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California Labor Law Compliance:
Termination

Below you will find many of the most common credible sources on the issue of termination. The contents on this site is provided for information purposes only and does not constitute legal advice and is not intended to form an attorney client relationship. Please contact us for a labor attorney or immediately contact your own for legal advice.

Final Employee Paystubs
Common-Interest Privilege
Constructive Discharge
Start of the 3 Year Limit
3 Year Reporting Limit
Personal Injury Cap
Crowded Mall Disorder
Reference Immunity
Penalty Amounts
Final Employee Paystubs

Final Paystubs
CANALES v. WELLS FARGO BANK


SOURCE: 

KEY WORDS:
Termination, Final Paycheck, Dispute 

AGENCY:

THE COURT OF APPEAL OF THE STATE OF CALIFORNIA, SECOND APPELLATE DISTRICT, DIVISION FIVE


Document Citation:

B276127


Action: 

Decided: May 30, 2018


FABIO CANALES et al.,

Plaintiffsand Appellants,


v.


WELLS FARGO BANK,N.A.,

Defendant and Respondent

B276127


(Los Angeles County Super. 

Ct. No.BC502826)

Law Offices of Sherry Jung and Larry W. Lee, Los Angeles; Hyun Legal, Dennis S. Hyun, Los Angeles for Plaintiffs and Appellants. Kading Briggs, Glenn L. Briggs, Theresa A. Kading, Irvine and Nisha Verma, for Defendant and Respondent.


I. INTRODUCTION
Plaintiffs Fabio Canales and Andy Cortes, on behalf of themselves and class members, appeal from a summary judgment. Plaintiffs were former or current non-exempt employees of defendant Wells Fargo Bank, N.A. Plaintiffs alleged that their wage statements failed to include information required under Labor Code 1 section 226, subdivision (a)(9). Specifically, plaintiffs argued that a line on the wage statement, “OverTimePay-Override,” should, but did not, include hourly rates and hours worked. Plaintiffs also alleged defendant violated section 226 by failing to provide a wage statement concurrently with the terminated employees' final wages paid in-store. Plaintiffs moved for summary adjudication on the section 226 cause of action.

Defendant in its summary judgment motion argued that OverTimePay-Override reflected additional overtime pay that was owed for work performed on a previous pay period, but could not be calculated because it was based on a nondiscretionary bonus not yet earned. Under subdivision (a)(9), defendant contended OverTimePay-Override did not have corresponding hourly rates or hours worked for the current pay period. As to plaintiffs' second theory, defendant asserted it complied with the statute by furnishing the wage statement by mail. The trial court found in favor of defendant and against plaintiffs.

Plaintiffs contend the trial court erred by denying their summary adjudication motion and by granting defendant's motion. We affirm.

II. BACKGROUND
    A. Factual Background 
Plaintiffs are current or former non-exempt California employees of defendant. Defendant would in some instances issue a paycheck and wage statement that contained nondiscretionary incentive compensation 3 (the bonus) to employees who worked during the period covered by the incentive compensation. These bonus periods would be monthly, quarterly, or annually. For employees who worked overtime during those bonus periods, the wage statements contained a line item called “OverTimePay-Override,” formerly called “OT-Flat.” OverTimePay-Override listed incremental additional overtime paid to the employee for overtime hours worked during the bonus period under the “Earnings” column.4 For the OverTimePay-Override line on the wage statements, no hourly rates or hours worked was identified.

In certain situations, defendant issued final wages to employees at the time of their termination through “in-store payments” made by cashier's check. Defendant's payroll department would then create the wage statement either the same day or the next day and mail it to the terminated employee by United States mail.5 During their employment, employees had online access to their itemized wage statements. Employees lost such online access the day after termination.

    B. First Amended Complaint
Plaintiffs filed their first amended complaint, the operative pleading, on June 20, 2013. Plaintiffs sued on behalf of themselves and a class composed of (1) current or former non-exempt California employees of defendant who received OverTimePay-Override from March 13, 2012 to present and (2) all former California employees of defendant who were terminated from March 13, 2012 to present and were paid their final wages through the “in-store payment” procedure. In their first cause of action, plaintiffs alleged defendant violated section 226 6 by failing to identify the hourly rates and the hours worked that corresponded to OverTimePay-Override. Plaintiffs also alleged defendant violated section 226 by failing to provide terminated employees with wage statements immediately upon termination. Plaintiffs alleged a second cause of action pursuant to the Private Attorneys General Act (§ 2698 et seq.) (PAGA) for violation of section 226.7

    C. Summary Adjudication/Judgment Motions
On December 15, 2015, plaintiffs moved for summary adjudication.8 Much like the allegations in their amended complaint, plaintiffs argued that defendant violated section 226, subdivision (a)(9) by failing to specify the hourly rates and number of hours worked for the OverTimePay-Override adjustment on the itemized wage statements. Plaintiffs also argued defendant violated section 226 by failing to provide to terminated employees an itemized wage statement concurrently with their final wages that were paid in-store by cashier's check.

Defendant filed its own summary judgment motion on December 15, 2015. Defendant asserted it did not violate section 226, subdivision (a)(9) because OverTimePay-Override represented an increase in overtime pay, based on a periodic bonus, for overtime hours worked in previous pay periods. Defendant argued there were no “applicable hourly rates in effect during the pay period” that corresponded to OverTimePay-Override and thus defendant did not have to provide such information on the wage statement. As to plaintiffs' second theory, defendant contended it furnished the itemized statement as required under section 226 by mailing it to the terminated employee's last known address either the same day or the next day. Finally, defendant argued plaintiffs' PAGA cause of action failed because it was wholly derivative of a violation based on section 226 and because plaintiffs failed to exhaust administrative remedies. Plaintiffs do not dispute their PAGA cause of action is derivative of the section 226 claims.

On May 26, 2016, the trial court issued its order granting defendant's motion and denying that of plaintiffs. As to defendant's first argument, the trial court agreed that section 226, subdivision (a)(9) did not apply to OverTimePay-Override because there was no applicable hourly rate for the pay period reflected in the wage statement. For defendant's second argument, the trial court found that defendant complied with the “furnish” requirement under section 226 by mailing the wage statement.

III. DISCUSSION
    A. Standard of Review
“[F]rom commencement to conclusion, the party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law. That is because of the general principle that a party who seeks a court's action in his favor bears the burden of persuasion thereon. [Citation.] There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof. ․ [¶] [T]he party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact. ․ A prima facie showing is one that is sufficient to support the position of the party in question. [Fns. omitted.]” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850-851, 107 Cal.Rptr.2d 841, 24 P.3d 493.)

We review an order granting summary judgment de novo. (Coral Construction, Inc. v. City and County of San Francisco (2010) 50 Cal.4th 315, 336, 113 Cal.Rptr.3d 279, 235 P.3d 947.) The trial court's stated reasons for granting summary judgment are not binding because we review its ruling not its rationale. (Ibid.) In addition, a summary judgment motion is directed to the issues framed by the pleadings. (Turner v. Anheuser-Busch, Inc. (1994) 7 Cal.4th 1238, 1252, 32 Cal.Rptr.2d 223, 876 P.2d 1022.) These are the only issues a motion for summary judgment must address. (Conroy v. Regents of University of California (2009) 45 Cal.4th 1244, 1250, 91 Cal.Rptr.3d 532, 203 P.3d 1127.)

This appeal solely involves statutory interpretation. “The proper interpretation of a statute, and its application to undisputed facts, presents a question of law that is ․ subject to de novo review.” (Morgan v. United Retail Inc. (2010) 186 Cal.App.4th 1136, 1142, 113 Cal.Rptr.3d 10 (Morgan).) “ ‘As in any case involving statutory interpretation, our fundamental task here is to determine the Legislature's intent so as to effectuate the law's purpose.’ [Citation.] The well-established rules for performing this task require us to begin by examining the statutory language, giving it a plain and commonsense meaning. [Citation.] We do not, however, consider the statutory language in isolation; rather, we look to the statute's entire substance in order to determine its scope and purposes. [Citation.] That is, we construe the words in question in context, keeping in mind the statute's nature and obvious purposes. [Citation.] We must harmonize the statute's various parts by considering it in the context of the statutory framework as a whole. [Citation.] If the statutory language is unambiguous, then its plain meaning controls. If, however, the language supports more than one reasonable construction, then we may look to extrinsic aids, including the ostensible objects to be achieved and the legislative history.” (Los Angeles County Metropolitan Transportation Authority v. Alameda Produce Market, LLC (2011) 52 Cal.4th 1100, 1106-1107, 133 Cal.Rptr.3d 738, 264 P.3d 579; Morgan, supra, 186 Cal.App.4th at pp. 1142-1143, 113 Cal.Rptr.3d 10.)

    B.-C.***
We first discuss the nature of nondiscretionary bonuses and how they relate to overtime pay under the Labor Code. Pursuant to section 510, subdivision (a), an employer must pay one and a half times an employee's “regular rate of pay” if he or she works more than 40 hours per week or more than 8 hours per day. Nondiscretionary bonuses are considered part of the “regular rate of pay.” (Marin v. Costco Wholesale Corp. (2008) 169 Cal.App.4th 804, 807, 87 Cal.Rptr.3d 161 (Marin); see 29 C.F.R. § 778.209 (2012) [federal method of explaining regular rate of pay calculation for bonuses].)

In order to calculate overtime pay for an employee paid at an hourly rate, an employer must allocate the bonus over the period in which it was earned. (Marin, supra, 169 Cal.App.4th at p. 807, 87 Cal.Rptr.3d 161; Chin et al., Cal. Practice Guide: Employment Litigation (The Rutter Group 2017) ¶ 11:906 [“A bonus or prize paid in cash is allocated over the period during which it was earned to determine the increase in the average hourly rate for each week of the period”].) To explain this using an example, take a hypothetical employee wage statement for the period of January 7 to January 20, 2018.9 This hypothetical wage statement would include an hourly regular rate, the number of regular hours worked during the pay period of January 7 to January 20, the hourly overtime rate, and the number of overtime hours worked during the pay period of January 7 to January 20. The hypothetical employee earned a $360 monthly bonus for work performed during the previous month of December, from December 1 to December 31, 2017. This bonus would be reflected on the January 7 to January 20, 2018 wage statement.10 To calculate the OverTimePay-Override line, the hours worked in December 2017 would be used because that is the time period in which the bonus was earned. In this hypothetical, the employee had worked 160 regular hours and 20 overtime hours in December 2017, for a total of 180 hours. First, divide $360 by 180, which results in $2. This number represents the increase to the regular hourly rate. Multiply $2 by 0.5 and the result, $1, represents the increase to the overtime hourly rate. Then, take $1 and multiply it by 20, the overtime hours worked during December 2017, and the result, $20, is the overtime pay adjustment, which would be identified as the OverTimePay-Override line on the wage statement. This allocation, at least for production or piecework bonuses, is calculated by using the method described above in footnote 4.

    C. Section 226, Subdivision (a)(9) Does Not Require Hourly Rate and Hours Worked to be Identified For OverTimePay-Override
The Court of Appeal in Morgan discussed the purpose of section 226, subdivision (a)(9): “The 2000 amendment [which added subdivision (a)(9) ] ․ expanded the scope of information to be included by employers in the itemized wage statements furnished to employees. Following the amendment, an employer that previously listed the total hours worked by an employee in a single category [as required under subdivision (a)(2) ] was now required to list both the total regular hours worked and the total overtime hours worked, along with the corresponding hourly rates. It appears that by adding this more specific requirement, the statute made it easier for employees to determine whether they were being paid for all hours worked at the appropriate rates of pay.” (Morgan, supra, 186 Cal.App.4th at p. 1148, 113 Cal.Rptr.3d 10.)

Subdivision (a)(6) requires that the wage statement show “the inclusive dates of the period for which the employee is paid.” Applying the standards of statutory construction, in the context of section 226 as a whole, the “pay period” discussed in subdivision (a)(9), which requires that the wage statement include “all applicable hourly rates in effect during the pay period,” refers to the period described in subdivision (a)(6). In our hypothetical wage statement above, we interpret the pay period to refer to the two-week period covered by the wage statement, January 7 to January 20, 2018.

Defendant argues it was not required to provide on the wage statement hourly rates or hours worked related to OverTimePay-Override. Defendant has met its initial burden of production. (Code Civ. Proc., § 437c, subd. (p)(2).) Based on the above statutory construction and the method by which OverTimePay-Override was calculated, there were no “applicable hourly rates in effect during the pay period” that corresponded to OverTimePay-Override. Accordingly, there was also no “corresponding number of hours worked at each hourly rate by the employee” for the pay period that applied to OverTimePay-Override. As discussed above, OverTimePay-Override represented additional wages that were earned as overtime pay based on nondiscretionary bonuses being spread over the hours worked during the bonus period. Moreover, based on how OverTimePay-Override was calculated, the overtime hours were worked in previous pay periods for which employees had already received their standard overtime pay. The itemized wage statement issued by an employer need only provide the applicable hourly rates and the corresponding number of hours worked “in effect during the pay period.” In other words, the employer need only identify on the wage statement the hourly rate in effect during the pay period for which the employee was currently being paid, and the corresponding hours worked.

Plaintiffs argue to the contrary, but have failed to meet their burden. (Code Civ. Proc., § 437c, subd. (p)(2).) “[S]ection 226, subdivision (a) is highly detailed, containing nine separate categories that must be included on wage statements ․ When a statute omits a particular category from a more generalized list, a court can reasonably infer a legislative intent not to include that category within the statute's mandate.” (Soto v. Motel 6 Operating, L.P. (2016) 4 Cal.App.5th 385, 391, 208 Cal.Rptr.3d 618.) The purpose of spreading the bonus over the hours worked during the bonus period is to calculate the “regular rate of pay” for overtime under section 510. Defendant's wage statements included the regular rate of pay, the overtime rate of pay, and the hours worked at each rate. Each of these was “in effect during the pay period,” January 7 to January 20 in our example. The OverTimePay-Override was an adjustment to the overtime payment due to an employee, based on bonuses earned by the employee for work performed during prior pay periods. Accordingly, there were no applicable hourly rates in effect during the pay period which defendant was required to include in the wage statement.

Plaintiffs contend a federal district court case, Ontiveros v. Safelite Fulfillment, Inc. (C.D.Cal. 2017) 231 F.Supp.3d 531 (Ontiveros) is directly on-point and supports their position. In Ontiveros, the district court found that the employer's wage statements were deficient for failing to report overtime wages associated with an installation bonus. (Id. at pp. 540-541.) The district court reasoned: “It is undisputed that Plaintiff earned additional overtime wages if he worked overtime during the same period that an installation bonus was earned, as this bonus would lead to an increase in his regular rate under 29 C.F.R. § 778.109․ It is also undisputed that when Plaintiff earned installation bonuses, his wage statements reflected both the underlying bonus earned and the additional overtime wages owed as a single line item. ․ Finally, it is undisputed that the wage statement does not have information from which Plaintiff could calculate the additional overtime owed as a result of participation in the installation bonus program. ․ The Court concludes that the ‘regular rate’ is an ‘applicable hourly rate.’ As such, the law requires that the regular rate appear on the face of the wage statement or else be ascertainable from the information included therein. Because it was not possible to promptly and easily determine the regular rate from the wage statements when an employee was enrolled in the installation bonus program, the statements were deficient. [Fn. omitted.]” (Ibid.)

Ontiveros is distinguishable. Ontiveros involved a piece-rate compensation, paid weekly. (231 F.Supp.3d at p. 535.) Additionally, the bonus earned and additional overtime wages were reflected on the wage statement on one line, rather than being separated. (Id. at p. 540.) Finally, the bonus was based on work performed during the pay period reflected in the wage statement. (See id. at p. 534.)

Plaintiffs also cite a May 17, 2002 opinion letter from the Division of Labor Standards Enforcement (DLSE). That letter concerned a unique situation in which an employer continually listed 86.67 hours as the hours worked by its employees during each pay period, regardless of whether it was true. The DLSE was concerned with an employer's failure to list all hours worked during the pay period, including overtime. To the extent the DLSE determined an employer must comply with section 226 when making additional overtime payments for work performed in prior pay periods, we conclude the DLSE opinion letter is not applicable. Accordingly, we find defendant should prevail as a matter of law on this theory.

    D. No Violation for not Providing an Itemized Statement at Time of Termination
Defendant argues it is in compliance with section 226, subdivision (a) because it “furnished” the wage statement to the discharged employee by United States mail. As noted, section 226, subdivision (a) provided, “[e]very employer shall, semimonthly or at the time of each payment of wages, furnish each of his or her employees, either as a detachable part of the check, draft, or voucher paying the employee's wages, or separately when wages are paid by personal check or cash, an accurate itemized statement in writing ․” It is undisputed defendant provided some discharged employees with their last wages in-store by cashier's check, in compliance with the Labor Code. (See §§ 201, subd. (a) [“[i]f an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately”], 208 [“[e]very employee who is discharged shall be paid at the place of discharge”].) “Furnish” means to “provide with what is needed,” or to “supply” or “give.” (Merriam-Webster's Collegiate Dict. (10th ed. 1993) p. 474, col. 1.) Section 226 provides that an employer must furnish the wage statement as either “a detachable part of the check, draft, or voucher paying the employee's wages,” or separately when the wages are paid by personal check or cash. Other than that one provision, section 226 describes no other specific means by which an employer is to furnish the itemized statement to an employee. Thus, mailing the wage statement is a viable means to “furnish.” Defendant could also furnish the wage statement separately because paying discharged employees by cashier's check was the equivalent of paying them by cash.11 However, the Legislature also provided for when an employer was to furnish the wage statement to the employee: “semimonthly or at the time of each payment of wages.”

We first find that for purposes of the Labor Code, “at the time of each payment of wages” for discharged employees means “immediately.” As noted, a discharged employee's unpaid earned wages are due and payable “immediately.” (§ 201, subd. (a).) When construing section 226 in relation to the Labor Code, the most logical construction of “at the time of each payment of wages” in section 226 for discharged employees is whenever the discharged employee receives his or her unpaid earned wages, which is “immediately.” Because defendant in some instances did not provide wage statements immediately to discharged employees, but rather mailed the statement to the employee's last known address the same day or the next day, defendant did not furnish the wage statement to these discharged employees “at the time of each payment of wages.”

However, by the plain meaning of the statute, defendant also had the option of furnishing the wage statement semimonthly. (§ 226, subd. (a).) Additionally, nothing in section 226 suggests that an employer cannot furnish the wage statement prior to the semimonthly date. For example, suppose an employer furnishes wage statements on the first and the fifteenth of each month. The employer discharges an employee on the second of the month. Per the statute's plain language, if an employer pays the final wages by personal check or cash, it has the option of furnishing the discharged employee with the wage statement on the fifteenth. We find it illogical to conclude an employer violates section 226 by furnishing a wage statement before the semimonthly date has been reached. If the employer furnishes the wage statement to the discharged employee on the fifth of the month, the employer has complied with the requirement that it furnish the wage statement to the employee “semimonthly” because the employee would have ostensibly been furnished with the wage statement by the semimonthly date.

For purposes of section 226, if an employer furnishes an employee's wage statement before or by the semimonthly deadline, the employer is in compliance. Thus, we interpret “semimonthly or at the time of each payment of wages” as representing the outermost deadlines by which an employer is required to furnish the wage statement. Since defendant mailed the wage statement to certain discharged employees paid in-store by the same day as or the next day after termination, defendant was in compliance with section 226 because the employee was “furnished” with the wage statement semimonthly. Defendant has met its initial burden of production. (Code Civ. Proc., § 437c, subd. (p)(2).)

Plaintiffs contend the wage statement must be furnished immediately for a discharged employee. Plaintiffs cite the DLSE Policies and Interpretations Manual (DLSE Manual), section 14.1.1, which provides, “[a] California employer must furnish a statement showing the following information to each employee at the time of payment of wages (or at least semimonthly, whichever occurs first),” and section 14.1.2, which provides, “[s]ection 226 ․ sets out the employer's responsibilities in connection with the wage statement which must accompany the check or cash payment to the employee.”

Plaintiffs have not met their burden. (Code Civ. Proc., § 437c, subd. (p)(2).) There is no evidence in the record that the DLSE adopted this interpretation in accordance with the Administrative Procedure Act (Gov. Code, § 11340 et seq.). Thus, it is the equivalent of a void underground regulation. (Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 576-577, 59 Cal.Rptr.2d 186, 927 P.2d 296.) As our Supreme Court held, “when an agency like the DLSE sets forth an interpretive policy in a void underground regulation, the deference that the agency's interpretation would normally enjoy is absent, but in its place the agency has its power to persuade.” (Alvarado, supra, 4 Cal.5th 542, 559, 229 Cal.Rptr.3d 347, 411 P.3d 528.)

The DLSE's interpretation is not persuasive. The term “whichever occurs first” is not in section 226. The plain meaning of the statute indicates the Legislature specifically intended a choice for employers as to when to furnish the wage statement. There is also no requirement in section 226 that the wage statement “must accompany” the personal check or cash payment to the employee. As noted, the wage statement must be a detachable part of the check, draft, or voucher, unless payment is by personal check or cash; in such instance the wage statement may be furnished separately. (§ 226, subd. (a).) Accordingly, we decline to follow the DLSE's interpretation.

Plaintiffs cite several cases that purportedly determined that section 226, subdivision (a) requires employers to furnish a wage statement to each employee “at the time wages are paid.” (See Zavala v. Scott Brothers Dairy, Inc. (2006) 143 Cal.App.4th 585, 591, 49 Cal.Rptr.3d 503 (Zavala); Reinhardt v. Gemini Motor Transport (E.D.Cal. 2012) 879 F.Supp.2d 1138, 1141 (Reinhardt); In re Bimbo Bakeries USA FLSA Actions (N.D.Cal. Oct. 24, 2008, No. C 05-00829 JW) 2008 WL 10850153, at *7, 2008 U.S. Dist. Lexis 125068 (Bimbo Bakeries).) Such statements were dicta as the cases concerned issues unrelated to the one here. (Zavala, supra, 143 Cal.App.4th at pp. 592-593, 49 Cal.Rptr.3d 503 [whether collective bargaining agreement required arbitration of Labor Code claims]; Reinhardt, supra, 879 F.Supp.2d at pp. 1141-1142 [whether plaintiffs sufficiently alleged Labor Code violations were “ ‘knowing and intentional’ ” for recovery under § 226, subd. (e) ]; Bimbo Bakeries, supra, 2008 WL 10850153, at *7, 2008 U.S. Dist. Lexis 125068 [whether defendant's violation was “knowing and intentional” for summary judgment purposes].) They are thus unpersuasive.

Defendant should prevail on this theory. Because there are no triable issues of material fact and defendant is entitled to judgment as a matter of law, summary judgment was properly granted in its favor.

IV. DISPOSITION
    The judgment is affirmed. Defendant Wells Fargo Bank, N.A. is entitled to recover its costs on appeal from plaintiffs Fabio Canales and Andy Cortes.

FOOTNOTES
1.   Further statutory references are to the Labor Code unless otherwise indicated.
2.   All facts are considered undisputed for purposes of summary judgment.
3.   Teresa Swanson, defendant's person most knowledgeable, stated that a nondiscretionary bonus was “given to a team member, based on some sort of preset work definition, goal, something that they have to meet. And then they earn that bonus.” It appears this bonus was a production or piecework bonus.
4.   To calculate the amount to be entered on the OverTimePay-Override line: (1) take the bonus earned during the bonus period, whether it be by year, quarter, or month; (2) divide the bonus by the total number of hours worked during the bonus period; (3) multiply the resulting number by 0.5; (4) multiply the resulting number by the total number of overtime hours worked during the bonus period.Our Supreme Court in a recent decision concerning flat sum bonuses under California law decided that the proper method for calculating the rate of overtime pay when an employee receives both an hourly wage and a flat sum bonus is to divide the bonus by the number of nonovertime hours actually worked during the bonus period. (Alvarado v. Dart Container Corp. of California (2018) 4 Cal.5th 542, 562, 229 Cal.Rptr.3d 347, 411 P.3d 528 (Alvarado).) The Supreme Court specifically excluded production or piecework bonuses or a commission from its holding. (Id. at p. 561, fn. 6, 229 Cal.Rptr.3d 347, 411 P.3d 528.)
5.   Plaintiffs asserted in their opening brief, without citation to the record, that they never received their wage statements. We will disregard such assertions as meritless. (Susag v. City of Lake Forest (2002) 94 Cal.App.4th 1401, 1416, 115 Cal.Rptr.2d 269.)
6.   At the time of the alleged offenses, section 226, subdivision (a)(9) provided in pertinent part: “(a) Every employer shall, semimonthly or at the time of each payment of wages, furnish each of his or her employees, either as a detachable part of the check, draft, or voucher paying the employee's wages, or separately when wages are paid by personal check or cash, an accurate itemized statement in writing showing ․ (9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee ․” (Stats. 2012, ch. 844, § 1.7.) Subdivision (a)(9) was added by the Legislature in 2000. (Stats. 2000, ch. 876, § 6.)Section 226, subdivision (a) was amended by the Legislature in 2016 to read in pertinent part: “An employer, semimonthly or at the time of each payment of wages, shall furnish to his or her employee, either as a detachable part of the check, draft, or voucher paying the employee's wages, or separately if wages are paid by personal check or cash, an accurate itemized statement in writing ․” (Stats. 2016, ch. 77, § 1, eff. Jan. 1, 2017.) Subdivision (a)(2) was also amended, and subdivision (j) was added. (Ibid.) The 2016 amendment does not substantively affect our opinion.
7.   A third plaintiff, Luciano Gonzales, was initially part of this action. However, Gonzales was not named as a class representative in plaintiffs' motion for class certification and is not an appellant. The class was certified on March 20, 2015.
8.   Though plaintiffs categorized their motion as one for summary judgment or in the alternative, summary adjudication, plaintiffs sought only summary adjudication as to their first cause of action for violation of section 226.
9.   We have provided these dates, but defendant used the hours and bonus figures in their respondent's brief as an illustration to calculate OverTimePay-Override. Plaintiffs have not disputed the accuracy of defendant's method.
10.   Section 204, subdivision (b)(1) provides, “all wages earned for labor in excess of the normal work period shall be paid no later than the payday for the next regular payroll period.” Plaintiffs contend that pursuant to Peabody v. Time Warner Cable, Inc. (2014) 59 Cal.4th 662, 669, 174 Cal.Rptr.3d 287, 328 P.3d 1028, defendant was prevented from paying OverTimePay-Override for wages earned in prior pay periods. Peabody v. Time Warner Cable, Inc., is inapposite. In that case, our Supreme Court held an employer could not attribute wages paid in one period to a prior pay period in order to meet an exemption for minimum wages. (Ibid.) It has no application to the OverTimePay-Override line at issue here.
11.   As argued by defendant, a cashier's check was the equivalent of paying by cash. (See Gray1 CPB, LLC v. SCC Acquisitions, Inc. (2015) 233 Cal.App.4th 882, 893-894, 896, 182 Cal.Rptr.3d 654 [citing U. Com. Code, § 3310, cashier's check taken for obligation has same effect as cash].) Plaintiffs argue for the first time in their reply brief that a cashier's check is not the equivalent of a personal check or cash for purposes of section 226. This issue was not raised in the opening brief nor before the trial court and is therefore waived and forfeited. (Tellez v. Rich Voss Trucking, Inc. (2015) 240 Cal.App.4th 1052, 1066, 193 Cal.Rptr.3d 403; SCI California Funeral Services, Inc. v. Five Bridges Foundation (2012) 203 Cal.App.4th 549, 573, fn. 18, 137 Cal.Rptr.3d 693; Greenwich S.F., LLC v. Wong (2010) 190 Cal.App.4th 739, 767, 118 Cal.Rptr.3d 531.)

KIM, J.** FN** Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

We concur: KRIEGLER, Acting P.J. BAKER, J.
Common-Interest Privilege

Common-Interest Privilege
Noel v. River Hills Wilsons, Inc.


SOURCE: 

KEY WORDS:
Termination, Common-Interest Privilege 

AGENCY:

CA Court of Appeal, Fourth District, Division One.


Document Citation:

D040367


CERTIFIED FOR PUBLICATION:


Brandon J. NOEL, 
Plaintiff and Appellant,


v.


RIVER HILLS WILSONS, INC., et al., 
Defendants and Respondents.
7 Cal.Rptr.3d 216 (2003)


113 Cal.App.4th 1363
December 5, 2003.

*218 Law Office of David A. Miller and David A. Miller, San Diego, for Plaintiff and Appellant.
Littler Mendelson and Michelle S. Park, San Diego, for Defendants and Respondents.
*217 McCONNELL, P.J.

In this defamation action, plaintiff Brandon J. Noel appeals a summary judgment in favor of defendants River Hills Wilsons, Inc. (Wilsons) and its employee Shelly Santillan. Noel contends the conditional common-interest privilege of Civil Code[1] section 47, subdivision (c), amended in 1994 to be expressly made applicable to defamatory statements made without malice by a current or former employer to a prospective employer, did not arise because in making the statements, Santillan acted with malice. Alternatively, Noel contends the privilege did not arise because the statements were not "based on credible evidence," as that phrase is used in the amended statute.

We conclude the defendants proved the defamatory statements were made on a privileged occasion, and Noel presented no evidence from which a reasonable jury could infer malice. Further, as a matter of apparent first impression, we hold that in including the "based on credible evidence" language in the 1994 amendment to section 47, subdivision (c), the Legislature did not intend to make the common-interest privilege inapplicable in the employment reference context on a showing of the defendant's mere negligence. The trial court ruled correctly, and, accordingly, we affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

In March 2000 Noel filled out a background questionnaire for a position with GTE, for whom he had recently begun working on a contingent basis. The questionnaire required full disclosure of any criminal convictions. In response, Noel wrote that in 1994 he was convicted of a felony he described as "aiding and abeting [sic]/not fully involved," and he received "parole/probation to youth authority."

GTE retained ChoicePoint to conduct a background investigation of Noel. ChoicePoint contacted Noel's former employers, including Wilsons, where he worked for approximately two months in 1999. Santillan, a Wilsons manager, advised ChoicePoint that Noel left its employ because of "loss prevention issues," and his "rehire status" was "unfavorable." It is undisputed that Noel actually had no "loss prevention issues" with Wilsons, and Santillan mistakenly gave this information to ChoicePoint.

*219 ChoicePoint included Santillan's information in an April 13, 2000 report to GTE. ChoicePoint also provided GTE with an April 25 addendum report regarding its criminal records search on Noel. The report revealed that in February 1995 Noel was convicted of carjacking, three counts of attempted robbery, two counts of exhibiting a weapon other than a firearm, two counts of residential burglary and four counts of robbery.[2] The addendum stated Noel was sentenced to the California Youth Authority (CYA), and was released on parole in March 1999.[3] After receiving the addendum report, GTE notified Noel in writing that his employment was terminated.[4] GTE provided Noel with copies of ChoicePoint's reports.

Noel sued Wilsons and Santillan for defamation and numerous other counts, based on Santillan's comments to ChoicePoint.[5] Noel alleged that Santillan's comments caused the loss of his position with GTE and emotional distress. He sought compensatory and punitive damages.

The defendants moved for summary judgment, arguing Santillan's comments to ChoicePoint were privileged under the conditional common-interest privilege of section 47, subdivision (c), because she was responding to an inquiry by a potential employer and did not act with malice. In support of the motion, the defendants relied on Santillan's deposition testimony that about 30 minutes before ChoicePoint telephoned her, she received a telephone call from the manager of another Wilsons store, informing her she would be receiving an employment reference check for another former employee, an A. T., who Wilsons fired because of "loss prevention issues." Santillan explained that because she was waiting for that call, she mistakenly believed ChoicePoint was requesting employment information on A.T. instead of Noel.

The defendants also relied on Noel's deposition testimony that he did not have a bad relationship with anyone at Wilsons, and when he contacted Santillan after receiving a copy of ChoicePoint's April 21, 2000 report, she apologized for mistakenly giving out inaccurate information about him. Noel believed Santillan was sincere. He also testified she immediately offered him a job at Wilsons, which he accepted, but then later rejected. Santillan testified she offered Noel a job "[b]ecause I wanted to do anything I could to help him."

Additionally, the defendants argued that even if the common-interest privilege were inapplicable, the erroneous information Santillan gave ChoicePoint caused him no damage. The defendants relied on the deposition testimony of Patricia Eller, the GTE employee who terminated Noel's employment, that he was disqualified because he falsified his criminal history on the 220*background questionnaire, and Santillan's comments did not influence the decision.[6]

The court granted the defendants' motion on the ground of the common-interest privilege. Judgment was entered on April 12, 2002.

DISCUSSION

I. Standard of Review

A "party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he [or she] is entitled to judgment as a matter of law." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850, 107 Cal.Rptr.2d 841, 24 P.3d 493.) A defendant satisfies this burden by showing "`one or more elements of' the `cause of action' in question `cannot be established,' or that `there is a complete defense'" to that cause of action. (Ibid.)

"De novo review is used to determine whether, as a matter of law, summary judgment was appropriately granted. [Citation.] De novo review is [also used] to determine the soundness of a trial court's resolution of the meaning of a statute, as entailing a pure question of law." (Camarillo v. Vaage (2003) 105 Cal.App.4th 552, 560, 130 Cal.Rptr.2d 26.)

II. Conditional Common-Interest Privilege

A. Defamation is effected either by libel or slander (§ 44), each of which is defined as a false and unprivileged publication (§§ 45, 46). Slander, with which we are concerned here, is defined as an oral communication that "[t]ends directly to injure [a person] in respect to his [or her] office, profession, trade or business...." (§ 46.)

Section 47, subdivision (c), whose predecessor was enacted in 1872, extends a conditional privilege against defamatory statements made without malice on subjects of mutual interest. (Lundquist v. Reusser (1994) 7 Cal.4th 1193, 1205, 31 Cal.Rptr.2d 776, 875 P.2d 1279.)[7] "[I]f malice is shown, the privilege is not merely overcome; it never arises in the first instance." (Brown v. Kelly Broadcasting Co. (1989) 48 Cal.3d 711, 723, fn. 7, 257 Cal.Rptr. 708, 771 P.2d 406.) "It is the occasion giving rise to the publication that is conditionally privileged, i.e., under specified conditions the occasion gives rise to a privilege. If the privilege arises, it is a complete defense." (Ibid.)

In enacting section 47, subdivision (c), "the Legislature intended to codify without change the common law common-interest privilege. At common law, that privilege embodied a two-step analysis, under which the defendant bore the initial burden of demonstrating that the allegedly defamatory communication was made upon a privileged occasion, and the plaintiff then bore the burden of proving that defendant had made the statement with malice." (Lundquist v. Reusser, supra, 7 Cal.4th at p. 1208, 31 Cal.Rptr.2d 776, 875 P.2d 1279 *221 [discussing § 47, subd. 3, the predecessor of § 47, subd. (c)].)

Courts have consistently interpreted section 47, subdivision (c) to apply in the employment context. (See Cuenca v. Safeway San Francisco Employees Fed. Credit Union (1986) 180 Cal.App.3d 985, 995, 225 Cal.Rptr. 852.) In Manguso v. Oceanside Unified School Dist. (1984) 153 Cal.App.3d 574, 200 Cal.Rptr. 535, this court held the common-interest privilege applied to uncomplimentary statements the plaintiff's former employer made to prospective employers. We explained that "[b]ecause the letter containing the alleged defamation was written by an educator, regarding qualifications of a particular teacher and directed to those prospective employers of that teacher, it is subject to a qualified privilege." (Id. at p. 580, 200 Cal.Rptr. 535; see also Neal v. Gatlin (1973) 35 Cal.App.3d 871, 877, 111 Cal.Rptr. 117 ["It is well established that a former employer may properly respond to an inquiry from a potential employer concerning an individual's fitness for employment, and if it is not done maliciously, such response is privileged."]; accord, Lesperance v. North American Aviation, Inc. (1963) 217 Cal.App.2d 336, 341, 31 Cal.Rptr. 873.)

In 1994 the Legislature amended section 47, subdivision (c) to expressly state the common-interest privilege applies to communications made by current or former employers to prospective employers. (§ 47, subd. (c), as amended by Stats.1994, ch. 364 (Assem. Bill No. 2778), § 1.) The statute currently reads in pertinent part: "This subdivision applies to and includes a communication concerning the job performance or qualifications of an applicant for employment, based upon credible evidence, made without malice, by a current or former employer of the applicant to, and upon request of, one whom the employer reasonably believes is a prospective employer of the applicant." (§ 47, subd. (c).)

The sponsor of Assembly Bill No. 2778 was the Los Angeles Unified School District Personnel Commission (the Commission), which reported "that former employers are loathe to comment on the fitness of prospective school employees because of the fear of legal retribution." (Sen. Com. on Judiciary, Analysis of Assem. Bill No. 2778 (1993-1994 Reg. Sess.) as amended May 18, 1994, p. 2.) The Commission advised "that it must hire numerous persons to fill very sensitive positions involving close contact with young children," and it "is critical that former employers be able to respond candidly about former employees" applying for such positions. (Id. at p. 3.) According to the Commission, in the 1992-1993 school year, it dismissed 124 classified employees for cause, and "if `references had been received, many of these persons might never have been hired.'" (Ibid.) The Legislature was aware that courts had interpreted the common-interest privilege to apply in the employment reference context, but it sought to "afford employers the certainty of statute, rather than the uncertainty of case law." (Id. at p. 4.)

B. Noel contends summary judgment was improper because he raised triable issues of fact regarding whether Santillan acted with malice when she gave ChoicePoint erroneous information on his employment. We find the contention without merit.

Insofar as the common-interest privilege is concerned, malice is not inferred from the communication itself. (§ 48.) "`The malice necessary to defeat a qualified privilege is "actual malice" which is established by a showing that the publication was motivated by hatred or ill will towards the plaintiff or by a showing *222 that the defendant lacked reasonable grounds for belief in the truth of the publication and therefore acted in reckless disregard of the plaintiff's rights (citations).' [Citations.]" (Sanborn v. Chronicle Pub. Co. (1976) 18 Cal.3d 406, 413, 134 Cal.Rptr. 402, 556 P.2d 764, citing Roemer v. Retail Credit Co. (1975) 44 Cal.App.3d 926, 936, 119 Cal.Rptr. 82; Agarwal v. Johnson (1979) 25 Cal.3d 932, 944, 160 Cal.Rptr. 141, 603 P.2d 58, disapproved on another ground in White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 574, 88 Cal.Rptr.2d 19, 981 P.2d 944, fn. 4 ["The malice referred to by the statute is actual malice or malice in fact, that is, a state of mind arising from hatred or ill will, evidencing a willingness to vex, annoy or injure another person."]; Lundquist v. Reusser, supra, 7 Cal.4th at pp. 1204, 1213, 31 Cal.Rptr.2d 776, 875 P.2d 1279; Brown v. Kelly Broadcasting Co., supra, 48 Cal.3d at p. 723, 257 Cal.Rptr. 708, 771 P.2d 406; BAJI Nos. 7.05, 7.05.1 [defendant abuses conditional privilege by publishing defamatory statement without good faith belief in its truth or without reasonable grounds for believing its truth, or when he or she is motivated by hatred or ill will toward plaintiff].)

However, "[l]ack of reasonable or probable cause ... is not ... a simple negligence concept.... [M]alice focuses upon the defendant's state of mind, not his [or her] conduct. Mere negligence in inquiry cannot constitute lack of reasonable or probable cause." (Rollenhagen v. City of Orange (1981) 116 Cal.App.3d 414, 423, 172 Cal.Rptr. 49, disapproved on another ground in Brown v. Kelly Broadcasting Co., supra, 48 Cal.3d at p. 738, 257 Cal.Rptr. 708, 771 P.2d 406.) "While `[t]he concept of negligence is inherent in the issue of probable cause' [citation], ... mere negligence ... in the sense of oversight or unintentional error, is not alone enough to constitute malice. It is only when the negligence amounts to a reckless or wanton disregard for the truth, so as to reasonably imply a wilful disregard for or avoidance of accuracy, that malice is shown." (Roemer v. Retail Credit Co. (1970) 3 Cal.App.3d 368, 371-372, 83 Cal.Rptr. 540; see also Bierbower v. FHP, Inc. (1999) 70 Cal.App.4th 1, 9, 82 Cal.Rptr.2d 393 ["[m]alice entails more than sloppiness"]; Davis v. Hearst (1911) 160 Cal. 143, 167, 116 P. 530 ["`Mere inadvertence or forgetfulness, or careless blundering, is no evidence of malice.'"]; Vackar v. Package Machinery Company (N.D.Cal.1993) 841 F.Supp. 310, 314 [mere negligence does not constitute malice within meaning of section 47, subd. (c)]; Hoesl v. United States (N.D.Cal.1978) 451 F.Supp. 1170, 1180 ["simple negligence does not satisfy the scienter requirement of the qualified privilege in the law of defamation"].)

We conclude no reasonable jury could find malice was a motivating cause of Santillan's statements. Rather, the undisputed evidence shows she made an unintentional error, or careless blunder, by paying insufficient attention to ChoicePoint's inquiry. Santillan gave inaccurate employment information on Noel because she was expecting an inquiry from a prospective employer on another former employee of Wilsons. In his responsive separate statement, Noel conceded that Santillan "had sincerely made [a] ... mistake in providing the incorrect employment reference to GTE." Contrary to Noel's position now, Santillan did not doubt the truth of the information she conveyed, or show a reckless disregard for his rights or feelings. "Inherent in the concept of reckless disregard for truth is the notion that it is the speaker's belief regarding the accuracy of his [or her] statements, rather than the truth of the underlying statements themselves, *223 that is relevant to the malice determination." (Vackar v. Package Machinery Company, supra, 841 F.Supp. at p. 314.) Noel ignores Santillan's belief and relies exclusively on the falsity of her statements. "`That the statement is now ... proved to be untrue is no evidence that it was made maliciously.' "(Davis v. Hearst, supra, 160 Cal. at p. 167, 116 P. 530.)

Noel cites the following from Witkin on Torts in support of his assertion Santillan's innocence or good faith is immaterial: "[I]nnocence or good faith of the defendant who makes a defamatory statement is not a defense, although it may be shown in mitigation of damages.... Thus, where he or his employees through an honest and reasonable mistake defame the wrong person, he is liable." (5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, § 554, p. 651.) However, this section of Witkin does not concern the conditional common-interest privilege of section 47, subdivision (c). Moreover, Witkin explained "[t]his rule is, however, subject to the New York Times [v. Sullivan (1964) 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686] requirement of proof of actual malice where the defamatory statement is directed at public officials or public figures ..., and to the Gertz [v. Robert Welch, Inc. (1974) 418 U.S. 323, 94 S.Ct. 2997, 41 L.Ed.2d 789] requirement of negligence where it is directed at a private individual." (5 Witkin, supra, Torts, § 554, p. 651.)[8] Accordingly, when a conditional privilege applies, as here, malice must be shown. (Brown v. Kelly Broadcasting Co., supra, 48 Cal.3d at pp. 740-742, 257 Cal.Rptr. 708, 771 P.2d 406 [malice standard, not negligence standard, governs in determining whether section 47, subd. (c) applies].)

Noel's reliance on Kerby v. Hal Roach Studios (1942) 53 Cal.App.2d 207, 127 P.2d 577, is also misplaced. There, the court stated, in dictum, "that inadvertence or mistake affords no defense to a charge of libel, where the defamatory publication does, in fact, refer to the plaintiff." (Id. at p. 213, 127 P.2d 577.) The case, however, does not concern the common-interest privilege of section 47, subdivision (c)." `It is axiomatic that cases are not authority for propositions not considered.' [Citation.]" (In re Marriage of Cornejo (1996) 13 Cal.4th 381, 388, 53 Cal.Rptr.2d 81, 916 P.2d 476.)

Additionally, Noel cites Cruey v. Gannett Co. (1998) 64 Cal.App.4th 356, 370, 76 Cal.Rptr.2d 670, for the proposition that whether the defendant acted with malice is for the trier of fact, and thus summary judgment is unavailable when a conditional privilege is at issue. The court there, however, merely concluded that in response to the defendant's motion for summary judgment, the plaintiff raised a triable issue of fact as to whether the defendant made the publication maliciously. (Id. at p. 370, 76 Cal.Rptr.2d 670.) In *224 contrast, Noel raised no facts from which Santillan's malice could reasonably be inferred. The applicability of the common-interest privilege provision is a question of law where, as here, the facts alleged to give rise to the privilege are undisputed. (Vackar v. Package Machinery Company, supra, 841 F.Supp. at p. 313.)

Section 47, subdivision (c) is applicable, and thus the defendants were entitled to summary judgment on the defamation cause of action, and on all other tort claims since they also stemmed from Santillan's comments. "California courts have held that plaintiffs may not avoid the strictures of defamation law by artfully pleading their defamation claims to sound in other areas of tort law." (Vackar v. Package Machinery Company, supra, 841 F.Supp. at p. 315; Felton v. Schaeffer (1991) 229 Cal.App.3d 229, 239, 279 Cal.Rptr. 713; Lerette v. Dean Witter Organization, Inc. (1976) 60 Cal.App.3d 573, 579, 131 Cal.Rptr. 592.)

C. Alternatively, Noel contends Santillan's lack of malice is immaterial because her false statements were not based on credible evidence. Again, in 1994 the Legislature amended section 47, subdivision (c) to expressly apply to statements current or former employers make to prospective employers when the statements are "based on credible evidence, made without malice." (§ 47, subd. (c).)

The issue is one of statutory interpretation. "`When interpreting a statute, we must ascertain legislative intent so as to effectuate the purpose of a particular law. Of course our first step in determining that intent is to scrutinize the actual words of the statute, giving them a plain and commonsense meaning. [Citation.] When the words are clear and unambiguous, there is no need for statutory construction or resort to other indicia of legislative intent, such as legislative history. [Citation.] But language that appears unambiguous on its face may be shown to have a latent ambiguity; if so, a court may turn to customary rules of statutory construction or legislative history for guidance. [Citation.] ... Statutory language [that] seems clear when considered in isolation may in fact be ambiguous or uncertain when considered in context. [Citation.]' [Citation.]" (National Technical Systems v. Commercial Contractors, Inc. (2001) 89 Cal.App.4th 1000, 1007-1008, 108 Cal.Rptr.2d 67.)

Here, we consider the legislative history of the 1994 amendment to section 47, subdivision (c). Standing alone, the phrase "based on credible evidence" connotes a negligence standard, and thus it is latently ambiguous given the Legislature's intent to foster communication between current or former employers and prospective employers, and the well-established rule that mere negligence does not constitute malice within the meaning of the statute.[9]

By amending section 47, subdivision (c) the Legislature foreclosed any argument the common-interest privilege is inapplicable in the employment reference context, and sought to encourage current or former employers to respond, or more fully respond, to inquiries of prospective employers regarding applicants' job qualifications. "The legislative history of the 1994 amendments clarified that their major purpose was to encourage a freer flow of reference information." (Saxton, Employment References in California After *225 Randi W. v. Muroc Joint Unified School District: A Proposal for Legislation To Promote Responsible Employment Reference Practices (1997) 18 Berkeley J.Emp. & Lab.L. 240, 245, fn. 10; Randi W. v. Muroc Joint United School Dist. (1997) 14 Cal.4th 1066, 1080, 60 Cal.Rptr.2d 263, 929 P.2d 582[[10]] (Randi W.) ["existence of this privilege may encourage more open disclosure of relevant information regarding former employees"].)

The express extension of a conditional privilege to employment references serves an important purpose. "To the extent that no comment and `name, rank and serial number' policies protect employers, the protection comes at the expense of communication in the job market. Employers' silence policies arrest the flow of positive information as well as negative information that most typically creates the risk of being sued. The consequences of employer silence affect the employers who seek references as well as job seekers who would benefit from receiving positive references." (Cooper, Job Reference Immunity Statutes: Prevalent But Irrelevant (2001) 11 Cornell J.L. & Pub. Policy 1, 10; see also Swemba, "To Tell the Truth, the Whole Truth, and Nothing but the Truth:" Employment References and Tort Liability (2002) 33 U. Tol. L.Rev. 847, 864-865 ["`no comment' policies are detrimental to society as a whole"].)

The original version of Assembly Bill No. 2778 did not contain the "based on credible evidence" phrase. Rather, the bill was amended to add the phrase in response to opposition by the California Trial Lawyers Association's (the Association). The legislative history explains that "[b]y requiring that the communication be `based upon credible evidence,' the bill ... will not immunize communications to a prospective employer that are based upon mere rumor." (Sen. Com. on Judiciary, Analysis of Assem. Bill No. 2778 (1993-1994 Reg. Sess.) as amended May 18, 1994, p. 3, italics added.)

Presumably, the Association was troubled by cases such as Brewer v. Second Baptist Church (1948) 32 Cal.2d 791, 797, 197 P.2d 713, in which the court explained that "[a]lthough there are situations where protection of the interest involved may make it reasonable to report rumors or statements that the publisher may even know are false [citations], ordinarily the [common-interest] privilege is lost if defendant has no reasonable grounds for believing his statements to be true." (Italics added; see also Institute of Athletic Motivation v. University of Illinois (1980) 114 Cal.App.3d 1, 12, 170 Cal.Rptr. 411.) Further, Witkin states the publication of rumors is ordinarily not privileged, but "where an inquiry is made as to an employee, or an employee reports to his employer about another employee, the relationship may warrant the communication of a rumor." (5 Witkin, supra, § 527, p. 617, citing Rest.2d, Torts § 602....)

If the "based on credible evidence" phrase of section 47, subdivision (c) is interpreted to impose a mere negligence standard in the employment reference context, the statute would afford current or former employers less protection than they had under case law predating the 1994 amendment, and the flow of information *226 would be impeded. Indeed, because false statements are, by definition, commonly based on a lack of credible evidence, the interpretation Noel urges could essentially abrogate the common-interest privilege insofar as employment references are concerned. Since the Legislature sought to foster the exchange of employment information, we impute no such intent to it.

Rather, we conclude that by adding the "based upon credible evidence" language to section 47, subdivision (c), the Legislature, out of an abundance of caution, intended to bar any argument that in the employment reference context, the protection of the interest involved may make it reasonable to report mere rumors or unfounded gossip. In other words, the Legislature clarified that if a current or former employer's publication was based on mere rumor, the privilege is lost because he or she lacked reasonable grounds for believing the truth of the publication. Although negligence is relevant in determining probable cause, "mere negligence ... in the sense of oversight or unintentional error, is not alone enough to constitute malice." (Roemer v. Retail Credit Co., supra, 3 Cal.App.3d at p. 372, 83 Cal.Rptr. 540.) Santillan reported no rumors or gossip regarding Noel's employment; she had no improper purpose and her statements were caused by a careless blunder. Accordingly, summary judgment for the defendants on all causes of action was proper.

DISPOSITION

The judgment is affirmed. The defendants are awarded costs on appeal.
WE CONCUR: BENKE and HALLER, JJ.



[1] Statutory references are to the Civil Code except when otherwise specified.
[2] In interrogatory responses, Noel admitted he was convicted of one count of carjacking, two counts of residential burglary, four counts of robbery, three counts of attempted robbery, and one count of exhibiting a deadly weapon other than a firearm.
[3] In deposition, Noel testified he was incarcerated between October 1994 and March 1999, and he was transferred from the CYA to state prison in early 1997 when he turned 19 years of age.
[4] GTE's termination letter is dated April 21, 2000. However, its author, Patricia Eller, testified that date was incorrect, and the letter was not written until after she received ChoicePoint's April 25 addendum report.
[5] In addition to defamation, the complaint included causes of action for negligence, negligent supervision and training, intentional and negligent infliction of emotional distress, violation of Labor Code section 1050 and violation of Civil Code section 43.
[6] In the factual statement of his appellate brief, Noel asserts his termination from GTE was not based on the falsification of his criminal history, but on Santillan's comments to ChoicePoint. However, he cites no competent evidence in support.
[7] Section 47 provides in part: "A privileged publication or broadcast is one made: (c) In a communication, without malice, to a person interested therein, (1) by one who is also interested, or (2) by one who stands in such a relation to the person interested as to afford a reasonable ground for supposing the motive for the communication to be innocent, or (3) who is requested by the person interested to give the information."
[8] In New York Times v. Sullivan, supra, 376 U.S. at pages 279-280, 283, 84 S.Ct. 710 the United States Supreme Court held that "constitutional guarantees [of the First and Fourteenth Amendments to the United States Constitution] require ... a federal rule that prohibits a public official from recovering damages for a defamatory falsehood relating to his official conduct unless he proves that the statement was made with `actual malice' — that is, with knowledge that it was false or with reckless disregard of whether it was false or not." The court also held that negligence in failing to discover published misstatements was constitutionally insufficient to show the recklessness required for a finding of malice. (Id. at p. 288, 84 S.Ct. 710.) In Gertz v. Robert Welch, Inc., supra, 418 U.S. at page 347, 94 S.Ct. 2997 the court held that "so long as they do not impose liability without fault, the States may define for themselves the appropriate standard of liability for a publisher or broadcaster of defamatory falsehood injurious to a private individual."
[9] We asked the parties for supplemental briefing on the "based on credible evidence" language of section 47, subdivision (c), and we have taken their responses into consideration.
[10] In Randi W., supra 14 Cal.4th at page 1070, 60 Cal.Rptr.2d 263, 929 P.2d 582 the court held "defendants' letters of recommendation, containing unreserved and unconditional praise for [a] former employee ... despite defendants' alleged knowledge of complaints or charges of his sexual misconduct with students, constituted misleading statements that could form the basis for tort liability for fraud or negligent misrepresentation."
Constructive Discharge

Constructive Discharge
Turner v. Anheuser-Busch, Inc.


SOURCE: 

KEY WORDS:
Termination, Constructive Discharge, Discharge

AGENCY:

Surpeme Court of California


Document Citation:

S029985


CERTIFIED FOR PUBLICATION:


JAMES M. TURNER,
Plaintiff and Appellant,

v.

ANHEUSER-BUSCH, INC.,
Defendant and Respondent.
[No. S029985. Jul 25, 1994.]

(Superior Court of Riverside County, 
No. CSC 198551, Victor Miceli, Judge.)



(Opinion by Lucas, C. J., with Arabian, Baxter and George, JJ., concurring. Separate concurring and dissenting opinion by Mosk, J. Separate dissenting opinion by Kennard, J., with Woods (A. M.), J., fn. * concurring.)

COUNSEL

Timothy L. Taggart for Plaintiff and Appellant. [7 Cal. 4th 1243]

Joseph Posner and William C. Quackenbush as Amici Curiae on behalf of Plaintiff and Appellant.

Ballard, Rosenberg & Golper, John B. Golper, Jeffrey P. Fuchsman and John J. Manier for Defendant and Respondent.

Paul, Hastings, Janofsky & Walker, Paul Grossman, Paul W. Cane, Jr., Horvitz & Levy, Ellis J. Horvitz and Daniel J. Gonzalez as Amici Curiae on behalf of Defendant and Respondent.

OPINION

LUCAS, C. J.

Plaintiff James M. Turner asserts he was forced by his employer, defendant Anheuser Busch, Inc. (ABI), to quit his job after he complained of ABI's alleged illegal activity. Although ABI prevailed on summary judgment in the trial court, Turner persuaded the Court of Appeal to reinstate his claim. We now consider the elements of a cause of action for constructive wrongful discharge in violation of fundamental public policy. Applying those elements, we discern no material issue of fact and no legal foundation for Turner's case. We therefore reverse the judgment of the Court of Appeal and direct summary judgment in favor of ABI.

I. Facts and Procedural History

Turner worked at ABI's Los Angeles brewery as an industrial relations manager for approximately six years, until his voluntary resignation in 1981. In January 1984, Turner returned to work for ABI at its wholesale operations division in Riverside.

Turner's initial position at the Riverside division was "branch off-premises coordinator" in the sales department. As such, he was responsible for coordinating sales activities with retailers who sold ABI products off-sale, i.e., for consumption away from the retailers' premises. Turner's immediate supervisor was William Schmitt. Schmitt's supervisor was George Liakos.

In May 1985, Turner was reassigned to the position of "assistant supervisor route sales." He retained the same salary and level of responsibility. In his new position, Turner no longer reported to Schmitt. In January 1986, Schmitt was transferred to St. Louis, Missouri.

With one exception, Turner received overall "good" ratings on written performance evaluations between June 1984 and November 1987. (He received a "needs improvement" rating in December 1984.) On his December [7 Cal. 4th 1244] 28, 1988, evaluation, however, Turner received a "needs improvement" rating. On that day, Turner met with ABI supervisors who, citing specific incidents, alleged that Turner's job performance had deteriorated. Turner denied that charge and criticized the supervisors' decision to wait until the meeting to complain of the particular incidents, rather than discussing them at the time of their occurrence.

On January 3, 1989, Turner tendered a letter of resignation to ABI, effective February 1, 1989. After his departure, Turner filed suit against ABI and certain individuals, alleging causes of action for age discrimination, constructive wrongful discharge in violation of public policy, breach of contract, and both intentional and negligent infliction of emotional distress.

The individual defendants were dismissed in various pretrial proceedings. Turner's emotional distress claims were dismissed on ABI's motion for judgment on the pleadings; he voluntarily dismissed his claim for age discrimination. ABI then obtained summary judgment on the breach of contract and public policy claims.

The Court of Appeal affirmed the summary judgment as to the contract claim, but reversed on the public policy claim. It held that the "cumulative effect" of the "long list of alleged actions [by ABI] and [workplace] conditions" established a triable case of constructive wrongful discharge in violation of public policy. We granted ABI's petition for review.

II. Discussion

A. The Governing Law

Employment relationships are generally terminated by resignation or discharge. (Lab. Code, § 2922.) An employee voluntarily severs the relationship by resignation; the employer does so by actual discharge. (Ibid.)

Actual discharge carries significant legal consequences for employers, including possible liability for wrongful discharge. In an attempt to avoid liability, an employer may refrain from actually firing an employee, preferring instead to engage in conduct causing him or her to quit. The doctrine of constructive discharge addresses such employer-attempted "end runs" around wrongful discharge and other claims requiring employer-initiated terminations of employment.

(1) Constructive Discharge

[1] Constructive discharge occurs when the employer's conduct effectively forces an employee to resign. Although the employee may say, "I [7 Cal. 4th 1245] quit," the employment relationship is actually severed involuntarily by the employer's acts, against the employee's will. As a result, a constructive discharge is legally regarded as a firing rather than a resignation. (Zilmer v. Carnation Co. (1989) 215 Cal. App. 3d 29, 38-39 [263 Cal. Rptr. 422] [hereafter Zilmer].)

We have not previously addressed what an employee must prove to establish a constructive discharge. The Courts of Appeal have devised and applied the following test for constructive discharge: "[A]n employee who is forced to resign due to actions and conditions so intolerable or aggravated at the time of his resignation that a reasonable person in the employee's position would have resigned, and whose employer had actual or constructive knowledge of the intolerable actions and conditions and of their impact upon the employee and could have remedied the situation, but did not, is constructively discharged." (Zilmer, supra, 215 Cal.App.3d at p. 38; see also Brady v. Elixir Industries (1987) 196 Cal. App. 3d 1299, 1306 [242 Cal. Rptr. 324] [hereafter Brady].)

Three areas of inquiry are suggested by the proffered test: (1) what kinds of actions or conditions are sufficient to convert what is ostensibly a voluntary quit into a discharge; (2) whether the impact of those actions and conditions is measured by a subjective (impact on this particular employee) test or an objective (impact on a hypothetical reasonable employee) test; and (3) what level of employer knowledge or intent regarding those actions or conditions should be required to achieve a discharge. We will consider these questions in light of the case law concerning constructive discharge.

The doctrine of constructive discharge was first recognized in federal cases brought under the National Labor Relations Act (NLRA). Under section 8(a)(3) of the NLRA, it is "an unfair labor practice for an employer ... by discrimination ... to encourage or discourage membership in any labor organization ...." (29 U.S.C. § 158(a)(3).) Approving decisions of the National Labor Relations Board and lower courts, the United States Supreme Court has held that "an employer violates [§ 8(a)(3)] not only when, for the purpose of discouraging union activity, it directly dismisses an employee, but also when it purposefully creates working conditions so intolerable that the employee has no option but to resign-a so-called 'constructive discharge.' " (Sure-Tan, Inc. v. NLRB (1984) 467 U.S. 883, 894 [81 L. Ed. 2d 732, 744, 104 S. Ct. 2803], italics added.)

The federal courts have also applied constructive discharge in employment discrimination cases under title VII of the Civil Rights Act of 1964 (42 U.S.C. § 2000e) and the Age Discrimination in Employment Act of 1967 (29 [7 Cal. 4th 1246] U.S.C. §§ 621-634; ADEA). Some federal cases have required "deliberate" conduct by an employer creating conditions so aggravated or intolerable that a reasonable person in the employee's position would have felt compelled to resign. fn. 1 The federal Court of Appeals for the Fourth Circuit has gone further, requiring proof of an employer's express intent to cause an employee to resign. (Bristow v. Daily Press, Inc. (4th Cir. 1985) 770 F.2d 1251, 1255, cert. den. (1986) 475 U.S. 1082 [89 L. Ed. 2d 718, 106 S. Ct. 1461].)

In contrast, the Ninth Circuit's formulation of constructive discharge makes no reference to employer knowledge or intent, but provides instead that "[a] constructive discharge occurs when, looking at the totality of circumstances, 'a reasonable person in [the employee's] position would have felt that he was forced to quit because of intolerable and discriminatory working conditions.' " (Watson v. Nationwide Ins. Co. (9th Cir. 1987) 823 F.2d 360, 361, quoting Satterwhite v. Smith (9th Cir. 1984) 744 F.2d 1380, 1381.) fn. 2 State court cases in discrimination and wrongful discharge contexts have generally followed the lead of the federal courts. (See, e.g., Slack v. Kanawha County Housing [hereafter Slack] (1992) 188 W.Va. 155 [423 S.E.2d 547] [collecting and analyzing state and federal cases]; Beye v. Bureau of National Affairs [hereafter Beye] (1984) 59 Md.App. 642 [477 A.2d 1197], cert. den. (1984) 301 Md. 639 [484 A.2d 274].)

a. Intolerable Conditions

[2] Under the cases, an employee cannot simply "quit and sue," claiming he or she was constructively discharged. The conditions giving rise to the resignation must be sufficiently extraordinary and egregious to overcome the normal motivation of a competent, diligent, and reasonable employee to remain on the job to earn a livelihood and to serve his or her employer. The proper focus is on whether the resignation was coerced, not whether it was simply one rational option for the employee. [7 Cal. 4th 1247]

" 'An employee may not be unreasonably sensitive to his [or her] working environment .... Every job has its frustrations, challenges, and disappointments; these inhere in the nature of work. An employee is protected from ... unreasonably harsh conditions, in excess of those faced by his [or her] co-workers. He [or she] is not, however, guaranteed a working environment free of stress.' " (Goldsmith v. Mayor and City of Baltimore (4th Cir. 1993) 987 F.2d 1064, 1072.)

In order to amount to a constructive discharge, adverse working conditions must be unusually "aggravated" or amount to a "continuous pattern" before the situation will be deemed intolerable. fn. 3 In general, "[s]ingle, trivial, or isolated acts of [misconduct] are insufficient" to support a constructive discharge claim. (Silver, Public Employee Discharge and Discipline (1989) § 1.5, p. 1-13.) Moreover, a poor performance rating or a demotion, even when accompanied by reduction in pay, does not by itself trigger a constructive discharge. fn. 4

"There appears to be no disagreement [in the cases] that one of the essential elements of any constructive discharge claim is that the adverse working conditions must be so intolerable that any reasonable employee would resign rather than endure such conditions." (Slack, supra, 423 S.E.2d at p. 556.)

Various terms such as "intolerable" or "aggravated" have been used to describe the subnormal character of the working conditions required to establish constructive discharge. (Slack, supra, 423 S.E.2d at p. 556; see also Zilmer, supra, 215 Cal.App.3d at p. 38; Brady, supra, 196 Cal.App.3d at p. 1306.) The essence of the test is whether, under all the circumstances, the working conditions are so unusually adverse that a reasonable employee in plaintiff's position " ' "would have felt compelled to resign." ' " (Slack, supra, 423 S.E.2d at p. 556, quoting Calhoun v. Acme Cleveland Corp. (1st Cir. 1986) 798 F.2d 559, 561.) [7 Cal. 4th 1248]

b. An Objective Standard

[3] As the citations and quotations in the previous section reveal, the cases are in agreement that the standard by which a constructive discharge is determined is an objective one-the question is "whether a reasonable person faced with the allegedly intolerable employer actions or conditions of employment would have no reasonable alternative except to quit." (Rochlis v. Walt Disney Co. (1993) 19 Cal. App. 4th 201, 212 [23 Cal. Rptr. 2d 793] [hereafter Rochlis], citing Brady, supra, 196 Cal.App.3d at p. 1306 and Lojek v. Thomas (9th Cir. 1983) 716 F.2d 675, 681.) fn. 5

c. Employer Knowledge and Intent

[4] A constructive discharge is the practical and legal equivalent of a dismissal-the employee's resignation must be employer-coerced, not caused by the voluntary action of the employee or by conditions or matters beyond the employer's reasonable control.

In Brady, the Court of Appeal concluded that a majority of other courts had declined to impose a requirement of express employer intent in constructive discharge cases and adopted instead an element mandating only the employer's "actual or constructive knowledge of the intolerable actions and of their impact on the employee" in a situation the employer "could have remedied." (Brady, supra, 196 Cal.App.3d at p. 1306, italics added.) The Brady court did not define the term "constructive knowledge," but observed that its goal in developing a test for constructive discharge was "to insure that a peaceful on-the-job resolution has been attempted or was futile." (Ibid.)

From our review of the cases, we conclude that Brady's test is inadequate to the extent it allows a claim for wrongful discharge on a finding that the employer had mere constructive knowledge of the intolerable conditions leading to an employee's resignation, because such a test does not further the Brady court's goal of insuring corrective measures will be attempted before a lawsuit is required. Although the majority of courts have declined to join the Fourth Circuit in requiring an employer's express intent to force an employee to leave, they have generally demanded that the "intolerable conditions" causing a constructive discharge be expressly "created by or [7 Cal. 4th 1249] known to the employer." (Slack, supra, 423 S.E.2d at p. 558.) Thus, an employer's intent to create or purposefully maintain working conditions that are intolerable from the standpoint of a reasonable employee has been deemed sufficient for a constructive discharge because it insures the claim is employer-coerced. An employer's actual knowledge of the existence of such conditions, and subsequent failure to remedy them, may constitute circumstantial evidence that the employer deliberately forced the employee to resign.

For example, in Goss v. Exxon Office Systems Co. (3d Cir. 1984) 747 F.2d 885, 888, the court stated: "[N]o finding of an [express] intent on the part of the employer to bring about a discharge is required for the application of the constructive discharge doctrine. The court need merely find that the employer knowingly permitted conditions of discrimination in employment so intolerable that a reasonable person subject to them would resign." (Italics added.)

And in Beye, the court emphasized that although an "express intent" was not necessary in constructive discharge cases: "It suffices if the employer's actions were deliberate, or, in cases of harassment by supervisors or fellow employees, if the employer was aware of the situation and permitted it to continue." (Beye, supra, 477 A.2d at p. 1202, italics added.)

Finally, following a comprehensive review of the state and federal cases, the West Virginia Supreme Court adopted the "majority view" that "in order to prove a constructive discharge, a plaintiff must establish that working conditions created by or known to the employer were so intolerable that a reasonable person would be compelled to quit. It is not necessary, however, that a plaintiff prove that the employer's actions were taken with [an express] intent to cause the plaintiff to quit." (Slack, supra, 423 S.E.2d at p. 558, italics added.)

An employer's intent to cause a resignation will rarely be revealed by direct evidence. Self-interest will most often prevent an employer from announcing a constructive discharge strategy from the rooftops. An express intent requirement might unduly focus the trier of fact's attention on the presence or absence of direct evidence. But we see no reason why a standard requiring the employer's actual (rather than mere constructive) knowledge of the intolerable conditions would do so. Such a standard serves to emphasize a central aspect of constructive discharge law-the resignation must be employer-caused and against the employee's will. Consistent with this principle, the employer must either deliberately create the intolerable working conditions that trigger the resignation or, at a minimum, must know about [7 Cal. 4th 1250] them and fail to remedy the situation in order to force the employee to resign.

The dissent of Justice Kennard rejects our modification of the Brady test, claiming that our actual knowledge test "leaves the employer free to turn a blind eye to blatant and pervasive workplace abuses and to discourage or refuse to entertain employee complaints about intolerable workplace conditions and then claim a lack of actual knowledge of the intolerable conditions as a complete defense to a wrongful discharge action." (Dis. opn., post, at p. 1260.) This is a highly exaggerated and unlikely situation that even the dissent admits is not supported by any examples of cases from the majority of jurisdictions that have adopted the identical actual knowledge test for constructive discharge claims. The dissent simply confuses constructive knowledge, which the Brady court left undefined, with constructive discharge which, as most courts hold, requires proof that the employer created or knowingly permitted the intolerable conditions to persist. (See, e.g., Goss v. Exxon Office Systems Co., supra, 747 F.2d at p. 888.)

By providing that a wrongful discharge claim may prevail only if an employee can show the employer, or those representing the employer, either created or knowingly permitted working conditions to remain intolerable, it should be easier for plaintiffs to prove their case in the situation hypothesized by the dissent-i.e., where an employer is either unavailable or refuses to acknowledge that the intolerable conditions exist. (Dis. opn. post, at p. 1260.) By requiring employees to notify someone in a position of authority of their plight, we permit employers unaware of any wrongdoing to correct a potentially destructive situation, and we prevent employers from shielding themselves from constructive discharge lawsuits simply by deliberately ignoring a situation that has become intolerable to a reasonable employee. Indeed, our test furthers the Brady court's stated goal that a constructive discharge test should encourage an employer to take corrective action if notified of the intolerable working conditions. (Brady, supra, 196 Cal.App.3d at p. 1306.) As a matter of policy, therefore, our holding requiring the employer (or its agent) either to have created or knowingly permitted the intolerable conditions to exist, encourages early resolution of the employee complaint and, contrary to the dissent, discourages employer inaction.

Finally, the dissent's unnecessary concern over a purely hypothetical situation is aggravated by its reliance on federal circuit court cases that either support our actual knowledge test for constructive discharge cases or focus exclusively on title VII (or its equivalent under title IX) sexual harassment causes of action. (Compare Paroline v. Unisys Corp. (4th Cir. [7 Cal. 4th 1251] 1989) 879 F.2d 100 [constructive discharge in sexual harassment case under title VII occurs only when employer deliberately makes work conditions intolerable in an effort to induce employee to quit] with Ellison v. Brady (9th Cir. 1991) 924 F.2d 872, 880 [title VII claim for sexual harassment is not a fault-based tort claim].) Thus, even though sexual harassment claims sometimes are considered within the context of constructive discharge allegations, the focus in a constructive discharge case is the employer's knowledge and conduct in forcing the employee to resign in light of the intolerable working conditions. (Ibid.) In criticizing our modification of the Brady test, therefore, the dissent simply strains to create a point of departure where none exists.

d. Summary

The considerations discussed above lead us to modify the elements of constructive discharge in the Brady line of cases. In order to establish a constructive discharge, an employee must plead and prove, by the usual preponderance of the evidence standard, that the employer either intentionally created or knowingly permitted working conditions that were so intolerable or aggravated at the time of the employee's resignation that a reasonable employer would realize that a reasonable person in the employee's position would be compelled to resign.

For purposes of this standard, the requisite knowledge or intent must exist on the part of either the employer or those persons who effectively represent the employer, i.e., its officers, directors, managing agents, or supervisory employees.


To the extent it is inconsistent with these elements in that it requires mere constructive knowledge of the intolerable conditions leading to the employee's resignation, the Brady line of cases is disapproved. (See, e.g., Brady, supra, 196 Cal.App.3d at p. 1306; Zilmer, supra, 215 Cal.App.3d at p. 38; Soules, supra, 2 Cal.App.4th at pp. 399-400; Rochlis, supra, 19 Cal.App.4th at p. 212.)

(2) Wrongful Discharge in Violation of Public Policy

[5] Standing alone, constructive discharge is neither a tort nor a breach of contract, but a doctrine that transforms what is ostensibly a resignation into a firing. Even after establishing constructive discharge, an employee must independently prove a breach of contract or tort in connection with employment termination in order to obtain damages for wrongful discharge. (Soules, supra, 2 Cal.App.4th at pp. 399-400.)

An employee may prove, for example, that a constructive discharge is a breach of an express or implied contract of employment. In the absence of an [7 Cal. 4th 1252] express or implied agreement to the contrary, an employment relationship without a fixed term is presumed to be validly terminable at the will of either party, employer or employee, at any time. (Lab. Code, § 2922; Foley v. Interactive Data Corp. (1988) 47 Cal. 3d 654, 675-682 [254 Cal. Rptr. 211, 765 P.2d 373] [hereafter Foley].) However: "In the employment context, factors apart from consideration and express terms may be used to ascertain the existence and content of an employment agreement, including 'the personnel policies or practices of the employer, the employee's longevity of service, actions or communications by the employer reflecting assurances of continued employment, and the practices of the industry in which the employee is engaged.' " (Id. at p. 680.)

Thus, a constructive discharge may, in particular circumstances, amount to breach of an employer's express or implied agreement not to terminate except in accordance with specified procedures or without good cause. (Soules, supra, 2 Cal.App.4th at pp. 399-400.)

Apart from the terms of an express or implied employment contract, an employer has no right to terminate employment for a reason that contravenes fundamental public policy as expressed in a constitutional or statutory provision. (Gantt v. Sentry Insurance (1992) 1 Cal. 4th 1083, 1094-1095 [4 Cal. Rptr. 2d 874, 824 P.2d 680] [hereafter Gantt].) An actual or constructive discharge in violation of fundamental public policy gives rise to a tort action in favor of the terminated employee. (Foley, supra, 47 Cal.3d at pp. 665-671; Tameny v. Atlantic Richfield Co. (1980) 27 Cal. 3d 167, 178 [164 Cal. Rptr. 839, 610 P.2d 1330, 9 A.L.R.4th 314] [hereafter Tameny].)

(3) Summary Judgment

This case arises from a Court of Appeal decision reversing a summary judgment in ABI's favor. [6] Like other civil causes of action, wrongful discharge claims arising in contract or in tort may be susceptible of pretrial disposition on motions for summary judgment. (Soules, supra, 2 Cal.App.4th at p. 398.) Summary judgment must be granted when the moving party's evidence is sufficient to sustain a judgment in its favor and the opposing party does not present evidence raising a triable issue of material fact. (Ibid.)

In reviewing a ruling on a motion for summary judgment, an appellate court (1) "identif[ies] the issues framed by the pleadings," (2) "determine[s] whether the moving party's showing has established facts which negate the opponent's claim and justify a judgment in movant's favor," and (3) "[w]hen a summary judgment motion prima facie justifies a judgment, ... determine[s] whether the opposition demonstrates the existence of a triable, [7 Cal. 4th 1253] material factual issue." (AARTS Productions, Inc. v. Crocker National Bank (1986) 179 Cal. App. 3d 1061, 1064-1065 [225 Cal. Rptr. 203].) fn. 6 B. Turner's Claim for Constructive Wrongful Discharge in Violation of Fundamental Public Policy

Turner claims ABI subjected him to a "campaign of harassment" because he complained of alleged ABI violations of federal and state laws, internal company policies, and provisions of ABI's collective bargaining agreement. Through declarations submitted in opposition to ABI's summary judgment motion, he catalogs various complaints he made to ABI management shortly after beginning his employment and argues they triggered less-than-satisfactory performance evaluations several years later, thereby causing him to quit.

In light of the governing law discussed in the previous section, Turner's claim suffers from two fatal flaws. First, Turner's declarations fail to show he was subjected to working conditions rendering his job so intolerable that a reasonable person in his position would have felt compelled to resign. Thus, he did not show that his resignation amounted to a constructive discharge. Second, even assuming a colorable claim of constructive discharge was shown, Turner did not establish the required nexus between his alleged "whistle-blowing" activities in reporting allegedly illegal conduct, and negative reviews of his performance coming four years later. For either of these independent reasons, Turner failed to create a triable issue of fact, and ABI was entitled to summary judgment in its favor.

(1) No Constructive Discharge

Observing that Turner resigned more than four years after his "whistleblowing" reports of alleged misconduct by ABI employees, ABI contends Turner's claim fails as a matter of law under the "statute of limitations" rule announced in Panopulos v. Westinghouse Electric Corp. (1989) 216 Cal. App. 3d 660 [264 Cal. Rptr. 810] (hereafter Panopulos). Turner urges us to reject the rule in Panopulos in favor of the more fact-specific and flexible principles applied in Valdez, supra, 231 Cal. App. 3d 1043.

In Panopulos, plaintiff resigned in 1983 and thereafter filed suit for constructive discharge in violation of an implied contract. Plaintiff maintained he had been transferred in 1978 and made to work under intolerable [7 Cal. 4th 1254] conditions until his resignation. Reasoning that "sound policy requires that there be a limit beyond which claims such as that of plaintiff here may not be asserted," the Panopulos court held "the applicable limitations period must constitute an outer limit beyond which an employee may not, as a matter of law, remain employed after the onset of allegedly intolerable conditions and thereafter maintain a claim for wrongful constructive discharge." (Panopulos, supra, 216 Cal.App.3d at pp. 669, 670.). Because plaintiff's transfer had occurred more than four years (the longest applicable limitations period) before his resignation, the court held his suit time-barred.

[7] Although we agree with Panopulos that there is an "outer limit" beyond which an employee cannot remain on the job after intolerable conditions arise and still claim constructive discharge, reliance on the applicable limitations period to define that limit is unduly arbitrary. Consistent with our discussion in part II.A.(1) above, the relevant question is what a reasonable employee would have done under the circumstances. The length of time the plaintiff remained on the job may be one relevant factor in determining the intolerability of employment conditions from the standpoint of a reasonable person. Neither logic nor precedent suggests it should always be dispositive. (See Valdez, supra, 231 Cal.App.3d at p. 1058.) Insofar as it prescribes the statute of limitations as an outer limit on an employee's decision to "weather the storm," we disapprove Panopulos. fn. 7

[8] Despite our rejection of Panopulos, we find no merit in Turner's constructive discharge allegations. Turner appears to rely on three kinds of allegedly intolerable conditions that he claims precipitated his resignation in 1989: (1) the alleged illegal acts of other ABI employees which he observed and reported in 1984; (2) his reassignment in 1985; and (3) his low performance rating in 1988. None of these purported conditions creates a triable issue of material fact.

The mere existence of illegal conduct in a workplace does not, without more, render employment conditions intolerable to a reasonable employee. Turner was not requested, let alone required, to participate in any of the illegal conduct he complains of. Nor does he contest ABI's statements that his supervisors duly acknowledged and investigated at least some of his complaints. Although Turner may have been a witness to allegedly illegal conduct condoned by his employer, the nature of the conduct (violations of state law regulating the economic and contractual relationships between [7 Cal. 4th 1255] beverage manufacturers and their customers and competitors) was not so obnoxious or aggravated as to cause a reasonable employee to feel compelled to resign.

Moreover, the so-called illegal acts in 1984 and Turner's 1985 reassignment were remote in time and context from the 1989 resignation. Although not dispositive, the passage of this much time after purportedly unbearable conditions arose strongly suggests that neither Turner, nor a reasonable employee, would have regarded the working conditions at ABI as intolerable. fn. 8 (Wagner v. Sanders Associates, Inc. (C.D.Cal.) 638 F. Supp. 742, 745 [passage of time between allegedly intolerable condition and resignation "goes a long way toward destroying" assertion that conditions were intolerable]; Vaughn v. Pool Offshore Co. (5th Cir. 1982) 683 F.2d 922, 926 [no constructive discharge when alleged misconduct occurred several months prior to resignation].)

Finally, Turner's 1988 performance rating, an event he contends triggered his resignation, is not a basis for a claim of constructive discharge. As we have observed in part II.A.(1), ante, a single negative performance rating does not amount to a constructive discharge. "In order to properly manage its business, every employer must on occasion review, criticize, demote, transfer, and discipline employees." (Cole v. Fair Oaks Fire Protection Dist. (1987) 43 Cal. 3d 148, 160 [233 Cal. Rptr. 308, 729 P.2d 743], quoted in Soules, supra, 2 Cal.App.4th at p. 401.) Thus, the dissent errs in claiming that Turner's pleadings show a campaign to drive him "out of the company by means of adverse performance evaluations based on charges deliberately fabricated." (Dis. opn., post, at p. 1270.)

Even if Turner's miscellaneous charges of employer misconduct are considered together, no continuous pattern of harassment or aggravating conditions emerges. (See Soules, supra, 2 Cal.App.4th at p. 402.) Turner concedes that he received good performance reviews and increases in his compensation from 1985-1987, more than three years after his complaints of illegal activity. He also admits that he resigned when he did because he believed ABI was "setting him up" for termination and that his "chances would be better" in future litigation if he preempted his discharge. Turner's attempt to weave unrelated and disjointed events together into an insidious pattern unravels quickly in these circumstances. Turner's resignation was voluntary and strategic, not, as the dissent claims, coerced or compelled by ABI's acts. In short, Turner was not constructively discharged. [7 Cal. 4th 1256] (2) No Wrongful Discharge in Violation of Fundamental Public Policy

[9a] As we observed in part II.A.(2), ante, even if Turner could raise a triable issue of fact as to constructive discharge, his case cannot reach the trier of fact unless he can also show a wrongful discharge in violation of fundamental public policy.

[10] In order to sustain a claim of wrongful discharge in violation of fundamental public policy, Turner must prove that his dismissal violated a policy that is (1) fundamental, fn. 9 (2) beneficial for the public, fn. 10 and (3) embodied in a statute or constitutional provision. (Gantt, supra, 1 Cal.4th at p. 1095.)

Tort claims for wrongful discharge typically arise when an employer retaliates against an employee for "(1) refusing to violate a statute ... [,] (2) performing a statutory obligation ... [,] (3) exercising a statutory right or privilege ... [, or] (4) reporting an alleged violation of a statute of public importance. (Gantt, supra, 1 Cal.4th at pp. 1091-1092, fn. omitted.)

[9b] Most of Turner's complaints pertained to ABI's alleged violations of its own internal practices or its collective bargaining agreements. For example, Turner alleges that, despite his complaints and expressed opposition, his supervisor, George Liakos, violated (1) a conflict of interest provision of the company's collective bargaining agreement, (2) collective bargaining agreement provisions "relative to wages, benefits and job security," (3) internal ABI policy concerning employment of family members, and (4) ABI policy concerning use of refrigerated delivery trucks.

Turner also maintains that Liakos "harassed" employees who failed to implement ABI policies concerning refrigeration of beer, arbitrarily and capriciously performed annual evaluations of salaried employees, used threats of probation and harassment to subject all salaried employees to his "whimsical" practices, fabricated merit reviews to justify decisions to discharge employees, and falsified records at ABI's Riverside operation to further its success in interbranch sales competitions. [7 Cal. 4th 1257]

Assuming, as we must in a summary judgment posture, that Turner could prove these claims at trial, none of them implicates a fundamental public policy embodied in a statute or constitutional provision. The tort of wrongful discharge is not a vehicle for enforcement of an employer's internal policies or the provisions of its agreements with others. Turner's failure to identify a statutory or constitutional policy that would be thwarted by his alleged discharge dooms his cause of action.

Turner does refer in some of his claims to statutory provisions. He charges that ABI management employees Liakos and Schmitt violated unspecified provisions of "the [federal] Alcohol, Tobacco and Firearms laws." He points to Schmitt's alleged gifts to alcohol retailers "in contravention of ABC laws." According to Turner, Schmitt also instructed sales personnel to remove or tear down competitor's products and advertising, to make consignment sales of alcoholic beverages in violation of "ABC Act § 25503."

Turner's vague charge of "Alcohol, Tobacco and Firearms laws" violations, largely unaccompanied by citations to specific statutory or constitutional provisions, puts ABI and the court in the position of having to guess at the nature of the public policies involved, if any. This kind of showing is plainly insufficient to create an issue of material fact justifying a trial on the merits of Turner's claims. fn. 11

Turner does refer to a single provision of California Alcohol Beverage Control Act (Bus. & Prof. Code, § 23000 et seq. [hereafter Act]) to support his claim. Section 25503 of the Act prohibits consignment sales of alcoholic beverages, i.e., arrangements under which title to beverages is retained by the seller or possession may be returned to the seller. (§ 25503, subd. (a).) In addition, section 23104.2 forbids a seller of beer from reacquiring its product "from a retailer except when the beer delivered was not the brand or size container ordered by the retailer, or the amount delivered was other than the amount ordered ... or if a package had been broken or otherwise damaged prior to or at the time of actual delivery...."

Violations of these sections might be construed as implicating fundamental public policy. The Legislature's declaration of purpose in section 23001 [7 Cal. 4th 1258] of the Act provides as follows: "This division is an exercise of the police powers of the State for the protection of the safety, welfare, health, peace, and morals of the people of the State, to eliminate the evils of unlicensed and unlawful manufacture, selling, and disposing of alcoholic beverages, and to promote temperance in the use and consumption of alcoholic beverages. It is hereby declared that the subject matter of this division involves in the highest degree the economic, social, and moral well-being and the safety of the State and of all its people. All provisions of this division shall be liberally construed for the accomplishment of these purposes." (Italics added.) fn. 12

Assuming that Turner has identified ABI violations of state statutes implicating fundamental public policies, he has nonetheless fallen short of creating a triable issue on a cause of action for wrongful discharge in violation of fundamental public policy. Initially, Turner does not show that he was ever asked to participate in any illegal activity or that he was subjected to harassment for performing a statutory obligation or exercising a statutory right or privilege. (Gantt, supra, 1 Cal.4th at pp. 1090-1091.) Therefore, he cannot assert a wrongful discharge claim in the classic Tameny sense. (See Tameny, supra, 27 Cal. 3d 167 [employee discharged for refusing to participate in illegal price-fixing scheme].) Thus, Turner's claim is limited to an assertion of "whistle-blower harassment," i.e., a contention that he was harassed and ultimately forced to quit because he reported to ABI "an alleged violation of a statute of public importance." (Gantt, supra, 1 Cal.4th at p. 1091.)

But Turner's claim of whistle-blower harassment fails because he cannot demonstrate the required nexus between his reporting of alleged statutory violations and his allegedly adverse treatment by ABI. Turner's reporting activity occurred some four to five years before the negative performance evaluations that Turner maintains caused him to quit. Indeed, contrary to the dissent, there is no indication in the record that management regarded Turner as a disloyal employee and troublemaker for his reporting of illegal activity. In response to Turner's complaints, ABI managers did not dismiss his concerns or admonish him to cease communication, but investigated and made their own determinations that illegal activity was not taking place. The ABI managers receiving Turner's reports were not on the scene when other ABI managers later found his performance less than satisfactory. Turner's performance evaluations and status within ABI were generally satisfactory [7 Cal. 4th 1259] throughout the three-year period following his complaints. On their face, the evaluations appear to be regularly prepared and well documented.

The only reasonable inference from the record before us is that Turner's evaluation reflected a bona fide assessment of his job performance, not a retaliatory blow for reporting alleged illegalities remote in time, place, and context from the evaluation setting.

III. Disposition

For the reasons stated above, Turner's claim for constructive wrongful discharge in violation of fundamental public policy fails as a matter of law. The trial court was correct in granting summary judgment in ABI's favor. We therefore reverse the judgment of the Court of Appeal and direct a summary judgment in favor of ABI. ABI shall recover its costs.

Arabian, J., Baxter, J., and George, J., concurred.

MOSK, J.,

Concurring and Dissenting.-I join in part I. of Justice Kennard's dissenting opinion. I agree, for reasons concisely stated therein, that an employer with constructive rather than actual knowledge of an employee's intolerable working conditions should not be able to escape liability for a constructive wrongful discharge.

I am also in accord with part II.C. of Justice Kennard's dissent. The facts and allegations of this case depict an employer who may have acted from a combination of motives, some legitimate, others not. It should be for the trier of fact to untangle this complex causal web to decide whether Turner's complaint about the company's illegal marketing practices in 1984 substantially contributed to his constructive discharge in 1988.

Nonetheless, I concur in the judgment of the majority because I agree that, as a matter of law, Turner did not suffer in his employment "actions and conditions ... so intolerable or aggravated at the time of the employee's resignation that a reasonable person in the employee's position would have resigned." (Brady v. Elixir Industries (1987) 196 Cal. App. 3d 1299, 1306 [242 Cal. Rptr. 324].) I agree in principle with Justice Kennard that unjustified poor performance evaluations may, in the proper context, constitute an intolerable condition that would cause a reasonable employee to resign. The majority opinion does not declare otherwise. But, although an employee who believes he must look forward to a series of undeservedly negative performance evaluations that will blot his employment record and block his chances for advancement may be able to maintain a cause of action for [7 Cal. 4th 1260] constructive discharge, a single "needs improvement" evaluation after four years of good evaluations does not reasonably warrant that belief. A plaintiff must show at least that the questionable evaluation is more than a singular or occasional occurrence.

Moreover, the view that the conditions of Turner's workplace were not truly "intolerable" is reinforced by his statement that the resignation was dictated by strategic considerations in pursuit of future litigation. (Maj. opn., ante, at p. 1254.) This damaging admission confirms the picture that emerges from the record before us-and before the trial court-that Turner's allegations of intolerable conditions cannot be substantiated.

On this limited basis, I concur in the judgment of the majority.

KENNARD, J.

I dissent.

First, I do not agree with the majority's modification of the established elements for a claim of constructive discharge in violation of public policy. The majority asserts that to succeed on such a claim, the employee must prove that the employer possessed actual and not merely constructive knowledge of the plaintiff's allegedly intolerable working conditions. By excluding constructive knowledge, the majority leaves the employer free to turn a blind eye to blatant and pervasive workplace abuses and to discourage or refuse to entertain employee complaints about intolerable workplace conditions and then claim lack of actual knowledge of the intolerable conditions as a complete defense to a wrongful discharge action. Analogous federal and state law, and considerations of sound public policy, support the constructive knowledge component of the established test for wrongful constructive discharge.

Second, I do not agree with the majority's conclusion that the employer in this case is entitled to summary judgment. Fairly read, the record of the trial court proceedings provides no basis for summary judgment.

I. Constructive Knowledge

In Brady v. Elixir Industries (1987) 196 Cal. App. 3d 1299, 1306 [242 Cal. Rptr. 324], the Court of Appeal identified the elements of a cause of action for wrongful constructive discharge in violation of public policy: "(1) the actions and conditions that caused the employee to resign were violative of public policy;  (2) these actions and conditions were so intolerable or aggravated at the time of the employee's resignation that a reasonable person in the employee's position would have resigned; and (3) facts and circumstances showing that the employer had actual or constructive knowledge of the intolerable conditions and of their impact on the employee and could have remedied the situation." (Italics added.) [7 Cal. 4th 1261]

This definition of constructive discharge has met with unanimous approval in subsequent decisions of the Courts of Appeal. (See, e.g., Rochlis v. Walt Disney Co. (1993) 19 Cal. App. 4th 201, 212 [23 Cal. Rptr. 2d 793]; Soules v. Cadam, Inc. (1991) 2 Cal. App. 4th 390, 399 [3 Cal. Rptr. 2d 6]; Valdez v. City of Los Angeles (1991) 231 Cal. App. 3d 1043, 1059 [282 Cal. Rptr. 726]; Zilmer v. Carnation Co. (1989) 215 Cal. App. 3d 29, 36-37 [263 Cal. Rptr. 422].)

Nevertheless, the majority disapproves this definition to the extent that it would allow proof of the employer's constructive rather than actual knowledge of the intolerable conditions that forced the employee to resign. I disagree.

At the outset, I note that the majority's entire discussion of this point is unnecessary because plaintiff is not proceeding on a theory that his employer had constructive rather than actual knowledge of his allegedly intolerable working conditions. As the majority acknowledges, in this context the term "employer" includes "supervisory employees." (Maj. opn., ante, p. 1255.) Thus, proof that plaintiff's immediate supervisors knew of his allegedly intolerable working conditions is sufficient. Here, plaintiff has alleged not only actual knowledge by his immediate supervisors, but also that they intentionally created the intolerable conditions in retaliation for his opposition to their actions and policies and for the purpose of forcing plaintiff's resignation.

The issue of constructive knowledge could arise only in a case in which the employee's plight is unknown not only to the employing company's management, but also to the affected employee's immediate supervisor, a situation that is not alleged in this case.

Nevertheless, because the majority has chosen to address the issue, and because its determination of the issue will no doubt be accepted as the law of California, I will respond.

Apart from the Court of Appeal's decision in Brady v. Elixir Industries, supra, 196 Cal. App. 3d 1299, and the unanimous acceptance of that decision by this state's appellate courts, is there other substantial persuasive authority for the inclusion of an employer's constructive knowledge within the elements of constructive wrongful discharge? There is.

As the majority explains, federal courts have considered the elements of constructive wrongful discharge in the context of actions brought under title VII of the Civil Rights Act of 1964 (42 U.S.C. § 2000e et seq.), and a clear majority of the federal appellate courts has rejected a requirement that the [7 Cal. 4th 1262] employer intend to force the employee to resign. Under the majority rule in title VII cases, "a constructive discharge occurs whenever the complainant's resignation results from intolerable working conditions, for which the employer is responsible, that would have caused a reasonable person in the plaintiff's position to resign." (Lindemann & Kadue, Sexual Harassment in Employment Law (1992) p. 260, italics added.) Thus, employer responsibility is an element of a title VII claim for constructive discharge. How is employer responsibility established under title VII?

To implement title VII, the Equal Employment Opportunity Commission (EEOC) has issued a variety of regulations, including guidelines on discrimination because of sex (29 C.F.R. § 1604.1 et seq. (1993)) and discrimination because of national origin (id., 1606.1). fn. 1 With regard to harassment by coworkers because of sex or national origin, these guidelines provide that the employer is responsible for the harassment in the workplace where the employer (or its agents or supervisory employees) "knows or should have known of the conduct," unless the employer "can show that it took immediate and appropriate corrective action." (Id., §§ 1604.11(d) [sexual harassment], 1606.8(d) [harassment because of national origin], italics added.) Thus, the EEOC guidelines impose liability on an employer who has constructive knowledge of abusive workplace conditions and fails to act promptly and appropriately to remedy the situation.

This test for employer responsibility for the abusive acts of coworkers has been widely adopted by the federal courts, which have applied the test not only to acts of sexual harassment, but also to harassment on the basis of race, ethnic origin, and other prohibited grounds. Indeed, every federal appellate court that has considered the question has held that, absent prompt and appropriate corrective action, an employer is liable for a hostile workplace environment of which the employer has constructive knowledge. (Lipsett v. University of Puerto Rico (1st Cir. 1988) 864 F.2d 881, 901 [applying title VII standard in a title IX case]; Kotcher v. Rosa and Sullivan Appliance Center, Inc. (2d Cir. 1992) 957 F.2d 59, 63; Andrews v. City of Philadelphia (3d Cir. 1990) 895 F.2d 1469, 1486; Paroline v. Unisys Corp. (4th Cir. 1989) 879 F.2d 100, 107; Nash v. Electrospace System, Inc. (5th Cir. 1993) 9 F.3d 401, 403; Kauffman v. Allied Signal, Inc., Autolite Div. (6th Cir. 1992) 970 F.2d 178, 183; Juarez v. Ameritech Mobile Communications, Inc. (7th Cir. 1992) 957 F.2d 317, 320; Hall v. Gus Const. Co., Inc. (8th Cir. 1988) 842 F.2d 1010, 1015; Ellison v. Brady (9th Cir. 1991) 924 F.2d 872, 881; Hirschfeld v. New Mexico Corrections Dept. (10th Cir. 1990) 916 F.2d 572, [7 Cal. 4th 1263] 577; Steele v. Offshore Shipbuilding, Inc. (11th Cir. 1989) 867 F.2d 1311, 1316; see also Note, Sexual Harassment Claims of Abusive Work Environment Under Title VII (1984) 97 Harv.L.Rev. 1449, 1462-1463.) fn. 2

California law follows federal law on this point. Like title VII, the California Fair Employment and Housing Act (Gov. Code, § 12900 et seq.) prohibits workplace harassment on sexual, racial, and other grounds. When prohibited harassment by a coworker results in a hostile workplace environment, California law, like title VII, imposes liability on an employer who has constructive knowledge of the harassment, unless the employer has taken appropriate remedial action. In the words of the statute, "[h]arassment of an employee or applicant by an employee other than an agent or supervisor shall be unlawful if the entity, or its agents or supervisors, knows or should have known of this conduct and fails to take immediate and appropriate corrective action." (Gov. Code, 12940, subd. (h)(1), italics added.)

Under what circumstances might an employer (or its agents, including immediate supervisors) be said to have constructive knowledge of an employee's intolerable working conditions attributable to the actions of coworkers or subordinates? First, constructive knowledge exists when the intolerable conditions, or the improper practices that result in the intolerable conditions, are so obvious and pervasive that any reasonably attentive employer would notice them. (See E.E.O.C. v. Hacienda Hotel (9th Cir. 1989) 881 F.2d 1504, 1516; Hunter v. Allis-Chalmers Corp., Engine Div. (7th Cir. 1986) 797 F.2d 1417, 1422; Taylor v. Jones (8th Cir. 1981) 653 F.2d 1193, 1199; Note, Sexual Harassment Claims of Abusive Work Environment Under Title VII, supra, 97 Harv.L.Rev. 1449, 1462, fn. 69; Lindemann & Kadue, Sexual Harassment in Employment Law, supra, pp. 242-244.) Second, constructive knowledge exists when the employer declines to read or listen to employee complaints, otherwise discourages employee complaints, or gives the employee no reasonably available means to complain. (See Kotcher v. Rosa and Sullivan Appliance Center, Inc., supra, 957 F.2d 59, 63; [7 Cal. 4th 1264] Levendos v. Stern Entertainment, Inc. (3d Cir. 1990) 909 F.2d 747, 753 [116 A.L.R.Fed. 653].)

The constructive knowledge component of the established test for wrongful constructive discharge is supported by logic, sound public policy, and analogous but persuasive authority under title VII. I would retain it.

II. Summary Judgment

Disagreeing with the Court of Appeal, the majority concludes that defendant was entitled to summary judgment because of "two fatal flaws" in plaintiff's claim for constructive discharge in violation of public policy. (Maj. opn., ante, p. 1253.) The asserted flaws are, first, insufficient proof that plaintiff's working conditions were intolerable at the time he resigned and, second, insufficient nexus between plaintiff's complaints about illegal activities and his adverse performance evaluations. To explain why the majority's conclusion is erroneous, I will review the pertinent facts and then discuss each of the claimed "fatal flaws."

A. Facts

Plaintiff's complaint includes a claim for constructive discharge in violation of public policy. In support of that claim, the complaint makes these allegations:

In January 1984, Anheuser-Busch, Inc. (ABI) hired plaintiff to work at its plant in Riverside. On or about January 31, 1989, plaintiff was forced to resign after his supervisors "lodged a campaign of harassment to create intolerable conditions and to constructively terminate plaintiff" because of plaintiff's opposition to various practices that plaintiff regarded as illegal or otherwise improper. These improper practices included: (1) violations of "Alcohol, Tobacco and Firearms laws"; (2) violations of collective bargaining agreement provisions concerning conflicts of interest, wages, benefits, and job security; (3) violations of company policies prohibiting family members and relatives working in the same department, and requiring temperature control of draught beer to prevent spoilage; and (4) manipulation of sales records to artificially improve the Riverside plant's performance compared to other ABI facilities.

To justify punitive action against plaintiff, plaintiff's supervisors solicited and encouraged coworkers to fabricate accusations against plaintiff and to document these false accusations, which could then be used in annual merit reviews. Plaintiffs' supervisors also harassed plaintiff by changing his work shift schedule to affect his service on a federal jury panel. [7 Cal. 4th 1265]

ABI answered the complaint with a general denial (Code Civ. Proc., § 431.30, subd. (d)) and the assertion of various defenses. Eventually, after other proceedings not relevant here, ABI moved for summary judgment. In support of its motion for summary judgment, ABI relied upon excerpts from plaintiff's deposition and upon declarations by two of plaintiff's supervisors, George Liakos and Bill Richards. In opposition to ABI's summary judgment motion, plaintiff submitted a declaration by himself, excerpts from Liakos's deposition, and additional excerpts from plaintiff's own deposition. Considering all this evidence, the following picture emerges.

ABI employed plaintiff at its wholesale operations division (WOD) in Riverside from January 1984 until plaintiff's resignation on January 3, 1989. The Riverside WOD serves as a distribution center for the sale of ABI's beer and related products throughout Southern California. Plaintiff had previously worked for ABI as the industrial relations manager at its Los Angeles brewery in Van Nuys from 1975 to 1981.

George Liakos was the general manager at the Riverside WOD. He hired plaintiff in the position of branch off-premises coordinator with responsibility for the Riverside WOD's beer sales to retailers, such as liquor stores and supermarkets, that sell alcoholic beverages for consumption away from the retailers' premises. Plaintiff began work in January 1984. His immediate supervisor was William Schmitt, the sales manager, who reported directly to Liakos.

On his first performance appraisal, in June 1984, plaintiff received an overall rating of "good," which the appraisal form defines as "consistently dependable and competent performance of the job." The report was divided into 14 rating categories. Plaintiff received a "good" rating in 11 categories, a "very good" rating in 2 categories, and a "needs improvement" rating in 1 category. Schmitt performed the appraisal, and Liakos approved it.

On his next appraisal, in December 1984, plaintiff received an overall rating of "needs improvement," which the appraisal form defines as "performance which does not meet minimum level of acceptability, and is not good enough to warrant recognition or greater responsibility." He retained a "good rating" in five categories, and a "very good" rating in one category, but he received a "needs improvement" rating in eight categories. On this evaluation as well, Schmitt made the appraisal, and Liakos approved it.

The parties agree that the June 1984 evaluation was based solely on an objective evaluation of plaintiff's performance during the appraisal period, but they disagree about the reason for the "needs improvement" rating in the [7 Cal. 4th 1266] December 1984 evaluation. The written appraisal states that the lower rating was caused primarily by plaintiff's failure to timely and accurately complete important sales reports and to follow through on sales and marketing projects. In his declaration, Liakos states that the appraisal was based "solely on an objective review of Plaintiff's performance during the appraisal period." By contrast, plaintiff's deposition reveals his belief that he had performed competently during the rating period and that the adverse rating was given in retaliation for his complaints about certain practices by his supervisor, Schmitt.

During his deposition, plaintiff testified about the following incidents:

(1) Plaintiff received information that Schmitt had directed one employee (Elledge) to have some Anheuser-Busch jackets made and to provide them as gifts to an ABI customer (a liquor retailer). Believing this conduct to be in violation of state or federal law, fn. 3 plaintiff reported the matter to Liakos. In a later conversation with plaintiff, Liakos said that Schmitt had admitted giving the jackets to retailers. According to plaintiff's declaration, Liakos told plaintiff he "had made arrangements for Schmitt to have the customers make payments for the material which was given in violation of the Alcohol and Beverage Commission regulations." fn. 4

(2) Plaintiff received information that Schmitt had directed another employee (Newman) to give a different ABI customer tickets to professional baseball games. Plaintiff relayed this information to Bill Richards, the operations manager, who at the time was his supervisor.

(3) Schmitt encouraged ABI sales employees to remove competitors' advertising displays from retail liquor stores. At the morning meeting of the sales department, Schmitt would initial the purloined displays and award the responsible employee points toward "salesman of the month." During the course of the meeting, Schmitt would, in plaintiff's words, "take these things, some of these things that were particularly good and he would hold them up as documentation, identify the person who brought them in and give him an 'atta boy.' " Based on briefings by ABI attorneys, plaintiff believed [7 Cal. 4th 1267] that handling or removing a competitor's retail displays was illegal. fn. 5 Plaintiff mentioned his concern to Schmitt. According to plaintiff's testimony, Schmitt responded with these words: "This is not a debating society. If I tell you to do it you do it." Plaintiff then raised the problem with Liakos. According to plaintiff, Liakos's response was: "Thank you for telling me. I'll handle it."

(4) Plaintiff also complained to Schmitt about fabrication of company documents reflecting the number of times ABI representatives had called on customers. Schmitt's sarcastic reply, as related by plaintiff, was, "We'll call in a priest."

In July 1985, Liakos transferred plaintiff from the sales department to the delivery department, with no change in salary. The reason for the transfer is disputed. In his declaration, Liakos states that he transferred plaintiff because of plaintiff's performance problems in the sales department and because he believed plaintiff's background would be better utilized in the delivery area. By contrast, plaintiff's deposition reveals his conviction that he had performed competently in the sales department and that the transfer, like the adverse performance evaluation, was in retaliation for his complaints about the previously mentioned practices by Schmitt.

In his new position, plaintiff supervised the day-to-day activities of delivery department employees. His immediate supervisor was Steve Garcia, the delivery manager, and his second level supervisor was Bill Richards, the operations manager. Garcia reported to Richards, who in turn reported to Liakos. In performance evaluations in December 1985, December 1986, and November 1987 plaintiff received an overall rating of "good." Richards made the appraisals; Liakos approved them. It is undisputed that these evaluations were based solely on an objective evaluation of plaintiff's performance during the appraisal periods.

In his December 1988 performance appraisal, plaintiff received an overall rating of "needs improvement." The decline from the November 1987 appraisal was dramatic. In the earlier evaluation, plaintiff was rated "good" in eight categories, "very good" in six categories, and "excellent" in one category. He did not receive a single "needs improvement" rating in any of the 15 rating categories. In the December 1988 appraisal, by contrast, plaintiff was rated "needs improvement" in eight categories, and "good" in the remaining seven categories. [7 Cal. 4th 1268]

Richards and Garcia prepared the December 1988 appraisal, which Liakos approved. The parties dispute the reason for the sudden decline in plaintiff's ratings. In his declaration, Liakos states that the ratings were based solely on an objective evaluation of plaintiff's performance during the appraisal period. More specifically, he states that plaintiff's performance began to deteriorate during mid-1988, in that plaintiff became uncooperative, confrontational with management, and failed to timely complete assigned projects. In Liakos's words, plaintiff appeared to be "an embittered and disgruntled employee." The Richards declaration echoes these allegations of plaintiff's "poor attitude and performance" during this time and provides some specific instances.

Plaintiff, by contrast, maintains that his performance never deteriorated below the level of "good" and that the "needs improvement" performance evaluation was part of a concerted effort of harassment in retaliation for plaintiff's continuing opposition to his superiors' improper practices. He states in his declaration that his supervisors did not question him about the alleged instances of poor performance at the time they occurred, and that Richards raised them for the first time on December 28, 1988. Plaintiff states that he denied the allegations when first confronted with them. As he explained in his deposition, he then believed he was being "set up" for termination; he testified that his supervisors had used similar tactics in the past with other employees, whom he named. fn. 6

During his tenure with the delivery department, plaintiff complained to Riverside WOD management about actions he believed were in violation of ABI's union contracts. Specifically, he complained that ABI was violating its union contract by subcontracting the task of washing delivery trucks to a company owned by Garcia, the delivery manager, when this task should have been performed by ABI employees who were union members. Plaintiff complained to Garcia, Richards, and Liakos about this contract violation.

Plaintiff also informed Liakos about a provision of the union contract defining eligibility for what plaintiff described as "health and welfare benefits." Plaintiff told Liakos that ABI could be "in jeopardy" for withholding [7 Cal. 4th 1269] benefits under this provision. He recommended that the provision be revised when the union contract was renegotiated, but it was never changed. Plaintiff also believed that the company was violating a contract provision stating, in plaintiff's words, that "clerical staff would be paid for 40 hours and work 37 and a half." When plaintiff mentioned this problem to Liakos, Liakos replied, "We'll live with it until we are caught."

Plaintiff also complained that the Riverside facility was not following ABI policies requiring temperature control of draught beer, with the result that the beer was in danger of spoilage.

On January 3, 1989, approximately one week after the discussion with Richards about his performance evaluation, plaintiff tendered his letter of resignation, effective January 31.

B. Intolerable Conditions

The essential elements of a claim for constructive discharge in violation of public policy are, as I have previously observed, the following: (1) working conditions so intolerable or aggravated that a reasonable person in the employee's position would have felt compelled to resign; (2) circumstances sufficient to establish the employer's responsibility for the intolerable conditions, and (3) circumstances showing that the discharge violated public policy. (Brady v. Elixir Industries, supra, 196 Cal. App. 3d 1299, 1306.) The majority concludes that the state of the evidence relating to the first element-intolerable working conditions-warrants summary judgment for defendant ABI. I disagree. Although I would not characterize the evidence of intolerable conditions as "overwhelming," I am convinced it was sufficient to establish a triable issue of fact.

By itself, a single adverse performance review does not constitute intolerable working conditions, even when the low evaluation is unjustified. But the record here, viewed in the light most favorable to the party opposing summary judgment (Molko v. Holy Spirit Assn. (1988) 46 Cal. 3d 1092, 1107 [252 Cal. Rptr. 122, 762 P.2d 46]), shows considerably more.

According to plaintiff, the adverse December 1988 performance review was not an isolated incident, but was part of a concerted campaign of harassment designed to force him to leave the company. He has provided some evidence to justify this assertion; defendant's contrary evidence does no more than establish the existence of a triable issue of fact.

Plaintiff suffered two adverse performance reviews, both of which followed plaintiff's complaints about actions of his supervisors that he considered illegal or otherwise improper. After the first adverse evaluation, he was [7 Cal. 4th 1270] given a lateral transfer from the sales department to the delivery department. It is a reasonable inference, although disputed by defendant, that Liakos's purpose in transferring plaintiff was to prevent him from observing and opposing activities by Schmitt, the sales manager, that were illegal but that Liakos was willing to tolerate or even encourage because they increased the company's sales. It is also a reasonable inference that after plaintiff opposed certain practices in the delivery department, Liakos made a similar decision to prevent him from observing and opposing improper activities in that department; lateral transfer no longer being feasible, Liakos, in concert with Garcia and Richards, fabricated charges that would support adverse performance evaluations of plaintiff and eventually lead to his discharge or resignation.

It is striking that after some four years in the delivery department, during which plaintiff received uniformly favorable evaluations, he suddenly received a negative evaluation. Plaintiff has explained this anomaly by stating that his performance did not change and that the charges against him were fabricated in retaliation for his opposition to practices in the delivery department. Defendant, by contrast, has offered no explanation for the sudden deterioration in plaintiff's performance that it claimed had occurred.

Plaintiff testified, without contradiction, that his supervisors had not discussed any of the instances of poor performance cited in the December 1988 evaluation at the time they allegedly occurred. This was contrary to normal and sound personnel practices, and it lends credence to plaintiff's belief that he was being "set up" for discharge.

Finally, plaintiff testified, again without contradiction, that Liakos had used the same or similar tactics with other employees who had opposed or reported improper activities at ABI's Riverside facility. This testimony further supports the conclusion that plaintiff was being "set up" for termination or discharge.

The question, then, is not whether one, or even two, adverse performance reviews justify an employee's decision to resign. Rather, the issue is whether a reasonable employee would find working conditions intolerable, and feel compelled to resign, when the employee's supervisors had launched a campaign to drive the employee out of the company by means of adverse performance evaluations, based on charges deliberately fabricated. Knowing that the poor evaluations would continue and would eventually lead to discharge, and knowing also that discharge would reduce the prospects of employment elsewhere, an employee of normal sensibilities might very well find the described situation intolerable. Because plaintiff presented substantial evidence to support this description of his predicament at the Riverside [7 Cal. 4th 1271] WOD when he resigned, the existence of intolerable conditions presents a triable issue of fact.

C. Nexus

As to the third element of the claim for constructive discharge in violation of public policy-circumstances showing that the discharge violated public policy-the majority asserts that if there was a constructive discharge in December 1988, uncontradicted evidence establishes that it was unrelated to the illegal activities that allegedly occurred in the sales department in 1984. fn. 7 As I understand the majority opinion, it does not dispute that the alleged violations of alcoholic beverage control laws-including the alleged gifts to retailers and encouraging employees to remove competitors' retail advertising displays-were themselves against public policy, or that discharging an employee in retaliation for opposition to these activities would likewise be against public policy. Rather, the majority concludes that ABI has carried its summary judgment burden of establishing the absence of any causal link between the discharge and the alleged illegal activities. Once again, I disagree.

Plaintiff's complaints about illegal activities in the sales department promptly resulted in an adverse performance evaluation (in December 1984) and a transfer to the delivery department. Whether plaintiff was thereafter a "marked man" within the company is properly a jury question. Assuming that he was, I do not find it implausible that his supervisors allowed an interval of time to pass before stepping up a campaign of harassment designed to force plaintiff to resign or be fired. Indeed, this is exactly how one might expect a legally sophisticated employer to treat an employee it regards as disloyal.

Moreover, the record shows that the period between plaintiff's transfer to the delivery department and his December 1988 adverse performance evaluation was not uneventful. Plaintiff continued to oppose activities he regarded as improper. Although these activities did not violate fundamental public policy (see fn. 7, ante), they gave his superiors, and particularly Liakos, continuing grounds to regard plaintiff as a disloyal employee and a troublemaker. Thus, there is sound evidentiary support for plaintiff's belief that his final adverse evaluation was not based on an objective appraisal of his performance, but rather was made to force him out of the company in retaliation for his "disloyal" opposition to established practices at the Riverside WOD. If this is true, then the only issue as to "nexus" is whether the [7 Cal. 4th 1272] negative appraisal was only in retaliation for plaintiff's opposition to certain practices in the delivery department, or whether it was also, in significant part, in retaliation for plaintiff's opposition to law violations in the sales department. In my view, the answer to this question, and thus the existence of the required nexus, presents a triable issue of fact.

The majority offers unpersuasive reasons for denying plaintiff a trial on the merits of his wrongful discharge claim. In my view, the claim is not suitable for summary judgment and should proceed to trial.

III. Conclusion

An employer who reasonably should know of intolerable workplace conditions, and who does nothing to correct them, should not escape liability when the intolerable conditions force an employee to quit. As I have explained, in reaching out unnecessarily to strike down the constructive knowledge component of the established test for constructive discharge, the majority diverts our state's employment jurisprudence from the judicial mainstream of American employment law.

In this case, moreover, the majority errs in directing summary judgment for the employer. Defendant employer failed to establish that plaintiff employee will be unable to prove any element of his constructive wrongful discharge claim at trial.

For these reasons, I dissent.

Woods (A. M.), J., fn. * concurred.

FN *. Presiding Justice, Court of Appeal, Second Appellate District, Division Four, assigned by the Acting Chairperson of the Judicial Council.

FN 1. See, e.g., Stetson v. Nynex Service Company (2d Cir. 1993) 995 F.2d 355, 361 (employer "deliberately created working conditions that were ' "so difficult or unpleasant that a reasonable person in the employee's shoes would have felt compelled to resign" ' "); McKethan v. Texas Farm Bureau (5th Cir. 1993) 996 F.2d 734, 740 (employer " 'deliberately makes an employee's working conditions so intolerable that the employee is forced into involuntary resignation' "); Irving v. Dubuque Packing Co. (10th Cir. 1982) 689 F.2d 170, 172 (employer "deliberately makes or allows the employee's working conditions to become so intolerable that the employee has no other choice but to quit"); Johnson v. Bunny Bread Co. (8th Cir. 1981) 646 F.2d 1250, 1256 (employer " 'deliberately renders the employee's working conditions intolerable and thus forces [the employee] to quit' ").

FN 2. The federal ADEA cases are collected in Annotation, Circumstances Which Warrant Finding of Constructive Discharge Under Age Discrimination in Employment Act (1989) 93 A.L.R.Fed. 10.

FN 3. In some circumstances, a single intolerable incident, such as a crime of violence against an employee by an employer, or an employer's ultimatum that an employee commit a crime, may constitute a constructive discharge. Such misconduct potentially could be found "aggravated." No such misconduct is alleged in this case.

FN 4. See Valdez v. City of Los Angeles (hereafter Valdez) (1991) 231 Cal. App. 3d 1043, 1056 [282 Cal. Rptr. 726] ("In general, a 'single isolated instance' of employment discrimination is insufficient as a matter of law to support a finding of constructive discharge.... Thus, the mere failure to promote the plaintiff, even if unlawfully discriminatory, will not support a finding of constructive discharge.... Nor is it sufficient to show only that the employee received a poor performance rating."); Soules v. Cadam, Inc. (1991) 2 Cal. App. 4th 390, 401 [3 Cal. Rptr. 2d 6] (hereafter Soules) ("Further, demotion of job level, even when accompanied by reduction in pay, does not constitute constructive discharge.").

FN 5. See also Slack, supra, 423 S.E.2d at page 556; 93 A.L.R.Fed., supra, at page 16 (Courts "generally recognize the view that the standard of intolerability is an objective one, viewed from the standpoint of the reasonable person .... These courts generally hold that a constructive discharge occurs when an employer makes working conditions so difficult or unpleasant that a reasonable person in the employee's shoes would feel compelled to resign.").

FN 6. ABI's motion for summary judgment was heard and granted in 1989, well before the 1992 amendments to the summary judgment statute. (See, e.g., Code Civ. Proc., § 437c, subd. (n), added by Stats. 1992, ch. 1348, § 1.) Therefore, our discussion of summary judgment procedure necessarily reflects pre-1993 law. We have no occasion in this case to determine the effect of section 437c as amended.

FN 7. The record suggests there may be some question as to the applicable limitations period in this case. It may be four years (Code Civ. Proc., § 343), two years (id., 339, subd. 1), or one year (id., § 340, subd. (3)). Because of our rejection of the Panopulos rule, we need not and do not decide this question.

FN 8. The Court of Appeal suggested that Turner may have postponed his resignation in an effort to secure retirement benefits. As ABI notes, there was no contention by Turner, nor any evidence before the court, that Turner waited to resign until he was eligible for retirement benefits. Turner does not challenge this assertion.

FN 9. See also Foley, supra, 47 Cal.3d at page 670, footnote 11 (policy must be " 'firmly established'..., 'fundamental'..., and 'substantial' "); Sequoia Ins. Co. v. Superior Court (1993) 13 Cal. App. 4th 1472, 1480 [16 Cal. Rptr. 2d 888] ("constitutional or statutory provision must sufficiently describe the type of prohibited conduct to enable an employer to know the fundamental public policies that are expressed in that law").

FN 10. The interest advanced by the policy must inure to the benefit of the public at large, rather than simply to the individual employer or employee. (Gantt, supra, 1 Cal.4th at pp. 1090, 1095-1096; see Foley, supra, 47 Cal.3d at p. 669.)

FN 11. Turner also asserts in his brief in this court that his ABI supervisors "harassed" him by "changing his work shift schedule to affect his service on a federal jury panel." Like the balance of Turner's argument, this assertion is both factually and legally devoid of merit. The portion of the record Turner cites shows only that he had some difficulty reaching his immediate supervisor by phone to coordinate his schedule while on jury duty. At the time, he did not feel the problem was sufficiently important even to mention to another ABI manager, with whom Turner was in contact about his jury service. Turner nowhere demonstrates how, if at all, his jury service was interfered with nor, again, does he direct our attention to any specific statute or constitutional provision implicating a fundamental public policy. Thus, Turner fails to meet his burden of showing a triable issue of fact.

FN 12. In addition, although Turner does not cite the applicable law, ABI's alleged conduct in interfering with product display and advertising of competing sellers inside retail outlets might be construed as illegal "ribbonizing" in violation of Business and Professions Code sections 25502, subdivision (b) and 25503.3 and California Code of Regulations, title 4, section 106, subdivision (b). (Markstein Distributing Co. v. Rice (1976) 65 Cal. App. 3d 333 [135 Cal. Rptr. 255].)

FN 1. The EEOC has also issued guidelines for discrimination because of religion (29 C.F.R. § 1605.1 et seq. (1993)), but the guidelines for religious discrimination do not appear to define employer responsibility for harassment by coworkers.

FN 2. In most instances, the language of the federal appellate court rulings closely tracks the language of the EEOC guidelines. (E.g., Andrews v. City of Philadelphia, supra, 895 F.2d 1469, 1486 ["management-level employees had actual or constructive knowledge about the existence of a sexually hostile environment and failed to take prompt and adequate remedial action"]; Katz v. Dole (4th Cir. 1983) 709 F.2d 251, 255 ["the employer had actual or constructive knowledge of the existence of a sexually hostile working environment and took no prompt and adequate remedial action"]; Nash v. Electrospace System, Inc., supra, 9 F.3d 401, 403 ["the employer either knew or should have known of the harassment and failed to take prompt remedial action"].) The one exception is the Second Circuit, which has phrased the rule under which an employer is responsible for a hostile environment resulting from coworker harassment in terms of a requirement that the employer "either provided no reasonable avenue for complaint or knew of the harassment but did nothing about it." (Kotcher v. Rosa and Sullivan Appliance Center, Inc., supra, 957 F.2d 59, 63.)

FN 3. Plaintiff's belief was well founded: By state law, a liquor wholesaler is generally prohibited from giving any gift to any off-premises retailer or in connection with the sale or distribution of any alcoholic beverage. (Bus. & Prof. Code, §§ 25502, subd. (a)(2), 25600; see also, Smith v. Brown-Forman Distillers Corp. (1987) 196 Cal. App. 3d 503, 510 [241 Cal. Rptr. 916]; Markstein Distributing Co. v. Rice (1976) 65 Cal. App. 3d 333 [135 Cal. Rptr. 255].)

FN 4. In his declaration, Liakos admitted that plaintiff had informed him that Schmitt had provided an Anheuser-Busch jacket to a customer, but he stated that upon inquiry Schmitt had told him that the customer had paid for the jacket. Liakos declared that he had been satisfied with this representation and had terminated his investigation. He denied that plaintiff had ever complained to him about other alleged unlawful or improper activity.

FN 5. Plaintiff's belief that it was illegal to handle the products or advertising displays of competing alcoholic beverage distributors was well founded. (See Smith v. Brown-Forman Distillers Corp., supra, 196 Cal. App. 3d 503, 510; Markstein Distributing Co. v. Rice, supra, 65 Cal. App. 3d 333.)

FN 6. Plaintiff described the case of an employee named Van Hoy, who had reported to ABI's head office in St. Louis that employees at the Riverside facility were fabricating sales documents "for accounts that never received the goods." Van Hoy's report triggered an investigation, as a result of which two employees were fired. But Van Hoy was given reduced responsibilities, his keys were taken away, and he was not allowed to handle cash any more. Plaintiff stated that Van Hoy "got the message and left."

Plaintiff also testified that Bosman, Hocking, Dunez (or Dunaj), and Peterson were four Riverside WOD employees whose merit reviews had been fabricated to encourage them to "terminate rather than be fired."

FN 7. I do not challenge the majority's conclusion that the alleged activities in the delivery department-violations of collective bargaining agreements and internal company policies-were not against fundamental public policy.

FN *. Presiding Justice, Court of Appeal, Second Appellate District, Division Four, assigned by the Acting Chairperson of the Judicial Council.
Start of the 3 Year Limit

Start of three years long Limit
Mullins v. Rockwell Internat. Corp.


SOURCE: 

KEY WORDS:
Termination, Time Limitation, Date Calculation

AGENCY:

Surpeme Court of California


Document Citation:

S053132


Cornelius MULLINS,
Plaintiff and Appellant,

v.

ROCKWELL INTERNATIONAL CORPORATION,
Defendant and Respondent.

15 Cal.4th 731 (Cal. 1997)

63 Cal. Rptr. 2d 636
936 P.2d 1246


 Nick N. Mrakich and Douglas Fee, Pasadena, for Plaintiff and Appellant. Quackenbush & Quackenbush, and William C. Quackenbush, San Mateo, as Amici Curiae on behalf of Plaintiff and Appellant. Peck & Loewe, Woodland Hills, Allan P. Loewe, Los Angeles, Paul, Hastings, Janofsky & Walker, Paul W. Cane, Jr. and Jenny C. Wu, Los Angeles, for Defendant and Respondent.


In this case we consider whether the statute of limitations in a breach of contract action based upon an alleged constructive termination of employment begins to run when the alleged intolerable working conditions occur, or instead when employment actually is terminated.   The Court of Appeal concluded that the employee's knowledge of intolerable working conditions should be the circumstance that begins the running of the statute of limitations in a case of alleged constructive discharge.   We disagree.   As in our recent decision in Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479, 59 Cal.Rptr.2d 20, 926 P.2d 1114 (Romano ), in which we rejected  notice of termination as the event triggering the statute of limitations in a contract action alleging wrongful termination of employment, we conclude that the statute of limitations runs from the date of actual termination of employment in any contract action for wrongful termination, whether or not constructive discharge is alleged.


I


Plaintiff Cornelius Mullins was employed by defendant Rockwell International Corporation (Rockwell) for 22 years in various managerial positions.   Throughout this time, Mullins received promotions, salary increases, bonuses, and awards.   In 1983, Mullins became factory manager of Rockwell's Downey facility, replacing Dan Brown, who was moved to Rockwell's Palmdale facility to work under Sy Rubenstein.   From 1983 to 1988, Mullins received excellent performance reviews, and for most of that time he received a salary rank of 18, which was considered an executive level of pay at Rockwell.


In early January 1988, when Rubenstein became president of Rockwell's Space Transportation Division, he requested all executives in his division to submit an account of their personal goals.   Mullins responded that at age 56, with 22 years of seniority, he had 76 points toward his retirement goal of 85 points.   He expected to work at Rockwell for another four or five years as factory manager.   Shortly thereafter, at one of Rubenstein's first staff meetings as division president, Rubenstein commented that you do not have to fire someone, but can “just give them a shit job they can't do and don't talk to them.”


On February 2, 1988, Rubenstein announced that for the purpose of construction of the space shuttle Endeavor, he would combine the management of both the Downey and Palmdale facilities and have one director oversee both.   Because Brown, Mullins's counterpart at Rockwell's Palmdale facility, had experience in building spacecraft, Rubenstein selected him to be the new director, but assured Mullins that he would not be hurt by the move.   On February 4, 1988, Mullins met with Brown and was told that he would head the “back shops.”   Shortly thereafter, Mullins was reassigned to a new position as Project Director of Manufacturing and Testing, which he viewed as a demotion, because the newly created position was not executive level, had no job description, and did not provide for a secretary or staff.


For the rest of his employment at Rockwell, Mullins alleged, his job responsibilities and working environment continually diminished.   Although promised important assignments, his only significant assignment in 1988  was to set up a “cold plates” process in the shops, which required less than one day per week of actual work.   Mullins spent the rest of his time waiting for assignments that never materialized.   He was excluded from executive staff meetings.   At the same time, two new directors, former subordinates of Mullins, were appointed to executive level positions.   Mullins was not asked to interview for these positions.   Further, Brown did not review plaintiff's job performance for 1988 or 1989, despite company policy that required Brown to do so.   Rubenstein also refused to approve merit increases for Mullins in 1988 and cut his bonus by two-thirds.   This was the first year in 21 years that Mullins failed to receive a raise from Rockwell and the first time in 5 years that his bonus was decreased.   On several occasions, Mullins complained to his superior that he had no responsibilities, and he objected to his assignment as project director.


Mullins viewed his situation as the result of “internal politics,” because of his relationship with Rubenstein's predecessor, Rocco Petrone, whom Rubenstein disliked.   Mullins's coworkers thought of Mullins as a “Petrone man.”   Although Mullins continued to receive his executive level salary, an internal letter dated June 27, 1988, stated that his position was to be evaluated objectively no later than February 1989, and that he would be assigned a new grade level reflecting his changed responsibilities.   Because Mullins's responsibilities were not at the executive level, he expected that this evaluation would lead to a nonexecutive pay level and a loss of current and future benefits, including his anticipated retirement at an executive level.   Feeling stressed and humiliated, Mullins took a medical leave of absence from March 18, 1988, to April 24, 1988, and again from January 7, 1989, to September 20, 1989.   During such a medical leave, company policy prohibited reevaluation of job classification.   His medical leave due to expire, Mullins submitted his resignation to Rockwell on September 20, 1989, and actually retired on an unspecified date in October 1989.


On September 19, 1991, Mullins filed a complaint against Rockwell for constructive discharge and requested damages.   The complaint alleged (1) wrongful termination, (2) wrongful termination based upon a breach of the covenant of good faith and fair dealing, and (3) breach of an oral employment contract.   Mullins alleged he was forced to resign because Rockwell was going to demote him and reduce his pay and benefit level when he returned from sick leave.   He submitted his resignation while still, technically, in a high-level management position.   In addition, he alleged the existence of an oral contract of employment arising from his long service, his promotions, his bonuses, his stock rights, the praise given him, and Rockwell's practices and policies, which impliedly prohibited termination of employment except for good cause.


 Rockwell sought summary judgment on the ground that all the claims alleged against it were time-barred by the applicable statute of limitations.   Rockwell asserted that the first cause of action was barred by the one-year statute of limitations for tort actions set out in Code of Civil Procedure section 340(3).   As to the second and third causes of action, involving breach of the covenant of good faith and fair dealing and breach of an oral contract, Rockwell maintained that the two-year limitations period in Code of Civil Procedure section 339 applied.   The applicability of these limitations periods was not the subject of dispute.   Rather, the issue was when these statutes of limitation began to run.   Rockwell alleged that these limitation periods began to run on January 19, 1988, when Mullins received word of his alleged demotion, or at the latest on March 18, 1988, when Mullins took his first medical leave.   Mullins failed to address Rockwell's statute of limitations argument directly, but instead argued the substantive merits of his claim.


The trial court granted Rockwell's motion for summary judgment on the ground that all claims were barred by the applicable statutes of limitation.   The court declared that the first cause of action was barred by the applicable one-year limitations period because Mullins announced his resignation on September 20, 1989, and did not file his complaint until September 19, 1991.   The court also declared that “a demotion will not support a constructive discharge claim.”   The court further held that the second and third causes of action were barred by the two-year statute of limitations set out in Code of Civil Procedure section 339, which “began to run once plaintiff suffered appreciable harm.”   Because Mullins realized he was demoted when Rubenstein notified him of the change in his status on January 19, 1988 (that is, when he was told Brown would head both the Palmdale and Downey facilities and that some position would be found for him), he suffered appreciable harm at that time.   Accordingly, the trial court concluded that his complaint filed on September 19, 1991, was untimely.


Mullins appealed, and the Court of Appeal affirmed.   It concluded that even if it were assumed the date of resignation commenced the running of the limitations period for any tort claim, Mullins had failed to file his action within one year of that date.   With respect to the contract causes of action, the Court of Appeal declared that the limitations period for a wrongful discharge claim begins when the employee is given notice of termination or “the basis for constructive discharge,” not when termination occurs.   It reasoned that the limitations period begins when the circumstances have developed such that the plaintiff is entitled to a legal remedy.   Applying this theory, it determined that Mullins's contract claims accrued at the latest in January 1989, when he became aware of all the facts underlying Rockwell's new attitude toward him.


 II


The Court of Appeal determined that Mullins's contract claims were barred by the statute of limitations;  the court did not consider the merits of the claims.   We determine only the issue of when the statute of limitations begins to run in a contract action based upon constructive discharge from employment.   Like the Court of Appeal, we need not and do not decide whether the facts upon which Mullins's claim is based are sufficient to support a contract action premised upon a claim of constructive discharge.


We recently examined the constructive discharge doctrine in Turner v. Anheuser-Busch, Inc. (1994) 7 Cal.4th 1238, 32 Cal.Rptr.2d 223, 876 P.2d 1022 (Turner ).   We explained that constructive discharge is a termination of employment that is caused by the employer and is against the employee's will.   (Id. at pp. 1244, 1249, 32 Cal.Rptr.2d 223, 876 P.2d 1022.)   As we noted, “[a]ctual discharge carries significant legal consequences for employers, including possible liability for wrongful discharge.   In an attempt to avoid liability, an employer may refrain from actually firing an employee, preferring instead to engage in conduct causing him or her to quit.   The doctrine of constructive discharge addresses such employer-attempted ‘end runs' around wrongful discharge and other claims requiring employer-initiated terminations of employment.”  (Id. at p. 1244, 32 Cal.Rptr.2d 223, 876 P.2d 1022.)


 We emphasized that constructive discharge occurs only when an employer terminates employment by forcing the employee to resign.  (Turner, supra, 7 Cal.4th at p. 1244, 32 Cal.Rptr.2d 223, 876 P.2d 1022;  see also Scott v. Pacific Gas & Electric Co. (1995) 11 Cal.4th 454, 468, 46 Cal.Rptr.2d 427, 904 P.2d 834.)   A constructive discharge is equivalent to a dismissal, although it is accomplished indirectly.  (Turner, supra, 7 Cal.4th at p. 1245, 32 Cal.Rptr.2d 223, 876 P.2d 1022.)   Constructive discharge occurs only when the employer coerces the employee's resignation, either by creating working conditions that are intolerable under an objective standard, or by failing to remedy objectively intolerable working conditions that actually are known to the employer.  (Id. at p. 1249, 32 Cal.Rptr.2d 223, 876 P.2d 1022.)   We have said “a constructive discharge is legally regarded as a firing rather than a resignation.”  (Id. at p. 1245, 32 Cal.Rptr.2d 223, 876 P.2d 1022.)


We noted in Turner, supra, 7 Cal.4th 1238, 32 Cal.Rptr.2d 223, 876 P.2d 1022, that courts in various jurisdictions have defined quite differently the requisite intent on the part of the employer.   Some require proof of the employer's express intent to secure the employee's resignation through the creation of intolerable conditions, while some require only that the employer have constructive knowledge that intolerable conditions exist.   We concluded that proof of express intent to discharge is not required, because the employer's intent rarely will be  revealed by direct evidence.  (Id. at p. 1249, 32 Cal.Rptr.2d 223, 876 P.2d 1022.)   The court rejected a constructive knowledge standard, however, as providing insufficient support for the goal of informal conciliation in the workplace.  (Id. at p. 1248, 32 Cal.Rptr.2d 223, 876 P.2d 1022.)   We did not find it appropriate to permit the employee to institute a lawsuit without giving the employer some notice of intolerable conditions so that the employer would have the opportunity to attempt corrective measures.   Rather, in order to ensure that the resignation actually is employer coerced, the court concluded that the better practice is to require proof that “the employer either intentionally created or knowingly permitted working conditions that were so intolerable or aggravated at the time of the employee's resignation that a reasonable employer would realize that a reasonable person in the employee's position would be compelled to resign.”   (Id. at p. 1251, 32 Cal.Rptr.2d 223, 876 P.2d 1022.)


Mullins alleged that he was constructively discharged in breach of an implied contract not to terminate his employment absent good cause.   In our recent decision in Romano, supra, 14 Cal.4th 479, 59 Cal.Rptr.2d 20, 926 P.2d 1114, we determined that the statute of limitations applicable to a claimed breach of an implied contract not to terminate employment without good cause begins to run at the time of actual termination of employment, even when the employer has issued an unequivocal notification of termination at an earlier date.  (Id. at p. 491, 59 Cal.Rptr.2d 20, 926 P.2d 1114.)   We noted that in a contract action, the statute of limitations does not begin to run before the alleged breach occurs, and that the breach of promise alleged in Romano consisted of the termination of employment without good cause.   (Id. at p. 488, 59 Cal.Rptr.2d 20, 926 P.2d 1114.)   In addition, we observed that even if the notification of termination in that case were viewed as a breach of the employment contract, such notification constituted an anticipatory breach that gave the plaintiff an election of remedies.  (Id. at p. 489, 59 Cal.Rptr.2d 20, 926 P.2d 1114.)   The plaintiff could elect to sue on the breach at once, or he or she could elect to continue to perform until the breach announced by the defendant came to pass.   Because the plaintiff in Romano elected to continue to perform, we concluded that the statute of limitations began to run when the defendant's announced breach actually came to pass, that is, when employment terminated.  (Id. at p. 491, 59 Cal.Rptr.2d 20, 926 P.2d 1114.)


Similar reasoning applies to a breach of contract action based upon an alleged constructive discharge.   The breach of contract alleged is the termination of employment without good cause.   To the extent the employer's creation or knowing exploitation of intolerable working conditions for the purpose of securing a resignation in the future also may be a breach of contract, it is similar to an announcement that employment will be terminated in the future.   Even more on point is the example of the contract that contemplates ongoing performance over a period of time.   As we said in Romano, supra, 14 Cal.4th 479, 59 Cal.Rptr.2d 20, 926 P.2d 1114, “whether the breach is anticipatory or not, when there are ongoing contractual obligations the plaintiff may elect to rely  on the contract despite a breach, and the statute of limitations does not begin to run until the plaintiff has elected to treat the breach as terminating the contract.  [Citation.]   In the context of successive breaches of a continuing contractual obligation, we have explained:  ‘ “In such a contract, where the parties did not mutually abandon or rescind it upon a breach or successive breaches, the injured party could wait until the time arrived for a complete performance by the other party and then bring an action for damages for such breaches.  [Citation.]   Respondent was not bound to treat the contract as abandoned on the first breach of it, or any particular breach, but had his election to still rely on it, and the statute of limitations could not begin to run until it had made its election.” ’ ”  (Id. at pp. 489-490, 59 Cal.Rptr.2d 20, 926 P.2d 1114.)


In the present case, Mullins alleged that the termination of his employment was a breach of contract.   Any possible earlier breach of contract committed through the alleged creation of intolerable working conditions did not rescind the contract, for Mullins continued to perform (or, for certain periods, to take temporary leave authorized by the employer while hoping for an amelioration of his employment situation) until he resigned.   Under these circumstances, he had an election of remedies, and the statute of limitations did not begin to run until he made that election by resigning.


Rockwell objects that if the statute of limitations runs from the date of actual termination of employment pursuant to a constructive discharge, the employee will control the limitations period, because it is up to the employee to decide when to leave his or her employment.   Rockwell argues that this circumstance distinguishes constructive discharge from express termination of employment for the purpose of the statute of limitations.   If the employee controls the date on which the statute of limitations begins to run, Rockwell argues, employers will live in ignorance of an impending lawsuit until memories have faded and evidence is difficult to gather.   Rockwell claims that such a result is inconsistent with the policy of the statute of limitations to prevent the bringing of stale claims.


In this connection, Rockwell relies upon Regents of University of California v. Superior Court (1995) 33 Cal.App.4th 1710, 39 Cal.Rptr.2d 919 (Regents ) (disapproved on other grounds in Romano, supra, 14 Cal.4th at p. 500, 59 Cal.Rptr.2d 20, 926 P.2d 1114).   In that case, the Court of Appeal rejected the constructive discharge claim of a medical resident who was told to repeat her third year of residency or be excluded from the residency program.   The court determined, in a conclusion inconsistent with our later Romano decision, that the date the resident was notified of the adverse employment decision-and not the date of actual termination of employment-was the date the statute of limitations began to run, and held that the resident could not avoid the running of the  statute of limitations by alleging a constructive discharge.  (Regents, supra, 33 Cal.App.4th at pp. 1713, 1723, 39 Cal.Rptr.2d 919.)   The Court of Appeal stated that the date of actual termination should not be the date the statute of limitations begins to run for a constructive discharge claim, because such a date would be arbitrary and would vest complete control over the limitations period in the employee.   (Id. at p. 1722, 39 Cal.Rptr.2d 919.)   The court decided that, in any event, no constructive discharge had been shown.  (Id. at pp. 1722, 1723, 39 Cal.Rptr.2d 919.)


Rockwell's concern to avoid vesting employees with sole control over the commencement of the statute of limitations period, which it asserts would leave employers unaware of the accrual of a cause of action until an employee resigns, is misplaced, as is the concern expressed by the Court of Appeal in Regents, supra, 33 Cal.App.4th 1710, 39 Cal.Rptr.2d 919.   The essence of constructive discharge is that it is a termination of employment secured by the employer through indirect means.   The employer remains in control in that he or she coerces the employee's resignation.   Just as an employer who gives advance notice of impending termination of employment has knowledge sufficient to prepare for a possible lawsuit, an employer who creates or knows of intolerable conditions is in the same position to be prepared for a possible lawsuit when the coerced resignation finally occurs.   In addition, the alleged intolerable condition-a circumstance in the control of the employer-normally continues up until the time of resignation, so that the litigation will not relate to some long-ago event, but to recent circumstances.   Nor is it true that having the statute of limitations run from the date of termination leaves the employee able to delay the bringing of a lawsuit indefinitely.   The longer the employee delays his or her resignation, the more difficult it may be to prove that the allegedly intolerable conditions of employment actually were intolerable on an objective basis (see Turner, supra, 7 Cal.4th at p. 1254, 32 Cal.Rptr.2d 223, 876 P.2d 1022), or that it was these conditions that caused the employee's resignation.   Further, the employer, who has created or permitted the persistence of known intolerable conditions, should not be able to complain of delay when the employee retains employment in the hope that conditions will improve or that informal conciliation may succeed.1


 Rockwell also argues that the statute of limitations for constructive discharge should run from the date the employee is subjected to intolerable working conditions, on the theory that the employee suffers appreciable harm at that point.   It argues that, at the latest, this date occurred in the present case on Mullins's last day on the job before his second medical leave, since no adverse personnel acts occurred thereafter.   The statute of limitations in a contract action, however, does not run before the breach of  contract in question has occurred.  (Romano, supra, 14 Cal.4th at p. 488, 59 Cal.Rptr.2d 20, 926 P.2d 1114.)   We have explained that the breach alleged in the present case is the termination of employment.   If the creation of intolerable conditions itself properly could be considered a breach of contract, the employee would have an election-because the contract is an ongoing one-to ignore the employer's breach and continue to perform in the hope that the breach may be cured.   In this connection, we note that Mullins alleged that he hoped his employment situation would be ameliorated during his medical leaves.   As in the case of express termination of employment, we do not believe it is appropriate to establish a statute of limitations rule that forces employees to resort to litigation at the earliest moment.   As a practical matter, a rule requiring a lawsuit to be filed as soon as intolerable conditions begin would interfere with informal conciliation in the work place.   The filing of a lawsuit not only would stifle the parties' efforts to resolve differences informally;  it would in most cases prompt the employee to resign at the earliest date to avoid the awkwardness of maintaining employment while pursuing litigation against his or her employer.   The statute of limitations should not force the employee to institute premature legal proceedings, whether at the time the employer announces an intention to fire the employee, or at the time the employer begins to coerce a resignation by creating or knowingly permitting intolerable working conditions.  (See Romano, supra, 14 Cal.4th at pp. 494-495, 59 Cal.Rptr.2d 20, 926 P.2d 1114.)   Finally, a rule providing that the statute of limitations begins to run on the date of actual termination of employment has the virtue of certainty.   In contrast, it would be difficult to establish with certainty the event or events that set the statute of limitations running under the rule proposed by Rockwell.


Rockwell also argues that federal court decisions support its claim that the statute of limitations in a constructive discharge case should run from the time the employer created the conditions the employee alleges were intolerable.   It relies particularly upon Davidson v. Indiana-American Water Works (7th Cir.1992) 953 F.2d 1058 (Davidson ) and Lempres v. CBS Inc. ( D.D.C.1996) 916 F.Supp. 15.


In Davidson, supra, 953 F.2d 1058, an employee claimed a transfer that removed her from a desirable work assignment constituted a constructive discharge in violation of the federal Age Discrimination in Employment Act (29 U.S.C. § 621 et seq.).   The federal court, measuring from the date of the transfer and not from the date of actual termination of employment, held that the claim was untimely.   It held that under the federal statute, the “limitations period begins to run on the date that the defendant takes some adverse personnel action against the plaintiff, and not when the full consequences of the action are felt.”  (Davidson, supra, at p. 1059.)   It relied upon Delaware  State College v. Ricks (1980) 449 U.S. 250, 258, 101 S.Ct. 498, 504, 66 L.Ed.2d 431, in which the United States Supreme Court held that the limitations period for a claim under title VII of the federal Civil Rights Act of 1964 (42 U.S.C. § 2000e et seq.) began to run when the employee was notified he would not receive tenure, and not from the date his contract of employment actually ended.   The high court declared that it was the decision to deny tenure that constituted the discrimination prohibited by the statute, and that the termination of employment was only an inevitable consequence of the earlier act of discrimination.  (Delaware State College v. Ricks, supra, 449 U.S. at pp. 257-258, 101 S.Ct. at pp. 503-504.)


In Romano, supra, 14 Cal.4th 479, 59 Cal.Rptr.2d 20, 926 P.2d 1114, however, we declined to apply the rule set out in Delaware State College v. Ricks, supra, 449 U.S. 250, 101 S.Ct. 498, 66 L.Ed.2d 431 in the context of a claim under our state's Fair Employment and Housing Act. (Gov.Code § 12900 et seq.)   We explained that because the state statute defines a “discharge” on specified grounds as an unfair employment practice, and because the statute's limitations period provides that no complaint may be filed after the expiration of a year from the date the unlawful practice “occurred,” “it would be anomalous for us to conclude that the limitations period for that unlawful practice begins to run prior to discharge.”  (Romano, supra, 14 Cal.4th at p. 497, 59 Cal.Rptr.2d 20, 926 P.2d 1114.)   We said, in addition, that it seemed inconsistent with basic contract principles to require the employee to bring a lawsuit before actual discharge-referring to the rules stated above that, even when a contract is repudiated before performance is due, or when a continuing contractual obligation is breached but the plaintiff continues to perform, the plaintiff may elect not to bring a lawsuit during the period he or she continues to perform.  (Id. at pp. 497-498, 59 Cal.Rptr.2d 20, 926 P.2d 1114.)


Davidson, supra, 953 F.2d 1058, involves a statutory scheme defining the act of discrimination as a wrong, and follows the federal practice of holding that the statute of limitations begins to run on such claims from the time the decision to discriminate is made and communicated to the employee.   We note some contrary federal authority in the context of constructive discharge (Armington v. School Dist. of Philadelphia (E.D.Pa.1991) 767 F.Supp. 661, 665), but in any event, as in Romano, we decline to follow the federal authority upon which Rockwell relies.   We see no reason to conclude the federal rule applicable to federal statutory claims should be adopted with respect to a state common law contract action based upon a termination of employment, particularly in light of our statements in Romano that the federal rule appears inconsistent with settled law regarding the statute of limitations applicable to contract actions.


Lempres v. CBS Inc., supra, 916 F.Supp. 15, does not persuade us to reach a contrary result.   In that case, the employee claimed that the employer  discriminated against her during the period of employment and prevented her from returning to work at a desirable position after a maternity leave.   She alleged a constructive discharge in violation of the District of Columbia Human Rights Act. The statute required actions to be filed within one year of the occurrence of the unlawful discriminatory practice.   The court held that no adverse employment actions had occurred during the limitations period and held the action time-barred.   That case, like Davidson, supra, 953 F.2d 1058, is not persuasive, because the case involves a statutory scheme specifying the act of discrimination as the date from which the limitations period runs, and because of the rules regarding the statute of limitations applicable to contract actions, discussed above.


 Because (1) constructive discharge is an employer-directed termination of employment, (2) termination normally is the breach alleged, and (3) the employee may elect to overlook earlier adverse actions of the employer in the hope of conciliation, we conclude that the statute of limitations does not begin to run until actual termination.   An employee is not barred from bringing his or her claim on the basis of the statute of limitations as long as the claim is brought in a timely manner after the actual termination of employment.


III
For the foregoing reasons, the judgment of the Court of Appeal is reversed to the extent it bars plaintiff's contract causes of action on statute of limitations grounds.


FOOTNOTES
1.   Regents, supra, 33 Cal.App.4th 1710, 39 Cal.Rptr.2d 919, is disapproved to the extent it is inconsistent with this opinion.


GEORGE, Chief Justice.

MOSK, KENNARD, BAXTER, WERDEGAR, CHIN and BROWN, JJ., concur.

3 Year Reporting Limit

3 Years Reporting Limit
MINOR v. FEDEX OFFICE & PRINT SERVICES, INC.


SOURCE: 

KEY WORDS:
Termination, Time Limitation, Three Years Limit

AGENCY:

US District Court Northern District of California


Document Citation:

No. 16-CV-00532-LHK.


CERTIFIED FOR PUBLICATION:


Gary MINOR,
Plaintiff,

v.

FEDEX OFFICE & PRINT SERVICES, INC., et al.,
Defendants.

182 F.Supp.3d 966 (2016)

United States District Court, 
N.D. California, San Jose Division.

Signed April 25, 2016.


ORDER GRANTING DEFENDANTS' MOTIONS TO DISMISS - Re: Dkt. Nos. 31, 33, 38

LUCY H. KOHUnited States District Judge.


Plaintiff Gary Minor ("Plaintiff") filed this action pro se against Defendants FedEx Office and Print Services, Inc. ("FedEx Office"), Lance Freitas ("Freitas"), Federal Express Corporation ("Express"), and Gallagher Bassett Services, Inc. ("Gallagher") (collectively, "Defendants"). Before the Court are Defendants' three motions to dismiss. ECF Nos. 31 ("Gallagher Mot."); 33 (FedEx Office and Freitas Motion, or "Office Mot."); 38 ("Express Mot."). Having considered the parties' submissions, the record in this case, and the applicable law, the Court GRANTS Defendants' motions to dismiss.


I. BACKGROUND


    A. Plaintiff's Employment and Termination

Plaintiff began working as a store manager for FedEx Office in September 2006. ECF Nos. 6, 6-1 (collectively "Compl.") 11. As a store manager, Plaintiff supervised other employees and performed other duties required to manage a store. Id. Around October 1, 2006, Plaintiff discovered that another store manager was altering employee timecards, so Plaintiff filed a complaint with management. Id. 13. Soon after, on October 19, 2006, Plaintiff was demoted to assistant manager. Id. 14. In January 2007, Plaintiff was transferred to a different location, and no longer held any duties as assistant manager. Id. 15.


In February 2007, a store manager denied Plaintiff's request for medical leave to have surgery on Plaintiff's right hip. Id. 16. However, Plaintiff's condition worsened and in October 2007 Plaintiff began an approved Family Medical Leave Act ("FMLA") leave of absence to have a right hip replacement. Id. 17. Plaintiff underwent surgery in January 2008 — a three-month delay allegedly attributable to FedEx Office. Id. 17-18.


Plaintiff returned to work in April 2008 after learning that his position was in peril and his medical insurance had been cancelled, which prevented him from going to out-patient physical therapy. Id.20-21. On May 29, 2008, Plaintiff filed a complaint with the California Department of Fair Employment and Housing ("DFEH") for being denied reasonable accommodations related to Plaintiff's hip surgery. Id. 35; FAC E-29 to -32 (Plaintiff's letter to the presiding judge in another federal court case discussing DFEH complaint). The DFEH denied Plaintiff's claim on June 18, 2008. Compl. 37.


Meanwhile, on May 24, 2008, Plaintiff tripped over a rubber floor mat at work and tore the meniscus in his left knee. Id.22, 24. Together, Plaintiff's right hip replacement and torn meniscus limited Plaintiff's ability to work and rendered him disabled. Id.24, 49. On June 18, 2008, Defendant Gallagher, FedEx Office's third party workers' compensation administrator, denied Plaintiff's claim for surgery on Plaintiff's knee. Id. 36.


In July 2008, after additional visits to the doctor and another MRI, Plaintiff was placed on disability leave by his treating physician. Id.36, 39. Plaintiff underwent knee surgery in November 2008 and returned to work in January 2009 despite not feeling ready to return. Id.40-41. After Plaintiff's return to work, Defendant Freitas and Randy Leighton ("Leighton"), store managers with FedEx Office, "knowingly made schedules where Plaintiff was left alone" in the store to complete shipments. Id. 59. This required Plaintiff to lift heavy boxes despite his knee injury. Id.60, 62-63. According to Plaintiff, Freitas's and Leighton's actions "violated FedExCorporate Team Member policies and rules for employees." Id. 58.


From January to December of 2009, Plaintiff sent over fifty emails to Gallagher and FedEx Office complaining of extreme pain and requesting further treatment, which were ignored. Id. 41. On December 17, 2009, Plaintiff used his own medical insurance for an MRI. Id. 69. The physician discovered permanent damage to Plaintiff's left knee and recommended a full knee replacement. Id. On April 13, 2010, Plaintiff filed retaliation and harassment complaints requesting another knee surgery with the DFEH, the U.S. Equal Employment Opportunity Commission ("EEOC"), and the Department of Industrial Relations ("DIR"). Id.70, 83. It is not clear against whom these complaints were filed. Although Gallagher approved Plaintiff's claim and Plaintiff's selection of a treating surgeon on April 29, 2010, Plaintiff apparently used Plaintiff's own medical insurance for the surgery on September 13, 2010. Id.71, 84.


Shortly after, in November 2010, Plaintiff wrote a letter to the California Attorney General complaining of discrimination and retaliation related to Plaintiffs' reporting of employee timecard editing and Plaintiff's knee injury. FAC E-62 to E-65. The California Attorney General directed Plaintiff to file his complaint with different agencies, including the DFEH. Id. E-60 to -61.


On February 25, 2011, FedEx Office terminated Plaintiff. Compl. 52. Following Plaintiff's termination, in 2011 and 2012, Plaintiff filed six complaints related to "retaliation, discrimination and harassment for filing a worker's [compensation claim] for a work related injury against sister company Federal Express Corporation" with the Workers' Compensation Appeals Board. Id.74-75. The outcome of these complaints is unclear. Also in 2012, Plaintiff wrote a second letter to the California Attorney General complaining of discrimination and retaliation, FAC E-68 to -69, to which the California Attorney General again responded by referring Plaintiff to other state agencies, id. E-66 to -67. In 2013, Plaintiff wrote a third letter to the California Attorney General alleging that FedEx Office unlawfully underpays taxes and edits employee timecards. Id. E-91 to -96. For the third time, the California Attorney General directed Plaintiff to other state agencies. Id. E-87 to -89. In 2015, Plaintiff apparently contacted the DIR regarding tax and workers' compensation fraud by FedEx Office, which Plaintiff discovered through the altered employee timecards. Id. E-110 to -117 (emails sent to DIR). In 2016, Plaintiff contacted the Santa Clara County District Attorney, the California Attorney General, the California Department of Insurance, and the DIR to report workers' compensation and tax fraud by FedEx Office, Express, and Gallagher. Id. E-120 to -123, E-128 to -129.


In addition to the administrative complaints and the instant lawsuit, Plaintiff has filed two federal court cases regarding his employment with FedEx Office as discussed below.


    B. 2009 Class Action Suit and Settlement Agreement

In 2009, Plaintiff was a Class Representative in a wage-and-hour class action against FedEx Office before Judge Thelton E. Henderson of this Court (the "2009 Class Action"). See ECF No. 34-7 (Second Amended Class Action Complaint); Minor et al. v. FedEx Office & Print Servs. Inc., Case No. 09-1375 (N.D.Cal.). In that case, the Class claimed that FedEx Office failed to pay overtime wages, provide meal periods, pay a minimum wage, keep accurate records, and indemnify employees' expenses, among other allegations. See ECF No. 34-7. Although Express was originally a defendant in the case, Plaintiff voluntarily dismissed Express without prejudice after Plaintiff signed a stipulation in which Plaintiff admitted that FedEx Office — not Express — was Plaintiff's employer. See ECF No. 39-2 (Joint Stipulation).


The parties settled the 2009 Class Action in November 2012. See ECF No. 53 ("Settlement Agreement"). Judge Henderson preliminarily approved the settlement agreement in February 2013, ECF No. 34-10, and gave final approval in July 2013, FAC E-1 to -6. As part of the settlement, Plaintiff, as a Class Representative, received $5,000 in exchange for a limited release of claims against FedEx Office. See FAC E-1 to -6. The limited release provision released all of Plaintiff's claims except for five already-filed DFEH complaints. See Settlement Agreement § 2.13.

In 2014, Plaintiff filed a complaint against Class Counsel with the California State Bar. See FAC E-43 to 44. The State Bar closed Plaintiff's complaint after finding there was not sufficient grounds to find that Class Counsel violated the law or the Rules of Professional Conduct. Id. E-52 to -57.


    C. 2013 Federal Lawsuit: Minor I

On February 8, 2013, the same day the class action settlement agreement was preliminarily approved by Judge Henderson, Plaintiff filed a lawsuit in Santa Clara County Superior Court against Express and several Doe defendants. See ECF No. 34-12; ECF No. 39-4. In February 2014, Plaintiff substituted FedEx Office and FedEx Corporation for two Does as Defendants. ECF No. 34-15. Then, on March 6, 2014, Plaintiff voluntarily dismissed Express without prejudice. ECF No. 34-16. On March 10, 2014, FedEx Office removed the case to federal court. See ECF No. 39-7; Minor v. FedEx Office and Print Services, Inc., Case No. 14-CV-01117-LHK (N.D.Cal.) ("Minor I").


Minor I arose from Plaintiff's February 2011 termination and related events, including FedEx Office's responses to Plaintiff's reporting of employee timecard violations and Plaintiff's hip and knee injuries. Plaintiff asserted claims for (1) discrimination on the basis of disability in violation of California's Fair Employment and Housing Act ("FEHA") § 12946; (2) failure to make reasonable accommodations in violation of FEHA § 12940(m); (3) failure to protect from discrimination in violation of FEHA § 12940(k); (4) retaliation in violation of FEHA § 12940(h); (5) failure to grant leave under the California Family Rights Act, FEHA § 12945.2; and (6) wrongful termination in violation of public policy. ECF No. 39-8 ("Minor I Compl.").


1. August 11, 2014 Order Granting Judgment on the Pleadings With Leave to Amend

On August 11, 2014, this Court granted FedEx Office's motion for judgment on the pleadings with leave to amend. ECF No. 34-17. First, the Court found that Plaintiff failed to allege that he filed an administrative complaint after Plaintiff was terminated even though Plaintiff's FEHA claims all stemmed from his February 2011 termination. Accordingly, the Court determined that Plaintiff failed to allege exhaustion of administrative remedies as required by FEHA § 12960 and dismissed Plaintiff's five FEHA claims with leave to amend. Id. at 7-9.

Second, the Court concluded that the Settlement Agreement prohibited tort claims against FedEx Office and therefore facially barred Plaintiff's wrongful termination claim. Id. at 9-10. However, the Court granted Plaintiff leave to amend to allege the existence of evidence that FedEx Office obtained Plaintiff's consent to the Settlement Agreement by fraud, deception, and/or misrepresentation. Id. at 11.


Additionally, the Court ordered Plaintiff to clarify what role FedEx Corporation had in the allegedly wrongful conduct, as Plaintiff's complaint alleged that Plaintiff was employed solely by FedEx Office, not FedEx Corporation. Id. at 4 n.1. The Court warned Plaintiff that failure to cure all of these deficiencies would result in dismissal of Plaintiff's claims with prejudice. Id. at 12. The Court also ordered Plaintiff not to add new causes of action or parties without leave of the Court or stipulation of the parties. Id.


2. September 11, 2014 Order Granting Motion to Dismiss With Prejudice

On September 11, 2014, Plaintiff filed a third amended complaint reasserting Plaintiff's claims against FedEx Office and FedEx Corporation and adding Express back into the lawsuit as a defendant. Minor I Compl. On January 16, 2015, the Court granted FedEx Office's motion to dismiss with prejudice. ECF No. 34-19 ("Minor I Order"). The Court noted that the three FedEx companies — FedEx Corporation, FedEx Office, and Express — are distinct entities with FedEx Office and Express structured as wholly-owned subsidiaries of FedEx Corporation. Id. at 8. The Court dismissed FedEx Corporation with prejudice because Plaintiff's third amended complaint still failed to address what role, if any, FedEx Corporation played in the conduct at issue. Id. at 9.


The Court also dismissed Plaintiff's claims against Express with prejudice because Plaintiff's claims could only be brought against Plaintiff's employer and Plaintiff had signed a stipulation in the 2009 Class Action that stated FedEx Office — not Express — was Plaintiff's employer. Id. at 10. Further, as noted above, Plaintiff had voluntarily dismissed Express while the case was pending in Santa Clara County Superior Court. ECF No. 34-16. Moreover, Plaintiff added Express to the third amended complaint without a stipulation or leave of the Court in violation of the Court's order granting judgment on the pleadings with leave to amend. Minor I Order at 10.


Finally, the Court dismissed Plaintiff's six claims against FedEx Office with prejudice. As to Plaintiff's five FEHA causes of action, the Court held that Plaintiff again failed to allege that Plaintiff exhausted his administrative remedies even after the Court granted Plaintiff leave to amend to cure that deficiency. Id. at 15. For the same reason, the Court also noted that the five FEHA causes of action against Express would be legally precluded even if Express met the definition of employer. Id. at 10.


As to Plaintiff's wrongful termination claim, the Court held that Plaintiff failed to allege facts to show that FedEx Office obtained Plaintiff's consent to the release provision by fraud, deception, or misrepresentation. Id. at 17. Thus, Plaintiff's wrongful termination claim was facially barred by the class action Settlement Agreement. Id. Accordingly, the Court dismissed Plaintiff's third amended complaint with prejudice.


D. The Instant Lawsuit

On December 29, 2015, Plaintiff filed a new lawsuit in Santa Clara County Superior Court against Defendants. ECF Nos. 6, 6-1. As in Minor I, Plaintiff asserted five causes of action for violations of FEHA §§ 12946, 12940(h), (k), (m), 12945.2, and one cause of action for wrongful termination in violation of public policy. Id. In addition, Plaintiff added claims under "the EEOC," the Americans with Disabilities Act ("ADA"), 42 U.S.C. § 12112 et seq., and California Labor Code § 1102.5. Id. On February 1, 2016, FedEx Office removed the case to federal court. ECF No. 1. On February 8, 2016, FedEx Office, Freitas, and Express filed two motions to dismiss under Federal Rule of Civil Procedure 12(b)(6). ECF Nos. 13 (Motion of Express); 15 (Motion of FedEx Office and Freitas). In response to these motions to dismiss, Plaintiff filed a First Amended Complaint ("FAC") on March 1, 2016. ECF No. 27. The FAC notes that Plaintiff "would like to amend the original complaint by submitting federal court documents as supporting argument where the defendant stated that this complaint filed is the same complaint filed in the Northern District Court of California with Judge Lucy H. Koh — not true." Id. at 1. While the caption of the FAC includes four claims — disability discrimination in violation of "FEHA/EEOC," wrongful termination, violation of California Labor Code § 1102.5, and retaliation — the FAC does not describe Plaintiff's claims or include factual allegations. Instead, the FAC consists of 11 exhibits, including orders and filings from Plaintiff's prior lawsuits and communications between Plaintiff and various California administrative agencies. Because Defendants have each expressed confusion over the contents and operability of the FAC, the Court addresses the FAC in more detail in section IV.A of this order.


On March 9, 2016, Plaintiff submitted a motion "requesting approval for missed deadline to file rely [sic]." ECF No. 30. After Plaintiff filed the motion to extend time, but before the Court ruled, Defendants filed three new motions to dismiss the FAC and/or the original complaint. See Gallagher Mot. (filed March 11, 2016); Office Mot. (filed March 14, 2016); Express Mot. (filed March 16, 2016). FedEx Office, Freitas, and Express also filed requests for judicial notice. ECF No. 34; ECF No. 39. On March 18, 2016, the Court interpreted Plaintiff's motion to extend time as a request to excuse the untimeliness of the FAC, but denied the motion as moot because Plaintiff's FAC was timely. ECF No. 41. The Court also denied as moot the two February 8, 2016 motions to dismiss the original complaint filed by FedEx Office, Freitas, and Express. Id.


In March 2016, Plaintiff opposed the three new motions to dismiss. ECF No. 45 (Opposition to Gallagher Mot., filed March 25, 2016); ECF No. 47 (Opposition to Office Mot., filed March 28, 2016); ECF No. 50 (Opposition to Express Mot., filed March 30, 2016). Gallagher filed a reply on March 31, 2016. ECF No. 48. FedEx Office and Freitas filed a reply on April 4, 2016. ECF No. 54. FedEx Office and Freitas also filed a notice of errata correcting an exhibit in their March 14, 2016 request for judicial notice. ECF No. 53. Express filed a reply on April 6, 2016. ECF No. 56. On April 18, 2016, Plaintiff filed a request for the Court to consider the oppositions filed in response to the instant motions to dismiss. ECF No. 69.


II. LEGAL STANDARD

    A. Rule 12(b)(6)

Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a complaint to include "a short and plain statement of the claim showing that the pleader is entitled to relief." A complaint that fails to meet this standard may be dismissed pursuant to Rule 12(b)(6). Rule 8(a) requires a plaintiff to plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (internal quotation marks omitted).


For purposes of ruling on a Rule 12(b)(6) motion, the Court "accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving party." Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir.2008). The Court, however, need not accept as true allegations contradicted by judicially noticeable facts, see Shwarz v. United States, 234 F.3d 428, 435 (9th Cir.2000), and it "may look beyond the plaintiff's complaint to matters of public record" without converting the Rule 12(b)(6) motion into a motion for summary judgment. Shaw v. Hahn, 56 F.3d 1128, 1129 n. 1 (9th Cir. 1995). Nor must the Court "assume the truth of legal conclusions merely because they are cast in the form of factual allegations." Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir.2011) (per curiam). Mere "conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss." Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir.2004).


    B. Leave to Amend

If the Court concludes that the complaint should be dismissed, it must then decide whether to grant leave to amend. Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend "shall be freely given when justice so requires," bearing in mind "the underlying purpose of Rule 15... [is] to facilitate decision on the merits, rather than on the pleadings or technicalities." Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir.2000) (en banc) (ellipsis in original). Nonetheless, a district court may deny leave to amend a complaint due to "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [and] futility of amendment." See Leadsinger, Inc. v. BMG Music Publ'g, 512 F.3d 522, 532 (9th Cir.2008).


III. JUDICIAL NOTICE

On a Rule 12(b)(6) motion, the Court generally may not look beyond the four corners of the complaint, with the exception of documents incorporated into the complaint by reference and any relevant matters subject to judicial notice. See Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir.2007); Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir.2001), overruled on other grounds by Galbraith v. Cty. of Santa Clara, 307 F.3d 1119, 1125-26 (9th Cir.2002). The Court may take judicial notice of matters that are either "generally known within the trial court's territorial jurisdiction" or "can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b). Proper subjects of judicial notice include court documents in the public record and documents filed in other courts, see Holder v. Holder, 305 F.3d 854, 866 (9th Cir.2002); records of administrative agencies, see United States v. 14.02 Acres of Land More or Less in Fresno Cty., 547 F.3d 943, 955 (9th Cir.2008); and publically accessible websites, see Caldwell v. Caldwell, 2006 WL 618511, at *4 (N.D.Cal. Mar. 13, 2006).


In connection with the instant motion to dismiss, FedEx Office and Freitas request judicial notice of twenty-one documents, including (1) documents filed by the parties in the 2009 Class Action and Minor I; (2) court orders issued in the 2009 Class Action and Minor I; (3) complaints Plaintiff filed with various administrative agencies; and (4) case information from publicly available websites. ECF No. 34. On April 4, 2016, FedEx Office and Freitas filed a notice of errata and a complete version of Exhibit 8, the 2009 Class Action Settlement Agreement, because FedEx Office and Freitas had inadvertently omitted certain pages of the Settlement Agreement in their original request for judicial notice. ECF No. 53. Plaintiff does not oppose judicial notice of any documents and these documents are all appropriate subjects of judicial notice. See Holder, 305 F.3d at 866 (court documents); 14.02 Acres of Land More or Less in Fresno Cty., 547 F.3d at 955 (agency records); Caldwell, 2006 WL 618511, at *4 (publicly available websites). Accordingly, the Court GRANTS FedEx Office's and Freitas's unopposed request for judicial notice.


Similarly, Express requests judicial notice of ten documents, including (1) documents filed by the parties in the 2009 Class Action and Minor I; (2) court orders issued in the 2009 Class Action and Minor I; and (3) case information from publicly available websites. ECF No. 39. These ten documents are nearly identical in form and in kind to the documents provided by FedEx Office and Freitas, and Plaintiff does not oppose judicial notice. For the reasons outlined above, the Court GRANTS Express's unopposed request for judicial notice.


IV. DISCUSSION

    A. Plaintiff's Claims

As stated above, the FAC does not describe Plaintiff's claims or include any factual allegations. Instead, the FAC consists of 11 exhibits, including orders and filings from Plaintiff's prior lawsuits and communications between Plaintiff and various California administrative agencies. Thus, as a preliminary matter, the Court will construe Plaintiff's claims as alleged in Plaintiff's pleadings. The Court acknowledges that Plaintiff's pleadings are not a model of clarity and that Defendants are confused by these filings. See, e.g., Express Mot. at 5-6 ("[I]t is difficult for [ ] Express to determine precisely what causes of action are asserted or how those causes of action differ from those asserted in Plaintiff's initial [ ] [c]omplaint."); Gallagher Mot. at 2-3 (noting confusion); Office Mot. at 3, 8-9 (same). From Defendants' statements and the Court's review of the record, the Court identifies four issues in need of clarification: (1) Plaintiff's original and amended complaints assert claims under the "EEOC" without identifying a relevant statute; (2) the FAC contains no factual allegations or claims; (3) the caption of the complaint, the body of the complaint, and the caption of the FAC are inconsistent; and (4) Plaintiff's oppositions attempt to raise a seemingly new claim and new allegations. When addressing these issues, the Court is mindful that "courts must construe pro se pleadings liberally." See Resnick v. Hayes, 213 F.3d 443, 447 (9th Cir.2000).


First, in response to Plaintiff's claims brought under "the EEOC," the Court notes that the EEOC is not a federal law. Rather, the EEOC is a federal agency "responsible for enforcing federal laws that make it illegal to discriminate against... an employee because of the person's...disability." Overview, U.S. Equal Employment Opportunity Commission, http://www.eeoc.gov/eeoc/(last visited Apr. 25, 2016). Thus, Plaintiff cannot assert claims under "the EEOC." However, the ADA is among the federal laws under the EEOC's purview. Plaintiff cites the ADA with regard to some of the claims in the complaint and all of Plaintiff's "EEOC" claims sound in discrimination. Construing Plaintiff's pleadings liberally, it appears to the Court that when Plaintiff references the EEOC, Plaintiff intends to state a claim under the ADA. See Compl.55-94 (second, third, fourth, and fifth causes of action).


Second, Defendants disagree as to whether the FAC incorporates Plaintiff's original complaint. Gallagher, for example, references the allegations that Plaintiff asserts in the original complaint and notes that the FAC "does not amend these basic factual allegations." Gallagher Mot. at 2 n.1. On the other hand, Express's motion focuses on the four claims in the caption of the FAC and notes that the FAC "does not include any factual allegations supporting [Plaintiff's] claims." Express Mot. at 6. In turn, FedEx Office and Freitas argue that the FAC "supersedes [Plaintiff's] original [c]omplaint" and does not allege any claims. Office Mot. at 11. In the alternative, however, FedEx Office and Freitas move to dismiss both the FAC and the original complaint in anticipation of the Court finding that the FAC supplements and does not supersede the original complaint. Id. at 4 n. 5, 9, 11.


As FedEx Office and Freitas point out, as a general rule "an amended pleading supersedes the original pleading and renders it of no legal effect, unless the amended complaint incorporates by reference portions of the prior pleading." Williams v. Cty. of Alameda, 26 F.Supp.3d 925, 936 (N.D.Cal.2014). However, as all Defendants point out, the FAC includes no factual allegations or claims and thus is not really in the form of a pleading. Nevertheless, the FAC is clearly labeled an amended complaint; states that Plaintiff "would like to amend the original complaint by submitting federal court documents as supporting argument"; includes a caption with claims listed; and states "all complaint damages from original complaint filed remain the same." FAC at 1. It is therefore apparent to the Court that Plaintiff intended the FAC as a supplement to the original complaint. In light of the liberal standard applied to pro se plaintiffs, see Resnick, 213 F.3d at 447, the Court construes the FAC filed on March 1, 2016 as incorporating the original complaint. Therefore, the Court addresses the allegations and claims in the original complaint as well as the FAC.


Third, the claims listed in the captions of the original complaint and the FAC are not entirely consistent with those described in the body of the original complaint. For example, the caption in the original complaint does not list whistleblower retaliation in violation of California Labor Code § 1102.5 as a cause of action, but Plaintiff extensively discusses this claim in the body of the complaint and lists this claim in the caption of the FAC. In order to give this pro se complainant the "benefit of any doubt," see Cooper v. Pasadena Unified Sch. Dist., 52 Fed.Appx. 362, 363 (9th Cir.2002), the Court construes the complaint as including a claim under California Labor Code § 1102.5.


Having carefully reviewed the original complaint and FAC, the Court identifies seven causes of action. Of these seven causes of action, Plaintiff asserts five solely against FedEx Office and Express: (1) discrimination on the basis of disability in violation of FEHA § 12946 and the ADA, Compl.48-51; (2) failure to take reasonable steps to prevent discrimination in violation of FEHA § 12940(k) and the ADA, id.55-56; (3) retaliation in violation of FEHA § 12940(h) and the ADA, id.72-87; (4) failure to grant leave in violation of FEHA § 12945.2 and the ADA, id.88-94; and (5) wrongful termination in violation of public policy pursuant to Tameny v. Atlantic Richfield Co., 27 Cal.3d 167164 Cal.Rptr. 839610 P.2d 1330 (1980), id.113-119, 120-122. The remaining two causes of action — failure to make reasonable accommodations in violation of FEHA § 12940(m) and the ADA, id.52-54, 57-71, and whistleblower retaliation in violation of California Labor Code § 1102.5, id.95-112, 120-122 — do not specify against which of the four Defendants the claims are asserted. Accordingly, the Court construe Plaintiff's failure to accommodate and whistleblower retaliation claims as being stated against all Defendants.


Finally, in opposition to the instant motions to dismiss Plaintiff does not refute Defendants' motions and instead attempts to offer new allegations and raise at least one new claim related to Defendants' allegedly fraudulent business practices. Specifically, Plaintiff appears to assert a workers' compensation insurance fraud claim under California Insurance Code § 1871.4. ECF No. 45 at 7; ECF No. 47 at 9; ECF No. 50 at 9. Plaintiff contends that "Plaintiff fears of being charged with worker's compensation insurance fraud even though it was committed by FedEx Office, GBS and Federal Express. Plaintiff has the right to clear his good name no matter how long it takes." See, e.g., ECF No. 47 at 10. For the following reasons, the Court disregards these new assertions related to workers' compensation fraud.


Most importantly, Plaintiff's pleadings do not include a claim for workers' compensation insurance fraud nor any factual allegations to support such a claim. See generally Compl.; FAC. Although the FAC includes letters that Plaintiff sent to various California agencies discussing workers' compensation insurance fraud, these letters never cite California Insurance Code § 1871.4. Additionally, these letters — attached to the FAC with no context or supporting factual allegations — are not "sufficient to put [Defendants] on notice that [Plaintiff] was making claims" of workers' compensation insurance fraud in the instant lawsuit. See Cooper, 52 Fed. Appx. at 363. The Court further notes that the record does not indicate that Plaintiff has ever been charged, or is at risk of being charged, with workers' compensation insurance fraud in connection with his employment with FedEx Office.

Additionally, Plaintiff may not use his opposition to raise and argue new allegations or claims not in the complaint. See Schneider v. Cal. Dep't of Corr., 151 F.3d 1194, 1197 n. 1 (9th Cir.1998) ("In determining the propriety of a Rule 12(b)(6) dismissal, a court may not look beyond the complaint to a plaintiff's moving papers, such as a memorandum in opposition to a defendant's motion to dismiss."); Clark v. Beard, 2015 WL 4452470, at *4 n. 7 (N.D.Cal. July 20, 2015) ("Plaintiff cannot raise new claims that were not previously raised in his amended complaint."). Thus, in deciding the instant motion the Court may not consider Plaintiff's newly raised workers' compensation insurance fraud claim or related allegations.


Moreover, although the Court will not determine the merits of Plaintiff's fraud allegations, the Court notes that California Insurance Code § 1871.4 is a penal statute. See Leegin Creative Leather Prods., Inc. v. Diaz, 131 Cal.App.4th 1517, 1527 n. 11, 33 Cal.Rptr.3d 139 (2005) ("Insurance Code section 1871.4 defines the crime of presenting a false workers' compensation claim and sets forth its punishment range."). "[A] private right of action exists only if the language of the statute or its legislative history clearly indicates the Legislature intended to create such a right to sue for damages." Redmond v. San Jose Police Dep't, 2015 WL 2337874, at *2 (N.D.Cal. May 14, 2015) (alteration in original) (quoting Vikco Ins. Servs., Inc. v. Ohio Indem. Co., 70 Cal.App.4th 5582 Cal.Rptr.2d 442 (1999)). The United States Supreme Court has indicated that a private right of action under a criminal statute is rarely implied. Id. (citing Chrysler Corp. v. Brown, 441 U.S. 281, 316, 99 S.Ct. 1705, 60 L.Ed.2d 208 (1979)). Here, a review of California Insurance Code § 1871.4 does not reveal an express private right of action. See Cal. Ins. Code § 1871.4; see also id. § 1871 (noting purpose of the chapter is, in part, for the Department of Insurance to "assist and receive assistance from federal, state, local, and administrative law enforcement agencies in the prosecution of persons who are parties in insurance frauds"). Nor does Plaintiff argue that a private right of action should be implied under California Insurance Code § 1871.4. Because Plaintiff does not assert this claim in the pleadings and can not bring this claim as a private plaintiff, the Court does not consider the allegations in Plaintiff's oppositions to the instant motions related to workers' compensation fraud.

The Court now turns to the merits of Plaintiff's claims. Given the number of Defendants in the instant lawsuit and the varying claims asserted, the Court will first discuss FedEx Office and Express, then turn to Freitas and Gallagher.


B. FedEx Office and Express

FedEx Office and Express both contend that, because of Minor I, all of Plaintiff's claims are barred by res judicata. Office Mot. at 11-13; Express Mot. at 7-10.1 Express moves to dismiss Plaintiff's claims on four additional bases: (1) Express was not Plaintiff's employer for purposes of the FEHA and the ADA; (2) Plaintiff has not exhausted his administrative remedies; (3) Plaintiff fails to state a claim for whistleblower retaliation under California Labor Code § 1102.5; and (4) Plaintiff's wrongful termination claim is untimely. Express Mot. at 10-14. Because the Court concludes that Plaintiff's claims against FedEx Office and Express are precluded by res judicata, the Court need not reach Express's remaining arguments.


"Res judicata, or claim preclusion, prohibits lawsuits on any claims that were raised or could have been raised in a prior action." Stewart v. U.S. Bancorp, 297 F.3d 953, 956 (9th Cir.2002) (emphasis and internal quotation marks omitted). To determine the preclusive effect of Minor I — a federal court case — the Court must look to federal law. See W. Sys., Inc. v. Ulloa, 958 F.2d 864, 871 n. 11 (9th Cir.1992) ("The res judicata effect of federal court judgments is a matter of federal law."). Thus, to establish the res judicata effect of Minor I on the instant lawsuit, the Court looks to whether "there is (1) an identity of claims, (2) a final judgment on the merits, and (3) privity between parties." United States v. Liquidators of European Fed. Credit Bank ("Liquidators"), 630 F.3d 1139, 1150 (9th Cir.2011).


In opposition to FedEx Office's and Express's motions to dismiss, Plaintiff does not challenge that these criteria are satisfied. ECF Nos. 47, 50. Nevertheless, the Court will address each factor in turn to determine whether the application of res judicata is appropriate.


1. Identity of Claims

To decide if there is identity of claims, courts in the Ninth Circuit apply four factors: "(1) whether rights or interests established in the prior judgment would be destroyed or impaired by prosecution of the second action; (2) whether substantially the same evidence is presented in the two actions; (3) whether the two suits involve infringement of the same right; and (4) whether the two suits arise out of the same transactional nucleus of facts." Liquidators, 630 F.3d at 1150 (quoting Costantini v. Trans World Airlines, 681 F.2d 1199, 1201-02 (9th Cir.1982)). The fourth factor is the most important. Id. Accordingly, the Court addresses this factor first. As to this factor, the Ninth Circuit has directed that "[w]hether two events are part of the same transaction or series depends on whether they are related to the same set of facts and whether they could conveniently be tried together." Int'l Union of Operating Eng'rs-Emp'rs Constr. Indus. Pension, Welfare & Training Trust Funds v. Karr, 994 F.2d 1426, 1429 (9th Cir.1993).


In both the instant case and Minor I, Plaintiff asserts the same violations of FEHA §§ 12946, 12940(h), (k), (m), 12945.2 and the same claim for wrongful termination in violation of public policy. The Court identifies just two differences between the claims that Plaintiff asserted in Minor I and the claims asserted in the instant case. First, in the instant complaint Plaintiff alleges that Plaintiff's FEHA claims are also viable claims under the ADA. Second, Plaintiff adds a single new claim, for whistleblower retaliation under California Labor Code § 1102.5. As explained below, these two differences are immaterial in the context of res judicata because the Court finds that Minor I and the instant lawsuit arise out of the same transactional nucleus of facts.


Minor I stemmed from workplace events leading up to, and including, Plaintiff's February 2011 termination. See Minor I Order. Specifically, Plaintiff alleged in Minor I that Plaintiff was demoted after complaining to management that employee timecards had been altered; that Plaintiff's employer delayed Plaintiff's hip surgery and then encouraged Plaintiff to return to work early post-operation; and that Plaintiff's employer did not properly accommodate Plaintiff's work restrictions after Plaintiff injured his knee at work. See id. at 2-3. Plaintiff asserted that Plaintiff's termination "was motivated by Plaintiff's disability and/or requests for time off due to Plaintiff's disability." Minor I Compl. 36.


Similarly, in the instant lawsuit, Plaintiff describes three events: Plaintiff's discovery of allegedly illegal tampering of employee timecards; Plaintiff's request for medical leave to have surgery on his right hip; and Plaintiff's work-related accident where Plaintiff injured his left knee. See Compl.5-47. As in Minor I, all of Plaintiff's claims in the instant case stem from Defendants' responses to and involvement in those events, including Plaintiff's eventual termination. See, e.g., id. 50 ("The termination of Plaintiff's employment was motivated by Plaintiff's disability and/or requests for time off due to Plaintiff's disability...."), 52 ("Rather than providing an accommodation, Defendants terminated Plaintiff's employment...."). For example, in both the instant case and Minor I, Plaintiff accuses FedEx Office and Express of failing to accommodate Plaintiff by forcing Plaintiff to do heavy lifting despite his knee injury. Compare Minor I Compl. 30 ("Plaintiff was left in the Federal Express store" alone and was required "to lift heavy boxes and shipments irregardless of the injury to his knee"), with Compl.59-60 (alleging that "Plaintiff was left alone to do international and domestic shipments" and then terminated because he was "unable to do heavy lifting"). Plaintiff does not allege that he has obtained any new evidence regarding these events that was unavailable to Plaintiff prior to the filing of Minor I. See Ardalan v. McHugh, 2013 WL 6212710, at *8 (N.D.Cal. Nov. 27, 2013) (finding identity of claims where plaintiff did not present any new evidence that was not raised in the previous lawsuit). Nor do Plaintiff's pleadings present new evidence. Thus, Plaintiff's claims here arise out of the same transactional nucleus of facts as Minor I.


Moreover, the fact that Plaintiff brings his disability-related claims pursuant to the ADA and adds a seventh claim for whistleblower retaliation under California Labor Code § 1102.5 has no bearing on res judicata. "Newly articulated claims based on the same nucleus of facts may still be subject to a res judicata finding if the claims could have been brought in the earlier action." Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg'l Planning Agency, 322 F.3d 1064, 1078 (9th Cir.2003). The Ninth Circuit has explained when a plaintiff could have brought a claim in an earlier action: "If the harm arose at the same time, then there was no reason why the plaintiff could not have brought the claim in the first action. The plaintiff simply could have added a claim to the complaint. If the harm arose from different facts at a different time, however, then the plaintiff could not have brought the claim in the first action." Liquidators, 630 F.3d at 1151.


Here, Plaintiff could have brought the ADA and California Labor Code § 1102.5 claims in Minor I because "[t]here are no real differences (if there are any differences at all) between the factual predicates" for the two actions. Id. Plaintiff's ADA claims are coextensive with the associated FEHA claims. See Compl.55-94 (asserting ADA and FEHA claims in same causes of action). As noted above, Plaintiff's FEHA claims are the same claims asserted in Minor I and arise from the same facts. Additionally, Plaintiff's California Labor Code § 1102.5 claim states that Plaintiff "reported the illegal tampering of employee time cards" to management and subsequently won the 2009 Class Action. Id.95-102. As a result of reporting these "wrongdoings," Plaintiff alleges that he "suffered continuous retaliation that last[ed] for over two and [a] half years" during which time he was denied benefits related to medical leave and ultimately terminated. Id.100-01, 106, 109-10. Plaintiff could have — and did — bring claims based on these same allegations in Minor I. Accordingly, the "transactional nucleus of facts" factor supports finding an "identity of claims" between all of the claims in the instant suit and Minor I.


Although satisfaction of the fourth factor is often sufficient to find an identity of claims for res judicata purposes without analysis of the other factors, see Int'l Union of Operating Eng'rs, 994 F.2d at 1430 (citing cases finding successive claims barred by res judicata based solely on analysis of the fourth factor), the Court examines the other three factors relevant to the identity of claims. The first factor is "whether rights or interests established in the prior judgment would be destroyed or impaired by prosecution of the second action." Liquidators, 630 F.3d at 1150 n. 7. Minor I established that FedEx Office and Express could not be held liable for the alleged employment discrimination and retaliation. However, this factor is "unhelpful here because it begs the question. Resolution of that factor depends only on [the Court's] conclusion about res judicata." Id. In other words, whether the rights in Minor I would be destroyed depends on whether the Court concludes that the alleged employment discrimination and retaliation in the instant case is the same as that alleged in Minor I. Accordingly, the first factor is neutral.


The second factor supports a finding of an identity of claims because "substantially the same evidence" as was presented in Minor I would necessarily be presented here. See id. at 1150 & n. 7 (finding that the presentation of substantially the same evidence supports a finding of res judicata). The third factor also supports an identity of claims because the "two suits involve infringement of the same right," specifically Plaintiff's right to be free from employment discrimination and retaliation. Id. at 1150.


In sum, three factors support finding an identity of claims while one factor is neutral. The Court concludes that the identity of claims supports a finding that res judicata bars all seven of Plaintiff's claims against FedEx Office and Express.


2. Final Judgment on the Merits

"An involuntary dismissal generally acts as a judgment on the merits for the purposes of res judicata...." In re Schimmels, 127 F.3d 875, 884 (9th Cir. 1997). In Minor I, Plaintiff's complaint was involuntarily dismissed after the Court considered the merits of Plaintiff's claim. See Minor I Order at 18 (dismissing complaint against FedEx Office, Express, and FedEx Corporation with prejudice). This involuntary dismissal amounts to a final judgment on the merits for purposes of res judicata as to both FedEx Office and Express. The second prong, therefore, is satisfied.


3. Privity

Lastly, the Court looks at whether the prior actions and the current lawsuit involve parties in privity with each other. The Ninth Circuit has defined privity in the res judicata context as "a legal conclusion `designating a person so identified in interest with a party to former litigation that he represents precisely the same right in respect to the subject matter involved.'" In re Schimmels, 127 F.3d at 881 (quoting Sw. Airlines Co. v. Tex. Int'l Airlines, Inc., 546 F.2d 84, 94 (5th Cir.1977)). Privity exists if "there is sufficient commonality of interest." Tahoe-Sierra, 322 F.3d at 1081. Here, there is no dispute that Plaintiff was the complainant in Minor I or that FedEx Office and Express were defendants in Minor I. Therefore, privity is established for these parties. See Liquidators, 630 F.3d at 1150 (privity established where parties are identical).


In light of the foregoing, the Court concludes that Plaintiff's claims against FedEx Office and Express are barred by the doctrine of res judicata. This deficiency is a legal one that can not be cured by amendment. Accordingly, the Court GRANTS FedEx Office's and Express's motions to dismiss with prejudice. See Leadsinger, Inc., 512 F.3d at 532 (noting that leave to amend may be denied "due to ... futility of amendment").


C. Freitas and Gallagher

The Court now turns to the two claims that Plaintiff asserts against Freitas and Gallaher: (1) failure to make reasonable accommodations in violation of FEHA § 12940(m) and ADA § 12112(b)(5), and (2) whistleblower retaliation in violation of California Labor Code § 1102.5. Because Freitas and Gallaher make similar arguments about these claims, the Court addresses these defendants' motions to dismiss together. The Court first addresses Plaintiff's failure to accommodate claim, and then Plaintiff's whistleblower retaliation claim.


1. Failure to Accommodate in Violation of FEHA § 12940(m) and ADA § 12112(b)(5)

Freitas and Gallagher move to dismiss Plaintiff's failure to accommodate claim on three bases: (1) Plaintiff fails to state a claim because neither Freitas nor Gallagher was Plaintiff's employer; (2) Plaintiff has not alleged that Plaintiff exhausted his administrative remedies; and (3) the claim is time-barred. Freitas also asserts that individual defendants can not be personally liable under the FEHA or the ADA. Office Mot. at 15-16. Plaintiff does not respond to any of Freitas's or Gallagher's arguments. Although this may be a sufficient basis for dismissal, the Court will consider Freitas's and Gallagher's arguments. The Court first considers exhaustion and timeliness, then turns to whether Freitas or Gallagher was Plaintiff's employer.

    a. Plaintiff Has Not Alleged That He Exhausted His Administrative Remedies or Timely Filed the Complaint

Exhaustion under the FEHA requires filing a complaint with the DFEH within one year of the date of the alleged unlawful practice and obtaining notice of the right to sue. FEHA § 12960; see Romano v. Rockwell Int'l, Inc., 14 Cal.4th 479, 492, 59 Cal.Rptr.2d 20, 926 P.2d 1114 (1996). Moreover, for a civil suit to be timely, the plaintiff must bring a claim within one year of obtaining a right-to-sue letter from DFEH. See FEHA § 12965(b), (d) (noting "the one-year statute of limitations, commencing from the date of the right-to-sue notice by the [DFEH]"). The Court must generally dismiss unexhausted FEHA causes of action. Rodriguez v. Airborne Express, 265 F.3d 890, 900 (9th Cir. 2001) ("The administrative time limits prescribed by FEHA are treated as equivalent to statutes of limitations and are subject to equitable doctrines such as waiver, estoppel, and tolling."). Moreover, "[a]llegations in the civil complaint that fall out-side of the scope of the administrative charge are barred for failure to exhaust." See id. at 897.


Exhaustion under the ADA occurs when the plaintiff files a charge with the EEOC within 180 days from the date upon which the alleged unlawful practice occurred. See 42 U.S.C. § 2000e-5(e). If, however, a plaintiff has initially instituted proceedings with a state or local agency with authority to grant relief from the allegedly unlawful practice, a plaintiff has 300 days after the allegedly unlawful employment practice, or 30 days after receiving notice that the state or local agency has terminated proceedings under state or local law, whichever is earlier, to file a charge with the EEOC. Id. After receiving an EEOC right-to-sue letter, a plaintiff has 90 days to file suit. See id. § 2000e-5(f)(1). The Court lacks subject matter jurisdiction over unexhausted ADA claims. EEOC v. Farmer Bros. Co., 31 F.3d 891, 899 (9th Cir.1994).


In Plaintiff's pleadings, Plaintiff alleges that he filed a number of complaints with the DFEH. See, e.g., Compl.8, 35, 70, 83. However, Plaintiff does not allege that any of these DFEH complaints were brought against Freitas or Gallagher and does not explain the substance of the complaints. Nor does Plaintiff allege that Plaintiff filed any complaints against Freitas or Gallagher with the EEOC. See generally id.; FAC.


Freitas, however, states that Plaintiff filed a single charge against Freitas with the DFEH on June 1, 2010, ECF No. 34-21, and received notice of right-to-sue on April 1, 2011, ECF No. 34-22.2 The right-to-sue letter stated: "Based upon its investigation, DFEH is unable to conclude that the information obtained establishes a violation of the statute." Accordingly, the DFEH closed the file. ECF No. 34-22. Under the one-year statute of limitations, Plaintiff's right to sue on this complaint expired on April 1, 2012 — well before Plaintiff filed the instant lawsuit on December 29, 2015. FEHA § 12965(b). Plaintiff offers no reason to equitably toll the statute of limitations. Accordingly, any suit on this charge is time barred. Hughes v. Cty. of Mendocino, 2011 WL 4839234, at *3 (N.D.Cal. Oct. 12, 2011) (dismissing FEHA claims when suit was not filed within one year of receiving the right-to-sue letter from the DFEH and the complaint did not address equitable tolling).


As noted above, Plaintiff does not identify any additional DFEH or EEOC claims against Freitas. Nor does Plaintiff allege that Plaintiff filed any DFEH or EEOC complaints against or received any right-to-sue letters for Gallagher. See generally Compl.; FAC. In opposition to the instant motions to dismiss, Plaintiff does not point to any complaints that would demonstrate exhaustion nor argue that the Court should excuse Plaintiff's failure to exhaust. See generally ECF Nos. 45, 47. Accordingly, Plaintiff fails to allege that he exhausted his administrative remedies and thus fails to state a failure to accommodate claim under the FEHA or the ADA. Miller v. United Airlines, Inc., 174 Cal.App.3d 878, 890, 220 Cal.Rptr. 684 (1985) ("[Plaintiff] could not maintain a civil action alleging violations of the FEHA until after she had exhausted her administrative remedies pursuant to the FEHA."); Farmer Bros., 31 F.3d at 899 (federal courts lack jurisdiction over unexhausted ADA claims).


    b. Whether Freitas or Gallagher Was Plaintiff's "Employer"

Although failure to exhaust is a sufficient basis for dismissal, the Court next addresses Freitas's and Gallagher's assertion that Plaintiff may not state a claim for failure to accommodate under the FEHA and the ADA because neither Freitas nor Gallagher was Plaintiff's employer. To determine whether Plaintiff has stated a failure to accommodate claim, the Court first analyzes the definition of "employer" under the FEHA and the ADA. The Court next considers the sufficiency of Plaintiff's allegations as to whether either Freitas or Gallagher was Plaintiff's employer. Lastly, the Court examines Freitas's argument that Freitas may not be held individually liable as an employer under the FEHA or the ADA.


        i. Legal Standard

Claims under both FEHA § 12940(m) and ADA § 12112(b)(5)(A) may be brought only by an employee against an "employer." See FEHA § 12940(m) ("It is an unlawful employment practice ... [f]or an employer or other entity...to fail to make reasonable accommodation for the known physical or mental disability of an applicant or employee."); 42 U.S.C. §§ 12112(b)(5)(A), 12111(2) (providing that no "covered entity," or "employer," shall discriminate by "not making reasonable accommodations to the known physical or mental limitations of an otherwise qualified individual with a disability who is an applicant or employee"). An "employer" is a person who employs more than five employees (under the FEHA) or fifteen employees (under the ADA). See FEHA § 12926(d) (defining an employer as, in part, "any person regularly employing five or more persons, or any person acting as an agent of an employer, directly or indirectly"); 42 U.S.C. § 12111(5)(A) ("The term `employer' means a person engaged in an industry affecting commerce who has 15 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year, and any agent of such person....").

To determine whether an employer-employee relationship exists under the ADA, the U.S. Supreme Court has advised courts to examine "all of the incidents of the relationship." Clackamas Gastroenterology Assocs., P.C. v. Wells, 538 U.S. 440, 451, 123 S.Ct. 1673, 155 L.Ed.2d 615 (2003); see also Vernon v. State, 116 Cal.App.4th 114, 124, 10 Cal.Rptr.3d 121 (2004) (noting that, to find an employer-employee relationship under the FEHA, courts consider the "`totality of circumstances' that reflect upon the nature of the work relationship of the parties, with emphasis upon the extent to which the defendant controls the plaintiff's performance of employment duties"). The U.S. Supreme Court further noted: "The employer can hire and fire employees, can assign tasks to employees and supervise their performance, and can decide how the profits and losses of the business are to be distributed." Clackamas, 538 U.S. at 445, 450, 123 S.Ct. 1673 ("[W]hen Congress has used the term `employee' without defining it, we have concluded that Congress intended to describe the conventional master-servant relationship as understood by common-law agency doctrine." (internal quotation marks omitted)). Similar factors, centered on the extent to which the alleged employer controls the employee's performance of employment duties, govern the employer-employee determination under the FEHA. See Vernon, 116 Cal. App.4th at 125, 10 Cal.Rptr.3d 121 (noting the courts should examine, among other factors, the payment of salary or other employment benefits and Social Security taxes, the authority of the defendant to hire, transfer, promote, discipline or discharge the employee, the authority to establish work schedules and assignments).

        

        ii. Lack of Allegations of an Employer-Employee Relationship

In the instant case, Plaintiff never alleges that Freitas or Gallagher was Plaintiff's "employer." See Compl.; FAC. Nor has Plaintiff alleged sufficient facts from which the Court may infer that Freitas or Gallagher was Plaintiff's employer. As to Freitas, who was a store manager at the FedEx Office where Plaintiff worked, Plaintiff alleges that Freitas and another store manager "knowingly made schedules where Plaintiff was left alone to do international and domestic shipments." Compl. 59. However, there are no other allegations relevant to an employee-employer relationship, including the relationship between Freitas, the other store manager, and FedEx Office; the extent of Freitas's supervision of Plaintiff; or whether Freitas could fire Plaintiff or direct Plaintiff's work.


As to Gallagher, the exhibits filed with the FAC indicate that Plaintiff has long acknowledged that Gallagher was FedEx Office's workers' compensation administrator. See FAC E-29 to -32 (Letter to Judge Henderson) (discussing a Gallagher claims adjustor's denial of Plaintiff's claim); E-46 to -50 (Letter to California State Bar) (arguing Gallagher violated duty as claims adjuster); E-68 (Letter to Attorney General) ("FedEx Kinkos is licensed and has worker's comp ins. Ace American (claims adjustor-Gallagher Basset Services)"). Plaintiff does not allege that Plaintiff had any interactions or relationship with Gallagher besides the dispute over Plaintiff's workers' compensation. However, if Gallagher acted only as FedEx Office's workers' compensation administrator, then Gallagher was not Plaintiff's employer. See Weyer v. Twentieth Century Fox Film Corp., 198 F.3d 1104, 1113 (9th Cir.2000) (finding that defendant was not the plaintiff's "employer" when the defendant "was simply the administrator of the employer's disability policy"); see also Marshall v. Whirlpool Corp., 2010 WL 348344, at *4 (N.D.Okla. Jan. 26, 2010) ("[Defendant] is simply the administrator of the disability policy and as such is not a `covered entity' under the ADA."); Van Hulle v. Pac. Telesis Corp., 124 F.Supp.2d 642, 643 n. 4 (N.D.Cal.2000) (administrator of Pacific Telesis's employee health insurance plans was not an employer of Pacific Telesis's employees). Moreover, the Court has taken judicial notice of documents that indicate that FedEx Office (not Freitas or Gallagher) paid and employed Plaintiff. See FAC E-91 (Letter from Plaintiff to Unidentified Recipient stating "I am writing this letter to report as a WHISTLEBLOWER against my employer FedEx Kinkos later renamed to FedEx Office..." (emphasis added)); id. E-121 (Letter to Santa Clara District Attorney stating "Gallagher Basset Services covers FedEx Office employees only" (emphasis added)); ECF No. 39-2 (joint stipulation in the 2009 Class Action signed by Plaintiff's counsel stating that FedEx Office paid and employed Plaintiff). The Court also notes that in Minor I, the Court found that Plaintiff had repeatedly acknowledged that FedEx Office was Plaintiff's employer. Minor I Order at 10. Plaintiff does not challenge this point. In fact, in Plaintiff's oppositions to the motions to dismiss, Plaintiff does not assert that either Freitas or Gallagher was Plaintiff's employer.


Because Plaintiff does not allege that Freitas or Gallagher was Plaintiff's employer, Plaintiff has not pled a claim for failure to accommodate under the FEHA or the ADA against Freitas or Gallagher. See, e.g., Montazer v. SM Stoller, Inc., 363 Fed.Appx. 460, 461 (9th Cir.2010) (affirming dismissal of federal discrimination claims when plaintiff failed to allege facts showing that any defendant was plaintiff's employer); Kelly v. Methodist Hosp. of S. Cal., 22 Cal.4th 1108, 1116, 95 Cal.Rptr.2d 514997 P.2d 1169 (2000) (noting that § 12926 "predicates potential FEHA liability on the status of the defendant as an `employer"').


        iii. Individual Liability

Even if Plaintiff were to allege that Freitas was Plaintiff's employer, Plaintiff's failure to accommodate claim against Freitas would still fail under the ADA and the FEHA. The Ninth Circuit has clearly held, in accordance with other circuits, that "individual defendants cannot be held personally liable for violations of the ADA." See Walsh v. Nev. Dep't of Human Res., 471 F.3d 1033, 1037-38 (9th Cir.2006) (citing Koslow v. Commonwealth of Pennsylvania, 302 F.3d 161, 177 (3rd Cir.2002); Sullivan v. River Valley Sch. Dist., 197 F.3d 804, 808 n. 1 (6th Cir.1999); Butler v. City of Prairie Village, 172 F.3d 736, 744 (10th Cir.1999); Mason v. Stallings, 82 F.3d 1007, 1009 (11th Cir.1996); EEOC v. AIC Sec. Investigations, Ltd., 55 F.3d 1276, 1279-80 (7th Cir.1995)). In so holding, the Ninth Circuit noted that, like Title VII of the Civil Rights Act of 1964, the ADA limits liability to employers with 15 or more employees. Id. at 1037. The Ninth Circuit explained that "Congress limited liability under Title VII to employers with 15 or more employees because it did not want to burden small entities with the costs associated with litigating discrimination claims" and it was "inconceivable that Congress intended to allow individual employees to be sued under Title VII." See id. at 1037 (internal quotation marks omitted). The Ninth Circuit held that the same reasoning applied to the ADA and thus, as with Title VII, individuals are not "employers" under the ADA. Id. at 1038. Accordingly, Freitas may not be personally liable as an "employer" for failing to accommodate Plaintiff under the ADA.


Similarly, the Court concludes that Freitas is not an "employer" for purposes of FEHA § 12940(m). Although California courts have not ruled specifically on the availability of individual liability under FEHA § 12940(m), the California Supreme Court has held that individual supervisors may not be sued personally under FEHA § 12940(a), which prohibits "an employer" from discriminating on the basis of disability. Reno v. Baird, 18 Cal.4th 640, 663, 76 Cal.Rptr.2d 499957 P.2d 1333 (1998). In Reno, the California Supreme Court looked to the definition of "employer" in Title VII and the ADA and noted the "clear and growing consensus" of federal courts holding that individual supervisors can not be liable for employment discrimination. Id. at 648, 659, 76 Cal.Rptr.2d 499957 P.2d 1333 ("We find the cases concluding supervisory employees are not individually liable persuasive in both number and reasoning."). The California Supreme Court explained that, similar to Title VII and the ADA, the FEHA exempts small employers from liability for discrimination. Id. at 650-51, 76 Cal.Rptr.2d 499957 P.2d 1333 (noting that an "employer" under the FEHA is limited to individuals or entities with five or more employees). In light of that limit, the California Supreme Court noted that there would be "incongruity between exempting small employers and imposing liability on individual supervisors." Id. at 663, 76 Cal.Rptr.2d 499957 P.2d 1333.


In addition, the California Supreme Court explained that the "[b]ehavior that gives rise to a discrimination claim...is often indistinguishable from performing one's job duties." Id. at 657, 76 Cal.Rptr.2d 499957 P.2d 1333. For example, employees may claim discrimination based on "hiring and firing, job or project assignments, office or work station assignments, promotion or demotion, performance evaluations, the provision of support, the assignment or non assignment of supervisory functions, deciding who will and who will not attend meetings, deciding who will be laid off, and the like." Id. at 646-47, 76 Cal.Rptr.2d 499957 P.2d 1333. The California Supreme Court found that to allow individual liability for such "necessary personnel management actions" would inappropriately subject supervisory employees to "the ever-present threat of a lawsuit every time they make a personnel decision." Id.


Lastly, the California Supreme Court contrasted discrimination to harassment. While the FEHA prohibits discrimination by "an employer," the FEHA prohibits "an employer... or any other person" from harassing an employee. Id. at 644, 76 Cal.Rptr.2d 499957 P.2d 1333. Thus, individual supervisors may be held personally liable for harassment. Id. at 645, 657, 76 Cal.Rptr.2d 499957 P.2d 1333. The California Supreme Court explained that the difference in the availability of individual liability for discrimination and harassment is justified because "[h]arassment... consists of actions outside the scope of job duties which are not of a type necessary to do business and personnel management." Id. at 647, 76 Cal.Rptr.2d 499957 P.2d 1333. Unlike personnel decisions, "[n]o supervisory employee needs to use slurs or derogatory drawings, to physically interfere with freedom of movement, to engage in unwanted sexual advances, etc., in order to carry out the legitimate objectives of personnel management." Id. at 646, 76 Cal.Rptr.2d 499957 P.2d 1333. Thus, "[e]very supervisory employee can insulate himself or herself from claims of harassment by refraining from such conduct." Id. For the above reasons, the California Supreme Court concluded that "individuals who do not themselves qualify as employers may not be sued under the FEHA for alleged discriminatory acts." Id. at 663, 76 Cal.Rptr.2d 499957 P.2d 1333.


Relying on Reno, the California Supreme Court in Jones v. Lodge at Torrey Pines P'ship held that individuals may not be held liable as "employers" for retaliation under FEHA § 12940(h). 42 Cal.4th 1158, 1160, 72 Cal.Rptr.3d 624177 P.3d 232 (2008). In the context of retaliation, the California Supreme Court noted that "[i]f an employee gains a reputation as a complainer, supervisors might be particularly afraid to impose discipline on that employee or make other lawful personnel decisions out of fear the employee might claim the action was retaliation for the complaining." Id. at 1167, 72 Cal.Rptr.3d 624177 P.3d 232. However, the California Supreme Court noted, "it is bad policy to subject supervisors to the threat of a lawsuit every time they make a personnel decision." Id. at 1167, 72 Cal.Rptr.3d 624177 P.3d 232. Accordingly, the California Supreme Court reasoned that "Reno's rationale for not holding individuals personally liable for discrimination applies equally to retaliation." Id. at 1164, 72 Cal.Rptr.3d 624177 P.3d 232. Accordingly, "nonemployer individuals are not personally liable for their role in... retaliation." Id. at 1173, 72 Cal.Rptr.3d 624177 P.3d 232.


Two district courts in this circuit have applied the reasoning of Reno to conclude that FEHA § 12940(m) does not permit individual liability for failure to accommodate. See Calderon v. Georgia-Pac. Corrugated LLC, 2008 WL 4159220, at *2 (E.D.Cal. Sept. 4, 2008) (dismissing failure to accommodate and disability discrimination claims because "Mr. Bergman and Mr. Wells, as supervisors, managers, superintendents, and/or agents of Georgia-Pacific, are not [plaintiff's] `employers.'"); Ball v. Los Rios Cmty. Coll. Dist., 2007 WL 1791689, at *2 (E.D.Cal. June 15, 2007) (dismissing failure to accommodate FEHA claims). The Court agrees.


Similar to the discrimination provision examined in Reno, which prohibited actions by "an employer," FEHA § 12940(m) prohibits actions by "an employer or other entity." Given the similarity of these provisions, the Court concludes that the reasoning of Reno applies equally to FEHA § 12940(m). See Ball, 2007 WL 1791689, at *2 (relying on Reno's explanation of the policy against individual liability and the plain language of FEHA § 12940(m) to rule that there is no individual liability for failure to accommodate). Moreover, the discriminatory conduct that Plaintiff alleges violates FEHA § 12940(m) includes the kind of "discriminatory hiring, firing, and personnel practices" contemplated in Reno and Jones that do not give rise to individual liability. See Reno, 18 Cal.4th at 645, 76 Cal.Rptr.2d 499957 P.2d 1333Jones, 42 Cal.4th at 1160, 72 Cal.Rptr.3d 624177 P.3d 232. Plaintiff's complaint alleges that Freitas "violated FedEx Corporate Team Member policies and rules for employees" and "knowingly made schedules where Plaintiff was left alone to do international and domestic shipments." Compl.58-59. The complaint also alleges that "[r]ather than providing an accommodation, Defendants terminated Plaintiff's employment." Id. 52. Under Reno and Jones, personnel decisions including work assignments, setting of work schedules, and termination do not subject individual supervisors to liability under the FEHA. Thus, the Court finds that Freitas cannot be held individually liable for Plaintiff's failure to accommodate claim under FEHA § 12940(m).


    c. Leave to Amend

In sum, Plaintiff has failed to allege exhaustion of administrative remedies and that either Freitas or Gallagher was Plaintiff's employer. Accordingly, the Court GRANTS Freitas's and Gallagher's motions to dismiss as to Plaintiff's failure to accommodate claim.


The Court concludes that granting Plaintiff leave to amend the failure to accommodate claim against Freitas would be legally futile. If exhaustion of administrative remedies was the only issue before the Court, the Court would grant leave to amend. Additionally, if the factual sufficiency of Plaintiff's allegations as to the employer-employee relationship was the only issue before the Court, the Court would grant leave to amend because Plaintiff may be able to allege additional facts to show that Freitas was Plaintiff's employer. However, as discussed above, Freitas may not be held individually liable for failure to accommodate under the FEHA or the ADA. Specifically, the Ninth Circuit has clearly stated that individual supervisors may not be held liable as employers under the ADA. See Walsh, 471 F.3d at 1038. Additionally, the California Supreme Court has held that individual supervisors may not be held individually liable under the FEHA for necessary personnel management decisions such as work assignments, setting of work schedules, and termination. See Reno, 18 Cal.4th at 663, 76 Cal.Rptr.2d 499957 P.2d 1333Jones, 42 Cal.4th at 1160, 72 Cal.Rptr.3d 624177 P.3d 232. Accordingly, Freitas — one of Plaintiff's supervisors — could not be held individually liable for failing to accommodate Plaintiff even if Plaintiff exhausted administrative remedies and adequately alleged an employer-employee relationship. This deficiency is a legal one that Plaintiff can not cure through allegation of new facts. See Leadsinger, Inc., 512 F.3d at 532. Thus, the Court's dismissal of Plaintiff's failure to accommodate claim against Freitas is with prejudice.


However, as to Gallagher, the Court can not say that any amendment of Plaintiff's failure to accommodate claim against Gallagher would necessarily be futile. Accordingly, the Court's dismissal of Plaintiff's failure to accommodate claim against Gallagher is with leave to amend.


2. Whistleblower Retaliation Claim

Given Plaintiff's unclear pleadings, it appears that Freitas and Gallagher did not understand Plaintiff to raise a California Labor Code § 1102.5 whistleblower retaliation claim. Nonetheless, as discussed above, the Court construed Plaintiff's complaint liberally to include a claim under § 1102.5 against all Defendants. Accordingly, the Court deems it appropriate to examine whether Plaintiff is able to state a claim under § 1102.5. The Court finds dismissal appropriate for two reasons: (1) Plaintiff's claim is time barred; and (2) Plaintiff fails to allege that Freitas or Gallagher was Plaintiff's employer. The Court discusses the two reasons for dismissal in turn.


As a preliminary matter, only Express construed Plaintiff's pleadings to include a § 1102.5 claim and moved to dismiss the claim. Express argued that Plaintiff was unable to state a § 1102.5 claim because, among other reasons, the claim is untimely under the statute of limitations. Express Mot. at 13-14. In opposition to Express's motion to dismiss, Plaintiff does not refute Express's argument as to the statute of limitations nor address Plaintiff's § 1102.5 claim at all. Moreover, as discussed above, Plaintiff may not state a § 1102.5 claim against Express because the claim is barred by res judicata.


As to Plaintiff's § 1102.5 claim against Freitas and Gallagher, the Court first concludes that Plaintiff's claim is barred by the statute of limitations. California's statute of limitations for "[a]n action upon a liability created by statute, other than a penalty or forfeiture" is three years. See Cal. Civ. Proc. Code § 338(a). Therefore, actions commenced under § 1102.5 must be brought within three years. See Monk v. Sacramento Metro. Fire Dist., 2011 WL 6176078, at *11 (Cal. Ct.App. Dec. 13, 2011) (unpublished) (dismissing § 1102.5 claim as time barred under three-year statute of limitations set forth in Cal. Civ. Proc. Code § 338(a)). However, if the suit seeks the civil penalty provided in § 1102.5(f), the claim is subject to a one-year limitations period. See Terbeek v. Panda Rest. Grp. Inc., 2015 WL 1863046, at *4 (Cal.Ct.App. Apr. 22, 2015) (unpublished) (dismissing claim as time barred under one-year statute of limitations set forth in Cal. Civ. Proc. Code § 340(a)); Fenters v. Yosemite Chevron, 2009 WL 4928362, *7 (E.D.Cal. Dec. 14, 2009) (same). The Court need not decide which statute of limitations would apply in this case as Plaintiff's claim would be time barred under either statute of limitations as explained below. See Somers v. Digital Realty Trust, Inc., 2015 WL 4481987, at *3 (N.D.Cal. July 22, 2015) (noting that different courts have reached different conclusions regarding the applicable limitations period for § 1102.5 claims).


Specifically, construing Plaintiff's pleadings liberally, Plaintiff alleges that Freitas retaliated against Plaintiff by making schedules that failed to accommodate Plaintiff's disability. Compl. 59. Gallagher, as FedEx Office's third party claims administrator, allegedly denied Plaintiff's requests for medical treatment following Plaintiff's knee injury and refused to provide benefits. Id.101, 107. The time frame for these alleged retaliations is unclear. However, the latest date on which Plaintiff's whistleblower claim could have accrued is February 25, 2011, the date that Plaintiff was terminated and the latest alleged date of any retaliation by any defendants. See La v. San Mateo Cty. Transit Dist., 2014 WL 6682476, at *4 (N.D.Cal. Nov. 25, 2014) (citing Shoemaker v. Myers, 2 Cal.App.4th 1407, 1427, 4 Cal.Rptr.2d 203 (1992)) ("The latest date on which the statute of limitations for [plaintiff's] state law whistleblower causes of action could have accrued is the date of her termination...."). Yet Plaintiff waited until December 29, 2015, nearly five years after he was terminated, to file the instant lawsuit. Thus, Plaintiff's claim is untimely. See U.S. ex rel. Air Control Technologies, Inc. v. Pre Con Indus. Inc., 720 F.3d 1174, 1178 (9th Cir.2013) (claim may be dismissed as untimely pursuant to a 12(b)(6) motion when "the running of the statute [of limitations] is apparent on the face of the complaint"). The Court notes that Plaintiff makes no argument for tolling the statute of limitations.


As an alternative basis for dismissal, the Court considers whether Plaintiff has alleged Freitas or Gallagher was Plaintiff's employer for purposes of § 1102.5. Section 1102.5 is a whistleblower protection statute intended to encourage employees to report unlawful acts without fear of retaliation. Thus, § 1102.5(b) prohibits retaliation by "[a]n employer, or any person acting on behalf of an employer" against an employee "for disclosing information... if the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation." As with the FEHA and ADA failure to accommodate claims, § 1102.5 claims may only be brought against "an employer." See id.; Hansen v. Cal. Dep't of Corr. & Rehab., 171 Cal.App.4th 1537, 1546, 90 Cal.Rptr.3d 381 (2008) ("Accordingly, a prerequisite to asserting a Labor Code section 1102.5 violation is the existence of an employer-employee relationship at the time the allegedly retaliatory action occurred.").


Section 1102.5 does not define "employer," so courts analyzing § 1102.5 claims have relied on interpretations of "employer" under the FEHA. See, e.g., Hall v. Apartment Inv. & Mgmt. Co., 2011 WL 940185, at *5 n. 6 (N.D.Cal. Feb. 18, 2011) (concluding that claims under the FEHA and California Labor Code were subject to the same analysis); Huse v. Auburn Honda, 2005 WL 1398521, at *3 (E.D.Cal. June 10, 2005) ("borrowing" definition of employer from Title VII and FEHA for purposes of § 1102.5 claim). Cf. Patten v. Grant Joint Union High Sch. Dist., 134 Cal.App.4th 1378, 1387, 37 Cal.Rptr.3d 113 (2005) (adopting, for purposes of § 1102.5 claim, definition of "adverse employment action" from FEHA cases). Under the FEHA, the employer-employee relationship is determined according to the totality of the circumstances, "with emphasis upon the extent to which the defendant controls the plaintiff's performance of employment duties." Hall, 2011 WL 940185 at *5 (quoting Vernon, 116 Cal.App.4th at 124, 10 Cal.Rptr.3d 121).


As discussed above, Plaintiff fails to allege that either Freitas or Gallagher was Plaintiff's "employer." Nor has Plaintiff alleged sufficient facts from which the Court may infer that Freitas or Gallagher was Plaintiff's employer. As to Freitas, Plaintiff's sole relevant allegation is that Freitas and another store manager "knowingly made schedules where Plaintiff was left alone to do international and domestic shipments." Compl. 59. There are no other allegations relevant to an employee-employer relationship, including the relationship between Freitas, the other store manager, and FedEx Office; the extent of Freitas's supervision of Plaintiff; or whether Freitas could fire Plaintiff or direct Plaintiff's work. Thus, the Court concludes that Plaintiff fails to allege that Freitas was Plaintiff's employer.


Furthermore, even if Plaintiff had alleged that Freitas was Plaintiff's employer, neither party addresses whether individual liability exists for employers under § 1102.5. Because this issue has not been briefed, the Court declines to determine whether individual liability is available under § 1102.5 and thus whether Freitas, an individual, can even be liable under § 1102.5. See Indep. Towers of Wash. v. Washington, 350 F.3d 925, 929 (9th Cir. 2003) ("Our adversarial system relies on the advocates to inform the discussion and raise the issues to the court.").


As to Gallagher, the exhibits filed with the FAC indicate that Plaintiff has long acknowledged that Gallagher was FedEx Office's workers' compensation administrator. See FAC E-29 to -32 (Letter to Judge Henderson) (discussing a Gallagher claims adjustor's denial of Plaintiff's claim); E-46 to -50 (Letter to California State Bar) (arguing Gallagher violated duty as claims adjuster); E-68 (Letter to Attorney General) ("FedEx Kinkos is licensed and has worker's comp ins. Ace American (claims adjustor-Gallagher Basset Services)"). Moreover, Plaintiff signed a stipulation in the 2009 Class Action stating that FedEx Office (not Freitas or Gallagher) paid and employed Plaintiff. See ECF No. 39-2. Plaintiff also wrote letters stating that FedEx Office was his employer. See FAC E-91 (Letter from Plaintiff to Unidentified Recipient stating "I am writing this letter to report as a WHISTLEBLOWER against my employer FedEx Kinkos later renamed to FedEx Office..." (emphasis added)); id. E-121 (Letter from Plaintiff to Santa Clara District Attorney stating "Gallagher Basset Services covers FedEx Office employees only" (emphasis added)). The Court also notes that in Minor I, the Court found that Plaintiff had repeatedly acknowledged that FedEx Office was Plaintiff's employer. Minor I Order at 10. Thus, Plaintiff has failed to establish that Gallagher was his employer, and in fact, there is an abundance of evidence to the contrary.


In light of the foregoing, the Court concludes that Plaintiff fails to allege that either Freitas or Gallagher was Plaintiff's employer for purposes of Plaintiff's § 1102.5 claim. Additionally, Plaintiff's claim is time barred. Accordingly, the Court GRANTS Gallagher's and Freitas's motions to dismiss as to Plaintiff's California Labor Code § 1102.5 claim. Plaintiff may be able to allege additional facts to show that the statute of limitations should be tolled, and that Gallagher or Freitas acted as Plaintiff's employer. Thus, as the Court can not say that amendment will necessarily be futile, this dismissal is with leave to amend. See Leadsinger, Inc., 512 F.3d at 532.


V. CONCLUSION

For the foregoing reasons, the Court rules as follows:

        The Court GRANTS FedEx Office's and Express's motions to dismiss with prejudice;• The Court GRANTS Freitas's motion to dismiss with prejudice as to Plaintiff's claim for failure to accommodate under the FEHA and the ADA;• The Court GRANTS Freitas's motion to dismiss with leave to amend as to Plaintiff's California Labor Code § 1102.5 claim;• The Court GRANTS Gallagher's motion to dismiss with leave to amend as to Plaintiff's claim for failure to accommodate under the FEHA and the ADA and Plaintiff's California Labor Code § 1102.5 claim.

Should Plaintiff elect to file an amended complaint curing the deficiencies identified herein, Plaintiff shall do so within thirty (30) days of the date of this order.3 Failure to meet the thirty-day deadline to file an amended complaint or failure to cure the deficiencies identified in this Order will result in a dismissal with prejudice of Plaintiff's claims. Plaintiff may not add new causes of action or parties without leave of the Court or stipulation of the parties pursuant to Rule 15 of the Federal Rules of Civil Procedure.


IT IS SO ORDERED.


FootNotes

1. As noted above, Express's motion focuses upon the four claims expressly listed in the FAC and not all seven of the claims identified by the Court. However, Express specifically incorporates by reference Express's first motion to dismiss, see Express Mot. at 6 n.1, which contends that all of Plaintiff's claims are barred by res judicata. Moreover, "[a]s a general matter, a court may, sua sponte, dismiss a case on preclusion grounds where the records of that court show that a previous action covering the same subject matter and parties had been dismissed." Headwaters Inc. v. U.S. Forest Serv., 399 F.3d 1047, 1054 (9th Cir.2005) (internal quotation marks omitted).

2. Freitas also requests judicial notice of an application for discrimination benefits that Plaintiff filed with the Workers' Compensation Appeals Board. ECF No. 34-5. Plaintiff does not rely on this application to argue that Plaintiff exhausted his administrative remedies under the FEHA. Moreover, to exhaust a claim under the FEHA, the employee must file a complaint with the DFEH — not the Workers' Compensation Appeals Board. See FEHA § 12960; Romano, 14 Cal.4th at 492, 59 Cal.Rptr.2d 20, 926 P.2d 1114.

3. Plaintiff is encouraged to continue seeking advice from the Federal Pro Se Program. Appointments may be made with the Federal Pro Se Program by calling (408) 297-1480, or by stopping by Room 2070 of the San Jose Courthouse, 280 South First Street, San Jose, CA 95113.

Personal Injury Cap

Personal Injury Cap
Fein v. Permanente Medical Group


SOURCE: 

KEY WORDS:
Termination, Personal Injury, Injury Cap

AGENCY: 
United States Supreme Court


Document Citation: 
No. 85-19


Action:  

Argued and Decided, October 15, 1985


LAWRENCE FEIN, 
Plaintiff and Appellant, 

v. 
PERMANENTE MEDICAL GROUP, 
Defendant and Appellant
No. 85-19

(1985) 38 Cal.3d 137 
211 Cal.Rptr. 368; 
695 P.2d 665

OPINION

 

KAUS, J.

 

In this medical malpractice action, both parties appeal from a judgment awarding plaintiff about $1 million in damages. Defendant claims that the trial court committed reversible error during the selection of the jury, in instructions on liability as well as damages, and in failing to order that the bulk of plaintiff's award be paid periodically rather than in a lump sum. Plaintiff defends the judgment against defendant's attacks, but maintains that the trial court, in fixing damages, should not have applied two provisions of the Medical Injury Compensation Reform Act of 1975 (MICRA): Civil Code section 3333.2, which limits noneconomic damages in medical malpractice cases to $250,000, and Civil Code section 3333.1, which modifies the traditional "collateral source" rule in such litigation. Plaintiff's claims are based on a constitutional challenge similar to the challenges [38 Cal.3d 143] to other provisions of MICRA that we recently addressed and rejected in American Bank & Trust Co. v. Community Hospital (1984) 36 Cal.3d 359 [204 Cal.Rptr. 671, 683 P.2d 670], Barme v. Wood (1984) 37 Cal.3d 174 [207 Cal.Rptr. 816, 689 P.2d 446], and Roa v. Lodi Medical Group, Inc. (1985) 37 Cal.3d 920 [211 Cal.Rptr. 77, 695 P.2d 164]. We conclude that the judgment should be affirmed in all respects.

 

I

 

On Saturday, February 21, 1976, plaintiff Lawrence Fein, a 34-year-old attorney employed by the Legislative Counsel Bureau of the California State Legislature in Sacramento, felt a brief pain in his chest as he was riding his bicycle to work. The pain lasted a minute or two. He noticed a similar brief pain the following day while he was jogging, and then, three days later, experienced another episode while walking after lunch. When the chest pain returned again while he was working at his office that evening, he became concerned for his health and, the following morning, called the office of his regular physician, Dr. Arlene Brandwein, who was employed by defendant Permanente Medical Group, an affiliate of the Kaiser Health Foundation (Kaiser).

 

Dr. Brandwein had no open appointment available that day, and her receptionist advised plaintiff to call Kaiser's central appointment desk for a "short appointment." He did so and was given an appointment for 4 p.m. that afternoon, Thursday, February 26. Plaintiff testified that he did not feel that the problem was so severe as to require immediate treatment at Kaiser Hospital's emergency room, and that he worked until the time for his scheduled appointment.

 

When he appeared for his appointment, plaintiff was examined by a nurse practitioner, Cheryl Welch, who was working under the supervision of a physician-consultant, Dr. Wintrop Frantz; plaintiff was aware that Nurse Welch was a nurse practitioner and he did not ask to see a doctor. After examining plaintiff and taking a history, Nurse Welch left the room to consult with Dr. Frantz. When she returned, she advised plaintiff that she and Dr. Frantz believed his pain was due to muscle spasm and that the doctor had given him a prescription for Valium. Plaintiff went home, took the Valium, and went to sleep.

 

That night, about 1 a.m., plaintiff awoke with severe chest pains. His wife drove him to the Kaiser emergency room where he was examined by Dr. Lowell Redding about 1:30 a.m. Following an examination that the doctor felt showed no signs of a heart problem, Dr. Redding ordered a chest X-ray. On the basis of his examination and the X-ray results, Dr. Redding [38 Cal.3d 144] also concluded that plaintiff was experiencing muscle spasms and gave him an injection of Demerol and a prescription for a codeine medication.

 

Plaintiff went home but continued to experience intermittent chest pain. About noon that same day, the pain became more severe and constant and plaintiff returned to the Kaiser emergency room where he was seen by another physician, Dr. Donald Oliver. From his initial examination of plaintiff Dr. Oliver also believed that plaintiff's problem was of muscular origin, but, after administering some pain medication, he directed that an electrocardiogram (EKG) be performed. The EKG showed that plaintiff was suffering from a heart attack (acute myocardial infarction). Plaintiff was then transferred to the cardiac care unit.

 

Following a period of hospitalization and medical treatment without surgery, plaintiff returned to his job on a part-time basis in October 1976, and resumed full-time work in September 1977. By the time of trial, he had been permitted to return to virtually all of his prior recreational activitiese.g., jogging, swimming, bicycling and skiing.

 

In February 1977, plaintiff filed the present action, alleging that his heart condition should have been diagnosed earlier and that treatment should have been given either to prevent the heart attack or, at least, to lessen its residual effects. The case went to judgment only against Permanente.

 

At trial, Dr. Harold Swan, the head of cardiology at the Cedars-Sinai Medical Center in Los Angeles, was the principal witness for plaintiff. Dr. Swan testified that an important signal that a heart attack may be imminent is chest pain which can radiate to other parts of the body. Such pain is not relieved by rest or pain medication. He stated that if the condition is properly diagnosed, a patient can be given Inderal to stabilize his condition, and that continued medication or surgery may relieve the condition.

 

Dr. Swan further testified that in his opinion any patient who appears with chest pains should be given an EKG to rule out the worst possibility, a heart problem. He stated that the symptoms that plaintiff had described to Nurse Welch at the 4 p.m. examination on Thursday, February 26, should have indicated to her that an EKG was in order. He also stated that when plaintiff returned to Kaiser late that same night with his chest pain unrelieved by the medication he had been given, Dr. Redding should also have ordered an EKG. According to Dr. Swan, if an EKG had been ordered at those times it could have revealed plaintiff's imminent heart attack, and treatment could have been administered which might have prevented or minimized the attack. [38 Cal.3d 145]

 

Dr. Swan also testified to the damage caused by the attack. He stated that as a result of the attack a large portion of plaintiff's heart muscle had died, reducing plaintiff's future life expectancy by about one-half, to about 16 or 17 years. Although Dr. Swan acknowledged that some of plaintiff's other coronary arteries also suffer from disease, he felt that if plaintiff had been properly treated his future life expectancy would be decreased by only 10 to 15 percent, rather than half.

 

Nurse Welch and Dr. Redding testified on behalf of the defense, indicating that the symptoms that plaintiff had reported to them at the time of the examinations were not the same symptoms he had described at trial. Defendant also introduced a number of expert witnessesnot employed by Kaiserwho stated that on the basis of the symptoms reported and observed before the heart attack, the medical personnel could not reasonably have determined that a heart attack was imminent. Additional defense evidence indicated (1) that an EKG would not have shown that a heart attack was imminent, (2) that because of the severe disease in the coronary arteries which caused plaintiff's heart attack, the attack could not have been prevented even had it been known that it was about to occur, and finally (3) that, given the deterioration in plaintiff's other coronary arteries, the heart attack had not affected plaintiff's life expectancy to the degree suggested by Dr. Swan.

 

In the face of this sharply conflicting evidence, the jury found in favor of plaintiff on the issue of liability and, pursuant to the trial court's instructions, returned special verdicts itemizing various elements of damages. The jury awarded $24,733 for wages lost by plaintiff to the time of trial, $63,000 for future medical expenses, and $700,000 for wages lost in the future as a result of the reduction in plaintiff's life expectancy. fn. 1 Finally, the jury awarded $500,000 for "noneconomic damages," to compensate for pain, suffering, inconvenience, physical impairment and other intangible damages sustained by plaintiff from the time of the injury until his death.

 

After the verdict was returned, defendant requested the court to modify the award and enter a judgment pursuant to three separate provisions of MICRA: (1) Civil Code section 3333.2which places a $250,000 limit on noneconomic damages, (2) Civil Code section 3333.1which alters the collateral source rule, and (3) Code of Civil Procedure section 667.7which provides for the periodic payment of damages. The trial court, which had rejected plaintiff's constitutional challenge to Civil Code sections 3333.2 [38 Cal.3d 146] and 3333.1 in a pretrial ruling, fn. 2 reduced the noneconomic damages to $250,000, reduced the award for past lost wages to $5,430deducting $19,303 that plaintiff had already received in disability payments as compensation for such lost wagesand ordered defendant to pay the first $63,000 of any future medical expenses not covered by medical insurance provided by plaintiff's employer, as such expenses were incurred. At the same time, the court declined to order that the award for future lost wages or noneconomic damages be paid periodically pursuant to Code of Civil Procedure section 667.7, determining that the statute was not "mandatory" and that "under the unique facts and circumstances of this case" a periodic payment award of such damages would "defeat[] rather than promote[]" the purpose of section 667.7.

 

As noted, both parties have appealed from the judgment. Defendant maintains that the trial court committed reversible error in (1) excusing all Kaiser members from the jury, (2) instructing on the duty of care of a nurse practitioner, (3) instructing on causation, (4) permitting plaintiff to recover wages lost because of his diminished life expectancy, and (5) refusing to order the periodic payment of all future damages. Plaintiff argues that the judgment in his favor should be affirmed, but asserts that the court erred in upholding the MICRA provisions at issue here. Since defendant's claims go to the basic validity of the judgment in favor of plaintiff, we turn first to its contentions.

 

II

 

At the outset of the empanelment of the jury, the court indicated that it would excuse from the jury those prospective jurors who would refuse to go to Kaiser for treatment under any circumstances and also those prospective jurors who were members of the Kaiser medical plan. When defendant noted its objection to the court's exclusion of the Kaiser members without conducting individual voir dire examinations, the court explained to the jury panel: "I am going to excuse you at this time because we've found that we can prolong the jury selection by just such a very long time by going through each and every juror under these circumstances. I'm not suggesting that ... everyone who goes to Kaiser could not fairly and with an open mind resolve the issues in this case, but we may be here for four weeks trying to [38 Cal.3d 147] get a jury under the circumstances. I hope you can appreciate that. Probably some of you have sat in on situations where we've tried to get jurors in cases and it just goes on and on and on and on because you'll be questioned in great detail." On inquiry, it turned out that 24 of the 60 persons on the initial jury panel were members of Kaiser. They were excused. Voir dire then proceeded in the ordinary fashion, with each party questioning the remaining jurors and exercising challenges for cause and peremptory challenges.

 

Although defendant does not contend that any of the jurors who ultimately served on the jury and decided the case were biased against it, it nonetheless asserts that the discharge of the Kaiser members was improper and warrants reversal. In support of its contention, it argues that a potential juror's mere membership in Kaiser does not provide a basis for a challenge for cause under the applicable California statute, Code of Civil Procedure section 602.

 

Past decisions do not provide a clear-cut answer to the question whether a potential juror's membership in Kaiser would itself render the juror subject to a statutory challenge for cause. Section 602 does not define with precision the degree of "interest" or connection with a party that will support a challenge for cause, fn. 3 and courts in other states have come to different conclusions with respect to the eligibility of potential jurors whose relationship to one of the parties is similar to Kaiser members' relationship to defendant. Some cases have found error when a trial court has failed to excuse such persons for cause (see, e.g., M & A Electric Power Cooperative v. Georger (Mo. 1972) 480 S.W.2d 868, 871-874 [69 A.L.R.3d 1286] [members of consumer" electrical cooperative]; Weatherbee v. Hutcheson (1966) 114 Ga.App. 761 [152 S.E.2d 715, 718-719] [policyholder of mutual insurance company]); other decisions, on which defendant relies, have found no error when a trial court has refused to excuse such jurors. (Rowley v. Group Health Coop. of Puget Sound (1976) 16 Wn.App. 373 [556 P.2d 250, 252-254] [member of health care cooperative].) In McKernan v. Los Angeles Gas etc. Co. (1911) 16 Cal.App. 280, 283 [116 P. 677]perhaps [38 Cal.3d 148] the closest California case in pointthe court indicated that the mere fact that some of the jurors were customers of the defendant utility company would not, in itself, mandate their excusal for cause.

 

[1] But whether or not under California law membership in Kaiser rendered the prospective jurors excludable for cause under section 602, we believe that it is clear that the trial court's discharge of such members provides no basis for reversing the judgment in this case. To begin with, even if membership in Kaiser is not itself disqualifying, it is not apparent that the trial court abused the broad discretion it retains over the jury selection process (see, e.g., Rousseau v. West Coast House Movers (1967) 256 Cal.App.2d 878, 883-886 [64 Cal.Rptr. 655]) by excusing the members in this case. As its comments to the jury suggest, the court had apparently discovered through past experience that in this situation the individual voir dire procedure would prove very time-consuming and unproductive, with a substantial proportion of the Kaiser members ultimately being subject to challenge by one party or the other. Furthermore, the trial court may reasonably have felt that the process of conducting an extensive voir dire of all Kaiser members might itself prejudice prospective jurors who did not belong to Kaiser. From experience, it may have foreseen that such questioning would invariably involve the recounting of specific, potentially prejudicial incidents concerning the prospective jurors and Kaiser, as well as the exploration of the relative satisfaction or dissatisfaction with Kaiser of the particular jurors on this venire. Such matters would, of course, not be admissible in the actual trial of the case, and the court may have feared that such revelations on voir dire might "taint" all of the other prospective jurors in the courtroom. Under these circumstances, it cannot be said that the trial court abused its discretion in excusing the Kaiser members without individual examination.

 

Further, even if the trial court did err in this regard, the error clearly would not warrant reversal. This follows from the general rule that an erroneous exclusion of a juror for cause provides no basis for overturning a judgment. (See, e.g., Asevado v. Orr (1893) 100 Cal. 293, 300-301 [34 P. 777]; McKernan v. Los Angeles Gas etc. Co., supra, 16 Cal.App. 280, 283; 1 Cal. Civil Procedure During Trial (Cont.Ed.Bar 1982) § 7.41, p. 298.) As the court explained in Dragovich v. Slosson (1952) 110 Cal.App.2d 370, 371 [242 P.2d 945]: "'Since a defendant or a party is not entitled to a jury composed of any particular jurors, the court may of its own motion discharge a qualified juror without committing any error, provided there is finally selected a jury composed of qualified and competent persons.'" [2] Although defendant attempts to fit this case within the proviso of the above ruleon the theory that the removal of the Kaiser members rendered the jury panel unconstitutionally nonrepresentative (cf. [38 Cal.3d 149] Thiel v. Southern Pacific Co. (1946) 328 U.S. 217 [90 L.Ed. 1181, 66 S.Ct. 984, 166 A.L.R. 1412] [exclusion of daily wage earners])defendant points to no authority which even remotely supports its claim that Kaiser members are a "cognizable class," and the record in this case provides no evidence to suggest that this group has the kind of shared experiences, ideology or background that have been identified as the sine qua non of such a class. (See, e.g., People v. Fields (1983) 35 Cal.3d 329, 347-349 [197 Cal.Rptr. 803, 673 P.2d 680] [plurality opinion]; cf. People v. White (1954) 43 Cal.2d 740, 751 [278 P.2d 9] ["The system of jury selection primarily from the membership rosters of certain private clubs and organizations [such as the Lions, Rotary and the Chamber of Commerce] would normally tend to result in a systematic inclusion of a large proportion of business and professional people and a definite exclusion of certain classes such as ordinary working people."].) On this record, we cannot find that the jury that tried this matter was any less a cross-section of the community than it would have been had Kaiser members not been excused.

 

Accordingly, the manner in which the jury was selected provides no basis for reversing the judgment.

 

III

 

[3] Defendant next contends that the trial court misinstructed the jury on the standard of care by which Nurse Welch's conduct should be judged. In addition to the general BAJI instruction on the duty of care of a graduate nurse, the court told the jury that "the standard of care required of a nurse practitioner is that of a physician and surgeon ... when the nurse practitioner is examining a patient or making a diagnosis." fn. 4

 

We agree with defendant that this instruction is inconsistent with recent legislation setting forth general guidelines for the services that may properly be performed by registered nurses in this state. Section 2725 of the Business and Professions Code, as amended in 1974, explicitly declares a legislative intent "to recognize the existence of overlapping functions between physicians and registered nurses and to permit additional sharing of functions [38 Cal.3d 150] within organized health care systems which provide for collaboration between physicians and registered nurses." fn. 5 Section 2725 also includes, among the functions that properly fall within "the practice of nursing" in California, the "[o]bservation of signs and symptoms of illness, reactions to treatment, general behavior, or general physical condition, and ... determination of whether such signs, symptoms, reactions, behavior or general appearance exhibit abnormal characteristics ...." In light of these provisions, the "examination" or "diagnosis" of a patient cannot in all circumstances be saidas a matter of lawto be a function reserved to physicians, rather than registered nurses or nurse practitioners. fn. 6 Although plaintiff was certainly entitled to have the jury determine (1) whether defendant medical center was negligent in permitting a nurse practitioner to see a patient who exhibited the symptoms of which plaintiff complained and (2) whether Nurse Welch met the standard of care of a reasonably prudent nurse practitioner in conducting the examination and prescribing treatment in conjunction with her supervising physician, the court should not have told the jury that the nurse's conduct in this case mustas a matter of lawbe measured by the standard of care of a physician or surgeon. (See Fraijo v. Hartland Hospital (1979) 99 Cal.App.3d 331, 340-344 [160 Cal.Rptr. [38 Cal.3d 151] 246]. See generally Note, A Revolution in WhiteNew Approaches in Treating Nurses as Professionals (1977) 30 Vand.L.Rev. 839, 871-879.)

 

But while the instruction was erroneous, it is not reasonably probable that the error affected the judgment in this case. (See People v. Watson (1956) 46 Cal.2d 818, 836 [299 P.2d 243].) As noted, several hours after Nurse Welch examined plaintiff and gave him the Valium that her supervising doctor had prescribed, plaintiff returned to the medical center with similar complaints and was examined by a physician, Dr. Redding. Although there was considerable expert testimony that the failure of the medication to provide relief and the continued chest pain rendered the diagnosis of muscle spasm more questionable, Dr. Reddinglike Nurse Welchfailed to order an EKG. Given these facts, the jury could not reasonably have found Nurse Welch negligent under the physician standard of care without also finding Dr. Reddingwho had more information and to whom the physician standard of care was properly applicablesimilarly negligent. Defendant does not point to any evidence which suggests that the award in this case was affected by whether defendant's liability was grounded solely on the negligence of Dr. Redding, rather than on the negligence of both Dr. Redding and Nurse Welch, and, from our review of the record, we conclude that it is not reasonably probable that the instructional error affected the judgment. fn. 7 Accordingly, the erroneous instruction on the standard of care of a nurse practitioner does not warrant reversal.

 

IV

 

Defendant also objects to several instructions on causation. [4] First, defendant contends that an instruction on concurrent causation fn. 8though accurately [38 Cal.3d 152] stating the lawshould not have been given because Permanente was the only defendant in the case. As plaintiff points out, however, the evidence suggested that the alleged negligence of a number of different persons employed by Permanente may have contributed to the injury, and the instructionworded in terms of the concurrent negligent conduct of more than one "person," not "defendant"properly informed the jury that each alleged negligent act could be a proximate cause of the injury regardless of the extent to which other negligent acts also contributed to the result. Although the instruction might not have been strictly necessary, the court did not err in giving it.

 

[5] Defendant also complains of another of the proximate cause instructions, which informed the jury that "[i]f the conduct of the defendant is a substantial factor in bringing about the injuries or damages to the plaintiff, the fact that the defendant neither foresaw nor should have foreseen the extent or nature of the injuries or damages, or the manner in which they occurred, does not prevent its conduct from being a proximate cause of such injuries or damages." This instruction simply informed the jury of the general rule that the unforeseeability of the extent or nature of the specific harm suffered by the plaintiff does not mean that the defendant's conduct was not a proximate cause of the injuries. (See, e.g., Bigbee v. Pacific Tel. & Tel. Co. (1983) 34 Cal.3d 49, 58-59 [192 Cal.Rptr. 857, 665 P.2d 947]. See generally 4 Witkin, Summary of Cal. Law (8th ed. 1974) Torts, § 629, pp. 2911-2912 and cases cited.) Contrary to defendant's contention, this instruction is applicable whether or not there are concurrent tortfeasors. Furthermore, although defendant suggests that the jury could have interpreted the instruction to render it strictly liable for plaintiff's injuriesimposing liability on defendant even if its failure to have diagnosed (i.e., "foreseen") plaintiff's heart condition was not negligentthat suggestion ignores the context in which this instruction was given, as well as additional instructions which informed the jury that plaintiff's case depended upon a showing of negligence. fn. 9 Taken as a whole, the instructions did not suggest that defendant could be held strictly liable. [38 Cal.3d 153]

 

V

 

[6] Defendant next argues that the trial court erred in permitting the jury to award damages for the loss of earnings attributable to plaintiff's so-called "lost years," i.e., the period of time by which his life expectancy was diminished as a result of defendant's negligence. (See generally Fleming, The Lost Years: A Problem in the Computation and Distribution of Damages (1962) 50 Cal.L.Rev. 598 [hereafter The Lost Years].)

 

We believe that this was clearly a proper element of plaintiff's damages. As the United States Supreme Court explained in Sea-Land Services, Inc. v. Gaudet (1974) 414 U.S. 573, 594 [39 L.Ed.2d 9, 26, 9 S.Ct. 806]: "Under the prevailing American rule, a tort victim suing for damages for permanent injuries is permitted to base his recovery 'on his prospective earnings for the balance of his life expectancy at the time of his injury undiminished by any shortening of that expectancy as a result of the injury.' 2 Harper & James[, The Law of Torts (1956)] § 24.6, pp. 1293-1294 (emphasis in original)." (See also Rest.2d Torts, § 924, coms. d, e, pp. 525-526.) fn. 10 Although, to our knowledge, the lost years issue has not been previously decided in California, recovery of such damages is consistent with the general rule permitting an award based on the loss of future earnings a plaintiff is likely to suffer "because of inability to work for as long a period of time in the future as he could have done had he not sustained the accident." (Italics added.) (Robison v. Atchison, Topeka & S. F. Ry. Co. (1962) 211 Cal.App.2d 280, 288 [27 Cal.Rptr. 260].)

 

Contrary to defendant's contention, plaintiff's recovery of such future lost wages will not inevitably subject defendant to a "double payment" in the event plaintiff's heirs bring a wrongful death action at some point in the future. In Blackwell v. American Film Co. (1922) 189 Cal. 689, 700-702 [38 Cal.3d 154] [209 P. 999], we held that in a wrongful death case, a jury was properly instructed that in computing damages it should consider the amount the decedent had obtained from defendant in an earlier judgment as compensation for the impairment of his future earning capacity. Similarly, in the Sea-Land Services case, the Supreme Court recognized that an appropriate setoff may be made in the later wrongful death action. (Sea-Land Services, Inc. v. Gaudet, supra, 414 U.S. at pp. 592-594 & fn. 30 [39 L.Ed.2d at pp. 25-26].)

 

Defendant alternatively argues that the jury should have been instructed to deduct from plaintiff's prospective gross earnings of the lost years, the "saved" cost of necessities that plaintiff would not incur during that period. Although there is some authority to support the notion that damages for the lost years should be assessed on the basis of plaintiff's "net" loss (see The Lost Years, supra, 50 Cal.L.Rev. 598, 603 & fn. 23), we need not decide that issue in this case because defendant neither requested such an instruction at trial nor presented any evidence of anticipated cost savings that would have supported such an instruction. Under these circumstances, the trial court did not err in failing to instruct on the point. (See LeMons v. Regents of University of California (1978) 21 Cal.3d 869, 875 [148 Cal.Rptr. 355, 582 P.2d 946].)

 

VI

 

After the jury returned its verdict, defendant requested the trial court to enter a judgmentpursuant to section 667.7 of the Code of Civil Procedureproviding for the periodic payment of future damages, rather than a lump-sum award. Although the trial court rejected plaintiff's constitutional challenge to the periodic payment provisiona conclusion consistent with our recent decision in American Bankit nonetheless denied defendant's request, interpreting section 667.7 as affording a trial court discretion in determining whether to enter a periodic payment judgment and concluding that on the facts of this case the legislative purpose of section 667.7 "would be defeated rather than promoted by ordering periodic payments rather than a lump sum award." Defendant contends that the trial court misinterpreted the statute and erred in failing to order periodic payment of all future damages.

 

[7] We agree with defendant that the trial court was in error insofar as it interpreted section 667.7 as "discretionary" rather than "mandatory." The statute provides that "[i]n any [medical malpractice action], a superior court shall, at the request of either party, enter a judgment ordering that money damages or its equivalent for future damages of the judgment creditor be paid in whole or in part by periodic payments rather than by a lump-sum [38 Cal.3d 155] payment if the award equals or exceeds fifty thousand dollars ($50,000) in future damages." (Italics added.) fn. 11 Although in some contexts the use of the term "shall" may be consistent with a "discretionary" rather than a "mandatory" meaning (see, e.g., Estate of Mitchell (1942) 20 Cal.2d 48, 50-52 [123 P.2d 503]), the legislative history of section 667.7 leaves little doubt that here the Legislature intended to impose a mandatory duty on the trial court to enter a periodic payment judgment in cases falling within the four corners of the section. fn. 12 [38 Cal.3d 156]

 

[8] Nonetheless, for several reasons relating to the specific facts of this case, we conclude that the trial court judgment should not be reversed on this ground. To begin with, although the court formally rejected defendant's motion for a periodic payment order, its judgment did provide for the periodic payment of the damages which the jury awarded for plaintiff's future medical expenses, directing the defendant to pay such expenses "as [they] are incurred up to the amount of $63,000."

 

Second, with respect to the award of noneconomic damages, we find that defendant is in no position to complain of the absence of a periodic payment award. As noted, defendant did not move for a periodic payment award until after the jury had returned its special verdicts. Although the trial court had requested the jury to return a special verdict designating the total amount of its noneconomic damage awardto facilitate the application of Civil Code section 3333.2, whose constitutionality we discuss belowthe jury was not instructed to designate the portion of the noneconomic damage award that was attributable to future damages, and it did not do so. Instead, it returned an undifferentiated special verdict awarding noneconomic damages of $500,000. Because of defendant's failure to raise the periodic payment issue earlier, plaintiff was deprived of the opportunity to seek a special verdict designating the amount of "future noneconomic damage." Furthermore, as we have seen, the trial court, acting pursuant to Civil Code section 3333.2, reduced the $500,000 noneconomic damage verdict to $250,000. Given the facts of this case, the $250,000 might well reflect the noneconomic damage sustained by plaintiff up until the time of the judgment. Under the circumstances, we conclude that the interests of justice would be served by affirming the lump-sum noneconomic damage award. (See American Bank & Trust Co. v. Community Hospital, supra, 36 Cal.3d 359, 378.)

 

Third and finally, there is the question of the $700,000 award for lost future earnings. Although in general lost future earnings are a type of future damage particularly suitable to a periodic payment judgment, this case presents a somewhat unusual situation because the damages awarded are solely attributable to the earnings of plaintiff's lost years. If the trial court had ordered such damages paid periodically over the time period when the loss was expected to be incurred, the damages would have been paid in their entirety after plaintiff's expected death, and thusif the life expectancy predictions were accurateplaintiff would not have received any of this element of damages. Had defendant presented evidence by which the jury [38 Cal.3d 157] could have determined what proportion of the lost years' earnings would likely be spent for the support of plaintiff's dependents rather than plaintiff himself (see The Lost Years, supra, 50 Cal.L.Rev. 598, 613), and had it raised the periodic payment issue in a timely fashion so that the jury could have made special findings on that question, there might well be a strong argument that the dependents' share of the lost years' earnings should be subject to periodic payment. In the absence of any such apportionment, however, we conclude that the trial court properly determined that section 667.7 did not call for the periodic payment of this element of plaintiff's award.

 

Thus, in sum, we conclude that none of the defendant's contentions call for a reversal of the judgment.

 

VII

 

We now turn to plaintiff's contentions.

 

As noted, although the jury by special verdict set plaintiff's noneconomic damages at $500,000, the trial court reduced that amount to $250,000 pursuant to Civil Code section 3333.2. fn. 13 Plaintiff challenges this ruling, contending that section 3333.2 is unconstitutional on a number of grounds. In many respects, plaintiff's argument tracks the constitutional objections to other provisions of MICRA that we have recently rejected in American Bank, Barme and Roa.

 

[9] We begin with the claim that section 3333.2 denies due process because it limits the potential recovery of medical malpractice claimants without providing them an adequate quid pro quo. In rejecting a similar challenge to the periodic payment provision at issue in American Bank, we explained that "[i]t is well established that a plaintiff has no vested property right in a particular measure of damages, and that the Legislature possesses broad authority to modify the scope and nature of such damages. (See, e.g., Werner v. Southern Cal. etc. Newspapers (1950) 35 Cal.2d 121, 129 [216 P.2d 825, 13 A.L.R.2d 252]; Feckenscher v. Gamble (1938) 12 Cal.2d 482, 499-500 [85 P.2d 885]; Tulley v. Tranor (1878) 53 Cal. 274, 280.) Since the demise of the substantive due process analysis of Lochner v. New York (1905) 198 U.S. 45 [49 L.Ed. 937, 25 S.Ct. 539], it has been clear that the constitutionality of measures affecting such economic rights under the due [38 Cal.3d 158] process clause does not depend on a judicial assessment of the justifications for the legislation or of the wisdom or fairness of the enactment [i.e., the "adequacy" of the quid pro quo]. So long as the measure is rationally related to a legitimate state interest, policy determinations as to the need for, and the desirability of, the enactment are for the Legislature." (Italics added.) (American Bank, supra, 36 Cal.3d 359, 368-369.)

 

It is true, of course, that section 3333.2 differs from the periodic payment provision in American Bank inasmuch as the periodic payment provisionin large measuresimply postpones a plaintiff's receipt of damages whereas section 3333.2 places a dollar limit on the amount of noneconomic damages that a plaintiff may obtain. fn. 14 That difference, however, does not alter the applicable due process standard of review. As our language in American Bank itself suggests, our past cases make clear that the Legislature retains broad control over the measure, as well as the timing, of damages that a defendant is obligated to pay and a plaintiff is entitled to receive, and that the Legislature may expand or limit recoverable damages so long as its action is rationally related to a legitimate state interest. In Werner v. Southern Cal. etc. Newspapers, supra, 35 Cal.2d 121, for example, our court applied the "rational relationship" standard in dismissing a due process attack on a statuteCivil Code section 48awhich permitted a plaintiff who brought a libel or slander action against a newspaper generally to obtain only "special damages," largely eliminating the traditional right to obtain "general damages" that such a plaintiff had enjoyed before the statute. fn. 15

 

In light of our discussion of the legislative history and purposes of MICRA in American Bank, Barme and Roa, it is clear that section 3333.2 is rationally related to legitimate state interests. As we explained in those decisions, in enacting MICRA the Legislature was acting in a situation in which it had found that the rising cost of medical malpractice insurance was posing serious problems for the health care system in California, threatening to curtail the availability of medical care in some parts of the state and creating the very real possibility that many doctors would practice without insurance, leaving patients who might be injured by such doctors with the prospect of uncollectible judgments. In attempting to reduce the cost of [38 Cal.3d 159] medical malpractice insurance in MICRA, the Legislature enacted a variety of provisions affecting doctors, insurance companies and malpractice plaintiffs.

 

Section 3333.2, like the sections involved in American Bank, Barme and Roa, is, of course, one of the provisions which made changes in existing tort rules in an attempt to reduce the cost of medical malpractice litigation, and thereby restrain the increase in medical malpractice insurance premiums. It appears obvious that this sectionby placing a ceiling of $250,000 on the recovery of noneconomic damagesis rationally related to the objective of reducing the costs of malpractice defendants and their insurers.

 

There is no denying, of course, that in some caseslike this onesection 3333.2 will result in the recovery of a lower judgment than would have been obtained before the enactment of the statute. It is worth noting, however, that in seeking a means of lowering malpractice costs, the Legislature placed no limits whatsoever on a plaintiff's right to recover for all of the economic, pecuniary damagessuch as medical expenses or lost earningsresulting from the injury, but instead confined the statutory limitations to the recovery of noneconomic damages, andeven thenpermitted up to a $250,000 award for such damages. Thoughtful jurists and legal scholars have for some time raised serious questions as to the wisdom of awarding damages for pain and suffering in any negligence case, noting, inter alia, the inherent difficulties in placing a monetary value on such losses, the fact that money damages are at best only imperfect compensation for such intangible injuries and that such damages are generally passed on to, and borne by, innocent consumers. fn. 16 While the general propriety of such damages is, of course, firmly imbedded in our common law jurisprudence (see, e.g., Capelouto v. Kaiser Foundation Hospitals (1972) 7 Cal.3d 889, 892-893 [103 Cal.Rptr. 856, 500 P.2d 880]), no California case of which we are aware has ever suggested that the right to recover for such noneconomic [38 Cal.3d 160] injuries is constitutionally immune from legislative limitation or revision. (See, e.g., Werner v. Southern Cal. etc. Newspapers, supra, 35 Cal.2d 121, 126-128; fn. 15, ante. See generally Morris, Liability for Pain and Suffering (1959) 59 Colum.L.Rev. 476 [urging legislative revision of rules relating to damages for pain and suffering].)

 

Faced with the prospect that, in the absence of some cost reduction, medical malpractice plaintiffs might as a realistic matter have difficulty collecting judgments for any of their damagespecuniary as well as nonpecuniarythe Legislature concluded that it was in the public interest to attempt to obtain some cost savings by limiting noneconomic damages. Although reasonable persons can certainly disagree as to the wisdom of this provision, fn. 17 we cannot say that it is not rationally related to a legitimate state interest. fn. 18 [38 Cal.3d 161]

 

A number of state courts have invalidated statutory provisions limiting damages in medical malpractice actions on a variety of theories (see, e.g., Wright v. Central Du Page Hospital Assn. (1976) 63 Ill.2d 313 [347 N.E.2d 736, 80 A.L.R.3d 566]; Arneson v. Olson (N.D. 1978) 270 N.W.2d 125, 135-136; Carson v. Maurer (N.H. 1980) 120 N.H. 925 [424 A.2d 825, 836-838, 12 A.L.R.4th 1]; Baptist Hosp. of Southeast Texas v. Baber (Tex.Ct.App. 1984) 672 S.W.2d 296, 297-298); others have upheld such limitations. (See, e.g., Johnson v. St. Vincent Hospital, Inc. (1980) 273 Ind. 374 [404 N.E.2d 585, 600-601]; Prendergast v. Nelson (1977) 199 Neb. 97 [256 N.W.2d 657, 668-672] [plurality opinion].) With only one exception, all of the invalidated statutes contained a ceiling which applied to both pecuniary and nonpecuniary damages, and several courtsin reaching their decisionswere apparently considerably influenced by the potential harshness of a limit that might prevent an injured person from even recovering the amount of his medical expenses. (See Anderson v. Wagner (1979) 79 Ill.2d 295 [402 N.E.2d 560, 564] [explaining decision in Wright, supra, 347 N.E.2d 736]; Arneson v. Olson, supra, 270 N.W.2d 125, 135.) fn. 19 Section 3333.2, of course, could have no such effect. In any event, as we have explained, we know of no principle of Californiaor federalconstitutional law which prohibits the Legislature from limiting the recovery of damages in a particular setting in order to further a legitimate state interest. (See, e.g., Cory v. Shierloh (1981) 29 Cal.3d 430, 437-440 [174 Cal.Rptr. 500, 629 P.2d 8] [upholding statute eliminating liability of persons who provide alcohol to drunk driver]; Duke Power Co. v. Carolina Env. Study Group, supra, 438 U.S. 59 [upholding statutory limit on liability in the event of a nuclear accident].) Accordingly, we conclude that section 3333.2 does not violate due process.

 

Plaintiff alternatively contends that the section violates the equal protection clause, both because it impermissibly discriminates between medical malpractice victims and other tort victims, imposing its limits only in medical malpractice cases, and because it improperly discriminates within the class of medical malpractice victims, denying a "complete" recovery of [38 Cal.3d 162] damages only to those malpractice plaintiffs with noneconomic damages exceeding $250,000.

 

[10] With respect to the first contention, it should be evident from what we have already said that the Legislature limited the application of section 3333.2 to medical malpractice cases because it was responding to an insurance "crisis" in that particular area and that the statute is rationally related to the legislative purpose. American Bank, Barme and Roa make clear that under these circumstances, plaintiff's initial equal protection claim has no merit. (See American Bank, supra, 36 Cal.3d 359, 370-374; Barme, supra, 37 Cal.3d 174, 181-182; Roa, supra, 37 Cal.3d 920, 930-931.)

 

[11] As for the claim that the statute violates equal protection because of its differential effect within the class of malpractice plaintiffs, the constitutional argument is equally unavailing. First, as we have already explained, the Legislature clearly had a reasonable basis for drawing a distinction between economic and noneconomic damages, providing that the desired cost savings should be obtained only by limiting the recovery of noneconomic damage. (See pp. 159-160, ante.) The equal protection clause certainly does not require the Legislature to limit a victim's recovery for out-of-pocket medical expenses or lost earnings simply because it has found it appropriate to place some limit on damages for pain and suffering and similar noneconomic losses. (See, e.g., Werner v. Southern Cal. etc. Newspapers, supra, 35 Cal.2d 121, 126-128.)

 

Second, there is similarly no merit to the claim that the statute violates equal protection principles because it obtains cost savings through a $250,000 limit on noneconomic damages, rather than, for example, through the complete elimination of all noneconomic damages. Although plaintiff and a supporting amicus claim that the $250,000 limit on noneconomic damages is more invidiousfrom an equal protection perspectivethan a complete abolition of such damages on the ground that the $250,000 limit falls more heavily on those with the most serious injuries, if that analysis were valid a complete abolition of damages would be equally vulnerable to an equal protection challenge, because abolition obviously imposes greater monetary losses on those plaintiffs who would have obtained larger damage awards than on those who would have recovered lesser amounts. Just as the complete elimination of a cause of action has never been viewed as invidiously discriminating within the class of victims who have lost the right to sue, the $250,000 limitwhich applies to all malpractice victimsdoes not amount to an unconstitutional discrimination.

 

Nor can we agree with amicus' contention that the $250,000 limit is unconstitutional because the Legislature could have realized its hoped-for cost [38 Cal.3d 163] savings by mandating a fixed-percentage reduction of all noneconomic damage awards. The choice between reasonable alternative methods for achieving a given objective is generally for the Legislature, and there are a number of reasons why the Legislature may have made the choice it did. One of the problems identified in the legislative hearings was the unpredictability of the size of large noneconomic damage awards, resulting from the inherent difficulties in valuing such damages and the great disparity in the price tag which different juries placed on such losses. The Legislature could reasonably have determined that an across-the-board limit would provide a more stable base on which to calculate insurance rates. Furthermore, as one amicus suggests, the Legislature may have felt that the fixed $250,000 limit would promote settlements by eliminating "the unknown possibility of phenomenal awards for pain and suffering that can make litigation worth the gamble." Finally, the Legislature simply may have felt that it was fairer to malpractice plaintiffs in general to reduce only the very large noneconomic damage awards, rather than to diminish the more modest recoveries for pain and suffering and the like in the great bulk of cases. Each of these grounds provides a sufficient rationale for the $250,000 limit.

 

In light of some of the dissent's comments, one additional observation is in order. Contrary to the dissent's assertion, our application of equal protection principles in American Bank, Barme, Roa and this case is not inconsistent with the principles enunciated in Brown v. Merlo (1973) 8 Cal.3d 855 [106 Cal.Rptr. 388, 506 P.2d 212, 66 A.L.R.3d 505], Cooper v. Bray (1978) 21 Cal.3d 841 [148 Cal.Rptr. 148, 582 P.2d 604], or like cases. As Cooper explains, under the traditional, rational relationship equal protection standard, what is required is that the court "'conduct "a serious and genuine judicial inquiry into the correspondence between the classification and the legislative goals."'" (21 Cal.3d at p. 848 [quoting Newland v. Board of Governors (1977) 19 Cal.3d 705, 711 (139 Cal.Rptr. 620, 566 P.2d 254), italics added in Cooper].) We have conducted such an inquiry in all of these cases, and have found that the statutory classifications are rationally related to the "realistically conceivable legislative purpose[s]" (Cooper, supra, 21 Cal.3d at p. 851) of MICRA. We have not invented fictitious purposes that could not have been within the contemplation of the Legislature (see Brown v. Merlo, supra, 8 Cal.3d at p. 865, fn. 7) nor ignored the disparity in treatment which the statute in realistic terms imposes. (Id. at p. 862.) But Brown and Cooper have never been interpreted to mean that we may properly strike down a statute simply because we disagree with the wisdom of the law or because we believe that there is a fairer method for dealing with the problem. (See Cory v. Shierloh, supra, 29 Cal.3d 430, 437-439.) Our recent decisions do not reflect our support for the challenged provisions of MICRA as a matter of policy, but simply our conclusion that under established constitutional principles the Legislature [38 Cal.3d 164] had the authority to adopt such measures. As Justice Traynor explained in Werner v. Southern Cal. etc. Newspapers, supra, 35 Cal.2d 121, 129: "[A] court cannot eliminate measures which do not happen to suit its tastes if it seeks to maintain a democratic system. The forum for the correction of ill-considered legislation is a responsive legislature."

 

Accordingly, we conclude that section 3333.2 is constitutional. The trial court did not err in reducing the noneconomic damage award pursuant to its terms.

 

VIII

 

For similar reasons, plaintiff's constitutional challenge to Civil Code section 3333.1which modifies this state's common law "collateral source" ruleis also without merit.

 

[13] Under the traditional collateral source rule, a jury, in calculating a plaintiff's damages in a tort action, does not take into consideration benefitssuch as medical insurance or disability paymentswhich the plaintiff has received from sources other than the defendanti.e., "collateral sources"to cover losses resulting from the injury. (See, e.g., Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 1 [84 Cal.Rptr. 173, 465 P.2d 61, 77 A.L.R.3d 398].) Section 3333.1 alters this rule in medical malpractice cases. fn. 20 Under section 3333.1, subdivision (a), a medical malpractice defendant is permitted to introduce evidence of such collateral source benefits received by or payable to the plaintiff; when a defendant chooses to introduce such evidence, the plaintiff may introduce evidence of the amounts he has paidin insurance premiums, for exampleto secure the benefits. Although section 3333.1, subdivision (a)as ultimately adopteddoes not specify how the jury should use such evidence, the Legislature apparently assumed that in most cases the jury would set plaintiff's damages [38 Cal.3d 165] at a lower level because of its awareness of plaintiff's "net" collateral source benefits. fn. 21

 

In addition, section 3333.1, subdivision (b) provides that whenever such collateral source evidence is introduced, the source of those benefits is precluded from obtaining subrogation either from the plaintiff or from the medical malpractice defendant. As far as the malpractice plaintiff is concerned, subdivision (b) assures that he will suffer no "double deduction" from his tort recovery as a result of his receipt of collateral source benefits; because the jury that has learned of his benefits may reduce his tort award by virtue of such benefits, the Legislature eliminated any right the collateral source may have had to obtain repayment of those benefits from the plaintiff. As for the malpractice defendant, subdivision (b) assures that any reduction in malpractice awards that may result from the jury's consideration of the plaintiff's collateral source benefits will inure to its benefit rather than to the benefit of the collateral source.

 

In our recent case of Barme v. Wood, supra, 37 Cal.3d 174, we addressed a constitutional challenge to section 3333.1, subdivision (b) brought by a "collateral source" whose subrogation rights against a malpractice defendant had been eliminated by the statute. In upholding the section's constitutionality, [38 Cal.3d 166] we explained that a collateral source has no vested due process right to subrogation and that section 3333.1, subdivision (b) is rationally related to the purposes of MICRA since it reduces the costs imposed on medical malpractice defendants by shifting some of the costs in the area to other insurers.

 

This case is not controlled by Barme, because here plaintiff challenges the validity of subdivision (a), rather than subdivision (b), and contends that the statute violates the rights of a malpractice plaintiff, rather than the rights of a collateral source. Nonetheless, plaintiff's constitutional challenge is still without merit.

 

[14] Again, we begin with the due process objections to the statute. Although, by its terms, subdivision (a) simply adds a new category of evidence that is admissible in a medical malpractice action, we recognize that in reality the provision affects the measure of a plaintiff's damage award, permitting the jury to reduce an award on the basis of collateral source benefits of whichbut for the statutethe jury would be unaware. Nonetheless, as we have already explained in our discussion of section 3333.2, a plaintiff has no vested property right in a particular measure of damages. Thus, the fact that the section may reduce a plaintiff's award does not render the provision unconstitutional so long as the measure is rationally related to a legitimate state interest.

 

Because section 3333.1, subdivision (a) is likely to lead to lower malpractice awards, there can be no question but that this provisionlike section 3333.2directly relates to MICRA's objective of reducing the costs incurred by malpractice defendants and their insurers. And, as we have seen, the Legislature could reasonably have determined that the reduction of such costs would serve the public interest by preserving the availability of medical care throughout the state and by helping to assure that patients who were injured by medical malpractice in the future would have a source of medical liability insurance to cover their losses.

 

Moreover, the Legislature clearly did not act irrationally in choosing to modify the collateral source rule as one means of lowering the costs of malpractice litigation. In analyzing the collateral source rule more than a decade ago in Helfend v. Southern Cal. Rapid Transit District, supra, 2 Cal.3d 1, we acknowledged that most legal commentators had severely criticized the rule for affording a plaintiff a "double recovery" for "losses" he [38 Cal.3d 167] had not in reality sustained, fn. 22 and we noted that many jurisdictions had either restricted or repealed it. (Id., at pp. 6-7, & fns. 4, 5 & 6.) Although we concluded in Helfend that a number of policy considerations counseled against judicial abolition of the rule, we in no way suggested that it was immune from legislative revision, but, on the contrary, stated that the changes proposed by legal commentators "if desirable, would be more effectively accomplished through legislative reform." (Id., at p. 13.) In the mid-1970's, California was only one of many states to include a modification of the collateral source rule as a part of its medical malpractice reform legislation (see Comment, An Analysis of State Legislative Responses to the Medical Malpractice Crisis (1975) Duke L.J. 1417, 1447-1450), and the American Bar Association's Commission on Medical Professional Liability also recommended abolition of the rule as one appropriate response to the medical malpractice "crisis." (See Rep. of Com. on Medical Professional Liability, supra, 102 ABA Ann. Rep. 786, 849-850.) Under the circumstances, we think it is clear that the provision is rationally related to a legitimate state interest and does not violate due process.

 

Plaintiff's equal protection challenge to section 3333.1 is equally without merit. As with all of the MICRA provisions that we have examined in recent cases, the Legislature could properly restrict the statute's application to medical malpractice cases because the provision was intended to help meet problems that had specifically arisen in the medical malpractice field.

 

Accordingly, the trial court did not err in upholding section 3333.1. fn. 23

 

IX

 

The judgment is affirmed. Each party shall bear its own costs on appeal.

 

Broussard, J., Grodin, J., and Lucas, J., concurred.

 

BIRD, C. J.,

 

Dissenting.

 

With today's decision, a majority of this court have upheld, in piecemeal fashion, statutory provisions that require victims [38 Cal.3d 168] of medical negligence to accept delayed payment of their judgments (American Bank & Trust Co. v. Community Hospital (1984) 36 Cal.3d 359 [204 Cal.Rptr. 671, 683 P.2d 670] [hereafter American Bank]), that prohibit them from paying the market rate for legal representation (Roa v. Lodi Medical Group (1985) 37 Cal.3d 920 [211 Cal.Rptr. 77, 695 P.2d 164]), that deprive them of compensation for proven noneconomic damages greater than $250,000 (maj. opn., ante, at pp. 157-164), and that divest them of the benefit of their own insurance policies (id., at pp. 164-167).

 

While the majority have considered the cumulative financial effect of these provisions on insurers to support their conclusion that MICRA might have some desirable impact on insurance rates (see maj. opn., ante, at p. 159, fn. 16), they have insisted upon assessing the human impact of each provision on injured victims in isolation. However, it is no longer possible to ignore the overall pattern of the MICRA scheme. In order to provide special relief to negligent healthcare providers and their insurers, MICRA arbitrarily singles out a few injured patients to be stripped of important and well-established protections against negligently inflicted harm.

 

Crisis or no crisis, this court is dutybound to apply the constitutional guarantee against irrational and invidious legislative classifications. Today's majority opinion represents a sad departure from this court's previously proud tradition of fulfilling that important duty.

 

By now, the story of MICRA is a familiar one. (See generally, American Bank, supra, 36 Cal.3d at p. 364.) Enacted in 1975 amidst a nationwide "medical malpractice crisis," it includes a number of provisions that seek to relieve healthcare providers and their insurers from some of the costs of medical malpractice litigation. Victims of medical negligenceespecially those afflicted with severe injurieshave been singled out to provide the bulk of this relief. These plaintiffs have been deprived of the benefit of various general rules that normally govern personal injury litigation. (See, e.g., Code Civ. Proc., § 667.7 [exception to general rule requiring immediate lump sum payment of a judgment]; Bus. & Prof. Code, § 6146 [special restrictions on attorney fees]; Civ. Code, § 3333.2 [special limit on noneconomic damages]; fn. 1 § 3333.1 [abrogation of collateral source rule].)

 

As political scientist Paul Starr has observed, "[a] crisis can be a truly marvelous mechanism for the withdrawal or suspension of established rights, and the acquisition and legitimation of new privileges." (Quoted in Jenkins & Schweinfurth, California's Medical Injury Compensation Reform Act: An Equal Protection Challenge (1979) 52 So.Cal. L.Rev. 829, 935 [38 Cal.3d 169] [hereafter California's MICRA.) However, now that the medical malpractice "crisis" is fading into the past, courts around the country are taking a closer look at medical malpractice legislation. At the time of this court's first MICRA decision, only three courts had invalidated medical malpractice legislation on equal protection grounds. (American Bank, supra, 36 Cal.3d at p. 370, fn. 10.) In the past year alone, that number has doubled. (See Austin v. Litvak (Colo. 1984) 682 P.2d 41; Baptist Hosp. of Southeast Texas v. Baber (Tex.Ct.App. 1984) 672 S.W.2d 296; Kenyon v. Hammer (1984) 142 Ariz. 69 [688 P.2d 961].)

 

Unfortunately, a majority of this court today decline to join this growing trend. Instead, they continue to defer to the Legislature's resolution of the "crisis," with dire consequences both for victims of medical negligence and for well-established principles of constitutional law.

 

The problems of this approach are rapidly becoming apparent as the courts begin to confront its human consequences. Less than one year ago, this court rejected the first MICRA challenge, upholding the periodic payment provision. (See American Bank, supra, 36 Cal.3d 359.) Already, that provision has been severely limited. In American Bank itself, this court mandated special procedures to offset the provision's worst effects (id., at pp. 376, 377, fn. 14) and declined to apply it to the case at bar. (Id., at p. 378.) Today, in "the interests of justice," this court approves the trial court's refusal to apply the provision to all but a small portion of the present plaintiff's award. (Maj. opn., ante, at p. 156.)

 

While the majority have upheld the various provisions of MICRA out of deference to the Legislature, it is unlikely that such ad hoc judicial adjustments to the act will ultimately produce a result that is more respectful of the Legislature than a clear-cut constitutional invalidation followed by a legislative revision of the scheme. The majority's well meaning attempt at "deference" serves only to perpetuate a fundamentally unjust statutory scheme.

 

I.

 

For the first time, this court is confronted with a provision of MICRA that directly prohibits plaintiffs from recovering compensation for proven injuries. In contrast to the provisions so far upheld by this court, there is no pretense that the $250,000 limit on noneconomic damages affects only windfalls (compare American Bank, supra, 36 Cal.3d at p. 369), that it protects plaintiffs' awards (compare ibid.; Roa v. Lodi Medical Group, supra, 37 Cal.3d at p. 933), or that it discourages nonmeritorious suits (compare [38 Cal.3d 170] id., at p. 932.) The statute plainly and simply denies severely injured malpractice victims compensation for negligently inflicted harm.

 

Also for the first time, the weight of authority from other jurisdictions supports the constitutional challenge. A substantial majority of the courts of the nation that have addressed the constitutionality of medical malpractice damage limits have invalidated the challenged provisions. (See Wright v. Central Du Page Hospital Association (1976) 63 Ill.2d 313 [347 N.E.2d 736, 743, 80 A.L.R.3d 566]; Carson v. Maurer (1980) 120 N.H. 925 [424 A.2d 825, 838, 12 A.L.R.4th 1] [hereafter Carson]; Arneson v. Olson (N.D. 1978) 270 N.W.2d 125, 136; Baptist Hosp. of Southeast Texas v. Baber, supra, 672 S.W.2d at p. 298; Simon v. St. Elizabeth Medical Center (1976) 3 Ohio Ops.3d 164 [355 N.E.2d 903, 906-907] [dictum]; cf. Jones v. State Board of Medicine (1976) 97 Idaho 859 [555 P.2d 399, 416], cert. den., 431 U.S. 914 [53 L.Ed.2d 223, 97 S.Ct. 2173] [remanding for factual determination on whether a medical malpractice crisis actually existed]; but see Johnson v. St. Vincent Hospital, Inc. (1980) 273 Ind. 374 [404 N.E.2d 585, 601].)

 

In Carson, supra, 424 A.2d at page 838, the New Hampshire Supreme Court struck down a damage limit identical to the present one. The court explained that "[i]t is simply unfair and unreasonable to impose the burden of supporting the medical care industry solely upon those persons who are most severely injured and therefore most in need of compensation." (Id., at p. 837.) fn. 2

 

The majority suggest that, with the exception of Carson, the decisions of other jurisdictions are factually distinguishable from the present case. It is argued that the invalidated statutes were more oppressive than the present one since they restricted recovery for all types of injury. (See maj. opn., ante, at p. 161.) However, in Baptist Hosp. of Southeast Texas v. Baber, supra, 672 S.W.2d 296, a Texas appellate court invalidated a $500,000 limit that applied only to damages other than medical expenses. Also, in Simon v. St. Elizabeth Medical Center, supra, 355 N.E.2d 903, an Ohio appellate court stated in dictum that a $200,000 limit on "general" damages, similar to the limit on "noneconomic" damages involved in the present case, violated the United States and Ohio Constitutions. These provisions were not markedly more severe than MICRA's $250,000 limit on noneconomic damages. [38 Cal.3d 171]

 

Moreover, for many plaintiffs the present limit may be no less harsh than the $500,000 limit on total damages struck down by the Illinois Supreme Court in Wright v. Central Du Page Hospital Association, supra, 347 N.E.2d at page 741. Depending on the relative size of a particular plaintiff's economic and noneconomic damages, the present limit might produce more or less harsh results than the Illinois statute. Only the North Dakota and Ohio statutes imposed substantially more stringent restrictions. (See Arneson v. Olson, supra, 270 N.W.2d at p. 135 [$300,000 limit on total damages]; Jones v. State Board of Medicine, supra, 555 P.2d at p. 410 [$150,000 limit on total damages].)

 

The burden on medical malpractice victims is no less real by virtue of the fact that it is "noneconomic" injury which goes uncompensated. Noneconomic injuries include not only physical pain and loss of enjoyment, but also "fright, nervousness, grief, anxiety, worry, mortification, shock, humiliation, indignity, embarrassment, apprehension, terror or ordeal." (Capelouto v. Kaiser Foundation Hospitals (1972) 7 Cal.3d 889, 892-893 [103 Cal.Rptr. 856, 500 P.2d 880].)

 

For a child who has been paralyzed from the neck down, the only compensation for a lifetime without play comes from noneconomic damages. Similarly, a person who has been hideously disfigured receives only noneconomic damages to ameliorate the resulting humiliation and embarassment.

 

Pain and suffering are afflictions shared by all human beings, regardless of economic status. For poor plaintiffs, noneconomic damages can provide the principal source of compensation for reduced lifespan or loss of physical capacity. Unlike the attorney in the present case, these plaintiffs may be unable to prove substantial loss of future earnings or other economic damages.

 

At first blush, $250,000 sounds like a considerable sum to allow for noneconomic damages. However, as amici California Hospital Association and California Medical Association candidly admit, most large recoveries come in cases involving permanent damage to infants or to young, previously healthy adults. Spread out over the expected lifetime of a young person, $250,000 shrinks to insignificance. Injured infants are prohibited from recovering more than three or four thousand dollars per year, no matter how excruciating their pain, how truncated their lifespans, or how grotesque their disfigurement. Even this small figure will gradually decline as inflation erodes the real value of the allowable compensation. [38 Cal.3d 172]

 

The majority are able to cite only a single decision upholding a limit on medical malpractice damages. fn. 3 In Johnson v. St. Vincent Hospital, Inc., supra, 404 N.E.2d 585, 601, the Indiana Supreme Court upheld a $500,000 limit on total damages. However, the Indiana statute did more than restrict malpractice victims' recoveries. In order to obtain the benefits of the limit, health care providers were required to contribute to a state-run compensation fund. (Id., at p. 601; Ind. Code, tit. 16, art. 9.5, ch. 2-1.)

 

By contrast, the present limit is not linked to any public benefit. Insurers and health care providers are free to retain any savings for private use. Moreover, the Legislature had before it no evidence that the immense sacrifices of victims would result in appreciable savings to the insurance companies. In the years preceding the enactment of MICRA, an insignificant number of individuals (at maximum, 14 in a single year) received compensation of over $250,000 in noneconomic and economic damages combined. (See Cal. Auditor General, The Medical Malpractice Insurance Crisis in California (1975) p. 31 [hereafter Report of the Auditor General].) Further, it does not appear that the Legislature had access to any data specifically relating to noneconomic damages. (Id., at pp. 30-31; see generally, California's MICRA, supra, at p. 951.)

 

As in American Bank and Roa, this court is urged to apply a heightened level of equal protection scrutiny. (Cf. Carson v. Maurer, supra, 424 A.2d 825.) However, I do not find it necessary to address that issue, since the limit cannot survive any "'serious and genuine judicial inquiry into the correspondence between the classification and the legislative goals.'" (Cooper v. Bray (1978) 21 Cal.3d 841, 848 [148 Cal.Rptr. 148, 582 P.2d 604], quoting Newland v. Board of Governors (1977) 19 Cal.3d 705, 711 [139 Cal.Rptr. 620, 566 P.2d 254].)

 

Only one legitimate purpose is advanced in support of the statute: that of preserving medical malpractice insurance so that plaintiffs will be able to collect on the unrestricted portions of their judgments. (Maj. opn., ante, at p. 158.) Admittedly, the objective of preserving insurance is legitimate. And, the Legislature might reasonably have determined that special relief [38 Cal.3d 173] to medical tortfeasors and their insurance companies would effectuate that purpose. (See American Bank, supra, 36 Cal.3d at p. 372.)

 

However, it is not enough that the statute as a whole might tend to serve the asserted purpose. Each statutory classification "'"must be reasonable, not arbitrary, and must rest upon some ground of difference having a fair and substantial relation to the object of the legislation, so that all persons similarly circumstanced shall be treated alike."'" (Brown v. Merlo (1973) 8 Cal.3d 855, 861 [106 Cal.Rptr. 388, 506 P.2d 212, 66 A.L.R.3d 505]; see also Cooper v. Bray, supra, 21 Cal.3d at p. 848; Newland v. Board of Governors, supra, 19 Cal.3d at p. 711.)

 

There is no logically supportable reason why the most severely injured malpractice victims should be singled out to pay for special relief to medical tortfeasors and their insurers. The idea of preserving insurance by imposing huge sacrifices on a few victims is logically perverse. Insurance is a device for spreading risks and costs among large numbers of people so that no one person is crushed by misfortune. (See generally, Keeton, Basic Insurance Law (1960) p. 484.) In a strange reversal of this principle, the statute concentrates the costs of the worst injuries on a few individuals.

 

The result is a fundamentally arbitrary classification. Under the statute, a person who suffers a severe injuryfor example loss of limbs or eyesightlate in life may receive up to $250,000 for the resulting loss of enjoyment during his or her final years. An infant with identical injuries is limited to the same compensation for an entire lifetime of blindness or immobility.

 

Such arbitrary treatment cannot be justified with reference to the purpose of the statute. Without speculating on the wisdom of the possible alternatives, it is plain that the Legislature could have provided special relief to health care providers and insurers without imposing these crushing burdens on a few arbitrarily selected victims. Most obviously, the burden could have been spread among all of the statute's beneficiarieshealth care consumers or, more broadly, the taxpayers. Alternately, the Legislature could have reduced all noneconomic damage awards in medical malpractice actions by a pro rata amount. (See California's MICRA, supra, 52 So.Cal.L.Rev. at p. 952.)

 

The majority suggest three rationales for singling out the most severely injured plaintiffs to bear the burden. First, it is suggested that "[t]he Legislature could reasonably have determined that an across-the-board limit would provide a more stable base on which to calculate insurance rates." (Maj. opn., ante, at p. 163.) However, the same could be said of any restriction on recoveries, regardless of the existence or nature of classifications [38 Cal.3d 174] among tort victims. In effect, this rationale ignores the fact that plaintiff is challenging a classification among tort victims.

 

Next, the majority hypothesize that "the Legislature may have felt that the fixed $250,000 limit would promote settlements by eliminating 'the unknown possibility of phenomenal awards for pain and suffering that can make litigation worth the gamble.'" (Maj. opn., ante, at p. 163.) Again, any restriction on recoveries might make plaintiffs less willing to face the risk of litigation. Like the "stability" rationale, this theory fails to address the nature of the classifications among plaintiffs.

 

Finally, it is suggested that "the Legislature simply may have felt that it was fairer to malpractice plaintiffs in general to reduce only the very large noneconomic damage awards, rather than to diminish the more modest recoveries for pain and suffering and the like in the great bulk of cases." (Maj. opn., ante, at p. 163.) The notion that the Legislature might have concentrated the burden of medical malpractice on the most severely injured victims out of considerations of fairness certainly has the advantage of originality.

 

While many courts have concluded that fixed malpractice damage limits are grossly unfair (see cases cited ante, at p. 169), none has suggested the possibility of fairness as a legitimate basis for such a limit. If "fairness" can justify the present limit, it is hard to imagine a statute that could be invalidated under the majority's version of equal protection scrutiny.

 

The majority's acceptance of rationales so broad and speculative that they could justify virtually any enactment calls attention to the implications of the MICRA cases for equal protection doctrine in this state. In American Bank, supra, 36 Cal.3d at page 398 (dis. opn. of Bird, C. J.), I joined a majority of this court in rejecting the notion of "intermediate" equal protection scrutiny. However, I conditioned that rejection on the beliefgrounded in the past practice of this courtthat the alternative was a two-tier system with a meaningful level of scrutiny under the lower tier. (Id., at pp. 398-401; see also Hawkins v. Superior Court (1978) 22 Cal.3d 584, 607-610 [150 Cal.Rptr. 435, 586 P.2d 916] (conc. opn. of Bird, C. J.).)

 

In particular, I relied on Brown v. Merlo, supra, 8 Cal.3d 855. In Brown, this court conducted a serious and sensitive inquiry into the nature and purposes of the automobile guest statute. The court demanded not only that the enactment might tend to serve some conceivable legislative purpose, but also that each classification bear a fair and substantial relationship to a legitimate purpose. (Id., at p. 861.) The guest statute failed to pass this level of scrutiny since the classification of all automobile guests bore an insufficiently [38 Cal.3d 175] precise relation to the asserted purposes. For example, the classification was held to be overinclusive with regard to the purpose of preventing collusive suits. (Id., at p. 877.) Brown was subsequently followed in Cooper v. Bray, supra, 21 Cal.3d 841.

 

If applied in the present case, the mode of analysis used in Brown and Cooper would compel invalidation of the $250,000 limit, which is grossly underinclusive by any standard. Millions of healthcare consumers stand to gain from whatever savings the limit produces. Yet, the entire burden of paying for this benefit is concentrated on a handful of badly injured victimsfewer than 15 in the year MICRA was enacted. (See Report of the Auditor General, supra, at p. 31.) Although the Legislature normally enjoys wide latitude in distributing the burdens of personal injuries, the singling out of such a minuscule and vulnerable group violates even the most undemanding standard of underinclusiveness.

 

However, the MICRA majority opinions have made no attempt to assess the over- or under-inclusiveness of the legislative classifications at issue. American Bank, Barme, and Roa could arguably be distinguished from Brown and Cooper on the ground that the MICRA provisions at issue did not directly deny malpractice victims compensation for negligently inflicted harm. However, if Brown and Cooper retain any vitality today, their analysis must be applied in the present case.

 

At a bare minimum the court should honestly confront the existence of Brown and Cooper. In my view, it is remarkable that neither of these decisionspreviously considered to be leading opinions on the application of equal protection analysis in the personal injury areais capable of being distinguished in any MICRA majority opinion.

 

In conclusion, there is no rational basis for singling out the most severely injured victims of medical negligence to pay for special relief to health care providers and their insurers. Hence, the $250,000 limit on noneconomic damages cannot withstand any meaningful level of judicial scrutiny.

 

II.

 

Plaintiff also challenges section 3333.1, which deprives medical malpractice victims of the benefits of the longstanding collateral source rule. fn. 4

 

The collateral source rule bars the deduction of collateral compensation, such as insurance benefits, from a tort victim's damage award. (See Hrnjak [38 Cal.3d 176] v. Graymar, Inc. (1971) 4 Cal.3d 725, 729 [484 P.2d 599, 47 A.L.R.3d 224]; see generally, Schwartz, The Collateral-Source Rule (1961) 41 B.U.L.Rev. 348, 354.) The effect of the rule is to prevent tortfeasors and their insurers from reaping the benefits of collateral source funds, which "are usually created through the prudence and foresight of persons other than the tortfeasor, frequently including the injured person himself." (Gypsum Carrier, Inc. v. Handelsman (9th Cir. 1962) 307 F.2d 525, 534-535 [4 A.L.R.3d 517].)

 

As this court has observed, the collateral source rule embodies "the venerable concept that a person who has invested years of insurance premiums to assure his medical care should receive the benefits of his thrift. The tortfeasor should not garner the benefits of his victim's providence." (Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 1, 9-10 [84 Cal.Rptr. 173, 465 P.2d 61, 77 A.L.R.3d 398] [hereafter Helfend].) In the present case, the plaintiff collected workers' compensation, which he earned indirectly from his employment.

 

It is not disputed that section 3333.1 must be reviewed under the rational relationship test. That test requires that legislative classifications bear a rational relationship to a legitimate state purpose to pass constitutional muster. (See Brown v. Merlo, supra, 8 Cal.3d at p. 882; Cooper v. Bray, supra, 21 Cal.3d at p. 848.)

 

The proponents of section 3333.1 have suggested that it serves two purposes. First, it seeks to eliminate double recoveries by victims. (See Keene, California's Medical Malpractice Crisis, in A Legislator's Guide to the Medical Malpractice Issue (Warren & Merritt edits. 1976) p. 31.) However, there is no apparent reason why legislation enacted for this purpose should be limited to medical malpractice victims. (See Graley v. Satayatham (1976) 74 Ohio Ops.2d 316 [343 N.E.2d 832, 836-838].)

 

Moreover, as this court has recognized, the collateral source rule "does not actually render 'double recovery' for the plaintiff." (Helfend, supra, 2 Cal.3d at p. 12.) Tort victims are not fully compensated for their injuries by their judgments alone. The jury is directed to award damages only in the amount of the plaintiff's injuries. Yet, plaintiffs must pay attorney fees and costs out of their recoveries. Generally, fees and costs account for a substantial proportion of the recovery in medical malpractice actions. (See U.S. Dept. of Health, Ed. & Welf., Rep. of Sect.'s Com. on Medical Malpractice (1973) p. 32.)

 

The collateral source rule enables the plaintiff to recover some of these costs from collateral sources. Hence, the rule "will not usually give him [38 Cal.3d 177] 'double recovery,' but partially provides a somewhat closer approximation to full compensation for his injuries." (Helfend, supra, 2 Cal.3d at p. 13.) Section 3333.1 will prevent many tort victims from obtaining this relatively full compensation simply because they were injured by a doctor instead of some nonmedical tortfeasor.

 

Furthermore, while supposedly eliminating victims' "windfalls," section 3333.1 provides a windfall to negligent tortfeasors. Under section 3333.1, negligent healthcare providers obtain a special exemption from the general rule that negligent tortfeasors must fully compensate their victims. "No reason in law, equity or good conscience can be advanced why a wrongdoer should benefit from part payment from a collateral source. ... If there must be a windfall certainly it is more just that the injured person shall profit therefrom, rather than the wrongdoer ...." (Grayson v. Williams (10th Cir. 1958) 256 F.2d 61, 65; see also Helfend, supra, 2 Cal.3d at p. 10.)

 

The second purpose advanced to justify section 3333.1 is that of reducing the cost of medical malpractice insurance, the overall goal of MICRA. (See Stats. 1975, Second Ex. Sess. 1975-1976, ch. 2, § 12.5, p. 4007.) It is argued that the Legislature rationally singled out medical malpractice actions in order to alleviate a "crisis" in medical malpractice insurance rates.

 

However, the relationship between section 3333.1 and the reduction of malpractice insurance premiums is entirely speculative. There is no requirement that physicians' insurers pass on their savings in the form of lowered premiums. Hence, insurance companies may simply retain their windfall for private purposes. Further, section 3333.1 operates only as a rule of evidence. Juries may choose not to offset collateral compensation. Hence, "a degree of arbitrariness may frustrate the relationship between this provision and attainment of MICRA's goal." (California's MICRA, supra, 52 So.Cal.L.Rev. at p. 949.)

 

The courts of other jurisdictions have had occasion to address the constitutionality of similar provisions. In Arneson v. Olson, supra, 270 N.W.2d 125, 137, the North Dakota Supreme Court unanimously invalidated a statute that effectively abolished the collateral source rule in medical malpractice cases. The court found that there was no "'close correspondence between [the] statutory classification and [the] legislative goals'" (Id., at pp. 133, 137), and noted that the provision gave the tortfeasor "the benefit of insurance privately purchased by or for the tort victim ...." (Id., at p. 128.)

 

Similarly, in Carson v. Maurer, supra, 424 A.2d at pages 835-836, the New Hampshire Supreme Court unanimously overturned a kindred provision, [38 Cal.3d 178] reasoning that it "arbitrarily and unreasonably discriminate[d] in favor of the class of health care providers." And, in Graley v. Satayatham, supra, 343 N.E.2d at page 836, the court struck down a requirement that collateral benefits be listed in medical malpractice complaints, reasoning that it unconstitutionally discriminated against medical malpractice victims.

 

Some jurisdictions have upheld similar provisions. (See Eastin v. Broomfield (1977) 116 Ariz. 576 [570 P.2d 744, 751-753]; Pinillos v. Cedars of Lebanon Hospital Corp. (Fla. 1981) 403 So.2d 365, 367-368; Rudolph v. Iowa Methodist Medical Ctr. (Iowa 1980) 293 N.W.2d 550, 552-560.) Two of these decisions were made by sharply divided courts. (See Pinillos, supra, 403 So.2d at pp. 369-371 (dis. opn. of Sundberg, C. J.); Rudolph, supra, 293 N.W.2d at pp. 561-568 (dis. opn. of Reynoldson, C. J.).) Moreover, the decisions reflect a highly deferential approach that is not consistent with the California courts' rigorous application of the rational relationship test to classifications affecting tort victims. (See, e.g., Brown v. Merlo, supra, 8 Cal.3d 855; Cooper v. Bray, supra, 21 Cal.3d 841; Monroe v. Monroe (1979) 90 Cal.App.3d 388 [153 Cal.Rptr. 384]; Ayer v. Boyle (1974) 37 Cal.App.3d 822 [112 Cal.Rptr. 636].)

 

In conclusion, section 3333.1 permits negligent healthcare providers and their insurers to reap the benefits of their victims' foresight in obtaining insurance. This departure from the general rule prohibiting the deduction of collateral source benefits from a judgment is not rationally related to any legitimate state purpose. Hence, section 3333.1 should be declared unconstitutional.

 

Woods, J., concurred.

 

MOSK, J.

 

I dissent.

 

The well-reasoned dissent of the Chief Justice reaches a conclusion consistent with the duty of a democratic society to protect malpractice victims and to refrain from creating specially favored economic insulation for those who commit malpractice.

 

I part company with the Chief Justice only in regard to the equal protection test employed. The case before us is a paradigm demonstrating the impracticality of either the strict scrutiny or the rational relationship test. My colleagues persist in denying the existence of an intermediate test, and cling to the inflexible two-tier rule with a tenacity that suggests it originated with the Delphic oracle. Yet an intermediate test of equal protection has [38 Cal.3d 179] received frequent approval from many reputable sources. (See the numerous authorities cited in my separate opinion in Hawkins v. Superior Court (1978) 22 Cal.3d 584, 595-603 [150 Cal.Rptr. 435, 586 P.2d 916].)

 

Now an intermediate test has been adopted by the Supreme Court of New Hampshire in one of the most persuasive opinions in the country invalidating legislative provisions comparable to MICRA in California. In Carson v. Maurer (1980) 120 N.H. 925 [424 A.2d 825, 831, 12 A.L.R.4th 1], the court held that in determining the validity of MICRA-type legislation, "the test is whether the challenged classifications are reasonable and have a fair and substantial relation to the object of the legislation. [Citations.] Whether the malpractice statute can be justified as a reasonable measure in furtherance of the public interest depends upon whether the restriction of private rights sought to be imposed is not so serious that it outweighs the benefits sought to be conferred upon the general public."

 

The Supreme Court of New Hampshire concluded that the act "arbitrarily and unreasonably discriminates in favor of the class of health care providers. Although the statute may promote the legislative objective of containing health care costs, the potential cost to the general public and the actual cost to many medical malpractice plaintiffs is simply too high." (Id. at p. 836.)

 

Once again we have an opportunity to employ a test carefully crafted to avoid the rigid extremes of the anachronistic two-tier test of equal protection. As I wrote in Hawkins, supra, 22 Cal.3d at page 595, "the ultimate acceptance of an intermediate test is foreordained in Supreme Court opinions: the question is not whether, but when, the third test will become standard. I regret that our court has failed to forthrightly assume leadership among the states on this important question of constitutional law."

 

­FN 1. Plaintiff did not claim that the heart attack would reduce his earning capacity during his lifetime.

 

­FN 2. Plaintiff had anticipated the possible application of sections 3333.2 and 3333.1 before trial and had requested the court to declare the statutes unconstitutional at that time. After full briefing, the court rejected the constitutional attack. The court also ruled at that time that in order to avoid possible confusion of the jury, it would not inform them of the $250,000 limit and thatsince the amounts of the collateral source benefits were not disputedit would simply reduce the verdict by such benefits; neither party objected to the court's decision to handle the matter in this fashion.

 

­FN 3. Section 602 provides in relevant part: "Challenges for cause may be taken on one or more of the following grounds: ... (4) Standing in the relation of ... master and servant ... or principal and agent, or debtor and creditor, to either party .... A depositor of a bank ... shall not be deemed a creditor of such bank ... for the purpose of this subsection solely by reason of his being such a depositor ... ... (6) Interest on the part of the juror in the event of the action, or in the main question involved in the action, except his interest as a member or citizen or taxpayer of a county, city and county, incorporated city or town, or other political subdivision of a county, or municipal water district."

 

As the above quotation demonstrates, section 602 by its terms establishes that two types of relationships(1) the relationship of a bank depositor to a bank and (2) the relationship of a taxpayer to a governmental entitydo not justify a challenge for cause. The statute does not, however, state whether the designated exceptions are exclusive or illustrative.

 

­FN 4. The relevant instruction read in full: "It is the duty of one who undertakes to perform the service of a trained or graduate nurse to have the knowledge and skill ordinarily possessed, and to exercise the care and skill ordinarily used in like cases, by trained and skilled members of the nursing profession practicing their profession in the same or similar locality and under similar circumstances. Failure to fulfill either of these duties is negligence. I instruct you that the standard of care required of a nurse practitioner is that of a physician and surgeon duly licensed to practice medicine in the state of California when the nurse practitioner is examining a patient or making a diagnosis."

 

The initial paragraph of this instruction tracks BAJI No. 6.25; the second paragraph was an added instruction given at plaintiff's request.

 

­FN 5. Section 2725 currently provides in relevant part: "In amending this section at the 1973-74 session, the Legislature recognizes that nursing is a dynamic field, the practice of which is continually evolving to include more sophisticated patient care activities. It is the intent of the Legislature in amending this section at the 1973-74 session to provide clear legal authority for functions and procedures which have common acceptance and usage. It is the legislative intent also to recognize the existence of overlapping functions between physicians and registered nurses and to permit additional sharing of functions within organized health care systems which provide for collaboration between physicians and registered nurses. ... The practice of nursing within the meaning of this chapter means those functions, including basic health care, which help people cope with difficulties in daily living which are associated with their actual or potential health or illness problems or the treatment thereof which require a substantial amount of scientific knowledge or technical skill, and includes all of the following: (a) Direct and indirect patient care services that insure the safety, comfort, personal hygiene, and protection of patients; and the performance of disease prevention and restorative measures. (b) Direct and indirect patient care services, including, but not limited to, the administration of medications and therapeutic agents, necessary to implement a treatment, disease prevention, or rehabilitative regimen ordered by and within the scope of licensure of a physician ... (c) The performance of skin tests, immunization techniques, and the withdrawal of human blood from veins and arteries. (d) Observation of signs and symptoms of illness, reactions to treatment, general behavior, or general physical condition, and (1) determination of whether such signs, symptoms, reactions, behavior, or general appearance exhibit abnormal characteristics; and (2) implementation, based on observed abnormalities, of appropriate reporting, or referral, or standardized procedures, or changes in treatment regimen in accordance with standardized procedures, or the initiation of emergency procedures."

 

­FN 6. In 1977, the Legislature adopted legislation specifically related to "nurse practitioners," providing that a "nurse practitioner" must be both a registered nurse and also meet the standards for nurse practitioner established by the Board of Registered Nursing. (See Bus. & Prof. Code, § 2834 et seq.) The evidence in this case established that Nurse Welch had been certified as both a registered nurse and a "family nurse practitioner."

 

­FN 7. The medical experts on both sides agreed that the major infarction probably occurred about nine hours after Dr. Redding's examination. While Dr. Swan did indicate that the chances of preventing or minimizing injury are improved by the earliest possible detection of an impending attack, he also testified that assuming plaintiff were still in the preinfarctive stage at the time of Dr. Redding's examinationan assumption shared by the defense expertsif an EKG had been performed at that time "the same happy outcome could have happened that we projected for the 4:15 intervention [i.e., diagnosis and treatment at the time of Nurse Welch's examination]."

 

Defendant never suggested to the jury that its verdict should be affected by whether it found only Dr. Redding, and not Nurse Welch, to have been negligent. Its position was simply that in light of the symptoms described and exhibited by plaintiff at the time of the examinations, neither Nurse Welch nor Dr. Redding was negligent in failing to order an EKG, and that, in any event, the heart attack could not have been prevented even if an EKG had been performed at either time.

 

­FN 8. The instruction read: "There may be more than one proximate cause of an injury. When negligent conduct of two or more persons contributes concurrently as proximate causes of an injury, the conduct of each of said persons is a proximate cause of the injury regardless of the extent to which each contributes to the injury. A cause is concurrent if it was operative at the moment of injury and acted with another cause to produce the injury."

 

­FN 9. For example, just before reading the instructions on causation, the court read the following instructions: "A plaintiff who was injured as a proximate result of some negligent conduct on the part of a defendant is entitled to recover compensation for such injury from that defendant. Thus, the plaintiff is entitled to a verdict in this case if you find, in accordance with my instructions: 1. That defendant was negligent; and 2. That such negligence was a proximate cause of injury to the plaintiff.

 

"In this action, the plaintiff has the burden of establishing by a preponderance of the evidence all of the facts necessary to prove the following issues: 1. The negligence of the defendant. 2. That such negligence was the proximate cause of injury to plaintiff. 3. The nature and extent of plaintiff's damages. ..." (Italics added.)

 

­FN 10. The comments in the Restatement state: "d. Loss or impairment of earning capacity for the future. The extent of future harm to the earning capacity of the injured person is measured by the difference, viewed as of the time of trial, between the value of the plaintiff's services as they will be in view of the harm and as they would have been had there been no harm. This difference is the resultant derived from reducing to present value the anticipated losses of earnings during the expected working period that the plaintiff would have had during the remainder of his prospective life, but for the defendant's act. (On the determination of the prospective length of life, see Comment e.) Accordingly, the trier of fact must ascertain, as nearly as can be done in advance, the difference between the earnings that the plaintiff would or could have received during his life expectancy but for the harm and the earnings that he will probably be able to receive during the period of his life expectancy as now determined. ... e. The determination of length of life. In the case of permanent injuries or injuries causing death, it is necessary, in order to ascertain the damages, to determine the expectancy of the injured person's life at the time of the tort. ... If the person harmed is alive at the time of trial, ordinarily the opinion of experts on the probable diminution of the plaintiff's life expectancy as a result of the tort is admissible as bearing upon the impairment of future earning capacity. ..." (Ibid.)

 

­FN 11. Section 667.7 provides in relevant part: "(a) In any action for injury or damages against a provider of health care services, a superior court shall, at the request of either party, enter a judgment ordering that money damages or its equivalent for future damages of the judgment creditor be paid in whole or in part by periodic payments rather than by a lump-sum payment if the award equals or exceeds fifty thousand dollars ($50,000) in future damages. In entering a judgment ordering the payment of future damages by periodic payments, the court shall make a specific finding as to the dollar amount of periodic payments which will compensate the judgment creditor for such future damages. As a condition to authorizing periodic payments of future damages, the court shall require the judgment debtor who is not adequately insured to post security adequate to assure full payment of such damages awarded by the judgment. Upon termination of periodic payments of future damages, the court shall order the return of this security, or so much as remains, to the judgment debtor. (b)(1) The judgment ordering the payment of future damages by periodic payments shall specify the recipient or recipients of the payments, the dollar amount of the payments, the interval between payments, and the number of payments or the period of time over which payments shall be made. Such payments shall only be subject to modification in the event of the death of the judgment creditor. (2) In the event that the court finds that the judgment debtor has exhibited a continuing pattern of failing to make the payments, as specified in paragraph (1), the court shall find the judgment debtor in contempt of court and, in addition to the required periodic payments, shall order the judgment debtor to pay the judgment creditor all damages caused by the failure to make such periodic payments, including court costs and attorney's fees. (c) However, money damages awarded for loss of future earnings shall not be reduced or payments terminated by reason of the death of the judgment creditor, but shall be paid to persons to whom the judgment creditor owed a duty of support, as provided by law, immediately prior to his death. In such cases the court which rendered the original judgment, may, upon petition of any party in interest, modify the judgment to award and apportion the unpaid future damages in accordance with this subdivision. (d) Following the occurrence or expiration of all obligations specified in the periodic payment judgment, any obligation of the judgment debtor to make further payments shall cease and any security given, pursuant to subdivision (a) shall revert to the judgment debtor. ... (f) It is the intent of the legislature in enacting this section to authorize the entry of judgments in malpractice actions against health care providers which provide for the payment of future damages through periodic payments rather than lump-sum payments. By authorizing periodic payment judgments, it is the further intent of the legislature that the courts will utilize such judgments to provide compensation sufficient to meet the needs of an injured plaintiff and those persons who are dependent on the plaintiff for whatever period is necessary while eliminating the potential windfall from a lump-sum recovery which was intended to provide for the care of an injured plaintiff over an extended period who then dies shortly after the judgment is paid, leaving the balance of the judgment award to persons and purposes for which it was not intended. It is also the intent of the Legislature that all elements of the periodic payment program be specified with certainty in the judgment ordering such payments and that the judgment not be subject to modification at some future time which might alter the specifications of the original judgment."

 

­FN 12. As originally introduced, the bill which ultimately became section 667.7 provided that a trial court "may," and at the request of either party "shall," provide for periodic payments. (Assem. Bill No. 1 (1975-1976 Second Ex. Sess.) June 6, 1975, § 26.) Thereafter, the bill was amended to provide simply that a court "may" provide for periodic payments. (Assem. Amend. to Assem. Bill No. 1 (1975-1976 Second Ex. Sess.) June 12, 1975, § 26.) Before enactment, however, the bill was again amended to delete the permissive "may" language and to insert the mandatory "shall" language that appears in the current statute. (Sen. Amend. to Assem. Bill No. 1 (1975-1976 Second Ex. Sess.) June 25, 1975, § 26.)

 

­FN 13. Section 3333.2 provides in relevant part: "(a) In any [medical malpractice] action ... the injured plaintiff shall be entitled to recover noneconomic losses to compensate for pain, suffering, inconvenience, physical impairment, disfigurement and other nonpecuniary damage. (b) In no action shall the amount of damages for noneconomic losses exceed two hundred fifty thousand dollars ($250,000)."

 

­FN 14. One feature of the periodic payment provision upheld in American Bankterminating payments for future damages, other than damages for loss of earnings, on the plaintiff's deathclearly does operate to reduce the amount of damages ultimately recovered.

 

­FN 15. The "general damage/special damage" distinction drawn by section 48a is similar to the "noneconomic damage/economic damage" distinction established by section 3333.2. Section 48a defines "general damages" as "damages for loss of reputation, shame, mortification and hurt feelings" and defines "special damages" as "all damages which plaintiff alleges and proves that he has suffered in respect to his property, business, trade, profession or occupation, including such amounts of money as the plaintiff alleges and proves he has expended as a result of the alleged libel, and no other."

 

­FN 16. Justice Traynor, in a dissenting opinion in Seffert v. Los Angeles Transit Lines (1961) 56 Cal.2d 498, 511 [15 Cal.Rptr. 161, 364 P.2d 337], observed: "There has been forceful criticism of the rationale for awarding damages for pain and suffering in negligence cases. (Morris, Liability for Pain and Suffering, 59 Columb.L.Rev. 476; Plant, Damages for Pain and Suffering, 19 Ohio L.J. 200; Jaffe, Damages for Personal Injury: The Impact of Insurance, 18 Law & Contemp. Probs. 219; Zelermyer, Damages for Pain and Suffering, 6 Syracuse L.Rev. 27.) Such damages originated under primitive law as a means of punishing wrongdoers and assuaging the feelings of those who had been wronged. [Citations.] They become increasingly anomalous as emphasis shifts in a mechanized society from ad hoc punishment to orderly distribution of losses through insurance and the price of goods or of transportation. Ultimately such losses are borne by a public free of fault as part of the price for the benefits of mechanization. [Citations.] Nonetheless, this state has long recognized pain and suffering as elements of damages in negligence cases [citations]; any change in this regard must await reexamination of the problem by the Legislature." (Italics added.)

 

­FN 17. In its comprehensive report on the medical malpractice insurance crisis, the American Bar Association's Commission on Medical Professional Liability recommended that no dollar limit be imposed on recoveries for economic loss, but expressly "[took] no position on whether it is appropriate to place a ceiling on the recovery of non-economic loss." (Rep. of Com. on Medical Professional Liability (1977) 102 ABA Ann.Rep. 786, 849.) The commission explained its conclusions as follows: "When liability has been demonstrated, the first priority of the tort system is to compensate the injured party for the economic loss he has suffered. While it is legitimate in the Commission's view to deduct payments to or for the benefit of the plaintiff by collateral sources, it is unconscionable to preclude a plaintiff, by an arbitrary ceiling on recovery, from recovering all his economic damages, even though some lowering of medical malpractice premiums may result from the enactment of such a ceiling. The Commission has taken no position, however, on whether it is appropriate to place a statutory ceiling on the recovery of non-economic loss. The arguments in favor of limiting non-economic loss are that a ceiling on general damages would contain jury awards within realistic limits, reduce the exposure of insurers (which reductions could be reflected in lowered premiums), lead to more settlements and less litigation, and enable insurance carriers to set more accurate rates because of the greater predictability of the size of judgments. The arguments against limiting non-economic loss are that medical malpractice should not be distinguished from other areas of professional malpractice or personal injury actions which have no ceiling on general damages, that general damages are as real to the plaintiff as economic loss, that a wrongdoer should pay for all the losses he has caused, including pain and suffering, and that the general damages portion of an award provides a fund out of which the plaintiff's attorney's fees can be deducted without leaving the plaintiff economically undercompensated. In addition, it is argued that no immediate cost or premium savings will be generated by a ceiling on non-economic losses because questions regarding the constitutionality of such statutes would have to be finally resolved before the insurance companies would reflect any potential savings in their rates; and because the ceiling might prove to be the norm." (Ibid.)

 

­FN 18. Indeed, even if due process principles required some "quid pro quo" to support the statute, it would be difficult to say that the preservation of a viable medical malpractice insurance industry in this state was not an adequate benefit for the detriment the legislation imposes on malpractice plaintiffs. As the United States Supreme Court observed in upholding the provisions of the Price-Anderson Act which placed a dollar limit on total liability that would be incurred by a defendant in the event of a nuclear accident: "'It should be emphasized ... that it is collecting a judgment, not filing a lawsuit, that counts. ... [A] defendant with theoretically 'unlimited' liability may be unable to pay a judgment once obtained.'" (Duke Power Co. v. Carolina Env. Study Group (1978) 438 U.S. 59, 89-90 [57 L.Ed.2d 595, 621, 98 S.Ct. 2620] [quoting from legislative history].)

 

Although we do not suggest that the Legislature felt that section 3333.2 aloneor for that matter any other single provision of MICRAwas essential to the survival of the medical malpractice insurance system, there is surely nothing in the due process clause which prevents a legislature from making a number of statutory changes which, in combination, provide the requisite benefit to justify the enactment.

 

­FN 19. The one exception is Carson v. Maurer, supra, 424 A.2d 825, in which the New Hampshire court struck down a provision which imposed a limit only on noneconomic damages, a statute apparently modeled on section 3333.2. As we noted in Roa, supra (37 Cal.3d at p. 932, fn. 9), the Carson courtin invalidating a variety of provisions of its medical malpractice legislationapplied an "intermediate scrutiny" standard of review that is inconsistent with the standard applicable in this state.

 

­FN 20. Section 3333.1 provides in relevant part: "(a) In the event the defendant so elects, in an action for personal injury against a health care provider based upon professional negligence, he may introduce evidence of any amount payable as a benefit to the plaintiff as a result of the personal injury pursuant to the United States Social Security Act, any state or federal income disability or worker's compensation act, any health, sickness or income-disability insurance, accident insurance that provides health benefits or income-disability coverage, and any contract or agreement of any group, organization, partnership, or corporation to provide, pay for, or reimburse the cost of medical, hospital, dental, or other health care services. Where the defendant elects to introduce such evidence, the plaintiff may introduce evidence of any amount which the plaintiff has paid or contributed to secure his right to any insurance benefits concerning which the defendant has introduced evidence. (b) No source of collateral benefits introduced pursuant to subdivision (a) shall recover any amount against the plaintiff nor shall it be subrogated to the rights of the plaintiff against a defendant."

 

­FN 21. As we noted in Barme (37 Cal.3d at p. 179, fn. 5): "Earlier drafts of section 3333.1, subdivision (a) required the trier of fact to deduct such collateral source benefits in computing damages, butas enactedsubdivision (a) simply provides for the admission of evidence of such benefits, apparently leaving to the trier of fact the decision as to how such evidence should affect the assessment of damages."

 

In this case, it is not clear from the record whether the parties and the trial court recognized that section 3333.1, subdivision (a) simply authorizes the reduction of damages on the basis of collateral source benefits, but does not specifically mandate such a reduction. As noted earlier (see p. 146, fn. 2, ante), after rejecting plaintiff's pretrial constitutional challenge to this statute, the trial court indicated that in order to avoid any confusion of the jury and because the amount of collateral source benefits was not in dispute, the evidence would not be admitted at trial and the court would simply reduce the jury award by the amount of such benefits. Plaintiff did not object to this procedure and raises no claim with respect to this aspect of the court's ruling on appeal.

 

Plaintiff does raise a minor contention, however, which is somewhat related to this matter. In awarding damages applicable to plaintiff's future medical expenses, the trial court indicated that defendant was to pay the first $63,000 of such expenses that were not covered by employer-provided medical insurance. Plaintiff, pointing out that he may not be covered by medical insurance in the future, apparently objects to any reduction of future damages on the basis of potential future collateral source benefits. Under the terms of the trial court's judgment, however, defendant's liability for such damages will be postponed only if plaintiff does in fact receive such collateral benefits; thus, it is difficult to see how plaintiff has any cause to complain about this aspect of the award. Indeed, if anything, the trial court may have given plaintiff more than he was entitled to, since it did not reduce the jury's $63,000 award by the collateral source benefits plaintiff was likely to receive, but instead imposed a continuing liability on defendant to pay up to a total of $63,000 for any noncovered medical expenses that plaintiff may incur in the future as a result of the injury. Defendant has not objected to this portion of the judgment.

 

­FN 22. See, e.g., 2 Harper and James, The Law of Torts (1968 Supp.) section 25.22, at page 52; Fleming, The Collateral Source Rule and Loss Allocation in Tort Law (1966) 54 Cal.L.Rev. 1478; James, Social Insurance and Tort Liability: The Problem of Alternative Remedies (1952) 27 N.Y.U.L.Rev. 537; Schwartz, The Collateral Source Rule (1961) 41 B.U.L.Rev. 348; West, The Collateral Source Rule Sans Subrogation: A Plaintiff's Windfall (1963) 16 Okla.L.Rev. 395; Note, Unreason in the Law of Damages: The Collateral Source Rule (1964) 77 Harv.L.Rev. 741.

 

­FN 23. The majority of out-of-state cases that have passed on the issue have upheld the validity of provisions modifying the collateral source rule in medical malpractice cases. (See, e.g., Eastin v. Broomfield (1977) 116 Ariz. 576 [570 P.2d 744, 751-753]; Rudolph v. Iowa Methodist Medical Ctr. (Iowa 1980) 293 N.W.2d 550, 557-560; Pinillos v. Cedars of Lebanon Hospital Corp. (Fla. 1981) 403 So.2d 365, 367-368. Contra, Carson v. Maurer, supra, 424 A.2d 825, 835-836.)

 

­FN 1. Henceforth, all statutory references are to the Civil Code unless otherwise specified.

 

­FN 2. The majority attempt to distinguish Carson on the grounds that the New Hampshire Supreme Court applied an "intermediate" form of equal protection scrutiny, which is not appropriate under the California Constitution. (See maj. opn., ante, at p. 161, fn. 19.) However, the Carson court's conclusion that it was "unreasonable" to require the most severely injured victims of medical negligence to support the medical care industry is no less relevant under a lower form of scrutiny. The Carson court found no rational basis for the fixed limit.

 

­FN 3. The majority erroneously cite a second case, Prendergast v. Nelson (1977) 199 Neb. 97 [256 N.W.2d 657], as upholding a damage limit. In Prendergast a three-justice plurality of the Nebraska Supreme Court expressed their view that a $500,000 limit on damages should be upheld. (Id., at p. 669.) An equal number contended that the limit was unconstitutional. (Id., at pp. 675-677 (conc. & dis. opn. of White, J.), (dis. opn. of McCown, J.), (dis. opn. of Boslaugh, J.).) The seventh justice expressed no opinion on the merits of the constitutional challenge, but dissented from the result and pointed out that the plurality opinion did not decide the constitutional questions. (Ibid. (dis. opn. of Clinton, J.).)

 

In short, four out of seven justices concluded either that the limit was unconstitutional or that the question of its constitutionality was not justiciable.

 

­FN 4. For the relevant text of section 3333.1, see the majority opinion, ante, at page 164, footnote 20.

Crowded Mall Disorder

Crowded Mall Disorder
Colucci v. T-Mobile USA, Inc.


SOURCE: 

KEY WORDS:
Accomodation, Disability, Disorder, Anxiety Disorder

AGENCY:
COURT OF APPEAL, FOURTH APPELLATE DISTRICT, DIVISION ONE, STATE OF CALIFORNIA

ACTION:

Modified and Certified for Publication


Document Citation:

D075932


STEPHEN COLUCCI, Plaintiff and Respondent,

v
.
T-MOBILE USA, INC., Defendant and Appellant.

D075932


(Super. Ct. No. CIVDS1502822)


APPEAL from a judgment of the Superior Court of San Bernardino County, Super. Ct. No. CIVDS1502822, Keith D. Davis, Judge. Affirmed in part, reversed in part, and remanded with directions.
Allen Matkins Leck Gamble Mallory & Natsis and Amy Wintersheimer Findley; Paul Hastings, Paul W. Cane, Jr., and Andrea Dicolen, for Defendant and Appellant.
Barrera & Associates, Patricio T.D. Barrera, Ashley A. Davenport; McCormick, Barstow, Sheppard, Wayte & Carruth and Scott M. Reddie for Plaintiff and Respondent.

CERTIFIED FOR PUBLICATION

DATO, J.

T-Mobile USA, Inc. (T-Mobile) appeals a judgment entered on a $5 million jury verdict in favor of former employee Stephen Colucci in a workplace retaliation case.

T-Mobile primarily challenges the $4 million punitive damages award, arguing there is insufficient evidence that a managing agent engaged in retaliatory conduct or that the managing agent's actions were malicious or oppressive (Civ. Code, § 3294, subd. (b)). Alternatively, it argues the punitive damages award is constitutionally excessive and must be reduced. Finally, T-Mobile contends the jury's $200,000 award of damages for future emotional distress is not supported by sufficient evidence.

For the reasons discussed below, we reduce the punitive damages award to an amount that is one and one-half (1.5) times the amount awarded in compensatory damages, and otherwise affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

"In summarizing the facts, we view the evidence in favor of the judgment." (Roby v. McKesson Corp. (2009) 47 Cal.4th 686, 693-694 (Roby).)

T-Mobile, headquartered in the State of Washington, sells wireless telephones and plans to consumers at retail store locations. There are hundreds of T-Mobile retail stores in California, which the company groups into smaller geographic regions and districts.

Colucci worked for T-Mobile from 2007 until 2014 as the manager of a store in Ontario, California, known as the Milliken store. As store manager, he supervised around 10 employees, participated in hiring and training these employees, conducted physical inventories, and completed other tasks to support sales. Colucci was a good employee and garnered positive performance reviews. His direct supervisor was the district manager of "Inland Empire West." Inland Empire West was comprised of about nine stores including Milliken.

In February 2014, Brian Robson became the new district manager of Inland Empire West. Robson was responsible for operating his district's stores and roughly 100 employees. His job duties included coaching and developing individual retail store managers; making final decisions on hiring and firing employees; and handling a wide range of operational issues in partnership with personnel from other T-Mobile departments, such as human resources (HR) and loss prevention.

As the new district manager, Robson planned to transfer Colucci from the Milliken store to a kiosk located inside the Ontario Mills mall (mall location), which had no store manager at the time. However, Colucci suffered from a medical disability—an anxiety disorder—that prevented him from performing his job in the crowded mall location. When Robson told Colucci of his plans, Colucci informed him of his disability and requested an accommodation (accommodation request). Colucci was willing to transfer to a different store not located inside a mall. Robson was highly skeptical of Colucci's condition ("this is the most ridiculous thing I've ever heard") but referred the matter to HR. An HR representative was likewise doubtful and requested a doctor's note from Colucci that described his precise limitations. Colucci obtained a medical diagnosis and physician's letter confirming his limitations. HR ultimately advised Robson that Colucci could not be transferred to the mall location due to his protected medical condition.

Several months later, in July 2014, Colucci learned that one or more of the Milliken retail sales associates was spreading inflammatory rumors and/or making defamatory statements about him (defamation incident), and Colucci asked Robson to investigate. Robson agreed to do so but allowed the investigation to languish, telling Colucci he should "quit complaining" and that he had been "nothing but problems."

In the same time frame, Robson heard from a part-time Milliken sales associate (associate) that Colucci had an outside business (Auto Compound) in which he was licensed to sell used cars. The associate had recently been disciplined by Colucci due to work performance issues and was looking to transfer out of the Milliken store. According to the associate, Colucci had, at some time during the past year, used T-Mobile's resources to support Auto Compound, including occasionally using T-Mobile's fax machine and requiring the associate to answer an Auto Compound cell phone while he was on the clock at T-Mobile.[1] Based on the associate's report, Robson promptly initiated an investigation of Colucci with the help of a loss prevention manager.[2]

On July 21, 2014, Colucci called T-Mobile's "integrity line" (a designated means for employees to report workplace issues) to notify the company of the unresolved defamation incident. After the defamation incident, the work environment in the store had been tense and uncomfortable.

Around noon on July 22, 2014, Robson and the loss prevention manager visited the Milliken store, intending to interview Colucci about Auto Compound. However, they did not have an opportunity to complete any interview or tell Colucci why they were there. Colucci was experiencing severe back pain that day, for which he later required surgery. His back pain was aggravated by anxiety over the tense work environment. Colucci complained to Robson, stating his (1) distress over Robson's failure to resolve the defamation incident and (2) his belief that Robson was treating him unfairly due to his medical condition and accommodation request. Colucci requested that he be permitted to go on a medical leave of absence. Robson responded that it was Colucci's "right" to take medical leave, and he approved Colucci's taking the rest of the day off. Colucci left the premises.

Unknown to Colucci, about two hours after he left the Milliken store premises, Robson recommended to HR that T-Mobile terminate Colucci for "cause"—a conflict of interest. In making this decision, Robson admittedly bypassed T-Mobile's progressive discipline policy, which might have included a warning or less severe consequence before resorting to termination. Information about the alleged conflict of interest had come almost entirely from the associate; at no point did anyone speak to Colucci about a purported conflict. Robson claimed that Colucci knowingly refused to be interviewed about it. Robson and HR exchanged communications about the pending termination.

Between July 23 and 24, consistent with his last conversation with Robson and still unaware of any pending termination, Colucci submitted a formal request to HR for a medical leave of absence. Colucci also lodged a second complaint to the integrity line, reporting that Robson was discriminating against him and neglecting to resolve the defamation incident. Undeterred, Robson proceeded with processing Colucci's termination.

On July 25, Robson prepared and mailed Colucci a letter informing him of his employment termination, bearing an effective date of July 22, 2014, per HR's instructions.[3] On July 28, the loss prevention manager who had been assisting Robson reported to his colleagues during a weekly staff call that Colucci had been "turned into a customer" (internal company jargon for firing an employee) because of his complaints or the way he had acted. The loss prevention manager made no mention on the call that Colucci was terminated due to a conflict of interest.

In February 2015, Colucci filed a complaint against T-Mobile. Of relevance here, he alleged a cause of action for retaliation in violation of the Fair Employment and Housing Act (FEHA) (Gov. Code, § 12940, subd. (h)). In 2017, the cause was tried to a jury, which received evidence regarding the workplace events we have described. In addition, the jury received evidence regarding Colucci's post-termination life, including the immense, ongoing toll of the termination on his mental and physical health, and his struggle to find comparable employment. Finally, the jury heard expert witness testimony regarding (a) the prognosis on Colucci's mental condition, and (b) his past and future economic losses, i.e., lost earnings and benefits.

The jury returned a unanimous verdict in Colucci's favor on his claim of retaliation. It awarded $1,020,042 in total compensatory damages as follows: (A) $130,272 for past economic losses; (B) $189,770 for future economic losses;[4] (C) $500,000 for past noneconomic damages and/or emotional distress; and (D) $200,000 for future noneconomic damages and/or emotional distress.

In a bifurcated proceeding on punitive damages, the parties stipulated that the jury would receive certain information about T-Mobile's financial condition. For 2015 and 2016, respectively, T-Mobile had: total revenue of $32.1 and 37.2 billion; net income of $733 million and $1.460 billion;[5] free cash flow of $690 million and $1.433 billion; and total assets of $62.4 and $65.9 billion. Colucci's counsel argued that T-Mobile generated $4 million in net income in one day, based on its 2016 net income of $1.460 billion divided by 365 days.

The jury awarded $4 million in punitive damages, and the trial court entered judgment accordingly. Later, the court denied T-Mobile's motions for new trial and for judgment notwithstanding the verdict. This appeal followed.[6]

DISCUSSION
    I. Substantial Evidence Supports an Award of Punitive Damages

At trial, Colucci argued that Robson was a managing agent of T-Mobile and that Robson's actions were committed with malice or oppression. The jury agreed, finding clear and convincing evidence that Colucci was entitled to punitive damages. On appeal, T-Mobile contends there is insufficient evidence to support either (1) that Robson was a managing agent of T-Mobile, or (2) that he engaged in acts of malice or oppression.

A. Standard of Review

A jury may award punitive damages in a tort action "where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice." (Civ. Code, § 3294, subd. (a).) On appeal, a jury's decision to award punitive damages must be upheld if it is supported by substantial evidence. (Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 821 (Egan) ["Determinations related to assessment of punitive damages have traditionally been left to the discretion of the jury"].) Because our review is for substantial evidence, we are bound to consider the evidence in the light most favorable to the prevailing party, giving him the benefit of every reasonable inference, and resolving conflicts in support of the judgment. However, since the jury's findings were subject to a heightened burden of proof, we review the record in support of these findings in light of that burden. Thus, we inquire whether the record contains "`"substantial evidence to support a determination by clear and convincing evidence. . . ."'" (In re Marriage of Rossi (2001) 90 Cal.App.4th 34, 40.)

B. Managing Agent

Civil Code section 3294, subdivision (b), provides in pertinent part: "An employer shall not be liable for damages pursuant to subdivision (a), based upon acts of an employee of the employer, unless the employer . . . was personally guilty of oppression, fraud, or malice. With respect to a corporate employer, the . . . act of oppression, fraud, or malice must be on the part of an officer, director, or managing agent of the corporation." (Italics added.) At issue in this case is whether Robson was a "managing agent"—a term with no statutory definition.

In the seminal case of White v. Ultramar (1999) 21 Cal.4th 563 (White), our high court construed managing agent as follows: "[T]he Legislature intended that principal liability for punitive damages not depend on employees' managerial level, but on the extent to which they exercise substantial discretionary authority over decisions that ultimately determine corporate policy. Thus, supervisors who have broad discretionary powers and exercise substantial discretionary authority in the corporation could be managing agents. Conversely, supervisors who have no discretionary authority over decisions that ultimately determine corporate policy would not be considered managing agents even though they may have the ability to hire or fire other employees. In order to demonstrate that an employee is a true managing agent under section 3294, subdivision (b), a plaintiff seeking punitive damages would have to show that the employee exercised substantial discretionary authority over significant aspects of a corporation's business." (Id. at pp. 576-577.)

The White court went on to discuss how "Salla," who supervised the wrongfully terminated plaintiff/employee, was a managing agent of corporate defendant Ultramar. Ultramar owned convenience stores at gas stations throughout California. (White, supra, 21 Cal.4th at p. 577; id. at p. 580.) Salla was a "zone manager," responsible for managing eight stores in the San Diego area and at least 65 employees. (Id. at p. 577.) Individual store managers reported to her. (Ibid.) Salla's superiors "delegated most, if not all, of the responsibility for running these stores to her. The fact that Salla spoke with other employees and consulted the human resources department before firing plaintiff does not detract from her admitted ability to act independently of those sources." (Ibid.) In managing numerous stores on a daily basis and making significant decisions affecting both store and company policy, the court concluded that "Salla exercised substantial discretionary authority over decisions that ultimately determined corporate policy. . . ." (Ibid.; see also id. at pp. 583-584 (conc. opn. of Mosk, J.) ["Salla had sufficient discretion to take actions that necessarily resulted in the ad hoc formulation of policy over the aspect of the corporation's business giving rise to plaintiff's cause of action"].)

The facts of White are practically indistinguishable from the facts of this case. Robson was a district manager, responsible for managing nine retail stores and 100 employees. Individual store managers reported to him, and he in turn reported to a more senior manager. Robson had independent, final authority to hire or fire employees within his district; indeed, he alone decided to fire Colucci. Further, as in White, Robson had substantial discretionary authority over daily store operations, which led to the ad hoc formulation of policy. For example, Robson decided whether and where to transfer employees; whether to institute disciplinary measures; and whether and how to investigate employees' reported concerns. These decisions affected company policy over a significant aspect of T-Mobile's business.

T-Mobile's primary counterargument is that Robson was not in a high enough position to determine official corporate policies, i.e., he was not a corporate policymaker. T-Mobile posits that managing agents must be corporate policymakers and "policies" in this context refers only to "formal policies that affect a substantial portion of the company and that are the type likely to come to the attention of corporate leadership." (Roby, supra, 47 Cal.4th at p. 715.) In its reply brief, T-Mobile argues that the California Supreme Court's decision in Roby, at pages 714-715, limited or disapproved White on this precise point.

In Roby, which was a harassment and discrimination case, the supervisor in question (Schoener) worked at one of the company's distribution centers and supervised four employees in a company of over 20,000. (Roby, supra, 47 Cal.4th at p. 714.) The court, in addressing White, was not reviewing whether substantial evidence supported the jury's decision to award punitive damages, but rather the constitutionality of the amount of the jury's award. (Id. at pp. 712, 714.) In deciding whether the award was excessive under the due process clause, the court analyzed the corporation's degree of reprehensibility, noting that Schoener did not have "broad authority" in determining formal corporate policies. (Id. at p. 715.) However, two mid-level managers, one of whom was the head of the distribution center where plaintiff and Schoener worked, had become aware of Schoener's discriminatory conduct and did nothing to correct it. (Ibid.) The court therefore assumed without deciding that at least one of the mid-level managers was a managing agent. (Ibid.) Although that person's inaction was wrongful, the court concluded the corporation's reprehensibility, in totality, was on the low end of the range of wrongdoing. (Id. at p. 717.)

Read in context and considering what was actually at issue in Roby, we do not believe the California Supreme Court intended to modify or limit White's careful formulation of the managing agent test. Before White, our high court already rejected the view that a managing agent must be involved in "`high-level policymaking.'" (Egan, supra, 24 Cal.3d at p. 822.) Instead, the "determination whether employees act in a managerial capacity . . . does not necessarily hinge on their `level' in the corporate hierarchy. . . . [T]he critical inquiry is the degree of discretion the employees possess in making decisions that will ultimately determine corporate policy." (Id. at pp. 822-823.) In Egan, the court upheld the finding that two claims managers were managing agents of the defendant insurance company. The court opined that a corporate defendant "`should not be allowed to insulate itself from liability by giving an employee a nonmanagerial title and relegating to him crucial policy decisions.'" (Id. at p. 823.)

We have considered all the cases cited by T-Mobile and are not persuaded by its argument that only T-Mobile's corporate leaders who played a role in setting official corporate policies—e.g., those contained in an employee handbook—could be considered managing agents. (See, e.g., Cruz v. HomeBase (2000) 83 Cal.App.4th 160, 164, 168 [security guard and his immediate supervisor, both of whom were subordinate to the store's general manager, were not managing agents]; Gelfo v. Lockheed Martin Corp. (2006) 140 Cal.App.4th 34, 63 [no substantial evidence presented regarding vice-president's duties or authority].) Courts evaluate numerous factors in the "managing agent equation . . . in determining whether the supervisor was a managing agent whose conduct could justify awarding punitive damages against his employer." (White, supra, 21 Cal.4th at p. 574, citing with approval Kelly-Zurian v. Wohl Shoe Co. (1994) 22 Cal.App.4th 397.) Managing agents are not limited to those individuals with the ability to set handbook policies. (E.g., White, supra, 21 Cal.4th at p. 577 [manager of eight retail stores]; Davis v. Kiewit Pacific Co. (2013) 220 Cal.App.4th 358, 370 [onsite project manager for construction company]; Hobbs v. Bateman Eichler, Hill Richards (1985) 164 Cal.App.3d 174, 193 [office manager of brokerage firm].)

T-Mobile argues that Robson could not be considered a policy setting managing agent based solely on his deviations from T-Mobile's official company policy, such as discharging Colucci despite the company's progressive discipline policy or sending Colucci a termination letter even though managers were not supposed to communicate with employees who had requested medical leave. However, based on our review of the record, Robson had substantial discretionary authority to override these general policies. For example, T-Mobile's progressive discipline policy arguably might have prevented Colucci's firing had it been followed, but Robson testified that discipline was not required to be progressive under the policy and that he decided the appropriate action to take, depending on the circumstances. Likewise, Robson testified that management "typically" would not communicate with employees once they requested leaves of absences, but he could situationally deviate. Robson suffered no consequences for deviating from these policies and indeed, was authorized to do so. Accordingly, Robson formulated operational policies through his discretionary decisions. (White, supra, 21 Cal.4th at p. 577.)

In summary, we conclude substantial evidence supports the jury's finding that Robson was a managing agent whose conduct could justify an award of punitive damages against T-Mobile.

C. Malice or Oppression

T-Mobile next contends that, even assuming Robson was a managing agent, there was insufficient evidence to show he acted with malice or oppression as required to support an award of punitive damages. (Civ. Code, § 3294, subd. (a).) In this context, our task is to determine whether substantial evidence supports the jury's finding, by clear and convincing evidence, that Robson's actions were malicious or oppressive. (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1287-1288 (Tomaselli).)

"Malice" is defined as "conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others"; "oppression" is "despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights." (Civ. Code, § 3294, subd. (c).) "`Despicable conduct' "is "`conduct which is so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people.'" (Tomaselli, supra, 25 Cal.App.4th at p. 1287.) "`The mere carelessness or ignorance of the defendant does not justify the imposition of punitive damages. . . . Punitive damages are proper only when the tortious conduct rises to levels of extreme indifference to the plaintiff's rights, a level which decent citizens should not have to tolerate.'" (Ibid.)

Based on our review of the record, we conclude substantial evidence supports the jury's finding that Robson acted with malice or oppression. "Malice and oppression may be inferred from the circumstances of a defendant's conduct." (Monge v. Superior Court (1986) 176 Cal.App.3d 503, 511.) Here, the jury could reasonably infer from the evidence that Robson became angered by Colucci's complaints and decided to concoct a reason for termination, all the while knowing Colucci was in a weak physical and mental state. None of Robson's actions strike us as inadvertent or careless; even if his initial termination recommendation was hasty, he had several days to reevaluate and reverse his decision. He did not. Moreover, the jury could consider it despicable of Robson to allow Colucci, who was suffering severe back pain, to leave the store under the belief that he was permitted to go on medical leave, and then turn around and use Colucci's inability to complete an interview that day as a basis for firing him. The record supports that Robson willfully and consciously retaliated against Colucci, in violation of Colucci's right to complain of discrimination. (Cf. Commodore Home Systems, Inc. v. Superior Court (1982) 32 Cal.3d 211, 220-221 [punitive damages recoverable under Civ. Code § 3294 in racially-motivated terminations].)

T-Mobile cites Scott v. Phoenix Schools, Inc. (2009) 175 Cal.App.4th 702 (Scott), in support of its position that Robson did not act with requisite malice or oppression. The plaintiff in Scott was a preschool teacher who was terminated by the employer/school due to her decision not to enroll one child in the school, which was part of her job duties. (Id. at p. 707.) At trial, the plaintiff established that enrolling the child would have violated the state mandated teacher-student ratio, e.g., one teacher for every 12 children. (Id. at pp. 709-711.) The jury found that it was wrong to terminate plaintiff for this reason and awarded punitive damages. (Id. at pp. 708, 715.) The Court of Appeal affirmed the judgment but reversed the award of punitive damages, explaining that the school's conduct did not rise to the level of malice or oppression: "[W]rongful termination, without more, will not sustain a finding of malice or oppression. There was no evidence [the school] attempted to hide the reason it terminated Scott. It admitted to terminating her because she would not enroll the [particular] child. Likewise, there was no evidence [the school] engaged in a program of unwarranted criticism to justify her termination." (Id. at p. 717.)

The facts of Scott are readily distinguishable. There, the employer was forthright about its reason for terminating the plaintiff, but the reason was found improper because it would violate a significant public policy of protecting children. (Scott, supra, 175 Cal.App.4th at pp. 714-715.) In contrast, there is evidence in this case that T-Mobile attempted to hide its reason for terminating Colucci. Supervisor Robson did not ever admit he was retaliating against Colucci because Colucci had complained about him; Robson maintained that the only reason Colucci was terminated was due to a conflict of interest. As we have noted, the jury could infer that the conflict-of-interest rationale was contrived for many reasons, including that no one at T-Mobile had even asked Colucci about the underlying facts of the supposed conflict prior to firing him.[7] Consequently, the jury in this case could reasonably find that Robson's retaliatory conduct was malicious or oppressive. (Cloud v. Casey (1999) 76 Cal.App.4th 895, 912 [evidence that a decision maker attempted to hide an improper basis for termination with a false explanation is contemptible and supports a finding of willful conduct].)

    II. The Amount of Punitive Damages Is Excessive and Must Be Reduced

Even if the jury was entitled to award some amount of punitive damages, T-Mobile contends that the jury's $4 million award is constitutionally excessive in violation of the federal due process clause. Our review is de novo. (Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159, 1172 (Simon).)

"The due process clause of the Fourteenth Amendment to the United States Constitution places constraints on state court awards of punitive damages." (Roby, supra, 47 Cal.4th at p. 712.) An award of grossly excessive or arbitrary punitive damages is constitutionally prohibited because due process entitles a defendant to fair notice of both the conduct that will subject it to punishment and the severity of the penalty that may be imposed for the conduct. (State Farm Mutual Automobile Insurance Co. v. Campbell (2003) 538 U.S. 408, 416-417 (State Farm); Simon, supra, 35 Cal.4th at p. 1171.) "Eschewing both rigid numerical limits and a subjective inquiry into the jury's motives," the Supreme Court set forth "a three-factor weighing analysis looking to the nature and effects of the defendant's tortious conduct and the state's treatment of comparable conduct in other contexts." (Simon, at pp. 1171-1172.)

In reviewing the amount of a punitive damages award, a court must "consider three guideposts: (1) the degree of reprehensibility of the defendant's misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases." (State Farm, supra, 538 U.S. at p. 418.) We address these guideposts in turn.

A. Degree of Reprehensibility

"`[T]he most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant's conduct.' [Citation.] We have instructed courts to determine the reprehensibility of a defendant by considering whether: [(1)] the harm caused was physical as opposed to economic; [(2)] the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; [(3)] the target of the conduct had financial vulnerability; [(4)] the conduct involved repeated actions or was an isolated incident; and [(5)] the harm was the result of intentional malice, trickery, or deceit, or mere accident." (State Farm, supra, 538 U.S. at p. 419.) "It should be presumed a plaintiff has been made whole for his injuries by compensatory damages, so punitive damages should only be awarded if the defendant's culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or deterrence." (Ibid.)

With respect to the first of these reprehensibility factors, the harm to Colucci was "physical" in the sense that it negatively impacted his emotional and mental health, rather than being a purely economic harm. (Roby, supra, 47 Cal.4th at p. 713.) With respect to the second reprehensibility factor, it was objectively reasonable to assume that employer T-Mobile's retaliation against Colucci would affect his emotional well-being, and therefore T-Mobile's "`conduct evinced an indifference to or a reckless disregard of the health or safety of others.'" (Ibid.)

Colucci does not meaningfully address the third or fourth reprehensibility factors. He does not contend he was financially vulnerable. As to whether T-Mobile's conduct was repeated or isolated, we conclude Robson's retaliatory conduct toward Colucci was an isolated incident. There is no indication in the record that T-Mobile engaged in repeated acts of retaliation. (See Roby, supra, 47 Cal.4th at pp. 713-714.)

With respect to the fifth reprehensibility factor, the jury necessarily determined that Colucci's harm was the result of T-Mobile's intentional malice; that is, Robson's malice was imputable to T-Mobile through his managing agent status. This distinguishes our case from Roby, where the court explained that the conduct of the managing agents was not intentional and amounted at most to a conscious disregard of the rights of others. (Roby, supra, 47 Cal.4th at p. 716.) Nevertheless, we are convinced, as in Roby, that T-Mobile's conduct in this case did not rise to the kind of oppressive or malicious conduct that has in the past justified large punitive damages awards. (Id. at p. 717 [summarizing egregious conduct causing deaths or severe injuries, and a case involving repeated outrageous acts of sexual harassment].) Notwithstanding the harm to Colucci from Robson's actions, there is no hint in the record that T-Mobile engaged in a calculated pattern of retaliation against its employees. In fact, it was undisputed that T-Mobile maintained an integrity line to receive employee complaints; the company had a variety of policies and procedures ostensibly designed to prevent workplace misconduct; and managers and employees were trained on T-Mobile's employment policies.

Taking into account all five reprehensibility factors set out in State Farm, supra, 538 U.S. at page 419, we conclude that T-Mobile's conduct warrants the imposition of sanctions to achieve punishment or deterrence, but the reprehensibility of T-Mobile's conduct was in the low to moderate range of wrongdoing that can support an award of punitive damages under California law.

B. Ratio of Punitive Damages to Actual or Potential Harm

Regarding the second guidepost, the Supreme Court has "been reluctant to identify concrete constitutional limits on the ratio between harm, or potential harm, to the plaintiff [i.e., compensatory damages] and the punitive damages award." (State Farm, supra, 538 U.S. at p. 424.) Yet "in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process." (Id. at p. 425.) In general, a higher ratio might be necessary where the plaintiff's injury was hard to detect, or the monetary value of noneconomic harm might have been difficult to determine. But "[w]hen compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee. The precise award in any case, of course, must be based upon the facts and circumstances of the defendant's conduct and the harm to the plaintiff." (State Farm, supra, 538 U.S. at p. 425, italics added.)

Here, the jury's award of compensatory damages was substantial. The jury decided Colucci was entitled to a total of $1,020,042 in compensatory damages, the substantial majority of which was for noneconomic harm and/or emotional distress ($700,000). The jury's award for noneconomic harm "may have reflected the jury's indignation at [T-Mobile's] conduct, thus including a punitive component."[8] (Roby, supra, 47 Cal.4th at p. 718.) We are cognizant that a large amount of damages awarded for emotional distress may itself serve as a deterrent to further corporate misconduct. (Ibid.) In Roby, at page 719, the court applied a one-to-one ratio between punitive and compensatory damages where there was relatively low corporate reprehensibility and a substantial award of noneconomic damages. Given the low to moderate range of reprehensibility of T-Mobile's conduct here, we conclude that a 1.5-to-one ratio between punitive and compensatory damages is the federal constitutional maximum.

C. Comparable Civil Penalties

The final guidepost requires us to compare the difference between the punitive damages award and the "`civil penalties authorized or imposed in comparable cases.'" (State Farm, supra, 538 U.S. at p. 428.) T-Mobile points us to the $300,000 maximum award for combined emotional distress and punitive damages in a federal Title VII case. Colucci responds convincingly that a Title VII claim is not an appropriate comparison due to the lower standard of proof to prevail on such a claim. In Roby, the court looked to the maximum administrative fine the plaintiff could have obtained had she pursued her FEHA claim before the Fair Employment and Housing Commission (Gov. Code, § 12970, subd. (a)(3)), which is $150,000. (Roby, supra, 47 Cal.4th at pp. 718-719.) The parties have not briefed whether such an administrative fine is a fair comparison, and accordingly, we do not consider it. T-Mobile has not established a relevant civil penalty for comparison purposes.

D. Conclusion

Based on the foregoing, we conclude that a 1.5-to-one ratio between punitive and compensatory damages is the federal constitutional maximum in this case. We are primarily guided by T-Mobile's low to moderate degree of reprehensibility. In addition, Colucci's compensatory award appeared to already contain a punitive component. Finally, we have reviewed evidence of T-Mobile's financial condition and are satisfied that a $1,530,063 punitive damages award (1.5 times compensatory damages of $1,020,042) achieves an appropriate deterrent effect. (Roby, supra, 47 Cal.4th at p. 719.)

    III. Substantial Evidence Supports the Award of Damages for Future Emotional Distress

T-Mobile's final argument on appeal is that no evidence supports the jury's $200,000 award for future noneconomic harm and/or emotional distress. We disagree. To recover future damages, a plaintiff must prove that his or her detriment is reasonably certain to result in the future. (Civ. Code, § 3283; Bihun v. AT&T Information Systems, Inc. (1993) 13 Cal.App.4th 976, 995, disapproved on other grounds in Lakin v. Watkins Associated Industries (1993) 6 Cal.4th 644, 664.) "While there is no clearly established definition of `reasonable certainty,' evidence of future detriment has been held sufficient based on expert medical opinion which considered the plaintiff's particular circumstances and the expert's experience with similar cases." (Bihun, at p. 995.) However, expert testimony is not required in all cases. For example, it is unnecessary if the injury is such that the jury could conclude, based on all the evidence and relying upon its own experiences and common knowledge, that the future harm is reasonably certain to occur. (Mendoza v. Rudolf (1956) 140 Cal.App.2d 633, 636 [involving future pain and suffering from car accident].) Courts have affirmed a jury's finding of future damages based on the plaintiff's testimony of continued pain and suffering at the time of trial. (Loper v. Morrison (1944) 23 Cal.2d 600, 611 [plaintiff's testimony that at the time of trial she was still suffering from headaches, nervousness and pain]; Parsell v. San Diego Consol. Gas & Electric Co. (1941) 46 Cal.App.2d 212, 216 [plaintiff's testimony that two years after accident she still had little, if any, use of her hand and arm].)

In this case, Colucci's expert psychologist testified that Colucci had, in 2016, reported symptoms associated with depression and/or a "thought disorder," which the psychologist attributed to Colucci's termination from T-Mobile. The psychologist opined at trial that Colucci was "improved" insofar as his "depression all the time" had turned to "periodic depression" and that Colucci "hadn't quite recovered, but he was doing much better[.]" Importantly, the psychologist believed that Colucci would continue to suffer "residual issues" until he could "reconstitut[e] his work in a [more fulfilling] situation. . . ."

The jury heard from Colucci at trial that he had gained up to 100 pounds after being terminated by T-Mobile in 2014; he became depressed, lethargic, and sad; without a job, he was inactive and engaging in unhealthy eating habits; and he suffered stomach problems that disturbed his sleep. Colucci subsequently found a new job, but he made significantly less money, the job had limited growth potential, and he had to travel for his new job, which he viewed as a "big sacrifice" to his home life. As of trial, Colucci testified he had lost "some" but not all the weight he had gained and was still stressed and "depressed at times" about his wrongful termination from T-Mobile. His emotional distress was continuing to manifest physically in the form of stomach discomfort, sleeplessness, and rashes. The jury heard Colucci's testimony first-hand, evaluated his physical appearance, and was shown pictures of his stress-induced rashes.

Based on all this evidence, a jury could reasonably infer that Colucci would continue to suffer emotional distress after the trial concluded. Consistent with the evidence, the jury awarded substantially less in damages for future harm than it did for past harm. T-Mobile mischaracterizes the state of the evidence, arguing that Colucci's psychologist admitted Colucci was "fully recovered" by the time of trial. The psychologist did not state that Colucci was "fully recovered"; moreover, the jury was free to discount any of the psychologist's minimizing statements and credit Colucci instead, who testified unequivocally that he was continuing to suffer depression, stress, sadness, and anxiety over being terminated. His testimony was not esoteric; based on its own experiences, the jury could fairly evaluate the extent of Colucci's future suffering over his derailed career. Substantial evidence supports the jury's award of damages for future noneconomic harm and/or emotional distress.

T-Mobile speculates that the reason the jury awarded any amount of damages for future harm was because of non-discharge-related reasons, e.g., because of Colucci's anxiety disorder that predated his discharge. These were factual disputes to be resolved by the jury, and T-Mobile does not contend any instructions were erroneous. Because the award for future damages is supported by substantial evidence, we have no basis to reverse it.

DISPOSITION

The punitive damages portion of the judgment against T-Mobile is reversed, and the matter is remanded to the trial court with directions to modify the punitive damages award to $1,530,063, representing a ratio of 1.5 times the amount awarded in compensatory damages. In all other respects, the judgment is affirmed. The parties are to bear their own costs on appeal.

BENKE, Acting P.J. and GUERRERO, J., concurs.

[1] At trial, the associate's statements were largely discredited. The associate had never been an employee of Auto Compound and was not required to do any Auto Compound work.
[2] Colucci's prior supervisor at T-Mobile was aware of Auto Compound and had even referred someone to Colucci for advice on used cars. This supervisor never had any concerns about Colucci's side business or that Colucci was misusing T-Mobile's resources.
[3] According to T-Mobile, Colucci's termination was made effective on July 22 because that was the date Robson recommended termination. According to Colucci, T-Mobile backdated his termination date to July 22 so that it appeared as if he was terminated prior to his second integrity line complaint.
[4] The jury's award for economic losses, totaling $320,042, corresponded to figures that Colucci's expert economic witness provided in his testimony.
[5] The reporter's transcript of the party's stipulation contains an error. The reporter's transcript, volume 7, page 1591, line 15, states that T-Mobile's 2016 net income was $28,460,000,000, or $28.460 billion. However, Colucci's counsel repeatedly stated, without any objection or correction from defense counsel, that T-Mobile's net income for 2016 was $1.460 billion. $1.460 billion divided by 365 days equals $4 million of net income per day, which is not coincidentally what the jury awarded in punitive damages. Thus, we believe the parties stipulated that T-Mobile's net income for the year 2016 was $1.460 billion.
[6] On appeal, T-Mobile has requested judicial notice of three briefs filed by Colucci's counsel's law firm in three completely unrelated cases. The matter is not relevant. T-Mobile's request for judicial notice is denied.
[7] Colucci established at trial that numerous T-Mobile employees had side businesses. We have not attempted to summarize all the facts Colucci adduced to discredit T-Mobile's conflict-of-interest rationale; suffice it to say, the factual justification for a conflict of interest was highly tenuous. For example, T-Mobile's electronic access policy actually allowed employees to occasionally use T-Mobile's equipment for personal reasons. In addition, multiple witnesses testified that they had never seen Colucci selling used cars during work hours.
[8] We discuss in section III, infra, that substantial evidence supports the jury's award of $200,000 for future damages.
Reference Immunity

Reference Immunity
CA Civ. Code Sec. 47(c)


SOURCE: 

KEY WORDS:
Termination, Dispute, Reference, Immunity, Reference Immunity

Document:

CIVIL CODE - CIV

    DIVISION 1. PERSONS [38 - 86]  ( Heading of Division 1 amended by Stats. 1988, Ch. 160, Sec. 12. ) 

    PART 2. PERSONAL RIGHTS [43 - 53.7]  ( Part 2 enacted 1872. ) 


47. A privileged publication or broadcast is one made:


        (a) In the proper discharge of an official duty.
        (b) In any (1) legislative proceeding, (2) judicial proceeding, (3) in any other official proceeding authorized by law, or (4) in the initiation or course of any other proceeding authorized by law and reviewable pursuant to Chapter 2 (commencing with Section 1084) of Title 1 of Part 3 of the Code of Civil Procedure, except as follows:


(1) An allegation or averment contained in any pleading or affidavit filed in an action for marital dissolution or legal separation made of or concerning a person by or against whom no affirmative relief is prayed in the action shall not be a privileged publication or broadcast as to the person making the allegation or averment within the meaning of this section unless the pleading is verified or affidavit sworn to, and is made without malice, by one having reasonable and probable cause for believing the truth of the allegation or averment and unless the allegation or averment is material and relevant to the issues in the action.


(2) This subdivision does not make privileged any communication made in furtherance of an act of intentional destruction or alteration of physical evidence undertaken for the purpose of depriving a party to litigation of the use of that evidence, whether or not the content of the communication is the subject of a subsequent publication or broadcast which is privileged pursuant to this section. As used in this paragraph, “physical evidence” means evidence specified in Section 250 of the Evidence Code or evidence that is property of any type specified in Chapter 14 (commencing with Section 2031.010) of Title 4 of Part 4 of the Code of Civil Procedure.
(3) This subdivision does not make privileged any communication made in a judicial proceeding knowingly concealing the existence of an insurance policy or policies.
(4) A recorded lis pendens is not a privileged publication unless it identifies an action previously filed with a court of competent jurisdiction which affects the title or right of possession of real property, as authorized or required by law.


        (c) In a communication, without malice, to a person interested therein, (1) by one who is also interested, or (2) by one who stands in such a relation to the person interested as to afford a reasonable ground for supposing the motive for the communication to be innocent, or (3) who is requested by the person interested to give the information. This subdivision applies to and includes a communication concerning the job performance or qualifications of an applicant for employment, based upon credible evidence, made without malice, by a current or former employer of the applicant to, and upon request of, one whom the employer reasonably believes is a prospective employer of the applicant. This subdivision applies to and includes a complaint of sexual harassment by an employee, without malice, to an employer based upon credible evidence and communications between the employer and interested persons, without malice, regarding a complaint of sexual harassment. This subdivision authorizes a current or former employer, or the employer’s agent, to answer, without malice, whether or not the employer would rehire a current or former employee and whether the decision to not rehire is based upon the employer’s determination that the former employee engaged in sexual harassment. This subdivision shall not apply to a communication concerning the speech or activities of an applicant for employment if the speech or activities are constitutionally protected, or otherwise protected by Section 527.3 of the Code of Civil Procedure or any other provision of law.


        (d) (1) By a fair and true report in, or a communication to, a public journal, of (A) a judicial, (B) legislative, or (C) other public official proceeding, or (D) of anything said in the course thereof, or (E) of a verified charge or complaint made by any person to a public official, upon which complaint a warrant has been issued.


(2) Nothing in paragraph (1) shall make privileged any communication to a public journal that does any of the following:


(A) Violates Rule 5-120 of the State Bar Rules of Professional Conduct.
(B) Breaches a court order.
(C) Violates any requirement of confidentiality imposed by law.


        (e) By a fair and true report of (1) the proceedings of a public meeting, if the meeting was lawfully convened for a lawful purpose and open to the public, or (2) the publication of the matter complained of was for the public benefit.


(Amended by Stats. 2018, Ch. 82, Sec. 1. (AB 2770) Effective January 1, 2019.)
Penalty Amounts

Penalty Amounts
CA Aseembly Bill No. 673


SOURCE: 

KEY WORDS:
Termination, Penalty, Wage Calculation, Final Wage, Failure to Pay

Document:
Assembly Bill No. 673
CHAPTER 716

An act to amend Section 210 of the Labor Code, relating to employment.
[ Approved by Governor  October 10, 2019. Filed with Secretary of State  October 10, 2019. ]

LEGISLATIVE COUNSEL'S DIGEST

    - AB 673, Carrillo. Failure to pay wages: penalties.

Existing law provides for a civil penalty, in addition to, and entirely independent and apart from other penalties, on every person who fails to pay the wages of each employee, as specified, including a provision prohibiting wage differential on the basis of sex, as provided in specified provisions of the Labor Code. Existing law requires the Labor Commissioner to recover that penalty as part of a hearing held to recover unpaid wages and penalties or in an independent civil action. Existing law requires that a specified percentage of the penalty recovered under that provision be paid into a fund within the Labor and Workforce Development Agency dedicated to educating employers about state labor laws and that the remainder be paid into the State Treasury to the credit of the General Fund.

This bill would also authorize the affected employee to bring an action to recover specified statutory penalties against the employer as part of a hearing held to recover unpaid wages. The bill would remove the authority for the Labor Commissioner to recover civil penalties in an independent civil action. The bill would also modify the list of statutes that a statutory penalty may be recovered for violation of by adding a provision relating to wages paid to an employee who is licensed under the Barbering and Cosmetology Act. The bill would authorize an employee to either recover statutory penalties under these provisions or to enforce civil penalties under a specified provision of the Labor Code Private Attorneys General Act of 2004, but not both, for the same violation.

DIGEST KEY
Vote: majority   Appropriation: no   Fiscal Committee: yes   Local Program: no 

BILL TEXT

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 210 of the Labor Code is amended to read:

210. (a) In addition to, and entirely independent and apart from, any other penalty provided in this article, every person who fails to pay the wages of each employee as provided in Sections 201.3, 204, 204b, 204.1, 204.2, 204.11, 205, 205.5, and 1197.5, shall be subject to a penalty as follows:
(1) For any initial violation, one hundred dollars ($100) for each failure to pay each employee.
(2) For each subsequent violation, or any willful or intentional violation, two hundred dollars ($200) for each failure to pay each employee, plus 25 percent of the amount unlawfully withheld.    
(b) The penalty shall either be recovered by the employee as a statutory penalty pursuant to Section 98 or by the Labor Commissioner as a civil penalty through the issuance of a citation or pursuant to Section 98.3. The procedures for issuing, contesting, and enforcing judgments for citations issued by the Labor Commissioner under this section shall be the same as those set forth in subdivisions (b) through (k), inclusive, of Section 1197.1.
(c) An employee is only entitled to either recover the statutory penalty provided for in this section or to enforce a civil penalty as set forth in subdivision (a) of Section 2699, but not both, for the same violation.

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