69 Cal.App.5th 434
Cal. Ct. App.2021Background:
- M&N Financing (owned by Mahmood Nasiry) bought retail installment sales contracts from used-car dealers and serviced them.
- In 2012 Nasiry created a risk-assessment spreadsheet that assigned points for purchaser gender: female purchasers (1 point) reduced the price M&N paid (1% less), female coborrowers (0.5 point) reduced it 0.5%.
- M&N purchased many contracts with female borrowers; it stopped using gender as a factor after a Department of Fair Employment and Housing (Department) investigation.
- The Department sued alleging violations of Civil Code §§51, 51.5 and FEHA; the trial court granted summary adjudication for the Department on §§51/51.5 and awarded statutory damages (~$6.2M), but granted judgment on the pleadings dismissing FEHA causes (fifth–seventh).
- An M&N employee (Etemadi) repeatedly complained about the spreadsheet, alleged coercion and workplace harm; those allegations underpinned the Department’s FEHA claims on appeal.
- The Court of Appeal affirmed liability and damages under §§51/51.5, reversed the dismissal of the FEHA §12940(i) (coercion) claim, and affirmed dismissal of the FEHA §12940(k) (failure-to-prevent) claims.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Department standing to sue under FEHA and to pursue Civil Code claims | Department authorized by FEHA statutes to file on its own and on behalf of aggrieved groups/classes | Department lacked standing because no individual filed a verified complaint first | Department has standing; statutes allow the Department to file without a prior individual complaint |
| Whether defendants’ use of gender in pricing contracts violated Civil Code §§51 and 51.5 and caused injury | Per se sex discrimination; statutory minimum damages apply even without proof of actual damages | Discrimination was "abstract"; purchasers were not injured or patrons of defendants | Conduct was discriminatory under §§51/51.5; injury is per se and statutory damages appropriate |
| Whether §§51/51.5 apply where defendant bid on and serviced contracts (not negotiating with purchasers) | Unruh/§51.5 reach unequal treatment in business practices; dealerships sold contracts and purchasers became patrons when M&N serviced contracts | Liability limited to direct dealings; purchasers did not transact with M&N | §§51/51.5 apply—purchase and servicing made female borrowers patrons and dealerships were harmed by reduced prices |
| Nasiry’s individual liability; defense under Civ. Code §51.6 (Gender Tax Repeal); and constitutionality of statutory damages | Dept argued Nasiry ordered and created the discriminatory spreadsheet; §51.6 does not immunize Unruh/§51.5 claims; damages not excessive given culpability and ability to pay | Nasiry claimed lack of knowledge precludes individual liability; §51.6(c) authorized price differences; award is an excessive fine | Nasiry individually liable for ordering and implementing the spreadsheet; §51.6(c) does not shield Unruh/§51.5 liability; statutory damages were not unconstitutionally excessive |
| Whether FEHA §12940(i) (coerce/compel) and §12940(k) (failure-to-prevent) causes were properly dismissed on the pleadings | Employees coerced to commit unlawful discrimination are "aggrieved" and Department may sue on their behalf; employer had a duty under §12940(k) | Defendants argued employees were not aggrieved and §12940(k) does not reach non-employee discrimination or coercion alleged under §12940(i) | Reversed dismissal of §12940(i) claim — coerced employees are aggrieved and claim may proceed; affirmed dismissal of §12940(k) claims — (k) does not encompass violations of (i) in the manner alleged |
Key Cases Cited
- Angelucci v. Century Supper Club, 41 Cal.4th 160 (Unruh Act protects patrons from arbitrary sex discrimination; statutory damages may be per se)
- Koire v. Metro Car Wash, 40 Cal.3d 24 (Unruh Act to be liberally construed; proscribes unequal treatment in business practices)
- White v. Square, Inc., 7 Cal.5th 1019 (plaintiff must be victim of discriminatory act; injury requirement explained)
- Rotary Club of Duarte v. Board of Directors, 178 Cal.App.3d 1035 (association-based discrimination actionable under §51.5)
- North Coast Women’s Care Medical Group, Inc. v. Superior Court, 44 Cal.4th 1145 (liability for discrimination extends to employees who engage in discriminatory conduct)
- United States v. Bajakajian, 524 U.S. 321 (factors for assessing whether a fine is unconstitutionally excessive)
- Hale v. Morgan, 22 Cal.3d 388 (ignorance of law is not a defense to statutory liability)