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Kelley v. Tyk Refractories Co.

argued: June 20, 1988.

ROGER P. KELLEY, APPELLANT IN 87-3530
v.
TYK REFRACTORIES COMPANY, FORMERLY TYK SWANK REFRACTORIES COMPANY; ROGER P. KELLEY V. TYK REFRACTORIES COMPANY, FORMERLY TYK SWANK REFRACTORIES COMPANY. TYK REFRACTORIES COMPANY, INC., APPELLANT IN 87-3577



On Appeal from the United States District Court for the Western District of Pennsylvania, Pittsburgh, D.C. Civil Action No. 84-2312.

Gibbons, Chief Judge, Higginbotham, and Hunter, Circuit Judges.

Author: Higginbotham

Opinion OF THE COURT

A. LEON HIGGINBOTHAM, JR., Circuit Judge.

Roger P. Kelley appeals from an order granting a final judgment in favor of his employer, TYK Refractories, Co., Inc., ("TYK") on its motion for summary judgment on Kelley's action alleging employment discrimination in violation of 42 U.S.C. § 1981 (1982)("§ 1981"). TYK cross-appeals from the district court's decision to remand Kelley's pendent state law claims to the Pennsylvania Court of Common Pleas for Allegheny County. We must determine whether the district court correctly held that certain factual findings regarding Kelley's termination made by the Pennsylvania Unemployment Compensation Board must be given collateral estoppel effect so as to preclude litigation of his § 1981 claim in federal court. We conclude that under Pennsylvania law, issue preclusion does not apply in the circumstances of this case. We will therefore reverse the district court's order granting summary judgment for TYK. We will dismiss TYK's cross-appeal for lack of appellate jurisdiction.

I. Factual Background and Prior Proceedings

TYK, which produces refractory products used in the steel industry, is a wholly owned subsidiary of Tokyo Yogyo, a Japanese trading company that purchased the company in April, 1982. Kelley, a white, male U.S. citizen, accepted a position as Chief Operating Officer and Executive Vice-President of TYK in October, 1982. A letter of employment from TYK entitled him to two types of TYK stock options at specified times, as well as a salary, fringe benefits, and executive perquisites. Joint Appendix ("Jt. App.") at 37-38. Kelley contends that he was induced to accept the position by the promises that he would have the authority to manage the company according to American customs, laws, and business principles, and that he would be promoted to president within one year, with a substantial increase in salary. Id. at 10, 15, 17 (Complaint at paras. 5, 22, 28). Kelley avers that, having undertaken the job, he was asked by TYK, including specifically TYK's President Tomito, not only to institute Japanese business customs, such as morning chanting sessions during which company slogans were chanted in unison, but also to discriminate against older employees, to engage in unfair labor practices in dealings with the employees' bargaining agent, and to deprive workers of overtime and vacations, all in violation of numerous federal and state laws, among them the Fair Labor Standards Act, 29 U.S.C. §§ 201-219 (1982), the National Labor Relations Act, 29 U.S.C. §§ 151-187 (1982), and the Pennsylvania Minimum Wage Act of 1968, 43 Pa. C.S.A. §§ 331.101-.115 (Purdon 1964 & Supp. 1988). Jt. App. at 12-17 (Complaint, paras. 8-28). Kelley also alleged that TYK insisted that particular employees be fired in order to replace them with younger, Japanese males. Jt. App. at 27. Kelley alleged that TYK terminated Kelley's employment on October 11, 1983, and replaced him with a Japanese individual. Id. at 17, 27. In Count V of his complaint, Kelley contended that TYK discharged him and denied the exercise of his stock options because he is a white American citizen, and thereby violated his rights under 42 U.S.C. § 1981 (1982).*fn1 Jt. App. at 27.

In November 1983, Kelley filed a claim for benefits under the Pennsylvania Unemployment Compensation Law, 43 Pa. Cons. Stat. Ann. § 802(e)(Purdon 1983), which the Office of Employment Security initially denied. Jt. App. at 173 (Decision of the Unemployment Compensation Board of Review). Kelley appealed that decision, and on February 24, 1984, a four-hour hearing on his appeal was held before an unemployment compensation referee. The referee made the following factual findings:

5. [Kelley] attended a meeting on October 4, 1983, with senior company officials which was called for the purpose of discussing a memorandum drafted by the claimant enumerating his complaints. Claimant was dissatisfied with the results of the meeting and, after one of the senior officials agreed with the claimant's assessment that there appeared to be little room for further negotiation, the claimant removed his company lapel pin and stated, "I'm leaving." He thereupon left the room and did not return thereafter to work.

6. [Kelley] did not intend by his actions of October 4, 1983, to resign his job. He eventually may have reached that decision but he had not reached that point as of October 4, 1983.

7. On October 6, 1983, [Kelley] received a letter from the company stating that his resignation was being accepted. He immediately notified the company that it was not his intention to resign his job.

8. If [Kelley] had not separated from his employment he would not have been allowed by the company to continue to operate as Chief Operating Officer but instead would have been restricted to functioning as Sales Manager.

Id. at 171 (Referee's Decision). The referee determined that Kelley's separation was involuntary, that it would be treated as a discharge, and that Kelley was not disqualified under § 402(b) of the Unemployment Compensation Law, 43 Pa. Cons. Stat. Ann. § 801 (Purdon 1983). Jt. App. at 172.*fn2 The referee stated further that, under § 402(e), the only just cause for discharge is willful misconduct on Kelley's part. Since TYK did not allege willful misconduct, the referee concluded that Kelley was entitled to benefits. Id. at 172. The referee did not discuss whether discrimination based on race or national origin contributed to Kelley's discharge.*fn3

TYK appealed the referee's decision to the Unemployment Compensation Board of Review. That tribunal, on July 17, 1984, without taking further evidence or conducting a hearing, determined that the referee's findings were ...


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