Cotran v. Rollins Hudig Hall Intern., Inc.

• Decision Date: 05 January 1998
• Docket Number: No. S057098,S057098
• Citation: 69 Cal.Rptr.2d 900,948 P.2d 412,17 Cal.4th 93
• Court: California Supreme Court
• Parties: , 948 P.2d 412, 75 Fair Empl.Prac.Cas. (BNA) 1074, 73 Empl. Prac. Dec. P 45,348, 135 Lab.Cas. P 58,406, 136 Lab.Cas. P 58,462, 13 IER Cases 961, 97 Cal. Daily Op. Serv. 58, 98 Daily Journal D.A.R. 117 Ralph COTRAN, Plaintiff and Respondent, v. ROLLINS HUDIG HALL INTERNATIONAL, INC., et al., Defendants and Appellants

Page 900

69 Cal.Rptr.2d 900

17 Cal.4th 93, 948 P.2d 412, 75 Fair Empl.Prac.Cas. (BNA) 1074,

73 Empl. Prac. Dec. P 45,348,

135 Lab.Cas. P 58,406, 136 Lab.Cas. P 58,462,

13 IER Cases 961, 97 Cal. Daily Op. Serv. 58,

98 Daily Journal D.A.R. 117

Ralph COTRAN, Plaintiff and Respondent, v. ROLLINS HUDIG HALL INTERNATIONAL, INC., et al., Defendants and Appellants.

No. S057098.

Supreme Court of California

Jan. 5, 1998.

Rehearing Denied Feb. 25, 1998.

Shand S. Stephens, Margaret L. Parker, San Francisco, Littler, Mendelson, Fastiff, Tichy & Mathiason, Henry D. Lederman, Walnut Creek, Steven B. Berlin, San Francisco, Mark E. Robson, Walnut Creek, and Robert T. Landau, San Francisco, for Defendants and Appellants.

Paul N. Halvonik, Berkeley, Fred J. Hiestand, Sacramento, Orrick, Herrington & Sutcliffe, Gary R. Siniscalco, Douglas D. Mandell, San Francisco, Nancy M. Lee, Paul, Hastings, Janofsky & Walker, Paul W. Cane, Jr., Alfred Sanchez, Jr., Los Angeles, Rushfeldt, Shelley & Drake, Linda C. Miller and Christine T. Hoeffner, Sherman Oaks as Amici Curiae on behalf of Defendants and Appellants.

Thomas Kallay, Robert H. Pourvali, Los Angeles, Robert Knickerbocker, Woodland Hills, Anderson & Bennett and Gail S. Cooper-Folb, Los Angeles, for Plaintiff and Respondent.

Ajalat & Ajalat, Sol P. Ajalat, Stephen P. Ajalat, Burbank, Quackenbush & Quackenbush and William C. Quackenbush, San Mateo as Amicus Curiae on behalf of Plaintiff-Respondent.

Judith E. Kurtz and Patricia A. Shiu, San Francisco as Amici Curiae.

BROWN, Justice.

When an employee hired under an implied agreement not to be dismissed except for "good cause" is fired for misconduct and challenges the termination in court, what is the role of the jury in deciding whether misconduct occurred? Does it decide whether the acts that led to the decision to terminate happened? Or is its role to decide whether the employer had reasonable grounds for believing they happened and otherwise acted fairly? The Courts of Appeal are divided over the question. The majority of California decisions suggest the jury's role is to decide whether the employer concluded misconduct occurred "fairly, honestly, and in good faith." That standard, or variations on it, appears to be the rule in most other jurisdictions as well. But at least one Court of Appeal opinion adopts a more expansive view. It holds the jury must decide whether the alleged misconduct occurred as a matter of fact, and places the burden of proving it on the employer.

We granted review to clarify the role of the jury in litigation alleging breach of an implied contract not to terminate employment except for good or just cause, and to resolve the conflict among the Courts of Appeal. The better reasoned view, we conclude, prescribes the jury's role as deciding whether the employer acted with " 'a fair and honest cause or reason, regulated by good faith.' " That language is from Pugh v. See's Candies, Inc. (1981) 116 Cal.App.3d 311, 330, 171 Cal.Rptr. 917 (Pugh I ), the font of implied contract-based wrongful termination law in California. Recently, in Scott v. Pacific Gas & Electric Co. (1995) 11 Cal.4th 454, 467, 46 Cal.Rptr.2d 427, 904 P.2d 834 (Scott ), we elaborated on the content of good or just cause by enumerating what it is not: reasons that are " 'trivial, capricious, unrelated to business needs or goals, or pretextual.' " (Quoting Wood v. Loyola Marymount University (1990) 218 Cal.App.3d 661, 670, 267 Cal.Rptr. 230.)

Today, we expressly adopt a governing standard that combines the formulations in both Scott, supra, 11 Cal.4th at page 467, 46 Cal.Rptr.2d 427, 904 P.2d 834, and Pugh I, supra, 116 Cal.App.3d at page 330, 171 Cal.Rptr. 917 (the Scott-Pugh standard), elaborating on its meaning and how it should be administered by trial judges to promote the policies underlying implied-contract-based wrongful discharge claims involving employee misconduct. ¹ And because the Court of Appeal relied on a substantially similar standard in overturning a jury verdict in favor of the plaintiff-employee in this case and ordering a new trial, we affirm its judgment as well. We disapprove Wilkerson v. Wells Fargo Bank (1989) 212 Cal.App.3d 1217, 261 Cal.Rptr. 185, the only published Court of Appeal decision adopting a broader view of the jury's function in this species of wrongful discharge litigation.

I. Facts And Procedural Background; Rollins's Investigation and the Decision to Terminate Plaintiff

In 1987, Rollins Hudig Hall International, Inc. (Rollins), an insurance brokerage firm, approached plaintiff, then a vice-president of a competitor, with a proposal to head its new West Coast international office. Following a series of telephone conferences, meetings and exchanges of letters, plaintiff joined Rollins in January 1988 as senior vice-president and western regional international manager. He held that position until 1993 when he was fired.

The events leading to plaintiff's termination began in March 1993, when an employee in Rollins's international department reported to Deborah Redmond, the firm's director of human resources, that plaintiff was sexually harassing two other employees, Carrie Dolce and Shari Pickett. On March 24, Redmond called both women to her office. In separate interviews, she asked each if they had been harassed. Both said yes; each accused plaintiff as the harasser. Two days later, both women furnished statements to Redmond stating that plaintiff had exposed himself and masturbated in their presence more than once; both also accused plaintiff of making repeated obscene telephone calls to them at home. Redmond sent copies of these statements to Rollins's equal employment opportunity (EEO) office in Chicago. Rollins's president, Fred Feldman, also was given copies. He arranged for a meeting with plaintiff at Rollins's Chicago office, attended by Robert Hurvitz, the firm's head of EEO, and Susan Held, Rollins's manager for EEO compliance. At the meeting, Feldman reviewed the accusations made by Dolce and Pickett against plaintiff. He explained that an investigation would ensue and that its outcome would turn on credibility. After reading the Dolce and Pickett statements to plaintiff, Held explained how the investigation would proceed. Plaintiff said nothing during the meeting about having had consensual relations with either of his two accusers, and offered no explanation for the complaints.

Pending completion of the EEO investigation, Rollins suspended plaintiff. Over the next two weeks, Held interviewed twenty-one people who had worked with plaintiff, including five he had asked her to interview. Held concluded that both Dolce and Pickett, who reiterated the incidents described in their statements, appeared credible. Her investigation failed to turn up anyone else who accused plaintiff of harassing them while at Rollins. One Rollins account executive, Gail Morris, told Held that plaintiff had made obscene telephone calls to her when they both worked for another company, soon after a sexual relationship between the two had ended. Susan Randall, one of those plaintiff had asked to be interviewed and who had described plaintiff as a "perfect gentleman," later called Held to relate "a strange early morning phone call" from plaintiff which "was not for any business purpose." Randall "couldn't figure out what [plaintiff] wanted, ... yelled at him, told him to leave her alone, and never to call her in the middle of the night again." Held's investigation also confirmed that plaintiff had telephoned Dolce and Pickett at home. In April, both women signed sworn affidavits reciting in detail the charges made against plaintiff in their original statements.

On the basis of her investigation, her assessment of Dolce's and Pickett's credibility, and the fact that no one she interviewed had said it was "impossible" to believe plaintiff had committed the alleged sexual harassment, Held concluded it was more likely than not the harassment had occurred. She met with Feldman and Hurvitz to present her conclusions and gave Feldman copies of the affidavits of Dolce, Pickett, and Gail Morris. After reviewing Held's investigative report and the affidavits, Feldman fired plaintiff on April 23, 1993. This suit followed.

II. The Trial

A. Plaintiff's Case; the Defense

At trial, plaintiff testified he met Dolce in December 1990 when she was employed temporarily at Rollins. After she left, Dolce telephoned plaintiff and suggested they meet socially. The two had lunch several times. Dolce asked plaintiff for a job as a temporary secretary in his department. Plaintiff agreed. Dolce began work at the end of February 1991, becoming a permanent employee in April. In May, plaintiff testified, he and Dolce began an intermittent affair that continued through February 1993. They had sex between six and ten times, including three times at a hotel room plaintiff had reserved for their lunch hour; he produced credit card receipts from the hotel for rooms rented during that period.

As for Pickett, plaintiff testified they had a brief affair from January to April 1992. Plaintiff's mother testified she saw Pickett at her son's house and leave with him a short time later. He was carrying bedding, she testified, and returned two hours later, explaining he had been to his unfurnished condominium nearby. This incident, plaintiff testified, was the first time he and Pickett had sex. Plaintiff's tae kwon do trainer testified he met Pickett at plaintiff's house in February 1992. According to plaintiff, he and Pickett had sex on several occasions before their relationship ended. He began a sexual relationship with his wife-to-be in June 1992. She moved in with him in July, and they were married in October. During this time, plaintiff continued his sexual liaison with Dolce, but not with Pickett. He had not disclosed these liaisons during the Chicago interview with Feldman because he was upset, "frightened," and felt "ambushed....