Smith v. American Exp. Travel Related Services Co., Inc.

• Decision Date: 17 March 1994
• Docket Number: CA-CV,No. 1,1
• Citation: 179 Ariz. 131,876 P.2d 1166
• Parties: Christine SMITH, an individual, Plaintiff-Appellant, v. AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC., Defendant-Appellee. 91-0572.
• Court: Arizona Court of Appeals

Page 1166

876 P.2d 1166

179 Ariz. 131

Christine SMITH, an individual, Plaintiff-Appellant, v. AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC., Defendant-Appellee.

No. 1 CA-CV 91-0572.

Court of Appeals of Arizona Division 1, Department C.

March 17, 1994.

Reconsideration Denied July 20, 1994.

[179 Ariz. 133] Douglas G. Wymore and Tracey Westerhausen, Phoenix, for plaintiff-appellant.

Steptoe & Johnson by Lawrence Allen Katz, Monica L. Goebel, Phoenix, for defendant-appellee.

OPINION

TOCI, Presiding Judge.

Appellant Christine Smith sued American Express Travel Related Services Company ("TRS") for sexual harassment based upon common law tort and contract principles. Smith appeals from the trial court's grant of summary judgment and award of attorneys' fees in favor of TRS.

We must decide under the standard adopted in Orme School v. Reeves, 166 Ariz. 301, 802 P.2d 1000 (1990), whether Smith presented evidence from which reasonable people could conclude either that: (1) Edwin Nally acted within the scope of his employment with TRS when he sexually harassed Smith, so that TRS is vicariously liable for Nally's conduct; or (2) because TRS knew or should have known of Nally's conduct and failed to prevent it, TRS is independently liable to Smith for intentional and negligent infliction of emotional distress and for breach of the employment contract covenant of good faith and fair dealing.

We hold that no reasonable person could conclude that Nally acted within the scope of his employment in sexually harassing and assaulting Smith. We also hold that Smith did not produce competent evidence either that TRS knew or should have known of Nally's conduct or that TRS failed to take action to prevent such conduct. Consequently, the principles set forth in Ford v. Revlon, Inc., 153 Ariz. 38, 734 P.2d 580 (1987), are not applicable here. Because we affirm the trial court's judgment in favor of TRS on these grounds, we need not reach the issue of whether Arizona's workers' compensation statute provides Smith's exclusive remedy for any physical injuries and emotional distress she may have suffered. We affirm the judgment of the trial court except for the portion that awards attorneys' fees to TRS.

I. FACTS AND PROCEDURAL HISTORY

Because this is an appeal from summary judgment, we view the facts in the light most favorable to the party against whom judgment was entered. Wagenseller v. Scottsdale Memorial Hosp., 147 Ariz. 370, 388, 710 P.2d 1025, 1043 (1985).

Smith, a twenty-two year employee of TRS, was employed in Phoenix as a fraud coordinator in the Fraud Operations Department from January 1984 until August 1990. Nally was also a twenty-year employee of TRS and was the manager of TRS Fraud Operations for the United States. He was not Smith's direct supervisor. From 1984, when Smith first met Nally, until December 1987, they had a friendly working relationship. During this time, Nally engaged in sexual joking with Smith and flirted with her. He occasionally patted her, touched her on the arms and shoulders, and put an arm around her waist. Until December 1987, Smith was not offended by Nally's conduct.

Beginning in December 1987, Nally began to engage in what Smith believed was sexual harassment. In addition to teasing her at her desk as part of a daily ritual, he harassed Smith in other ways. For example, he grabbed or touched Smith's breasts, rubbed up against her, touched her leg under her dress, threw a condom on her desk, and tossed candy down the front of her blouse, all in the view of other employees. On one occasion he grabbed her and started to carry her out of the building. On at least four occasions, he forced her to have sex with him at various locations in the TRS building. Smith submitted to Nally's sexual advances because she felt physically threatened by him. She also felt that to do otherwise might cause her to lose her job. Nevertheless, Nally did not promise Smith any reward if she submitted to his advances or threaten her with any adverse consequences if she refused.

During this time, TRS had a written policy prohibiting sexual harassment. Copies of the policy were posted throughout the TRS building, and TRS distributed a sexual harassment memorandum to its employees approximately once a year. Smith was familiar with TRS's sexual harassment policy and grievance procedures. Under this policy, employees could submit oral or written complaints, even anonymously, to TRS's Human Resources Department, and TRS would conduct a confidential investigation.

Between December 1987 and July 1989, Smith complained about Nally's conduct to several non-managerial co-workers, her sister-in-law Patricia Mereness, and her therapist. Although her co-workers and her therapist suggested that she report Nally to the TRS Human Resources Department, Smith declined, requesting that the matter be kept confidential. She specifically requested Mereness, a managerial employee of TRS in another facility, not to tell anyone outside the family about Nally's harassment.

Smith did not comply with the TRS procedure for reporting sexual harassment. Also, she did not report Nally's conduct to either of the two women who were her supervisors during the time she was being harassed. In either December 1988 or late spring or early summer of 1989, Smith asked Ken Robbins, a manager in the Fraud Operations group, to have lunch with her so that she could talk to him about a problem she was having with Nally. Smith told Robbins that Nally was sexually harassing her but did not give him any details about Nally's conduct. He told her to contact the personnel department and assumed that she followed his advice.

In July 1989, Alan Bickel, an occasional acting supervisor of the Fraud Department in Nally's absence, told a TRS employee during an exit interview that sexual harassment was occurring in the Fraud Department. When contacted by a TRS human relations specialist, Bickel said that he thought Nally was sexually harassing Smith. The human relations specialist met with Smith two days later, and Smith told her that Nally had sexually assaulted and harassed her.

TRS immediately began an investigation of Smith's allegations. Smith was instructed to call in sick, and on the next workday, TRS placed Nally on indefinite suspension. Two weeks later, after TRS gave Nally the option of resigning or being fired, Nally resigned. Smith then returned to her position in the Fraud Department, the sick leave she had used was reinstated, and TRS waived posting restrictions for Smith so that she could apply for other positions within TRS if she wished to transfer out of the Fraud Department. After TRS terminated Nally, Smith continued to work for TRS for about one year. In August 1990, Smith resigned from TRS to accept a similar position with a bank.

On July 2, 1990, Smith filed a complaint against Nally and TRS. She asserted claims for assault and battery, intentional infliction of emotional distress, and negligent infliction of emotional distress against both Nally and TRS. Smith also alleged claims for relief against TRS for breach of contract and breach of the implied covenant of good faith and fair dealing.

The trial court granted TRS's motion for summary judgment. The court ruled that no disputed issues of material fact existed and that Nally's conduct was outside the scope of his employment. Thus, TRS could not be held vicariously liable for Smith's claims for assault and battery and intentional and negligent infliction of emotional distress against TRS. The court further found that Smith did not utilize the remedies offered to her by TRS and that TRS did not engage in any extreme or outrageous behavior like that found in Ford v. Revlon. Finally, the court ruled that Smith could not recover on her contract claims because she had alleged no contract damages and could not recover tort damages for breach of contract.

Following the denial of Smith's motion for reconsideration, the trial court entered judgment for TRS and summarily ordered Smith to pay TRS's attorneys' fees in the amount of $57,281.50 and costs of $4,383.65. Smith appealed from the judgment.

II. DISCUSSION

A. TRS's Alleged Liability Under Respondeat Superior

We conclude that the trial court correctly ruled that Nally's conduct in sexually assaulting and harassing Smith was outside the scope of his employment. Nally's sexual misbehavior and assaultive conduct was neither the kind of activity for which he was hired nor was it actuated, even in part, by a desire to serve TRS. Thus, we follow the majority of cases that have held that, under common law principles, an employee's sexual harassment of another employee is not within the scope of employment.

We first observe that this appeal involves common law tort and contract claims rather than sexual harassment claims brought under either Title VII of the Civil Rights Act of 1964, 42 U.S.C. sections 2000e to 2000e-17 (1988) or Arizona's Civil Rights Act, Ariz.Rev.Stat.Ann. ("A.R.S.") sections 41-1461 through 41-1465 (1992). Title VII liability is much broader than common law tort liability. Spencer v. General Elec. Co., 894 F.2d 651, 657 (4th Cir.1990). One reason is that in Title VII actions, employer liability is based on a statutory scheme that broadly defines "employer," id., to include "agents" of the employer, 42 U.S.C. section 2000e(b) (1988). In common law tort actions, however, the acts of the employer's agents generally do not subject the employer to liability unless the elements of the doctrine of respondeat superior are met. Consequently, here we look to this common law doctrine rather than to the federal and state antidiscrimination statutes and cases interpreting such statutes.

According to the doctrine of respondeat superior, "an employer is vicariously liable only for the behavior of an employee who was acting within the course and scope of his employment." Pruitt v. Pavelin, 141 Ariz. 195, 205, 685 P.2d...