Davis v. Kiewit Pacific Co.: Court Finds Triable Issue as to Managing Agent Status, Overturns Summary Adjudication of Punitive Damages

In Davis v. Kiewit Pacific Co. (9/18/13, pub. 10/8/13) --- Cal.App.4th ---, the trial court entered a judgment for plaintiff Lisa Davis after a jury found defendant Kiewit Pacific Co. liable for gender discrimination, hostile work environment harassment, retaliation, and failure to prevent harassment, gender discrimination, or retaliation. However, before trial, the trial court granted Kiewit's motion for summary adjudication on Davis's claim for punitive damages, concluding there were no triable issues of material fact whether a managing agent of Kiewit had engaged in or ratified any oppressive, malicious and/or fraudulent conduct against her. The Court of Appeal reversed, finding triable issues of material fact on managing agent status. 

Davis worked for Kiewit on a construction project. She alleged that she complained of harassment to the project manager, Kyle Preedy, and Kiewit's EEO officer, John Lochner. On Kiewit's motion for summary adjudication of punitive damages, she argued that Preedy and Lochner were its managing agents. 

The Court found that Preedy's declaration in support of the motion "simply parroted" the managing agent standard set forth in White v. Ultramar, Inc. (1999) 21 Cal.4th 563, and did not state "sufficient evidence to make a prima facie showing that there was no triable issue regarding whether Preedy was a managing agent of Kiewit." Slip op. at 16. Even if Kiewit had introduced such evidence, Davis met her burden to raise a triable issue of material fact on the issue. Specifically:

Preedy, as the Project's manager, was Kiewit's top on-site manager. He had the responsibility to oversee and manage the $170 million project, including over 100 Kiewit employees working on the site. Preedy's duties included interfacing with stakeholders on the Project, contract administration, operations and personnel oversight, and making sure the Project was completed according to the contract. In performing those duties, a trier of fact could reasonably infer he exercised substantial authority and discretion regarding a broad range of issues involving the Project, including compliance with Kiewit's policies and the hiring, supervision, and laying off of Project employees. Absent evidence showing that management of a $170 million project with supervision of 100 employees is an insignificant part of Kiewit's business, a trier of fact could reasonably infer from the above evidence that Preedy "exercised substantial discretionary authority over significant aspects of [Kiewit's] business" and therefore was a managing agent of Kiewit.

Slip op. at 17-18. 

Lochner's declaration also failed in that it stated conclusions of law, rather than factual evidence. Slip op. at 20. In any event, Davis met her burden of raising a triable issue based on the following facts: 

Lochner, as Kiewit's EEO officer, had the duties and responsibilities to enforce its policies against discrimination, retaliation, and harassment based on gender and other protected classes. A trier of fact could therefore reasonably infer he had the authority and discretion regarding enforcement of those policies because he did not conduct, or direct anyone else to conduct, an investigation regarding the [alleged harassment]. In his declaration, Lochner stated, as Kiewit's district EEO officer, he was responsible for administering Kiewit's policies that prevent discrimination, retaliation, and harassment based on gender and other protected groups for the Northwest District. Lochner stated he "conducted training for staff employees (supervisory personnel); took and responded to employee complaints about EEO and other issues; and conducted or oversaw investigations regarding a variety of employee relations issues including alleged discrimination, retaliation and/or harassment." ... [A] a trier of fact could reasonably infer he had authority and discretion in making, interpreting, and applying Kiewit's EEO policies on a corporation-wide basis and therefore had authority and discretion to make decisions that ultimately determine corporate policy.

Slip op. at 21-22. 

The opinion is available here. 

City of Bell v. Superior Court (Rizzo): City Need Not Indemnify Former Official In Actions Alleging Theft of City Funds

Robert Rizzo deserves to have his picture in the dictionary next to the word "chutzpah." 

Robert Rizzo, the former Chief Administrative Officer of the City of Bell (City), has been sued by the City, as well as the Attorney General acting on behalf of the City, for restitution for his alleged looting of the City's coffers. He has also been criminally charged with multiple counts of misappropriation of public funds. Rizzo, by complaint for declaratory relief, seeks a judgment that the City is contractually obligated to provide him with a defense to these civil and criminal actions. We conclude that, as a matter of law, the City does not owe Rizzo such a defense. 

City of Bell v. Superior Court (Rizzo) (10/4/13) --- Cal.App.4th ---, slip op. at 2.  

The opinion is available here.  

Steven G. Pearl to Discuss Settling Wage and Hour Cases

I am presenting "Increasing the Chance of Success in Settling Wage & Hour Litigation" at the Bridgeport Continuing Education 2013 Wage and Hour Conference on December 13, 2013, at the Loews Hollywood Hotel. More information here.

American Corporate Security v. Su: Employer May Not Seek Writ of Mandate To Review Labor Commissioner Determination that Employer Retaliated Against Employee

A quick note on this case. 

In American Corporate Security, Inc. v. Su (9/10/13, pub. 9/27/13) --- Cal.App.4th ---, the Labor Commissioner found that an employer (ACS) terminated an employee in retaliation for complaints about alleged Labor Code violations. ACS petitioned for a writ of mandate, and the trial court sustained the Labor Commissioner's demurrer. The Court of Appeal affirmed, finding as follows: 

A Labor Commissioner order finding retaliation is not self-executing. Slip op. at 6-8. If the employer refuses to comply with such an order, the Labor Commissioner must bring an action in court to enforce it. Ibid. Nothing prevents the employer from raising defenses in such an action. Slip op. at 8-9. Because it could defend the retaliation action in court, ACS had an adequate remedy at law and the demurrer to its mandate action was properly sustained. Slip op. at 10-11. 

The opinion is available here. 

Peng v. First Republic Bank: Failure to Provide AAA Arbitration Rules to Employee Does Not Render Arbitration Policy Unconscionable

In Peng v. First Republic Bank (8/29/13, pub. 9/26/13), --- Cal.App.4th ---, the trial court denied an employer defendant's petition to compel arbitration in an action alleging discrimination and related claims. The Court of Appeal reversed, holding: 

Failure to attach the AAA arbitration rules to the arbitration policy, by itself, did not render the policy procedurally unconscionable. Slip op. at 6-9.

A provision in the policy allowing the employer to modify it unilaterally was not substantively unconscionable. Slip op. at 10-12. Because the covenant of good faith and fair dealing limits an employer's right to modify an arbitration policy, such a right is not "so one-sided as to 'shock the conscience.'" Slip op. at 12. 

Peng v. First Republic Bank is available here. 

Pacific Shores Properties v. City of Newport Beach: Ninth Circuit Reverses Summary Judgment in Action Alleging Discrimination Against Sober Living Group Homes

This is an interesting case on discrimination in the housing context. In Pacific Shores Properties, LLC v. City of Newport Beach (9th Cir. 9/20/13), the Ninth Circuit reversed an order granting summary judgment in a case alleging that a City ordinance violated the Fair Housing Act, the Americans with Disabilities Act, the California Fair Employment and Housing Act, and the Equal Protection Clause by having the practical effect of prohibiting new group homes for recovering alcoholics and drug users from opening in most residential zones and requiring existing group homes to undergo a permitting process.  

The Ninth Circuit held that the district court erred in disregarding evidence that the City’s sole objective was to discriminate against persons deemed to be disabled under state and federal housing discrimination laws. The plaintiffs, who were operators and residents of sober living homes,  were not required to identify similarly situated individuals who were treated better than themselves in order to survive summary judgment. Where there is direct or circumstantial evidence that the defendant has acted with a discriminatory purpose and has caused harm to members of a protected class, such evidence is sufficient to permit the protected individuals to proceed to trial under a disparate treatment theory.

The district court erred in concluding that the plaintiffs failed to create a triable issue of fact as to whether the losses that their businesses suffered were caused by the enactment and enforcement of the ordinance when the plaintiffs presented evidence that they experienced a significant decline in business after the ordinance’s enactment, that the publicity surrounding the ordinance reduced referrals, and that current and prospective residents expressed concern about whether the homes would close. In addition, costs borne by the plaintiffs to present their permit applications and to assure the public that they were still operating despite the City’s efforts to close them were compensable. 

The opinion is available here.  

Sonic-Calabasas A, Inc. v. Moreno: California Supreme Court Holds That Federal Arbitration Act Preempts California Law Prohibiting Waiver of Employee's Right to Labor Commissioner Hearing; Waiver May Be Unconscionable Depending on Totality of Circumstances

In 2011, the California Supreme Court held: (1) an employee's statutory right to a wage hearing before the Labor Commissioner, known as a Berman hearing, "with all the possible protections that follow from it, is itself an unwaivable right that an employee cannot be compelled to relinquish as a condition of employment;" (2) waiver of an employee's right to seek such a hearing is a substantively unconscionable contract term; and (3) the Federal Arbitration Act (FAA) does not preempt the Court's holdings on points one and two. Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659 (Sonic I) (discussed here). 

The Supreme Court of the United States granted review and vacated that decision, remanding the case for further consideration in light of AT&T Mobility LLC v Concepcion 563 U.S. ___ (2011) (discussed here). 

The California Supreme Court issued its new decision last week. Reversing its earlier decision, the Court held as follows: 

Although the Berman statutes (Cal. Labor Code sections 98 to 98.8) provide important benefits to employees by reducing the costs and risks of pursuing a wage claim (slip op. at 6-10), the FAA as construed by Concepcion preempts Sonic I's holding that a waiver of Berman procedures in an arbitration agreement is, in and of itself, unconscionable and contrary to public policy. Slip op. at 23. 

Because a Berman hearing causes arbitration to be substantially delayed, the unwaivability of such a hearing, even if desirable as a matter of contractual fairness or public policy, interferes with a fundamental attribute of arbitration — namely, its objective "'to achieve "streamlined proceedings and expeditious results."'" Sonic I's rule is thus preempted by the FAA. 

Slip op. at 25-26 (internal citations omitted). 

Unconscionability remains a valid defense to petitions to compel arbitration in the wake of Concepcion, but such rules must not facially discriminate against arbitration, must be enforced evenhandedly, and "must not disfavor arbitration as applied by imposing procedural requirements that interfere with fundamental attributes of arbitration, especially its lower costs, greater efficiency and speed, and the ability to choose expert adjudicators to resolve specialized disputes." Slip op. at 28-29. For example, state law rules requiring a neutral arbitrator or requiring the employer to pay the unique costs of arbitration do not interfere with fundamental attributes of arbitration and are not preempted. Slip op. at 29. 

Although waiver of Berman hearing procedures is not unconscionable per se, "waiver of these protections in the context of an agreement that does not provide an employee with an accessible and affordable arbitral forum for resolving wage disputes may support a finding of unconscionability." Slip op. at 33. 

The Court remanded to the trial court "to examine the totality of the agreement's substantive terms as well as the circumstances of its formation to determine whether the overall bargain was unreasonably one-sided." Slip op. at 33. The Court ordered the trial court to consider "not only what features of dispute resolution the agreement eliminates but also what features it contemplates." Slip op. at 33.  The Court noted: 

The unconscionability inquiry is not a license for courts to impose their renditions of an ideal arbitral scheme. Rather, in the context of a standard contract of adhesion setting forth conditions of employment, the unconscionability inquiry focuses on whether the arbitral scheme imposes costs and risks on a wage claimant that make the resolution of the wage dispute inaccessible and unaffordable, and thereby "effectively blocks every forum for the redress of disputes, including arbitration itself."

Slip op. at 35.

The unconscionability analysis outlined is not preempted by the FAA. It does not facially discriminate against arbitration, it applies equally to arbitration and nonarbitration agreements that require employees to forgo the Berman protections in resolving wage claims, and as applied it does not pose an obstacle to the achievement of the FAA's objectives as construed in Concepcion. Slip op. at 37.

Finally, the US Supreme Court's recent holding in American Express Co. v. Italian Colors Restaurant (2013) 570 U.S. __ (discussed here) does not affect the Court's reasoning. Slip op. at 42-48. 

Italian Colors involved the harmonization of the FAA with other federal law; it did not involve preemption of state laws dealing with historical police powers. Slip op. at 44. Further, whereas the class action waiver in Italian Colors "eliminated no statutory entitlement specifically designed to help vindicate the rights at issue there, the same is not true of the waiver of statutorily provided Berman protections in this case." Slip op. at 45. 

Concepcion held that the FAA preempts a state-law rule that interferes with fundamental attributes of arbitration "even if [the rule] is desirable for unrelated reasons," such as facilitating the prosecution of "small-dollar claims that might otherwise slip through the legal system." Concepcion did not hold that the FAA preempts state-law rules designed to facilitate prosecution of small-dollar claims even when the rules do not interfere with fundamental attributes of arbitration... 

Slip op. at 47-48. 

Justice Liu, who has become a leading voice in employment law over the last year, wrote the majority opinion, joined by Chief Justice Cantil-Sakauye and Justices Kennard, Werdegar, and Corrigan. Justice Corrigan concurred in the result but expressed the opinion that unconscionability should be found only where the agreement is "so one-sided as to 'shock the conscience.'"  Justice Chin, joined by Justice Baxter, joined in part and dissented in part, arguing that the FAA preempts the Court's approach, and the Court should find the agreement at issue not unconscionable, rather than remanding to the trial court to determine the issue. 

The opinion is available here.