2006-8

California Court of Appeal Rejects FEHA Disability Claims Of Plaintiff Who Was Terminated After Lengthy Leave Of Absence.

In Olinick v. BMG Entertainment, 2006 DJDAR 5090 (Cal. App. April 27, 2006)(1), the court held that the forum selection and choice-of-law provisions in the plaintiff's employment agreement encompassed all causes of arising from or related to the agreement, including the plaintiff's age discrimination claims under the Fair Employment and Housing Act ("FEHA").

Martin Olinick had been an employee of BMG, whose worldwide headquarters are in New York, since 1971. In 1977, Olinick relocated to the West Coast where he attained the level of senior vice president. In 2000, Olinick and BMG executed an employment agreement covering the period of July 1, 2000 to October 31, 2004, after nine months of negotiation. The agreement provided that Olinick could be terminated for cause or without cause, and specified the compensation he would receive in each instance. The agreement also contained a choice of law provision, which provided that the agreement was governed by New York law, and a forum selection provision indicating that the parties agreed to the exclusive jurisdiction and venue of New York courts to resolve "all disputes arising under the agreement."

BMG terminated Olinick's employment in 2003, allegedly without cause, asserting that his termination was due to the company's reorganization. Olinick contended that his age was the motivating factor in his termination and brought suit in Los Angeles Superior Court, alleging age discrimination in violation of FEHA and public policy.

BMG filed a motion to stay or dismiss the action based on the agreement's forum selection clause, requiring that any action between Olinick and BMG be brought in New York. Olinick argued that BMG failed to show California was a seriously inconvenient forum, that he lived and worked in California, one of the BMG defendants was in California, and many of the witnesses were in California.

The trial court concluded that a "deal is a deal." Finding nothing unreasonable about the New York forum selection clause, the trial court denied the motion to dismiss and issued a six-month stay to enable Olinick to file suit in New York. The Court of Appeal affirmed the trial court's decision.

On appeal, Olinick contended that the forum selection clause was limited only to contractual disputes to New York jurisdiction and his lawsuit was not a dispute arising under the agreement. Citing the California Supreme Court's decision in Nedlloyd Lines B.V. v. Superior Court (1992) 3 Cal.4th 459, the Court of Appeal rejected Olinick's argument and concluded that when a "rational businessperson enters into an agreement providing that disputes arising from the agreement will be governed by the law of an identified jurisdiction, the only logical conclusion is that the specified law was intended to apply to all disputes arising out of the transaction or relationship.

Because the legal relationship between Olinick and BMG emanated from the agreement, the court found Olinick's discrimination claim to be "inextricably intertwined" with the construction and enforcement of the agreement, including the choice of law and forum selection provisions.

Because New York law prohibited age discrimination and permitted the recovery of compensatory and punitive damages, the court found that Olinick had an adequate remedy for his aged discrimination claim in that forum and under New York law. Therefore, the forum selection clause did not violate California's public policy against age discrimination.

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Right To Privacy Of Class Members Who Contacted Plaintiffs' Counsel Outweighs Employer's Right To Discover Their Identities.

In International Chemical Workers Union v. NLRB, 2006 DJDAR 5133 (9th Cir. April 28, 2006)(2), the Ninth Circuit held that because the employer clearly asserted its inability to pay for the union's proposals, it bargained in bad faith when it did not disclose corroborative documents requested by the union.

American Polystyrene Corporation ("Company"), a California plastic manufacturer, and the International Chemical Workers Union Council of the United Food and Commercial Worker International and Its Local 1C ("Union") met to negotiate a successor collective bargaining agreement. At the April 22, 2002 bargaining session, Jeffrey Ferro, Union representative, proposed increases in wages and Company contributions to the employee 401(k) plans. Carolyn Tan, the General Manager, proposed smaller wage increases, discontinuation of the company 401(k) contributions indefinitely, and elimination of Company-provided meals.

At the April 29 session, the Company proposed discontinuing 401(k) fund matching for one-year. Ferro inquired whether things were really so bad that the Company could not continue to match the 401(k) plans or provide meals or a meaningful wage increase. Tan replied that "things are tough." Ferro asked, "Are you saying that you can't afford the Union's proposals?" Tan replied, "No I can't. I'd go broke."

At the end of the April 29 session, Ferro delivered a letter to Tan demanding to "review the Company's books" based on Tan's responses indicating that the Company could not afford the union's proposals. In an April 30 letter, Tan rejected the Union's request stating, "While I have told you that we are a small company and times are tough, at no time have I ever told you we cannot afford your proposals ... we believe we need to take a more cautious approach than you propose."

At the May 2 session, Ferro asked if business was really bad. Tan replied, "Have you seen sales lately?"

At the May 14 session, the Company's financial health came up again, but Tan stated that the Company was not taking the position that it was experiencing financial hardship. Ferro asked why the Company had proposed "all these take always." Tan responded that other companies were not providing meal coverage. In a May 14 letter, Ferro stated that it was clear that the Company was taking the position that it could not afford the Union's proposals and again demanded access to view the Company's financial records.

In her May 14 response, Tan denied saying, "No I can't. I'd go broke," and denied telling Ferro that she could not afford the Union's proposals. She again refused the Union's request to access the Company's financial records.

On June 18, the Union filed an unfair practice charge. The Administrative Law Judge ("ALJ") found that the Company violated Sections 8(a)(5) and (1) of the NLRA, 27 U.S.C. § 158(a)(1), (5), when it refused to provide the Union with the requested information to substantiate the claim that it could not afford to agree to the Union's bargaining demands. The NLRB reversed the ALJ, finding that the Company had clarified its bargaining position within a day of the alleged inability to pay.

The Ninth Circuit first considered whether the "essential core" of the Company's bargaining position as whole was grounded in assertions amounting to a claim that it could not afford to pay for the Union's proposals. The court noted that it ascertained the Company's intent from the substance of the Company's bargaining position and not the formal words the Company used. The court found that Company's statements of inability to pay, i.e., "I'd go broke," coupled with its refusal to substantiate, strongly suggested that the Company bargained in bad faith, regardless of whether the statement was made in heated negotiations.

The court also found that the Company's subsequent letters and actions were further evidence that the Company's actual position was its inability to pay. In her first response Tan stated "times are tough" and expressed a "more cautious approach" in uncertain economic times." In response to the Union's request she asked, "Have you looked at sales?" She sent an e-mail to Ferro stating that the Company was planning to lay off workers due to "unimproved sales and rising inventory." Therefore, the court found that the Company not only stated it could not pay for more benefits, but it actions were those of a company who could not sustain itself if forced to pay for the Union's proposals.

Although it has been recognized that a company can shed its obligation to produce financial information with a retraction of previous assertions of inability to pay, the Company must make it "unmistakably clear" to a union that it has abandoned its plea of poverty. The court noted that the NLRB in Fairhaven Props., Inc., 314 N.L.R.B. 763 (1994) and the D.C. Circuit Court of Appeals in Lakeland Bus Lines, Inc. v. NLRB, 347 F.3d 955 (D.C. Cir. 2003) have both held that a company effectively retracted earlier pleas of poverty. In Fairhaven, the company provided a written document to the Union that stated, "The Company does not claim the inability to pay." In Lakeland, the company's attorney stated, "No claim of financial inability, explicit or implicit, was made by myself or any company official."

In this case, the court found that the Company's purported disavowals "amounted to nothing more that a clumsy effort to shed a statutory responsibility to substantiate a bargaining position."

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Ninth Circuit Orders Unsealing Of Confidential Documents Attached To Summary Judgment Motion.

In Berry v. Department of Social Services, 2006 DJDAR 5245 (9th Cir. May 1, 2006)(3), the Ninth Circuit held that a public employer's interest in avoiding violations of the Establishment Clause of the Constitution and in maintaining the conference room as a nonpublic forum outweigh the resulting limitations on the employee's free exercise of his religion at work.

Daniel Berry, an employee at the Tehama County Department of Social Services ("Department"), described himself as an evangelical Christian who holds beliefs requiring him to share his faith. Berry's duties involved assisting clients in their transition out of welfare programs. These duties frequently required him to conduct client interviews, most of which took place in his cubicle. The Department informed Barry that its policy was that employees in his position were not allowed to talk to clients about religion. Berry felt uncomfortable with this restriction. In January 2002, he received a counseling memorandum advising him to adhere to the Department's policy. The Department did not prevent him from discussing his religion with colleagues.

Berry also organized a monthly prayer meeting that was to take place in a conference room in the Department's facility. The Director informed him that he could not use the conference room for these meetings. Berry also received a memorandum prohibiting him from decorating his cubicle with religious items.

Berry filed suit, alleging that the Department violated his rights under the First Amendment and Title VII of the Civil Rights Act of 1964 by prohibiting him from discussing his religion with clients, displaying religious items in his cubicle, and using a conference room for prayer meetings. The district court granted summary judgment in favor of the Department, and Berry appealed.

In Pickering v. Board of Education, 391 U.S. 563 (1968), the Supreme Court held that a reconciliation of the rights of public employees and the State's interest requires a balancing of the competing interest. Applying Pickering on appeal, the Ninth Circuit determined that the Department's restriction on Berry's speech was reasonable because, under the balancing test, the Department's need to avoid possible violations of the Establishment Clause outweighs the restrictions on Berry's religious speech on the job. In balancing these interests, the court considered Berry's contact with the Department's clients who may be motivated to seek ways of ingratiating themselves with Berry for assistance, or conversely, may seek a reason to explain a perceived failure to assist them.

The court also held that the Department's restrictions on the display of religious items was reasonable because the Department's clients have access to Berry's cubicle and might reasonably interpret his religious displays as an endorsement of religion. Because use of the conference room for birthdays and baby showers did not make it a public forum, the court concluded that the Department's decision to deny Berry the use of the conference room for prayer meetings was a reasonable limitation.

The court also rejected Berry's failure to accommodate claim under Title VII. The court found that it was "undue hardship" to allow Berry to discuss religion with clients and display religious items in his cubicle, creating the danger of Establishment Clause violations. Therefore, Berry did not show that the Department failed to accommodate his religious beliefs.

The court also found Berry's disparate treatment claim under Title VII to be unpersuasive. The court concluded that: (1) the Department declined to allow Berry to use the conference room for prayer meetings for a legitimate nondiscriminatory reason, to maintain the room as a nonpublic forum; (2) Berry did not show that this reason was a pretext for some discriminatory reason; and (3) Berry did not show that other employees who sought to use the conference room for similar purposes were allowed to do so.

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1. Opinion by Klein, P.J., joined by Croskey and Kitching, JJ.

2. Opinion by Pregerson, J., joined by Cowen and Thomas, JJ.

3. Opinion by Callahan, J., joined by Farris and Tashima, JJ.