United States v. 2005-08-10 | 03-35724 | PAOLINI VALBERTSON'S INC. | precedential | opinion |

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
 BRUCE P. PAOLINI,
Plaintiff-Appellant,
No. 03-35724v.
D.C. No.ALBERTSON’S INC.; PLAN  CV-02-00041-BLWADMINISTRATOR, of Albertson’s
amended and restated stock-based ORDER
incentive plan,
Defendants-Appellees. 
Appeal from the United States District Court
for the District of Idaho
B. Lynn Winmill, District Judge, Presiding
Argued February 17, 2005
Submitted March 16, 2005
Seattle, Washington
Filed August 10, 2005
Before: Betty B. Fletcher and Ronald M. Gould,
Circuit Judges, and Samuel P. King,* District Judge.
COUNSEL
Bruce P. Paolini, Virginia Beach, Virginia, Pro se plaintiff-
counterdefendant-appellant.
*The Honorable Samuel P. King, Senior United States District Judge
for the District of Hawaii, sitting by designation.
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J. Walter Sinclair, Harry S. Chandler, & Wade L. Woodard,
Stoel Rives LLP, Boise, Idaho, for defendant-
counterclaimant-appellee Albertson’s, Inc., and defendant-
appellee the Plan Administrator of Albertson’s Amended and
Restated Stock-Based Incentive Plan.
ORDER CERTIFYING QUESTIONS OF LAW TO
THE IDAHO SUPREME COURT
Bruce P. Paolini, the plaintiff, appeals the district court’s
summary judgment decision. The district court granted sum-
mary judgment to the defendants, Paolini’s former employer
Albertson’s, Inc. and the Administrator of Albertson’s, Inc.’s
Stock-Based Incentive Plan (the “Plan Administrator”), (col-
lectively “Albertson’s”).
On appeal Paolini argues, among other things, that he was
fired for petitioning to exercise stock options granted to him
by Albertson’s. He argues that firing him for this reason vio-
lated Idaho’s wage laws and public policy. We vacate submis-
sion and certify two legal questions that are dispositive of
these issues on appeal.
I.
Resolution of Paolini’s wrongful discharge claims as
related to Idaho’s wage laws and Idaho’s public policy are
matters of first impression under Idaho law. Because we find
no controlling precedent in the decisions of the Idaho courts,
pursuant to Rule 12.2 of the Idaho Appellate Rules, we
respectfully request the Idaho Supreme Court to exercise its
discretion to accept certification of the following legal ques-
tions:
1. Can stock options be wages under Idaho Code
sections 45-601(7) and 45-613? If so, is it a factual
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issue as to whether the stock options were issued as
wages, to be resolved by a factfinder?
2. If an employer fires an employee for trying to
exercise his right to the receipt of wages, has the
employer violated the public policy exception to at-
will employment?
A determination of Idaho law with regard to these certified
questions would resolve the wrongful discharge issues on
appeal as they relate to Idaho’s wage laws and Idaho’s public
policy and would determine whether these matters should be
remanded to the district court for further proceedings.
II.
Paolini was an employee at Albertson’s for seventeen
years. He advanced to the position of Senior Vice President
of Labor Relations and Employment Law. During Paolini’s
time at Albertson’s he received several thousand stock
options. The options were issued pursuant to the Albertson’s
Amended and Restated 1995 Stock-Based Incentive Plan (the
“Plan”). According to the Plan, a change in control at the
company accelerated vesting of the stock options.
In the summer of 2001, Paolini believed a change in control
occurred at Albertson’s.1 He attempted to exercise his stock
options based on accelerated vesting. The Plan Administrator
denied his request.
Then, for reasons that are disputed, Paolini left his employ-
ment at Albertson’s. Paolini claims Albertson’s discharged
him for acting to exercise his stock options, thus raising the
possibility that several million dollars of stock options,
1Whether a change in control occurred at Albertson’s is disputed by the
parties but this issue is not material to the questions as certified to the
Idaho Supreme Court.
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including his own, were subject to accelerated vesting. This,
Paolini claims, was a retaliatory discharge in violation of
Idaho’s wage laws, public policy, and the covenant of good
faith and fair dealing. Albertson’s response to Paolini’s
wrongful discharge claims is two-fold: first, they argue
Paolini quit and second, they argue that if Paolini was fired,
then his firing did not violate Idaho state law.2
Paolini filed a complaint in Idaho federal district court. The
complaint challenged the Plan Administrator’s interpretation
of the stock option Plan and alleged wrongful discharge.
Albertson’s counterclaimed for the amount owed on a dis-
puted promissory note.
Both parties filed for summary judgment. The district court
granted all of Albertson’s substantive motions for summary
judgment and denied all of Paolini’s motions for summary
judgment. Paolini appealed to the Ninth Circuit.
III.
A. Violation of Idaho’s wage laws.
Under Idaho law an employer may not fire or retaliate
against an employee for making a complaint under the Idaho
wage laws. Idaho Code § 45-613. The statute reads:
No employer shall discharge or in any other manner
retaliate against any employee because that
employee has made a complaint to the employer, or
to the department, or filed suit alleging that the
employee has not been paid in accordance with the
provisions of this chapter, or because the employee
has testified or may be about to testify in an investi-
gation or hearing undertaken by the department. The
2The parties agreed at oral argument that a material factual dispute
exists over whether Paolini quit or was discharged.
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provisions of this section shall not be construed to
otherwise restrict the discipline or termination of an
employee.
Id. Paolini argues he was fired for petitioning to exercise his
stock options and raising concerns in management over the
potential for accelerated vesting of the company’s stock
options. Stock options, he argues, were part of Albertson’s
compensation, i.e. wages, to himself and other executives.
Therefore, he argues, he was terminated for pursuing a com-
plaint under Idaho’s wage law.
Idaho law defines wages as “compensation for labor or ser-
vices rendered by an employee, whether the amount is deter-
mined on a time, task, piece or commission basis.” Idaho
Code § 45-601(7). The Idaho Supreme Court has never said
whether stock options can be wages and it is not clear from
Idaho’s existing case law how the court would decide this
question. The Idaho Supreme Court has addressed the defini-
tion of wages in other contexts,3 but none are comparable to
grants of stock options.
While the law is unclear, the facts suggest a triable issue of
fact on whether Albertson’s stock options are wages. Paolini
and the Plan Administrator both said the stock options were
compensation. Paolini’s affidavit says he was told “dozens of
times” that his pay included salary, bonuses, and stock
options. The chair of the Compensation Committee/Plan
Administrator4 testified to the same. The Plan Administrator’s
3For example, the Idaho Supreme Court said year end commissions are
wages, Goff v. H.J.H. Co., 521 P.2d 661, 664; 95 Idaho 837, 840 (1974);
bonuses and severance pay are wages, Johnson v. Allied Stores Corp., 679
P.2d 640, 644; 106 Idaho 363, 367 (1984); and deferred incentive compen-
sation packages are wages, Bilow v. Preco, Inc., 966 P.2d 23, 28-30; 132
Idaho 23, 28-30 (1998). The Idaho Court of Appeals said a life insurance
contract is not a wage, Whitlock v. Haney Seed Co., 759 P.2d 919, 925-26;
114 Idaho 628, 634-35 (Idaho Ct. App. 1988).
4The Compensation Committee and the Plan Administrator were one
and the same.
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written decision in this case calls the stock option Plan com-
pensation, saying: “[M]anagement has discretion to design
and create compensation programs such as the Plan.”
This court has said stock options under California’s wage
laws are not wages5 but not all states have excluded stock
options from the definition of wages. For example, the Third
Circuit has said stock options are wages under the Pennsylva-
nia Wage Payment and Collection Law “if the employer spe-
cifically agreed to deliver the option as employment
compensation.” Scully v. US WATS, 238 F.3d 497, 517-18 (3d
Cir. 2001).
In this case, if stock options are not wages then no triable
issue of fact exists for the wrongful discharge claims under
Idaho’s wage law. The claims therefore would have to be dis-
missed. If stock options are wages as a matter of law, then
these claims must return to the district court for a determina-
tion of whether Paolini was fired and, if so, for what reason.
If stock options may be wages and determining so is an issue
of fact, then these issues must return to the district court for
such a determination. Whether stock options can be wages is
a “controlling question of law” without “controlling precedent
in the decisions of the Idaho Supreme Court.” Idaho Appellate
Rule 12.2(a). Resolving this question will “materially advance
the orderly resolution” of this litigation. Id.
B. Public policy exception to employment at-will.
Idaho has long recognized a public policy exception to the
employment at-will relationship. Under this exception “an
employer may be liable for wrongful discharge when the
motivation for discharge contravenes public policy.” Edmond-
son v. Shearer Lumber Prods., 75 P.3d 733, 737; 139 Idaho
5See Falkowski v. Imation Corp., 309 F.3d 1123, 1132 (9th Cir. 2002)
(saying stock options are not wages under California law); Int’l Bus.
Machs. Corp. v. Bajorek, 191 F.3d 1033, 1039 (9th Cir. 1999) (same).
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172, 176 (2003). Whether a particular action falls within the
public policy exception is a question of law. Id. The Idaho
Supreme Court has explained the exception by saying:
The purpose of the exception is to balance the com-
peting interests of society, the employer, and the
employee in light of modern business experience.
The public policy exception has been held to protect
employees who refuse to commit unlawful acts, who
perform important public obligations, or who exer-
cise certain legal rights or privileges.
Crea v. FMC Corp., 16 P.3d 272, 275; 135 Idaho 175, 178
(2000) (internal quotation marks omitted). The exception has
been extended to specifically protect: participation in union
activities, Roberts v. Bd. of Trustees, 11 P.3d 1108, 1111; 134
Idaho 890, 893 (2000); Watson v. Idaho Falls Consol. Hosp.,
720 P.2d 632, 637; 111 Idaho 44, 49 (1986); reporting safety
violations, Ray v. Nampa School Dist., 814 P.2d 17, 120
Idaho 117 (1991); and reporting false medical records and the
performance of unnecessary operations, Thomas v. Med. Ctr.
Physicians, 61 P.3d 557, 138 Idaho 200 (2002). The Idaho
Supreme Court has indicated that the exception would also
protect against termination for refusing to date a supervisor,
filing a worker’s compensation claim, or serving on a jury,
Sorensen v. Comm. Tek, Inc., 799 P.2d 70, 75; 118 Idaho 664,
669 (1990). However, the Idaho Supreme Court has said the
exception does not protect private-sector employees who
exercise their constitutional rights of free speech and associa-
tion, Edmondson, 75 P.3d at 738-39; 139 Idaho at 177-78, and
Idaho Court of Appeals has declined to extend the exception
to cover running for public office, McKay v. Ireland Bank, 59
P.3d 990, 994-95; 138 Idaho 185, 189-90 (Idaho Ct. App.
2002).
The question of whether Paolini was fired in violation of
public policy is dependent, in part, on the answer to the earlier
question of whether stock options can be wages. If stock
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options are wages then a legal question exists over whether
firing a person for acting to prevent the withholding of wages
is a violation of public policy. A factual question also remains
as to whether Paolini was terminated for taking such an
action. The legal question has never been addressed by the
Idaho Supreme Court.
Paolini argues that as the head of labor and employment at
Albertson’s he was refusing to commit an unlawful act, i.e.
withholding wages from Albertson’s employees. He also
argues he was exercising his own legal right to pursue wages
owed to him by Albertson’s. Existing case law is not suffi-
ciently analogous to the legal questions presented by Paolini
to allow us to resolve these issues. Whether Paolini’s argu-
ments are correct under Idaho law is a matter best determined
by the Idaho Supreme Court. We respectfully request the
Idaho Supreme Court to exercise its discretion and accept cer-
tification of the legal questions presented.
IV.
The clerk of this court shall forward a copy of this order,
under official seal, to the Idaho Supreme Court. The clerk
shall also forward copies of all briefs and excerpts of record
to the Idaho Supreme Court. The parties shall notify the clerk
of this court within 14 days of any decision by the Idaho
Supreme Court to accept or decline certification. If the Idaho
Supreme Court accepts certification, the parties shall then
notify the clerk of this court within 14 days of the issuance of
that court’s opinion. We withdraw submission of this appeal
until further order of this court.
SUBMISSION VACATED AND QUESTIONS CERTI-
FIED
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