Southern Cal. Rapid Transit Dist. v. Superior Court

• Decision Date: 30 November 1994
• Docket Number: No. B083598,B083598
• Citation: 30 Cal.App.4th 713,36 Cal.Rptr.2d 665
• Parties: , 10 IER Cases 162 SOUTHERN CALIFORNIA RAPID TRANSIT DISTRICT, et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent. Allen LASTER and Richard Yeats, Real Parties in Interest.
• Court: California Court of Appeals Court of Appeals

Page 665

36 Cal.Rptr.2d 665

30 Cal.App.4th 713, 10 IER Cases 162

SOUTHERN CALIFORNIA RAPID TRANSIT DISTRICT, et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent Allen LASTER and Richard Yeats, Real Parties in Interest.

No. B083598.

Court of Appeal, Second District, Division 3, California.

Nov. 30, 1994.

As Modified Dec. 1, 1994.

Suzanne B. Gifford, Jeffrey J. Lyon, Richard A. Katzman and Charles M. Safer, Los Angeles, for petitioners.

No appearance for respondent.

Carolyn M. Yee, Los Angeles, for real parties in interest.

CROSKEY, Associate Justice.

Petitioners Southern California Rapid Transit District ("District"), Ernesto Fuentes ("Fuentes") and Nick Patsaouras ("Patsaouras") (collectively, "defendants") ¹ seek a writ of mandate from this court compelling the trial court to grant their summary judgment motion on the complaint of the real parties in interest, Allen Laster ("Laster") and Richard Yeats ("Yeats") (collectively, "plaintiffs").

This action arose out of the claim by plaintiffs that they were wrongfully terminated by the District from their position as employees hired by the District to investigate fraud, waste and corruption. They alleged that their terminations were in retaliation for reports made by them of suspected forgery, fraud, mismanagement and an official cover-up of such acts in connection with the certification of a minority contractor.

Defendants filed a motion for summary judgment and summary adjudication of issues as to all seven counts filed by Laster and Yeats. Although the trial court agreed with defendants on all but two of the causes of action filed by plaintiffs, it denied summary relief with respect to their second cause of action (wrongful termination in retaliation for reporting illegal conduct) and their fourth cause of action (wrongful termination in violation of First Amendment free speech rights).

We conclude that issues of fact do exist with respect to plaintiffs' claims of (1) retaliatory termination in violation of a fundamental statutory public policy and (2) infringement of their First Amendment right of free speech in violation of the Civil Rights Act (42 U.S.C. § 1983). We also reject defendants' qualified immunity claims under both state and federal law. We therefore deny the requested writ relief.

FACTUAL AND PROCEDURAL BACKGROUND

The District was, at the times relevant to this matter, a governmental agency created by statute to plan and operate mass transit in Los Angeles County. (Pub. Utilities Code, § 30,001, et seq.) ² Patsaouras and Fuentes On February 25, 1988, the District's Board of Directors authorized its Inspector General to direct a broad comprehensive program of (1) contract audits, (2) management, operational and performance audits and (3) investigations. Pursuant to a directive of the Board, all personnel in the Office of Inspector General ("OIG") were exempt from the District's non-contract personnel policy and served at the pleasure of the Inspector General. Such exemption was called to the attention of new OIG personnel by a written notice which expressly stated that the employment was "at-will" and that the "District has the right to discharge them for any reason whatever, with or without good cause." Plaintiffs, who were career law enforcement investigators, were hired by the OIG in 1989 to serve in that capacity; Laster was hired on October 23 and Yeats on November 6. Each was given a copy of this "Exempt Employment Status" notice at the time that they were hired. They each signed a statement that they had read and understood it. ³

were officials of the District. Patsaouras held the position of president of the District's Board of Directors; Fuentes was the District's Inspector General.

During the period of their employment they were given various investigative assignments. One involved a claim made by a member of the public on February 8, 1990, at a meeting of the District's Board, that a company called Communications International Inc. ("CII") had been improperly certified as a "Disadvantaged Business Enterprise" ("DBE"). Because the District receives substantial federal funding, federal regulations require that a certain percentage of contracting opportunities be provided to DBEs.

The charge which was publicly made was that CII was ineligible for DBE status and that a recertification letter sent by the District to CII was a forgery. Plaintiffs commenced an investigation of this charge and determined that it had substance. ⁴

Plaintiffs were assigned to investigate the allegation that the signature stamp of one of the District's certifying officials, one Alvin Rivera, had been utilized without his approval and despite his protestations, to recertify CII as a minority-owned, disadvantaged business enterprise. During the course of the investigation, plaintiffs discovered that CII had initially been certified by the District, even though it did not possess a California contractor's license in its own name, and utilized a non-minority person as its contractor license holder, suggesting the company might be a "front" rather than a bona fide minority-owned business. They also found that CII had boasted in its 1989 prospectus that it had done a gross volume of business exceeding $199 million, an amount far in excess of the federal regulatory $14 million gross volume qualifying standard for a DBE. A Dun & Bradstreet report also indicated that CII had reportable earnings in excess of the gross volume standards.

According to plaintiffs, the CII file that the District maintained contained neither tax returns for the past three years nor any other documentation indicating its financial eligibility for disadvantaged status. Plaintiffs requested documents from CII and the District's Office of Equal Employment Opportunity ("EEO") which they hoped would clear up questions about CII's status. However, CII declined to supply any documents. Walter Norwood, the EEO director, also refused to provide plaintiffs any access to the documents they had requested, notwithstanding a District Board Directive which provided that, in conducting investigations, "the Inspector General, and staff of the Inspector General, are authorized to have full, free and unrestricted access to all District functions, records, property, and personnel."

Plaintiffs reported these events to Fuentes and informed him that they suspected a violation of the law, specifically, forgery. (Pen.Code, § 470.) Plaintiffs also discussed the case with the Los Angeles County Sheriff's Department, which advised them that there appeared to be such a violation and requested that the Inspector General send a letter requesting the assistance of the Sheriff. When Laster asked Fuentes to sign such a request letter, Fuentes became angry and refused. Plaintiffs also requested that Fuentes employ the assistance of the United States Department of Transportation ("DOT") and its Urban Mass Transportation Administration ("UMTA"), the agencies responsible for overseeing compliance with the regulations relating to DBEs. Fuentes again refused, expressing fear that he would lose his job if the matter were made known to the federal agencies. Plaintiffs then spoke to the Los Angeles County District Attorney's Office about their suspicions of a forgery and coverup.

Rivera (the certifying officer whose signature stamp allegedly had been improperly used) told plaintiffs that Fuentes had spoken to him after plaintiffs' had made their report to Fuentes. According to Rivera, Fuentes told him that his career was "stagnant" with the District and advised him not to cooperate any further with the investigation.

On July 18, 1990, Fuentes told the plaintiffs that he had been advised by an outside investigative firm (which he had hired to look into the CII matter) that he could be guilty of a coverup. Relenting from his previous refusals, Fuentes stated he would send the case to the District Attorney's Office where he had previously indicated that he had "friends." However, when Laster stated that Fuentes was named in the plaintiffs' investigative report for making statements to Rivera which Rivera had found intimidating, Fuentes angrily retorted: "Are you accusing me of a crime?" He then ordered plaintiffs to leave his office.

Later that same day, Laster and Yeats were summoned independently to Fuentes' office by armed, uniformed Transit Police officers. There, Fuentes handed each of them a letter informing them that they were fired, but stating no reason. Fuentes told them immediately to clean out their desks and leave. The police officers remained with plaintiffs as they cleaned out their desks, then proceeded to escort them--one abreast, and one following--to the Personnel Office to be processed, and then out the door. This was done in the full view and presence of co-workers, other District employees and members of the public. ⁵

Plaintiffs claim, and defendants do not dispute, that they were never given any reason for their termination. Indeed, it is defendants' position that no reason or explanation was required. Similarly, there was never any hearing provided. As a result of plaintiffs' inability to articulate any given reason for their termination by the District, plaintiffs claim they have not been able to gain comparable employment in the law enforcement field.

On June 26, 1991, nearly one year after their termination, plaintiffs filed this action. They alleged seven separate causes of action. ⁶ Defendants then sought writ relief in this court. On May 17, 1994 we issued an alternative writ of mandate and an order staying the trial of the action.

⁶ However, we are only concerned here with two of them. As to the others, the trial court granted the defendants' motion, filed on March 15, 1994, for summary adjudication and plaintiffs have not sought writ relief. Plaintiffs' allegations of a wrongful discharge in violation of public policy (count 2) and civil rights...