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August 23, 1991


The opinion of the court was delivered by: D. LOWELL JENSEN

 On August 21, 1991, this Court heard defendant's motion for partial summary judgment. Cynthia E. Gitt of Ford & Harrison appeared for defendant Philippine Airlines. Lawrence Ball appeared for plaintiffs Fred Lemnitzer and Ken Green. Having considered the papers submitted, the arguments of counsel, the applicable law, and the entire record herein, the Court GRANTS defendant's motion for the following reasons.


 This is an action brought by two former employees of defendant Philippine Airlines, Inc. ("PAL"), alleging wrongful termination on the basis of age and national origin, in violation of Title VII, 42 U.S.C. §§ 2000e et seq., the California Fair Employment and Housing Act ("FEHA"), and the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. § 626, and other pendent state claims. Both plaintiffs are U.S. citizens who are not of Filipino national origin.

 Defendant is a foreign corporation and subsidiary of the Republic of the Philippines and is headquartered in Manila. PAL provides cargo and passenger service between the United States and the Philippines, using airports in Los Angeles, San Francisco, and Honolulu ("line cities") for departures and landings en route to or from Manila. PAL is prohibited from transporting passengers between U.S. cities.

 Prior to the summer of 1988, PAL also maintained District Sales Offices in fourteen cities in North America: Miami; Washington, D.C.; New York; Toronto; Chicago; Detroit; Dallas; Houston; San Diego; Los Angeles; San Francisco; Seattle; Honolulu; and Vancouver, British Columbia. Each office was headed by a District and/or Area Sales Manager. In addition to the District Sales Offices, there were certain marketing functions performed on behalf of all districts by managers in San Francisco. One such function was the Tours and Charters Department.

 PAL frequently filled certain sales and other key management positions with persons hired or trained in the Philippines, who were expected to return to the Philippines or go to any international destination to which they are assigned, and who were deemed "loyal" to the interests of PAL. *fn1" This policy translated into a practice of preserving key managerial positions for persons who were citizens of the Philippines and/or participants in a group of managers who rotate from the Philippines to various positions around the world [hereinafter referred to as "expatriates"] *fn2" However, over the years PAL has also appointed U.S. citizens who are non-Filipinos to such key positions.

 Plaintiff Fred Lemnitzer ("Lemnitzer") began work for PAL on or about April 21, 1969, and worked continuously for PAL until his termination effective September 30, 1988. He held various management positions during that time, and his last position was that of Tours and Charters Manager in San Francisco.

 Plaintiff Ken Green ("Green") worked continuously for PAL from on or about April 19, 1976, until his termination on or about September 30, 1988. He also held management positions throughout this time. It is disputed as to what particular position he held at the time of his termination, but that issue is immaterial to the present motion.

 On or about August 8, 1988, PAL announced that it was closing all of its District Sales offices in the United States outside of California and Hawaii due to financial losses stemming from PAL's U.S. operations, and that it would be abolishing several other positions throughout its U.S. operations. PAL had informed Lemnitzer in June 1988 that PAL would be abolishing the position of Tours and Charters Manager, as well as the Tours and Charter Department. PAL states that many of the expatriates whose positions were abolished were reassigned to posts outside the United States.

 The respective rights of PAL and U.S. carriers to operate in the other's country are governed by the Air Transport Agreement (ATA) negotiated by the United States and the Republic of the Philippines in 1981 and clarified or modified from time to time thereafter. The provisions pertinent to the present motion come from Article 8 of the ATA, which provides as follows:

 Article 8. Commercial Opportunities

 (1) The airline . . . of one Party may, subject to the nondiscriminatory requirements of domestic laws and regulations of the other Party, establish offices in the territory of the other Party for the promotion and sale of air transportation.

 (3) Each designated airline may perform its own ground handling in the territory of the other Party . . . . If the designated airline does not self-handle it may, subject to domestic laws and regulation of the other Party, select among competing agents for such services. Ground handling includes: the functions of checking in passengers and baggage, maintenance . . . ramp . . . ...

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