Victa v. Merle Norman Cosmetics, Inc.

Decision Date13 October 1993
Docket NumberNo. B,B
CourtCalifornia Court of Appeals Court of Appeals
Parties, 63 Fair Empl.Prac.Cas. (BNA) 102, 63 Empl. Prac. Dec. P 42,780 Jessie Louise VICTA, Plaintiff and Appellant, v. MERLE NORMAN COSMETICS, INC., Defendant and Respondent. 065856.

Cooper, Brown, Kardaras & Scharf, Michael R. Brown and George W. Williams, Jr., Pasadena, for plaintiff and appellant.

Donald R. Livingston, Gwendolyn Young Reams, Carolyn L. Wheeler and Paul R. Bogas, Washington, DC, as amici curiae on behalf of plaintiff and appellant.

O'Melveny & Myers, Scott H. Dunham, Kenneth E. Johnson and Steven M. Cooper, Los Angeles, for defendant and respondent.

Sonnenschein, Nath & Rosenthal, Lee T. Paterson, Brent M. Giddens and Anthony Capobianco, Los Angeles, as amici curiae on behalf of defendant and respondent.

FUKUTO, Associate Justice.

The question presented is whether an injunctive consent judgment, in a federal age discrimination in employment case brought by the United States Equal Employment Opportunity Commission (EEOC), operates as res judicata to bar the complaining employee's original action for damages under California law. We conclude that in this case the element of privity between the employee and the EEOC was lacking, and therefore the judgment for defendant based on res judicata must be reversed.

I.

In 1985 plaintiff Jessie Louise Victa, who had been an employee of defendant Merle Norman Cosmetics, Inc. (Merle Norman), for over 10 years, was demoted and then terminated. Plaintiff was 54 years old; upon her demotion, her position went to an employee allegedly 20 years younger. Plaintiff proceeded to file an administrative age discrimination charge with both the EEOC and the California Department of Fair Employment and Housing (DFEH). In accordance with its "work-sharing" agreement with the EEOC, the DFEH withheld action and sent plaintiff a "right-to-sue" notice under Government Code section 12965, subdivision (b). 1 In October 1986, plaintiff commenced this action against Merle Norman, alleging her demotion and termination violated both an implied employment contract and the California Fair Employment and Housing Act's (FEHA) prohibitions of age discrimination in employment (see Gov.Code, § 12941). Plaintiff sought actual and punitive damages, and attorney fees.

The complaint was not served on Merle Norman until 1988. In the interim, the EEOC, acting pursuant to the federal Age Discrimination in Employment Act (29 U.S.C. § 621 et seq.; ADEA), investigated plaintiff's charge and undertook settlement discussions. An EEOC representative communicated a settlement offer for plaintiff of five months' back pay; Merle Norman rejected it.

Ultimately, the EEOC determined reasonable cause existed that Merle Norman was in violation of the ADEA. The EEOC shortly informed plaintiff that Merle Norman was willing to settle with her. After further discussions with plaintiff's lawyer, the EEOC notified Merle Norman's counsel that plaintiff desired a "six-figure" settlement, including back pay, "front pay," and attorney fees. Merle Norman rejected this demand also.

In September 1988, the EEOC sued Merle Norman in United States District Court for violation of the ADEA. (EEOC v. Merle Norman Cosmetics (C.D.Cal., No. 88-05712-SVW(Sx)); the EEOC case.) The complaint alleged that the EEOC was bringing the case "to correct unlawful employment practices on the basis of age and to make whole Jessie L. Victa." It further alleged that since at least 1985, Merle Norman had committed and continued to commit violations of the ADEA, "by discriminating against Jessie L. Victa ... because of her age (54)." The EEOC prayed for permanent injunctive relief against Merle Norman's engaging in age discrimination, and for an order that it pay plaintiff back pay with interest, liquidated damages, and other necessary affirmative relief "including but not limited to her rightful place reinstatement."

The EEOC case proceeded through discovery for about six months. As a nonparty, plaintiff did not participate, except that Merle Norman took her deposition. Plaintiff's counsel in the present case represented her at that deposition, and also represented another witness, for whom he sought a protective order regarding deposition scheduling. To arrange for such scheduling, he also suggested that Merle Norman's counsel stipulate to a stay of the EEOC case. Merle Norman's counsel replied that the EEOC was not disposed to such a stay; but a few days later the EEOC's counsel offered one. Merle Norman's counsel refused. Reminding plaintiff's counsel he was not a participant in the EEOC case, she also refused to agree that plaintiff's and the witness's depositions could be used in the present case. 2

In March 1989, counsel for the EEOC and Merle Norman appeared before the district court for pretrial conference. The court stated it saw no merit in the EEOC's case. The next day, the EEOC opened settlement negotiations with Merle Norman, and proposed a dismissal without prejudice. Merle Norman insisted on a dismissal with prejudice, stating it did not wish to litigate the matter again. The EEOC countered that it was unwilling to agree to a judgment that would preclude plaintiff, but it believed a dismissal with prejudice would not do so anyway. On that question, the parties "agreed to disagree." They further agreed to a consent judgment, for injunctive relief against future discrimination and a dismissal with prejudice. Plaintiff and her counsel were never consulted or contacted about this settlement, until it was completed.

The stipulated judgment in the EEOC case, filed April 7, 1989, provided for dismissal with prejudice, in exchange for which Merle Norman agreed to maintain a workplace free of age discrimination, and to post notice of employees' rights regarding age discrimination for 90 days. The judgment further provided that "[t]his dismissal ... constitutes full ... discharge and satisfaction of any claims alleged by the EEOC in this action against Merle Norman regarding Victa as well as any other claims which could have been raised by the EEOC in the complaint filed in this action." Merle Norman was not obligated to make any payments; and in any EEOC petition for contempt of the injunctive provision, "any claims with respect to Victa w[ould] be barred by this judgment...."

Having been informed by the EEOC that she should now proceed with the present case, plaintiff undertook to do so. 3 However, in April 1990 Merle Norman sued plaintiff in United States District Court, seeking an injunction against prosecution of this case, and damages for having resumed it, on grounds the judgment in the EEOC case barred the present case by virtue of res judicata. In short order, the court (the same judge who had presided in the EEOC case) dismissed the new action, stating that "this issue would be better addressed in the state court that is now entertaining [the present] action." (Merle Norman Cosmetics, Inc. v. Victa (C.D.Cal. June 28, 1990) No. CV 90-1794-SVW, typed opn., p. 3.) Merle Norman appealed to the United States Court of Appeals, which affirmed the dismissal as a proper exercise of discretion, after stating, "We have serious doubts whether it can be said that Victa's state law claim was actually decided by the stipulated judgment of the [EEOC] case." (Merle Norman Cosmetics, Inc. v. Victa (9th Cir.1991) 936 F.2d 466, 468.)

The superior court then tried the res judicata question, separately (Code Civ.Proc., § 597). After receiving evidence about the history of the two cases as summarized above, the court issued its statement of decision to the effect that the present case was barred by res judicata. The court held that although plaintiff had not been a party to the EEOC case, in prosecuting and settling it the EEOC had been in privity with her, because it had sued Merle Norman as her representative, she had been aware of the litigation, and her counsel had participated in discovery proceedings therein. The judgment under appeal followed.

II.

Res judicata, and its component of collateral estoppel, foreclose relitigation of a cause of action or issue that was determined in a prior case, involving the same party or one in privity to it, and which ended in a final judgment on the merits. (E.g., County of Los Angeles v. County of Los Angeles Assessment Appeals Bd. (1993) 13 Cal.App.4th 102, 108, 16 Cal.Rptr.2d 479.) In the present case, Merle Norman invokes res judicata itself, i.e., "claim preclusion." 4

Plaintiff first preemptively contends that the ADEA precludes a judgment obtained by the EEOC from operating as res judicata to bar a claimant's action which was commenced before the EEOC's. Plaintiff bases this contention on several cases that have opined that under the ADEA, cases prosecuted and judgments obtained by the EEOC (or its enforcement predecessor, the Secretary of Labor 5) do not preclude the continuation of such prior actions. (E.E.O.C. v. Pan American World Airways, Inc. (9th Cir.1990) 897 F.2d 1499, 1507, fns. 7, 8; E.E.O.C. v. Eastern Airlines, Inc. (11th Cir.1984) 736 F.2d 635, 639-641; Dunlop v. Pan American World Airways, Inc. (2d Cir.1982) 672 F.2d 1044, 1049, fn. 7.) These decisions, in turn, relied on the prevailing interpretation of two sections of the ADEA, which provide that the commencement of an EEOC action "terminate[s]" the right to bring a private action under the ADEA (29 U.S.C. §§ 626(c)(1)), and that such commencement "shall supersede any State action." (29 U.S.C. § 633(a); see fn. 3, ante.)

The cited cases do lend ponderable support to plaintiff's position. 6 Moreover, as will appear, the ADEA's apparent intent that EEOC actions not displace previously commenced private actions bears significantly on an element of res judicata in a case such as this--privity. But there also are substantial contrary considerations. None of the...

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