Court of Appeal: Desperate Housewives Case

From the court of appeal's opinion:

Touchstone Television Productions (Touchstone) hired actress Nicollette Sheridan (Sheridan) to appear in the first season of the television series Desperate Housewives. The agreement gave Touchstone the exclusive option to renew Sheridan‟s services on an annual basis for an additional six seasons. Touchstone renewed Sheridan's services up to and including Season 5. During Season 5, Touchstone informed Sheridan it would not renew her contract for Season 6.

In case you hadn't heard about this, Sheridan sued for wrongful termination and other torts, claiming that

During the September 24, 2008 filming of a Season 5 episode of Desperate Housewives, an incident occurred between Sheridan and Cherry, the series‟ creator. Sheridan claims that Cherry hit her. Thereafter, Sheridan complained to Touchstone about Cherry‟s (alleged) battery.

Then, Touchstone decided not to renew Sheridan for the final season, killed her character, but had her return as a ghost.  Yes, I did not make this up.  No, I never watched an episode.

A jury deadlocked on whether Touchstone wrongfully terminated Sheridan in violation of public policy (retaliation for her complaint she was battered).   The trial court repeatedly rejected Touchstone's argument that non-renewal of annual contracts do not give rise to wrongful termination claims.

The Court of Appeal, however, disagreed: "Decisional law does not allow a plaintiff to sue for wrongful termination in violation of public policy based upon an employer‟s refusal to renew an employment contract. "

Like every good story, though, this one has a twist. The Court of Appeal permitted Sheridan to sue under Labor Code Section 6310(b):

(b) Any employee who is discharged, threatened with discharge, demoted, suspended, or in any other manner discriminated against in the terms and conditions of employment by his or her employer because the employee has made a bona fide oral or written complaint to the division, other governmental agencies having statutory responsibility for or assisting the division with reference to employee safety or health, his or her employer, or his or her representative, of unsafe working conditions, or work practices, in his or her employment or place of employment, or has participated in an employer-employee occupational health and safety committee, shall be entitled to reinstatement and reimbursement for lost wages and work benefits caused by the acts of the employer. Any employer who willfully refuses to rehire, promote, or otherwise restore an employee or former employee who has been determined to be eligible for rehiring or promotion by a grievance procedure, arbitration, or hearing authorized by law, is guilty of a misdemeanor.

So, why is this important?  Because the statute allows for "non-renewal" of employment as a basis for a claim. But the statute only allows for "reinstatement and reimbursement for lost wages and work benefits . . .. "  So, in Ms. Sheridan's case, she would be entitled to the one-year contract fee and related benefits, but not to emotional distress, front pay, or punitive damages.

For a minute, employers may have become interested in entering into six-month contracts with employees. But, as you can see, statutes may provide remeides, even if the common law does not.  On the other hand, these contracts, if done right, could limit exposure on the lost wages measure of damages .... maybe?  Another day and another case...

The case is Touchstone Television Productions v. Superior Court and the opinion is here.

Court of Appeal Expands Wrongful Discharge Law

OK, so let's say an employee has a non-compete agreement with a former employer. After Employee is hired by new employer, the former employer sends a "cease and desist" letter to the new employer. The new employer, fearling litigation, fires the employee. Employee sues new employer for wrongful discharge?!

Yep. I know....#@^!%.

In 2003, Silguero began employment with Floor Seal Technology, Inc. as a sales representative. In August 2007, FST threatened Silguero with termination unless she signed a confidentiality agreement. The agreement prohibited her from sales activities for 18 months following either departure or termination. (A Non-compete). FST terminated Silguero's employment in October 2007.

Shortly therafter, Silguero was hired by with Creteguard. But FST contacted Creteguard and requested enforcement of the non-compete.

In November 2007, Creteguard's chief executive officer, Thomas Nucum, did not call me. Instead, he informed Silguero in writing that "although we believe that non-compete clauses are not legally enforceable here in California, [Creteguard] would like to keep the same respect and understanding with colleagues in the same industry." Nice.

Silguero argued the noncompetition agreement enforced by Creteguard was void pursuant to section 16600, that no statutory exception to section 16600 applied, and that Creteguard's enforcement violated public policy.

The Court of Appeal agreed:

The complaint in this case alleges an ―understanding‖ between Creteguard and FST pursuant to which Creteguard would honor FST‘s noncompetition agreement. Creteguard admitted in writing that it entered into this understanding with FST, ―although [Creteguard] believe[d] that non-compete clauses are not legally enforceable here in California,‖ because Creteguard ―would like to keep the same respect and understanding with colleagues in the same industry. This alleged understanding is tantamount to a no-hire agreement.

No hire agreements are illegal too.

This case is Silguero v. Creteguard, Inc. and the opinion is here.

Court of Appeal: Wrongful Termination Alone Insufficient for Punitive Damages Liability

Scott sued her employer, Phoenix Schools, for wrongful termination in violation of public policy. A jury awarded her damages, including punitive damages. The Court of Appeal upheld the verdict for wrongful termination and the compensatory damages, but reversed on the punitive damages claim:

Thus, in order to sustain the punitive damages award, the evidence must leave no substantial doubt that Phoenix engaged in despicable conduct, or conduct intended to cause injury to Scott. “‘Something more than the mere commission of a tort is always required for punitive damages. There must be circumstances of aggravation or outrage, such as spite or “malice,” or a fraudulent or evil motive on the part of the defendant, or such a conscious and deliberate disregard of the interests of others that his conduct may be called wilful or wanton.’ [Citation.]” (Taylor v. Superior Court (1979) 24 Cal.3d 890, 894-895, italics omitted.) The only evidence of wrongful conduct directed toward Scott was her termination for an improper reason. This evidence was insufficient to support a finding of despicable conduct, because such action is not vile, base or contemptible.

So, a wrongful termination in violation of public policy, without additional evidence of malice, is not enough to sustain an award of punitive damages.

The case is Scott v. Phoenix Schools and the opinion is here.

California Supreme Court: Public Employee May Be Disciplined for Refusing to Cooperate in Investigation

The California Supreme Court held that a deputy public defender was properly discharged when he refused to answer questions during an internal investigation. He argued that he could not be compelled to answer because he invoked his Fifth Amendment right to refuse to answer questions on the grounds they might incriminate him.

But the investigator, a supervisor attorney at the public defender's office, had informed him that his cooperation in the investigation would not be used against him in criminal proceedings. Was his refusal to testify protected conduct? The court unanimously said "no":

a public employee may be compelled, by threat of job discipline, to answer questions about the employee’s job performance, so long as the employee is not required, on pain of dismissal, to waive the constitutional protection against criminal use of those answers. Here, plaintiff was not ordered to choose between his constitutional rights and his job. On the contrary, he was truthfully told that, in fact, no criminal use could be made of any answers he gave under compulsion by the employer. In the context of a noncriminal public employment investigation, the employer was not further required to seek, obtain, and confer a formal guarantee of immunity before requiring its employee to answer questions related to that investigation.

The case is Spielbauer v. County of Santa Clara and the opinion is here.

Court of Appeal Applies Anti-SLAPP Law to EDD Report

Dible worked for the Haight Ashbury Free Clinic as a counselor. The clinic terminated her employment for performance reasons. The clinic contested her unemployment claim. Ms. Dible sued for defamation and other claims. However, after some litigation, the clinic moved the court under the anti-SLAPP statute to dismiss the claim. Why? Because the clinic exercised its First Amendment rights to make a report in an official proceeding. The Court of Appeal agreed that the anti-SLAPP statute barred her claim. Dible then argued that she should be able to assert a claim for "defamation by compelled self-publication," because the clinic should have known Dible would have to re-publish to third parties the clinic's assertions regarding her performance.

The Court of Appeal disagreed:

Here we are clearly being asked to create a wider exception for claimants who have not republished where it is foreseeable that they might do so in the future. We decline to do so. Such a rule would require courts to engage in considerable speculation as to future conduct and lead to untenable attempts to speculate on future damage. A court could not, for instance, account for the possibility that after a plaintiff has received an award for damages in the form of lost future wages, he or she might republish while seeking a job and be given the job, thus not be damaged, nonetheless.

Since publication or republication to a third person is necessary to establish the cause of action of defamation, we conclude that plaintiff cannot establish a probability of success upon her defamation claim. The motion pursuant to section 425.16 was therefore properly granted.

The case is Dible v. Haight Ashbury Free Clinic and the opinion is here.

Narrowcast Supreme Court Opinion Contains Hidden Gems

So, I actually did not read Miklosy v. Regents on the day it was issued. The headline holding is that the state's Whistleblower Protection Act, Gov't Code section 8547 et seq., does not apply to the University of California, unless the University fails to address an internal complaint. Of course, this case is important to the University, its lawyers, its employees, and people who sue the University. But I'm none of those.

Yet, at the end of the opinion, the Court made some key rulings that affect all of us California employment lawyers:
- the court endorsed the long line of court of appeal decisions holding that individuals may not be held liable for wrongful termination in violation of public policy;
- the court held that claims for intentional infliction of emotional distress are preempted by the Workers' Compensation Act even when the conduct alleged violates public policy. The claim for wrongful termination is not preempted, but the common law IIED claim is.
- public entities may not be sued for wrongful termination in violation of public policy.

DGV

NLRA Preempts California Wrongful Termination Claim

Richard Luke was suspended for alleged dishonesty regarding his whereabouts. He then sent an email to his employer's parent's management entitled "trouble brewing." He was promptly fired the next day for circulating an anti-management petition and for ignoring the "chain of command." He testified at his deposition that he and other employees discussed working conditions such as being passed over for promotion, and physical conditions at the wine-label manufacturing plant at which he worked. He thought that was why he was fired. He said discharging him for that reason violated the public policy expressed in Labor Code section 232.5 (no adverse action against employee who "discloses" working conditions.).
In Luke v. Collotype Labels USA, Inc., opinion here, the court of appeal found that section 232.5 is preempted by the National Labor Relations Act. Essentially, Luke's working with other employees to complain about promotions and plant conditions was a "concerted activity" that were "arguably" protected by the NLRA. As such they fall within the "Garmon" preemption doctrine.
Although the court in Luke did not even cite the court of appeal's decision in Grant-Burton v. Covenant Care, 99 Cal.App.4th 1361 (2002), opinion here, this decision contradicts Covenant Care's holding that a common law wrongful termination claim based on section 232 (prohibiting discharge for discussing wages) was viable. The court in Covenant Care addressed the NLRA, but noted the parties had not raised Garmon preemption on appeal, and left that issue for remand. (That sound you hear is me, smacking my forehead really hard.) With all due respect to the court of appeal in Covenant Care, that case was incorrectly decided, as shown by the decision at blog.

California Court: No Preemption of State Law Claims for Bank

Banks have a special weapon in employment litigation (including wrongful termination and even discrimination claims). The National Bank Act preempts these state law claims, at least as they relate to bank "officers."

So, may a bank subject to the National Bank Act designate "officers" at will to come within the preemption provisions? No, said the court of appeal in Ramanathan v. Bank of America. Quoting from an earlier California Supreme Court case, the court reviewed the criteria for evaluating whether a bank employee is an "officer" and covered by the National Bank Act's discharge provisions:

a bank ‘officer’ within the meaning of section 24 possesses the following attributes: First, he or she holds an office created by the board of directors and listed in the bank’s bylaws. (Citation.) Second, he or she is appointed by the board of directors, either directly or pursuant to a delegation of board authority set forth in the bylaws. (Citations.) Third, he or she has the express legal authority to bind the bank in its transactions with borrowers, depositors, customers, or other third parties by executing contracts or other legal instruments on the bank’s behalf. (Citation.)
Fourth, his or her decision-making authority, however it might be limited by
bank rule or policy, relates to fundamental banking operations in such a manner
as to affect potentially the public’s trust in the banking institution. (Citation.) If a particular bank employee holds a position possessing these features, he or she may be viewed as the bank itself in the eyes of third parties. Such an employee is an ‘officer’ and serves at the pleasure of the board of directors.”

The court then applied these criteria and found that Ramanathan, a "vice president," raised a triable issue of fact as to whether he was an officer under the National Bank Act. Therefore, the court vacated summary judgment and remanded for trial on Ramanathan's claims for discrimination, harassment and wrongful termination brought under California law.

Thanks to Connecticut Employment Law Blog for reminding me to post about this case.