Arave v. Merrill Lynch, Pierce, etc.
E061677
| Cal. Ct. App. | Jan 2, 2018Background
- J. Brent Arave, a former Merrill Lynch managing director and LDS Church member, sued Merrill Lynch/Bank of America, his supervisor Holsinger, and HR manager Anderson under FEHA and Labor Code for religious discrimination, harassment, retaliation, whistleblower protection, failure to prevent discrimination, wrongful termination (later dismissed), and unpaid wages. Jury trial followed summary judgment dismissals on some claims.
- Dispute arose from anonymous employee satisfaction survey comments (late 2010) alleging favoritism toward Mormons and BYU hires in Arave’s complex; management reviewed the comments and asked Arave to address perceptions with employees.
- Arave refused (contending the comments were harassing toward his religion), sent a March 17, 2011 demand letter alleging discrimination, and resigned March 29, 2011. He sought damages including unpaid accrued vacation.
- At trial the jury found for defendants on all claims that went to trial (no adverse employment action, no harassment, no retaliation, no accrued vacation). Trial court awarded defendants costs ($54,545.18), expert fees ($29,097.50) under Code Civ. Proc. § 998, and $97,500 in attorney fees on the wage claim; denied FEHA attorneys’ fees to defendants as FEHA claims were not frivolous.
- On appeal, the Court of Appeal affirmed most rulings but (1) reversed the awards of ordinary costs and expert fees to defendants under FEHA principles and Code Civ. Proc. § 998 as inconsistent with FEHA cost-shifting, remanding for apportionment as to the wage claim; and (2) reversed the attorney-fee award on the wage claim for lack of a frivolousness finding under amended Lab. Code § 218.5, remanding for that determination.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Admissibility of demand letter (prelitigation settlement) | Letter was offer of compromise and inadmissible under Evid. Code § 1154 | Letter was an admission of full entitlement, not an offer to compromise | Admitted: court properly found letter asserted plaintiff’s full demand, not a compromise, so admissible |
| Jury instruction that survey comments alone cannot establish employer liability | Instruction could confuse jury and prevent consideration of comments | Instruction clarified defendants cannot be liable solely because comments existed; comments still admissible for evaluating defendants’ response | No error: instruction lawful and not misleading |
| Sufficiency of evidence re: adverse employment action (failure to interview for promotion) | Refusal to consider him for large Orange County post was an adverse action as a matter of law | Decision not to consider was based on business reasons (survey/performance) and not causally related to protected activity | Substantial evidence supports verdict for defendants; no adverse action proven for discrimination/retaliation claims |
| Award of ordinary costs and expert witness fees under FEHA / § 998 | Arave: FEHA precludes awarding such costs to prevailing defendants when claims are nonfrivolous | Defendants: § 998 authorizes awarding expert fees after rejected offer despite FEHA | Court: FEHA § 12965(b) (per Chavez/Williams) limits awards to prevailing FEHA defendants to cases that are frivolous; § 998(c) cannot override FEHA; reversed awards and remanded for apportionment to wage claim |
| Attorney fees on wage claim (Lab. Code § 218.5) | Fees awarded though court never found wage claim frivolous | Defendants: entitled to fees as prevailing party defending wage claim | Reversed: Legislature amended § 218.5 to permit fees only if suit brought in bad faith/frivolous; trial court must determine frivolousness on remand |
| Summary judgment for Anderson on harassment claim | Anderson’s conduct (talking points, directing meeting/apology) constituted harassment | Anderson’s acts were routine personnel-management communication and not severe/pervasive; no evidence she demanded apology or engaged in actionable harassment | Affirmed: communications were ordinary managerial actions and, even taken as alleged, were not sufficiently severe or pervasive to constitute harassment |
Key Cases Cited
- People ex rel. Lockyer v. Sun Pacific Farming Co., 77 Cal.App.4th 619 (2000) (standard of review for evidentiary rulings; abuse of discretion)
- Saxena v. Goffney, 159 Cal.App.4th 316 (2008) (prejudice standard for evidentiary error)
- Chavez v. City of Los Angeles, 47 Cal.4th 970 (2010) (FEHA defendants recover fees only if plaintiff’s claims frivolous)
- Williams v. Chino Valley Independent Fire Dist., 61 Cal.4th 97 (2015) (FEHA defendants cannot recover ordinary costs under CCP § 1032 unless claims objectively without foundation)
- Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978) (Title VII standard for awarding fees to prevailing defendants)
- Moving Picture Etc. Union v. Glasgow Theaters, Inc., 6 Cal.App.3d 395 (1970) (distinguishing admissions from offers of compromise under Evid. Code § 1154)
- Holman v. Altana Pharma US, Inc., 186 Cal.App.4th 262 (2010) (construing § 998 expert-fee awards in employment cases)
- Seever v. Copley Press, Inc., 141 Cal.App.4th 1550 (2006) (upholding § 998 expert-fee awards; discussed means test in FEHA context)
- Sviridov v. City of San Diego, 14 Cal.App.5th 514 (2017) (addressing § 998 in FEHA cases; reached a different result on § 998 interplay)
- Yanowitz v. L’Oreal USA, Inc., 36 Cal.4th 1028 (2005) (definition and scope of adverse employment action under FEHA)
- Guz v. Bechtel Nat’l, Inc., 24 Cal.4th 317 (2000) (use of federal precedent in interpreting California employment law)