January 21, 1993
                  UNITED STATES COURT OF APPEALS
                      FOR THE FIRST CIRCUIT
                                           

No. 92-1611

                        GLENN A. CUMMINGS,

                      Plaintiff, Appellant,

                                v.

            SOUTH PORTLAND HOUSING AUTHORITY, ET AL.,

                      Defendants, Appellees.

                                           

           APPEAL FROM THE UNITED STATES DISTRICT COURT

                    FOR THE DISTRICT OF MAINE

           [Hon. D. Brock Hornby, U.S. District Judge]
                                                     

                                           

                              Before

                    Torruella, Circuit Judge,
                                            

                  Brown,* Senior Circuit Judge,
                                              

                    and Stahl, Circuit Judge.
                                            

                                           

     John J. Finn for appellant.
                 
     Terry  A. Fralich, with whom Peter J. DeTroy III and Norman,
                                                                 
Hanson &amp; DeTroy, were on brief for appellees.
               

                                           

                                           

                    

*  Of the Fifth Circuit, sitting by designation.

          TORRUELLA,  Circuit  Judge.   Appellant  Glenn Cummings
                                    

brought suit  against appellee  South Portland  Housing Authority

("SPHA") for:  (1) the unconstitutional deprivation of a property

interest in  continued employment  pursuant to  42 U.S.C.    1983

("  1983"); (2) breach of contract; (3) intentional  interference

with  prospective  employment; and  (4)  negligent infliction  of

emotional distress.   The  district court adopted  a magistrate's

recommendation that appellant lacked a constitutionally protected

property  interest  in  continued employment,  and  thus  granted

summary judgment for the SPHA on the   1983 claim.   The district

court  also   dismissed  the  three  state   law  claims  because

supplemental  jurisdiction  was   inappropriate  once  the  court

dismissed the only federal  claim.  The judgment dismissed  the  

1983  claim  with  prejudice  and the  state  law  claims without

prejudice.  Because we find that appellant had a constitutionally

protected  property  interest  in his  continued  employment,  we

reverse and remand  the case  to the district  court for  further

proceedings.

                            BACKGROUND
                                      

          The SPHA  is a  municipal authority authorized  under a

state  enabling statute.  See Maine  Housing Authorities Act, Me.
                             

Rev. Stat. Ann.  tit. 30,   4701  (West 1991).  Appellant  worked

for the SPHA as a  department head in charge of maintenance.   On

May 30, 1988, when the SPHA hired appellant, it informed him that

he would have  to serve  a probationary period  during which  the

SPHA could  fire him  at any  time.   The  SPHA further  informed

appellant that  after the probationary  period he would  become a

permanent employee,  and that  the SPHA's personnel  policy would

govern his employment.

          Sometime during  appellant's first year  of employment,

he  gave the executive director  of the SPHA  an undated, written

letter of resignation, and told  him to use it if he  ever failed

to  fulfill his responsibilities at the  SPHA.  On July 13, 1990,

well after the probationary  period ended, the executive director

presented  appellant with this letter, stating that they had come

to a "parting of  ways."  Appellant then requested  a termination

hearing, and the SPHA rejected that request.

                            DISCUSSION
                                      

I.  Section 1983 claim

          The central issue  on appeal is whether appellant had a

constitutionally protected  property  interest in  his  continued

employment.    A public  employee has  such  an interest  when he

reasonably expects that his employment will continue.  Perkins v.
                                                              

Board of  Directors, 686 F.2d  49, 51  (1st Cir. 1982).   An  "at
                   

will"  employment contract creates  no reasonable  expectation of

continued employment, while an employment agreement that  permits

termination only "for cause" does create that expectation.  Id.
                                                              

          Whether an employment contract permits dismissal solely

"for cause" is a  matter of state law.   Id. at 52.   In general,
                                           

under Maine law, "a contract of employment for an indefinite time

is terminable  at the  will of  either party."   Libby v.  Calais
                                                                 

Regional  Hospital,  554 A.2d  1181, 1182  (Me. 1989).   However,
                  

parties  may restrict  the  employer's ability  to terminate  the

                               -3-

employment contract  to occasions when "cause"  exists by clearly

and expressly stating that intention.  Id.  That intention can be
                                         

expressed  in an employment  manual.  Id. at  1183.  However, the
                                        

manual must  use  clear  and express  language  to  restrict  the

employer's  ability to discharge employees.   Id.   Language in a
                                                

manual  merely implying a "for cause" limitation will not bind an

employer.  Id.  
             

          There are two relevant sections in the employee manual.

Section 1(a) reads:

            Merit   System.      The  employment   of
                          
            personnel and all actions effecting (sic)
            employees shall be based solely on merit,
            ability (performance), and justice.

Section 7(b) reads:

            Dismissals.    An  employee who  provides
                      
            unsatisfactory service or  who is  guilty
            of   substantial   (sic)   violation   of
            regulations shall be subject to dismissal
            without prior notice.  In such cases, the
            employee   shall  have  the  right  to  a
            hearing  before  the Executive  Director.
            The  employee may appeal  the decision of
            the  Executive  Director to  the existing
            Personnel Committee.

          Appellee argues that the SPHA manual does not provide a

clear  and specific  restriction  on termination  as required  by

Libby.   Appellee apparently takes  the position that  the manual
     

would have to specifically use the words  "for cause" in order to

limit an  employer's ability to terminate  employees to occasions

where cause exists.   However,  Maine law does  not support  that

position.  

          In Durepos v. Town of Van Buren, 516 A.2d 565, 566 (Me.
                                         

                               -4-

1986),  the Maine  Supreme Court stated  that "[t]he  phrase 'for

cause' . . .  refers to conduct affecting the ability and fitness

of  the employee to  perform his  duties."   Thus, language  in a

manual that permits dismissal based only on an employee's ability

to do his job constitutes a "for cause" limitation.  

          Similarly,   in  Lovejoy  v.  Grant  and  Maine  School
                                                                 

Administrative District No. 37, 434 A.2d 45, 50 (1981), the Maine
                              

Supreme  Court found that Maine law provides that "certain public

school teachers may  be discharged  only for cause."   The  court

based its  conclusion on a statute entitling  tenured teachers to

substantive and procedural protections from non-renewal  of their

contracts  and a  statute  permitting the  dismissal of  unfit or

unprofitable teachers.  Id.
                          

          Against  the  backdrop  of these  precedents,  the SPHA

employment  manual  clearly  restricts   the  SPHA's  ability  to

terminate  employees.   It specifically  states that  all actions
                                                         

affecting  employees   will  be  based  on   merit  and  ability.

Accordingly, the SPHA manual created a constitutionally protected

property interest in appellant's  continued employment.  Thus, we

reverse  the   district  court's   judgment  and  remand   for  a

determination of  whether appellant  received due process  in his

dismissal.

II.  State Law Claims

          Because appellant has stated a federal cause of action,

we reverse the dismissal of the state law  claims and remand them

to  the   district  court  to   determine  whether   supplemental

                               -5-

jurisdiction is appropriate.

          Reversed and remanded.
                               

                               -6-
