MAHONEY v. RFE/RL, INC., 47 F.3d 447 (D.C. Cir. 1995)

WILLIAM G. MAHONEY, ROY S. De LON, APPELLEES v. RFE/RL, INC., APPELLANT.

Nos. 93-7134, 93-7144.

United States Court of Appeals, District of Columbia Circuit.

Argued November 23, 1994.
Decided February 28, 1995.
Rehearing and Suggestion for Rehearing In Banc Denied April 19, 1995.

Appeal from the United States District Court for the District
of Columbia (91cv01842).

N. Frank Wiggins, Washington, DC, argued the cause and filed
the briefs for appellant.

Jane M. Picker, Cleveland Heights, OH, argued the cause for
appellees. With her on the brief were Kenneth J. Kowalski, Gordon
J. Beggs, Cleveland, OH, and William Bransford, Washington, DC.

Before: SILBERMAN, HENDERSON, and RANDOLPH, Circuit Judges.

Opinion for the court filed by Circuit Judge RANDOLPH.

RANDOLPH, Circuit Judge:

[1] If an American corporation operating in a foreign country would
have to "violate the laws" of that country in order to comply with
the Age Discrimination in Employment Act,
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29 U.S.C. § 623(f)(1), the company need not comply with the Act.
The question here is whether this "foreign laws" exception in
§ 623(f)(1) applies when the overseas company, in order to
comply with the Act, would have to breach a collective bargaining
agreement with foreign unions.

[2] RFE/RL, Inc. is a Delaware non-profit corporation. It is funded
but not controlled by the federal government, Ralis v. RFE/RL,
Inc., 770 F.2d 1121, 1125 (D.C. Cir. 1985), and is best known for
its broadcast services, Radio Free Europe and Radio Liberty.
RFE/RL's principal place of business is Munich, Germany. In 1982,
the company entered into a collective bargaining agreement with
unions representing its employees in Munich. One of the
provisions of the labor contract, modeled after a nation-wide
agreement in the German broadcast industry, required employees to
retire at age sixty-five.[fn1] In 1982, the Age Discrimination in
Employment Act had no extraterritorial reach and, from all that
appears, this portion of the RFE/RL collective bargaining
agreement was entirely lawful. See Ralis v. RFE/RL, Inc.,
770 F.2d at 1124.

[3] Congress amended the Act in 1984 to cover American citizens
working for American corporations overseas. Pub.L. No. 98-459,
98 Stat. 1767, 1792-93 (codified as amended at 29 U.S.C. §§ 623(h),
630(f)). RFE/RL initially thought its American employees in
Munich would therefore no longer have to retire at the age of
sixty-five, as the collective bargaining agreement provided, and
could continue to work until they were seventy if they so
chose.[fn2] In order to implement this understanding, the company
applied to the "Works Council" for limited exemptions from its
contractual obligation. Works Councils (Betriebsrate) exist in
all German firms with twenty or more workers. See Christopher
S. Allen, Principles of the Economic System, in GERMANY AND ITS
BASIC LAW: PAST, PRESENT AND FUTURE; A GERMAN-AMERICAN SYMPOSIUM
339, 348 (Paul Kirchhof & Donald P. Kommers eds., 1993). They are
bodies elected by both unionized and nonunionized employees.
Their duties include insuring that management adheres to all
provisions of union contracts. Departures from contractual
requirements are illegal without the Works Council's approval.
Rejecting RFE/RL's requests, the Works Council here determined
that allowing only those employees who were American citizens to
work past the age of sixty-five would violate not only the
mandatory retirement provision, but also the collective
bargaining agreement's provision forbidding discrimination on the
basis of nationality.

[4] RFE/RL appealed the Works Council's decisions with respect to
several employees, including plaintiff De Lon, to the Munich
Labor Court and lost. The Labor Court agreed with the Works
Council that RFE/RL must uniformly enforce the mandatory
retirement provisions because exemptions would unfairly
discriminate against German workers. The Labor Court also held
that the company's retaining employees over the age of sixty-five
despite the collective bargaining agreement would be illegal.
RFE/RL negotiated with the unions to delete the mandatory
retirement provision from the collective bargaining agreement,
but to no avail.

[5] The company terminated plaintiff De Lon in 1987, and plaintiff
Mahoney in 1988. Both plaintiffs were working for the company in
Munich, both are United States citizens, and both were discharged
pursuant to the labor contract because they had reached the age
of sixty-five. The parties agree that RFE/RL thereby violated the
Age Discrimination in Employment Act unless the "foreign laws"
exception applied. The Act prohibits employers from
discriminating against employees on the basis of age. 29 U.S.C. § 623.
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"Employee" includes "any individual who is a citizen of the
United States employed by an employer in a workplace in a foreign
country" (29 U.S.C. § 630(f)); and it is common ground that the
Act covers RFE/RL.

[6] On cross-motions for summary judgment, the district court found
that company liable for violating the Act, ruling that the
"foreign laws" exception (29 U.S.C. § 623(f)(1)) did not apply to
breaches of collective bargaining agreements. Mahoney v. RFE/RL,
Inc., 818 F.Supp. 1 (D.D.C. 1992). The case then proceeded to
trial on the issue of damages. A final judgment was entered May
10, 1993. The court amended this in a Revised Order, entered June
8, 1993, and another Order, entered July 7, 1993. RFE/RL appeals
the judgment establishing its liability and the award of damages
for violating the Act. Mahoney and De Lon cross-appeal the
judgment setting the amount of their damages.

[7] The "foreign laws" exception to the Act states:

It shall not be unlawful for an employer,
employment agency, or labor organization —

(1) to take any action otherwise prohibited under
subsections (a), (b), (c), or (e) of this section
where . . . such practices involve an employee in a
workplace in a foreign country, and compliance with
such subsections would cause such employer, or a
corporation controlled by such employer, to violate
the laws of the country in which such workplace is
located;

[8] 29 U.S.C. § 623(f)(1).

[9] The district court held § 623(f)(1) inapplicable because the
mandatory retirement provision "is part of a contract between an
employer and unions — both private entities — and has not in any
way been mandated by the German government. Second, the provision
does not have general application, as laws normally do, but binds
only the parties to the contract." Mahoney, 818 F.Supp. at 3.
Although "the mandatory retirement provision in the union
contract had `legal' force in Germany in the sense that it was
legally binding," the court found this to be "precisely the sense
in which such contracts in this country may be said to have
`legal' force; yet they are not ordinarily thought of as `laws.'"
Id.

[10] The decision of the Supreme Court in Norfolk & Western Railway
v. American Train Dispatchers' Ass'n, 499 U.S. 117,
111 S.Ct. 1156, 113 L.Ed.2d 95 (1991), stands firmly against the district
court's interpretation. But the parties unaccountably failed to
mention the case to the district court, and failed again even to
cite the decision on appeal. If Norfolk & Western had been
brought to the district court's attention, we have no doubt that
it would have ruled the other way.

[11] Norfolk & Western held that a rail carrier's exemption under
49 U.S.C. § 11341(a) "from all other law" included a "carrier's
legal obligations under a collective-bargaining agreement."
499 U.S. at 127, 111 S.Ct. at 1162. This meaning of "law" was, to the
Court, clear and certain. Id. at 133, 111 S.Ct. at 1165-66. "A
contract," the Court reasoned, "has no legal force apart from the
law that acknowledges its binding character." Id. at 130,
111 S.Ct. at 1164. A contract depends on laws to enforce it and make
it effective. Id. To drive the point home the Court quoted
extensively from its prior opinions. "The obligation of a
contract is `the law which binds the parties to perform their
agreement.'" Home Bldg. & Loan Ass'n v. Blaisdell, 290 U.S. 398,
429, 54 S.Ct. 231, 237, 78 L.Ed. 413 (1934) (quoting
Sturges v. Crowninshield, 17 U.S. (4 Wheat.) 122, 197,
4 L.Ed. 529 (1819)). It is the law that gives "legal and binding effect
to collective agreements." Detroit & T.S.L.R.R. v. United
Transp. Union, 396 U.S. 142, 156, 90 S.Ct. 294, 302,
24 L.Ed.2d 325 (1969). "Laws which subsist at the time and place of the
making of a contract, and where it is to be performed, enter into
and form a part of it, as fully as if they had been expressly
referred to or incorporated in its terms. This principle embraces
alike those laws which affect its construction and those which
affect its enforcement or discharge." Farmers & Merchants Bank
of Monroe v. Federal Reserve Bank of Richmond, 262 U.S. 649,
660, 43 S.Ct. 651, 655, 67 L.Ed. 1157 (1923).

[12] The point of Norfolk & Western is that when a company fails
to comply with a labor contract it violates "law," which is why
the
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statutory exemption from "law" relieved carriers of their
contractual obligations. Section 623(f)(1) of the Age
Discrimination in Employment Act is indistinguishable. See West
Virginia Univ. Hosps., Inc. v. Casey, 499 U.S. 83, 98-99,
111 S.Ct. 1138, 1146-47, 113 L.Ed.2d 68 (1991). If RFE/RL had not
complied with the collective bargaining agreement in this case,
if it had retained plaintiffs despite the mandatory retirement
provision, the company would have violated the German laws
standing behind such contracts, as well as the decisions of the
Munich Labor Court. In the words of § 623(f)(1), RFE/RL's
"compliance with [the Act] would cause such employer . . . to
violate the laws of the country in which such workplace is
located." Domestic employers of course would never face a
comparable situation; the Supremacy Clause of the Constitution
would force any applicable state laws to give way, U.S. CONST.
art. VI, cl. 2; and provisions in collective bargaining
agreements contrary to the Act would be superseded. Congressional
legislation cannot, however, set aside the laws of foreign
countries. When an overseas employer's obligations under foreign
law collide with its obligations under the Age Discrimination in
Employment Act, § 623(f)(1) quite sensibly solves the dilemma by
relieving the employer of liability under the Act.

[13] American Airlines, Inc. v. Wolens, ___ U.S. ___,
115 S.Ct. 817, 130 L.Ed.2d 715 (1995), decided after the oral argument in
this case, does not alter our decision. The Court there construed
a preemption clause in the Airline Deregulation Act of 1978:
"[N]o state . . . shall enact or enforce any law . . . relating
to [air carrier] rates, routes, or services." 49 U.S.C. app. §
1305(a)(1). When American Airlines retroactively modified its
frequent flyer program, those participating in the program sued
in state court claiming that American had violated a state
consumer protection statute and had breached its contract with
them. The Court held that § 1305(a)(1) preempted the state
consumer protection statute but not the state common law
enforcing contracts.

[14] As to the common law, the Court said that American's contracts
must have legal force because the stability and efficiency of the
market depended on the enforcement of agreements.
___ U.S. at ___, 115 S.Ct. at 824. But if, because of preemption, the state
courts could not invoke common law to enforce American's private
contracts, no one could enforce them. The Department of
Transportation lacked authority to adjudicate "private contract
disputes." Id. at ___, 115 S.Ct. at 825. Furthermore, the
Federal Aviation Act of 1958, as amended, 49 U.S.C. app. § 1301
et seq., contained a savings clause that had to be squared with
the preemption clause. The savings clause preserved "the remedies
now existing at common law," 49 U.S.C. app. § 1506. In order to
make sense of this provision, and to ensure the continued
enforcement of contracts, the Court concluded that the reference
to "law" in the preemption clause did not invalidate state
contract law. ___ U.S. at ___, 115 S.Ct. at 826. The Court
distinguished Norfolk & Western on the ground that if it
interpreted "law" to include "the obligations imposed by
contract," as Norfolk & Western had interpreted the term, it
could not make "sense of the statute as whole." Id. at ___ n.
6., 115 S.Ct. at 824 n. 6.

[15] Unlike the situation in American Airlines, construing the
foreign laws exception in the Age Discrimination in Employment
Act consistently with Norfolk & Western would not render the
Act senseless. Just the opposite. That construction agrees with §
623(f)(1)'s evident purpose — to avoid placing overseas employers
in the impossible position of having to conform to two
inconsistent legal regimes, one imposed from the United States
and the other imposed by the country in which the company
operates. Moreover, if American Airlines had ignored the
savings clause and preempted state contract law, it would have
created an intolerable system in which private contracts would
not be legally enforceable. No such problem is presented here. We
recognize that RFE/RL's collective bargaining agreement is
legally enforceable, which necessarily means that breaching the
agreement in order to comply with the Act would, in the language
of § 623(f)(1), "cause" RFE/RL "to violate the laws of" Germany.
Page 451

[16] Plaintiffs complain that RFE/RL could have bargained harder for
a change in the labor contract. But application of § 623(f)(1)
does not depend on such considerations. The collective bargaining
agreement here was valid and enforceable at the time of
plaintiffs' terminations, and RFE/RL had a legal duty to comply
with it. There is not, nor could there be, any suggestion that
RFE/RL agreed to the mandatory retirement provision in order to
evade the Age Discrimination in Employment Act. Such provisions
are, the evidence showed, common throughout the Federal Republic
of Germany, and RFE/RL entered into this particular agreement
before Congress extended the Act beyond our borders.

[17] Because we hold that § 623(f)(1) relieved RFE/RL of liability
for terminating plaintiffs, we do not pass on the issue of
damages raised in plaintiffs' cross-appeal.

[18] Reversed.

[fn1] Section II.5.a) 5) of the collective bargaining agreement
states:

Regular employment ends through: retirement; at the
latest, however, at the end of the month in which the
employee reaches age 65, in which case notice of
termination is not required, and/or in accordance
with pertinent provision of the RFE/RL Inc. pension
plans.

[fn2] In 1984 employers were permitted to enforce mandatory
retirement of employees reaching the age of 70. Compare Pub.L.
No. 95-256, 92 Stat. 189 (1978) with Pub.L. No. 99-592,
100 Stat. 3342 (1986).
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