Paris v. F. Korbel & Bros., Inc., C-89-1278 TEH.

• Decision Date: 16 March 1990
• Docket Number: No. C-89-1278 TEH.,C-89-1278 TEH.
• Court: U.S. District Court — Northern District of California
• Parties: Leigh PARIS, Ronald Paris, and Jonathan Northrop, Plaintiffs, v. F. KORBEL & BROTHERS, INC., F. Korbel & Brothers, Inc., as Plan Administrator, and Does 1 Through 30, Inclusive, Defendants.

751 F. Supp. 834

Leigh PARIS, Ronald Paris, and Jonathan Northrop, Plaintiffs, v. F. KORBEL & BROTHERS, INC., F. Korbel & Brothers, Inc., as Plan Administrator, and Does 1 Through 30, Inclusive, Defendants.

No. C-89-1278 TEH.

United States District Court, N.D. California.

March 14, 1990.

Judgment March 16, 1990.

ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

THELTON E. HENDERSON, Chief Judge.

Plaintiffs Leigh Paris, Ronald Paris and Jonathan Northrop move for summary judgment on their claims that defendant F. Korbel & Brothers (Korbel) violated portions of the Employee Retirement Income Security Act, 29 U.S.C. §§ 1161-1168 (Supp.1987) (hereinafter "ERISA"), and that the defendant wrongfully terminated Leigh Paris. Defendant Korbel crossmoves for summary judgment that no ERISA violations occurred and that it did not wrongfully terminate Leigh Paris. In addition, Korbel moves on grounds of federal preemption for summary judgment on Leigh Paris' tort claims from Korbel's alleged violations of ERISA. For the reasons set forth below, this Court GRANTS summary judgment in favor of Korbel on Leigh Paris' claim of wrongful termination, and on her other tort claims, and GRANTS summary judgment in favor of the plaintiffs on their claim of ERISA violations.

I. Undisputed Facts

Plaintiff Leigh Paris was hired by Korbel sometime in February, 1985. She was terminated on April 15, 1988, after just over three years' employment, for breaching a company confidence regarding another employee.

Leigh signed three different documents stating that she could be fired, with or without cause, with or without notice, at any time, at the company's option or that she could quit at any time without notice: her employment application, a secrecy agreement, and the receipt for her employee handbook. In the course of her employment, Leigh received revised handbooks in 1987 and 1988.

In January, 1986, Leigh was promoted to "hospitality assistant." This job entailed giving v.i.p. tours of the winery, and also waitressing at the poolhouse, where executives and their guests often dined. She was told when promoted that whatever she heard in the poolhouse was confidential, and that a breach of this confidentiality could result in termination. Deposition of Leigh Paris at p. 62:9-14, attached as Exhibit A to Declaration of Jeffrey Wohl.

On April 13, 1988, while working in the poolhouse, Leigh overheard the executives discussing whether another employee, Garrett Krambs, would be allowed to go on part-time status. Krambs was a friend of Leigh, as was Krambs wife, Debbie. Leigh called Debbie that afternoon. In the course of their conversation, Debbie stated that the Krambses were hoping Garrett would be able to go part-time, to ease some personal family stress. Leigh replied "I can confirm that." Deposition of Leigh Paris at 136:13-25.

By April 14, Debbie told her husband what Leigh had said. Garrett Krambs became angry because Leigh's information meant that his personal problems were being discussed by Korbel executives, and Garrett had originally asked to go part-time by explaining those personal problems to his supervisor in confidence. Garrett Krambs' understanding was that his supervisor, Tom Gilliand, would not tell Krambs' troubles to anyone else. Garrett called Gilliand to complain not that Leigh knew but, that Gilliand had breached Krambs' confidence. Deposition of Garrett Krambs at p. 14:6-7, and p. 25.

Gilliand told Garrett that a company confidence had been breached. Garrett, realizing that Leigh's job might now be in jeopardy, asked if Gilliand could deal with this without mentioning Leigh's name. After speaking with Gilliand, Garrett called Leigh and warned her that her job might be in jeopardy. Id. at 15:22-16:3.

Gary Heck, President of Korbel, upon learning the above facts from Gilliand, ordered the personnel director, Jani Logsdon, to investigate, and if true, to fire Leigh Paris. Logsdon investigated. Leigh admitted the conversation with Debbie Krambs, and was terminated. Declaration of Jani Logsdon at p. 2:23-3:2.

Garrett Krambs is a pilot at Korbel, which maintains its own fleet of airplanes because of Heck's concern with commercial air travel safety. When Logsdon fired Leigh, Logsdon determined that Leigh had committed "gross misconduct" because Leigh's breach of a company confidence had angered a pilot, thereby risking the safety of Korbel executives who flew with that pilot. Deposition of Logsdon p. 78:14-26, attached as Exhibit B to the Declaration of William Fritz in Support of Summary Judgment.

When she was fired, Leigh Paris was not given any information that she could elect to continue her health insurance benefits at her own cost, as provided for under the Consolidated Omnibus Budget Reconciliation Act of 1986, codified in pertinent part at 29 U.S.C. § 1161 to § 1168 (1989) ("COBRA benefits"), which were 1986 amendments to ERISA. In addition, she was not given written reasons for her discharge.

At the time she was terminated, Leigh's dependent son, plaintiff Jonathan Northrop was qualified to receive COBRA benefits. Ronald Paris, Leigh's husband, was employed elsewhere, and received health care benefits from his employer as of April 1, 1988, and so was not a beneficiary under the Korbel benefits plan. Deposition of Ronald Paris at p. 15:2, attached as Exhibit B to the Declaration of Jeffrey Wohl.

Jonathan Northrop was injured on July 5, 1988, requiring medical treatment. At the time, Leigh and Jonathan had no medical insurance.

On July 13, 1988, Leigh telephoned Jani Logsdon and requested information about COBRA benefits, which Leigh had learned of from an insurance agent.¹ Logsdon told Leigh that COBRA "prohibited the extension of benefits to individuals who were terminated for gross misconduct." Deposition of Logsdon at p. 104:16-23.

On November 8, 1988, Leigh's attorney wrote to Korbel requesting information about COBRA benefits for all the plaintiffs. On November 22, 1988, Harold Duncan, Vice President of Administration/Finance wrote to Leigh's lawyer, and enclosed information on how Leigh could elect to continue her health benefits under COBRA.

Leigh and Ronald Paris did not elect to continue their health coverage because the retroactive premium, dating back to April, 1988, would have been more than they had already spent on health care in the interim.

The plaintiffs filed suit on April 12, 1989.

II. Discussion

A. Tort Claims Arising Out of ERISA Violations.

The complaint states two tort causes of action arising from the alleged denial of COBRA benefits; the Second Cause of Action is for intentional infliction of emotional distress, the Fourth Cause of Action is for breach of the duty of good faith and fair dealing. In Pilot Life Insurance Co. v. Dedaux, 481 U.S. 41, 46, 107 S.Ct. 1549, 1552, 95 L.Ed.2d 39 (1987), the Supreme Court held that ERISA preempted tort claims of bad faith by an insurer. Thus, here, the Second and Fourth causes of action are preempted by ERISA. Accordingly, these causes of action are DISMISSED for failure to state a claim.

B. Wrongful Termination.

The plaintiffs' third cause of action is for wrongful termination on an employment contract. To make out a claim of wrongful termination, the plaintiff must rebut the statutory presumption found in California Labor Code § 2922 that she is an at-will employee. The presumption may be rebutted if the plaintiff can show "a course of conduct, including various oral representations," that created the reasonable expectation of termination only for cause, or other contract provisions. Foley v. Interactive Data Corp. 47 Cal.3d 654, 675, 254 Cal.Rptr. 211, 765 P.2d 373 (1988); Pugh v. See's Candies, 116 Cal.App.3d 311, 171 Cal. Rptr. 917 (Cal.Ct.App.1981).

In this case, the plaintiff's evidence does not rebut the presumption. She had worked at Korbel only three years, unlike Mr. Pugh's thirty-two. She had never been told she would be fired only for cause. Deposition Leigh Paris at p. 74:4-11. She signed at least three documents in which she acknowledged that she was an at-will employee. Korbel's personnel policies provide that employees who breach company confidences may be fired. Deposition of Leigh Paris, exhibit 21 at p. 29. Leigh Paris' own belief that she could not be fired without cause, even if it were true, would not rebut the statutory presumption because under the employer's policies, Leigh's actions constituted cause for termination. Leigh Paris has failed to come forward with evidence that a material dispute of fact exists as to whether she was an at-will employee. Accordingly, summary judgment is GRANTED in favor of Korbel on this cause of action.

C. COBRA Benefits.

The Consolidated Omnibus Budget Reconciliation Act of 1986 provides that for a maximum of eighteen months, 29 U.S.C. 1162(2)(A)(i), employees, former employees, and qualified dependents may elect to continue the health care benefits provided by the employer. 29 U.S.C. § 1161. The employee or qualified beneficiary must pay for these benefits herself, at a cost of not more than 102% of the employer's cost. 29 U.S.C. § 1162(3). In addition, the employee, etc. only becomes eligible upon the happening of a qualifying event. The pertinent qualifying event here is termination for other than gross misconduct. 29 U.S.C. § 1163(1).

In the event of a termination, an employer must notify the health benefits plan administrator that a qualifying event has occurred within thirty days of that event. 29 U.S.C. § 1166(2). The health benefits plan administrator then has fourteen days to notify the former employee or qualified beneficiary that she is eligible to elect to continue her benefits. 29 U.S.C. § 1166(4). Civil penalties of up to $100 per day may be assessed against an administrator personally for failure to comply with § 1166(4). 29 U.S.C. § 1132(c).

The same civil penalties also may be assessed against any plan administrator who refuses "to comply with a...