Mathews v. Happy Valley Conference Ctr., Inc.

• Decision Date: 12 December 2019
• Docket Number: H044098,H043723
• Citation: 43 Cal.App.5th 236,256 Cal.Rptr.3d 497
• Court: California Court of Appeals Court of Appeals
• Parties: Jeremiah MATHEWS, Plaintiff and Respondent, v. HAPPY VALLEY CONFERENCE CENTER, INC. et al., Defendants and Appellants.

43 Cal.App.5th 236

256 Cal.Rptr.3d 497

Jeremiah MATHEWS, Plaintiff and Respondent,

v.HAPPY VALLEY CONFERENCE CENTER, INC. et al., Defendants and Appellants.

H043723

H044098

Court of Appeal, Sixth District, California.

Filed December 12, 2019

Elizabeth Mary Peck, Peck-Law, Devin Cannell Coyle, Devin Coyle Law, Oakland, Counsel for Plaintiff/Respondent JEREMIAH MATHEWS

Michon Marie Spinelli, Ropers, Majeski, Kohn & Bentley, Redwood City, S. Thomas Todd, Horvitz & Levy, LLP, Counsel for Defendants/Appellants HAPPY VALLEY CONFERENCE CENTER, INC. and COMMUNITY OF CHRIST

Grover, J. Plaintiff Jeremiah Mathews worked as a maintenance supervisor and a cook for defendant Happy Valley Conference Center, Inc. (Happy Valley), which hosts seminars, retreats, and camps on a 30-acre property in the Santa Cruz Mountains. Happy Valley is a subordinate affiliate of defendant Community of Christ (the Church). When a younger male employee confided in plaintiff that Happy Valley's female executive director had been sending him sexually inappropriate text messages, plaintiff reported the allegation to a member of Happy Valley's board of directors and to the Church's general counsel. The executive director admitted sending the messages, was reprimanded, and was allowed to continue supervising plaintiff and the younger male employee. Plaintiff was terminated less than a month after reporting the harassment. Plaintiff sued defendants, alleging retaliatory termination under several legal theories. The jury returned special verdicts in plaintiff's favor on all causes of action. Defendants were ordered to pay almost $900,000 in damages (including punitive damages) and almost $1 million in attorney's fees.

Defendants contest most of the jury's findings. Relevant to most appellate issues, defendants argue the Church cannot be held liable for Happy Valley's actions because the two are separate entities that do not fall within the single employer doctrine. They further argue the trial court's single employer doctrine jury instruction was prejudicially erroneous.

Regarding liability, defendants argue that Happy Valley is not liable under title VII of the Civil Rights Act of 1964 (Title VII; 42 U.S.C. § 2000 et seq.) because Happy Valley does not have enough full-time employees to come within that law. Defendants also contest their liability under the California Fair Employment and Housing Act (FEHA; Gov. Code, § 12900 et seq. ) because they are exempt religious entities, and contend the trial court erred in finding they had waived or were estopped from claiming the religious entity exemption. Defendants assert they are not liable under the version of the whistleblower statute in effect at the time of the events at issue (rather than the amended statute reflected in the parties' proposed jury instructions). They also argue the evidence was insufficient to support a finding that the Church breached an implied or actual contract with plaintiff.

Regarding damages, defendants contend the trial court awarded damages under Title VII beyond the maximum value allowed by that statutory scheme; noneconomic and punitive damages not recoverable for breach of contract; excessive punitive damages; and attorney's fees not recoverable as a matter of law.

As we will explain, we find no prejudicial error regarding most of defendants' appellate arguments, but the judgment must be modified to reflect that defendants are exempt from FEHA liability.

I. TRIAL COURT PROCEEDINGS

The following factual summary is based on trial testimony and evidence admitted during the jury trial.

A. DEFENDANTS' ORGANIZATIONAL STRUCTURES

The Church is a Missouri non-profit corporation with around 250,000 members in over 60 countries. The Church is separated geographically into Mission Centers. The Sierra Pacific Mission Center covers, among other areas, the County of Santa Cruz and the Happy Valley property.

Happy Valley is a California non-profit corporation. According to Happy Valley's bylaws, it is an "integral subordinate unit and part of the Community of Christ." It is "accountable to General Church Officers to include the Apostle in charge of the field, the Presiding Bishopric and the First Presidency and Sierra Pacific Mission Center officers." Happy Valley is run by a volunteer board of directors (Happy Valley Board). The bylaws state the Happy Valley Board "shall regard the Sierra Pacific Mission Center as the body to which it is initially accountable for management of the Conference Center." The Happy Valley Board consists of elected members and ex officio members. The elected members are "elected by the Conference of the Sierra Pacific Mission Center." And the ex officio members are the Sierra Pacific Mission Center president and the Mission Center's financial officer. Ronald Smith was the Sierra Pacific Mission Center president at all relevant times. Happy Valley also has an executive committee made up of four members of the Happy Valley Board. Ronald Smith and Happy Valley Board President Jerry DeVries were members of the executive committee.

Happy Valley had three full-time employees: an executive director, a food services manager, and a maintenance supervisor. For the time period preceding plaintiff's termination, the executive director was Melinda Gunnerud, the food services manager was Amanda McKnight, and plaintiff was the maintenance supervisor. Happy Valley also employed part-time and seasonal employees, especially during the summer months.

B. PLAINTIFF'S HISTORY WITH HAPPY VALLEY AND REPORTS OF HARASSMENT

Plaintiff was hired by Happy Valley as a cook in 2009. He received periodic raises based on his performance. His performance reviews were generally positive, but plaintiff received lower scores for his communication skills and attitude. At trial plaintiff acknowledged he sometimes lost his temper at work, and also acknowledged receiving at least three disciplinary write-ups during his time working for Happy Valley. All were related to plaintiff losing his temper with other employees. Plaintiff changed positions from part-time cook to full-time maintenance supervisor in late 2010. Both executive director Gunnerud and food services supervisor McKnight acknowledged at trial that Gunnerud frequently praised plaintiff for his hard work and cooking skills.

Dianne Barnett, a former bookkeeper for Happy Valley, testified that she worked there while Gunnerud was the executive director. Barnett stated that several employees complained to her about Gunnerud being unfair and treating employees poorly. Barnett related that employees would inform Happy Valley Board President Jerry DeVries about Gunnerud's conduct, but that DeVries did not take the concerns seriously. According to Barnett, when employees brought their concerns about Gunnerud to DeVries, he would report that information back to Gunnerud and then Gunnerud would discipline the employees in retaliation.

Food services supervisor McKnight testified that Gunnerud frequently flirted with younger male employees and commented on their physical appearance. (We refer to two of the former employees by their first names in the interest of their privacy.) McKnight testified Gunnerud seemed a "little delusional" about the nature of her relationship with a dishwasher named Eli. Gunnerud told McKnight she had gone to Eli's house to see him without his permission. McKnight did not think Gunnerud understood that Eli was uncomfortable with the interaction. McKnight testified that even after Eli resigned, Gunnerud continued trying to spend time with him including going to see him at his new job. Gunnerud also sent Eli text messages, which we will discuss in greater detail.

Brett began working at Happy Valley after Eli left. McKnight testified that Gunnerud took Brett on shopping errands offsite, which was a task she used to do without assistance from others. Brett testified that at first he felt welcomed and comfortable, but that he started to feel like he was receiving special treatment from Gunnerud. The treatment made him feel "kind of strangely." Brett testified that Gunnerud began sending him personal text messages after work hours, which eventually focused on "more and more suggestive" topics. Brett stated he confided in plaintiff about inappropriate text messages received from Gunnerud when he reached a point where he no longer felt comfortable at work. Brett went to plaintiff because he looked up to plaintiff and plaintiff was the person at Happy Valley with whom Brett was most comfortable talking.

Plaintiff confirmed in his trial testimony that Brett showed him text messages from Gunnerud in mid-April 2012. Among the text messages Brett showed plaintiff were the following: "Not such a great night. Currently driving around looking for a place to get a stiff one after getting in a fight with the hubby"; "I'm glad red didnt give u trouble getting in the house....i did tell him to guard my underwear drawer though!" (Errors in original.) Gunnerud admitted in her trial testimony that she sent those and other text messages to Brett.

Brett and plaintiff took the text messages to McKnight. According to McKnight, she was uncomfortable reporting the text messages to Gunnerud or DeVries for fear of retaliation, so she decided to ask a Happy Valley Board member, Karen Ardito, for help. Ardito testified that once she learned about the text messages, she asked her friends in the Church for advice and those friends recommended that she contact Karen Minton, the Church's general counsel. Minton testified that plaintiff and Brett reported the messages to her, and that they told her they feared retaliation by Gunnerud.

Minton believed the messages constituted sexual harassment, and she asked Sierra Pacific Mission Center President (and ex officio Happy Valley Board and executive committee member) Smith to investigate them. Minton testified that she looked to Smith because she had worked with him before on Church business. The plan was for Smith to...