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Wild v. United States Department of Housing and Urban Development

decided: November 12, 1982.


On Petition for Review of an Order of the Merit Systems Protection Board.

Cummings, Chief Judge, Posner, Circuit Judge, and Decker, Senior District Judge.*fn* Decker, Senior District Judge, dissenting.

Author: Posner

POSNER, Circuit Judge.

The following facts are either uncontested, or were found by the Merit Systems Protection Board and are supported by substantial evidence. Lawrence A. Wild was for many years employed by the U.S. Department of Housing and Urban Development in Chicago as an appraiser. In 1976 his wife purchased, for $28,500, two six-flat apartment buildings in a poor neighborhood of Chicago. He assisted in the purchase and became the manager of the buildings. At the time of purchase all of the apartments were fully rented, but within a very short space of time the tenants began moving out because of harassment by a gang known as the "Insane Unknowns," and because the buildings were deteriorating physically. Within a year the buildings had fallen into serious disrepair, had no tenants at all, and were being used by the gang for narcotics trafficking. A group fighting to save the neighborhood took steps, which included filing complaints with the City of Chicago and complaining in person and in writing to Wild's superiors at HUD, to pressure Wild to rehabilitate the buildings. Beginning in February 1978 Wild's superiors tried to persuade him to either rehabilitate or get rid of the buildings. He made repeated promises to do so that he did not keep, and efforts that were half-hearted and ineffectual. His superiors threatened to discharge him for violation of HUD's code of conduct. In January 1979 an article on Wild's troubles appeared in the Chicago Sun-Times, under the title "HUD Employee Told to Repair Buildings." He still temporized and on April 24 the housing court ordered the buildings demolished. A month later Wild was fired for having (1) violated the code of basic principles governing the conduct of HUD employees, (2) violated HUD's financial conflict of interest regulations, and (3) falsified a financial disclosure statement. He appealed to the Merit Systems Protection Board, which, after a full evidentiary hearing, threw out the last two charges as unproved but upheld the third and affirmed his discharge. Wild has petitioned this court under 5 U.S.C. § 7703(b) (1) for review of the Board's determination.

We can dispose quickly of several of Wild's grounds for reversing the Board. He claims that he was discriminated against on account of his marital status -- which the Civil Service Reform Act of 1978 makes a forbidden basis for adverse personnel action, see 5 U.S.C. § 2302 (b) (1) (E) -- because he was punished for his wife's ownership of slum properties. But as the Board found on ample evidence, he managed the properties and was fired because of what he did, or rather failed to do, as manager.

We also reject Wild's argument that the code of conduct does not authorize adverse personnel action. The evident purpose of the code is to make conduct that is not necessarily forbidden by any express regulation a ground for separating an employee from HUD. It states that a HUD employee "can never have a right of tenure that transcends [ sic ] the public good. He can properly be a Government employee only as long as it remains in the public interest for him to be one. Public trust and confidence in the integrity of the Government are paramount." 24 C.F.R. § 0.735-201(a). In addition, "the effective accomplishment of the Department's mission is significantly dependent upon a public image that engenders confidence in the Department's integrity. Accordingly, the avoidance of any involvement that tends to damage that image is a responsibility of exceptional importance for all employees who participate in or influence official operating determinations that affect the interests of those with whom the Department does business." 24 C.F.R. § 0.735-201(b) (1). Therefore, "If there is knowledge of an employee's involvement in or association with circumstances reasonably construed to reduce public confidence in the acts or determinations of the Department, such knowledge may be sufficient cause for the initiation of action adverse to the employee" 24 C.F.R. § 0.735-201(b) (2).

Wild makes the distinct but related argument that the code is too vague to provide adequate notice that his off-duty conduct placed his job on the line. We do not condone the draftsmen's sloppy use of the English language -- especially the mayhem committed on the word "transcend" -- but, redundant and heavy-handed and bureaucratic as it is, the code adequately conveys its concern that an employee not conduct himself in a way likely to bring public obloquy upon HUD. Wild was employed by HUD as an appraiser, a responsible professional position, but moonlighting as the manager of his wife's slum property let it deteriorate so badly that it became a focus of criminal activity -- a true neighborhood blight -- and it was eventually ordered to be demolished. The irony of a professional employee of HUD, the federal agency whose most important or at least best known mission is to eradicate slum housing, being hauled into court for letting the slum property of which he was sole manager and in effect absentee landlord deteriorate so badly that it was ordered to be demolished did not escape newspaper comment.

We cannot imagine a better example of the sort of episode that the code was designed to prevent. But even if the code is vaguer than we think, this would not help Wild, because his superiors warned him for more than a year before actually discharging him that he was violating the code. True, he and his wife might have lost money if he had gotten rid of or rehabilitated the property on the timetable set by his superiors (though as it turned out the housing court's order that the buildings be demolished was issued before HUD got around to firing him); but as soon as the property began to deteriorate late in 1976, Wild should have had more than an inkling that his extracurricular activities in real estate could jeopardize his job. Two years of explicit warnings is a sufficient grace period.

The most substantial ground on which Wild challenges the lawfulness of his discharge is that HUD's code of conduct, as applied to the facts of this case, is inconsistent with the laws protecting the tenure of federal civil servants.

The problem of the public employee whose private conduct mocks the mission of the agency that employs him is not a new one; and until 1978, when the Civil Service Reform Act was passed, it was clear that such conduct was a lawful basis for firing the employee. For example, in Wroblaski v. Hampton, 528 F.2d 852 (7th Cir. 1976) (per curiam), this court upheld the discharge of an employee of the Immigration and Naturalization Service for employing illegal aliens in her home; and in Masino v. United States, 218 Ct. Cl. 531, 589 F.2d 1048 (Ct. Cl. 1978), the Court of Claims upheld the discharge of a customs officer who used marijuana -- one of the substances he was supposed to keep out of this country -- albeit off duty.

These cases arose under 5 U.S.C. § 7513(a), which provides that the discharge of a federal employee on grounds of misconduct may "only [be] for such cause as will promote the efficiency of the [federal civil] service." The Civil Service Reform Act of 1978, while it did not amend section 7513(a), added two provisions which, Wild argues, qualify it. One, 5 U.S.C. § 7703(c) (3), requires that discharges for cause be supported by substantial evidence; before 1978 they only had to have a rational basis, see Wroblaski, supra, 528 F.2d at 853. But a change in evidentiary requirements should not affect the outcome of cases where the issues are not evidentiary. In Wroblaski and Masino, as in this case, the question was not whether the employee had engaged in the alleged misconduct, a question that might be answered differently under a substantial evidence standard than under a rational basis standard, but whether the misconduct was of a character likely to undermine public confidence in the agency, and thus impair the agency's efficiency, although it might not affect the employee's job performance. It is unlikely that a change in the standard of judicial review was intended to change the answer to that question.

The second provision, 5 U.S.C. § 2302(b) (10), forbids federal agencies to "discriminate for or against any employee or applicant for employment on the basis of conduct which does not adversely affect the performance of the employee or applicant or the performance of others," unless the employee or applicant has been convicted of a crime, as Wild has not been. At first glance this provision may seem to forbid agencies to fire employees for any misconduct committed while off duty, but a closer reading suggests that no such drastic change in existing law, as illustrated by Wroblaski and Masino, was intended. The reference to "performance by others," presumably the employee's co-workers, would seem to allow discharge where an employee's off-duty conduct impairs the efficiency of the agency by undermining public confidence in it, thereby making it harder for the agency's other employees to perform their jobs effectively. This provision, the draftsmen's use of the pejorative term "discriminate" to denote the forbidden conduct, and the fact that the other subsections of section 2302(b) specifying impermissible grounds for discharge involve grounds that the draftsmen obviously regarded as invidious, such as race, age, and marital or political affiliation, see 5 U.S.C. §§ 2302(b) (1) (A)-(E), suggest that section 2302(b) (10) should be read to prevent agencies from using the threat of discharge to deter unrelated off-duty behavior of federal employees, but not to prevent them from using such threats to deter off-duty behavior directly related to the agency's work.

The cases Wild relies on, such as Bonet v. United States Postal Serv., 661 F.2d 1071 (5th Cir. 1981), involve off-duty sexual behavior of federal employees whose official duties do not involve sex, or off-duty narcotics use by federal employees whose official duties (unlike Masino's) do not involve narcotics. In contrast, Wroblaski, Masino, and the present case involve off-duty misconduct that undermines the mission of the agency. Bonet recognizes this difference, see 661 F.2d at 1078, and cites with approval Hoover v. United States, 206 Ct. Cl. 640, 513 F.2d 603 (Ct. Cl. 1975). That was a case much like Wroblaski, Masino, and the present case. An officer of the Internal Revenue Service had falsified his own tax returns, and the court held that this was a lawful ground for firing him.

Our suggested interpretation of section 2302(b) (10) may not be inevitable as a textual matter, but considerations of legislative purpose reinforce it. The Civil Service Reform Act of 1978 was the culmination of a long effort to make the federal civil service more efficient and businesslike, and less political, see S. Rep. No. 969, 95th Cong., 2d Sess. 2-4 (1978), U.S. Code Cong. & Admin. News 1978, p. 2723--- more, that is, like the work forces of (enlightened) private employers. A private employer would think twice about firing a valued employee who had been, say, arrested for homosexual activity while off duty. Assuming the employer was not a junior high school, or a defense contractor, or some other kind of enterprise likely to lose customers if it was known to employ homosexuals in certain positions, firing such an employee would reduce the efficiency and hence profitability of the business, and might even endanger its survival if it was in a highly competitive market. But government agencies not only do not face the market constraints that private businesses do, they are subject to political constraints of a sort that private businesses are not, and for both reasons are more likely than private businesses to bow to public hostility to deviant or unorthodox private behavior. Cf. Alchian & Kessel, Competition, ...

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