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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1991
- **Citation:** 502 U.S. 901

## Text

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
2
2
4

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

iv

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,
§ } 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

I
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.

II
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

2

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.)

IV
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

3

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

4

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.

Vv
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.

5

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

6

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.)

7

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.”

8

“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.

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
IV

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.

Vv

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.)

A-10

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.)

De

A-12

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.

VI

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).)

le

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

v.

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

Ss

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:

I
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

II
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

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_2222%3A1. Public record. Not legal advice.