Freeman v. Duke Power Company

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
ALBERT L. FREEMAN, 
Plaintiff-Appellant,
v.
DUKE POWER COMPANY, a Division  No. 03-2146
of Duke Energy Corporation; DUKE
ENERGY CORPORATION,
Defendants-Appellees.

ALBERT L. FREEMAN, 
Plaintiff-Appellant,
v.  No. 03-2147
CINDY THAXTON; GEORGE KWASCHA,
Defendants-Appellees.

Appeals from the United States District Court
for the Middle District of North Carolina, at Durham.
N. Carlton Tilley, Jr., Chief District Judge.
(CA-00-665-1; CA-02-630-1)
Argued: June 4, 2004
Decided: September 27, 2004
Before WIDENER and SHEDD, Circuit Judges, and
David R. HANSEN, Senior Circuit Judge of the
United States Court of Appeals for the Eighth Circuit,
sitting by designation.
Affirmed by unpublished per curiam opinion.
2 FREEMAN v. DUKE POWER CO.
COUNSEL
ARGUED: Fred Thurman Hamlet, Sr., Greensboro, North Carolina,
for Appellant. Dena Beth Langley, NEXSEN PRUET ADAMS
KLEEMEIER, P.L.L.C., Greensboro, North Carolina, for Appellees.
ON BRIEF: Brian S. Clarke, NEXSEN PRUET ADAMS KLEEM-
EIER, P.L.L.C., Greensboro, North Carolina, for Appellees.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
The district court dismissed both of Albert Freeman’s state law
actions, one against Duke Power Company (Duke Power) and one
against Cindy Thaxton and George Kwascha, on the bases that all of
the state law claims raised in the two cases were either preempted by
§ 301 of the Labor Management Relations Act (LMRA) and failed to
state claims under the LMRA, or, if not preempted, failed to state a
claim under state law. Freeman appeals, and we affirm.
I.
Because the district court granted the defendants’ motions to dis-
miss the plaintiff’s complaints for failure to state a claim under Fed-
eral Rule of Civil Procedure 12(b)(6), we take the allegations in the
complaints as true and construe the facts in the light most favorable
to the plaintiff. Franks v. Ross, 313 F.3d 184, 192 (4th Cir. 2002).
Albert Freeman worked for Duke Power as a Transmission Line
Helper and as a Distribution Line Technician C from 1983 until 1999
pursuant to a collective bargaining agreement (CBA) between Duke
Power and Freeman’s union, Local Union 962, International Brother-
hood of Electrical Workers (Union). In 1984, Freeman obtained a lim-
ited electrical contractor’s license and "moonlighted" as an electrician
FREEMAN v. DUKE POWER CO. 3
during his off-duty time performing small electrical jobs. Duke Power
was aware of Freeman’s moonlighting activities and took no employ-
ment action against him between 1984 and 1994.
In January 1994, Freeman was suspended and discharged from
employment as a lineman "for allegedly removing a service drop and
meter and disconnecting service to a customer without authorization
from Duke Power Company." (J.A. at 11-12.) The Union filed a
grievance on Freeman’s behalf pursuant to the grievance procedures
of the CBA. In settlement of the grievance, Duke Power, the Union,
and Freeman entered into a Grievance Resolution, under which Duke
Power agreed to reinstate Freeman to his lineman position, the Union
agreed to withdraw the grievance, and Freeman agreed not to engage,
directly or indirectly, in the business of electrical contracting while
employed with Duke Power. The Grievance Resolution provided that
Duke Power could discharge Freeman if he engaged in electrical con-
tracting, and that the discharge decision would be final and would not
be subject to the grievance procedures of the CBA in effect at the
time of any future discharge.
In June 1996, Duke Power suspended and proposed to discharge
Freeman a second time, asserting that Freeman violated the Grievance
Resolution by engaging in electrical contracting. Freeman asserted
that he did not violate the Grievance Resolution. In settling the dis-
pute, the Union, Duke Power, and Freeman entered into an Amend-
ment to the Grievance Resolution (Amendment) on July 3, 1996. The
Amendment prohibited Freeman from being or becoming employed
on a full- or part-time basis with any entity engaged in the business
of electrical contracting. In the Amendment, Duke Power agreed not
to terminate Freeman for the then current alleged violation of the
Grievance Resolution, and Freeman agreed not to engage in the busi-
ness of electrical contracting in the future. The Amendment provided
that Duke Power could terminate Freeman’s employment if he vio-
lated the Amendment, and that such termination would be final and
would not be subject to the arbitration or grievance procedures under
the CBA then in effect. In July 1999, Duke Power suspended and ulti-
mately discharged Freeman for allegedly violating the Amendment.
The Union declined to file a grievance for Freeman.
Freeman brought an action in North Carolina state court against
Duke Power, alleging breach of contract, wrongful discharge, viola-
4 FREEMAN v. DUKE POWER CO.
tions of North Carolina’s constitution, and bad faith discharge. He
brought a separate state court action against Cindy Thaxton and
George Kwascha, his immediate supervisors, for interference with
contract and violation of North Carolina’s unfair and deceptive trade
practices act. The defendants in both cases removed the cases to fed-
eral court and filed motions to dismiss the cases for failure to state a
claim. The defendants also sought to consolidate the cases in federal
court. Freeman resisted the motions and moved to remand the cases
back to state court, to amend his complaint, to exclude evidence
attached to the defendants’ motions to dismiss, and to conduct discov-
ery.
The district court denied Freeman’s motion to remand the cases to
state court because the complaints in both cases raised issues arising
under federal law, specifically the LMRA. The court determined that
Freeman’s claims against Duke Power for breach of contract and
wrongful discharge were preempted by § 301 of the LMRA and
granted the defendants’ motions to dismiss because the claims were
brought beyond the applicable statute of limitation. The district court
denied Freeman’s motion to amend his complaint to allege that he
was an at-will employee because the allegation would not have
changed the fact that the claim was preempted by the LMRA. The
district court dismissed the bad faith discharge and state constitutional
claims as failing to state claims cognizable under North Carolina law.
The district court determined that Freeman’s claim against the indi-
vidual defendants for interference with contract was also preempted
by the LMRA and subject to dismissal as untimely. It determined that
even if the unfair and deceptive trade practices claim was not pre-
empted by the LMRA, such a claim was unavailable under North Car-
olina law in the employment setting. The district court found that the
defendants’ motions to consolidate and Freeman’s motions to exclude
evidence and conduct discovery were all mooted by the dismissals.
Freeman appeals.
II.
A. Removal Jurisdiction
Freeman argues on appeal that both of his cases should have been
remanded to state court because both complaints raised only state law
FREEMAN v. DUKE POWER CO. 5
claims. Actions brought in state court are removable to federal court
if the complaint raises a federal question. See 28 U.S.C. §§ 1331,
1441(a) (2000). To determine whether a complaint raises a federal
question, we apply the "well-pleaded complaint" rule, which prevents
a defendant from removing a case to federal court unless the plain-
tiff’s complaint, without consideration of any potential defenses,
establishes that the case arises under federal law. Aetna Health Inc.
v. Davila, 124 S. Ct. 2488, 2494 (2004). A corollary to the well-
pleaded complaint rule allows an action to be removed, notwithstand-
ing the absence of a federal question in the plaintiff’s complaint, if "a
federal statute wholly displaces the state-law cause of action through
complete pre-emption." Id. at 2495 (internal marks omitted). Even
though the action alleges only state law claims, if those claims are
completely preempted by federal law, the complaint "is in reality
based on federal law." Id. (internal marks omitted).
The preemptive force of § 301 of the LMRA is unquestionably
broad. See Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation
Trust for S. Cal., 463 U.S. 1, 23-24 (1983). Section 301 totally dis-
places state causes of action related to contracts between employers
and labor organizations, as well as other claims the resolution of
which depends substantially on the interpretation of a CBA. See
Davis v. Bell Atlantic-W.V., Inc., 110 F.3d 245, 247 (4th Cir. 1997).
1. Action Against Duke Power
The Davis case is factually similar to Freeman’s case against Duke
Power, and its reasoning controls the outcome. In Davis, an employee
entered a settlement agreement with her employer and union that set-
tled a grievance brought pursuant to the CBA when the employer
attempted to terminate the employee for absenteeism. Davis, 310 F.3d
at 246. The settlement agreement reinstated the employee and pro-
vided that the employee was subject to immediate termination, with-
out recourse to the grievance procedures in the CBA, if she violated
the settlement agreement. The employee was subsequently terminated
for violating the settlement agreement, and she brought state law
claims for breach of the CBA, breach of the settlement, and wrongful
discharge. Id.
6 FREEMAN v. DUKE POWER CO.
As relevant here, this court held that the claim for breach of the set-
tlement agreement was preempted because it depended on rights con-
ferred on the employee by the CBA.1 The settlement agreement
derived from the CBA, in fact was entered as a result of a grievance
proceeding brought pursuant to the CBA, and therefore its "entire
vitality and legitimacy" drew from the CBA. Id. at 248. In the case
at bar, the Union followed the grievance procedure in the CBA and
entered into settlement negotiations with Duke Power, on Freeman’s
behalf, that resulted in the Grievance Resolution and Amendment in
lieu of arbitration as provided by the CBA. Without the CBA, the
Grievance Resolution and Amendment would not have existed. Set-
tlements of employee grievances that are entered pursuant to the
terms of a CBA are labor contracts within the meaning of § 301,
which "preempts an alleged breach of the Union-negotiated agree-
ment that settled an employee grievance." Id. at 249 (citing cases
holding same).
Freeman attempts to distinguish Davis on the basis that certain
terms used in the Davis settlement agreement were defined in the
CBA, whereas there are no terms in the Grievance Resolution or the
Amendment that need to be defined by reference to the CBA. How-
ever, the Davis court did not rely on the mutuality of terms for its
holding. Id. ("While an independent employment contract’s mere bor-
rowing of one or more terms from a [CBA] does not in itself bring
that contract within the scope of § 301 preemption, the settlement
agreement here was not an independent employment contract . . . .
The Union’s [CBA] remained in full force to govern [the employee’s]
employment relationship except insofar as it was modified by the set-
tlement agreement." (internal citations omitted)). The court construed
the settlement agreement as a rider to the CBA. Id.
Although disputes arising over independent employment contracts
unrelated to a CBA are not preempted by § 301 of the LMRA, see
Caterpillar Inc. v. Williams, 482 U.S. 386, 394-95 (1987), the Griev-
1
Contrary to Freeman’s assertions that the Davis court’s discussion of
the settlement agreement was dicta because Davis alleged breach of the
CBA (Appellant’s Br. at 21 n.1), the Davis court addressed the claims for
breach of the CBA and breach of the settlement agreement as distinct
claims.
FREEMAN v. DUKE POWER CO. 7
ance Resolution and the Amendment are not independent of the CBA.
The employees in Caterpillar had entered separate management con-
tracts and only later became subject to a CBA when they were
demoted. Their state law action was based on the management con-
tracts, not anything derivative of the CBA, and thus was not pre-
empted by the LMRA. Id. at 395 & n.9. The same cannot be said in
the instant case, as the Grievance Resolution and Amendment derive
their "entire vitality and legitimacy" from the CBA. Davis, 110 F.3d
at 248.
The district court also determined that § 301 of the LMRA pre-
empted Freeman’s wrongful discharge claim against Duke Power.
Freeman alleged in his complaint that Duke Power wrongfully dis-
charged him in violation of North Carolina public policy as reflected
in the state constitution, which protects an individual’s right to "the
enjoyment of the fruits of [his] own labor." N.C. Const. art. I, § 1.
Freeman’s wrongful discharge claim is preempted by the LMRA if it
is "inextricably intertwined with consideration of the terms of the
labor contract. If the state tort law purports to define the meaning of
the contract relationship, that law is pre-empted." Allis-Chalmers
Corp. v. Lueck, 471 U.S. 202, 213 (1985).
The Supreme Court of North Carolina has recognized a cause of
action for wrongful discharge in violation of public policy as a narrow
exception to North Carolina’s long-standing employment-at-will doc-
trine. See Coman v. Thomas Mfg. Co., 381 S.E.2d 445, 447 (N.C.
1989). However, "[t]he tort of wrongful discharge arises only in the
context of employment at will." Claggett v. Wake Forest Univ., 486
S.E.2d 443, 448 (N.C. Ct. App. 1997) (dismissing wrongful discharge
claim brought by a university professor who was covered by a con-
tract). Contract employees are limited to contract remedies. Resolu-
tion of the wrongful discharge claim would require a determination
of the type of employment relationship between Freeman and Duke
Power, regardless of whether Freeman pleads that he is a contract
employee or an at-will employee. Such an analysis necessarily would
involve construction of the CBA, the Grievance Resolution, and the
Amendment to determine what type of employment relationship
existed between Freeman and Duke Power. The wrongful discharge
claim is therefore preempted by the LMRA. Allis-Chalmers, 471 U.S.
at 213.
8 FREEMAN v. DUKE POWER CO.
Because Freeman’s claims of breach of contract and wrongful dis-
charge are preempted by § 301 of the LMRA and therefore raise a
federal question, the district court properly retained jurisdiction over
Freeman’s case against Duke Power, and no remand to state court was
in order.
2. Action Against Thaxton & Kwascha
Freeman brought state law claims of tortious interference with con-
tract and unfair and deceptive trade practices against two of his super-
visors, alleging that they intentionally induced Duke Power to
terminate his employment. The district court determined that the
interference with contract claim was completely preempted by § 301
because it required interpretation of Thaxton’s and Kwascha’s super-
visory authority as defined in the CBA, as well as a determination of
whether Freeman violated the Grievance Resolution and Amendment.
We agree.
As discussed above, a state law claim is completely preempted by
the LMRA if it relates to contracts between employers and labor orga-
nizations, or if resolution of the claim depends substantially on the
interpretation of a CBA. See Davis, 110 F.3d at 247. To state a claim
for tortious interference with contract against Thaxton and Kwascha
under North Carolina law, Freeman had to establish that (1) he had
a valid contract with Duke Power that gave Freeman contractual
rights; (2) the defendants knew of the contract; (3) the defendants
intentionally induced Duke Power not to perform the contract; (4) the
defendants acted without justification; and (5) Freeman was thereby
damaged. Embree Const. Group, Inc. v. Rafcor, Inc., 411 S.E.2d 916,
924 (N.C. 1992).
Freeman stated in his complaint that he had an employment agree-
ment with Duke Power that gave him certain legal rights and privi-
leges, that Thaxton and Kwascha intentionally induced Duke Power
to terminate the contract, and that Thaxton’s and Kwascha’s conduct
was outside of the scope of their employment (as Freeman’s supervi-
sors), in bad faith, for a wrongful purpose, with malice, and without
any legal justification. (J.A. at 231-32.) A court would need to inter-
pret the Grievance Resolution, the Amendment, and the CBA in an
effort to determine Freeman’s contractual rights, the extent of Thax-
FREEMAN v. DUKE POWER CO. 9
ton’s and Kwascha’s supervisory authority, and whether Duke Power
failed to perform its obligations to Freeman. We therefore hold that
Freeman’s claim against Thaxton and Kwascha for tortious interfer-
ence with contract was preempted by § 301 of the LMRA. See Int’l
Union, United Mine Workers of Am. v. Covenant Coal Corp., 977
F.2d 895, 899 (4th Cir. 1992) ("Clearly, the third element of this
cause of action [under Virginia law], requiring a breach or termina-
tion of the contractual relationship, necessitates interpretation of the
[CBA]."); Steinbach v. Dillon Cos., 253 F.3d 538, 540 (10th Cir.
2001) (holding that a tortious interference claim alleging that a third
party caused the employer to wrongfully terminate an employee was
preempted by § 301 where the claim required a determination of
whether the employer failed to perform the contract); Kimbro v. Pep-
sico, Inc., 215 F.3d 723, 727 (7th Cir. 2000) (holding that an employ-
ee’s state law claims for tortious interference with contract against a
supervisor and a third party were preempted by § 301 where the
claims would require interpretation of the CBA). The district court
properly exercised jurisdiction over Freeman’s case against Thaxton
and Kwascha.
B. Dismissal for Failure to State a Claim
Having determined that the district court properly exercised juris-
diction over both of Freeman’s complaints, we turn now to the district
court’s dismissal of each of his claims. Where state law claims are
preempted by the LMRA, the claim may still survive if it states a
claim under the federal statute. See Allis Chalmers Corp., 471 U.S.
at 220 ("[The] claim must either be treated as a § 301 claim, . . . or
dismissed as pre-empted by federal labor-contract law.").
1. Claims Against Duke Power
a. Breach of Contract/Wrongful Discharge
The district court dismissed Freeman’s claims against Duke Power
for breach of contract and wrongful discharge for failing to state a
§ 301 claim because both claims were brought outside of the applica-
ble statute of limitations, borrowing the six-month limitation period
contained in § 10(b) of the National Labor Relations Act (NLRA), 29
U.S.C. § 160(b) (2000). If a federal statute is silent as to the applica-
10 FREEMAN v. DUKE POWER CO.
ble statute of limitations, we generally borrow the most analogous
state limitations period. See DelCostello v. Int’l Bhd. of Teamsters,
462 U.S. 151, 158 (1983). To avoid frustrating federal policy, how-
ever, courts should borrow a limitations period from an analogous
federal statute if that statute clearly provides a closer analogy than
available state statutes. Id. at 172.
The NLRA proscribes "unfair labor practices" and provides a six-
month period within which to bring an unfair labor practices claim.
29 U.S.C. § 160(b). The six-month period takes into account "the
national interests in stable bargaining relationships and finality of pri-
vate settlements, and an employee’s interest in setting aside what he
views as an unjust settlement under the collective-bargaining system."
DelCostello, 462 U.S. at 171 (internal marks omitted).
In this case, Freeman twice settled grievances filed on his behalf
by the Union with Duke Power. The settlements provided that Duke
Power could terminate Freeman for engaging in electrical contracting,
and that Duke Power’s decision to do so "shall be final." (J.A. at 12.)
Freeman’s claims for breach of contract and wrongful discharge chal-
lenge Duke Power’s decision to terminate his employment despite his
agreement in the settlement negotiations that Duke Power’s decision
would be final. Allowing Freeman to use the three-year statute of lim-
itation provided under North Carolina law for breach of contract
claims would undermine the NLRA’s delicate balance between the
competing interests of promoting the finality of private settlements
and avoiding unjust settlements. See DelCostello, 462 U.S. at 171.
The district court appropriately borrowed the NLRA’s six-month stat-
ute of limitation and properly dismissed the breach of contract and
wrongful discharge claims as being brought outside of that period.
b. Direct Claims Under the State Constitution
Freeman asserted in the third count of his complaint that Duke
Power’s actions in limiting his ability to moonlight violated the North
Carolina constitutional provision recognizing the inalienable right of
all persons to "the enjoyment of the fruits of their own labor." N.C.
Const. art. I, § 1. North Carolina’s courts do not recognize a cause of
action based on article I, section 1 of the state constitution to remedy
private employment disputes. See Teleflex Info. Sys., Inc. v. Arnold,
FREEMAN v. DUKE POWER CO. 11
513 S.E.2d 85, 88 (N.C. Ct. App. 1999) (affirming summary judg-
ment for employer in suit brought by at-will employee claiming that
his firing violated article I, section 1 of the state constitution). Rather,
the provision limits the state’s ability to regulate an individual’s live-
lihood. Id. ("[T]he declaration of rights in [the North Carolina] State
Constitution was inserted ‘chiefly to protect the individual from the
State.’" (quoting North Carolina v. Ballance, 51 S.E.2d 731, 734
(1949))). Thus, the district court properly dismissed Freeman’s state
constitutional claim.
Likewise, Freeman’s direct cause of action under article I, section
19 of the state constitution, providing that no person shall be deprived
of his property but by the law of the land, also fails. Article I, section
19 is the North Carolina state constitution’s equivalent of the federal
Constitution’s Fourteenth Amendment due process clause. Both pro-
visions protect individuals only against governmental action. Thus,
Freeman has no cognizable action based on the state constitution
against his wholly private employer. See N.C. Nat’l Bank v. Burnette,
256 S.E.2d 388, 394 (N.C. 1979) ("This constitutional [due process]
shield does not protect citizens from the actions or activities of other
private individuals."); Weston v. Carolina Medicorp, Inc., 402 S.E.2d
653, 656-57 (N.C. Ct. App. 1991) ("‘[S]tate action’ is required to trig-
ger the protections of the ‘synonymous’ due process provisions of the
Fourteenth Amendment to the United States Constitution and Article
1, § 19 of the North Carolina Constitution."). The district court prop-
erly dismissed Freeman’s third count.
c. Bad Faith Discharge
Freeman argues that North Carolina courts are "undecided" as to
whether a bad faith discharge claim is separately cognizable in North
Carolina. The Supreme Court of North Carolina, however, unequivo-
cally stated, in disagreeing with two of the federal district court cases
relied upon by Freeman, that it "did not recognize a separate claim for
wrongful discharge in bad faith" in a prior case. Amos v. Oakdale
Knitting Co., 416 S.E.2d 166, 173 (N.C. 1992). The district court
properly dismissed Freeman’s fourth count against Duke Power.
12 FREEMAN v. DUKE POWER CO.
2. Claims Against Thaxton and Kwascha
a. Tortious Interference With Contract
Because the tortious interference claim is preempted, Freeman’s
claim must be dismissed unless it states a valid § 301 claim. Section
301 allows claims for "violations of contracts between an employer
and a labor organization." 29 U.S.C. § 185 (2000). "Applying the
most natural interpretation of this language, we [have previously held]
that a suit against a non-signatory of a contract cannot be considered
a suit for violation of the contract." Covenant Coal Corp., 977 F.2d
at 897. Bound, as both it and we are by prior controlling and unques-
tioned circuit precedent, the district court properly dismissed Free-
man’s claim against Thaxton and Kwascha for interference with
contract.
b. Unfair and Deceptive Trade Practices
To state a claim for unfair and deceptive trade practices against
Thaxton and Kwascha under North Carolina General Statutes § 75-
1.1, Freeman must establish that (1) the defendants "committed an
unfair or deceptive act or practice, (2) the action in question was in
or affecting commerce, and (3) the act proximately caused injury to
the plaintiff." Dalton v. Camp, 548 S.E.2d 704, 711 (N.C. 2001). "The
purpose of G.S. 75-1.1 is to provide a civil means to maintain ethical
standards of dealings between persons engaged in business and the
consuming public within this State[,] and [it] applies to dealings
between buyers and sellers at all levels of commerce." Sara Lee Corp.
v. Carter, 519 S.E.2d 308, 311 (N.C. 1999) (internal marks omitted)
(alterations in original). The statute generally does not apply to
employment situations, see Dalton, 548 S.E.2d at 711, though the
existence of an employment relationship will not necessarily defeat a
claim if the parties are otherwise involved in a business relationship.
See Sara Lee Corp., 519 S.E.2d at 312 (allowing an unfair trade prac-
tices claim brought by an employer against an employee where the
employee was involved in buyer-seller transactions with his
employer).
Freeman’s complaint alleges only that the individual defendants
acted to cause Duke Power to terminate Freeman’s employment con-
FREEMAN v. DUKE POWER CO. 13
tract. (J.A. at 232-34.) Although N.C.G.S. § 75-1.1(b) defines "com-
merce" broadly as "business activities, however denominated," the
Supreme Court of North Carolina has cautioned that the act "is not
intended to apply to all wrongs in a business setting," including most
employment disputes. Dalton, 548 S.E.2d at 657 (distinguishing Sara
Lee on the basis that the employee in Sara Lee owed a fiduciary duty
to his employer, and the employee was entrenched in a buyer-seller
relationship with his employer, which fell squarely within the purview
of the unfair trade practices act). Freeman’s allegation that the defen-
dants caused Duke Power to terminate him fails to meet the require-
ment that the defendants’ acts be in or affecting commerce, see
Durling v. King 554 S.E.2d 1, 4-5 (N.C. Ct. App. 2001) (affirming
summary judgment where "no evidence was presented that the subject
transactions had any impact beyond the parties’ employment relation-
ships"), and he therefore failed to state a claim under the state unfair
and deceptive trade practices act.
III.
We affirm the district court’s order denying Freeman’s motions to
remand and dismissing Freeman’s complaints against Duke Power
and against Thaxton and Kwascha. We also affirm the district court’s
denial of the various pending motions as the dismissal of all claims
makes the motions moot.
AFFIRMED