The First District Court of Appeals in California issued an opinion on December 10, 2012 which will be helpful to employers and employment law practitioners in understanding certain jury instructions and defenses to claims of pregnancy discrimination, specifically the business judgment rule and an employer's claim that an employment decision was made based on avoiding a hazard to a pregnant woman. The decision is also significant for its mention of an issue currently pending before the California Supreme Court on the question of whether the "mixed-motive" defense applies to FEHA claims.
The case arises out of claims made by Plaintiff Julie Gilman Veronese, who sued defendant Lucasfilm, Ltd. (Lucasfilm), alleging six causes of action. After three days of deliberation, the jury found for Plaintiff on three of the claims -- pregnancy discrimination, failure to prevent pregnancy discrimination, and wrongful termination in violation of public policy. The jury found for Lucasfilm on the other two claims--retaliation and failure to accommodate disability. The jury awarded Veronese $93,830 for past economic damages and $20,000 for noneconomic damages, a total of $113,830. The trial court later awarded Veronese $1,157,411 in attorney fees.
The facts alleged in the case are extensive, and the court discusses them in great detail. Essentially, and according the court's recitation, Plaintiff was offered a one month consulting gig as the assistant to the estate manager of Mr. Lucas' property, presumably as a trial to determine if she was suitable for a permanent position. Following the offer, Plaintiff advised the estate manager that she was pregnant.
Several communications between the parties took place over the next several weeks, which included: 1) Plaintiff advising that she was not feeling well due to her pregnancy and the estate manager telling her to take time for her health and that the job would be there for her; 2) the estate manager conveying that she was excited for Plaintiff when advised that Plaintiff was having twins; 3) several check in emails from both sides and the estate manager expressing that she was overworked and needed to figure out the scheduling and her own vacation; 4) Plaintiff advising that she had miscarried and lost one of the twins and the estate manager expressing concern for her; 5) discussion of a new start date; 6) the estate manager advising that the one month project was now shortened to 3 weeks "because they were being sensitive to [Plaintiff's] situation; 7) Plaintiff questioning whether changes were being made because of her pregnancy and that she was feeling that the estate manager no longer felt she was a good fit for the job; 8) the estate manager's response that the decision was due to other factors including stress at the position, her inability to take vacation, and that Plaintiff's claim that changes were being made due to her pregnancy were not true.
After several more communications, Plaintiff and the estate manager concluded that the position was not going to work out, although the specific facts were disputed as to what was said. Eight days later, the estate manager hired another person for the position.
Appeal by Lucasfilm
Lucasfilm appealed from both the judgment and the fee award, arguing that the court made several errors in the jury instructions given and that the damages had no support in the record.
The CA Court of Appeals agreed that the lower court erred in its instructions, reversed the judgment and vacated the $1,157,411 fee award.
"Business Judgment" Rule
Lucasfilm proposed special instruction no. 9, as follows: "You may not find that Lucasfilm discriminated or retaliated against Julie Gilman Veronese based upon a belief that Lucasfilm made a wrong or unfair decision. Likewise, you cannot find liability for discrimination or retaliation if you find that Lucasfilm made an error in business judgment. Instead, Lucasfilm can only be liable to Julie Gilman Veronese if the decisions made were motivated by discrimination or retaliation related to her being pregnant."
The trial court refused to give this instruction.
The Court clarified that plaintiffs in discrimination cases have the burden to prove discrimination, and not just that an employer's decision was "wrong, mistaken, or unwise."
The rule to remember is thus: "The employer may fire an employee for a good reason, a bad reason, a reason based on erroneous facts, or for no reason at all, as long as its action is not for a discriminatory reason. . .the relevant question is. . .whether the given reason was a pretext for illegal discrimination. The employer's stated legitimate reason. . .does not have to be a reason that the judge or jurors would act on or approve."
The Court noted, however, that Lucasfilm had not cited, and it had not found, any California case discussing this principle in connection with a jury instruction in a FEHA case.
It did find other federal cases that had concluded that refusing to give an instruction on the business judgment rule was reversible error. E.g., Walker v. AT&T Technologies (8th Cir. 1993) 995 F.2d 846, Scamardo v. Scott County (8th Cir. 1999) 189 F.3d 707, 710-711, and Marin v. American Meat Packing Company (1990) 562 N.E.2d 282, 287.
Moreover, the Court clarified that even if the proposed instruction has excess language, the solution is to cross out such language.
As such, the Court of Appeals concluded that the refusal to give the business judgment instruction was error.
Avoiding Hazard to Pregnant Women
Plaintiff proposed and the trial gave an instruction that said, "A potential hazard to a fetus or an unborn child is not a defense to pregnancy discrimination."
The court looked to the case Automobile Workers v. Johnson Controls, Inc. (1991) 499 U.S. 187, which Plaintiff cited as authority for giving the instruction. In that case, the U.S. Supreme Court held that an employer's policy that women who were pregnant or capable of having children would not be placed into jobs involving lead exposure "explicitly discriminates against women on the basis of their sex."
The Court distinguished this case, saying that here Lucasfilm had no such policy, no policy was involved here, and only one 36-year-old pregnant woman who had already miscarried one twin. Further, the Court noted that Lucasfilm was not making a claim that its concern for the fetus was a defense to its decision.
Thus, although the instruction was "abstractly correct as a statement of law, it is not within the issues developed by the evidence or reasonable inferences therefrom."
"Put otherwise, the instruction could be interpreted as telling the jury that any potential hazard to an unborn child is necessarily irrelevant to the employer's legitimate decisionmaking. That cannot be, as Johnson Controls itself acknowledged: "It is correct to say that Title VII does not prevent the employer from having a conscience. The statute, however, does prevent sex-specific fetal-protection policies." (Johnson Controls, supra, 499 U.S. at p. 208.)"
The Court therefore concluded that giving of the instruction was error in this case.
The Court did not decide one argument put forth by Lucasfilm that the giving of the instruction conflicted with the provisions of Government Code section 12940, which provides: "This part does not prohibit an employer from refusing to hire or discharging an employee with a physical or mental disability, or subject an employer to any legal liability resulting from the refusal to employ or the discharge of an employee with a physical or mental disability, where the employee. . .cannot perform those duties in a manner that would not endanger his or her health or safety or the health or safety of others . . . ."
Declining to address this issue, the Court stated: "We need not decide the issue, but do note that the case did not involve an "employee's inability to perform a particular job efficiently and safely due to a physical handicap or impairment."
Procedural Error in Instructions
For some reason, the trial court apparently did not give an instruction on the claim for failure to prevent discrimination and on the difference between the termination from the temporary position and the failure to hire for the permanent position. The Court noted that the judge began instructing the jury on this cause of action, but was interrupted by counsel, and then never resumed with the instruction.
Finding that it is "the duty of the court to see that jurors are guided on controlling legal principles, and the complete failure to instruct properly on a basic issue may be reversible error." See, Thomas v. Buttress & McClellan (1956) 31 141 Cal.App.2d 812, 819. The court concluded that the trial court had erred.
Instructional Errors Were Prejudicial
Instructional error in a civil case is prejudicial "where it seems probable" that the error "prejudicially affected the verdict," said the Court.
The Court set forth the test that should be employed in assessing whether a miscarriage of justice has occurred: “The reviewing court should consider not only the nature of the error, including its natural and probable effect on a party's ability to place his full case before the jury, but the likelihood of actual prejudice as reflected in the individual trial record, taking into account "(1) the state of the evidence, (2) the effect of other instructions, (3) the effect of counsel's arguments, and (4) any indications by the jury itself that it was misled."
The Court concluded that such miscarriage of justice occurred here, and that the cumulative effect of the errors supported such a determination.
Causation Issue Pending Before the CA Supreme Court
Lucasfilm argued that the appropriate test for causation is the "but for" test and that FEHA imposes liability “because of” discrimination under Gov. Code section 12940(a), and "because of" means that Plaintiff had to show that discrimination had a determining effect--was a "determining factor"--on the employment decisions.
The issue is currently before the CA Supreme Court, in Harris v. City of Santa Monica, review granted Apr. 22, 2010, S181004. The lower court held that giving only CACI instruction 2500 in a pregnancy discrimination case was error, as a "mixed motive" defense remains available to employers in appropriate circumstances.
The mixed motive defense is based on BAJI Instruction 12.26, which states: "If you find that the employer's action, which is the subject of plaintiff's claim, was actually motivated by both discriminatory and non-discriminatory reasons, the employer is not liable if it can establish by a preponderance of the evidence that its legitimate reason, standing alone, would have induced it to make the same decision."
The Court here concluded that it was unnecessary to reach this issue, because reversal was required due to the errors in instructions that were prejudicial.
The CA Supreme Court heard oral argument in Harris v. City of Santa Monica on December 4, 2012 on the issue of whether the "mixed-motive" defense applies to employment discrimination claims under the Fair Employment and Housing Act, and the case has been submitted.
Keep an eye out for the decision in the Harris case, as it will have an important effect on discrimination cases, for employers and employees alike.
Anne O'Donnell is a recovering litigator who is now currently a Senior Writer for legal professional content at Findlaw.com. She practiced for 10 years in civil litigation in San Francisco.