Bihun v. AT&T Information Systems, Inc.

Facts

The Fair Employment and Housing Act makes it an unlawful employment practice for an employer to sexually harass an employee, to discriminate against any person for opposing practices forbidden by the Act, and “to fail to take all reasonable steps necessary to prevent [sexual] harassment from occurring.” (Bihun, supra, 13 Cal.App.4th at p. 987 & fn. 1, quoting Gov. Code, § 12940, subds. (h), (f), (i).) Because the Fair Employment and Housing Commission cannot award damages for personal injuries such as emotional distress, the statute provides a private right of action. (Id. at p. 1004.)

Oksana Bihun worked for AT&T or one of its predecessors from 1977 to 1985, becoming an area personnel manager in 1983. (Bihun, supra, 13 Cal.App.4th at p. 985.) She received a “number one” staff rating and was eligible for promotion to the next level of management in January 1984. (Ibid.) In March 1984, Peter Fellows — a longtime employee — transferred from Denver to Los Angeles as area vice-president, and his sexual harassment of Bihun “began almost immediately.” (Ibid.)

The opinion catalogs the conduct in unsparing detail. On their first meeting Fellows winked at Bihun and brushed his hand against hers; later he walked into a colleague’s office “with his shirt unbuttoned and his pants unzipped” and pressed his body against Bihun’s shoulder; at a birthday luncheon he rubbed her leg with his foot and, when she kicked him away, “thrust his groin at her.” (Bihun, supra, 13 Cal.App.4th at p. 985.) Over dinner he described “his unsatisfactory sex life with his wife and his need for extramarital affairs,” told her a reorganization was coming and that if she “played her cards right” she could have any job she wanted — including her supervisor’s, because the supervisor “could be made to disappear” — and asked her to have an affair with him, boasting that “he did pretty much what he wanted in the company and no one questioned him.” (Id. at pp. 985–986.)

After Bihun reported the dinner to her supervisor, Jimetta Moore, who complained to Fellows, the direct harassment “became less frequent” but did not stop: Fellows once “cupped his hand on her breast” in the hall and later asked whether she had “softened up yet” and whether she had “changed [her] mind.” (Bihun, supra, 13 Cal.App.4th at p. 986.) Fellows then retaliated — stripping Bihun of her budgetary responsibilities, accusing her of forging her supervisor’s signature, and leaving her with “nothing to do.” (Ibid.) In December 1984 Bihun went on disability leave; her doctor diagnosed an “adjustment disorder” with anxiety and depression attributable to work. (Ibid.) Although she made “numerous complaints,” no one ever contacted her or Moore about them. (Ibid.) When she returned, she “was demoted two levels and placed in sales” where she had no background, and shortly thereafter she resigned. (Ibid.) Fellows had resigned while she was on leave. (Ibid.) By trial, Bihun was an attorney with the Los Angeles County Public Defender, but she continued to suffer “a low grade depression throughout these years.” (Id. at pp. 986, 995.)

Procedural history

Bihun sued AT&T and several of its employees. The case went to the jury on her claims of sexual harassment and retaliation in violation of FEHA. (Bihun, supra, 13 Cal.App.4th at pp. 986–987.) The jury awarded $1.5 million in compensatory damages and $500,000 in punitive damages; the trial court added $893,698 in prejudgment interest and $151,468 in attorney fees plus costs, for a total judgment of $3,057,369.34. (Id. at p. 987.) AT&T appealed, attacking the admission of evidence of Fellows’s misconduct with other women, the willful-suppression-of-evidence instruction, the sufficiency of the future-damages proof, the size of the compensatory award, the attorney-fee rate, and the prejudgment-interest award. The Court of Appeal, in an opinion by Justice Johnson, affirmed the judgment in its entirety; Presiding Justice Lillie and Justice Woods concurred without separate opinion. (Id. at pp. 984, 1006.)

Issue

The appeal presented a cluster of questions, two of which give the case its enduring value. First, where an employer was asked before trial to produce the harasser’s personnel file and instead objected on privacy and relevance grounds — concealing, until forced to confess mid-trial, that the file could not be located — was the jury properly instructed that it could draw an adverse inference from the employer’s “wilful suppression of evidence”? (Bihun, supra, 13 Cal.App.4th at pp. 991–995.) Second, is a FEHA sexual-harassment action one “brought to recover damages for personal injury” within the meaning of Civil Code section 3291, so that prejudgment interest runs on the entire judgment — compensatory and punitive — following the defendant’s rejection of a Code of Civil Procedure section 998 offer? (Id. at pp. 1001–1006.) Subsidiary issues concerned the admissibility of evidence of Fellows’s conduct toward other female employees, and the sufficiency of the evidence supporting future emotional-distress and lost-earnings damages. (Id. at pp. 987–998.)

Holding

Reasoning

The employer could not recast trial-relevant evidence as irrelevant by embracing strict liability on appeal. AT&T’s lead argument was that evidence of Fellows’s misconduct with other women — the anonymous “love nest” letter, warnings that Fellows “was unprofessional around women,” the supervisor’s startled “You, too?,” and reports that other employees “were having the same problem” — was irrelevant because, under Fisher v. San Pedro Peninsula Hospital (1989) 214 Cal.App.3d 590, an employer is strictly liable for a supervisor’s harassment, making its knowledge beside the point. (Bihun, supra, 13 Cal.App.4th at pp. 987–988.) The court refused to entertain the about-face: “Defendant cannot be allowed to change the theory of its case on appeal in order to argue evidence that was relevant at trial is now irrelevant.” (Id. at p. 988.) Independently, the evidence remained relevant because “the employer’s knowledge and failure to act are relevant to the award of punitive damages.” (Ibid., citing Civ. Code, § 3294, subd. (b).)

The “other women” evidence was operative-fact proof of notice, not hearsay or character evidence. The court rejected AT&T’s hearsay objection because the proof “was not admitted to prove the truth of the matters asserted,” such as that Fellows actually maintained a “love nest,” but “to show defendant had knowledge of Fellows’s reputation and the complaints about his conduct with female employees but took no steps to investigate or discipline Fellows.” (Bihun, supra, 13 Cal.App.4th at p. 988.) As such it was admissible as “operative facts.” (Ibid.) The court tethered the relevance of knowledge to vicarious punitive exposure: “If an employer, after knowledge or opportunity to learn of his agent’s misconduct, retains the wrongdoer in service, the employer may be liable in punitive damages for the misconduct.” (Id. at pp. 988–989, quoting J. R. Norton Co. v. General Teamsters Warehousemen & Helpers Union (1989) 208 Cal.App.3d 430, 445.) On prejudice, the court explained that the brands of “adulterer, womanizer and harasser” were “actually … placed on Fellows by the testimony of the plaintiff … and her supervisor,” and that section 352 prejudice means evidence that “uniquely tends to evoke an emotional bias” with “very little effect on the issues” — not evidence that is merely “damaging.” (Id. at pp. 989–990, quoting People v. Yu (1983) 143 Cal.App.3d 358, 377.) The character-evidence objection failed under Evidence Code section 1101 because the evidence went to the employer’s knowledge, not Fellows’s conduct on a specific occasion, and because reputation evidence is admissible where “character or a trait of character is an ultimate fact in dispute.” (Id. at pp. 990–991.)

The missing personnel file and the cover-up justified a willful-suppression instruction. The doctrinal centerpiece is the court’s treatment of the lost file. Three months before trial, Bihun demanded production of Fellows’s personnel file under Code of Civil Procedure section 1987, subdivision (c); AT&T objected on privacy and relevance grounds even though defense counsel “had never seen Fellows’s personnel file” and “had been informed by defendant several months earlier Fellows’s personnel file could not be located.” (Bihun, supra, 13 Cal.App.4th at pp. 991–992.) Counsel revealed the truth only mid-trial: “Attempts have been made to locate Mr. Fellows’s file. It cannot be located.” (Id. at p. 992.) The court held that a privacy-and-relevance objection “falsely implied” counsel had reviewed the file — “[t]here is no other way he could make a meritorious claim the contents were irrelevant” — making the objection “totally and completely without merit” and a “dishonest means of avoiding production” in tension with the attorney’s duty under Business and Professions Code section 6068, subdivision (d). (Id. at p. 992 & fn. 5.) Opposing counsel “was also entitled to rely on defense counsel’s good faith and truthfulness”; had he known the file was lost, “he could have taken steps to assure himself a diligent search had been made or requested other files.” (Ibid., fn. 5.)

Circumstantial evidence of suppression is enough; direct proof of destruction is not required. AT&T leaned on Thor v. Boska (1974) 38 Cal.App.3d 558, but the court found it both inapposite and, if anything, supportive: Thor “did not involve an instruction on wilful suppression of evidence,” and it stands for the proposition that a party who cannot produce records it should have anticipated would be sought creates “a strong inference of consciousness of guilt.” (Bihun, supra, 13 Cal.App.4th at pp. 992–994.) The court stressed the aggravating distinction: unlike the Thor defendant, who “admitted up front the records had been lost or destroyed,” AT&T “covered up the fact the records had been lost or destroyed and did not reveal this fact until forced to do so in the middle of trial” — facts that “[a]rguably … raise an even stronger inference of consciousness of guilt.” (Id. at pp. 993–994.) Four circumstances supplied substantial evidence for the instruction: Fellows’s file could not be located although Bihun’s file (a contemporaneous resignation) was found; the disappearance was covered up; company rules required retention of resigned employees’ files in litigation; and it was “reasonably probable” the file held Fellows’s evaluations and any harassment complaints. (Id. at p. 994.)

The instruction’s strength-and-weakness language was a correct statement of the law. The jury was told it could infer “there was something damaging to defendant’s case contained in that personnel file,” reflecting “defendant’s recognition of the strength of plaintiff’s case … and/or the weakness of its own case.” (Bihun, supra, 13 Cal.App.4th at p. 992.) Although this language “goes beyond … BAJI No. 2.03 and Evidence Code section 413,” the court held it correct: former Code of Civil Procedure section 1963, subdivision 5, permitted the inference “[t]hat evidence wilfully suppressed would be adverse if produced,” and section 413 “was not intended as a change in the law.” (Id. at pp. 994–995.) Thor itself endorsed instructing that “the adversary’s conduct may be considered as tending to corroborate the proponent’s case generally, and as tending to discredit the adversary’s case generally.” (Id. at p. 995, quoting Thor, supra, 38 Cal.App.3d at p. 567.)

Future damages were grounded in expert testimony, not speculation. The court upheld the life-expectancy instruction because a plaintiff “may recover for detriment reasonably certain to result in the future” (Civ. Code, § 3283), and Bihun’s treating physician testified she “continued to suffer ‘a low grade depression throughout these years’” and would “be affected psychologically in the future.” (Bihun, supra, 13 Cal.App.4th at p. 995.) On lost earnings, the court rejected AT&T’s speculation argument: Bihun had received “nothing but excellent evaluations,” was rated “‘ready now’” for promotion, earned her law degree with the employer’s encouragement, and the evidence supported a finding she “would have remained at AT&T indefinitely” at higher pay than the public defender’s office offered. (Id. at pp. 996–997.) FEHA posed no bar, because under Commodore Home Systems, Inc. v. Superior Court (1982) 32 Cal.3d 211, “all relief generally available in noncontractual actions … may be obtained.” (Id. at p. 996.) The $662,000 emotional-distress award was “well within the range of awards in similar cases” and not “out of line with the economic damages,” dispelling any inference of passion or prejudice. (Id. at pp. 997–998.)

FEHA harassment is a personal injury, so prejudgment interest reached the entire judgment. Turning to Civil Code section 3291, the court first refused to let AT&T raise — for the first time on appeal — the argument that Bihun’s unapportioned section 998 offer to multiple defendants could not support interest, even though Taing v. Johnson Scaffolding Co. (1992) 9 Cal.App.4th 579 had issued during the appeal. (Bihun, supra, 13 Cal.App.4th at pp. 998–1001.) Taing was distinguishable: it concerned defendants “not jointly liable for the full amount of the plaintiff’s damages,” whereas “AT&T was jointly liable with its employees on a respondeat superior or vicarious liability theory for the full amount of damages on every cause of action in which AT&T was named.” (Id. at pp. 1000–1001.) On the merits, the court held that “sexual harassment in the workplace is a personal injury within the meaning of Civil Code section 3291.” (Id. at p. 1004.) The applicability of section 3291 “depends on the primary purpose of the cause of action,” and “[t]he gravamen of any sexual harassment claim is that the alleged sexual advances were ‘unwelcome’” — a personal, not economic, wrong, even in “quid pro quo” form. (Id. at pp. 1002–1005, quoting Meritor Savings Bank v. Vinson (1986) 477 U.S. 57, 68.) Following its own decision in Greenfield v. Spectrum Investment Corp. (1985) 174 Cal.App.3d 111, the court held that on “a single cause of action for personal injury” a plaintiff “may claim prejudgment interest under Civil Code section 3291 as to both compensatory and punitive damages,” because the statute speaks of interest on “the judgment.” (Id. at pp. 1005–1006.) It is this last step — extending section 3291 prejudgment interest to punitive damages — on which the Supreme Court later disapproved Bihun and Greenfield in Lakin v. Watkins Associated Industries (1993) 6 Cal.4th 644, 664.

Significance

Bihun is a foundational California authority on the missing-evidence inference in employment litigation, decided years before the Supreme Court foreclosed a tort of intentional spoliation in Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1 and Temple Community Hospital v. Superior Court (1999) 20 Cal.4th 464. Because those decisions channeled the spoliation problem back into evidentiary tools — chiefly the Evidence Code section 413 inference and the willful-suppression instruction — Bihun’s detailed endorsement of that instruction, on circumstantial proof alone, has only grown in practical importance. (Bihun, supra, 13 Cal.App.4th at pp. 992–995.) Its companion holding — that FEHA harassment is a “personal injury” vindicating “decidedly personal rights” — situates the statute in the personal-injury tradition for purposes of section 3291 and the broader remedial architecture of Commodore Home Systems. (Id. at pp. 1004–1006.) The opinion is equally useful for its respondeat-superior and punitive-damages logic: an employer that knows of a supervisor’s harassment and “retains the wrongdoer in service” exposes itself to punitive damages, and evidence of that knowledge is admissible operative-fact proof, not hearsay or character evidence. (Id. at pp. 988–989.) The decision’s one identified limit is that the Supreme Court disapproved its extension of section 3291 prejudgment interest to punitive damages. (Lakin, supra, 6 Cal.4th at p. 664.) On harassment liability, evidence, and the suppression inference, Bihun remains good, frequently cited law.

Key quotes

“If you find that defendant AT&T Information Systems, Inc. wilfully suppressed the personnel file of Peter Fellows, you may draw an inference that there was something damaging to defendant’s case contained in that personnel file.” (Bihun, supra, 13 Cal.App.4th at p. 992.)

“[W]hen those records were requested it covered up the fact the records had been lost or destroyed and did not reveal this fact until forced to do so in the middle of trial. Arguably, the facts in the present case raise an even stronger inference of consciousness of guilt on defendant’s part than the facts in Thor.” (Id. at pp. 993–994.)

“We have concluded sexual harassment in the workplace is a personal injury within the meaning of Civil Code section 3291.” (Id. at p. 1004.)

Read the full opinion (Justia) →

Practice pointer

Open questions

The opinion leaves several matters for another day. Having declined to reach AT&T’s strict-liability theory because it conflicted with the position taken below, the court did not decide whether, or to what extent, an employer’s knowledge is independently relevant to liability for supervisor harassment under FEHA — it rested instead on the punitive-damages relevance of knowledge and on forfeiture. (Bihun, supra, 13 Cal.App.4th at pp. 987–988.) The court also expressly declined to decide whether an unapportioned section 998 settlement offer to multiple defendants can support prejudgment interest, holding only that AT&T could not raise the Taing issue for the first time on appeal and distinguishing Taing on joint-liability grounds. (Id. at pp. 999–1001.) Most consequentially for later practice, the opinion’s holding that section 3291 prejudgment interest reaches punitive damages did not survive: the Supreme Court disapproved that point in Lakin v. Watkins Associated Industries (1993) 6 Cal.4th 644, 664, leaving the availability of such interest governed by Lakin rather than Bihun. (Id. at pp. 1005–1006.)