Holmes v. Petrovich Development Co., LLC

Facts

The FEHA makes it “an unlawful employment practice for an employer, ‘because of … sex, … to harass an employee.’” (Gov. Code, § 12940, subd. (j)(1); see Holmes, supra, 191 Cal.App.4th at p. 1058.) Under the statute, “‘harassment’ because of sex includes sexual harassment, gender harassment, and harassment based on pregnancy, childbirth, or related medical conditions.” (Gov. Code, § 12940, subd. (j)(4)(C); Holmes, supra, at p. 1058.) A retaliation claim, in turn, requires an “‘adverse employment action,’” defined as a “substantial adverse change in the terms and conditions of the plaintiff’s employment.” (Id. at p. 1063, quoting Yanowitz v. L’Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1054.) The attorney–client privilege protects only a “confidential communication between client and lawyer,” meaning information transmitted “in confidence by a means which, so far as the client is aware, discloses the information to no third persons” outside the consultation. (Evid. Code, § 952; Holmes, supra, at p. 1052.)

Gina M. Holmes began working as executive assistant to Paul Petrovich in early June 2004. (Holmes, supra, 191 Cal.App.4th at p. 1052.) The employee handbook she admitted reading and signing spelled out the company’s technology policy: computer resources were “to be used only for company business,” employees were “prohibited from sending or receiving personal e-mails,” and employees who used company resources for personal messages had “no right of privacy with respect to that information or message.” (Ibid.) The handbook warned that “‘E-mail is not private communication,’” “‘may best be regarded as a postcard rather than as a sealed letter,’” and that the company could “‘inspect all files or messages … at any time for any reason at its discretion’” and would periodically monitor for compliance. (Ibid.)

In July 2004, Holmes told Petrovich she was pregnant with a December 7 due date and planned to take six weeks’ maternity leave. (Holmes, supra, 191 Cal.App.4th at p. 1052.) She did not like coworkers asking about her leave; she asked “‘[t]hat little group of hens’” to stop, and they complied. (Id. at pp. 1052–1053.) She also found Petrovich’s “‘belly-monitoring’” comments inappropriate but never told him so. (Id. at p. 1053.)

The dispute crystallized in an August 2004 e-mail exchange. After Petrovich raised the difficulty of covering her leave, Holmes advised that she might begin leave around November 15 and could be out up to the statutory maximum of four months. (Holmes, supra, 191 Cal.App.4th at p. 1053.) Petrovich replied, “‘I need some honesty. How pregnant were you when you interviewed with me and what happened to six weeks? … That is an extreme hardship on me, my business and everybody else in the company. You have rights for sure and I am not going to do anything to violate any laws, but I feel taken advantage of and deceived for sure.’” (Ibid.) Holmes answered at length, disclosing that she was 39, had undergone amniocentesis, had suffered two prior miscarriages, and would not have carried the pregnancy to term had the results been abnormal. (Id. at pp. 1053–1054.) Concerned she might quit, Petrovich forwarded the exchange to several people who handled human-resources and payroll functions and to in-house counsel. (Id. at p. 1054.) He assured Holmes, “‘No, you are not fired,’” and later wrote, “‘I want you to stay. It will work.’” (Id. at pp. 1054–1055.)

On August 10, after seeing her doctor, Holmes used the company computer to e-mail attorney Joanna Mendoza seeking a referral on pregnancy discrimination, stating her boss was “‘making it unbearable’” and that she was “‘officially working in a hostile environment.’” (Holmes, supra, 191 Cal.App.4th at p. 1056.) Mendoza advised her to delete the communications from her work computer “because her employer might claim a right to access it.” (Ibid.) The next evening, after lunch with Mendoza, Holmes e-mailed Petrovich that his “‘feelings about my pregnancy … leave me no alternative but to end my employment here,’” cleared her desk, and did not return. (Ibid.) Her entire tenure had lasted roughly two months. (Id. at pp. 1052, 1060.)

Procedural history

In September 2005, Holmes sued Petrovich and his company for sexual harassment, retaliation, wrongful termination in violation of public policy, invasion of privacy, and intentional infliction of emotional distress. (Holmes, supra, 191 Cal.App.4th at pp. 1056–1057.) The trial court granted summary adjudication on the harassment, retaliation, and constructive-discharge causes of action, finding no triable issue that the environment was objectively hostile or that Holmes suffered an adverse employment action. (Id. at p. 1057.) It denied adjudication on the invasion-of-privacy and IIED claims — which rested on Petrovich’s forwarding of her pregnancy e-mails, not on his access to her attorney e-mails — and those two claims went to a jury, which returned a defense verdict. (Id. at pp. 1057–1058.) During discovery and at trial, the court ruled that Holmes’s e-mails to Mendoza, sent on the company computer, were not privileged and could be used by the defense. (Id. at pp. 1065–1068.) Holmes appealed. The Third District, in a unanimous opinion by retired Presiding Justice Scotland sitting by assignment, affirmed in full. (Id. at pp. 1051, 1073–1074.)

Issue

The published opinion presents three questions. First, on the merits of the discrimination claims: did the August e-mail exchange and related comments, over a two-month tenure, create a work environment that was objectively hostile or abusive “because of” pregnancy under the FEHA, and could those facts support constructive discharge? Second, on retaliation: did Petrovich’s conduct — chiefly forwarding Holmes’s pregnancy e-mail to others in the office — amount to an “adverse employment action,” i.e., a “substantial adverse change in the terms and conditions of … employment”? (Holmes, supra, 191 Cal.App.4th at p. 1063.) Third, on privilege: were the e-mails Holmes sent her attorney using the company’s computer “confidential communication[s]” under Evidence Code section 952, given the company’s monitoring policy?

Holding

Reasoning

The summary-judgment frame, and the objective standard governs. Reviewing de novo, the court presumed the judgment correct and placed the burden of demonstrating error on Holmes. (Holmes, supra, 191 Cal.App.4th at p. 1058.) A hostile-environment plaintiff must show conduct “(1) unwelcome, (2) because of sex, and (3) sufficiently severe or pervasive to alter the conditions of … employment and create an abusive work environment.” (Id. at pp. 1058–1059, citing Lyle v. Warner Brothers Television Productions (2006) 38 Cal.4th 264, 279.) Critically, the environment “‘must be both objectively and subjectively offensive,’” so that “‘a plaintiff who subjectively perceives the workplace as hostile or abusive will not prevail … if a reasonable person in the plaintiff’s position … would not share the same perception.’” (Id. at p. 1059, quoting Lyle, supra, at p. 284.) The trial court had found Holmes subjectively perceived hostility but that the environment was not objectively abusive as a matter of law. (Id. at pp. 1059–1060.)

Rejecting a “reasonable pregnant woman” override of the objective test. Holmes argued that whether conduct is objectively offensive “‘should have been left to the trier of fact,’” and that the standard should ask whether a “reasonable pregnant woman” would find the environment hostile. (Holmes, supra, 191 Cal.App.4th at pp. 1059–1060.) The court was unpersuaded. Even framed as a reasonable pregnant woman, the record “disclose[d] an absence of evidence from which a reasonable jury could objectively find that Petrovich created a hostile work environment.” (Id. at p. 1060.) Coworkers stopped asking about leave when asked; the August e-mails “show nothing more than that Petrovich made some critical comments due to the stress of being a small business owner who must accommodate a pregnant woman’s right to maternity leave.” (Ibid.) He “recognized Holmes’s legal rights, stated he would honor them, said he was not asking for her resignation, … and assured Holmes that ‘it will work.’ … Rather than giving him a chance to honor his promise, Holmes quit.” (Ibid.)

FEHA is not a civility code. Invoking Lyle, the court reiterated that “there is no recovery for harassment that is occasional, isolated, sporadic, or trivial,” and that a plaintiff “must show a concerted pattern of harassment that is repeated, routine, or generalized in nature.” (Holmes, supra, 191 Cal.App.4th at p. 1061.) It distinguished the three authorities Holmes invoked for the proposition that a few incidents can suffice, noting each “involve[d] egregious and severe conduct that unquestionably was abusive” — a forced tongue-kiss and bra-grabbing in Hostetler, a demand that a homosexual employee become heterosexual and convert religions in Erdmann, and stigmatizing comments coupled with negative evaluations, punitive workloads, and a denied sick day in Mayfield. (Id. at pp. 1061–1062.) “Petrovich did not engage in any similarly egregious conduct, and he provided a nondiscriminatory explanation for his conduct.” (Id. at p. 1062.)

Constructive discharge collapses into the harassment failure. Constructive discharge requires conditions “‘sufficiently extraordinary and egregious to overcome the normal motivation of a competent, diligent, and reasonable employee to remain on the job,’” and a coerced — not merely rational — resignation. (Holmes, supra, 191 Cal.App.4th at p. 1062, quoting Turner v. Anheuser-Busch, Inc. (1994) 7 Cal.4th 1238, 1246–1247.) Because Holmes could not even show severe or pervasive harassment, “it [would] be impossible for her to meet the higher standard of constructive discharge.” (Ibid.)

No adverse employment action — the Yanowitz line. Turning to retaliation, the court anchored the analysis in Yanowitz: an adverse employment action “requires a ‘substantial adverse change in the terms and conditions of the plaintiff’s employment,’” and “‘a mere offensive utterance or … a pattern of social slights by either the employer or coemployees cannot properly be viewed as materially affecting the terms, conditions, or privileges of employment.’” (Holmes, supra, 191 Cal.App.4th at p. 1063, quoting Yanowitz, supra, 36 Cal.4th at p. 1054.) Acts are judged collectively and case-by-case “in light of the objective evidence.” (Ibid.) On the record, “Petrovich did not reduce Holmes’s salary, benefits or work hours, and did not terminate her,” but “assured Holmes that she still had a job.” (Ibid.) Forwarding the pregnancy e-mail showed no retaliatory animus: he sent it “only to people he believed needed to know,” and that he forwarded the whole e-mail rather than redrafting it did not “demonstrate any animus … given there was no clear directive in her e-mail that she did not wish others to see it.” (Ibid.) The conduct was, “‘[m]inor or relatively trivial,’” the kind “‘reasonably likely to do no more than anger or upset an employee.’” (Id. at pp. 1063–1064, quoting Yanowitz, supra, at p. 1054.)

The privilege holding: a company computer is not a confidential channel. The court’s most consequential analysis addressed the attorney e-mails. Section 917, subdivision (b) provides that a communication “‘does not lose its privileged character for the sole reason that it is communicated by electronic means.’” (Holmes, supra, 191 Cal.App.4th at p. 1067.) But the court held that this electronic-neutrality rule “does not mean that an electronic communication is privileged when (1) the electronic means used belongs to the defendant; (2) the defendant has advised the plaintiff that communications … are not private, may be monitored, and may be used only for business purposes; and (3) the plaintiff is aware of and agrees to these conditions.” (Id. at p. 1068.) Under those conditions, the communication is not confidential within section 952 because it is not transmitted by a means that, “‘so far as the client is aware, discloses the information to no third persons.’” (Ibid.) The court drew its memorable analogy: using the company computer here was “akin to consulting her attorney in one of defendants’ conference rooms, in a loud voice, with the door open, yet unreasonably expecting that the conversation overheard by Petrovich would be privileged.” (Id. at p. 1068.)

Distinguishing Quon, Stengart, and the “operational reality” argument. Holmes urged that the “‘operational reality’” of lax enforcement gave her a reasonable expectation of privacy, relying on the Ninth Circuit’s Quon decision. (Holmes, supra, 191 Cal.App.4th at pp. 1069–1070.) The court rejected the analogy on two levels. Quon was a Fourth Amendment case about a government employer, inapposite to a private-sector privilege dispute; and the United States Supreme Court had reversed it without resolving the operational-reality test, cautioning that courts “‘must proceed with care … before its role in society has become clear.’” (Id. at pp. 1070–1071.) Even assuming the test applied, it availed Holmes nothing because the company “explicitly told employees that they did not have a right to privacy” and “never conveyed a conflicting policy.” (Id. at p. 1071.) The court distinguished Stengart v. Loving Care Agency, Inc. (2010) 201 N.J. 300, where the employee used a personal web-based account whose use was not clearly covered by policy and which bore an attorney–client confidentiality hallmark. (Id. at p. 1068.) Lax enforcement was “immaterial”: it was “unreasonable to say a person has a legitimate expectation that he or she can exceed with absolute impunity a posted speed limit on a lonely public roadway simply because the roadway is seldom patrolled.” (Id. at p. 1071.)

The limiting instruction was proper. Finally, the court rejected the contention that the trial court’s admonition — explaining to the jury why the unusual attorney e-mails were admissible — undermined the invasion-of-privacy claim. (Holmes, supra, 191 Cal.App.4th at pp. 1072–1073.) Those claims rested on Petrovich’s forwarding of the pregnancy e-mails, not his access to the attorney e-mails, and the court had told the jury the privilege ruling had “‘nothing whatsoever to do with [her] claim of privacy.’” (Id. at p. 1073.) Holmes failed to show either misstatement of law or prejudice. (Ibid.) Several of Holmes’s further arguments — including a constitutional privacy theory and a service-of-process objection — were forfeited as raised for the first time in her reply brief. (Id. at pp. 1063–1064 & fn. 2, 1073–1074.)

Significance

Holmes sits at the intersection of two doctrinal lines and contributes to both. On the discrimination side, it is a workmanlike but useful application of Lyle and Yanowitz to a pregnancy claim. It confirms that pregnancy harassment is judged by the same objective “severe or pervasive” standard as other FEHA harassment, that a short tenure marked by a few pointed but work-related e-mails will not clear that bar, and — importantly for retaliation practice — that an employer’s forwarding of an employee’s own e-mail, absent a demotion, pay cut, or termination, is not the “substantial adverse change in the terms and conditions of … employment” that Yanowitz requires. (Holmes, supra, 191 Cal.App.4th at p. 1063.) The decision is a favorite defense citation for the proposition that pre-resignation friction, where the employer expressly disclaims any intent to fire and invites the employee to stay, is the employee’s “rational option” to quit rather than coercion. (Id. at pp. 1060, 1062.)

Its more enduring contribution is to the law of attorney–client privilege in the digital workplace. Holmes is the leading California authority holding that an employee who consults counsel using an employer’s computer system — having been warned the system is monitored and not private — forfeits confidentiality and therefore the privilege itself. It construes Evidence Code section 917, subdivision (b)’s electronic-neutrality provision narrowly: that section preserves the privilege against incidental access by carriers and storage providers, but it does not manufacture confidentiality where the chosen channel belongs to, and is monitored by, the adversary. The opinion has become a fixture in e-discovery and privilege practice, and its “conference room, loud voice, door open” image (id. at p. 1068) is its most-quoted line. Its limits matter too: the court expressly reserved that a home computer, or even an employer machine used for a personal web-based account not clearly covered by policy (the Stengart scenario), could yield a different result. (Id. at pp. 1068, 1070.)

Key quotes

“An ‘adverse employment action,’ which is a critical component of a retaliation claim, requires a ‘substantial adverse change in the terms and conditions of the plaintiff’s employment.’ … ‘[A] mere offensive utterance or … a pattern of social slights by either the employer or coemployees cannot properly be viewed as materially affecting the terms, conditions, or privileges of employment.’” (Holmes, supra, 191 Cal.App.4th at p. 1063.)

“[T]he e-mails sent via company computer under the circumstances of this case were akin to consulting her lawyer in her employer’s conference room, in a loud voice, with the door open, so that any reasonable person would expect that their discussion of her complaints about her employer would be overheard by him.” (Id. at p. 1051.)

“[I]t was unreasonable for Holmes to believe that her personal e-mail sent by company computer was private simply because, to her knowledge, the company had never enforced its computer monitoring policy.” (Id. at p. 1071.)

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Practice pointer

Open questions

The opinion expressly leaves several issues unresolved. It declined to decide the waiver question under Evidence Code section 912, resting instead on the threshold absence of confidentiality under section 952 — so the scope of waiver where an employee discloses an attorney communication to no one but transmits it on a monitored system remains undeveloped. (Holmes, supra, 191 Cal.App.4th at pp. 1066, 1071.) The court reserved the Stengart scenario — an employer computer used to access a personal, web-based account not clearly covered by company policy and bearing a confidentiality hallmark — noting it “does not involve similar scenarios” and could come out differently. (Id. at pp. 1068, 1070.) It likewise observed that a home computer accessed by unknown carriers “would have been a privileged communication,” leaving the boundary between protected and unprotected channels to future cases. (Id. at p. 1068.) And because the United States Supreme Court in Ontario v. Quon declined to resolve whether the “operational reality” test governs electronic-privacy expectations, Holmes assumed without deciding that the test applies and found it satisfied — leaving the test’s force in California an open question. (Id. at pp. 1070–1071.)