Earls v. Hagemann Meat Company, Inc., A114857 (Cal. App. 2/21/2008)

• Decision Date: 21 February 2008
• Docket Number: A114857
• Court: California Court of Appeals Court of Appeals
• Parties: DAN EARLS, Plaintiff and Appellant, v. HAGEMANN MEAT COMPANY, INC., et al., Defendants and Respondents.

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DAN EARLS, Plaintiff and Appellant,
v.
HAGEMANN MEAT COMPANY, INC., et al., Defendants and Respondents. A114857 Court of Appeals of California, First Appellate District, Division Four February 21, 2008 NOT TO BE PUBLISHED

Appeal from the Sonoma County, Super. Ct. No. SCV235958.

REARDON, J.

Dan Earls, an employee of a meat processing company briefly elevated to the position of general manager, claimed he was fired for complaining that the owner's son, who previously served in that capacity and was poised to be reinstated during Earls's tenure, was a methamphetamine addict who should not be running the company. The company previously had been threatened with the withdrawal of federal inspection services due to the fact that this son suffered a prior felony conviction for possession of methamphetamine. Dan Earls appeals from the judgment of nonsuit entered on his cause of action for wrongful discharge in violation of public policy, and from dismissal by summary adjudication of his contract-related claims.

We conclude that the trial court improvidently entered judgment of nonsuit because Earls made a sufficient showing that his firing implicated the significant public policies of our federal meat and poultry inspection laws. Further, the contract-related claims were not, as the trial court held, preempted by federal law. Accordingly, we reverse the judgment of nonsuit as well as the dismissal of the contract claims.

I. PROCEDURAL HISTORY

After being fired as the general manager of Hagemann Meat Company, Inc. (HMC), appellant Dan Earls sued HMC and Ray and Phyllis Hagemann (collectively, respondents) for breach of contract, wrongful discharge in violation of public policy, unpaid wages, breach of guaranteed personal services contract and other causes. Following a grant of summary adjudication in favor of respondents on the breach of contract, breach of personal services contract and unpaid wages claims, the matter proceeded to trial on the wrongful discharge cause. At the close of Earls's case-in-chief, respondents moved for nonsuit, arguing that Earls failed to carry his burden of showing wrongful discharge in violation of public policy. The trial court granted the motion and entered judgment accordingly. This appeal followed.

II. NONSUIT A. Factual Background

We relate the following facts according to the standard of review following a judgment of nonsuit. Under this familiar standard, upon examining the entire record, we view the evidence in the light most favorable to the appellant. We do not consider the credibility of witnesses or weigh the evidence; rather, we accept as true the evidence favoring the plaintiff, and disregard conflicting evidence. (Alpert v. Villa Romano Homeowners Assn. (2000) 81 Cal.App.4th 1320, 1327.) Engaging this standard, we cannot sustain the trial court's judgment unless the defendant is entitled to judgment as a matter of law. (Ibid.)

1. Earls is Hired by HMC

HMC is a family-owned wholesale meat processing plant located in Santa Rosa. Phyllis Hagemann has been its sole owner since 1994. Bruce Hagemann, one of Ms. Hagemann's sons, was the general manager of the company from 1994 through 2000. In 2000, Ray Hagemann, another son, took over as general manager. Previously, he had worked as a journeyman meat cutter. As general manager, Ray Hagemann worked in the front office next to the meat processing room, but his duties included supervising sales and administrative staff, pricing, checking invoices for accuracy, and making major purchases and capital improvements.

Prior to joining HMC in January 2002, Earls had served as executive vice-president, secretary-treasurer and president of United Food and Commercial Workers Union, Local 101 (Local 101), the union representing HMC employees. At an exploratory dinner meeting, Ms. Hagemann indicated she wanted Earls to "step in as . . . No. 2" and expressed concern about Ray Hagemann's previous drug problems. Earls's initial duties involved outside sales, and assisting with wage packages, insurance, benefits and the like. In April 2002, Earls took over the assistant manager position, the "No. 2 desk."

2. USDA Grant of Inspection

As a meat processing plant, HMC's facility and products are subject to inspection by the United States Department of Agriculture (USDA), pursuant to the Federal Meat Inspection Act (21 U.S.C. § 601 et seq.) (FMIA) and the Poultry Products Inspection Act (id., § 451 et seq.) (PPIA). All such establishments operate under a grant of inspection. (See, generally, 9 C.F.R. §§ 304, 305 and 307 (2007).) The grant of inspection designates the responsible parties within the plant with whom the USDA inspectors interact, ask questions, etc., in their role of certifying that the facilities meet USDA standards.

Without a valid grant of inspection, an establishment does not receive USDA inspection services, and without such services, it cannot distribute products in commerce. (See 9 C.F.R. §§ 304.3, 305.4.) The FMIA provides that the Secretary of the USDA may refuse to provide, or withdraw, inspection services when he or she determines that an applicant for, or recipient of, services "is unfit to engage in any business requiring inspection . . . because the applicant or recipient, or anyone responsibly connected with the applicant or recipient, has been convicted, in any Federal or State court, of (1) any felony. . . ." (21 U.S.C. § 671 (section 671).)¹

USDA-inspected plants must provide office space and a desk for the assigned inspector. (9 C.F.R. § 307.1 (2007).) As well, each plant must develop and implement a hazard analysis and critical control point plan, which is similar to a quality control system. (Id., §§ 304.3, 417.2(b).) At the pertinent times, Ray Serna was the certified hazard analysis and critical control point plan manager for HMC.

In the spring of 2002, the grant of inspection needed updating and Ray Hagemann submitted his name, along with Earls, Serna and Ms. Hagemann. In the application, Ray Hagemann admitted that he had been convicted of felony possession of methamphetamine. The Food Safety and Inspection Service of the USDA filed an administrative complaint to withdraw federal inspection services from HMC under the business fitness provisions of the meat and poultry inspection statutes, based on Ray Hagemann's felony conviction. The matter was resolved by a stipulated consent decree effective July 2002, pursuant to which inspection services were withdrawn but the withdrawal was held in abeyance provided that HMC complied with conditions imposed for an 18-month probationary period. Under the consent decree, Ray Hagemann was not to commit any felony and was required to participate in a business training program; and HMC was required to develop and implement an approved corporate code of conduct. Other provisions related to compliance with the FMIA and PPIA and related regulations.

Enacted in October 2002, the corporate compliance code provided, among other things, that HMC would not tolerate "illegal drug use or abuse of alcohol or other legally controlled substances by its employees. [HMC] is dedicated to ensuring a drug-free work place."

The consent decree called for reports to be submitted at six-month intervals summarizing the company's compliance efforts. Earls drafted the letter reports, submitting them to the company lawyer for review and then to Ray Hagemann for signature.

3. Ray Hagemann's Conduct and Behavior Postconsent Decree

Notwithstanding his commitment to forswear committing any felony, Ray Hagemann purchased at least a half ounce of crystal methamphetamine from an HMC employee in September 2003. He testified to using the drug a maximum of 25 times following the purchase, with his last use occurring in April 2004.² Regarding his representations to the USDA pursuant to the six-month reporting requirement that he had not committed "any felony," Hagemann had this to say: "I had not committed any felony of record. Perhaps as a white lie, or something of that nature, being in possession of this is a felony. But I guess as long as you don't get caught, it's all good, if you know what I mean. I had not committed a felony with the law . . . on the books."

Employees testified to their belief that Ray Hagemann was under the influence of drugs on occasion at the workplace. The former HMC secretary, who had been through a drug and alcohol recovery program herself, told Hagemann she thought he was on drugs. She pointed to the fact that he was coming in later and later,³ his "real high-strung behavior," the "increase in anger," and "micromanaging things." Because of his "amped" behavior, weight loss and sporadic thinking, she thought he was using methamphetamine. This employee related an incident in April 2004 in which, during an argument, Hagemann came within inches of her face. She could see a white powdery substance on his mustache. She was upset and scared, flew out of the office, and resigned shortly thereafter.

Ray Serna, the former hazard analysis and critical control point plan supervisor, testified to a 2003 incident in which Hagemann physically confronted him, getting within inches of his face. Serna could see a ring of white substance around Hagemann's nose, Hagemann was acting erratically, and his words were slurred. Serna also related that in 2002 he found frozen poultry being thawed out "in a truck outside with the door open," in the sun, with flies all around. This procedure was unacceptable and the poultry was discarded. Hagemann made the directive to thaw the product this way because he wanted to make sure it was ready for his customer. Another time Serna tried to enforce a USDA protocol directing that gowns worn by processing workers are kept inside the facility to ensure they are "cleaned and sanitized." When he brought it to Hagemann's attention that workers were wearing aprons outside, Hagemann said it was "a chicken-shit call."

A former foreman...