Michael M. Sato v. Orange County Department of Education

Filing 29

MINUTES (IN CHAMBERS) ORDER Granting in Part and Denying in Part Defendant's Motion to Dismiss Complaint 10 by Judge Josephine L. Staton: For the foregoing reasons, the Court GRANTS in part and DENIES in part Defendant's Motion. The Court DISMISSES WITH PREJUDICE Plaintiff's 1983 claim. Defendant's Motion, however, is denied with respect to Plaintiff's breach of contract claim. See document for further details. (lwag)

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 15-00311-JLS (JCGx)
Title: Michael M. Sato v. Orange County Department of Education

Date: July 6, 2015

Present: Honorable JOSEPHINE L. STATON, UNITED STATES DISTRICT JUDGE
Terry Guerrero
Deputy Clerk

N/A
Court Reporter

ATTORNEYS PRESENT FOR PLAINTIFF:
Not Present
PROCEEDINGS:

ATTORNEYS PRESENT FOR DEFENDANT:
Not Present

(IN CHAMBERS) ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANT’S MOTION TO DISMISS COMPLAINT
(Doc. 10)

Before the Court is Defendant Orange County Department of Education’s Motion
to Dismiss Plaintiff’s Complaint. (Mot., Doc. 10.) Plaintiff Michael M. Sato filed an
Opposition, and Defendant replied.1 (Opp’n, Doc. 14; Reply, Doc. 15.) Having
considered the briefing submitted by the parties and taken the matter under submission,
the Court GRANTS in part and DENIES in part Defendant’s Motion.
I.

INTRODUCTION

On August 11, 2014, Defendant Orange County Department of Education
(“OCDE”) offered Plaintiff Michael M. Sato a position as a Systems Database Architect,
which is “on the classified management salary schedule.”2 (Compl. ¶ 8, Doc. 1.)
Plaintiff accepted the position, moved from Oahu, HI to Orange County, CA, and began
1

On May 12, 2015, the Court ordered the parties to submit supplemental briefing regarding the
issue of Eleventh Amendment immunity. (Order, Doc. 17.) On May 22, 2015, Defendant filed a
Supplemental Memorandum. (Suppl. Mem., Doc. 18.) Plaintiff filed a Supplemental
Opposition, and Defendant filed a Supplemental Reply. (Suppl. Opp’n, Doc. 24; Suppl. Reply,
Doc. 25.)
2
When ruling on a motion to dismiss, the Court accepts as true the factual allegations in the
complaint. Hemi Grp., LLC v. City of New York, 559 U.S. 1, 5 (2010).
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 15-00311-JLS (JCGx)
Title: Michael M. Sato v. Orange County Department of Education

Date: July 6, 2015

full time employment with OCDE around August 20, 2014. (Id. ¶¶ 8, 13.) During his
initial job orientation, Plaintiff received the OCDE Board-approved Management
Employee Guidelines (“Guidelines”). (Id. ¶ 9.) The Guidelines state that classified
management employees such as Plaintiff “serve an initial probationary period [of] one (1)
year,” during which they “can be terminated . . . for failing to meet the expectations of
the job.” (Id. ¶ 9; Compl., Ex. B, “Guidelines” at 3, Doc. 1-2.) According to Section
XXVI of the Guidelines, “[t]ermination during the probationary period does not require
that the provisions of Section XXVI, Dismissal, be met. Section XXVI is applicable only
to employees who have completed the initial probationary period.” (Compl. ¶ 16;
Guidelines at 7.)
Around September 4, 2014, having received no warning “about any serious
deficiencies or issues in his performance, or how he had not fulfilled the stated
requirements of the position,” Plaintiff was called to a meeting and informed that he was
being terminated immediately. (Compl. ¶¶ 10-11.) Plaintiff alleges that he was provided
“no pre- or post-termination statement from [] OCDE as to the reasons for his
termination, nor was [he] ever provided a chance to respond.” (Id. ¶ 12.)
On February 25, 2015, Plaintiff filed a Complaint against OCDE, asserting claims
for (1) violation of 42 U.S.C. § 1983 and (2) breach of contract. (Id. ¶¶ 14-27.) Both
claims are based on Plaintiff’s contention that the OCDE Guidelines “restricted the
grounds upon which [Plaintiff] could be terminated to a finding of cause.” (Id. ¶ 17.)
On March 19, 2015, OCDE moved to dismiss Plaintiff’s Complaint in its entirety.
(See generally Mem, Doc. 10-1.)
II.

LEGAL STANDARD

When evaluating a motion to dismiss under Federal Rule of Civil Procedure
12(b)(6), the Court must accept as true all allegations of material facts that are in the
complaint and must construe all inferences in the light most favorable to the non-moving
party. Moyo v. Gomez, 40 F.3d 982, 984 (9th Cir. 1994). Dismissal of a complaint for
failure to state a claim is not proper where a plaintiff has alleged “enough facts to state a
claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007). A complaint must (1) “contain sufficient allegations of underlying facts to
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 15-00311-JLS (JCGx)
Title: Michael M. Sato v. Orange County Department of Education

Date: July 6, 2015

give fair notice and to enable the opposing party to defend itself effectively,” and (2)
“plausibly suggest an entitlement to relief, such that it is not unfair to require the
opposing party to be subjected to the expense of discovery and continued litigation.”
Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). “Although for the purposes of a
motion to dismiss [the Court] must take all of the factual allegations in the complaint as
true, [it] ‘[is] not bound to accept as true a legal conclusion couched as a factual
allegation.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at
555).
In considering a motion to dismiss, the Court is limited to the allegations on the
face of the complaint (including documents attached thereto), matters which are properly
judicially noticeable, and “documents whose contents are alleged in a complaint and
whose authenticity no party questions, but which are not physically attached to the
pleading.” Branch v. Tunnell, 14 F.3d 449, 453-54 (9th Cir. 1994), overruled on other
grounds in Galbraith v. Cnty. of Santa Clara, 307 F.3d 1119 (9th Cir. 2002).
III.

DISCUSSION

Defendant has moved to dismiss both of Plaintiff’s claims. The Court will address
each claim in turn.
A.

42 U.S.C. § 1983 Claim

Plaintiff’s § 1983 claim is based on the assertion that, because the OCDE
Guidelines “restricted the grounds upon which [Plaintiff] could be terminated to a finding
of cause,” (Compl. ¶ 17), Plaintiff’s termination without cause constituted a violation of
his procedural and substantive rights of due process with respect to his “constitutionallyprotected property interest in his present and future employment with [] OCDE.” (Id.
¶ 16). Defendant, however, has moved to dismiss Plaintiff’s § 1983 claim because,
according to Defendant, OCDE is an arm of the State and thus immune from suit. (Mot.
at 4-5.)
In Belanger v. Madera Unified School District, 963 F.2d 248 (9th Cir. 1992), the
Ninth Circuit held that California school districts are entitled to Eleventh Amendment
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CIVIL MINUTES – GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 15-00311-JLS (JCGx)
Title: Michael M. Sato v. Orange County Department of Education

Date: July 6, 2015

immunity and thus immune from suit under § 1983. Belanger, 963 F.2d at 254. While
applying the multi-factored balancing test established in Mitchell v. Los Angeles
Community College Dist., 861 F.2d 198, 201 (9th Cir. 1988), cert. denied, 490 U.S. 1081
(1989),”3 the Belanger court explained:
Unlike most states, California school districts have budgets that are
controlled and funded by the state government rather than the local districts
. . . [T]he school district’s budget in this case is made up of funds received
from the state’s general fund pursuant to a state calculated formula . . . .
The state sets a revenue limit for each school district based on average
attendance, subtracts property tax revenues from that limit, and allocates
the balance to the school district from the state school fund. In short, the
state determines the amount of money that school districts may spend per
pupil and then provides the necessary state funds . . . . Under the revenue
limit system, state and local revenue is commingled in a single fund under
state control, and local tax revenue lost to a judgment must be supplanted
by the interchangeable state funds already in the district budget . . . . In
essence, any use of the commingled funds is a use of state funds . . . .
Under the centralized revenue limit system, the allocation of property tax
revenue is hopelessly intertwined with the allocation of state funds, and any
change in the allocation of property tax revenue has a direct effect on the
allocation of state funds.
Belanger, 963 F.2d at 250-52 (citing the 1978 and 1992 versions of Cal. Educ. Code §§
41600–41610, 42238–42251). Thus, because the Belanger court found that the school
district “is an agent of the state that performs state governmental functions and [because]
3

In Mitchell, the Ninth Circuit explained that “[t]o determine whether a governmental agency is
an arm of the state, the following factors must be examined: [1] whether a money judgment
would be satisfied out of state funds, [2] whether the entity performs central governmental
functions, [3] whether the entity may sue or be sued, [4] whether the entity has the power to take
property in its own name or only the name of the state, and [5] the corporate status of the entity.”
Mitchell, 861 F.2d at 201.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 15-00311-JLS (JCGx)
Title: Michael M. Sato v. Orange County Department of Education

Date: July 6, 2015

a judgment would be satisfied out of state funds,” it held that California school districts
are “immune to suit under the Eleventh Amendment.” Belanger, 963 F.2d at 254.
Belanger further explained that “California’s centralized control of school funding
can be attributed to two key factors—decisions by the California Supreme Court in 1971
and 1976, and the adoption of Proposition 13 in 1978.” Belanger, 963 F.2d at 251. In
1971, “the California Supreme Court determined that the system of public school
financing in California that failed to equalize school spending for each student was
unconstitutional.” Belanger, 963 F.2d at 251 (citing Serrano v. Priest, 5 Cal. 3d 584
(1971) (Serrano I )). After the Ninth Circuit’s decision in Serrano I, “[t]he California
legislature responded by enacting Senate Bill 90 in an attempt to equalize public school
funding.” Id. Yet, in 1976, Senate Bill 90 was struck down when “the California
Supreme Court ruled that the equal protection provisions of the California Constitution
require strict statewide equalization of school spending per pupil. Belanger, 963 F.2d at
251 (citing Serrano v. Priest, 18 Cal. 3d 728 (1976) (Serrano II)). Thus, under Serrano I
and Serrano II, the state of California “has a duty to ensure that all school districts
receive an equal amount of funding per student” and “must prevent wealthier districts
from raising too much local revenue.” Belanger, 963 F.2d at 251. Following Serrano II,
the passage of Proposition 13 “reduc[ed] and capp[ed] the property tax revenues used to
fund local schools,” which “inadvertently helped California achieve the result mandated
in Serrano II” and “ensured that the state, rather than local school districts, would control
funding for public schools.” Id.
Further, “[t]he California Constitution requires the state legislature to ‘provide for
a system of common schools’ and sets forth detailed requirements for those schools.”
Belanger, 963 F.2d at 253 (citing Cal. Const. art. IX, §§ 5, 6). As a result, “California
law is well settled that providing public education is a state function.” Id. “[A]lthough
the state can assign certain duties with respect to the local operation of schools to local
agencies, it cannot by such incidental delegations abdicate its role as the entity ultimately
responsible for the proper and lawful functioning of the state’s schools.” Id. (citation
omitted).
In Eaglesmith v. Ward, 73 F.3d 857 (9th Cir. 1995), the Ninth Circuit extended
Belanger’s holding when it held that county boards of education also are state agencies
entitled to Eleventh Amendment immunity in California. Eaglesmith, 73 F.3d at 860. On
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 15-00311-JLS (JCGx)
Title: Michael M. Sato v. Orange County Department of Education

Date: July 6, 2015

May 12, 2015, this Court ordered the parties to submit “supplemental briefing regarding
Belanger . . . and Eaglesmith . . . and whether California school districts and county
boards of education are still entitled to Eleventh Amendment immunity following the
California Legislature’s 2013 enactment of Assembly Bill 97 [“AB 97”].” (Order at 1,
Doc. 17.)
Plaintiff claims that “the California Legislature’s massive 2013 enactment of
Assembly Bill 97 completely replaces the prior statutory basis for, and upends the
analysis of, Belanger.” (Opp’n at 1). According to Plaintiff, AB 97 brings California in
line with Eason v. Clark County School District, 303 F.3d 1137 (9th Cir. 2002), Savage
v. Glendale Union High School, District No. 205, 343 F.3d 1036 (9th Cir. 2003), and
Holz v. Nenana City Public School District, 347 F.3d 1176 (9th Cir. 2003), where the
Ninth Circuit found that school districts in Nevada, Arizona, and Alaska, respectively,
were not entitled to Eleventh Amendment immunity. (Id.) Plaintiff contends that AB 97
“explicitly abolishes the ‘revenue limit’ system and replaces it with a ‘County Local
Control Funding Formula’ and ‘Local Control and Accountability Plans’ providing only a
minimum ‘base grant’ of State support.” (Suppl. Opp’n at 1, Doc. 24.) Thus, according
to Plaintiff, the funding structure now does not prohibit a county education board or
school district from “raising funds from the county in excess of the base grant provided
by the state.” (Id. at 2.) Plaintiff asserts that “[t]he entire thrust of [AB 97] is to
decentralize control of the budgetary, administrative and educational process from the
state to the local county and school district level, unambiguously eliminating the ‘revenue
limit’ system, and decoupling the budget from one ‘hopelessly interwoven’ between
school districts and the State.” (Id. at 3.) As a result, Plaintiff contends that OCDE
should be denied immunity because “AB 97 completely nullifies and vitiates Bellanger’s
[sic] conclusion.” (Suppl. Opp’n at 24.)
OCDE, on the other hand, contends that, “[i]n California, all funds are dispersed
by the state to the various districts and county offices of education, and local revenues are
not permitted to be added to these amounts. The California Constitution mandates that
the state funds public schools.” (Suppl. Mem. at 3 (citing Cal. Const. Art. IX.).) OCDE
contends that “[t]he California Supreme Court has recognized that education has always
been considered a function of the state, since California was admitted to the Union.”
(Suppl. Reply at 2.) Further, according to OCDE, “Serrano I and Serrano II along with
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 15-00311-JLS (JCGx)
Title: Michael M. Sato v. Orange County Department of Education

Date: July 6, 2015

Proposition 13 comprise the statutory prohibition against the OCDE or any other school
district supplementing its minimum base funding grant under AB 97 with local property
tax revenue.” (Suppl. Reply at 7.) OCDE therefore concludes that, “[a]s the OCDE has
no constitutional means of raising additional funds to supplement the grant it receives
from the state under AB 97, OCDE remains completely dependent upon the state for
funding. This complete dependence results in the fact that any judgment against the
OCDE would have to be satisfied out of state funds as it cannot legally generate any other
funds for its use.” (Id.) Finally, according to OCDE, “given the fact that not all of AB
97 has been implemented, [P]laintiff cannot argue that the OCDE is no longer an arm of
the state. It remains so.” (Reply at 2.)
While there is merit to Plaintiff’s argument that the passage of AB 97 has brought
California’s public school funding regime closer to those found in Nevada, Arizona, and
Alaska and analyzed by the Ninth Circuit in Eason, Savage, and Holz, respectively, the
Court cannot say at this time that California school districts and California county boards
of education are no longer entitled to Eleventh Amendment immunity.
First, Plaintiff has failed to provide the Court with any authority or case law that
calls into question the holding of Belanger. In fact, since the passage of AB 97, not only
has every federal district in California cited Belanger and held that school districts are
entitled to Eleventh Amendment immunity, but the Ninth Circuit also has continued to
rely on Belanger for the proposition that “a school district cannot be sued for damages
under § 1983.” C.W. v. Capistrano Unified Sch. Dist., 784 F.3d 1237, 1247 (9th Cir.
2015); see also Pierce v. Santa Maria Joint Union High Sch. Dist., No. 12-57296, 2015
WL 2345154, at *1 (9th Cir. May 18, 2015); Brynjolfsson v. State Agency Los Angeles
Unified Sch. Dist., 576 F. App’x 697, 698 (9th Cir. 2014); Mnyandu v. Cnty. of Los
Angeles, No. CV 14-6485 DSF FFM, 2015 WL 3605157, at *6 (C.D. Cal. June 5, 2015);
V.S. by & through Sisneros v. Oakland Unified Sch. Dist., No. 14-CV-05144-JST, 2015
WL 3463475, at *2 (N.D. Cal. May 28, 2015); Sisneros v. Oakland Unified Sch. Dist.,
No. 14-CV-05144-JST, 2015 WL 1431679, at *2 (N.D. Cal. Mar. 27, 2015); Kitchen v.
Lodi Unified Sch. Dist., No. CIV. 2:14-01436 WBS, 2014 WL 5817320, at *3 (E.D. Cal.
Nov. 5, 2014); A.A. v. Clovis Unified Sch. Dist., No. 1:13-CV-01043 AWI SM, 2014 WL
3488963, at *5 (E.D. Cal. July 14, 2014); Brouillette v. Montague Elementary Sch. Dist.,
No. CIV. 2:14-840 WBS, 2014 WL 2453036, at *2 (E.D. Cal. May 30, 2014); Everett H.
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CIVIL MINUTES – GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 15-00311-JLS (JCGx)
Title: Michael M. Sato v. Orange County Department of Education

Date: July 6, 2015

v. Dry Creek Joint Elementary Sch. Dist., 5 F. Supp. 3d 1167, 1179 (E.D. Cal. 2014);
Tasia R. v. Grossmont Union High Sch. Dist., No. 13CV2874-WQH-DHB, 2014 WL
3734475, at *3 (S.D. Cal. July 28, 2014).
Further, Plaintiff has failed to show that either the statutory provisions or the
constitutional limitations set forth in Serrano I and Serrano II that the Ninth Circuit relied
upon in Belanger have been undermined. Plaintiff has not submitted to this Court any
authority that would warrant this Court finding that Serrano I or Serrano II no longer
requires centralized control of school funding in California, or that Proposition 13 limits
the amount of local funding available to school districts. At oral argument, Plaintiff
argued that the California Supreme Court’s decision in Serrano II has been overridden by
the passage of Proposition 30. Yet, Plaintiff has failed to cite any authority that would
support such a conclusion. While Proposition 30 amended Article XIII of the California
Constitution to grant local school districts greater control over funds that they receive
from the state, Plaintiff has failed to convince the Court that Proposition 30 changes the
California Constitution’s mandate that the state legislature “provide for a system of
common schools,” or Serrano I’s or Serrano II’s holding that the state of California “has
a duty to ensure that all school districts receive an equal amount of funding per student”
and “must prevent wealthier districts from raising too much local revenue.” Bellanger,
963 F.2d at 251. Thus, because nothing in Proposition 30 addresses the amount of
funding received by local school districts or the source of that funding, Plaintiff has
failed to cite any authority that undermines Belanger’s conclusion that a judgment against
a California school district would be satisfied out of state funds.
In addition, AB 97 established “an eight-year phase-in timeline . . . to
incrementally close the gap between actual funding and the target level of funding.”
06/14/13 – Assembly Floor Analysis and 06/13/13 – Senate Floor Analysis, Assemb. B.
97, 2013 Sess. (C.A. 2013),
http://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_id=201320140AB97
#. As a result, certain funding provisions that were applicable when Belanger and
Eaglesmith were decided, and upon which the Ninth Circuit relied when finding that
California school districts were entitled to Eleventh Amendment immunity, are still in
operation today. This Court therefore finds that, even if AB 97’s amendments would
warrant finding that California school districts are no longer entitled to Eleventh
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CIVIL MINUTES – GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 15-00311-JLS (JCGx)
Title: Michael M. Sato v. Orange County Department of Education

Date: July 6, 2015

Amendment immunity, it would be premature for this Court to find that the reasoning and
holding of Belanger have been undermined until all of the relevant provisions of AB 97
have been fully implemented.
Accordingly, for the reasons discussed above, the Court GRANTS OCDE’s
motion to dismiss Plaintiff’s first cause of action and dismisses with prejudice Plaintiff’s
§ 1983 claim.
B.

Breach of Contract Claim

Defendant argues that Plaintiff’s breach of contract claim should be dismissed
because “it has long been recognized in California that public employees, especially
public school employees, hold their positions not by contract, but by statute. Such
employees may not pursue actions based on common law breach of contract theories.”
(Mot. at 5.) Because Plaintiff alleges that OCDE is a public entity, (Compl. ¶ 2), OCDE
asserts that “all aspects of [Plaintiff’s] employment, including discipline and
termination[,] are set forth by the Education Code, not common law tort or contract
principles.”4 (Mot. at 8.) As a result, OCDE claims that “[t]o the extent that [P]laintiff
wished to challenge any decision made regarding his employment, his remedy lay
exclusively in administrative procedures,” or, if necessary, mandamus. (Mot. at 9-10.)
Plaintiff, on the other hand, argues that “the OCDE Guidelines . . . stand in the
position of an employee handbook . . .[,] abrogate any at-will employment presumption
and establish that [Plaintiff] could only be terminated for cause.” (Opp’n at 23-24 (citing
Guz v. Bechtel National, Inc., 24 Cal.4th 317, 340 (2000)).) Plaintiff’s Complaint alleges
that his termination was “without any cause or valid justification,” and thus OCDE’s
termination of Plaintiff’s employment constitutes a “breach of contract under the
applicable regulatory Guidelines.” (Compl. ¶¶ 25-26.) Defendant responds, however, by
4

The California Education Code provides that permanent employees “shall be subject to
disciplinary action only for cause as prescribed by rule or regulation of the governing board” and
“are entitled to notice and a hearing prior to being terminated.” Cal. Sch. Emps. Assn. v. Oroville
Union High Sch. Dist., 220 Cal. App. 3d 289, 292 (1990) (citing Cal. Educ. Code §§ 45113,
45101). However, “no similar protections are afforded probationary employees by the Education
Code.” Id.
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CIVIL MINUTES – GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 15-00311-JLS (JCGx)
Title: Michael M. Sato v. Orange County Department of Education

Date: July 6, 2015

claiming that there are no facts present in this case that establish that the parties entered
into a bilateral contract to govern the employment relationship. (Reply at 3.)
“The standard elements of a claim for breach of contract are (1) the contract, (2)
plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4)
damage to plaintiff therefrom.” Abdelhamid v. Fire Ins. Exch., 182 Cal. App. 4th 990,
999 (2010) (internal quotation marks omitted). “[T]here is a statutory presumption that
employment is terminable at will, and a contract of employment may be ended at any
time at the option of either party.” Eisenberg v. Alameda Newspapers, Inc., 74 Cal. App.
4th 1359, 1386 (1999). However, an express or implied agreement between parties can
overcome the at-will presumption and establish that employment can be terminated only
for cause. Id. A provision in an employee handbook or manual is relevant “in
determining whether the parties’ conduct was intended, and reasonably understood, to
create binding limits on an employer’s statutory right to terminate the relationship at
will.” Guz, 24 Cal. 4th at 340. “[T]he totality of the circumstances must be examined to
determine whether the parties’ conduct, considered in the context of surrounding
circumstances, gave rise to an implied-in-fact contract limiting the employer’s
termination rights.” Id. at 337 (internal quotation marks and citation omitted). “In
determining the existence of such a promise of termination only for cause, [courts] look
to the entire relationship of the parties, including such factors as the terms of any relevant
application for employment, employee handbook or manual; the personnel policies and
practices of the employer; the employee’s longevity of service; actions or
communications by the employer constituting assurances of continued employment; and
the practices of the industry in which the employee is engaged.” Eisenberg, 74 Cal. App.
4th at 1387.
As an initial matter, Plaintiff had been employed by OCDE for approximately two
weeks prior to his termination. Plaintiff, therefore, was still in the probationary period of
his employment with OCDE. (See Guidelines at 3.) Thus, as set forth in the Guidelines,
the dismissal provisions found in Section XXVI of the Guidelines are inapplicable to
Plaintiff’s breach of contract claim. (See Guidelines at 7.) Further, Plaintiff points to the
demotion and suspension provisions in the Guidelines, which provide that certain notice
procedures must be followed before a management employee can be demoted or
suspended. (See Guidelines at 5-7.) Plaintiff, however, was not demoted or suspended
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CIVIL MINUTES – GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 15-00311-JLS (JCGx)
Title: Michael M. Sato v. Orange County Department of Education

Date: July 6, 2015

by OCDE; rather, OCDE terminated Plaintiff’s employment. The demotion and
suspension provisions therefore also are inapplicable to Plaintiff’s claims regarding his
termination by OCDE.
Thus, the only provision of the Guidelines applicable to Plaintiff’s breach of
contract claim is the provision that states that Plaintiff “can be terminated during the
probationary period for failing to meet the expectations of the job.” (Guidelines at 3.)
Nonetheless, construing all inferences in the light most favorable to Plaintiff as the Court
must do at the motion to dismiss stage, the Court finds that Plaintiff has alleged
sufficiently a breach of contract claim against OCDE.
Neither party asserts that Plaintiff was ever told that his employment with OCDE
was at-will. Rather, the Guidelines specify that OCDE can terminate Plaintiff “for failing
to meet the expectations of the job.” (Guidelines at 3.) If the Court construes all
inferences in Plaintiff’s favor, the Guidelines could be said to provide for a different
standard than at-will employment. “[F]ailing to meet the expectations of the job”
suggests that Plaintiff’s position had particular responsibilities and requirements, and for
certain objective reasons, OCDE could terminate Plaintiff for failing to meet them. The
fact that OCDE provided this specific standard in the Guidelines, even though written
with the permissive language of “can be terminated . . . ,” suggests that OCDE intended
the employment relationship to be something other than at-will. Though the notice
provisions set forth in Section XXVI of the Guidelines are inapplicable to Plaintiff’s
termination by OCDE because Plaintiff was still in the probationary period of his
employment, this does not mean that Plaintiff’s employment was at-will. Rather, it
simply means that OCDE did not have to comply with the requirements and procedures
of Section XXVI. According to the Complaint, and uncontroverted by Defendant, OCDE
failed to provide Plaintiff with a reason for his termination. As a result, Plaintiff has
sufficiently alleged that the Guidelines created a binding limit on OCDE’s statutory right
to terminate its relationship with Plaintiff at will.
The Court recognizes that “it is well settled in California that public employment
is not held by contract but by statute and that, insofar as the duration of such employment
is concerned, no employee has a vested contractual right to continue in employment
beyond the time or contrary to the terms and conditions fixed by law.” Miller v. State of
California, 18 Cal. 3d 808, 813 (1977). However, the “often quoted language that public
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CIVIL MINUTES – GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 15-00311-JLS (JCGx)
Title: Michael M. Sato v. Orange County Department of Education

Date: July 6, 2015

employment is not held by contract has limited force where, as here, the parties are
legally authorized to enter . . . into bilateral contracts to govern the employment
relationship.” Retired Emps. Assn. of Orange Cnty., Inc. v. Cnty. of Orange, 52 Cal. 4th
1171, 1182 (2011) (internal quotation marks and citation omitted). The Court has found
that Plaintiff has alleged adequately that an express or implied contract existed between
Plaintiff and OCDE providing that Plaintiff could be terminated only for cause. “Thus,
where the employment relationship is governed by contract, a public employee’s breach
of contract claim is not simply defeated by his status as a public employee.” Id.
Accordingly, the Court DENIES OCDE’s motion to dismiss Plaintiff’s breach of
contract claim.5
C.

Supplemental Jurisdiction

OCDE also contends that if the Court dismisses Plaintiff’s § 1983 claim, “the
Court may properly decline to exercise supplemental jurisdiction, and dismiss [Plaintiff’s
breach of contract claim] on that basis.” (Mot. at 11.) However, in his Complaint,
Plaintiff alleges not only that the Court has federal question jurisdiction over Plaintiff’s
§ 1983 claim, but also that the Court has diversity jurisdiction because Plaintiff resides
and is domiciled in Hawaii, and OCDE is a California governmental organization.
(Compl. ¶¶ 1-4.) Accordingly, even though the Court has dismissed Plaintiff’s § 1983
claim, the Court still has jurisdiction to decide Plaintiff’s state breach of contract claim
5

Defendant also argues that, even if Plaintiff can somehow state a cause of action for breach of
contract, Plaintiff has failed to allege adequately a breach of contract claim because Plaintiff has
alleged damages “in only the most conclusory terms.” (Id. at 11.) However, in his Complaint,
Plaintiff alleges that “[h]e lost all the future income and benefits to which he would have been
entitled as an employee of the OCDE. This included significant insurance benefits, as well as
benefits related to student loan forgiveness after a term of years for [Plaintiff]’s children. Some
benefits had already accrued and vested as of the date of his termination.” (Compl. ¶ 27.)
Further, Plaintiff alleges that “[he] incurred all the costs attendant with his relocation from
Hawaii to Orange County, including leasing an apartment, leasing a car, purchasing cable,
internet, phone, appliances, furniture and amenities, as well as the cost of travel from Hawaii to
Orange County.” (Id.) The Court finds that Plaintiff has alleged adequately the damages he
suffered as a result of Plaintiff’s purported breach of contract.
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____________________________________________________________________________
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No. SACV 15-00311-JLS (JCGx)
Title: Michael M. Sato v. Orange County Department of Education

Date: July 6, 2015

based on diversity jurisdiction.
IV.

CONCLUSION

For the foregoing reasons, the Court GRANTS in part and DENIES in part
Defendant’s Motion. The Court DISMISSES WITH PREJUDICE Plaintiff’s § 1983
claim. Defendant’s Motion, however, is denied with respect to Plaintiff’s breach of
contract claim.

Initials of Preparer: tg

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