December 14, 2001

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

A. Ninth Circuit Affirms Summary Judgment In Favor Of Employer Where Employee Failed To Establish That He Was A Qualified Individual With A Disability Under The ADA

In Hutton v. Elf Atochem North America, Inc., 2001 Daily Journal D.A.R. 12416 (9^th Cir., November 29, 2001),⁽¹⁾ the Ninth Circuit affirmed summary judgment in favor of Elf Atochem North America, Inc. ("Elf") on grounds that Norman Hutton ("Hutton") had not established that he was a qualified individual with a disability under Title I of the Americans with Disabilities Act of 1990 ("ADA") and Oregon discrimination law.

In that case, Hutton began working for Elf as a chlorine finishing operator in 1986. Elf hired Hutton with the knowledge that he had been diagnosed as a Type I diabetic. As a chlorine finishing operator, Hutton was required to work a rotating schedule which included graveyard, swing, and day shifts. He was responsible for operating equipment that produced, stored, and transferred liquid chlorine into rail cars.

Hutton experienced a number of diabetic episodes during his employment with Elf, including insulin shock, seizures, unconsciousness and other serious medical problems. After a number of incidents, he was informed by management that he would need remain under the supervision of a doctor, provide evidence of regular medical exams, maintain a daily log related to diet and insulin intake, follow doctors orders and submit to regular blood sugar tests. Hutton agreed to these terms.

Hutton continued to experience diabetic episodes, did not comply with the terms of his employment on a regular basis, and was eventually suspended. He was required to complete certain medical conditions upon his return, or else he would be terminated. Hutton saw numerous doctors and met with company and union representatives, who tried to find a position to accommodate his condition. However, it was determined that there was no available position, and Hutton's employment was terminated.

Hutton brought suit under the ADA and other statutes. The ADA provides that no covered entity shall discriminate against a qualified individual with a disability because of the disability. 42 U.S.C. ó 12112(a). In order to prevail, Hutton was required to show that he was a qualified individual with a disability, which is defined as "an individual with a disability who, with or without reasonable accommodation, can perform the essential functions of the employment position that such individual holds or desires."

The district court granted summary judgment in favor of Elf, finding that Hutton was unable to show that he was a qualified person with a disability because he failed to produce evidence that he was able to perform the essential functions of the chlorine operator position with or without reasonable accommodation. Specifically, the court determined that Hutton's diabetes caused a risk of significant harm to himself and others, thereby disqualifying himself from the position.

The Ninth Circuit affirmed, finding that Hutton posed a direct threat to the health and safety of himself and others in the workplace. A "direct threat" is a significant risk of substantial harm to the health or safety of the individual or others that cannot be eliminated or reduced by reasonable accommodation. The direct threat test includes (1) the duration of the risk, (2) the nature and severity of the potential harm, (3) the likelihood that the potential harm will occur, and (4) the imminence of the potential harm. The Court found that all four factors existed and, as Hutton's diabetes posed a direct threat, affirmed summary judgment.

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B. Ninth Circuit Reverses Summary Judgment In Favor Of Employer Where Collective Bargaining Agreement Does Not Bar Employee's Requested Accommodation And Where Conflicting Evidence Exists

In Morton v. United Parcel Service, Inc., 2001 Daily Journal D.A.R. 12529 (9^th Cir., December 3, 2001),⁽²⁾ the Ninth Circuit reversed summary judgment in favor of United Parcel Service, Inc. ("UPS") on grounds that Jana Morton's ("Morton") request for accommodation did not violate the applicable collective bargaining agreement, and that there were triable issues of material fact relating to UPS' affirmative defenses.

In that case, Morton, who is severely hearing impaired, applied for the position of "package car driver." UPS has a policy of only hiring individuals who have obtained Department of Transportation certification for driving positions. Because of her hearing problems, Morton was unable to obtain such certification. Although she successfully passed the driving and written tests, and had been named employee of the month on four separate occasions, she was denied the promotion.

Morton brought suit under the ADA, alleging that UPS failed to accommodate her, and further failed to engage in the requisite interactive process. UPS moved for summary judgment, which was granted by the district court on grounds that no reasonable accommodation was available, and that Morton could not perform the essential functions of the package car driver job.

The Ninth Circuit reversed. On appeal, UPS conceded that it refused to promote Morton solely on account of her hearing impairment, and did not dispute that the impairment constitutes a disability for purposes of the ADA. The issues before the Court related to UPS's contentions that the ADA permitted it to refuse to hire Morton as a package car driver because (1) it would not be possible to accommodate Morton without violating the seniority provisions of the collective bargaining agreement; (2) Morton was not a "qualified individual" because the ability to drive DOT-certified cars is an essential function of the job of package car driver; (3) accommodating Morton would constitute an undue hardship; and (4) employing only DOT-certified individuals as drivers is a safety-related" business necessity" for UPS.

The Court ruled against UPS on each of these issues. The Court first found that nothing in the collective bargaining agreement prevented UPS from accommodating Morton by hiring her in a entry-level driver position and assuring that she was assigned to drive only vehicles which did not require DOT certification.

The Court next rejected UPS' argument that the ability to drive DOT certified vehicles was an "essential function" of the job of package car driver. A job's essential functions are its fundamental duties and not the marginal functions of the position. The Court ruled that factual inconsistencies in the declarations proffered by UPS did not support such a position, and that a reasonable juror could determine that driving DOT vehicles was not an essential function of the job.

The Court further rejected UPS' argument that accommodating Morton would constitute a "undue hardship." Employers are only required to make reasonable accommodations that do not impose undue hardships on them, which are considered actions requiring significant difficulty or expense when considered in light of the nature and cost of the accommodation, the size and resources of the employer, and the effect of the accommodation on the operations of the employer. The Court noted that the undue hardship analysis is a "fact intensive inquiry, rarely suitable for resolution on summary judgment." As such, the evidence was insufficient to warrant summary judgment in favor of UPS.

Finally, the Court rejected UPS' argument that its use of DOT certification requirements as a screening test for all drivers was permissible under the "business necessity" rule. The Court found that the direct threat defense is narrowly interpreted, and was inapplicable as the threat extended to the general public, and not just the workplace. The Court also found that UPS had not met its burden of showing that there was no triable issue of material fact as to the business necessity defense such that it was entitled to judgment as a matter of law.

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C. Ninth Circuit Reverses Summary Judgment In Favor Of Employer Where Numerous Triable Issues Of Material Fact Exist As To Title VII Discrimination, Retaliation, And Constructive Discharge Claims

In Bergene v. Salt River Project Agricultural Improvement and Power District, 2001 Daily Journal D.A.R. 12565 (9^th Cir., December 4, 2001),⁽³⁾ the Ninth Circuit reversed summary judgment in favor of Salt River Agricultural Improvement and Power District ("Salt River") on grounds that direct evidence of retaliation, as well as circumstantial evidence, could lead a jury to conclude that Elizabeth Bergene ("Bergene") was the target of discriminatory treatment.

In that case, Bergene was employed by Salt River as a journeyman electrician. In 1990, she filed a pregnancy discrimination claim against Salt River. Some time later, Salt River fired her husband from a temporary position. The Bergenes filed a 2retaliation suit in 1994. In November, 1995, settlement discussions began and, in March, 1996, the matter was resolved.

Also in November, 1995, Bergene applied for an open position of electrical foreman, a position she was qualified for. When she interviewed for the position by Jim Pratt, the superintendent of engineering, Pratt said "Hi trouble....I've heard about you." Bergene was also told by Doug Wilson, her former supervisor, that she would not get the foreman position if she held out for too much money in settlement discussions.

Soon thereafter, Pratt changed the requirements for the foreman position to include supervisory experience as a factor to be considered. Bergene had limited supervisory experience. Pratt chose Jerry DeGraff, an employee with supervisory experience who was not a journeyman electrician, for the foreman position. In fact, DeGraff was not qualified for the position under the old requirements, but was after Pratt changed them. Six days after DeGraff received the job, Bergene left work, was placed on disability stress leave, and never returned.

Bergene filed a complaint for violations of Title VII and for constructive discharge. Salt River moved for summary judgment, arguing that DeGraff was chosen as he was better qualified. The district granted the motion. On appeal, the Ninth Circuit applied the McDonnell Douglas shifting burdens test as ususal in Title VII cases. Under this test, Bergene had the initial burden to establish a prima facie case of discrimination, i.e. that (1) she belonged to a protected class, (2) she was performing according to her employer's legitimate expectations, (3) she suffered an adverse employment action, and (4) there was a causal link between the protected activity and Salt River's action. It was undisputed that this element was met.

Thus, the burden shifted to Salt River to show that Bergene was denied the promotion for a legitimate, non-discriminatory reason. Salt River did this by offering evidence that DeGraff was better qualified for the position, and showing the ranking criteria used.

The burden then shifted back to Bergene to show that Salt River's proffered reason was a pretext for discrimination. The Court ruled that Bergene was able to raise triable issues of material fact in this regard as to all her claims based on direct evidence (the statement by Wilson) and circumstantial evidence (the statement by Pratt and the fact that Pratt changed the criteria for the position). The Court further ruled that the totality of the circumstances from 1994 to 1996 were sufficient to raise triable issues as to the constructive discharge claim.

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D. Ninth Circuit Reverses Jury Verdict In Favor Of Plaintiff Where Finding That Employer Failed To Take Prompt And Adequate Corrective Action Is Not Supported By Evidence

In Swenson v. Potter, 2001 Daily Journal D.A.R. 12653 (9^th Cir., November 30, 2001),⁽⁴⁾ the Ninth Circuit reversed a $85,000 jury verdict in favor of Melody Swenson ("Swenson") on grounds that the evidence introduced at trial did not support the jury's findings that her employer, the United States Postal Service, failed to take prompt corrective action that was reasonably calculated to end the harassment.

In that case, Swenson, a deaf woman, was employed as a mail sorter for the Postal Service. In August 1993, Philip Feiner ("Feiner") worked in the same general area of the San Francisco Processing and Distribution Center. Swenson claimed that Feiner told her she was beautiful and sexy, that he dreamed about her at night, and that he watched her "ass moving." When Swenson clocked in to work, Feiner would be at the time clock waiting to greet her. According to Swenson, he asked her to teach him the sign for "sex" and told her, "I want to kiss you and go to a private room," to which Swenson replied, "No, I'm married."

These incidents and comments made Swenson uncomfortable enough to complain to co-workers about Feiner's conduct. However, she did not tell Feiner that his attention was unwelcome, nor did she inform her supervisors that Feiner was bothering her. In January, 1994, Feiner approached Swenson and said, "I want to kiss you," "You're my favorite," and grabbed her gloved hand. She jerked her hand away and screamed "Stop it," and he walked off. Swenson claimed she perceived Feiner's conduct to be the beginning of a rape.

Swenson complained to a co-worker, Li Lee. Lee told Swenson's supervisor, Ruben Domingo, that Feiner had grabbed Swenson's hand and tried to kiss it, but she did not tell Domingo that Swenson had complained of Feiner's conduct in the past. Domingo, who had never before received a complaint about Feiner, immediately discussed the grabbing incident with him. Domingo told Feiner he had committed sexual harassment and warned him to stay away from Swenson. Feiner disputed Swenson's characterization of the incident, but agreed to stay away. Feiner did in fact approach Swenson one last time to apologize. After insisting that she shake his hand, he walked away.

Three days later, Swenson herself reported the grabbing incident to the human resources coordinator, Randy Rollman. Rollman passed the complaint on to his own supervisor, Barbara Faciane, who immediately opened an investigation. Faciane began by cautioning Feiner to stay away from Swenson and reiterating that sexual harassment is unacceptable. Faciane then interviewed Swenson, Lee and Domingo, and asked them all for written statements. Swenson provided one, then revised it a week later with the assistance of an interpreter provided by the Postal Service. In her statement, Swenson disclosed--for the first time to a supervisor--the comments Feiner had made over the preceding months, and she repeated her account of the grabbing incident. Feiner claimed he had merely tried to shake Swenson's hand and, because Swenson had been wearing a dirty glove, had "held her wrist very lightly" to remove it. Feiner also denied making any sexual comments to Swenson on other occasions.

On the same day as her initial discussion with Swenson, Faciane temporarily moved her to a new location in the Processing Center in order to minimize contact between the two employees during the investigation. Faciane asked Swenson what she wanted done to resolve the complaint, and Swenson requested a meeting with Feiner, so that she could personally tell him to leave her alone. But the meeting never took place. The Postal Service had scheduled it for February 10, and had arranged for Swenson to meet with an interpreter, a management representative, a union representative and Feiner. However, Swenson stopped working after February 4, the day after she gave her revised statement to Faciane. Swenson said the grabbing incident gave her nightmares, and she was afraid to work in the same building as Feiner.

Jim Larson, manager of the entire Processing Center, met with Swenson and her union representative to try to resolve her complaint. Larson's effort proved unsuccessful and the Postal Service turned over responsibility for the investigation to Charles Bonds, a Senior Labor Relations Specialist. Over the next two months or so, Bonds interviewed Swenson three times. He investigated the grabbing incident and her other complaints by interviewing or obtaining written statements from her co-workers and supervisors. He also reviewed all transcripts and documents associated with the case. Bonds concluded his investigation in April or May 1994, finding insufficient evidence to support formal discipline against Feiner for sexual harassment.

In April, Bonds met with Swenson and her union representative to arrange for her return to work. Swenson agreed to return to work if assigned to the location where Faciane had moved her on January 28, away from Feiner's work area. Even though employees ordinarily must bid for new positions, the Postal Service reassigned her to that location and offered her a customized schedule to minimize contact with Feiner. Swenson returned to work on or about April 7, 1994, and remained in her new work area until she left for good on June 16, 1995. Her only contact with Feiner over that fourteen-month period consisted of some sixteen sightings in the Processing Center.

Swenson brought suit under Title VII alleging sexual harassment. The case went to trial, and the jury returned a special verdict finding that the Postal Service knew, or should have known, of Feiner's sexually harassing conduct as of January 24, 1994, the date Li Lee reported the grabbing incident to Domingo, and that the Postal Service failed to take prompt and appropriate action to end the harassment once it became aware of it. It awarded Swenson $125,000 in damages, but the district court reduced the award to $85,000.

The Ninth Circuit reversed. The Court noted that notice of the sexually harassing conduct triggers an employer's duty to take prompt corrective action that is "reasonably calculated to end the harassment." This obligation has two parts. First, the employer must take temporary steps to deal with the situation while it determines whether the complaint is justified. Second, the employer must take permanent remedial steps once it has completed its investigation.

In Swenson, the Court found that the temporary steps taken by the Postal Service were prompt and appropriate. These steps included warnings to Feiner, separation of Feiner and Swenson, prompt and thorough investigations by Domingo, Faciane and Bonds. The Court further found that the permanents steps taken by the Postal Service were likewise appropriate. Although the Postal Service determined it could not sustain a charge of harassment against Feiner, it permanently separated them. Swenson was given a permanent job assignment that kept her away from Feiner, and was offered a customized work schedule as well. Thus, based on the evidence introduced at trial, the jury's conclusion that the Postal Services' response was not prompt and adequate was not supported by the record and the verdict was reversed.

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CALIFORNIA COURTS OF APPEAL

A. Third Appellate District Denies Writ Of Mandate In Finding That Faragher/Ellerth Doctrine Does Not Apply To Actions Under The Fair Employment And Housing Act

In Department of Health Services v. Superior Court, 2001 Daily Journal D.A.R. 12511 (November 29, 2001),⁽⁵⁾ the Third Appellate District denied a petition for mandate after the trial court refused to apply the Faragher/Ellerth defense to a matter involving claims brought under the Fair Employment and Housing Act.

In that case, an employee of the Department of Health Service ("DHS"), Theresa McGinnis, alleged that her supervisor had harassed her over an extended period of time. McGinnis claimed generally that her supervisor made inappropriate comments and physically touched her. She did not report this conduct to management for two years. When she finally did, an investigation was undertaken. It was concluded that McGinnis' supervisor had violated the DHS policy regarding harassment, disciplinary action was commenced, and her supervisor retired. McGinnis filed a complaint for sexual harassment and discrimination under the Fair Employment and Housing Act ("FEHA"), but not Title VII.

The DHS sought to assert the affirmative defense articulated for use by employers in Title VII sexual harassment actions by the United States Supreme Court in Burlington Industries v. Ellerth, 524 U.S. 742 (1998) and Faragher v. City of Boca Raton, 524 U.S. 775 (1998). In Faragher/Ellerth, the Supreme Court ruled that if the offending conduct is committed by a supervisor, and if no tangible employment action is taken against the employee, the employer may defend liability or damages by demonstrating that: (1) the employer exercised reasonable care to prevent and promptly correct sexually harassing behavior, and (2) the plaintiff employee unreasonably failed to take advantage of the corrective or preventive opportunities provided by the employer or otherwise failed to avoid harm..

The DHS brought a motion for summary judgment, alternatively summary adjudication, arguing that it had circulated an employee manual describing its policy against sexual harassment and its complaint procedure, and that it provided sexual harassment training programs for its employees, which McGinnis attended. DHS argued that since (1) no adverse action had been taken against McGinnis, (2) it had developed a comprehensive policy and program to prevent and combat sexual harassment, and (3) McGinnis had not availed herself of those measures in a timely manner, it should not be held vicariously liable for her supervisor's harassing conduct.

The trial court denied the DHS' motion, noting that since no California appellate decision has considered the Faragher/Ellerth affirmative defense under the FEHA, the applicability of the defense to such a claim was a policy decision best left for the legislature. DHS filed a petition for writ of mandate, prohibition, or other relief, seeking a declaration that the Faragher/Ellerth defense applies in FEHA cases.

The Court of Appeal denied the petition. The Court noted that Title VII does not expressly mention sexual harassment, except in EEOC Guidelines, whereas FEHA expressly does so. The Court also noted that Title VII does not explicitly address the question of employer liability, but the FEHA does. The Court found that the 1984 amendments to FEHA clearly stressed the intent to eliminate harassment. The Court further reviewed and addressed Guidelines of the Fair Employment and Housing Commission, principles of statutory construction, strict liability case precedent, employment treatises, legislative intent and committee reports and non-California cases. Importantly, the Court disagreed with the prediction and suggestion made by the Ninth Circuit Court of Appeals in Kohler v. Inter-Tel Technologies, 244 F.3d 1167 (9^th Cir. 2001) that California state courts would apply the Faragher/Ellerth defense to state law claims.

The Court concluded that, while strong policy arguments could be made for and against the application of the Faragher/Ellerth defense in FEHA actions, any decision to allow such application should be left to the legislature.

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B. Second Appellate District Affirms Summary Judgment In Favor Of Employer Against Insurer On Issue Of Duty To Defend Where Defamatory Allegations Fall Within Coverage Of Policy

In Golden Eagle Insurance Corp. v. Rocky Cola Café, Inc., 2001 Daily Journal D.A.R. 12576 (November 30, 2001),⁽⁶⁾ the Court of Appeal, Second District, affirmed summary judgment in favor of Rocky Cola Café, Inc. ("Rocky Cola") in a declaratory relief action against Golden Eagle Insurance Corporation ("Golden Eagle") where the allegations of the underlying complaint fell within the coverage of the applicable insurance policy.

In the underlying matter, Krista Bollman ("Bollman") sued Rocky Cola and certain individual, including Christopher Vitolo ("Vitolo"), her shift manager, for harassment, retaliation, intentional infliction of emotional distress, defamation, wrongful termination and negligent hiring. Bollman generally alleged that Vitolo engaged in improper conduct towards her after she broke off a sexual relationship with him.

Bollman's defamation cause of action included allegations that Vitolo communicated to numerous other persons "words to the effect that [Bollman] was a 'sexually promiscuous and calculating bitch' who had, by use of sexually aggressive tactics, maneuvered him into an unwanted sexual relationship in order to obtain on-the-job favors from him." The complaint also alleged that Vitolo's false statements "were adopted and republished by all of the remaining Defendants, for the intent of unlawfully exculpating themselves from liability for [Bollman]'s injuries."

Rocky Cola and the individual defendants tendered defense of the Bollman suit to Golden Eagle. Golden Eagle rejected the tender, asserting that its coverages for bodily injury and personal injury were subject to exclusions for employment-related practices and, as such, there was no coverage.

Rocky Cola's attorney wrote to Golden Eagle, challenging this denial and arguing that the defamation claim fell within the scope of the policy's personal injury coverage. Rocky Cola's attorney further argued that the statement that Bowman was a "sexually promiscuous and calculating bitch" was not an employment-related practice within the meaning of the exclusion.

Golden Eagle reconsidered, and agreed to defend Rocky Cola and all of the individuals but Vitolo under a reservation of rights. The Bollman matter concluded with a judgment in favor of Rocky Cola and the other defendants. However, while it was still pending, Golden Eagle filed a complaint for declaratory relief, seeking a declaration that it had no duty to defend Rocky Cola and the individuals, and further sought attorneys' fees and costs. Cross-motions for summary judgment were filed, and the trial court ruled in favor of Rocky Cola.

The Court of Appeal affirmed. The Court noted that the controlling legal principles applicable to an insurer's duties under standard commercial general liability insurance policies are well-established. The policies provide that the insurer has a duty to indemnify the insured for sums the insured becomes legally obligated to pay as damages for any covered claim. The policies likewise provide that the insurer has a duty to defend the insured in any action brought against the insured seeking damages for any covered claim. The duty to indemnify runs to claims that are actually covered, in light of the facts proved.

The duty to defend, however, is broader than the duty to indemnify. The duty to defend "runs to claims that are merely potentially covered, in light of facts alleged or otherwise disclosed." In a "mixed" action, where some claims are potentially covered and others are not, the insurer has a duty imposed by law to defend the action in its entirety, because "to defend meaningfully, the insurer must defend immediately," and "to defend immediately, it must defend entirely."

In this case, the Court found that the exclusion in question provided that the insurance does not apply to personal injury to a person "arising out of any ... employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation or discrimination directed at that person ...." However, the fact that the defamatory statement in question arose out of Rocky Cola's business did not necessarily mean it is an employment-related act within the meaning of the exclusion. The Court decided that Vitolo's alleged statement that Bollman was a "sexually promiscuous and calculating bitch" was not employment-related and, as such, was outside the scope of the exclusion, and was potentially covered by the policy.

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1. Opinion by J. Tashima.

2. Opinion by J. Bezron, J. Tashima and J. Reinhardt concurring.

3. Opinion by C.J. Schroeder; Partial Concurrence and Partial Dissent by J. Wallace.

4. Opinion by J. Kozinski; J. Fletcher dissenting.

5. Opinion by J. Hull; J. Morrison and J. Callahan concurring.

6. Opinion by J. Boland; P.J. Lillie and J. Johnson concurring.

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