Cooper v. Rykoff-Sexton, Inc.

Facts

The after-acquired-evidence problem arises when an employer, sued for an unlawful discharge, discovers during the litigation that the plaintiff lied to get the job — and then argues that the lie, though it played no part in the firing, wipes out the employee’s claim. Cooper is the first published California decision to confront that argument squarely, and it arose on a clean record. (Cooper, supra, 24 Cal.App.4th at p. 617 [“There are no California decisions in point.”].)

Gary Cooper repaired commercial dishwashing machinery for Rykoff, which hired him in 1981. (Cooper, supra, 24 Cal.App.4th at pp. 615, 617.) For 10 years he “satisfactorily performed his job,” and the employer “never had reason to discipline him.” (Id. at pp. 617–618.) Rykoff had an unwritten policy requiring advance authorization for overtime. (Id. at p. 617.) On October 15, 1990, Cooper was dispatched to repair equipment at a department store; he skipped his lunch break to serve the customer promptly, finished at 4:30 p.m., telephoned his dispatcher, and obtained authorization to claim a half hour of overtime to compensate for the missed lunch. (Ibid.) On his daily service report he accordingly showed he had worked until 5 p.m. (Ibid.) “Rykoff immediately fired him for violating its rules requiring accurate recordkeeping.” (Ibid.)

Cooper sued, alleging breach of an implied agreement not to fire him without cause, breach of the implied covenant of good faith and fair dealing, and age discrimination. (Cooper, supra, 24 Cal.App.4th at p. 615.) Only at Cooper’s deposition did Rykoff’s counsel learn of two falsifications in his 1981 application. (Id. at p. 617.) Cooper had stated he worked for General Electric from 1964 to 1974 and then left to go into business for himself; in fact, he testified, General Electric had fired him for an accident in a company service van. (Ibid.) He had also stated he was self-employed from 1974 to 1981; in fact, during five of those years he worked for Tappan, which fired him “for moonlighting in a company van.” (Id. at pp. 617–618.) Rykoff’s general manager declared that, had he known of the omissions and misrepresentations, “I would not have hired Mr. Cooper,” and that learning of them during employment would have prompted discharge “for falsifying his application.” (Id. at p. 618.)

Procedural history

Rykoff’s summary judgment motion “had a single basis: that plaintiff could not complain his firing was unlawful, because he had, in his application for employment nearly 10 years earlier, made material omissions.” (Cooper, supra, 24 Cal.App.4th at p. 615.) The employer stated the theory bluntly in its moving papers: “It does not matter whether an employee can establish that his or her employer breached its contract with the employee or unlawfully discriminated against the employee . . . . Even if an employee can prove such claims, the employee is not entitled to any remedy and the employer is entitled to summary judgment if the employee materially falsified his or her employment application.” (Id. at pp. 615–616.) The trial court agreed and granted summary judgment. The Court of Appeal reversed, with costs to Cooper. (Id. at p. 619.) Part II of the opinion, addressing a routine procedural issue, was not certified for publication; the published portion is the after-acquired-evidence holding. (Id. at p. 614 [notice].)

Issue

The published question was framed as a matter of law: “whether . . . plaintiff’s claims are barred by material omissions in his employment application” that “[t]he employer discovered . . . during the litigation.” (Cooper, supra, 24 Cal.App.4th at p. 615.) Put doctrinally, the court asked whether after-acquired evidence of application fraud operates as a complete defense that forfeits all remedies for an otherwise-unlawful discharge.

Holding

Reasoning

The federal starting point — and its overreading. Rykoff relied on a line of federal cases descending from Summers v. State Farm Mut. Auto. Ins. Co. (10th Cir. 1988) 864 F.2d 700, where an insurance adjuster was fired for falsifying claims documents and poor performance, and post-discharge examination revealed the falsifications were far more widespread than realized. (Cooper, supra, 24 Cal.App.4th at p. 616.) The court flagged the analytic slippage at the root of the employer’s argument: “A number of federal courts, mostly overlooking the distinction between on-the-job misconduct and resume falsification, have regarded Summers as support for the broad proposition that after-acquired evidence of employment-application falsification can be used to defeat discrimination claims . . . .” (Ibid.) That conflation — between misconduct during employment (the actual Summers facts) and misrepresentation to obtain employment — is the fault line the court worked along.

The cases that “probably reached the correct result on their facts.” The court did not pretend resume fraud is harmless. It acknowledged that “[m]any of those decisions probably reached the correct result on their facts,” canvassing three illustrations in which the concealment was egregious: a clerk-typist who hid that four employers had fired her in three years and that she had a felony fraud conviction (Mathis v. Boeing Military Airplane Co. (D.Kan. 1989) 719 F.Supp. 991); a security guard who concealed drug abuse, a recent suicide-attempt hospitalization, 12 jobs in 10 years, and a recent firing (Churchman v. Pinkerton’s Inc. (D.Kan. 1991) 756 F.Supp. 515); and a jailer who concealed two criminal convictions (Washington v. Lake County (7th Cir. 1992) 969 F.2d 250). (Cooper, supra, 24 Cal.App.4th at p. 616.) The point of cataloguing them was not to bless a per se rule but to show that case-specific equities, not a blanket bar, explained the outcomes. The court singled out one decision that “seems to lie at the opposite factual extreme” — O’Driscoll v. Hercules, Inc. (D.Utah 1990) 745 F.Supp. 656, affd. (10th Cir. 1994) 12 F.3d 176 — where an age-discrimination plaintiff who had understated her age by five years was held properly subject to summary judgment, “apparently on the basis of the employer’s showing that if it had known her true age at the outset, it never would have hired her.” (Cooper, supra, 24 Cal.App.4th at pp. 616–617.) That the same Summers-derived rule could swallow even an age claim premised on the very trait misstated illustrates why a categorical bar proves too much.

The “masquerading doctor” analogy, and why it usually misfires. Many courts had embraced the vivid hypothetical posited in Summers: a company doctor fired “because of his age, race, religion, and sex” who turns out, on later discovery, “not [to be] a ‘doctor’” — in which case “the masquerading doctor would be entitled to no relief.” (Cooper, supra, 24 Cal.App.4th at p. 616, quoting Summers, supra, 864 F.2d at p. 708.) The Court of Appeal answered that the analogy “is inapposite in most of the cases.” (Ibid.) It would have applied most closely in Smith v. General Scanning, Inc. (7th Cir. 1989) 876 F.2d 1315 — where a sales engineer falsely claimed engineering degrees — “but the court ruled the other way,” reasoning that for a long-term employee “the ‘more appropriate’ inquiry is performance, into which the question of qualifications merges.” (Cooper, supra, 24 Cal.App.4th at p. 616, quoting Smith, supra, 876 F.2d at p. 1320.) The analogy, in other words, proves too much: it treats initial qualification as dispositive even where years of competent performance have intervened.

The emerging middle path: liability survives, damages may not. The court noted that “[t]wo federal circuits have rejected the resume-falsification defense as a complete bar to recovery, while recognizing that the measure of damages can be affected if the employer can prove it would eventually have discovered the falsification even in the absence of the litigation.” (Cooper, supra, 24 Cal.App.4th at pp. 616–617, citing Kristufek v. Hussmann Foodservice Co. (7th Cir. 1993) 985 F.2d 364, and Wallace v. Dunn Constr. Co. (11th Cir. 1992) 968 F.2d 1174.) This liability-versus-remedy distinction would soon become the governing federal rule.

The policy holding. Grounding its conclusion “in the facts of the case,” the court articulated the principle that has carried Cooper forward: “Neither sound public policy nor the general law of contract dictates that an employee who can show that despite loyal and competent service he was fired without cause, in violation of a term of his employment contract — or because of his age, in violation of statute — nonetheless has forfeited all resulting legal remedies against his employer because of material misrepresentations he made years earlier in his employment application. Although resume fraud is a serious social problem, so is termination of employment in violation of antidiscrimination laws or in breach of contract.” (Cooper, supra, 24 Cal.App.4th at p. 618.) “Automatic forfeiture of all employment rights regardless of the circumstances can be too harsh a penalty in many cases.” (Ibid.) And for statutory claims in particular: “Where an employer has fired a worker in violation of a statutory ban on discrimination in the workplace, the purpose and effect of the antidiscrimination statutes are unacceptably undermined by a principle that would allow a fact that played no part in the firing decision to bar any recovery.” (Id. at pp. 618–619.)

What the court did not decide. The court refused to resolve the damages question, observing in a footnote that “[t]he federal courts have devoted Herculean labors to the task of ascertaining the effect of resume fraud on damages. That issue is not before us on this appeal.” (Cooper, supra, 24 Cal.App.4th at p. 619 & fn. 1.) That reservation is doctrinally important: Cooper answers the liability question (no complete bar) without endorsing any particular remedial consequence.

Significance

Cooper set California’s default for application-fraud after-acquired evidence: it is not a complete defense. The decision anticipated the United States Supreme Court by less than a year. In McKennon v. Nashville Banner Publishing Co. (1995) 513 U.S. 352, the Court held that after-acquired evidence does not shield an employer from liability under the federal age statute, though it bears on the relief available — generally barring reinstatement and front pay and capping backpay at the date the misconduct was discovered. The two decisions are conceptually aligned: wrongdoing by the employee is relevant to remedy, not to the existence of the violation. California courts read them together. One year after Cooper, the same appellate district decided Camp v. Jeffer, Mangels, Butler & Marmaro (1995) 35 Cal.App.4th 620, which distinguished Cooper on a crucial axis: where the misrepresented qualification is one the employer self-imposes, after-acquired evidence (per Cooper and McKennon) limits remedies but does not bar the claim; where the employee was disqualified by a government-imposed requirement and lied to obtain the job, the equities can bar recovery entirely. (Camp, supra, 35 Cal.App.4th at pp. 632–638.) Cooper thus occupies the permissive end of a spectrum that Camp completes. Its limit is equally clear: Cooper leaves the damages calculus open, and an employer who proves it would inevitably have discovered the fraud retains a powerful argument to truncate the backpay period.

Key quotes

“We decline to adopt a blanket rule that material falsification of an employment application is a complete defense to a claim that the employer, while still unaware of the falsification, terminated the employment in violation of the employee’s legal rights.” (Cooper, supra, 24 Cal.App.4th at p. 617.)

“Although resume fraud is a serious social problem, so is termination of employment in violation of antidiscrimination laws or in breach of contract. Automatic forfeiture of all employment rights regardless of the circumstances can be too harsh a penalty in many cases.” (Id. at p. 618.)

“Where an employer has fired a worker in violation of a statutory ban on discrimination in the workplace, the purpose and effect of the antidiscrimination statutes are unacceptably undermined by a principle that would allow a fact that played no part in the firing decision to bar any recovery.” (Id. at pp. 618–619.)

Read the full opinion (Justia) →

Practice pointer

Open questions

The largest reserved issue is the one the court flagged: after-acquired evidence’s effect on the measure of damages. The court called the federal effort to resolve it “Herculean” and declined to enter the fray because “[t]hat issue is not before us on this appeal.” (Cooper, supra, 24 Cal.App.4th at p. 619 & fn. 1.) Cooper also leaves open the contours of the “correct result on their facts” caveat — it acknowledged that egregious concealment cases (Mathis, Churchman, Washington) may come out differently (id. at p. 616), without articulating the dividing line between fraud that merely limits remedies and fraud severe enough to defeat a claim. Camp later supplied one such line (self-imposed versus government-imposed disqualification), but the broader question — how courts should weigh the employee’s wrongdoing against the antidiscrimination interest in any given case — remains a fact-intensive inquiry the decision does not foreclose.