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D'amato v. Wisconsin Gas Co.

decided: April 25, 1985.

JOSEPH D'AMATO, PLAINTIFF-APPELLANT,
v.
WISCONSIN GAS COMPANY, ELLEN SHONG, DIRECTOR, OFFICE OF FEDERAL CONTRACT COMPLIANCE PROGRAMS, AND PETER M. SLIVA, AREA OFFICE DIRECTOR, OFFICE OF FEDERAL CONTRACT COMPLIANCE PROGRAMS, DEFENDANTS-APPELLEES, AND OIL, CHEMICAL AND ATOMIC WORKERS INTERNATIONAL UNION, AFL-CIO, LOCAL 6-18, PARTY OF INTEREST



Appeal from the United States District Court for the Eastern District of Wisconsin. No. 83 C 107 - Terence T. Evans, Judge.

Cummings, Chief Judge, Cudahy, Circuit Judge, and Pell, Senior Circuit Judge.

Author: Cummings

CUMMINGS, Chief Judge.

Plaintiff Joseph D'Amato appeals from the district court's dismissal of his complaint under Fed. R. Civ. P. 12(b)(6) for failure to state a claim for which relief can be granted. For the reasons stated herein, we affirm the lower court.

I

Plaintiff's factual allegations, which we take as true for the purposes of a Rule 12(b)(6) motion, are as follows. Defendant Wisconsin Gas Company (the "Company") hired D'Amato on April 23, 1980, as an Office Services Clerk B. This job required the plaintiff to go into tall buildings, a requirement he had difficulty meeting because he suffers from acrophobia. He discussed the problem with his supervisor, who advised him that he could either resign or be fired. On July 11, 1980, he chose to resign. On July 23 the Company offered him a position as meter reader, a position that would not require him to go into high places. But on the next day the Company withdrew its offer, informing D'Amato that its policy against rehiring employees who had quit or been fired prevented its rehiring him.

On January 26, 1981, D'Amato initiated this administrative complaint with the Milwaukee Area Office of Federal Contract Compliance Programs ("OFCCP") headed by defendant Peter Sliva. The complaint alleged that the Company discriminated against D'Amato through its no-rehire policy. On April 1, 1982, the OFCCP notified D'Amato that it agreed with his allegations of discrimination, and it instituted voluntary conciliation efforts with the Company.

On July 20, 1982, while these discussions were ongoing, the Company made D'Amato an unconditional offer of employment as meter reader, explaining that it had eliminated its no-rehire policy. The plaintiff accepted the offer and began work on August 2, 1982. The collective bargaining agreement (the "Agreement") governing plaintiff's work provided a probationary period of sixty days, after which the Company could dismiss an employee only for proper cause. During the probationary period th Company could terminate an employee without cause. On September 29, 1982, the fifty-eighth day of D'Amato's employment, the Company informed him that he had not performed his job "satisfactorily" and that the Company was therefore terminating him effective that day (App. 30).

Subsequent to this termination the Company consummated a conciliation agreement with OFCCP providing, among other things, that plaintiff would be entitled to seniority dating back to July 24, 1980, "assuming his completion of a 60-day probationary period" (App. 31). This agreement was a sham for the Company knew it had already terminated D'Amato, thus assuring it would never have to fulfill any of the obligations set forth in the conciliation agreement. On October 8, 1982, Sliva wrote D'Amato to inform him of the proposed conciliation agreement and that the agreement would be forwarded to a "higher agency authority" for review and approval "before a final offer can be made" (id.).

Thereafter plaintiff has tried repeatedly to learn the status of his case. Not until April 1, 1983, in an affidavit filed in the current suit, did he receive information regarding the status of the administrative proceeding. The case has now been referred by the OFCCP to the Regional Solicitor of the Department of Labor ("DOL") for enforcement, and an administrative complaint has been issued against the Company. That complaint is styled Office of Federal Contract Compliance Programs, U.S. Department of Labor v. Wisconsin Gas Company, Case No. 84-OFCCP-9, and is pending before DOL's Office of Administrative Law Judges.

On January 24, 1983, plaintiff filed the instant suit against the Company, the Oil, Chemical and Atomic Workers, International Union, Local 6-18 (the "Union"), and two federal employees. His four-count complaint alleged (1) the Company violated Section 503 of the Rehabilitation Act, 29 U.S.C. § 793 (the "Act"),*fn1 in connection with its termination of his employment on July 24, 1980; (2) the Company wrongfully discharged him on September 29, 1982, in violation of federal common law; (3) the Company conspired with Sliva and Ellen Shong, then Director of OFCCP, to deprive D'Amato of his rights as a handicapped individual in violation of 42 U.S.C. §§ 1985(3) and 1986; and (4) the Company breached its collective bargaining agreement with the Union in discharging D'Amato on September 29, 1982. The district court granted defendants' motions to dismiss on November 16, 1983, and plaintiff filed a timely notice of appeal. We have jurisdiction pursuant to 28 U.S.C. § 1291.

II

Section 503 (a) of the Rehabilitation Act requires companies with government contracts exceeding $2,500 for the procurement of personal property and nonpersonal services to include an affirmative action provision in their contracts.*fn2 Plaintiff's first count asserts a claim as a third-party beneficiary of this affirmative action provision.*fn3 See Plaintiff's Br. 11. Thus plaintiff seeks to avoid the well-settled rule in this Circuit that no private right of action arises under Section 503. Ernst v. Indiana Bell Telephone Co., 717 F.2d 1036, 1037 (1983); Simpson v. Reynolds Metals Co., 629 F.2d 1226 (1980).*fn4 We hold that plaintiff's Count I fails.

This case concededly implicates federal common law (Plaintiff's Br. 11) rather than state common law, because rights allegedly arising out of a federal statute are at issue. The Supreme Court concluded in Illinois v. City of Milwaukee, 406 U.S. 91, 100, 92 S. Ct. 1385, 31 L. Ed. 2d 712, "that § 1331 [federal question] jurisdiction will support claims founded upon federal common law as well as those of a statutory origin." The Court recognized that "the remedies which Congress provides are not necessarily the only federal remedies available. 'It is not uncommon for federal courts to fashion federal law where federal rights are concerned.'" Id. at 103 (quoting Textile Workers v. Lincoln Mills, 353 U.S. 448, 457, 1 L. Ed. 2d 972, 77 S. Ct. 912). Therefore the situation is quite different from that in Miree v. DeKalb County, 433 U.S. 25, 53 L. Ed. 2d 557, 97 S. Ct. 2490. In Miree, a case founded on the federal court's diversity jurisdiction under 28 U.S.C. § 1332, the Court held that federal common law would not be applied where the United States was not a party, no financial obligation of the United States was affected, and no paramount federal interest was at stake. Id. at 28-32. This analysis is inapplicable to a case dependent in the first instance on federal common law.

Consequently, the Eleventh Circuit's opinion in Howard v. Uniroyal, Inc., 719 F.2d 1552 (1983), has no direct relevance. Howard involved a third-party beneficiary claim allegedly arising under state law, a claim that the Eleventh Circuit found preempted by the administrative enforcement scheme Congress enacted in Section 503, discussed infra. Preemption analysis is distinct from determining whether the federal common law would furnish a remedy in addition to that contained in the federal statute. Nonetheless, the Eleventh Circuit's conclusion that the pervasive federal scheme of administrative enforcement barred state law third-party beneficiary claims, id. at 1559-1560, that themselves "present[ed] a serious danger of conflict with the administration of the federal program," id. at 1561, accords with the one we reach here concerning federal third-party beneficiary claims.

The Restatement (Second) of Contracts provides the relevant criteria with regard to Count I. Section 302(1) provides in relevant part that "unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties." Restatement (Second) of Contracts § 302(1) (1981). Section 313 deals specifically with government contracts, and it provides in relevant part that the "rules stated in this Chapter apply to contracts with a government or governmental agency except to the extent that application would contravene the policy of the law authorizing the contract or prescribing remedies for its breach. " Id. § 313(1).

Ascertainment of the intent of the parties and the purposes underlying both the Company's federal contracts and Section 503 is thereby central to the inquiry. D'Amato would have enforceable rights under the Company's government contracts if they were "made for his direct benefit. * * * If the agreement was not intended to benefit the third party, however, he viewed as an 'incidental' beneficiary, having no legally cognizable rights under the contract." Holbrook v. Pitt, 643 F.2d 1261, 1270 (7th Cir. 1981) (citations and footnote omitted). Plaintiff argues that because the affirmative action clauses benefit the handicapped the handicapped are direct beneficiaries and therefore entitled to sue. This analysis is overly simplistic. The question is not whether the contracts would benefit the handicapped, but whether the parties intended to confer an actionable right on the handicapped.

The tenor of the contracts suggests that the parties did not intend to make the handicapped direct beneficiaries of their contracts. The contracts are not directed at the handicapped in any way but instead focus exclusively on the government-contractor relationship. Thus our decisions in Holbrook, supra, and EEOC v. Liberty Trucking Co., 695 F.2d 1038 (7th Cir. 1982), do not lend D'Amato the support he claims. Holbrook involved Section 8 of the United States Housing Act of 1937, 42 U.S.C. § 1437f, under which the Department of Housing and Urban Development contracts with certain housing project owners to make rental assistance payments on behalf of eligible low-income tenants. We held that these tenants were third-party beneficiaries of the contracts the government made on their behalf. Liberty Trucking held that the Equal Employment Opportunity Commission ("EEOC") could bring suit directly under Title VII of the Civil Rights Act of 1964 for breach of a conciliation agreement an employer had signed. In both cases the needs of the third party motivated the government to enter into the contract in the first place. The Company's contracts, on the other hand, are not designed to serve the interests of the handicapped. They merely require the Company to take affirmative action as a promise incidental to a contract to provide goods and services.*fn5 That the main purpose is unrelated to the affirmative action clauses indicates that the handicapped may not sue as third-party beneficiaries.

The statutory language and structure buttress this conclusion. The Supreme Court observed in Cannon v. University of Chicago, 441 U.S. 677, 60 L. Ed. 2d 560, 99 S. Ct. 1946, that far less cause exists to infer a private remedy when the statutory language does not unequivocally focus on the benefitted class in their right but instead operates "simply as a ban on discriminatory conduct." Id. at 691-692. The same analysis applies in determining whether ...


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