Diaz v. Tesla, Inc.
| Decision Date | 13 April 2022 |
| Docket Number | Case No. 3:17-cv-06748-WHO |
| Parties | Owen DIAZ, Plaintiff, v. TESLA, INC., et al., Defendants. |
| Court | U.S. District Court — Northern District of California |
Lawrence Anthony Organ, Cimone Annmarie Nunley, Navruz Avloni, California Civil Rights Law Group, San Anselmo, CA, Jba Bernard Alexander, III, Alexander Morrison + Fehr LLP, Los Angeles, CA, Jonathan Rosenthal, Michael Rubin, Altshuler Berzon LLP, San Francisco, CA, for Plaintiff.
Daniel C. Posner, Kathleen Marie Sullivan, Quinn Emanuel Urquhart and Sullivan, LLP, Los Angeles, CA, Tracey Adano Kennedy, Ruwani Namal Munaweera Tantula, Brett David Young, Sheppard Mullin Richter & Hampton LLP, Los Angeles, CA, L. Julius M. Turman, Constangy, Brooks, Smith & Prophete, LLP, San Francisco, CA, Susan Q. Haines, Sheppard, Mullin, Richter & Hampton LLP, San Francisco, CA, Patricia Melody Jeng, Sheppard Mullin Richter & Hampton, Palo Alto, CA, for Defendant Tesla, Inc.
ORDER ON POST-TRIAL MOTIONS
Re: Dkt. No. 317
After the trial concerning plaintiff Owen Diaz's claims that defendant Tesla, Inc. ("Tesla") discriminated against him in violation of 42 U.S.C. § 1981—a Reconstruction-era civil rights statute that prohibits discrimination in the making and enforcement of contracts—and under California state law, the jury awarded Diaz $6.9 million in compensatory damages and $130 million in punitive damages. The evidence was disturbing. The jury heard that the Tesla factory was saturated with racism. Diaz faced frequent racial abuse, including the N-word and other slurs. Other employees harassed him. His supervisors, and Tesla's broader management structure, did little or nothing to respond. And supervisors even joined in on the abuse, one going so far as to threaten Diaz and draw a racist caricature near his workstation.
Tesla now moves for judgment as a matter of law that it is not liable. In the alternative, it moves for a new trial and to reduce the amount of damages.
Tesla's motion for judgment as a matter of law is denied. On the Section 1981 claim, Tesla argues that Diaz's contract of employment was with a staffing agency that Tesla contracted with, not with Tesla itself. But the jury had a legally sufficient basis to find Tesla liable on two grounds. First, it found in a special verdict that Tesla qualified as an employer of Diaz under the law, even if not on paper. It could have reasonably found that this employment relationship was governed by an implied-in-fact contract. Second, it could have found that Diaz was an intended beneficiary of the contract between Tesla and the staffing agency. As a result, Diaz was entitled to bring the Section 1981 claim to enforce his rights under that contract. On the remaining issues, Tesla waived its legal challenge to Diaz's state-law negligent supervision claim. And Tesla's motion for a new trial is also denied; the weight of the evidence amply supports the jury's liability findings.
Tesla's motion for a remittitur—that is, a reduction in the amount of damages—is granted in part. Great deference is owed to the jury's verdict, but after careful review of the record, I conclude that the award of compensatory damages was excessive. I will not reduce it to $300,000, as Tesla advocates. It will be remitted to $1.5 million, the highest award supported by the evidence. The punitive damages award must also be remitted under Supreme Court precedent imposing constitutional limitations on punitive damages. But again, I will not reduce it to the one-to-one ratio to compensatory damages that Tesla urges. I conclude that, on these facts, the Constitution permits a punitive-damages award of $13.5 million—nine times the amount of compensatory damages.
Diaz filed this suit in state court in October 2017 with co-plaintiffs Lamar Patterson and Demetric Di-Az (who is Diaz's son). Dkt. No. 1-2. The suit was against Tesla, CitiStaff Solutions, Inc. ("CitiStaff"), West Valley Staffing Group ("West Valley"), and Chartwell Staffing Services, Inc. ("Chartwell") for many federal and state claims related to discrimination, harassment, retaliation, and negligence. Id. In November 2017, Tesla removed the case to this Court. Dkt. No. 1. The parties stipulated to, and I approved, submitting Patterson's claims to arbitration and staying them in this court; Patterson eventually settled the case and his claims were voluntarily dismissed. Dkt. Nos. 36, 139. In December 2018, the plaintiffs amended the complaint to add nextSource, Inc. ("nextSource") as a defendant. Dkt. No. 57. As a result, the pretrial and trial schedule was continued by stipulated order. Dkt. No. 77. In December 2019, the parties stipulated to dismissing West Valley. Dkt. No. 138.
The defendants moved for summary judgment in fall 2019, which I granted in part and denied in part. Dkt. No. 144. The net effect of that order was to remove many of the claims from the case. See id. In March 2020, CitiStaff and nextSource each settled with the plaintiffs, and I approved their dismissal. Dkt. Nos. 166, 169. And in April 2020, I approved a stipulated dismissal of Di-Az. Dkt. No. 176. That left Diaz and Tesla as the only parties to go to trial. But due to the COVID-19 pandemic, public health responses, and the parties’ schedules, trial was repeatedly postponed until September 2021.
The jury heard six days of testimony, from September 27 to October 4, 2021.
In summer 2015, Diaz saw an online job post for work at Tesla. Tr. at 385:15–386:6; see also Ex. 62 (job posting).2 The post used Tesla's insignia at the top and contained no indication that there was another company involved. See Ex. 62. Among other things, the post required Diaz to authorize "Tesla Motors or its agents" to carry out various forms of background investigations. Id. After Diaz filled out the application and clicked the link to apply, he received an email that directed him to CitiStaff. Tr. at 392:2–9. He liked the idea of working at Tesla because he "was going to be a part of something that was bigger than" he was. Id. at 502:15–18. He liked that he would "be able to make the [E]arth a little bit better for the next generation." Id. He "believe[d] in the environment" and that "we need[ed] to move away from the diesel and the fossil fuels." Id. at 393:15–19. He thought that Tesla had a "vision to ... correct some of the damage that we have been doing to the [E]arth." Id. Before starting, he went to a CitiStaff office to fill out paperwork. Id. at 391:4–19.
Diaz began work at Tesla's factory in Fremont, California, on June 3, 2015. Id. at 392:5. He received a badge from Tesla that also had CitiStaff on it. Ex. 19. His checks came from CitiStaff. Tr. at 391:4–19. His job involved operating a forklift, for which he had to receive a training and certification that came from Tesla. Id. at 394:3–19. Tesla also provided orientations to other employees hired through staffing companies. See id. at 67:18–68:11. It provided employees with safety equipment. Id. at 70:14–16. Diaz testified that "all of [his] directions came from Tesla." Id. at 391:22–24. Other employees similarly testified that their "day-to-day" management did not come from the staffing companies. See, e.g., id. at 70:2–4. When Diaz arrived, he was given a tour of the facility by one of his supervisors, Jaime Salazar, who worked for Tesla. Id. at 400:2–9. Another supervisor of his, Ed Romero, also worked at Tesla for most of the time during which Diaz was employed, though he had previously been a nextSource employee. Id. at 400:10–16. Diaz and others testified that, in terms of their interactions inside the Tesla factory, there was no difference between Tesla employees and staffing company employees. Id. at 400:17–24.
On Diaz's second day of work, Diaz saw the N-word scratched into a bathroom stall. Id. at 401:6–12. Over the course of his employment, more racist bathroom graffiti was added. Id. at 403:5–15. He encountered swastikas and the phrase "death to all [N-words]3 ." Id. at 403:15–404:7. Diaz reported the N-word on the bathroom stall to a supervisor (either Romero or Tamotsu "Tom" Kawasaki). Id. at 401:17–23. Romero testified that the janitorial staff were instructed to take pictures of graffiti they found while cleaning and send them to personnel. Id. at 163:2–7.
Diaz also testified that "eight to ten" employees called him the N-word while he worked at Tesla. Id. at 512:25–513:9. Diaz could not identify who those employees were, or their races. Id. Kawasaki testified that the N-word was "thrown around" the Tesla factory "a lot." Id. at 99:4–11. He stated that at least some of these uses were "friendly" or in "fun." Id. at 99:7–11. Michael John Wheeler, a supervisor employed by Chartwell, testified that he heard the N-word used "all over the factory" and heard it "every day." Id. at 424:21–425:7. Wheeler also testified that he was derogatorily called the N-word, that the co-worker who said it was promoted not disciplined, and that another co-worker spread feces on the cart he drove around the factory. Id. at 431:10–432:21. And Wayne Jackson, who worked for nextSource liaising with Tesla employees, agreed that the N-word was used "on a daily basis," though sometimes in a "friend[ly]" way (as in, "my N-word"). Id. at 225:5–13.
One of Diaz's co-workers was Judy Timbreza (who is male). Id. 404:10–15. Timbreza, who spoke Spanish and English, would call Diaz "mayate," the Spanish equivalent of the N-word. Id. at 405:20–406:6. Timbreza also called Diaz "porch monkey" in Spanish, a derogatory slur for a Black person. Id. at 406:7–15.4
On July 31, 2015, Diaz and Timbreza got into a "verbal altercation." Id. at 407:25–408:1. Timbreza called Diaz the N-word in English and was "ranting" and "laughing." Id. at 407:11–22....
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