Wayte v. Rollins International, Inc.

Decision Date07 June 1985
Citation215 Cal.Rptr. 59,169 Cal.App.3d 1
CourtCalifornia Court of Appeals Court of Appeals
PartiesWalter F. WAYTE, Jr., et al., Plaintiffs and Appellants, v. ROLLINS INTERNATIONAL, INC., et al., Defendants and Appellants. Civ. 68832.

Shield & Smith and Ingall W. Bull, Jr., Nicholas W. Hornberger, and Kirk H. Nakamura, Los Angeles, for plaintiffs and appellants.

Morgan, Lewis & Bockius and Thomas A. Masterson, Kenneth B. Wright, Richard F. McMenamin, and Victoria B. Bonebakker, Los Angeles, for defendants and appellants.

DALSIMER, Associate Justice.

This case presents the issue whether a plaintiff may recover damages in state court for intentional infliction of emotional distress resulting from wrongful termination of an employee in 1975 for assertion in 1974 of his rights under an employee benefit plan governed by the Employee Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. § 1001 et seq.). We have concluded that he may.

STATEMENT OF THE CASE

Plaintiff Walter F. Wayte, Sr., was employed by defendant Rollins Leasing Corporation (Leasing), a subsidiary of RLC Corporation (RLC) (formerly Rollins International, Inc.). Mr. Wayte, Sr., his wife, Christine Wayte, and their paraplegic son, Walter F. Wayte, Jr., sued the employer, the parent corporation, and RLC Corporation Voluntary Employees Beneficiary Association (VEBA) for damages caused by denial of two claims for medical benefits made on behalf of Mr. Wayte, Jr., and by the alleged wrongful termination of Mr. Wayte, Sr.'s employment occurring shortly after the last of these claims was made. VEBA is a medical benefits trust governed by ERISA.

The action was tried upon the first amended complaint, which alleged breach of contract, intentional infliction of emotional distress, fraud, bad faith denial of benefits under an employee benefit plan, and wrongful termination.

The jury determined by way of general verdicts: (1) that Mr. Wayte, Jr., was entitled to $17,335 in compensatory damages and nothing in punitive damages in his action against VEBA; (2) that Mr. Wayte, Sr., and Mrs. Wayte should not recover anything in their action against VEBA; (3) that Mr. Wayte, Jr., was not entitled to any compensatory damages in his action against Leasing but should recover from Leasing $50,000 in punitive damages; (4) that Mrs. Wayte should recover from Leasing $52,000 in compensatory damages and $50,000 in punitive damages; (5) that Mr. Wayte, Sr., should recover from Leasing $154,000 in compensatory damages and $50,000 in punitive damages; (6) that Mr. Wayte, Jr., should recover from RLC $258,400 in compensatory damages and $200,000 in punitive damages; (7) that Mr. Wayte, Sr., should recover from RLC $208,000 in compensatory damages and $950,000 in punitive damages; and (8) that Mrs. Wayte should recover from RLC $104,000 in compensatory damages and $200,000 in punitive damages. By way of special verdict the jury indicated that the amount of medical expenses as to which reimbursement was proper was $17,335 and that this amount was not included in any of the verdicts other than the verdict of Mr. Wayte, Jr., against VEBA.

The trial court refused to enter the verdict of $50,000 in punitive damages in favor of Mr. Wayte, Jr., and against Leasing because it found that the jury had determined by its general verdict that Leasing had not caused Mr. Wayte, Jr., any damages. Mr. Wayte, Jr., appealed from that portion of the judgment that provides that he shall not recover anything from Leasing.

Defendants thereafter filed a motion for judgment notwithstanding the verdict and motions for new trial. The motion for judgment notwithstanding the verdict and the motions of Leasing and VEBA for new trial were denied. The motion of RLC for new trial was denied upon the consent of plaintiffs to a reduction of the amount of damages awarded against that defendant. 1

Defendants appealed from the modified judgment and from the order denying the motion for a judgment notwithstanding the verdict. Plaintiffs filed a cross-appeal seeking restoration of the original verdicts against RLC. An action based on the events giving rise to the instant case has been filed in the federal district court (Wayte et al. v. Rollins Leasing Corp. et al. (C.D.Cal.) Dock. No. CV 80-5401-KN) and has been stayed pending the final outcome of the present litigation.

In this appeal Mr. Wayte, Jr., contends that the court erred in refusing to enter the verdict for punitive damages against Leasing. He further contends that the court should have awarded him attorney fees against defendants either as an element of damages or as an item of costs.

Defendants contend that the court had no jurisdiction over any of the causes of action asserted against them, maintaining that essential acts upon which those causes of action were premised occurred after January 1, 1975, the effective date of the section of ERISA providing for supersession of state law relating to employee benefit plans. (See 29 U.S.C. § 1144; 29 U.S.C. § 1002(1); 29 U.S.C. § 1002(3).) Alternatively, they contend that reversal of the verdicts against RLC and Leasing is required because those verdicts almost certainly include damages for retaliatory wrongful termination occurring as a result of an employee's claim of benefits under an ERISA trust, a cause of action generally within the exclusive jurisdiction of the federal courts. (29 U.S.C. §§ 1132(e)(1), 1140, 1144(b)(1).) They further contend that no cause of action was stated by Mrs. Wayte against any of the defendants. Finally, defendants contend that the court erred in allowing extensive testimony about Mr. Wayte, Jr.'s paraplegic condition, that certain instructions were erroneously given and others were erroneously refused, and that the verdicts against RLC and Leasing are the product of passion and prejudice.

Plaintiffs contend that the court abused its discretion by conditionally granting RLC's motion for new trial.

FACTS

Viewed in the light most favorable to the judgment, the evidence adduced at trial established the following: On March 17, 1969, Mr. Wayte, Sr., was employed by Spina Truck Leasing, Inc. (Spina), in Pennsylvania. The benefits of his employment included medical insurance for Mr. Wayte, Jr., under a group medical policy between the employer and Liberty Life Assurance Company of Boston (Liberty). That policy provided that an unmarried child between the ages of 19 and 23 was an eligible dependent "if attending school full-time" and financially dependent on the employee. It was further provided that, if the child was physically incapable of earning his living, coverage could be extended beyond the stated ages if the employee presented proof of the child's incapacity to the company within 31 days of the child's attainment of the age of 23. When Mr. Wayte, Sr., became employed by Spina, Mr. Wayte, Jr., was 22 years of age, attending vocational school full time, and financially dependent on Mr. Wayte, Sr. It was stipulated that he was physically incapable of earning his living at that time and thereafter. Both Spina and Liberty were advised of Mr. Wayte, Jr.'s physical disability before he attained the age of 23, and Liberty acknowledged that coverage would continue.

In 1970 Rollins International (now RLC) (the parent company) negotiated for the takeover of Spina. Mr. Don Lund, vice-president of personnel and manager of the group insurance program at the parent company, told the employees of Spina that their group medical coverage under the parent company would be the same or better than it currently was. Mr. Wayte, Sr., informed Mr. Lund of Mr. Wayte, Jr.'s physical condition, and Mr. Lund personally assured him that his son would remain covered if Mr. Wayte, Sr., worked for Leasing (a subsidiary of the parent company) after the takeover.

Because of these representations, Mr. Wayte, Sr., accepted employment with Leasing. During the employment by Leasing, the Liberty policy was replaced with a policy by New York Life Insurance Company that had more restrictive terms regarding eligibility of dependents to be covered. In reliance on Mr. Lund's representations, Mr. Wayte, Sr., canceled his Blue Shield insurance policy covering Mr. Wayte, Jr., when he was transferred in June 1973 to California.

In August 1972 the New York Life group medical policy was replaced by an employee medical benefit trust administered by VEBA. The booklet explaining the new medical plan provided: "Your dependents who may be covered are your spouse and each unmarried child from birth until his 19th birthday. If a child is still attending school full-time, is unmarried, and has the same permanent address as you do, you In April 1974, while the employee medical benefit trust was still in effect, a medical claim was submitted to VEBA on Mr. Wayte, Jr.'s behalf. The claim was initially denied on the ground that Mr. Wayte, Jr., was not covered due to his age, but it was ultimately paid. In July 1974 James Burns, a manager of the parent company's insurance department, assured Mr. Wayte, Sr., that his son was indeed covered and that he would not encounter any such problems in the future.

                may continue him as your dependent until his 24th birthday.  A child who is handicapped so that he must remain dependent on you may continue to be covered beyond age 23."   The booklet also stated:  "This booklet is designed to outline the benefits for which you are eligible and does not create or confer any contractual or other rights.  All rights with respect to the benefits of a member as provided by the insured portion of the Program will be governed solely by the Group Master Policies issued by Confederation Life Association."   Mr. Wayte, Sr., was never provided with any copy of the master policies
                

Mr. Wayte, Jr., was hospitalized between May and July 1974, and a second claim was submitted on his behalf. Although checks were prepared for payment of the claim, John Carlisle Peet, head of the...

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