Arave v. Merrill Lynch, Pierce, Fenner & Smith, Inc.
19 Cal. App. 5th 525
| Cal. Ct. App. 5th | 2018Background
- Plaintiff J. Brent Arave, a Mormon former Merrill Lynch/Bank of America managing director, sued defendants (Merrill Lynch, Bank of America, supervisor Holsinger, HR manager Anderson) under FEHA for religious discrimination, harassment, retaliation, failure to prevent discrimination, and under the Labor Code for unpaid wages and whistleblower retaliation.\
- The dispute arose from an anonymous 2010 employee survey alleging Arave favored fellow church members; management asked Arave to address the perceptions and (according to Arave) to apologize for conduct tied to his religion.\
- Arave sent a March 17, 2011 prelitigation demand letter seeking substantial monetary relief, later resigned on March 29, 2011, and filed suit in May 2011.\
- After summary judgment disposed of some claims, a five-week jury trial resulted in verdicts for defendants on all claims that reached the jury; Arave dismissed one claim voluntarily.\
- The trial court awarded defendants ordinary costs ($54,545.18), expert witness fees ($29,097.50) under Code Civ. Proc. § 998, and $97,500 in attorney fees for defense of the wage claim; the court denied FEHA-related attorney fees to defendants as the FEHA claims were not frivolous.\
- On appeal the court affirmed most rulings but reversed the awards of ordinary costs and expert witness fees as inconsistent with FEHA, and reversed the wage-fee award because the court did not apply the amended Labor Code § 218.5 frivolous‑claim standard; remanded for apportionment and further findings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Admissibility of prelitigation demand letter | Letter was a settlement offer and inadmissible under Evid. Code § 1154 | Letter was an admission stating full measure of demand, not a compromise | Letter admissible; court found letter asserted plaintiff's full entitlement and, even if error, no prejudice |
| Judicial / evidentiary bias and misconduct | Trial judge and defense counsel acted prejudicially, denying fair trial | Conduct was within trial court discretion to control questioning and manage time | No reversible judicial bias or prejudicial conduct; rulings and admonitions were not so prejudicial as to deny fair trial |
| Award of attorney fees to defendants under FEHA (Gov. Code § 12965(b)) | FEHA does not permit shifting of fees absent frivolous claim; plaintiff's FEHA claims were nonfrivolous | Defendants sought fees; argued plaintiff’s claims lacked foundation and some evidence contradicted plaintiff | Trial court did not abuse discretion in finding FEHA claims not frivolous; defendants not entitled to FEHA attorney fees |
| Recoverability of ordinary costs and expert witness fees under Code Civ. Proc. § 998 in FEHA case | Section 998 permits expert-fee awards despite FEHA; settlement policy favors § 998 recovery | FEHA’s specific fee/cost limitations control and prohibit awarding costs/experts absent frivolity | FEHA § 12965(b) controls and forbids awarding ordinary costs and expert witness fees under § 998 for nonfrivolous FEHA claims; reversed those awards and remanded for apportionment to the wage claim |
| Attorney fees on wage claim (Lab. Code § 218.5) | Trial court properly apportioned and awarded fees for defense of wage claim | Defendants argued entitlement to fees under prevailing-party principles | Reversed: after Jan 1, 2014 amendment fees available only if claim was brought in bad faith / frivolous; remanded for court to determine frivolousness and appropriate fee award |
Key Cases Cited
- Moving Picture Etc. Union v. Glasgow Theaters, Inc., 6 Cal.App.3d 395 (distinguishing admissions from offers of compromise)
- Volkswagen of America, Inc. v. Superior Court, 139 Cal.App.4th 1481 (statements that assert full entitlement are not offers of compromise)
- Zhou v. Unisource Worldwide, 157 Cal.App.4th 1471 (de novo review on statutory construction questions)
- People v. Snow, 30 Cal.4th 43 (standard for evaluating claimed judicial misconduct)
- Chavez v. City of Los Angeles, 47 Cal.4th 970 (FEHA fee-shifting interpreted against awarding fees to prevailing defendants except for frivolous claims)
- Williams v. Chino Valley Independent Fire Dist., 61 Cal.4th 97 (prevailing FEHA defendant cannot recover ordinary costs unless claim was objectively without foundation)
- Holman v. Altana Pharma US, Inc., 186 Cal.App.4th 262 (discussing § 998 expert-fee awards in employment cases)
- Murillo v. Fleetwood Enterprises, Inc., 17 Cal.4th 985 (§ 998 must be read with § 1032 and other statutory exceptions)
- AFSCME v. County of Nassau, 96 F.3d 644 (federal precedent: prevailing Title VII defendant may recover expert fees only if plaintiff's claim was frivolous)
- Seever v. Copley Press, Inc., 141 Cal.App.4th 1550 (approved § 998 expert-fee award in FEHA context though not addressing Williams exception)