Perry v. Costco Wholesale, Inc.

• Decision Date: 18 October 2004
• Docket Number: No. 52454-2-I.,52454-2-I.
• Citation: 123 Wn. App. 783,123 Wash. App. 783,98 P.3d 1264
• Parties: Katina PERRY and Paul Perry, Respondents, v. COSTCO WHOLESALE, INC., Appellant.
• Court: Washington Court of Appeals

98 P.3d 1264

123 Wn. App. 783

123 Wash. App. 783

Katina PERRY and Paul Perry, Respondents, v. COSTCO WHOLESALE, INC., Appellant.

No. 52454-2-I.

Court of Appeals of Washington, Division 1.

October 18, 2004.

Steven Hill Winterbauer, Attorney at Law, Adam Graham Cuff, Attorney at Law, Seattle, WA, for Appellant.

Judith A. Lonnquist, Law Offices of Judith A. Lonnquist, P.S, Seattle, WA, for Respondent.

COX, C.J.

Costco Wholesale, Inc. appeals an adverse judgment based on Katina Perry's sexual harassment hostile work environment claim under the Washington Law Against Discrimination ("WLAD"), chapter 49.60 RCW. We hold that substantial evidence supports the findings of fact that are critical to the conclusions of law supporting the judgment. And the trial court properly awarded additional relief to cover adverse tax consequences arising from the damages award, pursuant to RCW 49.60.030(2). As to Perry's cross-appeals, we hold that the trial court did not abuse its discretion by declining to impose monetary sanctions in addition to other sanctions for a CR 26(g) discovery violation. Finally, the trial court abused its discretion when it considered the proportionality of the requested fee when it declined to apply a lodestar multiplier to Perry's request for attorney fees. We affirm in part, reverse in part, and remand with instructions for further proceedings.¹

Perry worked for Costco in its Optical Lab in Tukwila. Greg Smith was a non-supervisory co-worker on the same shift and a friend of Perry's husband, who also worked for Costco. Following her husband's transfer to another Costco location, Smith began to make inappropriate sexual comments and gestures toward Perry. Smith would comment on an almost weekly basis on the size of his tongue in relation to sexual acts and then stick out his tongue at Perry. Smith also placed a phallic-shaped item on her desk. Smith told Perry she had a "nice butt" and that she was "slacking" because she was not wearing thong underwear. Perry had also witnessed Smith's inappropriate behavior with other female coworkers. She did not immediately report any of these events to Costco.

At 4:00 a.m. one morning on an undetermined date in February or March 2000, after her shift ended, Perry saw Smith speaking with a female co-worker in the parking lot. She drove toward him to talk to Smith about an invitation he earlier extended to a barbeque. By the time she reached him, the female co-worker was walking away, and Smith's pants were pulled down, exposing him to Perry. Shocked, Perry asked him what he was doing. He said he was feeling crazy because of the full moon. Perry told him she was leaving, and Smith said that she better before he threw her in the back of her truck and "had his way with her." Feeling threatened, she quickly departed.

Perry was reluctant to report this incident to Costco until she first told her husband. But she delayed telling him because she was afraid he would physically assault Smith and because Perry and her husband were undergoing considerable domestic stress. Perry finally told her husband. Immediately thereafter, on May 8, 2000, Perry reported the incident to her shift supervisors Tracy Whisman and Scott Tanner.

Costco commenced an investigation, suspending Smith for three days during that investigation. Costco interviewed other women Perry identified as victims of Smith's sexual harassment. It also interviewed Smith, who denied the claims of sexual harassment. The lab manager, Michael Jorgensen, concluded that Smith's denial of the exposure and other inappropriate behavior was not credible. He concluded that Smith's actions violated company policy and recommended that Costco fire Smith. Costco Vice President John Osterhaus disagreed. He concluded that Costco could not confirm Perry's claims. However, Costco transferred Smith to the day shift in lieu of firing him. It also required him to attend three hours of sensitivity training and sign a Contract for Continued Employment, which conditioned his employment on completion of the training.

Perry was angry when Costco informed her of its decision in response to her complaint about Smith. She considered the response inadequate. Costco did not offer Perry either counseling or a transfer out of the Tukwila lab. She asked Tanner numerous times to transfer her to the Federal Way warehouse because she was uncomfortable with her intermittent contact with Smith at the Tukwila lab. Tanner failed to do so. Perry then completed the paperwork to initiate the transfer herself, and Costco transferred her to the Federal Way warehouse in July 2000.

Between January and August 2001, Perry saw Smith at the Federal Way warehouse four times. Each time they made eye contact, Smith glared at her. Each time Perry observed Smith, she informed a manager. They told her there was nothing Costco could do to keep Smith out of the store. After one such incident, Perry and a store manager checked Smith's shopping history and discovered that his activity at that store was "very low."

A manager at the Federal Way store informed Jorgenson of Perry's objection to Smith's presence in the store. Jorgenson told Smith to stay away from Perry and the Federal Way warehouse.

Perry sued Costco, claiming sexual harassment and retaliation in violation of the WLAD and discharge in violation of public policy. Following a bench trial, the judge dismissed Perry's retaliation and public policy discharge claims, but entered judgment for Perry on her sexual harassment hostile work environment claim. The trial court also awarded Perry attorney fees and relief for adverse tax consequences pursuant to RCW 49.60.030(2).

Costco appeals, and Perry cross appeals.

SEXUAL HARASSMENT

Costco assigns error to most of the trial court's findings of fact and conclusions of law. As we read the assignments of error, Costco identifies the principal issues for review as (1) whether Costco had constructive notice of Smith's alleged harassment before May 8, 2000 when Perry reported it to management (2) whether Costco failed to take reasonably prompt and adequate corrective action, and (3) whether the relief for adverse tax consequences arising from the award of damages and attorney fees was proper. We direct our attention primarily to those assignments of error that Costco supports with persuasive argument and citation to authority and the record.²

WLAD prohibits employment discrimination based on sex.³ Sex discrimination includes sexual harassment that "unfairly handicaps an employee against whom it is directed in his or her work performance and as such is a barrier to sexual equality in the workplace."⁴ The elements of a hostile work environment sexual harassment claim are: (1) unwelcome conduct, (2) based on sex, (3) affecting the terms and conditions of employment, and (4) imputed to the employer.⁵ To impute liability to an employer for a discriminatory work environment created by an employee's coworker, the employee must show:

... (a) that complaints were made to the employer through higher managerial or supervisory personnel or by proving such a pervasiveness of sexual harassment at the work place as to create an inference of the employer's knowledge or constructive knowledge of it and (b) that the employer's remedial action was not of such nature as to have been reasonably calculated to end the harassment.⁶

Where the trial court has weighed the evidence, appellate review is limited to determining whether substantial evidence supports the findings of fact and, if so, whether the findings support the conclusions of law.⁷ Substantial evidence is evidence sufficient to persuade a fair-minded person of the truth of the asserted premise.⁸ Perry is "... entitled to the benefit of all evidence and reasonable inference therefrom in support of the findings of fact entered by the trial court."⁹ Unchallenged findings are verities on appeal.¹⁰ This court reviews conclusions of law de novo.¹¹

Notice

We need not address Costco's first principal issue for review—whether it had constructive notice of Smith's inappropriate, harassing behavior prior to Perry's May 8, 2000 complaint. Assuming without deciding that Costco did not have such constructive notice, it is undisputed that Costco had actual notice on May 8, 2000 of Perry's sexual harassment complaint. Thus, we move to the second principal issue that Costco raises—whether it took prompt and effective remedial action following Perry's complaint.

Prompt and Effective Remedial Measures

Once an employer has actual knowledge through higher managerial or supervisory personnel of a complaint of sexual harassment, then the employer must take remedial action that is reasonably calculated to end the harassment.¹² Costco contends that the trial court erred by deciding that Costco failed to take reasonably prompt and effective action to end the sexual harassment of Perry.

There is little state authority on how to apply this criterion under the WLAD.¹³ However, interpretations of Title VII of the Civil Rights Act of 1964, while not binding in interpretation of the WLAD, are instructive.¹⁴ We turn to case authority under that federal law to assist here.

Ellison v. Brady¹⁵ articulates the standard that we conclude is applicable to this WLAD case:

An employer's remedy should persuade individual harassers to discontinue unlawful conduct. ... [N]ot ... all harassment warrants dismissal, rather, remedies should be assessed proportionately to the seriousness of the offense. Employers should impose sufficient penalties to assure a workplace free from sexual harassment.... [T]he reasonableness of an employer's remedy will depend on its ability to stop harassment by the person who engaged in the harassment. In evaluating the adequacy of the remedy, the court may also take into account the remedy's ability to persuade potential harassers to refrain from unlawful conduct. ... [M]eting out punishments that do not taken into account the

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