Douglas v. Los Angeles Herald-Examiner

• Decision Date: 10 March 1975
• Docket Number: HERALD-EXAMINER
• Citation: 45 Cal.App.3d 878,120 Cal.Rptr. 166
• Court: California Court of Appeals Court of Appeals
• Parties: Previously published at 45 Cal.App.3d 878 45 Cal.App.3d 878, 46 Cal.App.3d 539 John DOUGLAS, Plaintiff and Appellant, v. LOS ANGELES, a corporation, Defendant and Respondent. Civ. 44424.

Page 166

120 Cal.Rptr. 166

Previously published at 45 Cal.App.3d 878

45 Cal.App.3d 878, 46 Cal.App.3d 539

John DOUGLAS, Plaintiff and Appellant, v. LOS ANGELES HERALD-EXAMINER, a corporation, Defendant and Respondent.

Civ. 44424.

Court of Appeal, Second District, Division 5, California.

March 10, 1975.

As Modified on Denial of Rehearing March 31, 1975.

Hearing Granted and Retransferred to Court of Appeal May 8, 1975.

For Opinion on Remand see, 123 Cal.Rptr. 683.

Flint & MacKay, Philip M. Battaglia, George C. Huddleston and Richard I. Gilchrist, Los Angeles, for defendant and respondent.

MacDonald, Halsted & Laybourne and Mitchell L. Lathrop, Los Angeles, for plaintiff and appellant.

LORING, ^* Associate Justice.

John Douglas (Douglas) filed a second amended complaint against Los Angeles Herald-Examiner, Division of the Hearst Corporation ¹ (Herald) for indemnity and money damages seeking to recover attorney's fees and costs [under the provisions of Labor Code section 2802 ² incurred by him in defense of an action filed against him in the United States District Court, Central Division, entitled 'Leonard L. Bursten (Bursten) v. Allan Dorfman (Dorfman), et al., No. 70-2501-EC' which Douglas alleged was filed against him solely because of services rendered by him as a newspaper reporter in the course and scope of his employment as a reporter for Herald. He alleged that he tendered the defense of such action to Herald, but Herald refused to accept it, and that he employed his own counsel and incurred costs. It was stipulated that the correct sum of attorney's fees and costs was $3,102.30. He also sought damages because he was required to file the instant action. It was stipulated that costs incurred in the instant action [not counting appellate costs] were $5,239.20. He also sought damages for emotional distress in the sum of $85,000 and punitive damages in the sum of $500,000. Herald answered, and after non-jury trial, the court rendered a written decision, made certain findings (discussed in detail infra) and rendered judgment in Herald's favor. Douglas appeals from the judgment.

CONTENTIONS

Appellant contends:

I. Labor Code section 2802 requires that an employer indemnify his employee for all that the employee expends or loses as a result of the discharge of his duties as an employee.

II. Included within the word 'all' in Labor Code section 2802 are costs of defense and attorney fees incurred by the employee in defending an action brought against him by a third party.

III. Likewise included within the word 'all' in Labor Code section 2802 are costs and attorney fees incurred by an employee in an action brought by the employee to enforce the rights granted him under section 2802.

IV. Douglas is entitled to full indemnification for all costs and fees incurred in both the Bursten lawsuit and the instant action.

V. The conduct of the Herald in this case justifies the imposition of exemplary damages.

FACTS

The parties agree (either by stipulation or admissions in the pleadings or briefs) that Douglas was employed by Herald as a newspaper reporter during the period January 19, 1968, to November 20, 1970; that during and within the scope of his employment he was assigned to and did investigate and report on certain alleged irregularities and possible unlawful activity of an entity known as Beverly Ridge Estates Corporation (BREC), a real estate developer; Douglas obtained material and wrote a series of articles which were submitted to and approved by his appropriate superiors at Herald and its legal advisors; that Herald published such articles with notice of copyright in its newspaper.

The parties stipulated that the trial court should take judicial notice of the file in the Bursten case. Bursten's complaint alleged that he was vice president of BREC; that during the month of January 1969, certain named representatives of the office of the California Attorney General (including Thomas E. Lynch, Attorney General) and certain named representatives of the United States Department of Justice (including the United States Attorney Robert Meyer) agreed to form a joint task force to investigate Bursten's private and business affairs and the affairs of BREC in order to obtain documents which were beyond the subpoena power of the state of California through the use of a special United States Grand Jury; that documents were obtained and turned over illegally to unauthorized persons including Douglas, which Douglas included in articles written by him published in the Herald-Examiner, all of which was in violation of the civil rights, right of privacy and constitutional rights of Bursten; that the information obtained was maliciously and deliberately given and disseminated to the news media including Douglas; that the information thus supplied to Douglas 'was conveyed pursuant to an express agreement between Defendants DORFMAN [operating head of the Teamsters Pension Fund from which BREC had borrowed money] and DOUGLAS whereby said material would be forwarded to Defendants De FEO [Assistant U. S. Attorney], LYNCH [Attorney General of California] HUFFMAN [Deputy Attorney General of California] and KAUFMAN [Supervising Auditor for the California Attorney General] for use in furtherance of the conspiracy to violate Plaintiff's [Bursten's] Constitutional rights.'

The parties stipulated that Douglas, without the payment of any money or other consideration procured from Bursten a release with prejudice and a dismissal of the Bursten action, except that Douglas agreed to give a deposition for Bursten and waive the newspaperman's privilege of confidential communications.

At trial of the instant case Douglas relied upon the matters admitted by Herald's answer and its answers to Interrogatories number 3, 5 and 7 as follows:

'Interrogatory No. 3: 'During his investigation of and authorship of articles about Beverly Ridge Estates Corporation, its officers and directors, do you contend that plaintiff, JOHN DOUGLAS, committed any act or acts which were outside the course and scope of his employment by the LOS ANGELES HERALD EXAMINER?

"Answer: 'No."

'. . . Interrogatory No. 5: '. . .

'During his investigation of and authorship of articles about Beverly Ridge Estates Corporation, its officers and directors, do you contend that plaintiff, JOHN DOUGLAS, failed to commit any act or acts required to him in the course and scope of his employment by LOS ANGELES HERALD EXAMINER?

"Answer: No."

'. . . Interrogatory No. 7: 'Do you contend that plaintiff, JOHN DOUGLAS, was guilty of any wrongdoing whatsoever in connection with his investigation of or his authorship of articles about Beverly Ridge Estates Corporation, its officers or directors?

"Answer: No."

Douglas did not testify.

As noted, the amount of damages was stipulated to.

The parties stipulated that Mr. Caton (Douglas' supervisor at Herald) would testify that if Douglas 'committed any of the acts alleged in the Federal Court, they were not within the course and scope of his employment with the Herald Examiner.' The parties also stipulated that 'There was a full release executed by Mr. Bursten in favor of Mr. Douglas' which was 'with prejudice' without any monetary consideration except an agreement to give his deposition.

The trial court found, inter alia, in Finding Nos. 10 and 11. ³

'10. None of the acts alleged to have been committed by DOUGLAS in the Complaint in Bursten v. Dorfman, et al., was within the course and scope or in the discharge of the duties of his employment with the HERALD-EXAMINER, and none of the acts alleged of DOUGLAS in the Complaint was authorized or directed to be committed by the HERALD-EXAMINER.' (Emphasis ours.)

'11. The HERALD-EXAMINER had no knowledge at any time material hereto of whether or not DOUGLAS actually committed the acts alleged to have been committed by him in the Complaint in Bursten v. Dorfman, et al.'

The court made no finding that paragraph XIII of Douglas' complaint was true or untrue. That paragraph read:

'XIII

'Plaintiff BURSTEN in said United States District Court action sued plaintiff herein solely and exclusively because of acts performed for, at the direction of, and with the authorization and approval of defendants herein, which acts of this plaintiff were specifically ratified and approved by defendants, and each of them.'

DISCUSSION

Labor Code section 2802 reads:

'An employer shall indemnify his employee for all that the employee necessarily expends or loses in direct consequence of the discharge of his duties as such, or of his obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying such directions, believed them to be unlawful.'

No California case has been cited, nor has any been found which interprets section 2802 in the factual context here presented. Only two cases discuss the section in any detail. Earll v. McCoy, 116 Cal.App.2d 44, 253 P.2d 86 is not helpful. However, Davidson v. Welch, 270 Cal.App.2d 220 at 227, 75 Cal.Rptr. 676, 681, footnote 3 states:

'3 No opinion is expressed upon the liability of the employer to indemnify the employee for the expense of defending the tort action if the facts were resolved in favor of the employee's contention that he was unwarrantedly attacked and was acting in self-defense. The Restatement of Agency, section 439, subdivision d, page 329, suggests that the employer would be subject to a duty to exonerate the employee.'

Section 2802 was enacted in 1937 based upon former Civil Code section 1969 'without substantial change.' In the Code Commissioners' notes to the prior section (Civil Code § 1969), the commissioners cite a New York case, Castle v. Noyes, 14 N.Y. 329. In Castle v. Noyes the plaintiff sued to recover possession of certain oak lumber. Plaintiff derived title under a chattel mortgage which defendant claimed was a fraud on creditors. Plaintiff offered a judgment in a case in which defen...