Atalla v. Rite Aid Corp.

Facts

The statutory framework. California’s Fair Employment and Housing Act (FEHA) makes it “an ‘unlawful employment practice’ for an employer to harass an employee because of the employee’s ‘sex, gender, gender identity, gender expression, … [or] sexual orientation.’” (Gov. Code, § 12940, subd. (j)(1); Atalla v. Rite Aid Corp. (2023) 89 Cal.App.5th 294, 308.) That prohibition “includes protection from a broad range of conduct, [including] the creation of a work environment that is hostile or abusive on the basis of sex,” but the plaintiff “must establish the offending conduct was imputable to [his or] her employer.” (Atalla, supra, at pp. 308–309.) The decisive rule for this case is the one governing when a supervisor’s harassment is imputed to the employer: “Under FEHA, an employer is strictly liable for harassment by a supervisor.” (Id. at p. 309.) But that liability is bounded — an employer is strictly liable “only … if the supervisor is acting in the capacity of supervisor when the harassment occurs,” and “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.” (Ibid., quoting State Dept. of Health Services v. Superior Court (2003) 31 Cal.4th 1026, 1041, fn. 3.)

The friendship that preceded the job. Erik Lund was a Rite Aid district manager who oversaw “14 to 16” stores in the greater Fresno area. (Atalla, supra, 89 Cal.App.5th at p. 300.) Hanin Atalla met Lund in the “early fall” of 2017, during her last year of pharmacy school, when she did a six-week business-administration rotation “shadow[ing]” him as her “preceptor.” (Id. at p. 300.) When the rotation ended, “Atalla celebrated at a dinner with Lund and his wife,” and “stayed in close touch with Lund thereafter.” (Ibid.) Over time “they became close friends,” and Atalla “also viewed Lund as a mentor.” (Id. at p. 301.) Critically, “[t]hey were friends before Atalla started working at Rite Aid.” (Ibid.) At deposition Atalla agreed that “[b]efore you ever worked at Rite Aid with Mr. Lund, you had a relationship that was wholly unconnected to your work at Rite Aid”; Lund, for his part, “felt Atalla was one of his best friends.” (Ibid.)

The employment. Atalla began working part-time as a pharmacy intern at Rite Aid in March 2018, became a graduate intern, and on December 23, 2018, “moved up to the position of hourly staff pharmacist.” (Atalla, supra, 89 Cal.App.5th at pp. 300–301.) Lund, as district manager, “was the supervisor of graduate interns and staff pharmacists.” (Id. at p. 301.) The friendship continued throughout: they “texted frequently about all kinds of things,” “exchanged hundreds of texts,” “would go out for coffee and meet up for lunch,” and in December 2018 the two couples dined together to celebrate Atalla’s birthday. (Id. at p. 301.) Rite Aid produced “over 500 pages” of texts spanning food, travel, exercise, weight loss, family, religion, and “chit chat about work,” all sent “on Lund’s and Atalla’s respective personal cell phones.” (Id. at pp. 301–304.)

The January 4, 2019 exchange. One month after the birthday dinner, the two had their “final text exchange,” again on personal phones. (Atalla, supra, 89 Cal.App.5th at p. 304.) It was a Friday night; Lund was at a Modesto hotel after meeting his “wine group,” and Atalla “was at home sitting on the couch with her husband.” (Ibid.) At 11:07 p.m. Lund asked, “How did my newest pharmacist survive,” and after Atalla described a tough first week he texted, “You are my girl [so] conquer.” (Id. at pp. 304–305.) Atalla testified that text “really didn’t offend” her “because [they] had exchanged similar text messages in the past.” (Id. at p. 305, fn. 8.) The exchange “devolved into bantering about alcohol” — Lund photographing wine bottles, Atalla saying she was “‘doing the same with vodka, clearing my cold the Russian way.’” (Id. at pp. 305, 312.) Lund then “sent Atalla a ‘Live Photo’ … of him masturbating,” followed by a second photo of his penis. (Id. at p. 305.) Atalla texted “‘Erik, stop please,’” he replied “‘You are right,’” and “[t]hat was the end of the exchange.” (Ibid.) The next morning Lund apologized: “Wanted to apologize I was embarrassing drunk last night.” (Ibid.)

Rite Aid’s response. On January 10, 2019, Atalla’s counsel sent Rite Aid a sexual-harassment claim letter; on January 11, in-house counsel “immediately directed” a human-resources leader to investigate. (Atalla, supra, 89 Cal.App.5th at pp. 305–306.) Lund “admitted sending Atalla the photo and video,” was suspended that day, and Rite Aid “made the decision to terminate Lund” on January 14, with notice delivered January 15. (Id. at p. 306.) That same day Rite Aid e-mailed Atalla’s counsel that Lund was fired and that “‘Ms. Atalla remains an active employee in our system, and she is welcome to return to work,’” inviting her to contact the scheduler and offering employee-assistance resources. (Ibid.) Atalla’s counsel had already advised that she “‘will not be returning to work at Rite Aid,’” and neither she nor counsel responded to the invitation, contacted the scheduler, or requested a leave of absence. (Id. at pp. 306–307.) On January 21, 2019, Rite Aid changed her status to “‘resignation with the possibility of re-hire.’” (Id. at p. 307.)

Procedural history

Atalla’s first amended complaint pleaded eight causes of action against the Rite Aid defendants, including sexual harassment under FEHA (Gov. Code, § 12940, subd. (j)), failure to prevent harassment (§ 12940, subd. (k)), constructive termination in violation of public policy, hostile-work-environment harassment (§ 12940, subd. (j)), discrimination (§ 12940, subd. (a)), and retaliation (§ 12940, subd. (h)). (Atalla, supra, 89 Cal.App.5th at pp. 298–299.) The two emotional-distress counts were dismissed by Atalla. (Id. at p. 300, fn. 4.)

Rite Aid moved for summary judgment. The trial court (Hon. Kristi Culver Kapetan) declined to rule on the parties’ evidentiary objections and granted the motion as to every cause of action. (Atalla, supra, 89 Cal.App.5th at pp. 299–300.) On the harassment claims it found Rite Aid “met its burden of showing” that “the harassment arose from a completely private relationship unconnected with the employment.” (Id. at pp. 299–300.) On constructive termination it ruled that “[t]he undisputed facts show that plaintiff quit — she was not constructively terminated.” (Id. at p. 300.) Atalla appealed; the appeal “involves only the Rite Aid defendants,” not Lund individually. (Id. at pp. 298–299.) The Court of Appeal initially filed an unpublished opinion on February 24, 2023, then “Changed [its status] … from Unpublished to Published March 14, 2023.” The court affirmed in full.

Issue

The dispositive harassment question, the court explained, was narrow: “there is no dispute that Lund was a supervisor,” so “the issue on appeal is, whether Lund was acting in the capacity of a supervisor in the text exchange in which he sent the inappropriate texts, such that Rite Aid could properly be held strictly liable for that conduct.” (Atalla, supra, 89 Cal.App.5th at p. 309.) A second issue was whether Atalla’s departure was a constructive discharge — that is, whether Rite Aid “intentionally created or knowingly permitted working conditions” so intolerable that a reasonable employee “would be compelled to resign.” (Id. at pp. 319–320.) The discrimination and retaliation counts rose or fell with constructive termination, as both were pleaded as flowing from it. (Id. at pp. 322–323.)

Holding

Reasoning

The strict-liability rule and its built-in limit. The court began with the settled proposition that under FEHA “an employer is strictly liable for harassment by a supervisor.” (Atalla, supra, 89 Cal.App.5th at p. 309.) But it immediately drew the boundary the California Supreme Court announced in State Dept. of Health Services v. Superior Court (2003) 31 Cal.4th 1026: strict liability applies “only … if the supervisor is acting in the capacity of supervisor when the harassment occurs,” and 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.” (Atalla, supra, at p. 309, quoting Health Services, supra, 31 Cal.4th at p. 1041, fn. 3.) The animating principle, drawn from Doe v. Capital Cities (1996) 50 Cal.App.4th 1038, is that liability requires “a showing of a legally sufficient nexus between the employment relationship and the act of harassment; that is, as long as the harassment occurs in a work-related context, the employer is liable.” (Atalla, supra, at p. 316.)

The conduct grew out of a personal friendship, not the supervisory role. Applying that limit, the court held the undisputed evidence “does not support an inference … that the text exchange culminating in the inappropriate photos was work-related in that Lund was acting in his capacity as a supervisor.” (Atalla, supra, 89 Cal.App.5th at pp. 312–313.) The friendship “predated Atalla’s taking a pharmacy intern position at Rite Aid and continued thereafter”; Atalla herself “candidly admitted … that this preexisting relationship was wholly unconnected to her work at Rite Aid.” (Id. at p. 311.) The January 4 exchange occurred “after 11:00 p.m. on a Friday night,” with “both participants … away from the workplace” — Lund at a hotel after his wine group, Atalla “at home, sitting on the couch with her husband, sipping vodka.” (Id. at pp. 311–312.) Their banter “was no different in tone and subject matter than loads of their other text exchanges as personal friends.” (Id. at p. 312.) Even Lund’s opening line about her work week did not transform the exchange: that was, “as the trial [court] concluded, ‘a common inquiry for a friend.’” (Ibid.)

The plaintiff’s “career-mentor” theory rejected. The court engaged Atalla’s principal argument — that she maintained the relationship only to advance her career, so that “‘but for’ those subjective professional aspirations, the harassment would not have occurred.” (Atalla, supra, 89 Cal.App.5th at p. 310.) That self-characterization, the court held, was both “self-serving and inconsistent with the large volume of evidence of an outside-the-workplace friendship,” and was “undercut by the hundreds of texts” reflecting interactions that “were frequent, familiar, candid, and wide-ranging” rather than “the occasional networking contact.” (Id. at pp. 311–312.) A subjective motive to network could not convert a manifestly personal relationship into a supervisory one; what mattered was the objective character of the exchange.

The instructive precedent: Capitol City Foods. The court found “most instructive” Capitol City Foods, Inc. v. Superior Court (1992) 5 Cal.App.4th 1042, where a night-shift supervisor picked up a trainee, made a phone call rearranging her schedule, and then took her to his parents’ house where they had intercourse. (Atalla, supra, 89 Cal.App.5th at pp. 313–314.) Because the supervisor had not “forced [the] plaintiff to accompany him or coerced her in any way,” the single work-related phone call “‘was insufficient’” to render his conduct work-related, and the employer obtained summary judgment. (Id. at p. 314.) So too here: Lund’s passing inquiry about Atalla’s week, like the schedule call in Capitol City Foods, “was insufficient to render the text exchange work-related.” As Rite Aid aptly put it, had that supervisor merely asked “how her shifts were going,” the question “would not have rendered his subsequent assault … work-related.” (Id. at pp. 314–315.)

Distinguishing the employer-liability cases. The court worked through the authorities cutting the other way. Doe v. Capital Cities, supra, 50 Cal.App.4th 1038, found a sufficient nexus where an aspiring actor was raped after a casting director — “a kind of gatekeeper to the glamorous world of entertainment” — summoned him to a purported industry brunch; there, “admission to employment require[d] continuous participation in a variety of activities at various locations.” (Atalla, supra, 89 Cal.App.5th at pp. 315–316.) That was “distinguishable,” because Atalla and Lund “had a personal relationship that predated and was independent of their respective employment,” and nothing about their jobs “created a risk of the type of intentional tort Lund committed.” (Id. at p. 316.) Myers v. Trendwest Resorts, Inc. (2007) 148 Cal.App.4th 1403 was likewise distinguished: there the assaults occurred during employer-known “‘driving for dollars’” excursions “of obvious benefit to the employer’s enterprise,” whereas the Atalla–Lund texts, “with [their] personal tone,” were “not undertaken for Rite Aid’s benefit.” (Atalla, supra, at pp. 318–319.) And Doe v. Starbucks (C.D.Cal. 2009) 2009 U.S.Dist. LEXIS 118878, which turned on a minor’s coerced acquiescence, was “inapposite” because the Atalla–Lund banter “lacks any indicia of coercion.” (Atalla, supra, at pp. 316–318.) The court concluded the case “is more analogous to Capitol City Foods than to Myers v. Trendwest.” (Id. at p. 319.)

No constructive discharge. Turning to constructive termination, the court applied Turner v. Anheuser-Busch, Inc. (1994) 7 Cal.4th 1238: a plaintiff “must plead and prove … that the employer either intentionally created or knowingly permitted working conditions that were so intolerable or aggravated … that a reasonable employer would realize that a reasonable person in the employee’s position would be compelled to resign.” (Atalla, supra, 89 Cal.App.5th at pp. 320–321.) The undisputed facts cut decisively against Atalla. Rite Aid “immediately investigated the sexual harassment claim,” “terminated Lund expeditiously,” “invited Atalla back to work,” and “urged her to contact the scheduler.” (Id. at p. 322.) Her own testimony defeated her contention that she believed she had no options: she “explicitly admitted she never took any action to secure a leave of absence,” and never contacted Rite Aid “to inform them she wanted to return to work, not even upon receipt of the separation letter.” (Ibid.) On the contrary, “her attorneys informed Rite Aid that Atalla would not be returning to work.” (Ibid.) The court therefore agreed “the evidence shows that plaintiff resigned her position.” (Id. at pp. 321–322.)

The derivative claims. Because the discrimination and retaliation causes of action were both “based on the same contention that plaintiff was constructively terminated,” and there was no constructive termination, “[t]hese causes of action fail[] for the same reason.” (Atalla, supra, 89 Cal.App.5th at pp. 322–323.) The punitive-damages claim was moot once no cause of action survived. (Id. at p. 323.) The panel was unanimous; there was no dissent.

Significance

Atalla is a clean, recent appellate application of the capacity limit on supervisor strict liability that the Supreme Court planted in footnote 3 of State Dept. of Health Services v. Superior Court. (Atalla, supra, 89 Cal.App.5th at p. 309.) FEHA imposes strict liability for supervisor harassment precisely because supervisors wield delegated employer authority; Atalla confirms the corollary — when a supervisor is not exercising that authority, but is instead acting within a “completely private relationship,” the strict-liability rationale evaporates and the employer is off the hook on the harassment count. (Ibid.) The opinion is useful chiefly as a worked example of the nexus inquiry: it situates the off-site, after-hours fact pattern on the Capitol City Foods side of the line and away from Doe v. Capital Cities and Myers v. Trendwest, supplying a vocabulary (“spawned from a personal exchange that arose from a friendship”) that defense and plaintiff counsel alike will deploy in the growing class of disputes over electronic, off-premises harassment. (Id. at pp. 312, 315–319.)

The holding’s limits deserve emphasis. Atalla does not hold that harassment by personal text is categorically beyond FEHA; it turns on the antecedent, pre-employment friendship and the wholly personal character of the exchange. (Atalla, supra, 89 Cal.App.5th at pp. 311–312.) Nor does it disturb employer liability where a supervisor leverages workplace authority off-site, as Myers v. Trendwest illustrates. (Id. at pp. 318–319.) And because the harassment claim failed on imputation rather than on the severity or pervasiveness of Lund’s conduct, the opinion says nothing about whether two lewd images would suffice to create a hostile environment — a question it had no occasion to reach.

Key quotes

“Under FEHA, an employer is strictly liable for harassment by a supervisor. … However, an employer is only strictly liable under FEHA for harassment by a supervisor ‘if the supervisor is acting in the capacity of supervisor when the harassment occurs.’ ‘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.’” (Atalla, supra, 89 Cal.App.5th at p. 309.)

“The timing of the exchange, the fact that the participants were engaged in personal pursuits at the time, and the nature of the exchange, tied the exchange to the personal friendship between Atalla and Lund.” (Id. at pp. 312–313.)

“Lund’s initial inquiry about how Atalla’s work week went was insufficient to render the text exchange work-related.” (Id. at p. 315.)

Read the full opinion (official slip opinion, PDF) →

Practice pointer

Open questions

The hostile-environment merits. Because the harassment claims were resolved on imputation, the court never reached whether Lund’s two lewd images were severe or pervasive enough to constitute a hostile work environment under Lyle v. Warner Brothers Television Productions (2006) 38 Cal.4th 264. The opinion’s analysis stops at the nexus question. (Atalla, supra, 89 Cal.App.5th at pp. 309, 313.)

The line between personal and supervisory conduct. Atalla resolves a strongly personal fact pattern but leaves the harder middle cases unaddressed — for instance, a supervisor-initiated relationship that began at work, or off-hours conduct mixing genuine work direction with harassment. The court emphasized that this relationship “predated” and was “independent of” the employment, signaling those features may be doing the decisive work. (Atalla, supra, 89 Cal.App.5th at pp. 311, 316.)

Failure to prevent harassment. The court affirmed summary judgment “as to the remaining causes of action,” including the section 12940, subdivision (k), failure-to-prevent claim, without separate analysis. (Atalla, supra, 89 Cal.App.5th at p. 300.) The opinion does not independently examine whether such a derivative claim could survive where the underlying harassment is not imputable to the employer.