Court Opinion

ID: 4368078
Source: CourtListenerOpinion
Date Created: 2019-02-14 21:00:23.907578+00
Date Added: 2024-06-11T13:30:45.181696
License: Public Domain

UNITED STATES COURT OF APPEALS                        FILED
                            FOR THE NINTH CIRCUIT                          FEB 14 2019
                                                                       MOLLY C. DWYER, CLERK
                                                                        U.S. COURT OF APPEALS
PETER KLUNE,                                     No.    15-56918
                                                        16-56385
                Plaintiff-Appellant,
                                                 D.C. No.
 v.                                              5:13-cv-01247-JAK-SP
                                                 Central District of California,
PALO VERDE HEALTH CARE                           Riverside
DISTRICT, a public entity; et al.,
                                                 ORDER
                Defendants-Appellees.

Before: GOULD, PARKER,* and MURGUIA, Circuit Judges.

      The memorandum disposition filed on January 10, 2019 is hereby amended.

The superseding amended memorandum will be filed concurrently with this order.

      The Petition for Panel Rehearing is DENIED (Dkt. No. 75). No further

petitions for rehearing or petitions for rehearing en banc will be entertained.

      *
            The Honorable Barrington D. Parker, United States Circuit Judge for
the U.S. Court of Appeals for the Second Circuit, sitting by designation.
                           NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                        FEB 14 2019
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

PETER KLUNE,                                    No.    15-56918
                                                       16-56385
                Plaintiff-Appellant,
                                                D.C. No.
 v.                                             5:13-cv-01247-JAK-SP

PALO VERDE HEALTH CARE
DISTRICT, a public entity; et al.,              AMENDED MEMORANDUM*

                Defendants-Appellees.

                   Appeal from the United States District Court
                      for the Central District of California
                   John A. Kronstadt, District Judge, Presiding

                    Argued and Submitted November 15, 2018
                              Pasadena, California

Before: GOULD, PARKER,** and MURGUIA, Circuit Judges.

      This case arises out of the termination of Peter Klune as Chief Executive

Officer (“CEO”) of Palo Verde Hospital. On appeal, Klune challenges (1) the

entry of summary judgment in favor of Defendants on Klune’s § 1983 claim of a

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
            The Honorable Barrington D. Parker, United States Circuit Judge for
the U.S. Court of Appeals for the Second Circuit, sitting by designation.
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property interest in continued employment; (2) the entry of summary judgment in

favor of Defendants on Klune’s § 1983 claim of a property interest in his severance

payment; (3) the entry of summary judgment in favor of Defendants on Klune’s §

1983 claim of a liberty interest in his continued employment; (4) the imposition of

time limits on the trial; (5) the District Court’s calculation of damages on Klune’s

successful breach of contract claim; (6) the District Court’s calculation of

attorneys’ fees awarded to Klune; and (7) the District Court’s determination that

each party would bear its own costs. We reverse the District Court’s entry of

judgment as to the amount of damages on Klune’s contract claim and affirm the

District Court in all other respects.

           PROPERTY INTEREST IN CONTINUED EMPLOYMENT

      As the CEO of a California local hospital district, Klune was an at-will

employee with no property right to his continued employment. See Cal. Health &

Safety Code § 32121(h). While an employment contract can create such a right,

Klune’s contract did not. Instead, it stated that Palo Verde Health Care District

(“PVHD”) “may terminate [Klune’s] employment at will” provided that PVHD

pays severance to Klune. 3 Excerpts of Record 712. While the contract provided

for an employment term of three years, that term was, by the express language of

the contract, subject to termination by either party at any time. 3 Excerpts of

Record 711-12. Accordingly, Klune had no property interest in his continued

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employment which would support a due process right to notice and a hearing prior

to his termination. We affirm the District Court’s dismissal of this claim.

             PROPERTY INTEREST IN SEVERANCE PAYMENT

      While contracts can create constitutionally protected property interests,

Klune’s employment contract did not do so with respect to his severance payment.

The District Court appropriately dismissed this claim on the basis that it “was

essentially one for breach of contract and included no complaint that a separate

injury was caused by the procedural inadequacy of the state’s treatment.” San

Bernardino Physicians’ Servs. Med. Grp., Inc. v. San Bernardino Cty., 825 F.2d

1404, 1408 n.3 (9th Cir. 1987); see also Lujan v. G & G Fire Sprinklers, Inc., 532

U.S. 189, 196 (2001). We affirm the District Court’s dismissal of this claim.

            LIBERTY INTEREST IN CONTINUED EMPLOYMENT

      Klune fails to point to any stigmatizing statements made by Defendants in

connection with his termination. While he claims that Defendants stated he was

complicit in an illegal kickback agreement, the evidence does not support this

contention. Instead, the evidence cited by Klune shows only that Defendants

stated Klune was aware of and did not object to an employment arrangement

between two doctors at the hospital. Because Klune has failed to point to a

statement stigmatizing him by Defendants, his claim fails. See Bd. of Regents of

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State Colls. v. Roth, 408 U.S. 564, 573 (1972); Kramer v. Cullinan, 878 F.3d 1156,

1162 (9th Cir. 2018).

                                TRIAL TIME LIMITS

      We review trial management issues for an abuse of discretion. Gen. Signal

Corp. v. MCI Telecomms. Corp., 66 F.3d 1500, 1507 (9th Cir. 1995). As an initial

matter, Defendants claim that Klune has waived appellate review of the time limits

set for trial because he failed to object at the final pretrial conference when they

were imposed. However, we will assume that Klune sufficiently preserved the

issue by requesting additional time for cross-examination. Walsh v. Nev. Dep’t of

Human Res., 471 F.3d 1033, 1037 (9th Cir. 2006) (issue must be “raised

sufficiently for the trial court to rule on it” to be preserved for appeal) (quoting

Whittaker Corp. v. Execuair Corp., 953 F.2d 510, 515 (9th Cir. 1992)).

      Here, we affirm the District Court’s management of trial because its actions

were reasonable in the context of the proceeding viewed in its entirety. See Gen.

Signal. Corp., 66 F.3d at 1508. First, the District Court provided clear notice to

both parties of its time limitations. Second, the District Court provided Klune with

notice during the trial as to the remaining time. Third, the District Court

reasonably accommodated Klune after his time had expired. After Klune ran out

of time for the cross-examination of two witnesses, the District Court allowed

Klune to submit extensive excerpts from the lengthy deposition testimony of those

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witnesses. The District Court also allowed the parties to submit closing briefs in

lieu of closing oral arguments. In the context of a bench trial, we find these

accommodations to be reasonable in a case where the parties had devoted

enormous amounts of time, money, and acrimony litigating a case that largely

turned on the interpretation of two provisions in an employment contract.

      Because Klune had adequate notice of the time limitations, received repeated

warnings throughout trial, and was allowed to examine the witnesses at great

length during their depositions and to submit that testimony to the court, Klune

failed to show prejudice. Accordingly, we affirm the District Court’s time

management decisions.

                             CONTRACT DAMAGES

      We review de novo whether the District Court applied the correct legal

standard to compute damages. Ambassador Hotel Co. v. Wei-Chuan Inv., 189 F.3d

1017, 1024 (9th Cir. 1999). It is undisputed that, pursuant to Klune’s employment

contract, he was entitled to 12 months’ compensation as severance pay in the event

he was terminated without cause. It is also undisputed that Klune’s annual

compensation at the time of his termination, including deferred compensation, was

$476,998.

      California law limits “the maximum cash settlement that an employee may

receive” upon termination “to the monthly salary of the employee multiplied by the

                                          5
number of months left on the unexpired term of the contract.” Cal. Gov’t Code §

53260(a).1 This is the “maximum amount[] that may be paid by a local agency

employer to an employee.” Cal. Gov’t Code § 53260(c); see also Page v.

MiraCosta Cmty. Coll. Dist., 102 Cal. Rptr. 3d 902, 915 (Cal. Ct. App. 2009)

(“Thus, depending on the number of months remaining on the unexpired term of

the employee’s contract, the employer and employee are entitled to negotiate a

cash settlement of any amount up to the specified maximum.”). Under California

law, “[t]he cash settlement specified in Section 53260 shall not include any other

noncash items except health benefits . . . .” Cal. Gov’t Code § 53261.

        At the time of his termination, Klune had 13 months remaining on his

contract and his monthly base salary was $36,720.67. Accordingly, pursuant to §

53260(a), the maximum cash settlement that Klune could have received was

$477,368.71. This cap exceeds the amount due under the contract, which was

$476,998. Accordingly, the proper amount of Klune’s contract damages was

$476,998.

        In calculating Klune’s contract damages, the District Court excluded

$36,350 from the award, which is the amount of Klune’s deferred compensation.

The District Court either determined that deferred compensation was a noncash

1
  The statute contains an additional limitation of 18 months’ salary if the remaining contract term exceeds 18
months. Cal. Gov’t Code § 53260(a)(1). However, that limitation does not apply here, as Klune had 13 months
remaining on his contract.
                                                        6
benefit excluded by § 53261 or interpreted § 53260 to prevent an employee of a

local government agency from receiving a settlement amount calculated on any

basis other than multiplying the employee’s monthly base salary by some number

of months. In either case, the District Court erred. Accordingly, we reverse in part

and remand with instructions to amend the judgment to add $36,350 to Klune’s

contract damages, which is the amount of deferred compensation. We also direct

the District Court to calculate and award the appropriate amount of pre-judgment

interest on that amount from the date of Klune’s termination.

                               ATTORNEYS’ FEES

      Fee awards in California contract cases are reviewed for an abuse of

discretion. PSM Holding Corp. v. Nat’l Farm Fin. Corp., 884 F.3d 812, 828 (9th

Cir. 2018). Here, the District Court based its award on its extensive understanding

of the case and of the tactics of the attorneys, developed over 25 months of

litigation. The District Court considered the nature of the action and the effort

required to litigate it, and the recovery sought and received. The Court also

considered the importance of the specific claim upon which Klune prevailed within

the context of the entire litigation, the complexity of that claim, and the discovery

addressed to the claim.

      The District Court, as required by California law, began with the lodestar

amount and reduced the claimed work hours to an amount it concluded was

                                          7
appropriately tailored to the one claim upon which Klune prevailed. While the

amount awarded was considerably less than Klune applied for, we do not find an

abuse of discretion. Accordingly, we affirm the District Court’s award of

attorneys’ fees.

                               AWARD OF COSTS

      We review a denial of costs under Federal Rule of Civil Procedure 54(d)(1)

for an abuse of discretion. Ass’n of Mexican-Am. Educators v. State of Cal., 231

F.3d 572, 592 (9th Cir. 2000). Klune’s challenge to the District Court’s 54(d)(1)

determination is without merit. Out of all the claims originally filed by Klune, he

prevailed only on one. In a case such as this with a mixed judgment, a district

court is entitled to require that each party bear its own costs. Amarel v. Connell,

102 F.3d 1494, 1523 (9th Cir. 1996), as amended (Jan. 15, 1997). Accordingly,

we find no abuse of discretion and affirm the District Court’s allocation of costs.

      Each party to bear its own costs on appeal.

      AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

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