United States District Court

For the Northern District of California

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The Court uses the spelling of Ms. Kholligian’s name used by Defendants, rather

than the name, “Anne Marie Kholigian,” that appears in the complaint.

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

DEIRDRE MORRIS,

Plaintiff,

v.

FEDERAL RESERVE BANK OF

SAN FRANCISCO, et al.,

Defendants.

NO. C08-4981 TEH

ORDER GRANTING IN PART

AND DENYING IN PART

DEFENDANTS’ MOTION FOR

SUMMARY JUDGMENT

This matter comes before the Court on a motion for summary judgment brought by

Defendants Federal Reserve Bank of San Francisco (“San Francisco Fed”), Warren Howard,

Robin Kan, and Ann Marie Kholligian.1

 After carefully considering the parties’ papers, the

Court has determined that oral argument is unnecessary and hereby VACATES the hearing

and case management conference scheduled for February 8, 2010. For the reasons discussed

below, Defendants’ motion is GRANTED IN PART and DENIED IN PART.

BACKGROUND

Plaintiff Deirdre Morris worked for the San Francisco Fed in a variety of capacities

for twenty-seven years. She alleges that she was informed of her termination for falsification

of documents, fraud, dishonesty, and misconduct on December 14, 2007. Her termination as

of January 1, 2008, was ratified by the San Francisco Fed’s Board of Directors during their

February 28, 2008 meeting.

Morris contends that the purported reasons for her termination were a pretext for age

discrimination, and she brings six causes of action against Defendants: (1) breach of contract,

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Although Defendants’ moving papers also sought summary judgment on Morris’s

third claim for violation of FEHA, Defendants explained on reply that this was a

typographical error and that they are not seeking summary judgment on that claim.

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(2) breach of the covenant of good faith and fair dealing, (3) violation of the California Fair

Employment and Housing Act (“FEHA”), (4) violation of the federal Age Discrimination in

Employment Act (“ADEA”), (5) intentional infliction of emotional distress, and

(6) defamation. All claims are brought against the San Francisco Fed, and the latter two

claims are also brought against the individual defendants.

A material dispute exists over the cause of Morris’s termination, but those facts are

not at issue here; indeed, it appears that the parties have done no discovery on the underlying

facts. Instead, Defendants now challenge only the validity of Morris’s state common law

claims – claims 1, 2, 5, and 62

 – on grounds that these claims are preempted by the Federal

Reserve Act, 12 U.S.C. § 341 (Fifth).

LEGAL STANDARD

Summary judgment is appropriate when there is no genuine dispute as to material

facts and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). 

Material facts are those that may affect the outcome of the case. Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is “genuine” if there is

sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id. The

court may not weigh the evidence and must view the evidence in the light most favorable to

the nonmoving party. Id. at 255.

A party seeking summary judgment bears the initial burden of informing the court of

the basis for its motion, and of identifying those portions of the pleadings and discovery

responses that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v.

Catrett, 477 U.S. 317, 323 (1986). Where the moving party will have the burden of proof at

trial, it must affirmatively demonstrate that no reasonable trier of fact could find other than

for the moving party. Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 985 (9th Cir. 2007). 

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However, on an issue for which its opponent will have the burden of proof at trial, the

moving party can prevail merely by “pointing out to the district court . . . that there is an

absence of evidence to support the nonmoving party’s case.” Celotex, 477 U.S. at 325. If

the moving party meets its initial burden, the opposing party must then “set out specific facts

showing a genuine issue for trial” to defeat the motion. Fed. R. Civ. P. 56(e)(2); Anderson,

477 U.S. at 250.

DISCUSSION

This Court first rejects Morris’s contention that further discovery is necessary before

adjudicating Defendants’ motion. Except as discussed below on Morris’s defamation claim,

the issues decided in this order do not depend on any factual disputes, material or otherwise,

and no additional discovery is warranted. In addition, as Defendants correctly observe,

Morris merely argued that she needed further discovery in her opposition brief and failed to

follow the procedure for requesting additional discovery under Federal Rule of Civil

Procedure 56(f). Under that rule, a party seeking additional discovery to oppose summary

judgment “must file an affidavit specifying the facts that would be developed through further

discovery.” Baker v. Adventist Health, Inc., 260 F.3d 987, 996 (9th Cir. 2001). Failure to

comply with these requirements is “a proper ground for denying discovery and proceeding to

summary judgment,” which the Court now does. Brae Transp., Inc. v. Coopers & Lybrand,

790 F.2d 1439, 1443 (9th Cir. 1986).

As a Federal Reserve bank, the San Francisco Fed has the power “[t]o appoint by its

board of directors a president, vice presidents, and such officers and employees as are not

otherwise provided for in this chapter . . . and to dismiss at pleasure such officers or

employees.” 12 U.S.C. § 341 (Fifth). This “dismiss at pleasure” provision preempts

wrongful termination claims under state law. Bollow v. Fed. Reserve Bank of San Francisco,

650 F.2d 1093, 1098 (9th Cir. 1981) (“no process or tenure rights are conferred on reserve

bank employees” by § 341 (Fifth)). Although Bollow concerned contract claims, the Ninth

Circuit subsequently explained, when construing an analogous “dismiss at pleasure”

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The Diniz court held that § 341 (Fifth) preempts both state common law claims and

claims under FEHA. Defendants here do not challenge Morris’s FEHA claim, and this Court

makes no determination on the viability of such a claim at this time.

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provision under the National Bank Act, 12 U.S.C. § 24 (Fifth), that “it would make little

sense to allow state tort claims to proceed, where a former bank officer’s contract claims are

barred.” Mackey v. Pioneer Nat’l Bank, 867 F.2d 520, 526 (9th Cir. 1989). Thus, under the

law of the Ninth Circuit, § 341 (Fifth) preempts both state law contract and tort claims. See

also Diniz v. Fed. Reserve Bank of San Francisco, Case No. C03-5112 JSW, 2004 WL

2043127, at *1-2 (N.D. Cal. Sept. 13, 2004) (holding that all state law claims “aris[ing] out

of Plaintiff’s employment relationship with the [San Francisco] Fed and its decision to

terminate him” were preempted by § 341 (Fifth)).3

Morris does not dispute the preemptive nature of § 341 (Fifth) and instead asserts that

the provision does not apply to her because she was not “such” an employee appointed by the

board of directors. Although Morris is correct that “such” does not necessarily mean “all,”

this Court agrees with Defendants that, when read in context, “such officers and employees”

in § 341 (Fifth) refers to all employees. Morris has not, for example, pointed the Court to

any “employees” who are “otherwise provided for in this chapter.”

Moreover, Morris has failed to persuade the Court that Bollow is materially

distinguishable from this case. In Bollow, the Ninth Circuit explicitly held that the president

of the San Francisco Fed would exceed “the bounds of his authority” under § 341 if he tried

to enter into a contract guaranteeing employment security, and that such a contract would

therefore be void and unenforceable against the bank. Bollow, 650 F.2d at 1099-1100. The

Ninth Circuit made clear that § 341 (Fifth) barred not only employment contracts made by

the board of directors, but also any contracts made by bank officers: “(T)he United States is

neither bound nor estopped by acts of its officers or agents in entering into an arrangement or

agreement to do or cause to do what the law does not sanction or permit.” Id. at 1099

(quoting Utah Power & Light Co. v. United States, 243 U.S. 389, 409 (1917)). The court

made no mention of requiring appointment or termination by the Board. Indeed, the facts in

Bollow were even less favorable to the San Francisco Fed because the Board “was neither

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legally nor factually implicated in the Bank’s decision to terminate Bollow,” id. at 1103,

whereas the Board explicitly ratified Morris’s termination. Even if some action by the Board

were required to invoke the “dismiss at pleasure” provision of § 341 (Fifth), the ratification

of Morris’s termination would satisfy that requirement. It is true that the Board never

explicitly ratified Morris’s appointment; however, Morris concedes that she was an employee

of the San Francisco Fed – indeed, that is the entire premise of her lawsuit – and the Board

would have no reason to ratify termination of an individual whom it did not consider to be an

employee. In light of all of the above, the Court concludes that § 341 (Fifth) applies to

Morris’s employment and preempts her state common law claims based on alleged wrongful

termination, including her claims for breach of contract and breach of the implied covenant

of good faith and fair dealing.

Morris’s claim for intentional infliction of emotional distress is also barred: In

interpreting an analogous “dismiss at pleasure” provision in the Federal Home Loan Bank

Act, 12 U.S.C. § 1432(a), the Ninth Circuit explained that it did “not think that the statutory

power to dismiss at pleasure necessarily preempts claims based on an employer’s wrongful

act directed at the employee outside of the employment relationship.” Walleri v. Fed. Home

Loan Bank of Seattle, 83 F.3d 1575, 1582 (9th Cir. 1996). However, where “the conduct

complained of relates solely to the employment relationship” or “defendants’ management of

the employment relationship,” a claim for emotional distress is precluded. Id. Here,

Morris’s emotional distress claim merely “incorporates by reference all the allegations

contained in the General Allegations and the First through Fourth Counts of the complaint.” 

Compl. ¶ 60. All of these allegations concern acts alleged to have occurred in connection

with Morris’s termination, and her claim for emotional distress is therefore precluded by

§ 341 (Fifth).

Whether Morris’s defamation claim is similarly precluded is a closer question. While

no model of clarity, the complaint does allege that:

From approximately December 2007 through the present date,

Defendants caused to be published various false and

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nonprivileged communications directly tending to injure Plaintiff

in her career and personal reputation, including but not limited to

claims of falsification, violation of employer’s policies and fraud.

Compl. ¶ 65. It is therefore not clear whether Morris’s defamation claim rests solely on

statements made in connection with her termination and should therefore be precluded by

§ 341 (Fifth), or whether her defamation claim should be allowed to proceed. See, e.g.,

Bollow, 650 F.2d at 1102 (analyzing defamation claim on the merits rather than as preempted

by the “dismiss at pleasure” provision); Walleri, 83 F.3d at 1582-83 (same). Because Morris

bears the burden of proof, she would ordinarily need to come forth with specific evidence

concerning these communications to defeat summary judgment. However, given the unique

procedural posture of this case, where Defendants have moved for summary judgment on

preemption grounds and it appears that no discovery has been done concerning the

complaint’s factual allegations, this Court finds it prudent to deny summary judgment

without prejudice to a subsequent motion, if appropriate, following additional discovery.

CONCLUSION

For the above reasons, Defendants’ motion for summary judgment is GRANTED IN

PART and DENIED IN PART. The motion is GRANTED as to Morris’s claims for breach

of contract, breach of the implied covenant of good faith and fair dealing, and intentional

infliction of emotional distress. The motion is DENIED, without prejudice to bringing a

subsequent motion, as to Morris’s claim for defamation.

IT IS FURTHER ORDERED that the parties shall appear for a further case

management conference on April 12, 2010, at 1:30 PM. The parties shall meet and confer

and file a joint case management conference statement on or before April 5, 2010.

IT IS SO ORDERED.

Dated: 02/03/10 

THELTON E. HENDERSON, JUDGE

UNITED STATES DISTRICT COURT

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