2006-15

California Supreme Court Affirms Summary Judgment For Employer On Claims For Breach Of Contract And Fraud, And Holds Contract Defining "At-Will" To Mean Employment May Be Terminated "At Any Time" Is Unambiguous.

In Dore v. Arnold Worldwide, Inc., 2006 DJDAR 10153 (Cal. Aug. 3, 2006)(1), an employee who signed an "at-will" employment letter sued for breach of contract when his employment terminated, claiming good cause was required for termination. The trial court granted summary judgment for the employer, finding plaintiff Brook Dore could not establish either an express or implied in fact agreement requiring good cause for termination. The court of appeal reversed the employer's summary judgment. The Supreme Court reversed the appellate court, holding the language in the employment agreement stating employment is at-will is not ambiguous, and there is no triable issue of fact to support the employee's breach of contract claim that he could only be terminated for cause.

Dore accepted a management supervision position at AWI, an advertising agency, asserting he was told they needed someone on a long term basis to handle a new automobile account, that he would play a critical role in the growing agency, and that employees were treated like family. He asserts he was never told that he could be terminated for cause, but he signed a letter agreement containing a separate paragraph that stated:

"Brook, please know that as with all of our company employees, your employment with Arnold Communications, Inc. is at will. This simply means that Arnold Communications has the right to terminate your employment at any time just as you have the right to terminate your employment with Arnold Communications, Inc. at any time."

The three page agreement also provided other terms of the offer, including the start date, compensation and benefits details, and that he would have a 90 day assessment period, after which he could discuss consideration for being named as an officer. Dore was terminated two years later, and sued his employer and a related entity, Arnold Worldwide Partners (AWP) for breach of contract, fraud, intentional infliction of emotional distress, breach of the implied covenant of good faith and fair dealing, and negligent misrepresentation. The court of appeal affirmed summary judgment for AWP, but reversed as to the employer.

The Supreme Court noted that courts of appeal are in conflict over whether contracts allowing termination "at any time", without more, are reasonably susceptible to interpretation as requiring cause for termination. The court found no ambiguity caused by the contract not expressly addressing whether cause is required. The court stated:

"For the parties to specify?indeed to emphasize?that Dore's employment was at will (explaining that it could be terminated at any time) would make no sense if their true meaning was that his employment could be terminated only for cause. Thus, even though AWI's letter defined "at will" as meaning "at any time," without specifying it also meant without cause or for any or no reason, the letter's meaning was clear."

Doer claims he reasonably understood his agreement to include an implied-in-fact contract that he could be terminated only for cause, and that the letter agreement did not contain a clear and unambiguous agreement that he could be terminated without cause. But the court stated an ambiguity arises only when language is reasonably susceptible of more than one application under the facts. AWI's letter used language similar to Labor Code ? 2922 which states an "employment, having no specified term, may be terminated at the will of either party on notice to the other." (Emphasis added.) The 90 day assessment and annual review provisions did not expressly or impliedly provide a right to be terminated only for cause. And Dore's extrinsic evidence that he was told his role would be "critical", that AWI "needed a long-term fix", and that some employees had been employed for a long time and there was a family atmosphere did not render the agreement ambiguous.

Dore's fraud claim - that he was induced to leave his secure position and relocate from Denver to Los Angeles by a promise that he would not be terminated without good cause and would be given notice and an opportunity to respond to unfavorable evaluations - was also rejected. The court found no justifiable reliance on any such promise, and that Doer admitted that no one specifically made these promises.

Justice Baxter, joined by Justice Corrigan, filed a separate concurring opinion, stating:

"No rational person could believe this language meant both parties were obliged to continue the employment relationship except upon "good cause." The words "at will" and "at any time," as used in the letter, would make no sense if the parties really meant the opposite ? that good cause was required for termination."

Baxter's concurrence expressed concerns about the majority's "general endorsement" of Pacific Gas & Electric Co. v. G. W. Thomas Drayage etc. Co., 69 Cal.2d 33 (1968), which he viewed as abrogating the traditional rule that parol evidence is not admissible to contradict the plain meaning of an integrated agreement where the agreement "appears to the court to be plain and unambiguous on its face." Pacific Gas allowed extrinsic evidence to expose a latent ambiguity. He suggests that the majority opinion implies that Pacific Gas be limited on this point and states his interest in reviewing the question "in an appropriate case."

Justice Moreno also concurred separately, stating that AWI's agreement did not use the language "upon notice" as to terminations, and that a provision stating termination is allowed "upon notice" does not "shed light" on whether cause is required, and that the majority takes no position on this.

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Court Of Appeal Upholds Order Denying Class Action Certification In Wage-Hour Lawsuit

In Dunbar v. Albertson's Inc., 2006 DJDAR 10569 (Cal.App. Aug. 10, 2006)(2), the California Court of Appeal, First District, Division One, upheld a trial court ruling which denied a class certification motion in a lawsuit for unpaid overtime compensation and other relief brought by Maurice Dunbar, a grocery manager for Albertson's. Dunbar claimed he was erroneously classified as an executive and exempt from overtime wage laws. He attempted to certify a class of about 900 grocery managers, submitting 61 virtually identical declarations from other grocery managers. The store lodged 79 declarations from grocery managers, some of which were from managers who submitted declarations for the plaintiff, along with deposition testimony and a chart showing how defendants' evidence differed from plaintiffs'. On reply, Dunbar filed 31 more declarations from additional grocery managers. The trial court denied the class certification motion, finding Dunbar failed to show the class members would have common issues. To resolve each manager's overtime claims, the different facts of each manager would require each manager's active participation to determine whether 51% of his/her time was required on managerial tasks.

The court of appeal affirmed. To obtain class certification, there must be a showing of an ascertainable class and an established community of interest among the class members. The court agreed with the trial court's finding that individual inquiries would be necessary to determine the exemption question because individual job duties of grocery managers varied from store to store based on size, hours, location, and weekly work variations. The findings of whether overtime policies were proper as to one manager could not be applied to determine that the policies were unlawful as to other managers. It would be necessary to evaluate overtime liability on an individual basis, and each class member would have to litigate his/her personal right to recover. Because the findings as to one manager could not reasonably be extrapolated to the other managers, the "community of interest" factors (common questions of law or fact, the representative's claims are typical of the class, and the class representative can adequately represent the class) were not met.

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Ninth Circuit Holds That Unruh Act And Disabled Persons Act Do Not Apply To Employment Cases.

In Bass v. County of Butte, 2006 DJDAR 10757 (9th Cir. Aug. 15, 2006)(3), plaintiffs sued their employer, alleging failure to accommodate their work related injuries. They made claims under California's Unruh Act and the Disabled Persons Act ("DPA"). The DPA and the Unruh Act focus on ensuring persons with disabilities have equal access to public business. At the same session where the Unruh Act was adopted, the legislature also enacted extensive provisions governing employment discrimination.

Plaintiffs argued the Americans with Disabilities Act of 1990 ("ADA") was incorporated into the Unruh Act and the DPA, based on amendments to those statutes enacted in 1992 and 1996, and that the amendments broadened their application to cover employment discrimination claims. The Ninth Circuit rejected this argument. It found the 1992 and 1996 amendments affected a number of laws, including the Fair Employment & Housing Act ("FEHA"), and that allowing Unruh or DPA to apply to employment cases would allow an end run around the administrative procedures of FEHA. The court also found the legislative history of the amendments did not support application of the Unruh Act and the DPA to employment claims.

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1. Opinion by Werdegar, J., joined by George, C.J., and, Kennard, Chin and Moreno, JJ. Baxter, J., joined by Corrigan, J., wrote a concurring opinion. Moreno, J., wrote a concurring opinion.

2. Opinion by Marchiano, P.J., joined by Swager and Margulies, JJ.

3. Opinion by Graber, J., joined by Schroeder, C.J. and Duffy, J.