Huffman v. Interstate Brands Companies

• Decision Date: 12 August 2004
• Docket Number: No. B160274.,B160274.
• Citation: 17 Cal.Rptr.3d 397,121 Cal.App.4th 679
• Court: California Court of Appeals Court of Appeals
• Parties: Daniel HUFFMAN et al., Plaintiff and Appellant, v. INTERSTATE BRANDS COMPANIES et al., Defendants and Appellants.

17 Cal.Rptr.3d 397

121 Cal.App.4th 679

Daniel HUFFMAN et al., Plaintiff and Appellant, v. INTERSTATE BRANDS COMPANIES et al., Defendants and Appellants.

No. B160274.

Court of Appeal, Second District, Division 3.

August 12, 2004.

Rehearing Denied September 13, 2004.

Review Denied January 26, 2005.^*

Paul, Hastings, Janofsky & Walker, J. Al Latham, Jr., Patricia M. Berry and Elizabeth A. Falcone, Los Angeles, for Defendants and Appellants.

Mathews & Rager, Charles T. Mathews, Pasadena, and Jeffrey A. Rager; Law Offices of Roxanne Huddleston and Roxanne Huddleston for Plaintiff and Appellant.

CROSKEY, Acting P.J.

In this case, we must determine whether an industrial injury subsequent to an alleged unlawful demotion is exempt from the exclusivity provisions of the Workers' Compensation Act (WCA) (Lab.Code, §§ 3600, 3602). Interstate Brands Corporation, Inc. (IBC),¹ and its employee Daniel Huffman (Huffman), each appeal from a judgment after a jury awarded Huffman more than $2 million in noneconomic damages after it had found that IBC had unlawfully demoted him from a district sales manager to a division sales manager. The damages awarded included the emotional distress Huffman suffered after his demotion when he injured his knees, which ultimately required that he undergo bilateral knee replacement surgery. Although both parties also raise instructional errors, we are principally concerned here with IBC's challenge to the admission of the evidence related to Huffman's postdemotion knee injury. The trial court concluded that such evidence was admissible to show the emotional distress Huffman suffered following the demotion because the causal chain following the discriminatory act had not been broken. We conclude that the trial court erred in admitting this evidence because it applied an incorrect "but for" standard, that is, but for the demotion, or unlawful act, Huffman would not have suffered emotional distress arising from his subsequent industrial injury. Such a test is an unwarranted expansion of the exemption to the WCA's exclusive remedy provisions. As shall be discussed, we conclude that the trial court should have applied the traditional tort "substantial factor" test in determining whether the unlawful or discriminatory demotion was a substantial factor in causing the emotional distress arising from Huffman's post-demotion knee injury. Applying this test, we conclude that the evidence of Huffman's knee injury and consequent emotional distress should have been excluded. We further find instructional error in reversing the burden of proof on IBC's reasons for the demotion. Because these errors individually or cumulatively were prejudicial, we reverse and remand for a new trial.

FACTUAL AND PROCEDURAL BACKGROUND

In September 1999, IBC demoted Huffman, a 23-year employee and district sales manager, two steps down to a division sales manager. Huffman's salary decreased, he went from a management position to a union position, and he lost management-type benefits that included, for example, the use of a company car. Huffman was 51 years old when he was demoted and claimed that he had been demoted because of his age. Huffman filed suit against IBC and his immediate supervisors. The supervisors were later dismissed, and Huffman proceeded to trial on his claims against IBC for age discrimination in violation of the Fair Employment and Housing Act (the FEHA) (§ 12900, et seq.) and wrongful demotion in violation of public policy. IBC maintained Huffman's demotion was not age-related but rather based on unsatisfactory performance as a district sales manager. As the two principal issues in this appeal are "(1) the burden of proof on IBC's proffered reasons for Huffman's demotion, and (2) the admission of evidence concerning Huffman's injury following his demotion, we set forth the testimony on those issues in some detail to determine whether or not the court's rulings, if erroneous, were prejudicial to IBC.

1. Huffman and His Employment History at IBC

Huffman worked for IBC's Pomona bakery (bakery), which makes and distributes bread products, including Wonder Bread, Home Pride bread, and DiCarlo bread. Huffman was part of the sales team that serviced IBC's customer base of grocery stores and institutional facilities such as military bases and schools. Huffman started working for a previous owner of the bakery in 1976 as a route sales representative. A route sales representative delivers the bread products and stocks the customers' shelves. Huffman was promoted through the sales and management ranks, and continued to work for the bakery when it changed ownership in 1985.

In 1995, IBC bought the bakery. Huffman was one of the bakery's district sales managers. As a district sales manager, Huffman was responsible for overseeing the sales of products in his district, servicing IBC's customers and implementing product promotions. Huffman supervised a team of division sales managers, who, in turn, managed the route sales representatives. Both the route sales representatives and the division sales managers are represented by a union. The sales team also includes account managers who are assigned to serve as the liaison between a customer, such as Ralphs or Vons, and IBC. Account managers, like the district sales managers, report directly to the bakery's general sales manager and are nonunion employees.

In 1995, Gary Schneider (Schneider) was the general sales manager and Huffman's immediate supervisor. In 1998, a year before IBC saw a change in the bakery's upper management, Schneider gave Huffman a negative performance review, rating him as "adequate" overall, the second lowest score on the performance appraisal scale. In the written portion of the appraisal, Schneider indicated that Huffman needed to improve on, among other things, services issues, follow-up and execution of bakery programs, and distribution of variety bread products.

2. The Bakery Changed Leadership and Related Employment Actions

In approximately January 1999, the upper management at the bakery changed. Mark Cooper (Cooper) became the general manager of the bakery. Cooper was then 41 years old. Cooper replaced Schneider, then 48, with Dennis Laughlin (Laughlin) who was about 40 years old. Laughlin became Huffman's direct supervisor. Laughlin, with Cooper's approval, decided to demote Huffman in September 1999.

a. Cooper Announced the Need to Improve Sales

When Cooper and Laughlin first assumed their positions, they told the sales force that they intended to make changes to improve the bakery's overall sales performance. Huffman confirmed a change in management philosophy. Huffman testified: "Well, [it] started out with a meeting with us, and in that meeting he made reference to something to the effect that we as a sales department had not produced. We were not doing the job, and we needed to correct that, and . . . he made a statement like, something to this effect: This is going to be like a choo choo train going 100 miles an hour. And when it goes off and when it goes around the corner, some of you are not going to be able to hang on. It doesn't matter how long you have been with the company or what you have done with the company. We're starting over." Huffman acknowledged that Cooper's comments were motivated by a "downward spiral" in sales at the bakery.

Almost immediately, and for economic reasons, Cooper restructured the sales districts from five to four, thereby eliminating one of the district sales manager's positions. John Barron's (Barron) position as a district sales manager was eliminated, and he became an account manager.

b. IBC Decision Makers' Reasons for Huffman's Demotion

1) Laughlin Demoted Huffman Because of Customer Complaints and Failure to Execute the Bakery's Promotional Activities

Laughlin, Huffman's immediate supervisor, testified that he demoted Huffman because of his lack of execution and follow through, and his argumentative attitude. Laughlin testified, for example, that he directed Huffman to make sure that Wal-Mart, one of its customers, received service five days a week. After numerous conversations with Huffman on this issue, Huffman failed to provide the requested service.

Laughlin also criticized Huffman because he did not participate in the bakery's promotional events, a key to Cooper's turnaround marketing strategy. For example, according to Laughlin, the bakery had a promotional event over Memorial Day weekend to sell their hamburger and hot dog buns at a reduced price. Huffman had been informed of the promotion six weeks before the event but did not order additional products and/or did not display the products for the promotion in many of the stores in his district. The following month, the bakery had another promotion at Lucky stores where it was given space at no cost to sell additional bread products. According to Laughlin, Huffman again neglected to order additional products to fill the free shelf space.

In August, the bakery launched a campaign to promote Wonder Bread. Laughlin went to check out the displays and found that Huffman's district did not have the promotional displays in several stores. The last straw, according to Laughlin, came later that month, when the bakery worked with Stater Brothers supermarket to promote the grand reopening of the stores it had acquired following the Albertsons and Lucky merger. For this promotional event, IBC bread products were featured in a front-end display in the supermarkets, in addition to the baked goods aisles. Laughlin testified that he walked into the stores in Huffman's district and there was no product on the shelves.

Laughlin also testified that he received numerous complaints about Huffman from IBC's account manager Chris Vukojevich (Vukojevich), who was in charge of the Ralph's supermarket account, and Rachel Williams (Williams), Ralph's bakery merchandiser. Vukojevich also testified that Williams and Ralph's store personnel...