Kastanis v. Educational Employees Credit Union

• Decision Date: 07 October 1993
• Docket Number: No. 59443-1,59443-1
• Court: Washington Supreme Court
• Parties: , 68 Fair Empl.Prac.Cas. (BNA) 995 Florene M. KASTANIS and Dean Kastanis, husband and wife, and the marital community composed thereof, Respondents, v. EDUCATIONAL EMPLOYEES CREDIT UNION, a Washington non-stock corporation, Appellant. En Banc

Page 483

122 Wn.2d 483

859 P.2d 26, 68 Fair Empl.Prac.Cas. (BNA) 995

Florene M. KASTANIS and Dean Kastanis, husband and wife, and the marital community composed thereof, Respondents, v. EDUCATIONAL EMPLOYEES CREDIT UNION, a Washington non-stock

corporation, Appellant.

No. 59443-1.

Supreme Court of Washington,

En Banc.

Oct. 7, 1993.

As Amended on Denial of Reconsideration Jan. 13, 1994.

Note: See also 865 P.2d 507.

Schwabe, Williamson, Ferguson & Burdell, Elizabeth K. Reeve, Seattle, for appellant

Stanley M. Talcott, Tacoma, for respondents.

MADSEN, Justice

The Educational Employees Credit Union (EECU) appeals a jury's finding of marital status discrimination against Florene (Peggy) Kastanis, a former employee. EECU alleges that several of the trial court's instructions were erroneous and that the manner in which the court awarded attorney's fees was in error. We reverse because of error in the jury instructions and the trial court's award of attorney's fees.

FACTS

Peggy Jones was first employed as a teller by EECU in 1973. She became its accounting manager in 1983 or 1984. Dean Kastanis was appointed Chief Executive Officer (CEO) of EECU in 1973. In 1985, Peggy Jones and Dean Kastanis began seeing each other socially. They did not attempt to conceal their relationship from anyone at EECU. In March 1985, EECU adopted a policy precluding employment of close relatives without prior approval of the Board of Directors (Board). EECU rescinded this policy against nepotism in 1986.

On October 5, 1989, Dean Kastanis notified members of the Board that he and Peggy Jones would marry within 2 weeks. The Board concluded that the marriage would result in a conflict of interest. The chairman of the board met with Dean on October 11, 1989, to discuss a possible resolution. The content of that discussion is disputed. The chairman of the board testified that she informed Dean that either he or Peggy would have to leave; Dean testified that there was never a suggestion that he or Peggy would be terminated or forced to resign. Peggy Jones and Dean Kastanis were married on October 21, 1989. On October 25, the Board voted to terminate Peggy. On October 30, Dean Kastanis was given a directive from the Board requiring him to immediately secure the resignation of Peggy Kastanis. She left work on October 31, and formally resigned 2 weeks later. In December 1989, the Board asked Dean to resign.

Peggy Kastanis, hereafter referred to as the plaintiff, sued EECU on June 27, 1990, alleging four causes of action: (1) discrimination based on marital identity; (2) wrongful discharge because of public policy; (3) sexual discrimination based on state law and title VII of the Civil Rights Act of 1964; and (4) intentional, reckless and/or negligent infliction of emotional distress. ¹ Her complaint also requested equitable relief in the form of reinstatement to her former position.

On September 6, 1990, EECU tendered an unconditional offer of reinstatement. EECU explained that Dean's resignation from EECU obviated the need for plaintiff's termination. The position offered had the same title and the same benefits as plaintiff's previous position. Plaintiff refused the offer, however, because she and her husband had recently moved to eastern Washington. EECU knew of this move when it offered plaintiff reinstatement.

At trial, EECU moved for summary judgment on all causes of action or, in the alternative, to limit damages to the date of EECU's offer of reinstatement. The trial court granted summary judgment on the issues of violation of title VII, wrongful discharge, and intentional infliction of emotional distress. The issues of marital status discrimination and sexual discrimination based on Washington law proceeded to the jury. EECU defended itself from plaintiff's claim of marital status discrimination by arguing that her termination was justified under the "business necessity rule".

The jury ruled against plaintiff on the issue of sex discrimination, but found that EECU had discriminated against her on the basis of her marital status. The jury awarded plaintiff past economic damages, future economic damages, and noneconomic damages. The court awarded plaintiff all of her attorney's fees without distinguishing between her successful and unsuccessful claims. EECU appealed, assigning error to several of the jury instructions and to the court's award of

                damages and attorney's fees.   The Court of Appeals certified EECU's appeal to this court pursuant to RCW 2.06.030
                

ANALYSIS

Jury Instructions

The central issues in this case are whether the trial court properly instructed the jury on the issues of marital status discrimination and the business necessity defense. ²

RCW 49.60.180 provides that it is an unfair practice for any employer to refuse to hire, to discharge, or to discriminate against any person because of "age, sex, marital status, race, creed, color, national origin, or the presence of any sensory, mental, or physical handicap...." RCW 49.60.180(1). The meaning of marital status as used in RCW 49.60.180 is not limited to conditions such as being married, single, or divorced, but also applies to antinepotism policies based on the identity of an employee's or applicant's spouse. ³ Washington Water Power Co. v. State Human Rights Comm'n, 91 Wash.2d 62, 67-69, 586 P.2d 1149 (1978); McFadden v. Elma Country Club, 26 Wash.App. 195, 203, 613 P.2d 146 (1980); see also Edwards v. Farmers Ins. Co., 111 Wash.2d 710, 718, 763 P.2d 1226 (1988).

WAC 162-16-150 implements the statutory prohibition of employment discrimination based on marital status. The code provides that discrimination against an employee or applicant for employment because of (a) what a person's marital status is; (b) who his or her spouse is; or (c) what the spouse does, is an unfair practice because the action is based on the person's marital status. WAC 162-16-150(2). The code acknowledges, however, that there are circumstances where business necessity may justify action on the basis of what the spouse does. Business necessity includes "those circumstances where an employer's actions are based upon a compelling and essential need to avoid business-related conflicts of interest, or to avoid the reality or appearance of improper influence or favor." WAC 162-16-150(2).

EECU argues initially that the trial court erroneously instructed the jury on the burden of proof applicable to plaintiff's claim of marital status discrimination. The court instructed the jury as follows:

Plaintiff claims unlawful discrimination based upon her marital status. In order for plaintiff to prove this claim, the plaintiff has the burden of proving each of the following propositions:

First, that she was married to another employee of the defendant;

Second, that she was terminated from her employment with the defendant; and

Third, that but for plaintiff's marital status, the plaintiff would not have been terminated.

If you find from your consideration of all of the evidence that each of these propositions has been proved against the defendant, your verdict should be for the plaintiff and against the defendant unless you find that defendant has proved the defense of "business necessity." If you find that defendant has proved the defense of business necessity, then your verdict should be for the defendant.

On the other hand, if any of the propositions on which plaintiff has the burden of proving has not been proved against the defendant, your verdict should be for the defendant.

Instruction 7; Verbatim Report of Proceedings, at 719-20.

EECU excepted to this instruction on the ground that it imposed on EECU a burden to prove, rather than merely produce, a nondiscriminatory business necessity reason for its actions. EECU also argued that the court should have instructed the jury that plaintiff had to prove that its claim of business necessity was a pretext for an intentionally discriminatory act.

Plaintiff defends the instruction on the ground that the defendant's burden is greater in this case because she provided direct evidence of discrimination. In the face of direct evidence, plaintiff contends that the defendant must prove by a preponderance of the evidence that the discrimination was justified.

The parties' positions here highlight the difficulties involved when the shifting burdens relevant to establishing a prima facie case of discrimination are included as instructions to the jury. The burden-shifting schemes, developed initially in the federal courts, were an effort to formulate uniform rules for making a prima facie case. These rules were never intended as a charge to the jury. United States Postal Serv. Bd. of Governors v. Aikens, 460 U.S. 711, 716, 103 S.Ct. 1478, 1482, 75 L.Ed.2d 403 (1983).

Recognizing the "lack of harmony" among judges on the rules applicable to establishing a prima facie case under title VII, the Supreme Court addressed the difficulty by formulating a 3-step burden-shifting test in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 801, 93 S.Ct. 1817, 1823, 36 L.Ed.2d 668 (1973). This court has adopted the standard articulated by McDonnell Douglas in discrimination cases that arise out of RCW 49.60.180 and the common law. Grimwood v. Univ. of Puget Sound, Inc., 110 Wash.2d 355, 364, 753 P.2d 517 (1988); Baldwin v. Sisters of Providence in Wash., Inc., 112 Wash.2d 127, 136, 769 P.2d 298 (1989).

Under McDonnell Douglas, a plaintiff must first make out a prima facie discrimination case by showing that he or she: (1) was within the protected group; (2) was discharged; (3) was replaced by a person outside the protected group; and (4) was qualified to do the job. See McDonnell Douglas, at 802, 93 S.Ct. at 1824. The defendant employer then must show a legitimate nondiscriminatory reason for the termination. If the defendant fails to meet this production burden, the plaintiff is entitled to an order establishing liability as a matter of law. Texas Dep't...