Cheal v. El Camino Hospital

Facts

The California Fair Employment and Housing Act (FEHA) makes it unlawful for an employer, “because of the … age … of any person … to discharge the person from employment.” (Gov. Code, § 12940, subd. (a).) A FEHA age-discrimination plaintiff who proceeds on circumstantial evidence ordinarily proves her case through the burden-shifting framework adapted in Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317 from McDonnell Douglas Corp. v. Green (1973) 411 U.S. 792. As the court restated it, the plaintiff “raises a presumption of liability by ‘provid[ing] evidence that (1) he was a member of a protected class, (2) he was … performing competently in the position he held, (3) he suffered an adverse employment action, such as termination, demotion, or denial of an available job, and (4) some other circumstance suggests discriminatory motive.’” (Cheal, supra, 223 Cal.App.4th at p. 742, quoting Guz, supra, 24 Cal.4th at p. 355.) “Competent performance is part of a plaintiff’s ‘prima facie case of discrimination.’” (Ibid.) It was that second element — competent performance — on which the case turned.

Carol Cheal worked in the hospital’s nutrition services department from August 1987 until her discharge in October 2008, when she was 61 years old. (Cheal, supra, 223 Cal.App.4th at pp. 739–740.) She held the position of dietetic technician registered, or “Diet Tech,” whose duties — assumed for purposes of the motion to be the same as a “menu clerk” — “involved the preparation of menus for patient meals, while adhering to procedures intended to ensure that the correct foods reached the correct patients.” (Id. at p. 740.) The work was high-volume: by Cheal’s “uncontradicted account, the hospital prepared about 500 meals a day, which required processing 500 menus,” perhaps a third of them “special diets,” each item of which had to be checked against, and conformed to, the patient’s physician orders. (Id. at p. 743.) As a result, Cheal declared, “errors by all Diet Office staff invariably resulted,” and the hospital relied on a “multi-tiered system of safeguards” — tally clerks, a kitchen checker, and ultimately the delivering nurses, who bore “the final responsibility for the check of the food tray.” (Ibid.)

“Up to and including her performance evaluation in August 2007, plaintiff always received a rating of ‘Meets Standards,’” which she declared without contradiction was “the highest category of performance on the Hospital’s ‘Performance Evaluation.’” (Cheal, supra, 223 Cal.App.4th at p. 740.) That changed after July 2007, when the hospital hired Kim Bandelier to supervise the clinical side of nutrition services. By January 2008 Bandelier “was accusing plaintiff of numerous shortcomings,” and she issued written warnings in April and June 2008 for failure to follow a new “two-patient identifier procedure.” (Ibid.) After a September 8, 2008 accusation involving a patient’s thickened-liquid menu, a manager told Cheal “that she was no longer considered competent to perform her duties,” offered her another position or a severance package, and ultimately discharged her on October 10, 2008. (Ibid.)

Crucially, the hospital’s own written documents set quantitative error tolerances. Its “printed evaluation form for the diet tech position” specified that the diet tech “uses appropriate food consistencies and compositions in accordance with patient’s diet orders and age with less than one error per day,” with similar “less than two errors per meal” and “less than one error per day” notations for related tasks. (Cheal, supra, 223 Cal.App.4th at p. 744.) The court called the form “something of a smoking gun.” (Ibid.) On animus, Cheal produced a declaration from Diana Hendry, a former friend of Bandelier, who recounted that at dinner Bandelier said: “‘We shouldn’t have lunch anymore or talk socially at work … People are starting to notice I’m favoring the younger and pregnant ones.’” (Id. at p. 755.)

Procedural history

Cheal filed suit on April 30, 2009, asserting causes of action for age discrimination, wrongful demotion and termination, failure to investigate or take corrective action against age discrimination, and retaliation. (Cheal, supra, 223 Cal.App.4th at p. 740.) The hospital moved for summary judgment, “asserting 77 supposedly undisputed facts”; Cheal responded to each and submitted 37 additional facts, and “[e]ach party lodged numerous objections to the evidence put forth by the opposing party.” (Ibid.) The trial court, Judge Mark H. Pierce presiding, sustained some objections, overruled others, and granted the motion on two principal grounds: that “‘[p]laintiff fail[ed] to show she performed her job in a satisfactory manner,’” and that the hospital “‘establishe[d] a legitimate, nondiscriminatory reason for its actions’” that Cheal failed to show was “‘untrue or pretextual,’” or the product of “‘a discriminatory animus.’” (Id. at pp. 740–741.) Because the discrimination claim failed, the court held the derivative wrongful-termination and failure-to-investigate claims failed too, and it rejected the retaliation claim on the ground that Cheal had already been disciplined when she first complained. (Id. at p. 741.)

Cheal appealed. The Court of Appeal, Sixth Appellate District, reversed in an opinion by Presiding Justice Rushing, with Justices Elia and Grover concurring; there was no separate concurrence or dissent. (Cheal, supra, 223 Cal.App.4th at pp. 739, 761.) Reviewing the summary judgment de novo, the court held the order rested “entirely on two propositions” — the failure to raise a triable issue on competent performance, and the failure to controvert the hospital’s claim that the discharge was for perceived performance problems rather than animus — and “concluded that neither of these premises can be sustained on this record.” (Id. at p. 760.) The opinion opened with a pointed observation that “the merits of the case were obscured to the point of invisibility in the deluge of statements, counterstatements and objections, that mark modern summary judgment practice.” (Id. at p. 739.)

Issue

The dispositive question was whether the employer was entitled to summary judgment on a FEHA age-discrimination claim where it asserted that the plaintiff had performed unsatisfactorily, but the plaintiff produced evidence — including the employer’s own written policies and error-tolerance standards — that the conduct charged fell within the employer’s accepted norms. Put doctrinally: does an employer’s general discretion to set and apply performance standards permit it to “conclusively establish[] the governing standard of competence in an employment discrimination action merely by asserting that the plaintiff’s performance was less than satisfactory”? (Cheal, supra, 223 Cal.App.4th at p. 742.) A subsidiary issue was whether a supervisor’s out-of-court statement to a friend that she “favored” younger and pregnant workers was admissible against the employer over a double-hearsay objection, as bearing on discriminatory animus. (Id. at pp. 755–760.) Because the appeal turned on the application of legal standards to a summary-judgment record, review was independent. (Id. at pp. 741–742.)

Holding

Reasoning

The summary-judgment posture controlled, and the framework was a tool, not a cage. The court began with the familiar independent-review standard, asking whether the defendant “‘“‘conclusively negated a necessary element of the plaintiff’s case or demonstrated that under no hypothesis is there a material issue of fact that requires the process of trial,’”’” while “‘view[ing] the evidence in a light favorable to plaintiff as the losing party … and resolving any evidentiary doubts or ambiguities in plaintiff’s favor.’” (Cheal, supra, 223 Cal.App.4th at pp. 741–742.) It located competent performance as the second element of the Guz prima facie case, but cautioned that the McDonnell Douglas/Guz lens, while convenient, “is not mandatory and need not hamstring either the parties or the court”; quoting Judge Posner, the court noted that “the straightforward question to be answered in discrimination cases is whether the plaintiff has successfully demonstrated that she was the victim of … discrimination on the part of the employer.” (Id. at p. 742, fn. 1, quoting Simple v. Walgreen Co. (7th Cir. 2007) 511 F.3d 668, 670–671.)

The “business judgment” principle has limits: deference to the employer’s standards is not deference to its bare conclusion. This is the heart of the opinion and the proposition that maps onto CACI No. 2513. The court accepted that an employer “is free to set standards that might appear unreasonable to outside observers, and to discipline employees who fail to meet those standards, so long as the standards are applied evenhandedly.” (Cheal, supra, 223 Cal.App.4th at pp. 742–743.) But the court drew a sharp line between the employer’s discretion to define the standard and a litigating assertion that the plaintiff failed it: an employer does not “conclusively establish[]” the standard of competence “merely by asserting that the plaintiff’s performance was less than satisfactory.” (Id. at p. 742.) Instead, “[e]vidence of the employer’s policies and practices, including its treatment of other employees, may support a … finding[] that the plaintiff’s job performance did in fact satisfy the employer’s own norms.” (Ibid.) The decisive move is that the relevant yardstick is the employer’s own standard, objectively evidenced — not the after-the-fact characterization advanced in the motion.

Applied here, the hospital’s own documents defeated its claim that any errors necessarily fell short. The court found “strong evidence” that the hospital “anticipated and expected such mistakes because, given the nature of the work, they were inevitable,” evidenced by the 500-menu daily volume and the multi-tiered safeguard system culminating in the nurses’ “final responsibility.” (Cheal, supra, 223 Cal.App.4th at p. 743.) The “smoking gun” was the hospital’s printed evaluation form, which set an acceptable error rate of “less than one … per day,” yet “[d]efendant has never suggested that plaintiff committed such errors with anything approaching a daily or even weekly frequency.” (Id. at pp. 744–745.) “For this reason alone, the trial court’s chief rationale for granting summary judgment cannot be sustained.” (Id. at p. 745.)

The factual record about what the plaintiff actually did was riddled with triable conflicts. The court worked methodically through the employer’s catalog of roughly 19 asserted deficiencies and found “[n]early every item” “squarely controverted by plaintiff.” (Cheal, supra, 223 Cal.App.4th at p. 745.) Many “coachings” reflected not breaches of existing standards but Bandelier’s “introduction of new practices” (the carbohydrate-counting and stamping rules), some entries were “so trivial that their recordation was more suggestive of persecution than of anything resembling legitimate concern with performance” (the “soiled menus” and “dirty work station” items), and the culminating “wrong liquids” incident rested on disputed, hearsay-laden accounts that a fact finder could reject. (Id. at pp. 746–753.) The court repeatedly faulted the trial court for sustaining objections that improperly excluded the plaintiff’s controverting evidence, observing that “it is not the office of summary judgment to weed out claims based on judges’ doubts about the veracity of supporting evidence.” (Id. at p. 753.) Of the entire litany, the court found only one “serious error” conceded — a January 2008 thickness misnotation eight months before discharge — which, “under defendant’s own written policies,” a jury “could conclude … fell within the norm of acceptable performance.” (Id. at pp. 753–754.)

The second rationale — legitimate reason versus animus — failed for the same reasons and one more. The court turned to the burden-shifting sequence, explaining that once the plaintiff makes a prima facie showing, the employer must produce admissible evidence of a “‘legitimate, nondiscriminatory reason,’” after which the plaintiff must show the action “was in fact the product of an unlawful discriminatory motive.” (Cheal, supra, 223 Cal.App.4th at pp. 754–755.) But the court emphasized, quoting Mamou v. Trendwest Resorts, Inc., that the “‘central issue is and should remain whether the evidence as a whole supports a reasoned inference that the challenged action was the product of discriminatory or retaliatory animus,’” warning against letting “‘the “pretext” tail wag[] the whole anti-discrimination dog.’” (Id. at p. 755.) The same evidentiary conflicts that defeated the performance rationale “go far toward casting the legitimacy of the cited justification in doubt.” (Ibid.)

The supervisor’s “confession of bias” was admissible as a declaration against interest. The court then resolved an evidentiary question of first impression in the civil context. Hendry’s declaration recounting Bandelier’s statement was “hearsay within hearsay”; the first layer (a declaration under penalty of perjury) was plainly admissible, but the second — Bandelier’s statement to Hendry — required an exception. (Cheal, supra, 223 Cal.App.4th at pp. 755–756.) Declining to decide whether the statement qualified as an authorized or vicarious admission, the court held it admissible under Evidence Code section 1230 as a declaration against interest. (Id. at p. 756.) A supervisor’s admission that she “favors” one class of employees “potentially at the expense of a protected class, creates … risk of future economic loss,” because it “would expose her employer to liability and jeopardize her own present and future employment.” (Id. at pp. 756–757.) The court reinforced the point with Reno v. Baird’s observation that a discriminating supervisor faces real “career hazards,” and noted the statement also threatened civil liability for harassment, for which the Legislature has imposed personal liability on individual employees. (Id. at pp. 757–759.) Finally, the statement bore strong indicia of reliability: it was made “in a purely private, personal setting” between friends, “[n]o motive to fabricate has been suggested,” and its evident purpose was to enlist Hendry “in concealing Bandelier’s favoritism.” (Id. at pp. 759–760.) The trial court’s implied exclusion “was an abuse of discretion.” (Id. at p. 760.)

Significance

Cheal is among the most useful California appellate statements of how the “business judgment” concept — codified for trial in CACI No. 2513 — actually operates at the summary-judgment stage of a FEHA discrimination case. CACI No. 2513 instructs juries that they must not second-guess an employer’s business decisions and may not find discrimination merely because a decision was “wrong, mistaken, or unwise.” Cheal supplies the corollary that protects plaintiffs: deference runs to the employer’s genuine, evenhandedly applied standard, not to its bare assertion that the plaintiff failed. (Cheal, supra, 223 Cal.App.4th at p. 742.) An employer who points to the plaintiff’s mistakes must reckon with its own documented tolerances and its treatment of comparators; if its written policies anticipate the very errors charged, summary judgment on the competence element is unavailable. (Id. at pp. 742–745.) The opinion sits comfortably alongside Guz, Reeves v. Safeway Stores, Inc. (2004) 121 Cal.App.4th 95, and Mamou in resisting the conversion of the burden-shifting framework into a mechanical screen, and it expressly endorses the warning against letting “‘the “pretext” tail wag[] the whole anti-discrimination dog.’” (Id. at p. 755.) Independently, the decision is a leading — perhaps the leading — California authority applying the “risk of civil … liability” branch of Evidence Code section 1230 to a discriminatory-animus admission, a question the court observed “no apposite California decision” had previously addressed. (Id. at p. 757.) Its limits are real: the holding is that triable issues existed, not that the plaintiff was right; it is a summary-judgment reversal, not a merits adjudication, and it does not relax the requirement that the plaintiff ultimately prove animus.

Key quotes

“What constitutes satisfactory performance is of course a question ordinarily vested in the employer’s sole discretion. An employer is free to set standards that might appear unreasonable to outside observers, and to discipline employees who fail to meet those standards, so long as the standards are applied evenhandedly. But that does not mean that an employer conclusively establishes the governing standard of competence in an employment discrimination action merely by asserting that the plaintiff’s performance was less than satisfactory.” (Cheal, supra, 223 Cal.App.4th at p. 742.)

“The record does not show ‘several errors’ as a matter of law, and it does not show that some number of errors — even ‘several’ — necessarily fell below the hospital’s standards of performance.” (Id. at p. 754.)

“A supervisor’s statement that she ‘favors’ one class of employees, potentially at the expense of a protected class, creates a similar risk of future economic loss.” (Id. at p. 757.)

Read the full opinion (Justia) →

Practice pointer

Open questions

The opinion leaves several threads for later cases. The court “need not determine whether Bandelier’s reported statements to Hendry are admissible as authorized or vicarious admissions,” resting instead on Evidence Code section 1230; whether such a supervisor admission qualifies under sections 1222 or 1224 — and on what showing of authority — remains unsettled. (Cheal, supra, 223 Cal.App.4th at p. 756.) The court also noted it had “found no apposite California decision” and “no published California cases applying the ‘risk of civil … liability’ branch of the exception in section 1230,” cautioning that criminal-context declaration-against-penal-interest precedents “should be relied upon with caution in the civil context”; the precise contours of the civil branch — how directly a statement must threaten liability, and what trustworthiness showing is required — are left for development. (Id. at pp. 757–758.) More broadly, because the holding is that triable issues existed, the court did not decide how a fact finder should weigh the employer’s documented error tolerances against a genuine patient-safety justification, nor where the line lies between a tolerated error rate and a disqualifying pattern — questions that will turn on the proof at trial. (Id. at pp. 744–745, 754.)