Patterson v. Domino's Pizza, LLC

• Decision Date: 28 August 2014
• Docket Number: No. S204543.,S204543.
• Citation: 60 Cal.4th 474,333 P.3d 723,177 Cal.Rptr.3d 539
• Court: California Supreme Court
• Parties: Taylor PATTERSON, Plaintiff and Appellant, v. DOMINO'S PIZZA, LLC, et al., Defendants and Respondents.

60 Cal.4th 474

333 P.3d 723

177 Cal.Rptr.3d 539

Taylor PATTERSON, Plaintiff and Appellant,

v.DOMINO'S PIZZA, LLC, et al., Defendants and Respondents.

No. S204543.

Supreme Court of California

Aug. 28, 2014.

Rehearing Denied September 24, 2014.

Alan Charles Dell'Ario, Oakland; Winer & McKenna, Alexis S. McKenna, Oakland, Kelli D. Burritt and Kent F. Lowry, Jr., Woodland Hills, for Plaintiff and Appellant.

The deRubertis Law Firm, David M. deRubertis, Studio City; Pine & Pine and Norman Pine, Sherman Oaks, for Consumer Attorneys of California as Amicus Curiae on behalf of Plaintiff and Appellant.

Kolar & Associates, Elizabeth L. Kolar ; Snell & Wilmer and Mary–Christine Sungaila for Defendants and Respondents.

Seyfarth Shaw, David D. Kadue, Los Angeles; Law Offices of Steven Drapkin and Steven Drapkin, Los Angeles, for Employers Group, California Employment Law Council and California Chamber of Commerce as Amici Curiae on behalf of Defendants and Respondents.

Reed Smith, Margaret M. Grignon, Los Angeles, and Tillman J. Breckenridge for Automobile Club of Southern California as Amicus Curiae on behalf of Defendants and Respondents.

DLA Piper, Kim Lambert, Julia Brighton, San Francisco, and John F. Verhey for International Franchise Association and California Restaurant Association as Amici Curiae on behalf of Defendants and Respondents.

Manning & Kass, Ellrod, Ramirez, Trester and Steven J. Renick for Eleven Health Club Franchisees as Amici Curiae on behalf of Defendants and Respondents.

BAXTER, J.

Franchising, especially in the fast-food industry, has become a ubiquitous, lucrative, and thriving business model. This contractual arrangement benefits both parties. The franchisor, which sells the right to use its trademark and comprehensive business plan, can expand its enterprise while avoiding the risk and cost of running its own stores. The other party, the franchisee, independently owns, runs, and staffs the retail outlet that sells goods under the franchisor's name. By following the standards used by all stores in the same chain, the self-motivated franchisee profits from the expertise, goodwill, and reputation of the franchisor.

In the present case, a male supervisor employed by a franchisee allegedly subjected a female subordinate to sexual harassment while they worked together at the franchisee's pizza store. The victim, who is the plaintiff herein, sued the franchisor, along with the harasser and franchisee. The plaintiff claimed that because the franchisor was the "employer" of persons working for the franchisee, and because the franchisee was the "agent" of the franchisor, the latter could be held vicariously liable for the harasser's alleged breach of statutory and tort law.

The trial court granted summary judgment for the franchisor on the ground the requisite employment and agency relationships did not exist. The Court of Appeal disagreed, and reversed the judgment of the trial court.

We granted review to address the novel question dividing the lower courts in this case: Does a franchisor stand in an employment or agency relationship with the franchisee and its employees for purposes of holding it vicariously liable for workplace injuries allegedly inflicted by one employee of a franchisee while supervising another employee of the franchisee? The answer lies in the inherent nature of the franchise relationship itself.

Over the past 50 years, the Courts of Appeal, using traditional "agency" terminology, have reached various results on whether a franchisor should be held liable for torts committed by a franchisee or its employees in the course of the franchisee's business. In analyzing these questions, the appellate courts have focused on the degree to which a particular franchisor exercised general "control" over the "means and manner" of the franchisee's operations.

Meanwhile, franchising has seen massive growth. A franchisor, which can have thousands of stores located far apart, imposes comprehensive and meticulous standards for marketing its trademarked brand and operating its franchises in a uniform way. To this extent, the franchisor controls the enterprise. However, the franchisee retains autonomy as a manager and employer. It is the franchisee who implements the operational standards on a day-to-day basis, hires and fires store employees, and regulates workplace behavior.

Analysis of the franchise relationship for vicarious liability purposes must accommodate these contemporary realities. The imposition and enforcement of a uniform marketing and operational plan cannot automatically saddle the franchisor with responsibility for employees of the franchisee who injure each other on the job. The contract-based operational division that otherwise exists between the franchisor and the franchisee would be violated by holding the franchisor accountable for misdeeds committed by employees who are under the direct supervision of the franchisee, and over whom the franchisor has no contractual or operational control. It follows that potential liability on the theories pled here requires that the franchisor exhibit the traditionally understood characteristics of an "employer" or "principal;" i.e., it has retained or assumed a general right of control over factors such as hiring, direction, supervision, discipline, discharge, and relevant day-to-day aspects of the workplace behavior of the franchisee's employees. (See Vernon v. State of California (2004) 116 Cal.App.4th 114, 124, 10 Cal.Rptr.3d 121 (Vernon ) [considering "the ‘totality of circumstances' that reflect upon the nature of the work relationship of the parties"].)

Here, the franchisor prescribed standards and procedures involving pizza-making and delivery, general store operations, and brand image. These standards were vigorously enforced through representatives of the franchisor who inspected franchised stores. However, there was considerable, essentially uncontradicted evidence that the franchisee made day-to-day decisions involving the hiring, supervision, and disciplining of his employees. Plaintiff herself testified that after the franchisee hired her, she followed his policy, and reported the alleged sexual harassment to him. The franchisee suspended the offender. Nothing contractually required or allowed the franchisor to intrude on this process.

Plaintiff highlights the franchisee's testimony that a representative of the franchisor said the harasser should be fired. But, consistent with the trial court's ruling below, any inference that this statement represented franchisor "control" over discipline for sexual harassment complaints cannot reasonably be drawn from the evidence. The uncontradicted evidence showed that the franchisee imposed discipline consistent with his own personnel policies, declined to follow the ad hoc advice of the franchisor's representative, and neither expected nor sustained any sanction for doing so.

For these reasons, we will reverse the Court of Appeal's decision overturning the grant of summary judgment in the franchisor's favor.

I. PROCEDURAL BACKGROUND

A. The Parties

In September 2008, a company named Sui Juris, LLC (Sui Juris or the franchisee), acquired an existing Domino's pizza franchise in Southern California. The franchise agreement was signed for Sui Juris by its sole owner, Daniel Poff (Poff). The other contracting party was Domino's Pizza Franchising, LLC, which was related to both Domino's Pizza, Inc., and Domino's Pizza, LLC (collectively, Domino's or the franchisor).

When operations began, Sui Juris retained, as its employees, the 17 or 18 people who already staffed the store. One of them was Renee Miranda (Miranda), an adult male who held the title of assistant manager.

In November 2008, a young woman named Taylor Patterson (Patterson) was hired to serve customers at the Sui Juris store. Her job soon ended under circumstances set forth in the pleadings, which we now describe.

B. The Complaint

In June 2009, Patterson filed this action against Miranda, Sui Juris, and Domino's. She alleged the following facts: Miranda worked as a manager at the Sui Juris store. He sexually harassed her whenever they shared the same shift. He made lewd comments and gestures, and grabbed her breasts and buttocks. After Miranda refused to stop, Patterson reported the problem to her father and to Poff.

The complaint continued: Patterson's father contacted the police. He also called Domino's "corporate office," and told someone in the human resources department about the sexual harassment his daughter had endured at the Sui Juris store. Patterson stayed away from work for one week, and then returned. She soon resigned. She perceived that her hours were reduced because she had reported Miranda's misconduct to others.

The complaint stated several causes of action. The first three counts invoked the Fair Employment and Housing Act (FEHA), and alleged sexual harassment, failure to take reasonable steps to avoid harassment, and retaliation for reporting harassment. (See Gov.Code, § 12900 et seq. )¹ Otherwise, the complaint asserted common law counts for intentional infliction of emotional distress, assault and battery, and constructive termination against public policy under FEHA. Compensatory and punitive damages were sought.

Critical here is Patterson's portrayal of the legal relationship between Domino's and the employees of Sui Juris. As to all causes of action, the complaint maintained that Domino's was the "employer" of both Patterson and Miranda, and that they were the "employee[s]" of Domino's. Each defendant was described as "the agent, employee, servant and joint venturer" of the other defendants. At all relevant times, the defendants purportedly acted "within the course, scope and authority of such agency, employment and joint venture, and with the consent and permission of" the other defendants. Also, it was alleged that the officers and/or managing agents of every defendant "ratified and approved" all actions of the other defendants...