The opinion of the court was delivered by: RAYMOND J. DEARIE
Plaintiff, Michael Sciarrino, is an Italian-American. He worked at Municipal Credit Union ("MCU") for approximately twelve years before he was asked to resign in February, 1990. He subsequently sued MCU and William Porter, MCU's African-American President and Chief Executive Officer, alleging reverse discrimination in violation of Title VII and 42 U.S.C. § 1981. Defendants moved for summary judgment and attorney's fees.
Defendant MCU is a cooperative membership banking organization chartered by New York State. In 1977, the New York State Banking Department took control of MCU due to concerns about the institution's operating capabilities. The Banking Department assumed the responsibilities previously exercised by the private board of directors.
Plaintiff began working at MCU in 1978 as an assistant internal auditor. In 1981, William Porter, an African-American, joined MCU as its first President and Chief Executive Officer since the Banking Department takeover four years earlier. At that time, Norman Kohn, a Caucasian who had been employed at MCU since 1977, became Chief Financial Officer.
In 1983, Porter promoted plaintiff to the position of Manager of the Internal Audit Department. In that capacity, plaintiff reported to Porter and Kohn. In 1984, the State Banking Department returned control of MCU to an elected board of directors and responsibility for the internal audit function was transferred from management to MCU's Supervisory Committee. Thereafter, all internal auditing employees, including plaintiff, reported to the Supervisory Committee and not to management.
By order dated May 28, 1987, the State Banking Department ordered MCU to correct certain deficiencies, including deficiencies in the internal auditing function and the collections function. Affidavit of Norman Kohn, Exhibit A ("Kohn Affidavit"). To that end, the Board of Directors, Supervisory Committee, and management decided that the Internal Audit Department needed a more experienced chief auditor. The Supervisory Committee recruited Donald Barba, an Italian-American, as Chief Internal Auditor in 1988. Barba was superior to plaintiff in the hierarchy of the Internal Audit Department, but plaintiff kept his salary, benefits, and title as Manager of the Internal Audit Department.
According to the affidavits of Porter, Kohn, and Steven Presberg, who was chairman of the Supervisory Committee during the relevant time period, Barba told Presberg shortly after he began working at MCU that he was dissatisfied with plaintiff's performance and no longer wanted him in the Internal Audit Department. Barba gave plaintiff a poor performance review in the spring of 1989 and recommended that plaintiff be transferred to another department. Kohn Affidavit, Exhibit B. Presberg and Porter state in their affidavits that the Supervisory Committee was prepared to terminate plaintiff if Barba requested such action, and that Presberg relayed this information to Porter. Affidavit of William Porter, at 4 ("Porter Affidavit"); Affidavit of Steven Presberg, at 3.
Once it became clear that plaintiff would not be retained as an employee in the Internal Audit Department, the senior management, including Porter, attempted to find another place for plaintiff at MCU. In June 1989, Michealangelo DeSantis, Director of Credit Operations, who oversaw the Collections Department, suggested that plaintiff be transferred to head the Collections Department. Kohn Affidavit, at 6; Porter Affidavit, at 4. Plaintiff appeared to be qualified for the position, as he had audited the Collections Department in the past and had worked as a part-time collector. According to Mr. Kohn, plaintiff had previously expressed interest in the Collections Department. Kohn Affidavit, at 7. Although one of the technical requirements for the position is three years of experience in consumer collections, Porter thought plaintiff could handle the job in light of his prior collections experience, and he waived that requirement. Deposition of William Porter, at 43.
Porter discussed the transfer with plaintiff. Plaintiff ultimately accepted the transfer, and began work in July 1989 as Assistant Manager of the Collections Department, then the top management post in the department. Porter Affidavit, at 4-5. As Assistant Manager, plaintiff reported to DeSantis and Kohn, who had by then become Chief Operating Officer. Plaintiff kept the same salary he had had in his prior position as Manager of the Internal Audit Department, but once again reported to management, rather than to the Supervisory Committee.
In the fall of 1989, problems were detected in the Collections Department concerning Visa charge-offs. At MCU, a loan is charged-off and reported as a loss when it becomes seven months delinquent. In the State Banking Department's May 1987 order, the Banking Department had focused on deficiencies in the Collections Department and ordered MCU to improve its reporting, to ensure that charge-offs and delinquent accounts were handled properly. In September 1989, DeSantis reported to Kohn that the fourth quarter 1989 charge-off for delinquent Visa accounts was an estimated $ 108,000. Kohn used that figure to prepare his reports to federal and state regulators and to determine MCU's year-end fiscal position. Kohn Affidavit, at 10.
As a result of an investigation in December 1989, Kohn discovered that the Collections Department had underestimated the Visa charge-off by $ 600,000. Kohn found that plaintiff had not calculated his Visa charge-off estimates from the "trial balance" available from MCU's outside dataprocessor, despite the fact that the information necessary to properly calculate charge-offs had been available from that trial balance. Kohn Affidavit, at 11; Kohn Affidavit, Exhibit D. Furthermore, Kohn discovered that, contrary to instructions from his superiors, plaintiff had re-assigned three collectors who were working on delinquent accounts and directed them to work on "special projects" and Visa recoveries, i.e., collections on Visa loans already charged off. As a result, nearly $ 1 million in Visa delinquencies had not been worked from September 1989 through December 1989, resulting in a greatly increased charge-off for the last quarter of the year. Kohn Affidavit, at 11-12; Kohn Affidavit, Exhibit F, p. 2, Exhibit G, p. 1.
Kohn asked DeSantis for some explanations concerning the problems in the Collections Department. Finding the proffered explanation unsatisfactory, Kohn conducted further investigation. Kohn Affidavit, at 11-12. He ultimately determined that both DeSantis and plaintiff had acted incompetently and should no longer be employed in any capacity at MCU. Kohn had been keeping Porter apprised of the situation as it unfolded and, at a meeting with Porter in January 1990, he requested authorization to ask both DeSantis and Sciarrino to resign with severance packages. Mr. Porter authorized him to proceed. Kohn Affidavit, at 12-14; ...