

1978, he had become a full cashier and began attending meetings

of the Bank’s board of directors as an officer of the Bank (acting

at the meetings in the capacity of secretary). Plaintiff alleged his

competence at his job (as evidenced by his steadily increasing

responsibilities over the course of three decades) and his belief

that beginning in 1984 “most of [his] duties and responsibilities

were gradually taken away from him and given to other younger

individuals.” By November 22, 1985, plaintiff had attained the

age of 57 and intended to work with the Bank for a minimum of

eight additional years. But on that date, defendants Bolton and

Favre told the plaintiff the board had decided he should take an

early retirement; defendant Bolton demanded the plaintiff draft a

letter making such a request. The plaintiff cleared out his desk

and left without drawing up the letter. He returned on December

4th with the requested letter,’ and was given written confirmation,

dated November 22, of “the Board of Directors[’] action in

connection with your request for early retirement.” The wrongful

acts of defendants “were oppressive and were done maliciously

>In that letter, plaintiff wrote: “I hereby request early retirement

effective Dec. 31, 1985 under the terms and conditions stated below.”

Those conditions related to payment of pension funds, salary, insurance

premium and the additional payment “on Jan. 2, 1986 [of] $25,000.00

plus end of the year bonus of one month[’}s pay, $3800.00.”

with an intention and design of discriminating against Plaintiff

based upon his age.” Plaintiff further alleged that he had filed a

complaint with the California Department of Fair Employment

and Housing in June 1985 and received a right-to-sue letter in

July 1986. On this cause of action, plaintiff sought the imposition

of liability upon both the corporate and individual defendants.

For purposes of his Foley cause of action against the Bank, he

alleged he was the third most highly paid employee of the Bank.

Had he continued working until normal retirement, it would have

been at a substantial cost to the Bank. Therefore, without good

cause, the Bank began to reassign his duties in order to humiliate

him into resigning. At a board meeting on November 21 of which

the plaintiff was not informed, the individual defendants falsely

represented to the other board members that the plaintiffs

performance for the prior three years had been inadequate; the

other board members had no way of knowing these representa-

tions were false. This course of conduct was alleged to be a breach

of the covenant of good faith and fair dealing.

For the purpose of the Pugh claim against the Bank, he alleged

that a covenant was in fact implied limiting the Bank’s right to

terminate him except for good cause. As a result, he had a

reasonable expectation of continued employment based on his 30

years of employment, his receipt of only minor criticism through-

out this time, his continually increasing salary, and his observa-

tion of the Bank’s practice of not terminating people except after

progressive discipline and for good cause. Plaintiff's termination

and the Bank’s mendacious insistence that it indeed had good

cause for terminating him amounted to a breach of implied in fact

covenant.

In his fourth cause of action against the individual defendants,

he alleged they conspired to interfere with his business relation-

ship with the Bank. The course of conduct previously described

was the wrongful way in which they accomplished this.

Although plaintiff alleged defendant Bank “was a California

corporation duly organized and existing under the laws of the

State of California,” the documents in support of the summary

judgment motion revealed a certificate of authority had been

A-7

issued by the United States Comptroller of the Currency to

Merchants National Bank of Sacramento. Based upon that show-

ing, plaintiff ultimately conceded it was undisputed that the Bank

was a chartered national bank.

In support of their motion for summary judgment, defendants

declared, among other things, that at the board meeting on

November 21, 1985, “the Board of Directors unanimously agreed

that due to the Plaintiff[’s] ... poor performance over the last

three (3) years and lack of initiative, he be offered a chance to

retire early or be terminated.” In opposition to defendants’ sum-

mary judgment motion, plaintiff reasserted the factual claims set

forth in his complaint and then embellished them. As a result

plaintiff claims that his declaration raises a triable issue as to

whether it was the individual defendants and not the board of

directors as a whole who either terminated him or at least

constructively terminated him.

As we have noted, the defendants adhered to the dramatic

convention of thrice taking an action—moving for summary

judgment—before achieving success. The three motions are es-

sentially echoes of one another. Judge DeCristoforo had found the

second to be no more than a renewal of the first and denied it for

failure to comply with the statutory requirement of an affidavit.

(Code Civ. Proc., § 1008, subd. (b).) The third motion formally

complied with the statute by including counsel’s allegation that

declarations of the board directors (stating it was the action of the

board which had terminated the plaintiff) were new and previ-

ously unavailable evidence which were now included in the third

(and second) motion but not the first. The third motion, in point

of fact, relied on the papers filed for the second motion. The

plaintiff similarly incorporated in the third motion his previous

filings and objections.

In this sea of paper, only the following evidence is relevant. For

purposes of the summary judgment motion, it is sufficient to note

the board minutes and declarations of the directors establish it

was they who ultimately offered the plaintiff the claimed Hob-

A-8

son’s choice of termination or forced retirement.‘ For purposes of

the pre-emption question and the resolution of the interference

with contract cause of action, it suffices to note the defendants

produced declarations that they had valid reasons for retiring the

plaintiff, countered by the plaintiffs declarations setting forth

facts from which it might be inferred these reasons had no basis in

truth. At this stage of the proceedings, the defendants are not

even concerned with whether they had good cause to discharge

him, denoting the question “irrelevant” for purposes of their

summary judgment motion.

DISCUSSION

THE DOCTRINE OF LAW OF

THE CASE IS NOT RELEVANT.

The plaintiff asserts dehors the record that the defendants

challenged the denial of their initial demurrer by a writ in this

court. He claims this court’s denial of relief constitutes law of the

case that his age discrimination claim may proceed.

The defendants counter only with the statement that demurrers

and summary judgments are different. We judicially notice the

existence of Merchants National Bank v. Superior Court (Aal-

gaard) (January 29, 1987) No. C000980, in which a petition for a

writ of prohibition was summarily denied.

Under the venerable doctrine of law of the case, “where, upon

an appeal, the [appellate] court, in deciding the appeal, states in

its opinion a principle or rule of law necessary to the decision, that

principle or rule becomes the law of the case and must be adhered

to throughout its subsequent appeal, ... and this although in its

subsequent consideration [the] court may be clearly of the

opinion that the former decision is erroneous in that particular.”

(Tally v. Ganahl (1907) 151 Cal. 418, 421 [emphasis added].)

“ Notwithstanding the plaintiff's arguments that the interpretation of

these minutes raises questions of fact, we conclude as a matter of law

that they do not.

A Rina nel we PTE RR di elem itl ML aig Aut Ne tlt

A-9

However, “upon denial of application for an extraordinary writ by

the Court of Appeal without issuance of an alternative writ or

order to show cause, a mere order without opinion is entered. This

kind of summary denial cannot properly be deemed a conclusive

decision on the merits because there are many possible grounds

jor denial other than the merits.” (Richer v. Superior Court

(1976) 63 Cal.App.3d 748 755-756 [citations and internal quote

marks deleted].) Therefore, unless the sole issue in a summary

writ proceeding is the appealability of a judgment, law of the case

does not apply to intermediate summary denials of writs. (Cf.

People v. Medina (1972) 6 Cal.3d 484, 490-493 & fn. 7 [sum-

mary denial of suppression motion writ].) As a result, our prior

action in this case is of no effect.

MANAGER’S PRIVILEGE BARS

INTERFERENCE WITH CONTRACT CLAIM.

Because the defendants have advanced no argument regarding

the fourth cause of action, we could take this as a waiver.

However, since it is our obligation to affirm the decision of the

lower court unless we can find no basis for doing so, we address

the merits of this claim.

As noted earlier, the fourth cause of action pled a conspiracy by

the individual defendants to interfere with the plaintiff's economic

relationship with the Bank through a campaign of misrepresenta-

tions.’ “An action in tort will lie for the intentional interference by

a third person with a contractual relationship either by unlawful

means or by means otherwise lawful when there is a lack of

sufficient justification. The tort is a specie of the broader tort of

interference with prospective economic advantage[,] involving

* The conspiracy portion of the count is irrelevant for our purposes,

because it is the long-standing rule in this state that a conspiracy itself

does not give rise to a cause of action unless a civil wrong resulting in

damage has been committed. (Herron v. Hughes et als. (1864) 25 Cal.

555, 560. See also 5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts,

§ 45, p. 108 and cases cited there.)

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similarity in elementary makeup and conduct while differing only

in the existence of legally binding contract. . . . Privilege or justifi-

cation'®! for the interference is an affirmative defense, not an

element of plaintiff's cause of action... .”’ (H & M Associates v.

City of El Centro (1980) 109 Cal.App.3d 399, 405 [internal

punctuation & citations deleted ].)

The defendants’ federal pre-emption argument is of no import

with respect to this tort, because “even though the relationship is

terminable at will, ... the fact that a contract is at the will of the

parties, ... does not make it one at the will of others. Thus the

fact that the Bank was privileged to discharge plaintiff at any time

does not necessarily privilege a third party unjustifiably to induce

the termination.” (Kozlowsky v. Westminster Nat. Bank (1970)

6 Cal.App.3d 593, 598 [internal quotation marks & citation

deleted]; Marczak v. Drexel Nat. Bank (1989) 186 IIl.App.3d

640 [542 N.E.2d 787] [interference with contract claim is not

inconsistent with employment at will]; EIB v. Federal Reserve

Bank of Kansas City (Mo.App. 1982) 633 S.W.2d 432 [breach of

contract action pre-empted, but tort of interfering with business

relationship may proceed].) If the individual defendants were not

acting on behalf of the board in their dealings with plaintiff, then

the pre-emptive shelter of § 24 (Fifth) would not protect them.

“The federal statute (12 U.S.C. § 24, supra) empowers the board

of directors, not the shareholders or an individual director, to

dismiss an officer.” (Kozlowsky, supra, 6 Cal.App.3d at p. 600.)

Thus, even though the board ultimately terminated plaintiff and

hence exempted the Bank from liability under § 12 (Fifth), the

evidence is conflicting on whether the individual defendants were

acting on behalf of the board when they allegedly interfered with

plaintiff's contractual relationship with the Bank. Since the evi-

dence is conflicting on this point, the issue cannot be resolved on

pre-emption grounds at this stage of the proceedings. (See

® Modern analysts, following the Restatement Second of Torts, es-

chew use of either term in order to avoid questions of burden of proof,

preferring the phrase “improper interference.” The factors in determin-

ing whether the interference was improper remain essentially the same

as with privilege or justification. (Environmental Planning & Informa-

tion Council v. Superior Court (1984) 36 Cal.3d 188, 194, fn. 3.)

A-11

: Mahoney v. Crocker Nat. Bank (N.D.Cal. 1983) 571 F.Supp.

287, 291.)

But that does not end the matter. The defendants also relied

below on the so-called “manager’s privilege” as to this cause of

action. That privilege has been described by one court this way:

“The privilege to induce an otherwise apparently tortious breach

of contract is extended by law to further certain social interests

deemed of sufficient importance to merit protection from liability.

Thus, a manager or agent may, with impersonal or disinterested

motive, properly endeavor to protect the interests of his principal

by counseling the breach of a contract with a third party which he

reasonably believes to be harmful to his employer’s best inter-

ests.” (Olivet v. Frischling (1980) 104 Cal.App.3d 831, 840-841,

fn. omitted; see also 3 Levy et al, Cal. Torts (1990 ed.) Business

Torts, § 40.119[3], pp. 40-165 to 40-166.) Defendants claim this

nonstatutory privilege is absolute, entitling them to judgment as a

matter of law. The plaintiff argues that the defendants’ justifica-

tion is a question of fact and that triable issues exist with respect

' to it.

The question of whether the manager’s privilege is absolute

(and thus requiring the instant individual defendants to show only

that they occupied such a position with defendant Bank) or

qualified (requiring them to establish their prima facie case

entitlement to it) is somewhat muddled in California law. In

Boyson v. Thorn (1893) 98 Cal. 578, the Court apparently held

that the state of mind of a managerial defendant is irrelevant if

the means by which the defendant brought about the breach were

lawful. In Imperial Ice Co. v. Rossier (1941) 18 Cal.2d 33, the

Court expanded upon the nature of the tort of interference with

contractual relations. It held that the tort could be based on

breaches induced by unlawful means, or by lawful means without

justification.’ (Jd. at p. 35.) Justification was said to exist where

the person inducing the breach is protecting an interest of creater

social value than contractual stability. (/bid.) With respect to the

’ The court repudiated cases which had interpreted Boyson as holding

that breaches induced by lawful means were never actionable. (Id. at pp.

37-38.)

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defendant’s state of mind, the court held, “The presence or

absence of ill-will . . . is immaterial, except as it indicates whether

or not an interest is actually being protected."’ (Id. at p. 36

{emphasis supplied].) The Court ultimately held that the mere

purpose of obtaining an economic advantage is not sufficient to

justify a competitor’s inducement of a breach of contract. (/d. at

pp. 34, 37.) Next, in Collins v. Vickter Manor, Inc. (1957) 47

Cal.2d 875, the Court stated with respect to an interference cause

of action against individual officers/directors of a corporation (id.

at p. 879), “[w]hether or not [the individual defendants] were

privileged to cause the corporation to discontinue its relations

with plaintiffs, in the belief that such a course of action was in the

best interests of the corporation, is a matter of defense, to be

decided by a resolution of the factual issues presumptively in-

volved [and thus improper to resolve on demurrer].” (/d. at p.

883 [emphasis supplied ].)

It should be clear from these cases that the privilege should not

be based merely upon a defendant’s position with respect to the

breaching party but upon the defendant’s purpose in inducing the

breach,® Nevertheless, there are a number of authorities which

* This position is reflected in a number of appellate decisions. (Rosen-

feld, Meyer & Susman v. Cohen (1983) 146 Cal.App.3d 200, 227-230

[agency status does not itself entitle one to absolute privilege; “ “The

first step is to determine if the relationship between the parties involves

the type of interests that the privilege is designed to protect. The second

step is to determine whether, in light of the nature and importance of the

above relationship, the advisor’s intent in inducing the breach was

proper. This second step is necessary because .. . the privilege is quali-

fied and not absolute. Where the intent is not proper, the privilege is

lost.”””}; Los Angeles Airways, Inc. v. Davis (9th Cir. 1982) 687 F.2d

321, 325- 328 [same, applying California law]; McCabe v. General

Foods Corp. (9th Cir. 1987) 811 F.2d 1336, 1339 [same]; Olivet v.

Frischling, supra, 104 Cal.App.3d at p. 841 [“Thus, a manager or agent

may, with impersonal or disinterested motive, properly endeavor to

protect the interests of his principal by counseling the breach of a

contract with a third party which he reasonably believes to be harmful to

his employer’s best interests”; unavailable where it is alleged defendant

acted to further own interests]; cf. Sade Shoe Co. v. Oschin & Snyder

(1984) 162 Cal.App.3d 1174, 1181 [“the privilege ‘is at most a qualified

NOC ten teeth dae Wt Ee eA 9 og nant ot

A-13

seem to suggest, without much analysis, that it is an absolute

privilege.”

However, we need not unravel this knot of authority. Even if

the defendant’s privilege is not absolute the uncontradicted evi-

dence shows the defendants acted not in self-interest (indeed,

there is not the slightest indication the individual defendants

personally benefitted), but in the Bank’s interest by attempting to

reduce the Bank’s costs through elimination of a highly paid

employee, albeit by allegedly impermissible means, and replacing

him with lower-paid workers. With this as their purpose, the

privilege remains intact even if it is merely qualified and not

absolute. (Los Angeles Airways, Inc., supra, 687 F.2d at p. 328

[““where, as here, an advisor is motivated in part by a desire to

benefit his principal, his conduct in inducing a breach of contract

should be privileged” ]; Imperial Ice Co., supra, 18 Cal.2d at p. 36

one dependant for its existence upon the circumstances of the case. It is

essentially a state-of-mind privilege....The resoluiion of the issue

turns on the defendant’s predominant purpose in inducing the breach of

the contract’”; therefore third party with financial interest cannot

prevail on demurrer]; Culcal Stylco, Inc. v. Vornado, Inc. (1972) 26

Cal.App.3d 879, 883 [same]; Richardson v. La Rancherita (1979) 98

Cal.App.3d 73, 80-81 [one inducing a breach in order to protect a

financial interest must do so in good faith]; see Rest.2d Torts, §§ 767-

773, pp. 4-52.)

* Lawless v. Brotherhood of Painters (1956) 143 Cal.App.2d 474,

478, simply states a servant is privileged to induce breach of a master’s

contract without any discussion of the factual context. Mallard v. Boring

(1960) 182 Cal.App.2d 390, 393-394, simply cites Lawless; it also notes

defendant’s act was the act of the corporation, so there is no inducement

separate from the breach itself. Marin v. Jacuzzi (1964) 224 Cal.App.2d

549, 553-554 is an admixture of the concepts of “employment at will,”

manager's privilege, and—like Mallard—the defendant’s act beingt that

of the corporation. Becket v. Welton Becket & Associates (1974) 39

Cal.App.3d 815, 818, 820, 823, held it was sufficient to establish

privilege that the complaint alleged defendant was a corporate officer,

however, the case can also be explained on the basis of the defendant’s

act being that of the corporation. Wise v. Southern Pacific Co. (1963)

223 Cal.App.2d 50, 72-73, is similar. (Also see Kozlowsky, supra, 6

Cal.App.3d at p. 599.)

A-14

[if conduct justified, ill will toward plaintiff irrelevant.) Since no

factual controversy was raised on this point, summary judgment

was properly granted on the cause of action for the intentional

interference with a contractual right.

BREACH OF COVENANTS AND AGE

DISCRIMINATION CLAIMS ARE

PRE-EMPTED BY NATIONAL BANK ACT.

Having dispatched the interference with contract cause of

action, we turn to the remaining three. As we stated at the outset,

the main bulwark of the defense in this case has been the claim of

pre-emption. For that reason we begin with an overview of the

doctrine of pre-emption.

“The pre-emption doctrine, which has its roots in the

Supremacy Clause, U.S. Const, Art VI, cl 2, requires [the

reviewing court] to examine congressional intent. Pre-emption

may be either express or implied, and ‘is compelled where

Congress’ command is explicitly stated in the statute’s language

or implicitly contained in its structure and purpose.’ Absent

explicit pre-emptive language, Congress’ intent to supersede state

law altogether may be inferred because ‘[t]he scheme of federal

regulation may be so pervasive as to make reasonable the infer-

ence that Congress left no room for the States to supplement it,’

because ‘the Act of Congress may touch a field in which the

federal interest is so dominant that the federal system will be

assumed to preclude enforcement of state laws on the same

subject,’ or because ‘the object sought to be obtained by federal

law and the character of obligations imposed by it may reveal the

same purpose.’ [{]] Even where Congress has not completely

displaced state regulation in a specific area, state law is nullified to

the extent that it actually conflicts with federal law. Such a

conflict arises when ‘compliance with both federal and state

regulations is a physical impossibility,’ or when state law ‘stands

as an obstacle to the accomplishment and execution of the full

purposes and objectives of Congress.’” (Fidelity Federal S. & L.

Assn. v. de la Cuesta (1982) 458 U.S. 141, 152-153 [73 L.Ed.2d

NA ap ar are dn RE Ply ii wn:

A-15

664, 674-675], citations omitted. See also (Elsworth v. Beech

Aircraft Corp. (1984) 37 Cal.3d 540, 548.)

As applied to national banks, the United States Supreme Court

“has often pointed out that national banks are subject to state

laws, unless those laws infringe the national banking laws or

impose an undue burden on the performance of the bank’s

functions.” (Anderson National Bank v. Luckett (1943) 321 U.S.

233, 248 [88 L.Ed. 692, 705].) This application of the pre-

emption doctrine to the National Bank Act was reaffirmed in

Perdue v. Crocker National Bank (1985) 38 Cal.3d 913. In

Perdue, the California Supreme Court considered whether Cali-

fornia law prohibiting banks from exacting unreasonable charges

for processing checks drawn on accounts without sufficient funds

was pre-empted by the National Bank Act. The court began by

noting that “[a]s the United States Supreme Court explained in

Silkwood v. Kerr-McGee Corp. (1984) 464 U.S. 238, [78 L.Ed.2d

443, 104 S.Ct. 615], ‘state law can be pre-empted in either of two

general ways. If Congress evidences an intent to occupy a given

field, any state law falling within that field is pre-empted. If

Congress has not entirely displaced state regulation over the

matter in question, state law is still pre-empted to the extent it

actually conflicts with federal law, that is, when it is impossible to

comply with both state and federal law, or where the state law

stands as an obstacle to the accomplishment of the full purpose

and objectives of Congress ....’ Defendant bears the burden of

persuasion on this issue; ‘[cJourts are reluctant to infer pre-

emption, and it is the burden of the party claiming Congress

intended to pre-empt state law to prove it.”” (38 Cal.3d 913, 936-

937 [citations omitted ].)

The high court then rejected the Bank’s contention that Con-

gress, by comprehensive regulation, had occupied the field of

regulation of contracts between national banks and their deposi-

tors. “One hundred and fifteen years of practice under the

national banking system argue to the contrary. While nationally

chartered banks are subject to the paramount authority of the

United States, Congress has declined to provide an entire system

of federal law to govern every aspect of national bank operations.

Consequently, national banks have traditionally been ‘governed in

A-16

their daily course of business far more by the laws of the State

than of the Nation. All their contracts are governed and construed

by State laws.’ As explained in National State Bank, Elizabeth,

N.J. v. Long [3d Cir. 1980] 630 F.2d 981, ‘[w]hatever may be

the history of federal-state relations in other fields, regulation of

banking has been one of dual control since the passage of the first

National Bank Act in 1863....In only a few instances has

Congress explicitly pre-empted state regulation of national banks.

More commonly, it has been left to the courts to delineate the

proper boundaries of federal and state supervision. [{]] The judi-

cial test has been a tolerant one. [National banks’] nght to

contract, collect debts, and acquire and transfer property are all

based on state law.’ (P. 985.) Thus the rule is that state laws

apply, ‘the exception being the cessation of the operation of such

laws whenever they expressly conflict with the laws of the United

States or frustrate the purpose for which the national banks were

created, or impair their efficiency to discharge [their] duties

.... ” (Perdue, supra, 38 Cal.3d at pp. 937-938 [fns. & citations

omitted ].)

Given this standard and the judicial history of the National

Bank Act, we conclude that the act is not a comprehensive

statutory scheme occupying the entire field relating to national

banks. Consequently, the application of the state statute prohibit-

ing age discrimination by an employer has not been pre-empted

by a comprehensive federal statutory scheme which occupies the

field. “Where Congress has not pre-empted the entire field, a

state law will be upheld if it does not conflict with, or is

authorized by, the federal statute.” (7 Witkin, Summary of Cal.

Law (9th ed. 1988) Constitutional Law, § 13, p. 58.) We turn

then to the second pre-emption issue, whether the application of

the California statute will create an actual conflict with federal

law.

'0 As we have noted, a conflict also arises when “compliance with both

federal and state regulations is a physical impossibility ....” (Florida

Avocado Growers v. Paul (1963) 373 U.S. 132, 142-143 [10 L.Ed.2d

248, 257].) That type of blatant conflict is not tendered here.

A-17

“In addition to express or implied pre-emption, a state law also

is invalid to the extent that it ‘actually conflicts with a... federal

statute.’ Such a conflict will be found when the state law ‘stands

as an obstacle to the accomplishment and execution of the full

purposes and objectives of Congress.’” (International Paper Co.

v. Ouellette (1987) 479 U.S. 481, 491-492 [93 L.Ed.2d 883, 896]

[citations & some internal quotation marks omitted].) The “‘con-

trolling principle” then is that “any state legislation which frus-

trates the full effectiveness of federal law is rendered invalid by

the Supremacy Clause.” (Perez v. Campbell (1971) 402 U.S.

637, 652 [29 L.Ed.2d 233, 244].)

The controlling federal statute, § 24 (Fifth), empowers the

board of directors of a national bank to “dismiss [designated]

officers or any of them at pleasure, . . .”'' In contrast, the Califor-

nia statute provides in relevant part that “[i]t is an unlawful

employment practice for an employer... to discharge, dismiss,

reduce, suspend, or demote, any individual over the age of 40 on

the ground of age, except in cases where the law compels or

provides for such action.”'* (Gov. Code, § 12941, subd. (a).)

Similarly, as we noted at the outset, the breach of the implied

covenant of good faith and fair dealing or the breach of an implied

contract not to discharge except for good cause gives rise to a

cause of action against the employer for breach of contract. The

question to be resolved therefore is whether the state age discrim-

''In carrying out their duties, the board of directors have been

conferred with all necessary incidental powers. Thus, under the statute a

national bank is empowered “[t]o exercise by its board of directors or

duly authorized officers or agents, subject to law, all such incidental

powers as shall be necessary to carry on the business of banking; ... .”

(§ 24 (Seventh).)

'2 By statutory definition, an “employer” includes, with exceptions not

relevant here, “any person regularly employing five or more persons, or

any person acting as an agent of an employer, directly or indirectly; the

state or any political or civil subdivision thereof and cities.” (Gov. Code,

§ 12926, subd. (c).) A person is defined to include “one or more

individuals, partnerships, associations, corporations, legal representa-

tives, trustees, trustees in bankruptcy, and receivers or other fiduciaries.”

(Gov. Code, § 12925, subd. (d).)

A-18

ination statute and the state causes of action for breach of

contract conflict with § 24 (Fifth).

A part of the National Bank Act (12 U.S.C. § 38), § 24

(Fifth) is a stature of Civil War vintage. (Act of June 3, 1864, ch.

106, §8 [13 Stat. 101].) When enacted, it contemplated a

banking system in which the reputation of bank officers was a

crucial component of a bank’s solvency. This mindset is demon-

strated in the early case of Westervelt v. Mohrenstecher (8th Cir.

1896) 76 F. 118. There, holders of a bond posted on the

performance of a bank’s cashier had refused to honor it on the

theory it had expired with a previous one-year term of office given

the cashier by the bank. The court rejected the theory, noting it

was essential to the financial health of a bank that it have

unfettered authority to remove immediately an officer to whom

had adhered any suspicion of dishonesty or carelessness. “It

follows from this principle that, since the act of congress expressly

provides that the cashiers of national banks should hold their

offices subject to the pleasure of the board of directors, neither the

bank not its board can make time contracts or appointments in

violation of that provision.” (Jd. at p. 122; accord Rankin v.

Tygard (8th Cir. 1912) 198 F. 795; cf. In re Paramount Publix

Corp. (2d Cir. 1937) 90 F.2d 441, 443.) Thus, at the heart of this

inviolable dismissal provision is a linkage with public policy

protecting the financial stability and fiscal integrity of banks by

making it beyond the powers of bank directors to enter into any

contract restricting their ability to respond expeditiously to finan-

cial threats posed by bank officers. (Obradovich v. Federal

Reserve Bank of New York (S.D.N.Y. 1983) 569 F.Supp. 785,

790; Armano v. Federal Reserve Bank of Boston (D.Mass. 1979)

468 F.Supp. 674, 676.) As a result, §24 (Fifth) has been

construed as placing “the fullest responsibility upon the directors

by giving them the right to discharge such officers at pleasure.”

(Copeland v. Melrose National Bank of New York (1930) 241

N.Y.S. 429, 430, affd. 254 N.Y. 632, 173 N.E. 898.)

in light of this historical purpose, it is not surprising that

contractual claims of employment rights have been deemed pre-

empted by § 24 (Fifth) and its twins in analogous federal statutes.

This has been true whether the claims have been anchored in

A-19

express contractual terms, in implied-in-fact covenants, or in

covenants implied in law. And for the most part that has been the

case whether the breach of the contractual provision also gives

rise to a cause of action in tort. Unremarkably, therefore,

throughout the years “[t]he case law uniformly [has] inter-

pret{ed] this section and substantially similar provisions as ren-

dering unenforceable, as against public policy, all contractual

provisions which do not allow a national banking association to

discharge its officers at will without incurring liability for breach

of contract.” (McGeehan v. Bank of New Hampshire, Nat.

Ass’n. (N.H. 1983) 45 A.2d 1054, 1055.)

California has long been in accord with this doctrine with

respect to express contractual rights of employment.’* Thus, in

Kozlowsky v. Westminster Nat. Bank, supra, 6 Cal.App.3d 593,

the president of a national bank sued for breach of his contract of

employment. The Kozlowsky court held that § 24 (Fifth) over-

rode any contract to employ such an officer for a fixed term. “By

virtue of this statute the board may dismiss an officer without

liability for breach of the agreement to employ.” (/d. at pp. 596-

597) The same result was reached in Cox v. First Nat. Bank

(1935) 10 Cal.App.2d 302. There the cashier of a national bank

brought suit against the bank to recover unpaid salary and for

salary during vacation periods. On the salary issue, the Cox court

noted that “[a] contract with the cashier of a national banking

association appointing the cashier for a definite period at a fixed

'> There have been four recent California appellate decisions discuss-

ing the breadth of § 24 (Fifth)’s pre-emptive effrect. Three of them are

no longer precedent (Betz v. National Bank of Southern California

(Cal. App.) [249 Cal. Rptr. 625] [finding a Tameny cause of action not

pre-empted; ordered depublished November 17, 1988]; Schey v. Trans

Pacific Nat. Bancorp. (Cal.App.) [266 Cal.Rptr. 39] [holding that a

Tameny cause of action not preempted, that a cause of action for

wrongful removal from a directorship not pre-empted, and that a

removal by an executive committee was the delegated act of the board;

ordered depublished April 26, 1990]; Wells Fargo Bank v. Superior

Court (1990) 218 Cal.App.3d 929 [discussing scope of who may be

considered “officers” under § 24 (Fifth); review granted May 23, 1990

(S014994) ]); the fourth we will discuss presently.

A-20

salary is void and does not prevent his removal at any time by the

board of directors. It will not support an action for damages for

discharge nor permit recovery of salary accruing after such

discharge.” (Jd. at p. 305.)

Numerous sister state decisions through the years have thrown

out contractual claims against federally-empowered banks which

were in derogation of at-will employment or causes of action

relying on such a contract. (See, e.g., Van Slyke v. Andrews

(1920) 146 Minn. 316 [718 N.W. 959]; Copeland v. Melrose

National Bank (1930) 229 App.Div. 311 [241 N.Y.S. 429], afd.

without opn. 254 N.Y. 632; Kemper v. First Nat. Bank of Newton

(1981) 94 Ill. App.3d 169 [418 N.E.2d 819] [noting that since

Congress has amended § 24 repeatedly in the face of these

interpretations without changing § 24 (Fifth), it has impliedly

approved the uniform body of law barring contract actions]; EJB,

supra, 633 S.W.2d 432; Alfano v. First National Bank of High-

land (1985) 111 A.D.2d 960 [490 N.Y.S.2d 56]; Berry v.

American Federal Sav. (Col.App. 1986) 730 P.2d 905; Ambro v.

American Nat. Bank & Trust Co. (1986) 152 Mich.App. 613

[394 N.W.2d 46]; Hawkins v. Peoples Federal Sav. & Loan Asso.

(1986) 155 Mich.App 237 [399 N.W.2d 484]; see St. Yves v.

Mid State Bank (1987) 50 Wash.App 95, 101, fn. 3 [748 P.2d

633] [noting federal banking law overrides contracts, c eclining to

do so under state law].

There are a handful of more recent federal cases which are

significant for purposes of our review of claims based upon express

or implied covenants. In Armano v. Federal Reserve Bank of .

Boston, supra, 468 F.Supp. 674, an employee of the defendant

bank brought an action for breach of contract as well as another

claim. The Federal Reserve Act contains a provision similar to

'* A number of courts have held this doctrine precludes any reasona-

ble expectation in continued employment as well, so no property interest

for due process purposes can develop. (Shepherd v. Jones (1982) 136

Cal.App.3d 1049, 1058; Scott v. Federal Reserve Bank of New York

(S.D.N.Y. 1989) 704 F.Supp. 441, 447; Little v. Federal Reserve Bank

of Cleveland (N.D.Ohio 1988) 601 F.Supp. 1372, 1375; Jaffe v. Federal

Reserve Bank of Chicago (N.D.IIl. 1984) 586 F.Supp. 106, 107-108.)

A-21

§ 24 (Fifth) whereby the board of directors is empowered “to

dismiss at pleasure such officers or employees.” (12 U.S.C. § 341,

Fifth.) The district court noted that plaintiff alleged in his

complaint that he was terminated without just cause in violation

of his contract with defendant. “Clearly, a contract that binds the

Bank by requiring just cause for dismissal prevents the Bank from

exercising its express power to dismiss an employee at pleasure.

By that provision, Congress clearly sought to protect Federal

reserve banks from unnecessary restrictions in carrying out their

financial responsibility.” (Armano, supra, 468 F.Supp. at 676.)

Noting that the judicial interpretation of § 24 (Fifth) in the

National Bank Act supported its construction of the statute, the

court held that “an employment contract that restricts the Bank’s

statutory right to terminate at will is in violation of 12 U.S.C.A.

§ 341, Fifth, and, therefore, unenforceable.” (Jbid.)

The Ninth Circuit, construing the same analogous provision in

the Federal Reserve Act, rejected the claim of a discharged

federal reserve bank employee that under California law he was

an “at-will” employee who was entitled to a hearing before being

terminated. (Bollow v. Federal Reserve Bank of San Francisco

(9th Cir. 1981) 650 F.2d 1093.) The Bollow court concluded that

“attempts to create such rights by reference to independent

sources are violative of the statute and void thereunder. Assuming

that [the employee] would indeed have been entitled to certain -

process rights under California law, such law when applied to

reserve bank employees conflicts with section Four, Fifth. In such

circumstances, the federal statute must control.” (Jd. at p. 1098.)

These two decisions were followed without additional discussion

in Obradovich, supra, 569 F.Supp. at page 790.

In Inglis v. Feinerman (9th Cir. 1983) 701 F.2d 97, the Ninth

Circuit, this time construing the Federal Home Loan Bank Act,

reached the same conclusion with respect to a Tameny cause of

action. {(Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d

167.) Under that act, the bank is empowered “to dismiss at

pleasure [its] officers, employees and agents;...” (12 U.S.C.

§ 1432(a).) There a discharged bank employee argued that the

bank’s right to terminate its employees under the statute should

be restricted when the grounds for termination contravene public

ea A-22

policy. The /nglis court noted that the employee “argues that 12

U.S.C. § 1432(a) should be similarly limited and claims that the

real reason for his termination was his insistence that the Bank

conform its practices to federal law. We hold that § 1432(a)

permits no inroads into the ‘dismiss at pleasure’ language.”

(Inglis, supra, 702 F.2d at p. 99.)

This long line of cases supports the proposition that employ-

ment rights of officers of national banking associations which

conflict with the right of the board of directors to dismiss them at

pleasure are pre-empted by § 24 (Fifth) whether those rights

arise by virtue of an agreement or are imposed by state law, and

whether framed as contractual or tortious causes of action. As

these cases illustrate, the essential Congressional purpose re-

flected in the “at pleasure” provision of § 24 (Fifth) was to confer

upon the board of directors sweeping powers of dismissal in order

to insure the fiscal integrity of national banks and to instill public

confidence in those financial institutions. State-based employ-

ment rights which inhibit or reduce the power of the board to

dismiss its officers “at pleasure” thus conflict with § 24 (Fifth)

and stand as an obstacle to the accomplishment and execution of

the full purposes and objectives of Congress. Since these state-

based claims would frustrate the full effectiveness of federal law

by, diminishing the full power of the board to dismiss its officers

for the benefit of national banks, they must fall under the

supremacy clause.

For the same reasons, we conclude that the age discrimination

cause of action is also pre-empted by § 24 (Fifth). In analogous

circumstances, the federal courts have held that state antidis-

crimination causes of action may not proceed. Thus, in Ana Leon

T. v. Federal Reserve Bank of Chicago (6th Cir. 1987) 823 F.2d

928, 931, an employee of Columbian origin was discharged from

her employment with a reserve bank. She then filed an action in

the federal district court claiming discrimination under title VII

of the Civil Rights Act of 1964 (42 U.S.C. § 2000e) and the

Michigan antidiscrimination act. he lower court dismissed the

action for failure to state a claim. The employee appealed and the

Sixth Circuit affirmed. “Leon’s claim was also examined under

Michigan’s Elliott-Larsen Act. That Act creates certain rights in

"i ; ee ee ney EDN Tre

A-23

employment under state law in Michigan. For example, an

employer is prohibited from discriminating against an individual

with respect to employment on account of race, color, national

origin, religion, age, sex, weight, height, or marital status. How-

ever, inasmuch as Leon was an employee of a Federal Reserve

Bank, her rights under the Elliott-Larsen Act were pre-empted by

federal law. Section 4, Fifth, of the Federal Reserve Act, 12

U.S.C. § 341, Fifth, specifically provides that employees of a

Federal Reserve Bank may be dismissed ‘at pleasure.’ This

provision pre-empts any state-created employment right to the

contrary. [{] Although a claim cf discrimination based on na-

tional origin could not have been brought under the Elliott-Larsen

Act, Leon could have brought her claim under Title VII of the

Civil Rights Act of 1964.” (Jd. at p. 931.) However, since it was

unclear whether the employee timely brought her claim under

title VII, the court remanded the Title VII claim for further

consideration. (/d. at p. 932.) For similar reasons, Osei-Bonsu v.

Federal Homer Loan Bank of New York (S.D.N.Y. 1989) 726

F.Supp. 95, 97-98, reached the same conclusion with respect to

employees of Federal Home Loan Banks which are empowered to

“dismiss at pleasure [their] officers, employees, attorneys, and

agents;...” (12 U.S.C. § 1432(a).) The court held that a state

rights agency had no jurisdiction over a claim of racial discrimina-

tion against the banking institution in question by virtue of

dismiss-at-pleasure language in the relevant federal statute.

Plaintiff counters that the pre-emption doctrine cannot be

applied to his state age discrimination claim because Congress

has enacted a comparable antidiscrimination “atute. By that

enactment, he contends, “Congress intended and encouraged

states themselves to enact far broader regulations prohibiting

discrimination on the basis of age by specifically stating that

Federal Law does not affect the jurisdiction of state agencies

performing ‘like functions.’ ” It is true that Congress has enacted

the Age Discrimination in Employment Act of 1967 (29 U.S.C.

§ 621 et seq.) banning age discrimination by employers employ-

A-24

ing more than 20 persons in industries affecting commerce.'* (29

U.S.C. §§ 623, 630, subd. (a) & (b).) It is also true that the

federal age discrimination statute further provides that

“[n]othing in this chapter shall affect the jurisdiction of any

agency of any State performing like functions with regard to

discriminatory employment practices on account of age except

that upon commencement of action under this chapter such

action shall supersede any State action.” (29 U.S.C. § 623, subd.

(a).) Plaintiff argues that this savings clause reflects “a Congres-

sional intent that States may enact broader statutes prohibiting

age discrimination. Consequently, there is no conflict between the

statutes that prohibit discrimination in employment on the basis

of age and the dismissal at pleasure language in the national bank

act.” We disagree. It is not reasonable to read this savings clause

as reflecting a congressional intent that state age discrimination

statutes may nullify federal legislation. Plaintiff, not surprisingly,

cites no authority for such a novel claim. The federal age

discrimination act provides no exception for national banks (or

any form of federally chartered financial institution) and since it

was enacted long after the National Bank Act it may well be that

under “familiar statutory interpretation, when there is such a

conflict, the most recent and more specific congressional pro-

nouncement will prevail over a prior, more generalized statute.”

(National Resources Defense Council v. U.S.E.P.A. (1st Cir.

1987) 824 F.2d 1258, 1278; see also Morton v. Mancari (1974)

417 U.S. 535, 550 [41 L.Ed.2d 290, 300]; Woodard v. Southern

Cal. Permanente Medical Group (1985) 171 Cal.App.3d 656,

664; 2A Sutherland, Statutory Construction (4th ed. 1984)

§ 51.02, pp. 453-454.) But even if pre-emption can no longer be

applied to those large banks, it does not follow that Congress

intended that small national banks exempted from the provisions

of the federal age discrimination statute because of size should be

bound by more sweeping state statutes. By implication, Congress

arguably has decreed that national banks with 20 or more employ-

ees are bound by the federal age discrimination statute. But as to

'S This federal statute has no application to the defendant Bank in this

case because at all relevant times it never employed 20 or more

employees.

A-25

national banks with less than 20 employees, the National Bank

Act and the federal discrimination statute are not irreconcilable.

Thus, a repeal by implication cannot be asserted as to exempted

small national banks because there is no conflict as to them

between § 24, Fifth, of the National Bank Act and the federal

Age Discrimination in Employment Act. As to those small

national banks, the board of directors still retain the power to

dismiss their officers “at pleasure” without regard to age, a power

conferred by a federal statute which has never been repealed.

Consequently, the extant federal statute prevails and a conflicting

state statute cannot be applied to small national banks having less

than 20 employees. (See, e.g., E. E. O. C. v. County of Santa

Barbara (9th Cir. 1982) 666 F.2d 373, 378.)

Plaintiff's reliance upon Simpson v. Alaska State Com’n for

Human Rights (D. Ala. 1976) 423 F.Supp. 552, is misplaced. In

Simpson, the defendant employer contended that the Alaska age

discrimination statute had been pre-empted by the federal act.

The District Court rejected that claim, noting that Congress only

intended to establish minimum standards in the federal act. (Jd.

at p. 556.) “Since there are no specific conflicts between the state

and federal statutes and since Congress has expressly left the

states the power to act in this field, the fact that Alaska has gone

beyond the federal government in enacting a complementary

scheme in this area does not make the Alaska law void.” (/bid.)

In this case, unlike Simpson, there is a conflict between a federal

statute, namely the unimpaired portion of § 24, Fifth, and the

California statute. Because there is an actual conflict, the state

statute must give way.

Since the state age discrimination statute cannot be constitu-

tionally be applied to national banks, it follows that the trial court

did not err in granting summary judgment in favor of both the

Bank and the individuals defendants. (Bollow v. Federal Reserve

Bank of San Francisco, supra, 650 F.2d 1093, 1098.)

A-26

DISPOSITION

The judgment is affirmed. Defendants shall receive their costs

of appeal. (CERTIFIED FOR PUBLICATION.)

SPARKS

We concur:

SIMS, J.

SCOTLAND, J.

A-27

Exhibit B

Order Denying Review

After Judgment by the Court of Appeal

Third Appellat District No. C005605

S018437

In the Supreme Court of the

State of California

In Bank

Robert G. Aalgaard,

Appellant

Merchants National Bank Inc. Et Al.,

Respondents

[Filed Jan. 4, 1991]

Appellant’s petition for review Denied.

Mosk, J. is of the opinion the petition should be granted.

Lucas

Chief Justice

A-28

Exhibit C

ROBERT G. AALGAARD

8683 Rawhide Lane

Wilton, California 95693

Telephone: (916) 687-8790

In Pro Se

In the Supreme Court

of the

United States of America

Robert G. Aalgaard,

Plaintiff/ Appellant,

vs.

Merchants National Bank, Inc.,

Thomas Bolton, Jr., Louis Favre, et al.,

Defendants/ Appellees

Court of Appeal

Third Appellate District for the State of California

C005605 S018437

TO: Chief Justice William H. Rendquist

United States Supreme Court:

PRELIMINARY STATEMENT

This document is a motion for extension of time to file a Writ

of Certiorari before the United States Supreme Court in the case

of Robert G. Aalgaard v. Merchants National Bank Inc., Sam

Holton, Jr., Lewis Favre, et al. from the Court of Appeal, Third

Appellate District for the State of California pursuant to Supreme

Court Rules 13, 21, 22, 30, 34.

A-29

JURISDICTION OF THE COURT

This action is properly before the Court pursuant to 28 USC,

Section 2101 (c) since this is a Petition for Writ of Certiorari in a

civil action within ninety (90) days after entry of judgment or

decree by the California Court of Appeal, Third Appellate Dis-

trict in this matter. The Court of Appeal, rendered their decision

and entered judgment against Appellant on October 10, 1990.

(See Exhibit A.) On January 4, 1991, the Supreme Court of the

State of California denied Appellants’ Petition For Review. (See

Exhibit B.)

Pursuant to Rule 10.1(c) of the Supreme Court Rules of

Court, the decision of the California Court of Appeal, Third

Appellate District has decided an important question of Federal

Law, which has not been, but should be, settled by this Court.

Namely, whether Section 24 (Fifth) of the National Bank

preempts state and federal anti-discrimination statutes.

Ill

REASON WHY GRANTING AN EXTENSION

OF TIME IS JUSTIFIED

Plaintiff/Appellant Robert G. Aalgaard respectfully requests

an extension of time to file a Writ of Certiorari before the Court

due to most extraordinary circumstances. Appellant’s attorney has

not yet been admitted to practice before the United States

Supreme Court. Appellant’s counsel is awaiting receipt of a

certificate from the California Supreme Court evidencing the

counsel’s admission and good standing to practice in the State of

California. Appellant’s counsel expects to receive said certifica-

tion within five (5) to ten (10) working days. In addition,

Appellant’s counsel is awaiting statements from two (2) sponsors

pursuant to Rule 5, who must be members of the Bar of this

Court and must personally know, but not be related to, the

counsel, endorsing the correctness of counsel’s statement, stating

that counsel possesses all qualifications required for admission,

and affirming that counsel is of good moral and professional

A-30

character. Appellant’s counsel expects to receive these statements

within five (5) to ten (10) working days. Furthermore, Appel-

lant’s counsel was informed by the printing company who is

preparing Appellant’s Writ of Certiorari, that they will need an

additional five (5) to ten (10) working days to prepare the Writ

to comply with Rule 33.

The last day for filing a Petition for Writ of Certiorari before

the United States Supreme Court in this matter is April 5, 1991.

Therefore, Plaintiff/Appellant pro se requests that the Court

accept this petition under his signature pro se, and grant an

extension of time of at least fifteen (15) days for filing a Petition

for Writ of Certiorari with this Court.

Dated: March 29, 1991

/s/ ROBERT G. AALGAARD

ROBERT G. AALGAARD

In Pro Se

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.