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November 10, 1992


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


 This case requires the Court to examine factual and legal issues stemming from allegations of reverse discrimination. On May 27, 1992, this Court heard defendant's motion for summary judgment. Cynthia E. Gitt of Epstein, Becker & Green appeared for defendant Philippine Airlines, Inc. Lawrence Ball and Louis A. Highman 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. *fn1" ("Title VII"); 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. *fn2"

 Defendant is a foreign corporation, headquartered in Manila, and a subsidiary of the Republic of the Philippines. 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 arrivals en route to or from Manila. PAL is prohibited from transporting passengers between U.S. cities.

 Since September 1987, Rodolfo Llora, Regional Vice President for the Americas, has overseen U.S. operations from the regional office of San Francisco. Mr. Llora, in turn, has reported to the Senior Vice President for Marketing and the Vice President of Marketing in Manila, who in 1988 were Jose Maria Estrada and Rene Ocampo, respectively. 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 were assigned, and who were deemed "loyal" to the interests of PAL. 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"]. However, over the years PAL has also appointed U.S. citizens of Filipino origin and U.S. citizens of non-Filipino origin 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 September 30, 1988. He held management positions throughout this time. Green transferred from the Washington, D.C. office to the Detroit office in July 1988.

 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. Llora, under the direction of Estrada and Ocampo, was directed to eliminate unnecessary costs to cut the losses. This cost reduction involved terminating 114 PAL employees, including the plaintiffs. PAL informed Lemnitzer in June 1988 that it would be abolishing the position of Tours and Charters manager, as well as the Tours and Charter department. Green was notified in August 1988 that his position would be terminated effective September 30, 1988. Many of the expatriates whose positions were abolished were reassigned to posts outside the United States.

 Plaintiffs filed this action on August 8, 1990, alleging the following causes of action: (1) national origin discrimination in violation of Title VII; (2) age discrimination in violation of the ADEA; (3) national origin discrimination in violation of the FEHA; (4) age discrimination in violation of the FEHA; (5) wrongful termination in breach of employment contract; (6) wrongful termination based on national origin discrimination in violation of the California Constitution; and (7) wrongful termination in violation of California public policy.

 In a previous Order, this Court granted partial summary judgment for the defendant and ruled that the Air Transport Agreement ("ATA"), which was negotiated by the United States and the Republic of the Philippines and which governs the respective rights of PAL and U.S. carriers to operate in the other's country, "permits PAL to prefer its citizens at key positions . . . without implicating the national origin provisions of Title VII." Aug. 23, 1991 Order, at 18-19. Thus, defendant's preference for its own citizens did not violate either Title VII or the FEHA. Nor did defendant's decision to assign employees to positions outside the United States support plaintiffs' Title VII or FEHA theories. Id. at 19.

 PAL now moves for summary judgment on all causes of action. Plaintiffs concede that summary judgment should be granted on their age discrimination claims. Plaintiffs' Opposition to Summary Judgment, May 13, 1992, at 13-14.


 Under Rule 56(c) of the Federal Rules of Civil Procedure, a district court may grant summary judgment when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c).

  Recognizing that summary judgment motions can contribute significantly to the resolution of litigation when there are no factual issues, the Supreme Court and the Ninth Circuit have established the following standards for consideration of such motions: "If the party moving for summary judgment meets its initial burden of identifying for the court those portions of the materials on file that it believes demonstrates the absence of any genuine issues of material fact," the burden of production then shifts so that "the nonmoving party must set forth, by affidavit or as otherwise provided in Rule 56, 'specific facts showing that there is a genuine issue for trial.'" T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (quoting Fed. R. Civ. P. 56(e) (emphasis added) and citing Kaiser Cement Corp. v. Fischbach & Moore, Inc., 793 F.2d 1100, 1103-04 (9th Cir.), cert. denied, 479 U.S. 949, 107 S. Ct. 435, 93 L. Ed. 2d 384 (1986) and Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986)). With respect to these specific facts offered by the non-moving party, the court does not make credibility determinations or weigh conflicting evidence, and is required to draw all inferences in a light most favorable to the non-moving party. T.W. Elec. Serv., 809 F.2d at 630-31 (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 106 S. Ct. 1348, 1356 (1986)).

 Rule 56(c) nevertheless requires this Court to enter summary judgment, "after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 106 S. Ct. at 2552. The mere existence of a scintilla of evidence in support of the nonmoving party's position is insufficient: "There must be evidence on which the jury could reasonably find for the [nonmoving party]." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2512, 91 L. Ed. 2d 202 (1986). This Court thus applies to either a defendant's or plaintiff's motion for summary judgment the same standard as for a motion for directed verdict: "Whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id.


 A. National Origin Discrimination Claims

 1. Special Legal Standard for Summary Judgment on Discriminatory Termination Claims

 In a case raising claims of discriminatory termination, plaintiffs bear the initial burden to establish a prima facie case of discrimination. McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S. Ct. 1817, 1824, 36 L. Ed. 2d 668 (1973); Texas Dep't of Community Affairs v. Burdine, 450 U.S. 248, 101 S. Ct. 1089, 1093, 67 L. Ed. 2d 207 (1981). Once the plaintiffs establish a prima facie case, the burden of production shifts to the defendant to come forward with evidence that the plaintiffs were terminated for a nondiscriminatory reason. McDonnell Douglas, 93 S. Ct. at 1824. After defendant carries this burden, the burden of production shifts back to the plaintiffs to establish that defendant's asserted reasons are merely pretextual. Id. at 1825. The failure of the plaintiffs to come forward with specific facts that establish the existence of a prima facie case renders a grant of summary judgment appropriate. Stallcop v. Kaiser Foundation Hospitals, 820 F.2d 1044, 1050-51 (9th Cir.), cert. denied, 484 U.S. 986 (1987); Jurado v. Eleven-Fifty Corp., 813 F.2d 1406, 1409 (9th Cir. 1987); Yartzoff v. Thomas, 809 F.2d 1371, 1374 (9th Cir. 1987). Direct evidence of intentional discrimination carries plaintiffs' prima facie burden. Palmer v. United States, 794 F.2d 534, 537 n.1 (9th Cir. 1986).

 In the "traditional" discrimination case, a plaintiff who lacks direct evidence of discrimination may still establish a prima facie case of discriminatory termination by proving: (1) that he is a member of a protected class of persons; (2) that he was qualified for his position; (3) that his employment was terminated; and (4) that his employer replaced him with a person who was not a member of plaintiff's protected class. See McDonnell Douglas, 93 S. Ct. at 1824.

  However, in this case, plaintiffs are members of a traditionally favored group. Plaintiffs are male, non-Filipino U.S. citizens. In the face of a so-called "reverse discrimination" claim, a number of courts have applied a modified McDonnell Douglas standard. See Notari v. Denver Water Dep't, 971 F.2d 585, 588-89 (10th Cir. 1992); Murray v. Thistledown Racing Club, Inc., 770 F.2d 63, 67 (6th Cir. 1985); Parker v. Baltimore & Ohio R.R., 209 U.S. App. D.C. 215, 652 F.2d 1012, 1017 (D.C. Cir. 1981). The need for modifying the standard stems from the premise underlying the McDonnell Douglas standard. The McDonnell Douglas standard regarding prima facie proof was created in response to legislative efforts to "address this nation's history of discrimination against racial minorities, a legacy of racism so entrenched that we presume acts, otherwise unexplained, embody its effect." Murray, 770 F.2d at 67. Although Title VII prohibits racial discrimination against all groups, see McDonald v. Santa Fe Trail Transp. Co., 427 U.S. 273, 96 S. Ct. 2574, 2576, 2578, 49 L. Ed. 2d 493 (1976), "the majority plaintiff who asserts a claim of racial discrimination in employment does so within the historical context of the Act." Murray, 770 F.2d at 67.

 Under the modified test, majority plaintiffs may establish a prima facie case of reverse discrimination by showing: (1) "that background circumstances support the suspicion that the defendant is that unusual employer who discriminates against the majority" and (2) "that the employer treated differently employees who were similarly situated but not members of the protected group." Id.

 Despite making it clear that Title VII protects individuals who are members of historically or socially favored groups, the U.S. Supreme Court has not addressed whether the showing required to state a prima facie case must be modified or altered in a reverse discrimination case. *fn3" See Notari, 971 F.2d at 588. Other courts have expressly rejected the modified McDonnell Douglas test applied in Parker and Murray. See, e.g., Collins v. School Dist. of Kansas City, 727 F. Supp. 1318, 1322 (W.D. Mo. 1990) (holding that the modified test was unacceptable, stating that it is "simply unconscionable for the courts to erect this arbitrary barrier which serves only to frustrate those who have legitimate Title VII claims").

 The Ninth Circuit has not explicitly adopted the modified McDonnell Douglas standard. *fn4" Although this Court considers the modified test a better yardstick by which to measure reverse discrimination cases, the Court will leave such a determination for the Circuit when it has an opportunity to do so. *fn5"

 Accordingly, this Court will apply the traditional McDonnell Douglas test.

  Once a prima facie case has been established and the defendant has articulated a nondiscriminatory reason for its actions, a plaintiff must come forward with specific evidence that indicates that the nondiscriminatory reason is pretextual. Failure to come forward with specific facts on the issue of pretext that would constitute admissible evidence at trial is grounds for entering summary judgment. See Mundy v. Household Fin. Corp., 885 F.2d 542, 546 (9th Cir. 1989) (citing Cotton v. City of Alameda, 812 F.2d 1245, 1248 (9th Cir. 1987)); Steckl v. Motorola, Inc., 703 F.2d 392, 393 (9th Cir. 1983); see also Burdine, 101 S. Ct. at 1093 (requiring plaintiff to prove pretext by a "preponderance of evidence"); McDonnell Douglas, 93 S. Ct. at 1826 (permitting challenge to nondiscriminatory explanation through the use of "competent evidence"). There is no reason why the evidence presented by plaintiffs to establish a prima facie case cannot also be used to prove that defendant's nondiscriminatory explanation is pretextual. See, e.g., Diaz v. American Tel. & Telegraph, 752 F.2d 1356, 1363 n.8 (9th Cir. 1985).

 When judging the evidence at the summary judgment stage, the Court does not make credibility determinations or weigh conflicting evidence, and is required to draw all inferences in a light most favorable to the nonmoving party. T.W. Electric, 809 F.2d at 630-31 (citing Anderson, 106 S. Ct. at 2513). However, there are limits to the admissibility of evidence offered to support or defeat a motion for summary judgment. Conclusory, speculative testimony in affidavits and moving papers is insufficient to raise genuine issues of fact and defeat summary judgment. Thornhill Publishing Co. v. GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979); Falls Riverway Realty, Inc. v. Niagara Falls, 754 F.2d 49 (2nd Cir. 1985). Thus, in Title VII cases, summary judgment has been granted where the only evidence of discrimination consisted of a conclusory affidavit that lacked "concrete, relevant particulars." Forsberg v. Pacific Northwest Bell Tel. Co., 840 F.2d 1409, 1419 (9th Cir. 1988); Lim v. Citizens Sav. & Loan Ass'n, 430 F. Supp. 802, 814 (N.D. Cal. 1976). In addition, hearsay statements found in affidavits are inadmissable. Fong v. American Airlines, Inc., 626 F.2d 759, 762-63 (9th Cir. 1980) (hearsay inadmissable in summary judgment over Title VII claim). Plaintiffs must ultimately persuade the Court in opposing summary judgment that they will have sufficient admissible evidence to justify going to trial.

 2. Prima Facie Showing -- Application of the McDonnell Douglas Test

 Plaintiffs may establish a prima facie case of national origin discrimination by showing: (1) that they are members of a protected class of persons; (2) that they were qualified for their positions; (3) that their employment was terminated; and (4) that their employer replaced them with people who were not members of plaintiffs' protected class. See McDonnell Douglas, 93 S. Ct. at 1824.

 a. Protected or Cognizable Class Under Title VII

 As a preliminary matter in establishing a prima facie Title VII case, plaintiffs must demonstrate that they are members of a protected or cognizable class of persons eligible to receive protection under Title VII. Both plaintiffs and defendant skip this threshold inquiry, each assuming that plaintiffs, as caucasian American males, or more appropriately for this motion, as non-Filipino U.S. citizens, are members of a cognizable class. Specifically, plaintiffs allege that they have been discriminated against on the basis of their national origin.

 However, the August 23, 1991 Order precluded plaintiffs from complaining of potential preferential treatment afforded to Filipino citizens and to those assigned positions outside the United States. This would seem to leave only one group with which plaintiffs could compare their treatment and argue it was disparate -- U.S. citizens of Filipino origin.

 As a result, plaintiffs' argument must be that they were discriminated against in favor of U.S. citizens of Filipino origin. National origin claims under Title VII traditionally consider groups of those born outside the United States. *fn6" Here, plaintiffs allege reverse discrimination, which is actionable under Title VII. See McDonald v. Santa Fe Trail Transp. Co., 427 U.S. 273, 96 S. Ct. 2574, 2578-79, 49 L. Ed. 2d 493 (1976). However, rather than allege that citizens of another nation are being treated better than them, which is foreclosed by the ATA, plaintiffs argue that fellow U.S. citizens are awarded preference because of Filipino origin. *fn7" Whether plaintiffs, as non-Filipino U.S. citizens, are a cognizable group under Title VII when complaining of disparate treatment as compared to U.S. citizens of Filipino origin is a novel issue. *fn8"

 However, neither party has addressed the issue and this Court need not decide the question at this time because, even assuming that plaintiffs are members of a cognizable group, they nonetheless are not entitled to their requested relief for reasons explained below. Accordingly, for purposes of this Order, the Court will assume that plaintiffs are members of a protected class entitled to raise a Title VII claim.

 b. Qualified for Positions

 Plaintiffs must next demonstrate that they were qualified for their positions at PAL. Both sides agree that plaintiffs were qualified for their positions. Thus, plaintiffs have satisfied this portion of their prima facie case.

 c. Employment Terminated

 The third element of plaintiffs' prima facie case is to show that their employment was terminated. No dispute exists as to this element as plaintiffs were plainly terminated. Therefore, plaintiffs have met this element as well.

 d. Final McDonnell Douglas Element -- Different Treatment of Similarly Situated Filipino Employees

 The fourth and final prong of the McDonnell Douglas test requires plaintiffs to show that PAL replaced them with people who were not members of their protected class. However, since plaintiffs cannot establish this part of the test because they were not replaced by U.S. citizens of Filipino origin, it is necessary to adapt the McDonnell Douglas test to better consider plaintiffs' national origin claims. Such modification is proper because the McDonnell Douglas test should be flexibly applied. See Burdine, 101 S. Ct. at 1094 n.6. Accordingly, for plaintiffs to meet the fourth element of the standard, they must show that PAL treated employees who were similarly situated, but not members of their protected group, differently. In other words, plaintiffs need to show that similarly situated Filipino employees were treated differently than them.

 To reduce costs, PAL closed all ten of its U.S. district sales offices located outside of California and Hawaii. The Tours and Charters department in San Francisco was also closed. The class of similarly situated employees this Court will examine is necessarily comprised of the sales office managers not located in California and Hawaii and the tours manager from San Francisco, all of whom were terminated because all of their offices were closed. At the time the layoffs were announced, the sales offices located in Dallas and Washington, D.C. were not staffed with a manager. Thus of the eleven closed offices, nine managers were terminated. Four of the nine terminated managers were non-Filipinos: 1. Detroit plaintiff Green 2. San Francisco plaintiff Lemnitzer 3. New York Mr. Colisemo 4. Vancouver Mr. Halley


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