United States District Court, Northern District of Illinois, E.D
June 5, 1984
JONATHAN E. JAFFE, PLAINTIFF,
FEDERAL RESERVE BANK OF CHICAGO, ET AL., DEFENDANTS.
The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
Jonathan E. Jaffe ("Jaffe") has filed an amended complaint
(the "Complaint") against the Federal Reserve Bank of Chicago
("Bank") and its alleged agents R.M. Scheider ("Scheider"),
R.P. Bush ("Bush") and Andrew M. Cook ("Cook") in connection
with Bank's termination of Jaffe's employment. Jaffe, a white
man, alleges he was terminated as a direct result of a
complaint by a black co-worker that he had made racist remarks
in her presence. Defendants now move pursuant to Fed.R.Civ.P.
("Rule") 12(b)(6) to dismiss each of the Complaint's four
counts for various reasons. For the reasons stated in this
memorandum opinion and order, defendants' motion is granted as
to Count I and III and denied as to Counts II and IV.
Count I alleges defendants deprived Jaffe of his property
interest in continued employment without due process of
law.*fn1 Existence of such a property interest often is an
inappropriate issue for resolution on a motion to dismiss.
See, e.g., Folak v. Sheriff's Office, 579 F. Supp. 1338, 1340-41
(N.D.Ill. 1984). Contracts, statutes or the type of established
grievance procedure on which Jaffe relies may constitute "rules
or understandings that secure certain benefits and that support
claims of entitlement to those benefits" (Board of Regents v.
Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548
Here however a statute resolves the issue as a matter of
law. Under 12 U.S.C. § 341, Fifth each Federal Reserve Bank has
the power "to dismiss at pleasure . . . officers and
employees." Courts uniformly hold that statute precludes the
enforcement of any employment contract against a
Federal Reserve Bank and prevents the development of any
reasonable expectation of continued employment. Bollow v.
Federal Reserve Bank of San Francisco, 650 F.2d 1093, 1098-1100
(9th Cir. 1981); Obradovich v. Federal Reserve Bank of New
York, 569 F. Supp. 785, 790-91 (S.D.N.Y. 1983); Armano v.
Federal Reserve Bank of Boston, 468 F. Supp. 674 (D.Mass. 1979).
Count I must be dismissed with prejudice.
Count II alleges defendants, acting without due process of
law, deprived Jaffe of his liberty interest in seeking other
employment. As is required on motions to dismiss (Wolfolk v.
Rivera, 729 F.2d 1114, 1116 (7th Cir. 1984)), the following
allegations are taken as true and considered in the light most
favorable to Jaffe:
1. Bank's personnel files pertaining to Jaffe
state he was terminated because of a "racial
incident" and his "inability to get along with
others" (Count II ¶ 29).
2. That information is false (id. ¶ 30).
3. That information has been released to
Illinois' Division of Unemployment Compensation
(id. ¶ 29).
4. United States Naval Reserve Intelligence
Program (the "Naval Reserve"), a prospective
employer, desires to obtain the contents of
Jaffe's file. Unless Bank is enjoined from
maintaining or releasing that information, the
Naval Reserve will obtain that information and
deny Jaffe employment on that basis (id. ¶¶ 25-28).
Defendants argue those allegations do not indicate the
presence of sufficient stigma, publication or tangible harm to
support the existence of a liberty interest.
On the issues of publication and tangible harm this case is
controlled by the same analysis as in Zurek v. Hasten,
553 F. Supp. 745, 746-48 (N.D.Ill. 1982). In Zurek the existence of
stigmatizing information in plaintiff's government personnel
file, coupled with the prospect of dissemination of that
information to all government agencies requesting it, was
sufficient to establish both publication and tangible harm on a
motion to dismiss. Rule 12(b)(6) principles require this Court
to draw the inference Jaffe has been similarly foreclosed from
all federal government employment opportunities, and that is
sufficient to implicate constitutionally protected liberty
interests under Larry v. Lawler, 605 F.2d 954, 958 (7th Cir.
1978). If anything Jaffe's position is stronger than that of
the plaintiff in Zurek, because Jaffe actually alleges
imminent publication to a prospective employer and foreclosure
of employment,*fn2 while publication to a particular
prospective employer had to be inferred from the allegations in
Smith v. Board of Education, 708 F.2d 258 (7th Cir. 1983),
decided after Zurek, controls whether the adverse publicity
Jaffe alleges is sufficiently stigmatizing to implicate
protected liberty interests. Under Smith, 708 F.2d at 265 the
statements must be "so critical" Jaffe either is foreclosed
from "new employment in similar . . . positions" or becomes an
outcast in his community. If the publicity is no worse than the
fact of his discharge it cannot rise to that level of
significance (id. at 266) while if it implicates Jaffe's
honesty or morality it can (id. at 266 n. 6).
Whether publicity that Jaffe was discharged because of a
"racial incident" meets the stringent standard of
Smith cannot be determined at the pleading stage.*fn3 Larry
and Smith teach proof of foreclosure from all federal
employment would satisfy the stigma requirement automatically.
Jaffe has alleged at least one prospective
government employer takes charges of racism very
seriously.*fn4 In any event development of the facts through
discovery is necessary to determine whether in this case
charges of a "racial incident" are more akin to charges of
incompetence or charges of immorality.
Defendants attack Count III, a claim for discriminatory
interference with contractual rights under 42 U.S.C. § 1981
("Section 1981"), on the ground it does not contain sufficient
allegations of racially motivated differential treatment.*fn5
Indeed all Jaffe alleges is that defendants' "unjustified . . .
assumption of the truth of the charges of racial bias" (Count
III ¶ 27) operated "in conjunction with the fact that Plaintiff
is white" (id. ¶ 28) to lead to Jaffe's termination and
therefore "was based upon impermissible racial considerations"
(id.). Jaffe's response embellishes the count somewhat by
explaining that he believes defendants accepted his black
coworker's story and refused to let him respond because he is
white and his co-worker is black.
But Jaffe's Count III's allegations have not even attempted
to overcome the strictures of Jafree v. Barber, 689 F.2d 640,
643-44 (7th Cir. 1982). Jaffe cannot merely invoke his race in
the course of a claim's narrative and automatically be entitled
to pursue relief under Section 1981. Rather he "must allege
some facts that demonstrate that his race was the reason" for
defendants' actions. 689 F.2d at 643. To the contrary, Jaffe
alleges defendants believed they had a valid reason to
discharge him, then baldly asserts that reason operated "in
conjunction with" his race to cause his discharge.
Jaffe's embellishment of Count III confirms he does not even
allege differential treatment of different races as he must to
state a prima facie case. See International Brotherhood of
Teamsters v. United States, 431 U.S. 324, 335 & n. 15, 97 S.Ct.
1843, 1854 & n. 15, 52 L.Ed.2d 396 (1977) (Title VII case).
Jaffe alleges only "discrimination" between himself and his
black complaining co-worker. But Jaffe and his co-worker were
not similarly situated. Defendants' favoring the co-worker's
story over Jaffe's is just as likely to be indicative of a
tendency to favor the stories of those who complain over the
stories of subjects of complaints as it is to be indicative of
a tendency to favor blacks over whites. Though the latter would
be actionable under Section 1981, the former is not.
Count III is dismissed without prejudice. What Jaffe would
have to allege is that if a white co-worker complained about
anti-white racial "humor" by a black employee, that black
employee would be treated better than Jaffe was. But if Jaffe
elects to advance such an allegation he must have some factual
basis for doing so, or he or his attorney may be subject to
taxation of their opponents' attorneys' fees for bad faith
litigation. See 28 U.S.C. § 1927; Rule 11.
Defendants' only argument for dismissal of Count IV,
sounding in state law defamation, is that the alleged
defamatory publication is not actionable per se under Illinois
law. Although Jaffe disputes that argument, he also points out
he has alleged special damages (loss of Naval Reserve
employment), so under Illinois law he need not show
defendants' conduct is actionable per se. Jaffe does not call
those damages "special" in his amended complaint, but federal
(not state) pleading rules apply (Hanna v. Plumer,
380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965)), so the fact the
damages fall within Illinois' definition of "special damages"
is sufficient to escape dismissal.
Defendants' motion is granted in part. Count I is dismissed
with prejudice, and Count III is dismissed without prejudice.
Defendants must answer Counts II and IV by June 19, 1984.