DEPARTMENT OF FAIR EMPLOYMENT AND HOUSING v. M&N FINANCING CORPORATION et al.
B298901
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FIVE
Filed 9/27/21
CERTIFIED FOR PARTIAL PUBLICATION*
(Los Angeles County Super. Ct. No. BC591206)
APPEALS from a judgment of the Superior Court of Los Angeles County, John Shepard Wiley and Amy D. Hogue, Judges. Affirmed in part; reversed in part.
Xavier Becerra and Rob Bonta, Attorneys General, Matthew Rodriguez, Acting Attorney General, Michael L. Newman, Senior Assistant Attorney General, Susan E. Slager, R. Erandi-Zamora-Graziano, and Brian J. Bilford, Deputy Attorneys General, for Plaintiff and Appellant.
Ivan L. Tjoe; Ropers Majeski and Terry Anastassiou for Defendant and Appellant M&N Financing Corporation.
Lewis Brisbois Bisgaard & Smith, Roy G. Weatherup, Caroline E. Chan, and Allison A. Arabian for Defendant
I. INTRODUCTION
Defendants M&N Financing Corporation (M&N) and Mahmood Nasiry operated a business that purchased retail installment sales contracts (contracts) from used car dealerships. In deciding how much to pay for the
The Department of Fair Employment and Housing (the Department) filed a complaint that alleged numerous causes of action. The Department moved for summary adjudication. The trial court entered judgment in favor of the Department on the first and second causes of action, which alleged violations of the Unruh Civil Rights Act (
II. BACKGROUND
A. Factual Background2
Nasiry is the owner of M&N, a California corporation that purchased contracts from used car dealerships and thereafter serviced them by collecting monthly installment payments from the car purchasers and contacting those purchasers who failed to make payments.
In deciding whether and how much to bid on a contract, M&N utilized a risk assessment spreadsheet (spreadsheet) that Nasiry created in 2012. Based on Nasiry‘s 10 years of experience with loan defaults, he believed that there was “a greater risk of default for female borrowers.” Thus, Nasiry included the gender of the used car purchaser as one of the 18 to 20 specific factors on the spreadsheet. For gender, M&N employees, at Nasiry‘s direction, assessed
M&N purchased approximately half of the contracts that it reviewed. From October 17, 2012, to July 2, 2014, M&N purchased 1,037 contracts with female borrowers from 517 car dealerships.
In 2014, the Department initiated an investigation of M&N‘s business practices, following which M&N ceased to use gender as a factor in its spreadsheet.
B. Pleadings
The Department filed its initial complaint in 2015. On February 16, 2016, the Department filed the operative second amended complaint, alleging in the first and second causes of action violations of
On July 25, 2016, the Department filed a motion for summary adjudication on the first and second causes of action. On September 14, 2016, the trial court granted summary adjudication on the first and second causes of action, ruling that defendants’ conduct violated
On November 4, 2016, the Department filed a motion for an injunction and monetary relief in the amount of $6,216,000, the statutory minimum penalty for 1,554 violations4 of
On May 24, 2019, the trial court entered judgment. The Department and defendants appealed.
III. DISCUSSION
A. Defendants’ Appeal
1. Applicable Law
“A grant of summary adjudication is appropriate if there are no triable issues of material fact and the moving party is entitled to judgment as a matter of law. [Citations.] A plaintiff moving for summary adjudication meets its burden if it proves each element of the cause of action. [Citation.] ‘[I]f a plaintiff who would bear the burden of proof by a preponderance of evidence at trial moves for summary judgment, he must present evidence that would require a reasonable trier of fact to find any underlying material fact more likely than not—otherwise, he would not be entitled to judgment as a matter of law, but would have to present his evidence to a trier of fact.’ [Citation.] If the plaintiff meets its burden, the defendant must set forth specific facts showing a triable issue of material facts exist.” (Quidel Corporation v. Superior Court of San Diego County (2020) 57 Cal.App.5th 155, 163–164; see
The Unruh Civil Rights Act (Unruh Act) provides: “All persons within the jurisdiction of this state are free and equal, and no matter what their sex . . . are entitled to the full and equal accommodations, advantages, facilities, privileges, or services in all business establishments of every kind whatsoever.” (
2. Analysis
Here, defendants do not contest that they used gender in setting the price they paid for contracts or that they paid less for contracts with female borrowers than for contracts with male purchasers. We have little trouble concluding that such conduct constitutes sex discrimination within the meaning of
Rather than dispute the lack of a triable issue of material fact regarding the nature of their business practice, defendants contend that the judgment against them must be vacated because: (1) the Department did not have standing to sue; (2) the female borrowers and car dealerships did not suffer an injury; and (3) the female borrowers were not “clients, patrons, or customers of . . . defendants” within the meaning of the Unruh Act. Nasiry additionally argues that (1) he cannot be individually liable for M&N‘s conduct because he did not know that his conduct was illegal; (2) defendants’ conduct was authorized by
a. Standing
The Department is authorized pursuant to
Defendants contend that because there is no evidence that any female borrower or car dealership filed a complaint with the Department, the Department lacked standing to sue. In defendants’ view,
Defendants also assert that because they ceased their discriminatory practice, the Department lacked standing under
b. Injury
Defendants next assert that their business practice, even if discriminatory, did not cause any injury and cite White, supra, 7 Cal.5th 1019 in support. In White, our Supreme Court held: “[W]e have acknowledged that ‘a plaintiff cannot sue for discrimination in the abstract, but must actually suffer the discriminatory conduct.’ (Angelucci, supra, 41 Cal.4th at p. 175.) In essence, an individual plaintiff has standing under the [Unruh] Act if he or she has been the victim of the defendant‘s discriminatory act.’ (Ibid. [‘plaintiff must be able to allege injury—that is, some “invasion of the plaintiff‘s legally protected interests“].‘)” (White, supra, 7 Cal.5th at p. 1025.)
We reject defendants’ characterization of the discrimination here as “abstract.” When bidding on and purchasing contracts, defendants paid less for those with female purchasers and female borrowers and did so based solely on gender. Such conduct constitutes an invasion of the female borrowers’ legally protected interest to be free from arbitrary sex discrimination, by rendering their contracts less valuable than those with male purchasers, and violates the car dealerships’ rights of association with female borrowers by lowering the price they were able to obtain for contracts with such borrowers.
Having demonstrated that defendants’ conduct was directly discriminatory to these victims, the Department was not additionally required to demonstrate actual injury because it sought only statutory minimum damages. “[T]he [Unruh] Act renders ‘arbitrary sex discrimination by businesses . . . per se injurious.’ (Koire, supra, 40 Cal.3d at p. 33.) . . . ‘[Civil Code] [s]ection 51 provides that all patrons are entitled to equal treatment. [Civil Code] [s]ection 52 provides for minimum statutory damages . . . for every violation of [Civil Code] section 51, regardless of the plaintiff‘s actual damages.’ ([Koire, supra, 40 Cal.3d at p. 33, fn. omitted].)” (Angelucci, supra, 41 Cal.4th at p. 174.)
c. Civil Code sections 51 and 51.5 apply to defendants’ conduct
Defendants next assert that they did not discriminate within the meaning of
Accordingly, defendants’ business practices fall within the scope of conduct proscribed by
d. Nasiry‘s knowledge of unlawfulness
Nasiry contends he cannot be found individually liable because he did not believe that M&N‘s conduct violated the Unruh Act. We disagree. Nasiry created the spreadsheet used by M&N to engage in discriminatory practices and ordered its use. He therefore is responsible for the violations of
e. Civil Code section 51.6
Nasiry additionally asserts that his conduct was authorized by
f. Excessive damages
Nasiry also argues that $6,212,000 in statutory damages is unconstitutional as an excessive fine. In analyzing whether the damages here were unconstitutionally excessive, we consider the four factors enumerated in United States v. Bajakajian (1998) 524 U.S. 321 (Bajakajian): “(1) the defendant‘s culpability; (2) the relationship between the harm and the penalty; (3) the penalties imposed in similar statutes; and (4) the defendant‘s ability to pay.” (People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2005) 37 Cal.4th 707, 728.) “We review de novo whether a fine is constitutionally excessive and therefore violates the Eighth Amendment‘s Excessive Fines Clause.’ [Citations.] ‘[F]actual findings made by the district courts in conducting the excessiveness inquiry, of course, must be accepted unless clearly erroneous.’ [Citation.]” (Sweeney v. California Regional Water Quality Control Bd. (2021) 61 Cal.App.5th 1093, 1136–1137.) “We review the ‘underlying factual findings . . . for substantial evidence, viewing the record in the light most favorable to the ruling.” (Lent v. California Coastal Com. (2021) 62 Cal.App.5th 812, 857.)
Our review of the four Bajakajian factors demonstrates that the statutory damages were not excessive. First, defendants’ level of culpability supports the imposition of a heavy fine: defendants were perpetrators of sex discrimination who maintained that their unequal treatment of female borrowers was justified by the higher likelihood that women would default on their loans. Second, the relationship between the harm and the penalty is strong: defendants harmed female borrowers and the car dealerships that entered into contracts with them, and were fined for each discriminatory transaction. (See White, supra, 7 Cal.5th at p. 1025 [“The purpose of the [Unruh] Act is to create and preserve ‘a nondiscriminatory environment in California business establishments by “banishing” or “eradicating” arbitrary, invidious discrimination by such establishments“].) As to the third factor, although defendants do not identify similar statutes, a statutory minimum penalty for each violation is generally not unconstitutional. (See Ojavan Investors, Inc. v. California Coastal Com. (1997) 54 Cal.App.4th 373, 397 [“Within the civil penalty context, . . . a provision authorizing the imposition of a minimum civil penalty per violation, with each day constituting a separate violation, could not because of its civil character be subject to challenge under the constitutional provisions prohibiting excessive fines““].)
Finally, the record supports an inference that defendants were able to pay the damages. Carl Saba, a forensic accountant hired by the Department, opined that based on his review of defendants’ financial information, defendants had the ability to pay “either a significant portion of, or all of . . . [a] $7.2 million judgment in favor of [the Department. . . .]” Saba noted that M&N‘s cash balance for fiscal years 2012 and 2013 totaled $5.98 million and $9.12 million, respectively, and, based on his evaluation of M&N‘s operating expenses, he believed that the excess cash balance would be between $4.4 million and $7.5 million. Further, Saba identified two residential properties that Nasiry appeared to have obtained, debt-free, in 2015 and 2017, for $3.150 million and $1.725 million. Finally, Saba opined that, based on his review of financial statements, if M&N continued to perform services required over the term of the remaining contracts beyond 2013, “it would earn between another $10.71 and $9.1 million in contracts receivable respectively.”
We therefore hold the trial court properly granted summary adjudication on the Department‘s first and second causes of action against defendants.
B. The Department‘s Cross-Appeal
On cross-appeal, the Department contends that the trial court erred by granting M&N‘s motion for judgment on the pleadings as to its fifth, sixth, and seventh causes of action.
1. Background
“““The standard for granting a motion for judgment on the pleadings is essentially the same as that applicable to a general demurrer, that is, under the state of the pleadings, together with matters that may be judicially noticed, it appears that a party is entitled to judgment as a matter of law.” [Citation.]” (Southern California Edison Co. v. City of Victorville (2013) 217 Cal.App.4th 218, 227.) We recite the relevant allegations from the second amended complaint as follows.
When Nasiry created the spreadsheet in 2012, Khayyam Etemadi, then an M&N employee, told Nasiry that it was illegal to use gender to assign an additional risk point to women. Nasiry refused to remove gender as a factor in assessing risk and asserted that all banks engaged in such conduct. Etemadi complained again when the spreadsheet was placed on employee laptops, and again in November 2013. Nasiry refused each time to remove gender as a factor on the spreadsheet.
During the course of Etemadi‘s employment with M&N, Nasiry threatened to “ruin him financially” and directed him to do his job or be fired, thus coercing him to engage in conduct that was discriminatory and unlawful.
After Etemadi filed a complaint with the Department, M&N falsely reported to various credit agencies that Etemadi had failed to repay a loan from M&N. Etemadi left M&N in March 2014 due to stress at work.
2. Fifth, Sixth, and Seventh Causes of Action
In the operative complaint, the Department alleged for the fifth cause of action that M&N “knowingly compelled and coerced its employees to engage in practices that violated” FEHA and
As to the sixth and seventh causes of action, the Department alleged, on behalf of all current and former M&N employees and itself, respectively, that M&N failed to take all reasonable steps to prevent discrimination from occurring, in violation of
3. Motion for Judgment on the Pleadings
On October 9, 2018, M&N moved for judgment on the pleadings as to the fifth, sixth, and seventh causes of action.6 M&N argued that the fifth through seventh causes of action failed to state a claim because Etemadi did not exhaust his administrative remedies. M&N also argued that the sixth and seventh causes of action failed because the Department did not allege an employment discrimination cause of action under FEHA.
On January 15, 2019, the trial court granted M&N‘s motion, ruling that
4. FEHA
“In enacting the FEHA, the Legislature spoke at length about its purposes.
”
“In addition,
Relevant here are subdivisions
5. Analysis
We review a trial court‘s decision on a motion for judgment on the pleadings de novo. (People ex rel. Harris v. Pac Anchor Transportation, Inc. (2014) 59 Cal.4th 772, 777.) “““Our role in interpreting statutes is to ascertain and effectuate the intended legislative purpose. [Citations.] We begin with the text, construing words in their broader statutory context and, where possible, harmonizing provisions concerning the same subject.” [Citation.] In doing so, we give “the words their usual and ordinary meaning [citation], while construing them in light of the statute as a whole and the statute‘s purpose [citation].” [Citation.] Our inquiry ends “[i]f this contextual reading of the statute‘s language reveals no ambiguity . . . .” [Citation.]” (Lee v. Kotyluk (2021) 59 Cal.App.5th 719, 729.)
a. Section 12940, subdivision (i)
The trial court ruled, and we agree, that it is unlawful under
An “aggrieved” party is a person who has standing to sue. (See, e.g.,
” ‘To have standing, a party must be beneficially interested in the controversy; that is, he or she must have “some special interest to be served or some particular right to be preserved or protected over and above the interest held in common with the public at large.” [Citation.] The party must be able to demonstrate that he or she has some such beneficial interest that is
We hold that employees who are coerced by their employer to violate
b. Section 12940, subdivision (k)
The Department also asserts that the trial court erred by dismissing its sixth and seventh causes of action for violation of
In Taylor,
By contrast,
The Department therefore failed to allege facts demonstrating that defendants violated
The judgment is reversed as to the dismissal of the fifth cause of action and the matter is remanded for further proceedings. The judgment is otherwise affirmed. The Department is entitled to recover costs pertaining to M&N‘s and Nasiry‘s appeals. The parties are to bear their own costs pertaining to the Department‘s appeal.
CERTIFIED FOR PARTIAL PUBLICATION
KIM, J.
We concur:
RUBIN, P. J.
MOOR, J.