Sequoia Ins. Co. v. Superior Court

• Citation: 13 Cal.App.4th 1472,16 Cal.Rptr.2d 888
• Decision Date: 02 March 1993
• Docket Number: No. H010413,H010413
• Court: California Court of Appeals
• Parties: , 61 USLW 2541, 8 IER Cases 458 SEQUOIA INSURANCE COMPANY, et al., Petitioners, v. The SUPERIOR COURT of Santa Clara County, Respondent, Robert A. NORDEN, Real Party in Interest.

Page 888

16 Cal.Rptr.2d 888

13 Cal.App.4th 1472, 61 USLW 2541, 8 IER Cases 458

SEQUOIA INSURANCE COMPANY, et al., Petitioners, v. The SUPERIOR COURT of Santa Clara County, Respondent, Robert A. NORDEN, Real Party in Interest.

No. H010413.

Court of Appeal, Sixth District, California.

March 2, 1993.

Review Denied May 20, 1993.

Richard R. Pace, Donn Dimichele, and Carlsmith Ball Wichman Murray Case Mukai & Ichiki, Los Angeles, for petitioners.

No appearance for respondent.

John A. McGuinn, Keith A. Ehrman, and McGuinn, Hillsman & Palefsky, San Francisco, for real party in interest.

PREMO, Associate Justice.

In this writ proceeding, we consider whether a cause of action is stated for wrongful termination in violation of public policy when the employer's conduct is not specifically prohibited by a statutory or constitutional provision. We conclude that such a provision is a foundational requirement to establish wrongful termination on public policy grounds. Accordingly, we hold that the superior court erred in denying defendant employer's motion for summary adjudication of the wrongful termination cause of action in this case. We grant a writ of mandate to obviate an expensive and complex trial of a legal issue which, as a matter of law, must be resolved in the employer's favor.

BACKGROUND

For purposes of this proceeding, we will summarize only the undisputed facts leading to the termination at issue. Plaintiff Robert Norden was hired as Claims Manager by Sequoia Insurance Company (hereafter, Sequoia) in 1976. In 1979, his title was changed to Vice President. In 1987, Sequoia was acquired by defendant QBE Insurance Limited, an Australian insurance and reinsurance group. In connection with the transfer of ownership, plaintiff acknowledged in writing that his employment was terminable at will. Defendant Michael Moody was named president of Sequoia in late February 1990.

In November 1988, the voters of California passed Proposition 103, adding article 10 to the Insurance Code (§ 1861 et seq.) for the express purpose of reducing and controlling insurance rates. After assuming the presidency of Sequoia, Moody observed that a number of large, late increases in case reserves were appearing in the claims department. ¹ Moody told plaintiff that he believed the higher reserves on these cases should have been set earlier. Later, Moody expressed his opinion to plaintiff that a pattern of large, late reserves had developed at Sequoia. Plaintiff disagreed with this assessment, believing that "for the most part" adequate case reserves were being implemented on a timely basis. In June 1990, Moody sent plaintiff a memo expressing extreme concern about late reserve development. Although Moody never directly ordered plaintiff to increase the case reserves for all pending claims, he openly disagreed with the perceived overall practice by the claims department of establishing low case reserves and ultimately spending millions of In July 1990, Moody decided to activate a previously authorized position of "litigation specialist" and appoint plaintiff to the position. Plaintiff agreed that his abilities would best be utilized in the "legal-technical area" and accepted the transfer, which took effect September 4, 1990.

dollars on attorney fees disputing [13 Cal.App.4th 1476] liability for claims. Nevertheless, plaintiff received favorable performance evaluations, rating him either "satisfactory" or "excellent" in 19 out of 20 categories, with an overall rating of "satisfactory."

In August 1990, the company experienced an operating loss of over half a million dollars, its second major loss in three months. Moody concluded that the loss was due principally to excessive expenditures. Moody was also concerned that Sequoia's "A" rating with the Best's Insurance Group would decline as a result of these losses. In late September or early October 1990, Sequoia was notified that it had been placed on a "watch" list by Best's--a preliminary step, in Moody's view, to lowering Sequoia's rating, and a reflection of Sequoia's deteriorating financial condition. On September 24, 1990, Moody called a meeting of a large group of managers and explained to them the severity of Sequoia's financial situation. The meeting produced a long list of recommended cost-cutting measures. Subsequently, 18 to 20 measures were implemented, including the closure of offices in 2 cities.

On October 13, 1990, about one month after plaintiff assumed the duties of Litigation Director, Moody informed him that Sequoia was eliminating this position and that plaintiff's employment was terminated. According to Moody, the termination of plaintiff and five other employees was one of the company's cost-cutting measures; plaintiff's position was, in his words, "a job that we could do without." Plaintiff found this explanation "not credible," however. In May 1991, he filed suit, alleging (1) wrongful discharge in violation of public policy, (2) age discrimination, and (3) fraud and deceit.

With respect to the first cause of action, plaintiff alleged that he was terminated "for his refusal to inflate claim reserves." According to plaintiff, Sequoia was engaged in a "scheme" to defeat the purposes of Proposition 103, by artificially inflating case reserves in order to reduce its apparent profitability. By "creat[ing] the illusion of loss," Sequoia would be able to reduce the amounts it would be required to refund to customers under Proposition 103 and increase its premiums. Plaintiff was "in the way" of this scheme; although he was "pressured" to inflate case reserves, he refused to do so. In the second and third causes of action, plaintiff alleged he was fraudulently induced by Moody's false promise to accept the position of Litigation Director, and thereafter was terminated as part of a plan to "get rid of Sequoia's older employees."

Defendants moved for summary judgment, or in the alternative, summary adjudication of each cause of action. With respect to the first cause of action, defendants argued that there was no factual or legal foundation for a wrongful termination claim based on public policy, because there was no statutory expression of a policy against increasing case reserves. Plaintiff responded that there were numerous material factual issues precluding summary judgment. He further disputed defendants' interpretation of Gantt v. Sentry Insurance Co. (1992) 1 Cal.4th 1083, 4 Cal.Rptr.2d 874, 824 P.2d 680, on which defendants had relied, arguing that a public policy need only be "based on or derived from " a statute to support a cause of action for wrongful termination. After hearing argument on the matter, the trial court denied both summary judgment and summary adjudication, ruling by minute order that "defendant's [sic ] notice fails to specify the matters to be adjudicated. Plaintiff adequately alleges Causes of Action for age discrimination and breach of public policy, although the proof is very thin."

DISCUSSION

Defendants assert two errors in the trial court's ruling. First, they object to the We first consider the trial court's determination that defendants' statement of grounds for summary adjudication was deficient. The notice of motion requested summary judgment in defendants' favor, or "[a]lternatively, if for any reason summary judgment cannot be had[,] for an order adjudicating that there is no merit to the following described causes of action contained in the complaint filed herein by Robert A. Norden; and that the final judgment in this action shall, in addition to any matters determined at trial, award judgment as established by such adjudication as to the following described causes of action: discharge in violation of public policy, unlawful age discrimination, fraud and deceit, and intentional infliction of emotional distress. Said motion will be made upon the ground that there is no triable issue of material fact as to the summary judgment or summary adjudication sought and therefore the moving party is entitled to such summary judgment or summary adjudication as a matter of law."

court's perception of their summary adjudication motion as inadequate for failing to specify the matters to be adjudicated. Second, they challenge the court's legal determination that a cause of action is stated for wrongful termination on public policy grounds. Plaintiff responds that summary adjudication was not warranted because "numerous " material issues of fact existed with respect to the wrongful termination allegations. As for the legal adequacy of this cause of action, he maintains that his claim was sufficiently rooted in public policy concerns to withstand summary adjudication.

Defendants' motion was made in August 1992, more than 18 months after the 1990 amendment to Code of Civil Procedure section 437c ² took effect. Subdivision (f) of that statute redefines the summary adjudication process, eliminating its use for facts or issues "that do not completely dispose of a cause of action or a defense." (Stats.1990, ch. 1561, § 1.) Accordingly, there is no longer any reason for a notice of motion to identify specific issues; a listing of the disputed causes of action, as was done here, is sufficient. The trial court's stated requirement that the "matters" at issue be more precisely identified would have been accurate under the prior system of summary adjudication (cf. Homestead Savings v. Superior Court (1986) 179 Cal.App.3d 494, 224 Cal.Rptr. 554), but is unjustified under the present version of section 437c, subdivision (f). ³

We turn next to the trial court's ruling on the legal sufficiency of the wrongful termination cause of action. Defendants' position is that plaintiff cannot succeed on this theory because he was not directed to engage in any conduct specifically enjoined by a statutory or constitutional provision. Plaintiff suggests this issue need not be reached because there were disputed issues of fact that precluded summary...