Livitsanos v. Superior Court, No. S017174

• Court: United States State Supreme Court (California)
• Writing for the Court: ARABIAN; LUCAS
• Citation: 828 P.2d 1195,7 Cal.Rptr.2d 808,2 Cal.4th 744
• Parties: , 828 P.2d 1195, 60 USLW 2760, 7 IER Cases 745 Apostol LIVITSANOS, Petitioner, v. The SUPERIOR COURT of Los Angeles County, Respondent; CONTINENTAL CULTURE SPECIALISTS, INC., et al., Real Parties in Interest.
• Decision Date: 18 May 1992
• Docket Number: No. S017174

Page 808

7 Cal.Rptr.2d 808 2 Cal.4th 744, 828 P.2d 1195, 60 USLW 2760, 7 IER Cases 745 Apostol LIVITSANOS, Petitioner,
v.
The SUPERIOR COURT of Los Angeles County, Respondent;
CONTINENTAL CULTURE SPECIALISTS, INC., et al., Real Parties in Interest. No. S017174. Supreme Court of California,
In Bank. May 18, 1992.

Page 810

[2 Cal.4th 746] [828 P.2d 1197] Grossman, Grant, Cowan & Cramer, Michael I. Cowan and D. Toby Tabachnick, Santa Monica, for petitioner.

Joseph Posner, Encino, as amicus curiae on behalf of petitioner.

No appearance for respondent.

Carr & DeMarzo, Marshall, Carr & Perrigue and Christopher A. Carr, Pasadena, for real parties in interest.

[2 Cal.4th 747] ARABIAN, Justice.

We granted review to consider whether the exclusive remedy provisions of the Workers' Compensation Act apply to bar an employee's claims for intentional and negligent infliction of emotional distress, where no physical injury or disability is alleged. We hold that claims for intentional or negligent infliction of emotional distress are preempted by the exclusivity provisions of the workers' compensation law, notwithstanding the absence of any compensable physical disability. We further conclude that, for unrelated reasons, the case must be remanded to the Court of Appeal for further proceedings consistent with the views set herein.

FACTS

Because the matter reaches us after the sustaining of a demurrer, all well-pleaded allegations of the complaint are taken as true. (Ephraim v. Metropolitan Trust Co. of California (1946) 28 Cal.2d 824, 838, 172 P.2d 501; see Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 663, 254 Cal.Rptr. 211, 765 P.2d 373; Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 170, 164 Cal.Rptr. 839, 610 P.2d 1330.)

Plaintiff Apostol Livitsanos began his employment at Continental Culture Specialists, Inc. (Continental), a yogurt manufacturing company owned by Vasa Cubaleski (Cubaleski), in 1976 in the shipping department. Two years later, plaintiff was promoted to supervisor of the department and in 1980 he was made manager, with attendant salary increases. Plaintiff alleges that, as an inducement to remain at Continental, an oral employment agreement with Continental included a provision, repeated by defendant Cubaleski on many occasions to plaintiff and other employees, that "Continental is your future" as long as plaintiff followed proper procedures, and that "if Continental makes money, so will you." Plaintiff believed his employment was of indefinite duration, and would not be terminated without good cause.

In 1982, plaintiff was promoted to general manager and received a 1.25 percent share of Continental's gross sales in addition to an increased salary. As general manager, plaintiff worked sixteen hours a day on weekdays and three or four hours a day on weekends. In 1987, Continental introduced an employee profit-sharing plan as an inducement to employees to remain with the company. Pursuant to the plan, plaintiff was entitled to receive a share of Continental's profits so long as he was an employee.

In 1984, Continental's regular distributor went out of business, leaving Continental without a distributor. Plaintiff and another Continental employee, Andy Stylianou, formed a company, known as ABA, exclusively to [2 Cal.4th 748] distribute Continental's products. Plaintiff and Stylianou operated the distributorship with full knowledge and approval of defendants Continental and Cubaleski.

Throughout plaintiff's term of employment, defendant Cubaleski praised plaintiff's performance, telling him that he had "saved the company," and that he would "someday own Continental."

In late 1988 or early 1989, for no apparent reason, Cubaleski began a campaign of harassment against plaintiff. This campaign took several forms. Cubaleski falsely accused plaintiff, along with Continental's office manager, of writing fraudulent checks to an outside contractor as part of a scheme to siphon funds away from Continental. Cubaleski communicated this charge to other Continental employees, as well as to an employee of an outside accounting firm. In addition, Cubaleski told

Page 811

[828 P.2d 1198] Continental employees and others that $800,000 was "missing" from Continental, implying that plaintiff had stolen the money. Cubaleski threatened to have plaintiff "put in jail" because of the "missing" money.

In December 1988, Cubaleski borrowed $100,000 from plaintiff and promised to repay the entire amount by January 9, 1989. By March 15, 1989, Cubaleski still had not repaid plaintiff. When plaintiff asked Cubaleski for the money, Cubaleski became angry. Instead of repaying the loan, Cubaleski falsely told others that plaintiff owed him $24,000. Cubaleski knew there was no such debt owed to him by plaintiff. Cubaleski eventually repaid the $100,000 debt by paying $50,000 to plaintiff and by assuming a $50,000 debt plaintiff owed to Continental.

In or about April 1989, plaintiff took a four-week vacation. While plaintiff was on vacation, Cubaleski told other Continental employees that plaintiff had given himself an unauthorized pay raise, that money was missing from Continental (implying that plaintiff had stolen it), and that plaintiff was trying to sabotage Continental by telling certain employees to decrease the amount of fruit in the yogurt. When plaintiff returned, Cubaleski instructed Andy Stylianou, Continental's sales manager, to telephone plaintiff and accuse him of taking an unauthorized pay raise and sabotaging Continental.

In August 1989, Cubaleski insisted that plaintiff and Stylianou sell their distributorship company, ABA, to another distributor that Continental wished to employ. At the time, one of the clients of ABA was indebted to the company because Continental had asked ABA to extend $100,000 credit to this customer. Cubaleski promised that, if plaintiff sold ABA, Continental would assume responsibility for the $100,000 credit. After plaintiff agreed to [2 Cal.4th 749] sell ABA, Cubaleski demanded that plaintiff sign a promissory note for the $100,000 credit and agree to personal liability or he would "be in trouble." Plaintiff signed the note. Approximately two weeks later, plaintiff was terminated.

Plaintiff was discharged with no warning, no explanation and no severance pay. After the termination, Cubaleski told other Continental employees that plaintiff's company had been improperly buying fruit toppings to resell, using Continental's money. The accusations were false. After the termination, Cubaleski also told other Continental employees that plaintiff had stolen $800,000 from Continental and that plaintiff was blackmailing Cubaleski.

Plaintiff filed suit against Continental and Cubaleski for breach of contract, defamation, intentional infliction of emotional distress, negligent infliction of emotional distress, and money lent. ¹ He alleged that defendants engaged in a campaign of harassment resulting in the wrongful termination of his employment. Defendants demurred to the causes of action for defamation and negligent and intentional infliction of emotional distress. ² The trial court sustained Continental's demurrers without leave to amend, apparently on the ground that the employer's conduct was "a normal part of the employment relationship" and therefore barred by the Workers' Compensation Act (Cole v. Fair Oaks Fire Protection Dist. (1987) 43 Cal.3d 148, 160, 233 Cal.Rptr. 308, 729 P.2d 743 (hereafter Cole ). Cubaleski's demurrers were also sustained, but leave to amend was granted as to limited issues. The Court of Appeal, citing Cole, supra, 43 Cal.3d 148, 233 Cal.Rptr. 308, 729 P.2d 743, summarily denied plaintiff's petition for writ of mandate.

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828 P.2d 1199

DISCUSSION

1. Intentional Infliction of Emotional Distress ³

Plaintiff contends that because he did not allege any physical injury or disability resulting from defendants' conduct, his cause of action for [2 Cal.4th 750] intentional infliction of emotional distress is outside the scope of the workers' compensation law, and thus not governed by Cole, supra, 43 Cal.3d 148, 233 Cal.Rptr. 308, 729 P.2d 743. He relies principally on Renteria v. County of Orange (1978) 82 Cal.App.3d 833, 838, 147 Cal.Rptr. 447 (hereafter Renteria ), which held that a cause of action for intentional infliction of emotional distress is outside the scope of the workers' compensation scheme where the injury is purely "emotional," and no "physical" disability is alleged.

We have not heretofore been called upon to reconcile the principles of Cole and Renteria. In Cole, the employer engaged in a campaign of harassment which caused the plaintiff severe physical injury and disability. We held that the injuries were compensable under workers' compensation notwithstanding the egregious nature of the employer's misconduct, because such actions "are a normal part of the employment relationship." (43 Cal.3d at p. 160, 233 Cal.Rptr. 308, 729 P.2d 743.) There was no allegation, however, that the plaintiff had suffered a "purely emotional" injury. (Id. at p. 153, 233 Cal.Rptr. 308, 729 P.2d 743.) Although we took note of certain problems posed by the reasoning in Renteria, supra, 82 Cal.App.3d 833, 147 Cal.Rptr. 447, we did not address them. (43 Cal.3d at p. 156, 233 Cal.Rptr. 308, 729 P.2d 743.) Subsequently, in Shoemaker v. Myers (1990) 52 Cal.3d 1, 276 Cal.Rptr. 303, 801 P.2d 1054, and Gantt v. Sentry Insurance (1992) 1 Cal.4th 1083, 4 Cal.Rptr.2d 874, 824 P.2d 680, we considered the relation between workers' compensation and an injured employee's civil damage claims, but because both of the plaintiffs there alleged mental and physical disability, we were not required to address the so-called Renteria "anomaly." ( Cole, supra, 43 Cal.3d at p. 156, 233 Cal.Rptr. 308, 729 P.2d 743.) Here, plaintiff has not alleged any physical injury or disability resulting from the employer's conduct. ⁴ Thus, for the first time, we are called upon to...