Roby v. McKesson Corp.

• Decision Date: 30 November 2009
• Docket Number: No. S149752.,S149752.
• Citation: 101 Cal.Rptr.3d 773,219 P.3d 749,47 Cal. 4th 686
• Court: California Supreme Court
• Parties: Charlene J. ROBY, Plaintiff and Respondent, v. McKESSON CORPORATION et al., Defendants and Appellants.

219 P.3d 749

101 Cal.Rptr.3d 773

47 Cal. 4th 686

Charlene J. ROBY, Plaintiff and Respondent, v. McKESSON CORPORATION et al., Defendants and Appellants.

No. S149752.

Supreme Court of California.

November 30, 2009.

Howard Rice Nemerovski Canady Falk & Rabkin, Jerome B. Falk, Jr., Linda Q. Foy, Dipanwita Deb Amar, San Francisco, Jason M. Habermeyer; Fitzgerald, Abbott & Beardsley and Sara E. Robertson, Oakland, for Defendants and Appellants.

Paul, Hastings, Janofsky & Walker, Paul W. Cane, Jr., Katherine C. Huibonhoa, Laura Scher and Heather N. Mitchell, San Francisco, for California Employment Law Council as Amicus Curiae on behalf of Defendants and Appellants.

Wilson Sonsini Goodrich & Rosato, Fred W. Alvarez and Michael J. Nader, Palo Alto, for Employers Group as Amicus Curiae on behalf of Defendants and Appellants.

Christopher H. Whelan, Gold River; The deRubertis Law Firm, David M. deRubertis, David A. Lesser, Woodland Hills; Pine & Pine, Norman Pine, Los Angeles; Riegels Campos & Kenyon and Charity Kenyon, Sacramento, for Plaintiff and Respondent.

Law Offices of Jeffery K. Winikow and Jeffrey K. Winikow, Los Angeles, for California Employment Lawyers Association as Amicus Curiae on behalf of Plaintiff and Respondent.

Claudia Center, San Francisco, for Legal Aid SocietyEmployment Law Center, Disability Rights Education and Defense Fund, the Impact Fund, the Disability Rights Legal Center, Equal Rights Advocates, California Women's Law Center, Protection and Advocacy, Inc., and Disability Rights Advocates as Amici Curiae on behalf of Plaintiff and Respondent.

Sharon J. Arkin for Consumer Attorneys of California as Amicus Curiae on behalf of Plaintiff and Respondent.

KENNARD, J.

A jury found that plaintiff employee, Charlene J. Roby, was wrongfully discharged based on her medical condition and related disability. The jury found both harassment and discrimination, and it awarded $3,511,000 in compensatory damages and $15 million in punitive damages against the employer, as well as $500,000 in compensatory damages and $3,000 in punitive damages against the supervisor who was responsible for the harassment. Defendants appealed.

The Court of Appeal concluded that some of the noneconomic damages awards overlapped one another, and that the evidence was insufficient to establish harassment. It ordered the trial court to enter judgment in favor of the supervisor, and it ordered the trial court to modify the judgment against the employer to reflect a reduction of compensatory damages to $1,405,000. The court further concluded that the award of punitive damages against the employer exceeded the federal constitutional limit, and it ordered a reduction of punitive damages to $2 million. The Court of Appeal then affirmed the judgment as modified.

We granted plaintiff's petition for review, which raised three issues. First, did the Court of Appeal err in concluding that some of plaintiff's noneconomic damages awards overlapped one another? Second, did the Court of Appeal err in allocating plaintiff's evidence between her harassment claim and her discrimination claim, and, based on that allocation, in finding insufficient evidence to support the harassment verdict? Third, did the Court of Appeal err in concluding that the punitive damages against the employer exceeded the federal constitutional limit?

With respect to the first issue, we conclude that the jury's noneconomic damages awards are hopelessly ambiguous. In a letter to this court and again at oral argument, plaintiff's counsel stated that plaintiff preferred to concede this issue rather than face a new trial, and defendants accepted this concession. Therefore, the validity of the Court of Appeal's conclusion that some of the noneconomic damages awards overlapped one another is no longer in dispute. With respect to the second issue, we conclude that the Court of Appeal erred in allocating the evidence between the harassment claim and the discrimination claim, and we reject its determination that the record included insufficient evidence to support the harassment verdict. With respect to the third issue, we agree with the Court of Appeal that the punitive damages exceeded the federal constitutional limit, but we disagree with the Court of Appeal on the amount of this limit. We hold that in the circumstances of this case the amount of compensatory damages sets the ceiling for the punitive damages.

I

A

This matter is before us on appeal from a judgment in favor of plaintiff Charlene J. Roby, after a jury trial. In summarizing the facts, we view the evidence in favor of the judgment. (Bickel v. City of Piedmont (1997) 16 Cal.4th 1040, 1053, 68 Cal.Rptr.2d 758, 946 P.2d 427.)

Roby worked for defendant McKesson Corporation from 1975 until 2000. McKesson is a distributor of pharmaceutical and health care products, supplying both hospitals and pharmacies. At the end of her career with McKesson, Roby was a customer service liaison at a local distribution center, processing forms and handling customer problems related to product delivery. She did her job well and received favorable performance reviews. Starting in 1997, Roby began experiencing "panic attacks" that temporarily (and on short notice) restricted her ability to perform her job. During a panic attack, Roby suffered heart palpitations, shortness of breath, dizziness, trembling, and excessive sweating.

In 1998, McKesson instituted a complex attendance policy. The policy put particular emphasis on 24-hour advance notice for all absences, including medical absences. An absence without notice that lasted more than half the scheduled workshift was denominated an "occasion," and two incidents of tardiness or early departure also counted as an "occasion," but the term "occasion" referred to a period of absence that began without the required 24-hour notice, not to each day of absence. For example, if an employee suddenly became ill and was absent (without 24-hour advance notice) for three consecutive workdays, the three-day absence would be deemed a single occasion.

McKesson imposed progressive levels of discipline based on the number of occasions an employee accrued in any 90-day period. The discipline proceeded in a "3-3-2-2 sequence." Three occasions in any 90-day period would result in an oral warning, and an additional three occasions in any subsequent 90-day period would result in a written warning. After the written warning, two more occasions within any 90-day period would result in a final written warning. After the final written warning, two more occasions within any 90-day period would result in termination of employment.

An employee would repeat a level in the sequence (rather than progressing to the next, more severe disciplinary level) if the employee became eligible for discipline but had received no discipline during the preceding six months. If the employee became eligible for discipline but had received no discipline during the preceding 12 months, the level of discipline would be one level below the level last imposed (though the minimum discipline was always an oral warning). For example, if an employee received a final written warning but then received no discipline for six months before becoming again eligible for discipline, a second final written warning would be issued. If the same employee had received no discipline for 12 months before becoming again eligible for discipline, there would be a written warning (nonfinal), rather than a final written warning.

McKesson's attendance policy operated to the disadvantage of employees who, like Roby, had disabilities or medical conditions that might require several unexpected absences in close succession. Roby accrued a large number of occasions in a relatively short time span, and most of them were directly or indirectly related to her panic attacks. Roby's supervisors — including defendant Karen Schoener — were aware that Roby suffered from these unpredictable panic attacks and that many, if not all, of her absences without notice resulted from this condition.

Roby struggled to overcome her disability and to improve her attendance record, but after Schoener took over as Roby's immediate supervisor, Roby's frequent absences resulted in tension between them. Compounding this problem, Roby's medication caused her body to produce an unpleasant odor, and in connection with her panic attacks she also developed a nervous disorder that caused her to dig her fingernails into the skin of her arms, producing open sores.

Schoener made negative comments in front of other workers about Roby's body odor, although Schoener knew from Roby that medication was causing the odor. Schoener also called Roby "disgusting" because of the sores on her arms and her excessive sweating. Schoener openly ostracized Roby in the office, refusing to respond to Roby's greetings and turning away when Roby tried to ask questions, and Schoener made a facial expression of disapproval when Roby took rest breaks because of her panic attacks.

Schoener also ignored Roby at staff meetings, and she overlooked Roby when handing out specialty food items, holiday gifts, and travel trinkets, although Schoener regularly gave these small gifts to the other employees on her staff. Schoener effectively excluded Roby from office parties by designating her to cover the office telephones. In addition, Schoener frequently reprimanded Roby in front of her coworkers. She spoke about Roby in a demeaning manner and openly belittled Roby's contribution to the company, calling her job a "no brainer." According to the testimony of one coworker, when Roby would telephone the office in the morning to report that she would be absent, Schoener "would always make this announcement that was degrading; say, `Charlene's absent again' — you know — that type of response." Roby's complaints to more senior managers about Schoener's conduct went unanswered.

In early 1999, Roby accrued three occasions...