Court Opinion

ID: 4274152
Source: CourtListenerOpinion
Date Created: 2018-05-10 17:00:25.493325+00
Date Added: 2024-06-11T14:33:45.677196
License: Public Domain

FOR PUBLICATION

   UNITED STATES COURT OF APPEALS
        FOR THE NINTH CIRCUIT

 RICHARD A. PALM,                                   No. 16-55691
                Plaintiff-Appellant,
                                                      D.C. No.
                      v.                           2:15-cv-03533-
                                                      PSG-PLA
 LOS ANGELES DEPARTMENT OF
 WATER AND POWER, a government
 agency; JAMES GRADEN, an                             OPINION
 individual; MARK ASHFORD, an
 individual,
               Defendants-Appellees.

         Appeal from the United States District Court
             for the Central District of California
         Philip S. Gutierrez, District Judge, Presiding

          Argued and Submitted December 6, 2017
                   Pasadena, California

                        Filed May 10, 2018

   Before: Paul J. Kelly, Jr., * Consuelo M. Callahan, and
              Carlos T. Bea, Circuit Judges.

                   Opinion by Judge Callahan

    *
      The Honorable Paul J. Kelly, Jr., United States Circuit Judge for
the U.S. Court of Appeals for the Tenth Circuit, sitting by designation.
2          PALM V. LOS ANGELES DEP’T OF WATER

                          SUMMARY **

                           Civil Rights

    The panel affirmed the district court’s order (1) granting
defendants’ motion to dismiss; (2) denying plaintiff leave to
amend his third amended complaint; and (3) denying
plaintiff’s motion for reconsideration in his 42 U.S.C. § 1983
action alleging that the Los Angeles Department of Water
and Power terminated his employment in a probationary
promotional position without due process of law in violation
of the Fourteenth Amendment.

    The panel held that based on the plain language of the
Los Angeles Charter, the Los Angeles Civil Service Rules,
and Circuit precedent, plaintiff lacked a protected property
interest in his probationary employment as Steam Plant
Maintenance Supervisor. He therefore could not maintain a
claim under the Fourteenth Amendment based on his
termination from that position and his return to his
permanent position as Steam Plant Assistant.

                            COUNSEL

Allen B. Felahy (argued) and Franklin L. Ferguson Jr.,
Felahy Trial Lawyers APC, Los Angeles, California, for
Plaintiff-Appellant.

    **
       This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
         PALM V. LOS ANGELES DEP’T OF WATER                3

Kristine A. Moon (argued), Deputy City Attorney; Anat
Ehrlich, Assistant City Attorney; Joseph A. Brajevich,
General Counsel, Water and Power; Michael N. Feuer, City
Attorney; Office of the City Attorney, Los Angeles,
California; for Defendants-Appellees.

                        OPINION

CALLAHAN, Circuit Judge:

    Richard Palm appeals from the district court’s dismissal
of his 42 U.S.C. § 1983 civil rights action. Palm claims that
his employer, the Los Angeles Department of Water and
Power (“LADWP”), terminated his employment in a
probationary promotional position without due process of
law in violation of the Fourteenth Amendment. We reject
Palm’s claim because we hold that Palm lacked a
constitutionally protected property interest in his
probationary position.

                             I.

    Plaintiff-Appellant Palm began working for Defendant-
Appellee LADWP as a Steam Plant Assistant in 1987. On
December 31, 2012, Palm was promoted to Steam Plant
Maintenance Supervisor, which commenced a six-month
probationary period in the new position. Palm thereafter
allegedly made several complaints to his immediate
supervisor, Defendant-Appellee James Graden, about
LADWP’s noncompliance with state and federal health,
safety, and labor laws. Among other things, Palm alleges
that Graden unlawfully altered Palm’s time records. When
Palm confronted Graden, Graden allegedly reproached him
and threatened repercussions if Palm did not drop the issue.
4          PALM V. LOS ANGELES DEP’T OF WATER

    After working in his probationary position for five
months, Palm was given the choice of either “forced
resignation” or termination from the probationary position.
Palm chose to resign his position as Supervisor, after which
he returned to his permanent job as Steam Plant Assistant.
Palm then initiated an action against LADWP and Graden in
California superior court, claiming whistleblower retaliation
in violation of California Labor Code § 1102.5. 1 The
superior court sustained a demurrer on the state law claim,
but allowed Palm to amend his complaint to assert a civil
rights claim for Monell liability under 42 U.S.C. § 1983.
LADWP then removed the action to federal district court.
The district court granted LADWP’s motion to dismiss the
Monell claim, but allowed Palm to amend his complaint
again.

    In his third amended complaint (“TAC”), Palm added
Defendant-Appellee Mark Ashford, a Plant Manager, to his
action, and introduced another new claim: that LADWP,
Graden, and Ashford had retaliated against him for
exercising his First Amendment rights. LADWP filed a
motion to dismiss the TAC for failure to state a claim upon
which relief can be granted (Fed. R. Civ. P. 12(b)(6)), which
the court granted with prejudice. The court held that Palm
failed to plead a plausible free speech claim because Palm’s
speech was not a matter of public concern.

   Palm then sought leave to amend his complaint a fourth
time to assert another new theory, and the one that is before
us on appeal: that Defendants’ threatened termination of
Palm from his probationary position violated his Fifth and

    1
       Palm also filed an administrative complaint listing thirty-three
conflicts with his supervisors during the probationary period. That
proceeding is not at issue in this appeal.
          PALM V. LOS ANGELES DEP’T OF WATER                 5

Fourteenth Amendment due process rights. The district
court denied him leave to amend. The court found that
amendment would be futile because Palm could not state a
due process claim. First, the court summarily dismissed
Palm’s Fifth Amendment claim on the ground that
Defendants are not federal actors. Second, the court
determined that Palm could not state a Fourteenth
Amendment claim because he lacked a property interest in
his probationary position. The court then dismissed Palm’s
action with prejudice.

    Undeterred, Palm filed a motion for reconsideration,
which the district court denied because it found no clear error
in its decision dismissing the action. See Fed. R. Civ. P.
60(b). Indeed, the court deemed it plain that Palm lacked a
property interest in his probationary position.

    Palm timely appealed the district court’s orders granting
LADWP’s motion to dismiss, denying him leave to amend
his TAC, and denying his motion for reconsideration.

                              II.

                              A.

    We review an order granting a motion to dismiss for
failure to state a claim de novo. Faulkner v. ADT Sec. Servs.,
Inc., 706 F.3d 1017, 1019 (9th Cir. 2013). We review a
denial of a motion for reconsideration and denial of leave to
amend for abuse of discretion. Smith v. Pac. Props. & Dev.
Corp., 358 F.3d 1097, 1100 (9th Cir. 2004). That said,
“[w]hether such a denial rests on an inaccurate view of the
law and is therefore an abuse of discretion requires us to
review the underlying legal determination de novo.” Id.
(citation omitted). Finally, we review questions of state law
6          PALM V. LOS ANGELES DEP’T OF WATER

de novo. McGraw v. City of Huntington Beach, 882 F.2d
384, 387–88 (9th Cir. 1989).

                                 B.

    Palm’s appeal focuses on his claim under the Fourteenth
Amendment. 2 To prevail, Palm must demonstrate a
constitutionally protected property interest in his
probationary position. See Nozzi v. Hous. Auth., 806 F.3d
1178, 1190–91 (9th Cir. 2015) (citing Bd. of Regents of State
Colleges v. Roth, 408 U.S. 564, 569–70 (1972)). “It is well
settled that the procedural due process protections of the
Fourteenth Amendment apply only to deprivations of
property interests, the existence and dimensions of which
‘are defined by existing rules or understandings that stem
from an independent source such as state law.’” McGraw,
882 F.2d at 389 (quoting Roth, 408 U.S. at 577). “A [state]
law establishes a property interest in employment if it
restricts the grounds on which an employee may be
discharged.” Dorr v. Cnty. of Butte, 795 F.2d 875, 878 (9th
Cir. 1986) (internal quotation marks omitted). “If discharge
can only be for ‘just cause,’ an employee has a right to
continued employment until there is just cause to dismiss
him.” Id. (internal quotation marks and alteration omitted).
Whether a property interest exists is therefore informed by
the process involved in terminating an employee, rather than
any talismanic labels applied to a particular position—e.g.,
whether it is permanent or probationary. Indeed, “an
important factor in deciding the property interest question is
to determine whether the applicable state law restricts the
grounds on which an employee may be discharged such that

    2
      To the extent Palm presses his Fifth Amendment claim on appeal,
we reject it for the reasons articulated by the district court.
            PALM V. LOS ANGELES DEP’T OF WATER                            7

even a probationary employee could have a reasonable
expectation of continued employment.” 3 McGraw, 882 F.2d
at 390 (emphasis added; internal quotation marks omitted).

    Because the City of Los Angeles is the employer in this
case, our review of “applicable state law” turns on an
analysis of the City’s charter and applicable personnel
rules. 4 See id. In interpreting these authorities, we apply
California law governing rules of statutory instruction. Id.
at 387–88. “In California, the fundamental rules of statutory
construction apply in interpreting municipal enactments.”
Id. at 388 (citing DeYoung v. City of San Diego, 147 Cal.
App. 3d 11, 17–18 (1983)).

         In construing the [enactments] we must first
         ascertain the intent of the City Council so as
         to effectuate the purpose of the law, and then
         give the relevant provisions a reasonable and
         common sense interpretation consistent with
         the apparent purpose and intention of the
         local lawmakers. Additionally, significance
         should be attributed to every word, phrase,

    3
      We observe that “[t]he categories of substance and procedure are
distinct,” meaning that “‘[p]roperty’ cannot be defined by the procedures
provided for its deprivation . . . .” Cleveland Bd. of Educ. v. Loudermill,
470 U.S. 532, 541 (1985). Thus, the procedures governing termination
inform rather than conclusively determine whether a substantive
property interest exists. See Dorr, 795 F.2d at 877.

    4
       Because cities derive their power to enact local charters from the
State, city charters constitute the law of the State itself. See CAL. CONST.
art. XI, §§ 1(b), 3(a), 5(a)–(b). The Los Angeles Charter grants the
Board of Civil Service Commissioners the authority to “promulgate civil
service rules to carry out the purposes of this Article [in the Charter] in
accordance with applicable law.” Los Angeles Charter & Admin. Code
§ 1004 (effective Apr. 8, 2011).
8         PALM V. LOS ANGELES DEP’T OF WATER

       sentence and part of an act in pursuance of the
       legislative purpose, as the various parts of a
       statutory enactment must be harmonized by
       considering the particular clause or section in
       the context of the statutory framework as a
       whole.

Id. (citing DeYoung, 147 Cal. App. 3d at 17–18) (internal
citation omitted).

    The texts of the Los Angeles Charter and Los Angeles
Civil Service Rules indicate that probationary positions held
by city employees are not vested with a protected property
interest. Section 1016(a) of the Los Angeles Charter
provides that “[n]o person in the classified civil service shall
be discharged . . . except for cause . . . .” Los Angeles
Charter & Admin. Code § 1016(a) (effective Apr. 8, 2011).
At first blush, the “for cause” condition rings of a property
interest in civil service positions. But not all civil service
positions are alike, as reflected by the section titled
“Termination During Probation.” See id. § 1011(b). That
provision, § 1011(b), establishes a distinct procedure for
probationary employment. It provides that “[a]t or before
the expiration of the probationary period, the appointing
authority may terminate the probationary employee by
delivering written notice of termination to the employee
assigning in writing the reasons for the termination.” Id.
Critically, § 1011(b) does not require that “discharge can
only be for ‘just cause.’” Dorr, 795 F.2d at 878 (internal
quotation marks omitted). Instead, it allows LADWP to
terminate probationary employment based only on a
subjective finding that the employee has demonstrated
unsatisfactory performance—a fact that cuts sharply against
a finding of a property interest in the probationary position.
Id. at 878 (collecting cases). Indeed, in Dorr, we observed
          PALM V. LOS ANGELES DEP’T OF WATER                9

that “[t]he power of the appointing authority to determine,
on a purely subjective basis, whether a probationary
employee has performed satisfactorily undercuts any
expectation of continued employment that might otherwise
arise by virtue of the requirement that disciplinary dismissal
be grounded upon objectively reasonable cause.” Id.
(emphasis added).

    Section 1.26 of the Civil Service Rules similarly explains
that “PROBATIONARY PERIOD means the working test
period during which an employee is required to demonstrate
his/her fitness by the actual performance of the duties and
responsibilities of his/her position and during which he/she
may be terminated without right of appeal to the Board of
Civil Service Commissioners.” Rules of the Board of Civil
Service Commissioners § 1.26 (revised through Aug. 2012)
(emphasis added) (“Los Angeles Civil Service Rules”). We
have previously found that termination procedures lacking
any right to an appeal proceeding demonstrate a lack of a
property interest in a probationary position. For example, in
Fleisher v. City of Signal Hill, 829 F.2d 1491, 1494–95 (9th
Cir. 1987), we held that a probationary employee lacked a
property interest because the city personnel rules
“provide[d] that a probationary employee may be rejected at
any time without right of appeal or hearing.” (internal
quotation marks omitted).

    Palm does not argue that his probationary position as
Steam Plant Maintenance Supervisor, standing alone, is
vested with a protected property interest. Instead, he asserts
that his prior permanent employment as Steam Plant
Assistant means that the rules governing probationary
employees do not apply to him—regardless of the
probationary nature of his new position.
10        PALM V. LOS ANGELES DEP’T OF WATER

    We reject Palm’s argument based on the text and
structure of the Los Angeles Charter, the Los Angeles Civil
Service Rules, and our own precedent. As discussed,
§ 1011(b) of the Charter explains that one who serves, as
Palm did, a “probationary period” is a “probationary
employee.” Moreover, § 7.7 of the Civil Service Rules
makes clear that a permanent employee in one capacity may
be a probationary employee in another: employees who are
on probation are “considered automatically on leave of
absence from his/her former position while serving the
probationary period.” That provision also states that an
employee who fails probation “shall . . . be returned to the
[permanent] position from which he/she is on leave.” Los
Angeles Civil Service Rules § 7.7. Putting it all together, if
a probationary employee is by definition one who is serving
a probationary period, and if a permanent employee in one
capacity may serve a probationary period in another
position, then the rules that apply to probationary employees
govern a permanent employee’s probationary term.
Accordingly, contrary to Palm’s contention, an employee’s
permanent status in one position has no effect upon his
probationary status in another position.

    Our decision today is consistent with our approach in
McGraw.       That case involved an employee, Patrice
McGraw, who, like Palm, held a permanent position in local
government within the State of California and was later
promoted to a probationary position. McGraw, 882 F.2d at
386. Also like our case, the local personnel rules provided
that a probationary employee “may be rejected at any time
by the department head without cause and without the right
of appeal.” Id. at 387 (internal quotation marks omitted).
However, unlike Palm, McGraw was terminated from both
her probationary position and her permanent position. Id. at
385, 392. The question presented was whether McGraw
         PALM V. LOS ANGELES DEP’T OF WATER               11

“had acquired a property interest in continued city
employment”—i.e., employment in some capacity—“by the
time she was summarily ‘rejected.’” Id. at 388.

    We held that McGraw was, in fact, deprived of some
property interest without due process of law, but we did not
find a specific interest in her probationary position. Id. at
392. To the contrary, we indicated that McGraw’s property
interest was limited to her permanent employ: we held that
an employee who has achieved permanent status in one
position has “retained reasonable expectations of continued
employment, at least to continued employment in the [pre-
probationary] position from which [he or she] had been
promoted.” Id. (emphasis added). Had we determined that,
as Palm argues here, McGraw’s permanent status imbued
her probationary employment with constitutional
protections, we would not have distinguished the two
property interests.

                           *   *    *

    Based on the plain language of the Los Angeles Charter,
the Los Angeles Civil Service Rules, and our precedent, we
hold that Palm lacked a protected property interest in his
probationary employment as Steam Plant Maintenance
Supervisor. He therefore cannot maintain a claim under the
Fourteenth Amendment based on his termination from that
position and his return to his permanent position as Steam
Plant Assistant. The district court’s orders granting
LADWP’s motion to dismiss, denying Palm leave to amend
12          PALM V. LOS ANGELES DEP’T OF WATER

his TAC, and denying Palm’s motion for reconsideration are
therefore AFFIRMED. 5

     5
       Our disposition renders it unnecessary to address the other disputed
issues in this matter.