Myers v. Trendwest Resorts, Inc.

Facts

The statutory framework. The Fair Employment and Housing Act (FEHA) draws a sharp line between harassment by coworkers and harassment by supervisors. As the court explained, FEHA “imposes two standards of employer liability for sexual harassment, depending on whether the person engaging in the harassment is the victim’s supervisor or a nonsupervisory coemployee.” (Myers v. Trendwest Resorts, Inc. (2007) 148 Cal.App.4th 1403, 1419.) For coworker harassment, the standard is negligence: the employer is liable “only if the employer (a) knew or should have known of the harassing conduct and (b) failed to take immediate and appropriate corrective action.” (Ibid.) The operative text appears in Government Code section 12940, subdivision (j)(1), which provides in part that “[h]arassment of an employee … by an employee, other than an agent or supervisor, shall be unlawful if the entity, or its agents or supervisors, knows or should have known of this conduct and fails to take immediate and appropriate corrective action,” and that “[a]n entity shall take all reasonable steps to prevent harassment from occurring.” (Gov. Code, § 12940, subd. (j)(1); Myers, supra, 148 Cal.App.4th at p. 1420, fn. 8.)

Supervisor strict liability. Because the negligence standard is, by its terms, confined to harassment “by an employee other than an agent or supervisor,” the court explained that “by implication the FEHA makes the employer strictly liable for harassment by a supervisor.” (Myers, supra, 148 Cal.App.4th at p. 1420.) Quoting the Supreme Court in State Dept. of Health Services v. Superior Court (2003) 31 Cal.4th 1026 (Health Services), the court emphasized that supervisor liability “is not constrained by principles of agency law,” so that “all acts of harassment by a supervisor are to be exempted from the negligence standard, whether or not the supervisor was then acting as the employer’s agent.” (Myers, supra, at p. 1420, quoting Health Services, supra, 31 Cal.4th at pp. 1040–1041.) The one narrow carve-out: “The employer is not strictly liable for a supervisor’s acts of harassment resulting from a completely private relationship unconnected with the employment and not occurring at the workplace or during normal working hours. But instances of such harassment must be rare.” (Myers, supra, at p. 1420, quoting Health Services, supra, 31 Cal.4th at p. 1041, fn. 3.)

The employment relationship. Plaintiff Alissia Myers began working for Trendwest Resorts, Inc., a time-share sales and resort-development company, in October 2001. (Myers, supra, 148 Cal.App.4th at pp. 1410–1411.) She and Ayman Damlahki both started as salespersons in the Walnut Creek office; in June 2002, after Damlahki transferred to the Roseville office to become its project director, Myers transferred there as well. (Id. at p. 1412.) A project director “manages the office and trains, motivates, and monitors the salespersons,” and Damlahki was thus Myers’s supervisor. (Ibid.) Sales were generated by customers taking a tour of a sales office; although “contrary to Trendwest policy,” Roseville salespersons sometimes followed home customers who had forgotten their checkbook or credit card — a practice the office called “driving for dollars.” (Ibid.)

The harassment. Myers alleged that Damlahki “continually and repeatedly harassed her” with “numerous unwanted and unwelcome sexual advances,” telling her she had a “nice ass,” bragging of his sexual prowess, repeatedly asking her out, and phoning her at home. (Myers, supra, 148 Cal.App.4th at p. 1410.) For summary judgment, Trendwest accepted as undisputed that “Damlahki made sexual advances to plaintiff on two ‘driving for dollars’ trips in March and May 2003.” (Id. at p. 1412.) On the first, he “parked on an isolated dirt road, tried to kiss plaintiff … touched her breasts, and touched her vagina through her underwear,” telling her she “should go along with him because he was her project director” and would guarantee she achieved the President’s Club. (Ibid.) On May 29, 2003, after she transacted business at a customer’s home, “instead of driving plaintiff back to the office, Damlahki took her to his home, over her protests,” drove into his garage, “shut the door by remote control,” and groped her — pushing himself onto her, kissing her, and touching her breasts — until she escaped into the front yard. (Id. at pp. 1415–1416.) Myers did not report the conduct during her employment, attesting she was “scared and was making good money.” (Id. at p. 1416.)

The dispute over a “personal” relationship. Trendwest emphasized social contacts to suggest a private relationship: a December 2002 after-hours bar outing where Myers rode in Damlahki’s car and accepted a ride home, and his offer of expense-paid trips. (Myers, supra, 148 Cal.App.4th at pp. 1413–1414.) But Myers testified she “felt coerced,” understood his “gifts” were “tying” to sexual favors, and that the proposed Las Vegas trip “never happened.” (Id. at pp. 1416, 1421.) She also attested that Damlahki warned subordinates not to “go over his head,” having fired at least three employees, deterring her from complaining. (Id. at p. 1416.)

Procedural history

Myers’s third amended complaint alleged seven counts: (1) FEHA sexual harassment; (2) FEHA failure to take reasonable steps to prevent harassment; (3) sexual battery; (4) intentional infliction of emotional distress; (5) retaliatory discharge; (6) false imprisonment; and (7) quid pro quo sexual harassment. (Myers, supra, 148 Cal.App.4th at pp. 1411–1412.) Trendwest moved for summary judgment or summary adjudication, arguing chiefly that “Damlahki’s actions were personally motivated, outside the scope of his employment, and unforeseeable to Trendwest.” (Id. at p. 1414.) The trial court (Hon. Thomas M. Cecil) granted summary judgment, reasoning that because the incidents “took place outside the workplace,” were “not work related,” and reflected Damlahki’s “own personal gratification,” his conduct could not be imputed to Trendwest; the court also granted Trendwest $40,000 in attorney’s fees under section 12965, subdivision (b). (Id. at pp. 1417–1419.) Myers appealed. The Court of Appeal, Third Appellate District, in an opinion by Acting Presiding Justice Sims (with Justices Davis and Cantil-Sakauye concurring), reversed in part and affirmed in part. (Id. at pp. 1409, 1439.) On appeal, Myers presented no argument on the retaliation count and did not contest the quid pro quo ruling, so those counts were affirmed. (Id. at p. 1419.)

Issue

The central question was whether Trendwest could escape FEHA liability for its supervisor’s harassment on the ground that the conduct occurred away from the office and served Damlahki’s personal gratification rather than the employer’s interests. Put in the statutory frame the court adopted, the issue was whether the harassment “result[ed] from a completely private relationship unconnected with the employment” so as to fall within the narrow exception to supervisor strict liability. (Myers, supra, 148 Cal.App.4th at p. 1421.) A parallel issue governed the common law counts (battery, false imprisonment, IIED): whether Damlahki’s conduct fell within the scope of employment under respondeat superior so as to render Trendwest vicariously liable. Two further issues followed: whether Trendwest negated the section 12950 component of the failure-to-prevent claim, and whether it was entitled to summary adjudication of punitive damages.

Holding

Reasoning

The summary-judgment posture frames everything. The court reviewed the record de novo, “liberally construing the evidence in support of the party opposing summary judgment and resolving doubts concerning the evidence in favor of that party.” (Myers, supra, 148 Cal.App.4th at p. 1409.) A defendant prevails only by showing “that one or more elements of the cause of action cannot be established, or that there is a complete defense.” (Ibid.) That posture mattered repeatedly: where the evidence about Trendwest’s knowledge or about the parties’ relationship was “conflicting,” the conflict itself precluded summary adjudication. (Id. at p. 1421.)

Supervisor harassment triggers strict, not agency-based, liability. The court anchored its FEHA analysis in Health Services. The conduct was plainly actionable: Damlahki’s “physical groping of plaintiff during ‘driving for dollars’ in and of itself constitutes actionable conduct sufficient to defeat summary judgment/adjudication of the FEHA claims.” (Myers, supra, 148 Cal.App.4th at p. 1419.) The only question was whether that conduct could be charged to the employer. Quoting Health Services, the court held that because the Legislature imposed the negligence standard only for harassment “by an employee other than an agent or supervisor,” it “indicated that all acts of harassment by a supervisor are to be exempted from the negligence standard,” so that “under the FEHA, an employer is strictly liable for all acts of sexual harassment by a supervisor.” (Id. at p. 1420, quoting Health Services, supra, 31 Cal.4th at pp. 1040–1042.) Agency principles, in other words, “come into play only when the harasser is not a supervisor.” (Ibid.)

The “completely private relationship” exception is the only escape hatch — and it is narrow. The court located the trial court’s error precisely. Strict liability yields only where “the harassment must result from a completely private relationship unconnected with the employment”; “[o]therwise, the employer is strictly liable for the supervisor’s actions regardless of whether the supervisor was acting as the employer’s agent.” (Myers, supra, 148 Cal.App.4th at p. 1421.) On this record, the exception did not apply: “There was no personal dating relationship between plaintiff and Damlahki at the time of the most significant incidents, which occurred during the ‘driving for dollars’ excursions,” and those excursions “were obviously connected with the employment and of obvious benefit to the employer’s enterprise.” (Ibid.) Even Trendwest’s claim that it disapproved of “driving for dollars” could not help: the evidence was “conflicting on the point,” and in any event Trendwest “admittedly was aware of the practice, clearly would benefit from the practice, and did nothing to stop it.” (Ibid.)

Rejecting the “purpose-was-completed” gambit. Trendwest argued that even if the excursions began with a work purpose, “that purpose was completed by the time the tortious conduct occurred.” (Myers, supra, 148 Cal.App.4th at p. 1422.) The court exposed the logical overreach: “Under Trendwest’s reasoning, it would appear an employer would never be liable for sexual harassment by a supervisor, because the act of sexual harassment is never work related.” (Ibid.) Because “[t]he gropings occurred during the ‘driving for dollars’ excursions, which were clearly work related,” the argument failed. (Ibid.) The court declined to engage Trendwest’s reliance on the federal Sparks decision, noting its conclusion was “guided by Health Services.” (Ibid.) It also rejected the attempt to “inject respondeat superior principles into an employer’s strict liability for supervisors’ misconduct under the FEHA,” explaining that although respondeat superior may “provide guidance” at the margins of whether off-site conduct is an “unlawful employment practice,” FEHA supervisor liability “is not constrained by principles of agency law.” (Id. at pp. 1422–1423, 1424.)

Failure to report is not a complete defense. The court foreclosed Trendwest’s reliance on Myers’s silence. Quoting Health Services, it held that an employee’s “failure to avail herself of available protections offered by the employer … may reduce the amount of damages … but it does not provide the employer a complete defense; an employer continues to be strictly liable for hostile environment sexual harassment by a supervisor.” (Myers, supra, 148 Cal.App.4th at p. 1421.) Because failure to report is not a merits defense, the court did not need to resolve the parties’ dispute over whether Trendwest adequately advised Myers of a grievance procedure. (Ibid.) And a triable issue existed on whether Myers perceived the environment as hostile: she presented evidence she was hospitalized for a mental breakdown “she attributes to the harassment” and returned only because Damlahki promised to leave her alone, “a promise he broke.” (Id. at pp. 1424–1425.)

The failure-to-prevent count survives on an independent section 12950 ground. Having reinstated count one, the court held count two’s first basis — derivative of the harassment claim — “cannot stand.” (Myers, supra, 148 Cal.App.4th at p. 1425.) But it reinstated count two on a separate footing: Trendwest “failed to show it complied with section 12950,” which requires employers to provide information about “[t]he legal remedies and complaint process available through the [DFEH and FEHC]” and “[d]irections on how to contact” them. (Id. at pp. 1425–1426.) Although Trendwest pointed to its own antiharassment policy and a DFEH pamphlet, “Trendwest’s institution of its own grievance procedure does not excuse its violation of section 12950,” and there was no showing the pamphlet was distributed “during plaintiff’s tenure.” (Id. at p. 1426.)

The common law counts fail because the conduct was outside the scope of employment. Here the court split decisively from its FEHA analysis. Vicarious liability under respondeat superior turns on whether “the risk was one that may fairly be regarded as typical of or broadly incidental to the enterprise undertaken by the employer.” (Myers, supra, 148 Cal.App.4th at pp. 1428–1429.) Guided by Farmers Ins. Group v. County of Santa Clara (1995) 11 Cal.4th 992, the court reasoned that “an employer is not strictly liable for all actions of its employees during working hours,” and is not liable where the employee “substantially deviates from the employment duties for personal purposes.” (Id. at p. 1429.) Sexual misconduct, the Supreme Court had held, is generally not within the scope of employment outside the unique context of on-duty police officers. (Id. at pp. 1429–1430.) Applying Farmers, the court concluded “Damlahki’s sexual conduct towards plaintiff was outside the scope of employment as a matter of law, motivated by personal reasons unrelated to his job duties and in violation of the employer’s sexual harassment policy,” and “not typical of or broadly incidental to Trendwest’s enterprise of selling time shares.” (Id. at p. 1432.)

The crucial harmonization: FEHA strict liability already does the work. The court explained why the divergent results were coherent. The respondeat superior policy justifications — deterrence, victim compensation, and equitable loss-spreading — were already served by FEHA: “we consider it significant that Trendwest is already subject to strict liability under the FEHA for the conduct of Damlahki as plaintiff’s supervisor. Thus, common law liability is not needed to advance the respondeat superior policy justifications.” (Myers, supra, 148 Cal.App.4th at pp. 1432–1433.) The court distinguished Mary M. v. City of Los Angeles (1991) 54 Cal.3d 202 (police authority is sui generis) and Jacobus v. Krambo Corp. (2000) 78 Cal.App.4th 1096 (where a jury had found no harassment and the conduct was consensual office banter). (Id. at pp. 1431, 1433–1434.)

Punitive damages were improperly adjudicated. The trial court had rejected punitive damages because it concluded that, “in the absence of any wrongful conduct by Trendwest,” plaintiff’s punitive-damages claim “also failed.” (Myers, supra, 148 Cal.App.4th at p. 1418.) Reinstating the harassment counts swept that rationale away: “Our reversal of the judgment necessarily invalidates the trial court’s reasoning.” (Id. at p. 1437.) The court agreed that Damlahki himself “was not a corporate officer, director, or managing agent within the meaning of Civil Code section 3294,” because he lacked authority to “change or establish business policy.” (Id. at pp. 1437–1438.) But that did not end matters: “knowledge by upper management that Damlahki was unfit might provide a basis for punitive damages under Civil Code section 3294, and this basis was not addressed in Trendwest’s separate statement of facts concerning punitive damages.” (Id. at p. 1438.) Because the moving party bears the burden, Trendwest was not entitled to summary adjudication. (Ibid.)

Significance

Myers is a clean, citable application of Health Services to the recurring scenario in which a supervisor’s harassment occurs away from the office during work-connected activity. Its doctrinal contribution is twofold. First, it confirms that the “completely private relationship” exception of Health Services is genuinely narrow: an employer cannot defeat strict liability merely by showing the conduct was personally motivated, occurred off-site, or served no business purpose, because “the act of sexual harassment is never work related” in that sense. (Myers, supra, 148 Cal.App.4th at p. 1422.) The exception requires an actual private relationship — paradigmatically a consensual dating relationship — disconnected from the employment. The presence of work-connected activity at the time of the harassment (here, sales excursions) keeps the case within strict liability.

Second, Myers is a vivid illustration of FEHA strict liability and common law respondeat superior pulling apart on identical facts. The same gropings that defeated summary judgment on the FEHA counts were, as a matter of law, outside the scope of employment for purposes of battery, false imprisonment, and IIED. The court’s explanation — that FEHA already supplies strict liability, so the common law need not be stretched — situates the decision within the line running from Farmers through Lisa M. v. Henry Mayo Newhall Memorial Hospital (1995) 12 Cal.4th 291. For litigants, the practical lesson is that the choice of statutory versus common law theory can be outcome-determinative on the very same conduct. Finally, the section 12950 holding supplies an independent, often-overlooked basis for the failure-to-prevent claim: an employer’s private grievance machinery does not substitute for the statutory duty to inform employees of DFEH remedies. (Id. at p. 1426.)

Key quotes

“The trial court erred because … in order for the employer to avoid strict liability for the supervisor’s actions under the FEHA, the harassment must result from a completely private relationship unconnected with the employment. Otherwise, the employer is strictly liable for the supervisor’s actions regardless of whether the supervisor was acting as the employer’s agent.” (Myers, supra, 148 Cal.App.4th at p. 1421.)

“Under Trendwest’s reasoning, it would appear an employer would never be liable for sexual harassment by a supervisor, because the act of sexual harassment is never work related. The gropings occurred during the ‘driving for dollars’ excursions, which were clearly work related.” (Id. at p. 1422.)

“[W]e consider it significant that Trendwest is already subject to strict liability under the FEHA for the conduct of Damlahki as plaintiff’s supervisor. Thus, common law liability is not needed to advance the respondeat superior policy justifications.” (Id. at pp. 1432–1433.)

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Practice pointer

Open questions

Adequacy of the grievance procedure. Because failure to report is not a complete defense, the court held “the posture of this appeal from summary judgment does not require us to address the parties’ dispute about whether Trendwest adequately advised plaintiff of the availability of a grievance procedure.” (Myers, supra, 148 Cal.App.4th at p. 1421.)

The second basis for the failure-to-prevent count. Having reinstated count two on the section 12950 ground, the court stated it “need not decide the validity of the second ground given by the trial court” — i.e., whether Trendwest’s knowledge that Damlahki was a “loose cannon” obligated it to take additional preventive steps. (Myers, supra, 148 Cal.App.4th at p. 1425.) Likewise, it did not address the parties’ arguments on the parallel section 12940 “reasonable steps” theory. (Id. at p. 1426.)

Interim attorney’s fees to a defendant. In reversing the fee award, the court “decline[d] to consider whether section 12965, subdivision (b), should be construed to authorize an interim award of attorney’s fees to Trendwest as prevailing party on a motion for summary adjudication” of the two unchallenged counts. (Myers, supra, 148 Cal.App.4th at p. 1439.)