USCA1 Opinion
September 9, 1993 [NOT FOR PUBLICATION]
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 93-1202
MARSHALL J. KAGAN,
Appellant,
v.
EL SAN JUAN HOTEL & CASINO, ET AL.,
Appellees.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Jose Antonio Fuste, U.S. District Judge]
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Before
Cyr, Boudin and Stahl,
Circuit Judges.
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Marshall J. Kagan on brief pro se.
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Daniel R. Dominguez, Marie E. Lopez-Adames and Dominguez &
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Totti on brief for appellees El San Juan Hotel Corp. & Hans Lopez
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Stubbe.
Carlos A. Quilichini and Ramon Lloveras Otero on brief for
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appellee Rodrigo Otero Bigles.
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Per Curiam. Appellant Marshall J. Kagan appeals the
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district court order affirming an order of the bankruptcy
court. The district court found that Kagan's sole remedy for
alleged harm following upon his dismissal from his position
as comptroller of the El San Juan Hotel was pursuant to the
Puerto Rico wrongful termination statute, 29 L.P.R.A. 185a.
The court dismissed his other claims for relief. We affirm.
The factual as well as the procedural background to this
case are complex. We summarize from the facts found below.
See Kagan v. San Juan Hotel Corp., 149 B.R. 263 (D.P.R.
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1992).
Kagan was comptroller of the El San Juan Hotel when it
filed for bankruptcy under Chapter 11 in 1980. Kagan
continued in his position under the court appointed
bankruptcy trustee, Hector Rodriguez Estrada. After frequent
disagreements between Kagan and Rodriguez as to how the
estate should be managed, appellant was dismissed for
unsatisfactory performance in December 1982. Kagan asserts
that he was dismissed in retaliation for attempting to have
the trusteeship of Rodriguez investigated.
In March 1983, the Chapter 11 proceeding was converted
to a Chapter 7 proceeding. In September 1983, Rodriguez was
removed from the trusteeship by a unanimous vote of the
creditors and replaced by appellee Lopez. Kagan urged Lopez
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and Otero, the estate's attorney, to file suit against
Rodriguez for abuse of his position. When they refused to
file suit alleging that there was insufficient evidence
against Rodriguez, Kagan accused Lopez and Otero of covering
for Rodriguez. In 1985 suit was filed against Rodriguez by
the United States as one of the estate's creditors.
Rodriguez was found to have abused his trusteeship and a
judgment of over 2 million dollars was imposed on Rodriguez
on behalf of the estate. In Re San Juan Hotel Corp., 71 B.R.
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413 (D.P.R. 1987), aff'd in part and rev'd in part, 847 F.2d
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931 (1st Cir. 1988). Subsequently Rodriguez was convicted
and sentenced for fraud.
Kagan commenced suit against the estate and Rodriguez in
March 1983. Kagan sought both compensation for wrongful
termination and the removal from his personnel file of a
letter indicating that he had been terminated for poor
performance. When Lopez replaced Rodriguez, Kagan amended
his suit and sought compensation, removal of the negative
letter and a new letter of reference from Lopez and Otero.
Although Lopez agreed to compensation for wrongful
termination, he refused to remove the old letter or write a
new one. Kagan asserts that the failure to remove the old
letter from his file and to provide a new "corrected" letter
prevented him from obtaining new employment for several years
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and then resulted in his being compelled to accept a position
at lower wages than he had previously earned.
Kagan's suit "wend[ed] a torturous path through the
judicial system." Kagan, 149 B.R. at 268. Trial in the
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bankruptcy court did not commence until May 1988. In
September 1990 the bankruptcy court dismissed all claims
against Lopez and Otero and allowed Kagan damages against the
estate pursuant to 185a. The final order of the bankruptcy
court did not issue until March 23, 1992. Kagan appealed the
dismissal of his claims other than that under 185(a) to the
district court which affirmed.
On appeal to this court, Kagan seeks damages against
Lopez and Otero for the failure to provide him with a new
letter of reference. He also seeks additional damages from
the estate for his wrongful dismissal.1
Claims Against Lopez and Otero
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1. In his prayer for relief, Kagan asks this court to
"[r]emand to the Bankruptcy Court for appropriate action on
the pending motion for Otero to disgorge his fees, and for
Lopez to be removed from office and [to] forfeit[] his fees."
The district court dismissed the claim against Otero on the
ground that Kagan lacked standing to raise this claim in the
context of a wrongful discharge suit. Kagan, 149 B.R. at
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270-72. We agree. Moreover, although the district court did
not address the claim against Lopez, that claim would suffer
the same defect. In any event, since Kagan has presented no
argument to support this prayer in his brief, the issue is
waived. Ryan v. Royal Ins. Co., 916 F.2d 731, 734 (1st Cir.
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1990) (issues adverted to on appeal in a perfunctory matter
are deemed waived).
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Kagan concedes that 29 L.P.R.A. 185a is the sole
remedy for his claim of wrongful dismissal under Puerto Rico
law. Weatherly v. International Paper Co., 648 F. Supp. 872,
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878 (D.P.R. 1986) (citing cases). However, he notes that
185a does not prohibit recovery when an employee "can
establish that the employer committed an independent tortious
act in the course of terminating employment." Id. at 877-78.
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Kagan asserts that in this case Lopez and Otero committed the
"independent tortious act of not correcting the record of
dismissal and giving false bad references."2 He seeks
recovery under 31 L.P.R.A. 5141 which provides that
A person who by an act or omission causes
damage to another through fault or negligence
shall be obliged to repair the damage so
done.
To state a claim for damages under 5141, a plaintiff
must show (1) that the defendants owed him a duty to prevent
the harm suffered; (2) that the duty was negligently
breached; and (3) that the breach caused the plaintiff harm.
Tokio Marine & Fire Ins. Co. v. Grove Mfg. Co., 958 F.2d
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1169, 1171 (1st Cir. 1992) (citing cases). In this case,
Kagan has shown no basis for inferring that either Lopez or
Otero had a legal duty to correct his references which had
been given by the previous trustee Rodriguez ten months
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2. We assume, without deciding, that the failure to provide
corrected references and the supplying of false ones would be
within "the course of terminating employment."
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before Lopez and Otero arrived on the scene. Even assuming
that Lopez and Otero were employers of Kagan, they were under
no obligation to provide any references to him. See 48
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Am.Jur.2d. Labor and Labor Relations 43 (in absence of
statute "employer who discharges an employee is not liable to
the employee for his refusal to give the employee a
'character' or recommendation").3 Therefore, we cannot see
why they would be required to provide "corrected" ones. "It
is axiomatic that the failure to perform an act cannot give
rise to a cause of action unless there was a legal duty to
act." Torres v. United States, 621 F.2d 30, 33 (1st Cir.
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1980) (applying Puerto Rico law). Nor would it be reasonable
to require Lopez and Otero to provide "corrected" references
for an employee whom they never employed and whose
performance they were therefore in no position to evaluate.
Finally, while Lopez and Otero owe fiduciary duties to the
bankrupt estate, see In Re Thompson, 965 F.2d 1136, 1145 (1st
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Cir. 1992), and to its creditors, In Re Consupak, Inc., 87
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B.R. 529, 539 (Bankr.N.D.Ill. 1988); Bankruptcy Code
704(1), 11 U.S.C. 704(a) (duties of trustee), this duty
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3. Kagan's reliance on Ackerman v. Thompson, 356 Mo. 558,
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202 S.W.2d 795 (1947), is in vain. In Ackerman, a state
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statute compelled the employer to provide a "service letter"
upon terminating an employee. Puerto Rico has no such
statute.
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does not extend to Kagan who is seeking damages not as a
creditor of the estate but as a former employee of it.4
On appeal, Kagan also asserts that Lopez and Otero
harmed him by providing false references. However, this
claim was not raised below and therefore is not properly
before us. Johnston v. Holiday Inns, Inc., 595 F.2d 890, 894
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(1st Cir. 1979). In any event, Kagan admits that he never
actually sought any references for a prospective employer
from Lopez or Otero and that the uncorrected letter was never
disseminated. His claim to have been harmed by receiving
false references is devoid of merit.
Similarly without merit is Kagan's reliance on 107,
704 and 1106(a) of the Bankruptcy Code. Section 1106(a),
through incorporation of 704, provides that "[t]he trustee
shall . . . unless the court orders otherwise, furnish such
information concerning the estate and the estate's
administration as is requested by a party in interest." 11
U.S.C. 704(7). Section 107 provides that "the bankruptcy
court shall . . . protect a person with respect to scandalous
or defamatory matter contained in a paper filed in a case
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4. The district court found that Otero, as the estate's
attorney, owed no duty to the employees of the estate.
Kagan, 149 B.R. at 273. However, the district court did
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state that Lopez owed a duty to Kagan to act as a reasonable
employer. Id. Since we find that Lopez owed no duty to Kagan
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to provide corrected references, Kagan's claim would be
subject to dismissal under the "reasonable employer" standard
as well.
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under this title." 11 U.S.C. 107(b)(2). Alleging that the
uncorrected reference was defamatory, Kagan seeks to find in
these provisions a duty on the part of the trustee to provide
proper references and to revise false ones. However (1) any
duty under the Bankruptcy Code to prevent the dissemination
of defamatory material is imposed on the court not the
trustee; (2) the allegedly defamatory letter is not a "paper
filed" in a bankruptcy case; and (3) as noted above, Kagan
concedes that the letter was never disseminated.
Claim Against the Estate
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Kagan asserts that he is entitled to relief under the
federal common law for his wrongful dismissal. According to
Kagan, he was dismissed because he tried to stop the
bankruptcy trustee from violating federal law. Moreover, he
alleges that the Puerto Rico wrongful dismissal statute
provides insufficient protection because of the limited
amount of compensation the statute provides. Citing the
federal interest in seeing that federal law is not violated,
Kagan asks this court to formulate federal common law based
on analogous state court decisions which have found a "public
policy" exception to the employment-at-will doctrine where an
employee is terminated for refusing to participate in illegal
acts.
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The instances in which a federal court has the authority
to formulate a federal common law remedy are "few and
restricted." Wheeldin v. Wheeler, 373 U.S. 647, 651 (1963).
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Absent some statutory authorization to formulate substantive
rules of decision, and none is alleged here, the court has
authority to create a federal common law remedy only when it
is "necessary to protect uniquely federal interests." Texas
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Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630,
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640 (1981) (quoting Banco Nacional de Cuba v. Sabbatino, 376
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U.S. 398, 426 (1964)). It is not enough that a remedy
"supplements federal enforcement and fulfills the object of
the statutory scheme." Id. at 642. Federal common law is
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appropriate only where "the authority and duties of the
United States as sovereign are intimately involved or because
the interstate or international nature of the controversy
makes it inappropriate for state law to control." Id. at
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641. Moreover, "[i]n deciding whether rules of federal
common law should be fashioned, normally the guiding
principle is that a significant conflict between some federal
policy or interest and the use of state law . . . must first
be specifically shown." Wallis v. Pan American Petroleum
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Corp., 384 U.S 63, 68 (1966).
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We find no such "uniquely federal interests" in this
case which would warrant the formulation of federal common
law. Furthermore, no conflict exists here between the
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federal policy to be promoted and the application of state
law. The Commonwealth of Puerto Rico, like most states,
already provides protection for those dismissed for acting in
accordance with law. Finally, the rationale on which Kagan
relies--i.e., that the court ought to formulate a federal
common law remedy to protect those dismissed for upholding
federal law--would apply to all federal regulatory schemes.
Yet, Congress has chosen to enact specific protections for
"whistle-blowers" where it has thought appropriate. See
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Note, Protecting Employees at Will Against Wrongful
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Discharge: the Public Policy Exception, 96 Harv.L.Rev. 1931,
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1934 (1983) (listing federal statutes). In adopting Kagan's
rationale, we would not only be extending this protection
into areas where Congress has not thought appropriate but we
would be ignoring the Supreme Court's advisory that the
appropriate occasions for the formulation of federal common
law are "few and restricted." Wheeldin, 373 U.S. at 651. We
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decline to do so.
Kagan calls our attention to Barany v. Buller, 670 F.2d
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726 (7th Cir. 1982). In Barany, the court formulated a
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federal common law remedy for reinstatement of federal credit
union employees allegedly dismissed in violation of federal
laws. This case is distinguishable from Barany in two ways.
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First, the decision in Barany was based in part on the
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congressional desire to "insure uniform development in credit
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unions." Id. at 733. In contrast, no similar desire for
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national uniformity is found in congressional control over
bankruptcy law. Butner v. United States, 440 U.S. 48, 54 n.9
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(1979) (bankruptcy law frequently recognizes state
substantive law). Second, the rationale of Barany--that the
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federalization of the governance of an institution makes it
of "uniquely federal interest"--was limited to federal credit
unions and similar federal institutions. Barany, 670 F.2d at
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734. We see no principled way to limit the rationale for the
remedy sought in the present case.5
The opinion of the district court is affirmed.
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5. We also note that the Fourth Circuit has disagreed with
the Barany holding. Ridenour v. Andrews Federal Credit
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Union, 897 F.2d 715, 721-22 (4th Cir. 1990) (declining to
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fashion federal remedy as a matter of federal common law to
create cause of action for federal credit union employees
challenging adverse employment actions).
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