Tilkey v. Allstate Ins. Co.

• Decision Date: 26 October 2020
• Docket Number: D074459
• Court: California Court of Appeals Court of Appeals
• Parties: Michael A. TILKEY, Plaintiff and Respondent, v. ALLSTATE INSURANCE COMPANY, Defendant and Appellant.

56 Cal.App.5th 521

270 Cal.Rptr.3d 559

Michael A. TILKEY, Plaintiff and Respondent,

v.ALLSTATE INSURANCE COMPANY, Defendant and Appellant.

D074459

Court of Appeal, Fourth District, Division 1, California.

Filed October 26, 2020

Brown Law Group, Janice P. Brown, Arlene R. Yang ; Akin Gump Strauss Hauer & Feld, Rex S. Heinke, Los Angeles, Jessica M. Weisel ; Cozen & O'Connor, Anneliese Wermuth, and Jenny R. Goltz, for Defendant and Appellant.

Edleson & Rezzo, Louis "Chip" Edleson, Joann F. Rezzo ; Williams Iagmin and Jon R. Williams, San Diego, for Plaintiff and Respondent.

HUFFMAN, J.

INTRODUCTION

While Michael Tilkey and his girlfriend Jacqueline Mann were visiting at her home in Arizona, the two got into an argument. Tilkey decided to leave the apartment. When he stepped out onto the enclosed patio to collect his cooler, Mann locked the door behind him. Tilkey banged on the door to regain entry, and Mann called police. Police arrested Tilkey and charged him under Arizona law with criminal damage deface, possession or use of drug paraphernalia, and disorderly conduct, disruptive behavior. Domestic violence charges were attached to the criminal damage and disorderly conduct charges.

Tilkey pled guilty to the disorderly conduct charge only, and the other two charges were dropped. After Tilkey completed a domestic nonviolence diversion program, the disorderly conduct charge was dismissed. Before the disorderly conduct charge was dismissed, Tilkey's company of 30 years, Allstate Insurance Company (Allstate), terminated his employment based on his arrest for a domestic violence offense and his participation in the diversion program. Allstate informed Tilkey it was discharging him for threatening behavior and/or acts of physical harm or violence to another person. Following the termination, Allstate reported its reason for the termination on a Form U5, filed with Financial Industry Regulatory Authority (FINRA) and accessible to any firm that hired licensed broker-dealers like Tilkey. Tilkey sued Allstate for wrongful termination in violation of Labor Code ¹ section 432.7 and compelled, self-published defamation.

At trial, Allstate presented evidence that it would have terminated his employment based on after-acquired evidence that Tilkey had circulated obscene and inappropriate e-mails using company resources.

The jury returned a verdict in Tilkey's favor on all causes of action and awarded him $2,663,137 in compensatory damages and $15,978,822 in punitive damages. It advised the court that it did not find Allstate's after-acquired evidence defense credible, and the court agreed.

Allstate appeals the verdicts, contending (1) it did not violate section 432.7 and so there was no wrongful termination; (2) compelled self-published defamation per se is not a viable tort theory; (3) it did not defame Tilkey because there is not substantial evidence its statement was not substantially true; (4) punitive damages are unavailable in compelled self-publication defamation causes of action; (5) the defamatory statement was not made with malice; and (6) the punitive damages awarded here were unconstitutionally excessive.

We agree that Allstate did not violate section 432.7 when it terminated Tilkey's employment based on his plea and his participation in an Arizona domestic nonviolence program and will reverse that judgment. However, we conclude compelled self-published defamation is a viable theory, and substantial evidence supports the verdict that the statement was not substantially true, so we will affirm that portion of the judgment. Additionally, while we conclude punitive damages are available in this instance, the punitive damages awarded here are not proportionate to the compensatory damages for defamation, and we will remand the matter with directions regarding the recalculation of punitive damages.

FACTUAL AND PROCEDURAL BACKGROUND

On August 16, 2014, Tilkey was staying with his girlfriend, Mann, and her young grandson in Arizona. After going out for the evening and drinking, the two began to argue, and Tilkey decided to leave the home. When Tilkey stepped outside onto the enclosed patio, Mann closed and locked the patio door, which was a traditional door with glass panes. Tilkey banged on the patio door, demanding to be let back in so he could gather his belongings, which were in the bedroom where Mann's grandson was sleeping. Mann called police.

When police arrived, Mann told them she did not want Tilkey in the apartment because she was afraid he would wake up her grandson. Police noted the interior trim on the framing above the patio door was broken.

Officers searched Tilkey's travel bag, which contained marijuana and a plastic container used to smoke marijuana. Police arrested Tilkey and filed three charges against him: criminal damage deface (Arizona Revised Statute [A.R.S.] § 13-1602A1), possession or use of drug paraphernalia (A.R.S. § 13-3415A), and disorderly conduct - disruptive behavior (A.R.S. § 13-2904A1). A domestic violence label was attached to the criminal damage and disorderly conduct charges.

On August 31, 2014, Mann sent an e-mail to Tilkey at work mentioning the charges that had been filed against him. A field compliance employee later discovered this e-mail while conducting a routine compliance review and forwarded it to Human Resources (HR). HR professional Tera Alferos conducted the initial investigation; she interviewed Tilkey December 4, 2014. She noted Tilkey had been asked to accept a plea deal to have two of the three charges dropped, then the last one dismissed. She never spoke with Mann or interviewed the arresting officers. She also did not investigate Mann's background or review her social media accounts.

Mann sent an e-mail to Allstate March 3, 2015, which revealed the arrests and made several other allegations. That same day, the e-mail was shared with Harriet Harty, Executive Vice President of HR; Christina Metzger, Vice President of HR; and Tyrone Burno, Director of HR. Alferos added the e-mail to the case file. A couple weeks later, Alferos sent Burno a summary of her investigation, which stated that the police report had been reviewed and noted Tilkey had been charged with but not convicted of a crime. The summary also explained there was no FINRA reporting obligation because there were no felony charges, and it concluded there had been no violation of company policy.

On March 31, 2015, Alferos provided Burno with a revised summary of investigation that added that Tilkey had entered a diversion program for the disorderly conduct (domestic violence) charge, resulting in a deferred prosecution. Burno then changed the conclusion to state Tilkey's behavior may have been at a level that caused the company to lose confidence in him. Burno supplied this version of the summary of investigation to Metzger, Harty, and Greg Burns, the senior vice president of HR, the same day.

At Burno's request, Alferos next added references to the domestic violence charge because it suggested Tilkey had engaged in behavior that could be construed as acts of physical harm or violence toward another person, in violation of company policy.

On April 16, 2015, Metzger e-mailed Harty stating she and Burns could support a decision to terminate Tilkey's employment or not. In a May 4, 2015 e-mail referencing the decision to terminate Tilkey's employment, Metzger wrote that they were amending the reason for terminating Tilkey to be "violence against another person whether employed by Allstate or not." Alferos submitted a formal termination request two days later stating that based on Tilkey's voluntary entrance into a diversion program, he had engaged in acts of physical harm or violence to another person. It identified the policy violation as "[t]hreats or acts of physical harm or violence to the property or assets of the Company, or to any person, regardless of whether he/she is employed by Allstate." The summary of investigation attached to the termination request stated, "the retention of the domestic violence charges suggests that Tilkey engaged in behavior that was construed as acts of physical harm or violence towards another person."

Following written approval from Tilkey's supervisors, the company terminated Tilkey's employment on May 27, 2015. When the company terminated his employment, it informed Tilkey, "Your employment is being terminated as a result of engaging in behaviors that are in violation of Company Policy. Specifically, engaging in threatening behavior and/or acts of physical harm or violence to any person, regardless of whether he/she is employed by Allstate."

The company then filed a Form U5 with FINRA² reporting its reason for terminating him as follows: "Termination of employment by parent property and casualty insurance company after allegations of engaging in behaviors that are in violation of company policy, specifically, engaging in threatening behavior and/or acts of physical harm or violence to any person, regardless of whether he/she is employed by Allstate. Not securities related."

On July 1, 2015, the State of Arizona filed a motion to dismiss the case against Tilkey with prejudice, and the court approved it the same day.

Tilkey sued Allstate asserting three causes of action: (1) violation of section 432.7 ; (2) wrongful termination based on noncompliance with section 432.7 ; and (3) compelled self-published defamation to prospective employers.

As part of its defense at trial, Allstate presented evidence that Tilkey had used company equipment, including the company-issued laptop computer and the company's Intranet and Internet system, to forward e-mails containing graphic nudity and racist jokes, among other items. It argued that had it known of these e-mails at the time, it would have discharged Tilkey.

Following trial, the jury returned a verdict for Tilkey and awarded $2,663,137 in compensatory damages, with $960,222 for wrongful termination and $1,702,915 for defamation, and $15,978,822 in...