Kim v. Konad USA Distribution, Inc.

Facts

The California Fair Employment and Housing Act (FEHA; Gov. Code, § 12900 et seq.) routes a discrimination or harassment claim through an administrative gateway before a plaintiff may sue. An aggrieved person may file with the Department of Fair Employment and Housing (DFEH) a verified complaint identifying the respondent and the particulars. (Kim v. Konad USA Distribution, Inc. (2014) 226 Cal.App.4th 1336, 1345; see Gov. Code, § 12960, subd. (b).) If DFEH “fails to resolve the case or to file an accusation against the employer within 150 days, it must notify the employee in writing of his or her right to file a civil action under the FEHA,” a notice “commonly referred to as a ‘right to sue’ letter.” (Id. at p. 1345; see Gov. Code, § 12965, subd. (b).) An employee may instead obtain an immediate right-to-sue letter by filing an online complaint and waiving investigation; such an electronically filed complaint “need not be signed,” the complainant verifying its truth “under penalty of perjury” by submitting it. (Kim, supra, 226 Cal.App.4th at p. 1345, citing Cal. Code Regs., tit. 2, § 10005, subd. (d)(9).) “Before filing a civil action alleging FEHA violations, an employee must exhaust his or her administrative remedies with DFEH,” which “includes the timely filing of administrative complaints addressing the claims and parties at issue, as well as the procurement of right-to-sue letters.” (Id. at p. 1345.) It is the “‘plaintiff’s burden to plead and prove timely exhaustion.’” (Id. at pp. 1345–1346.)

That timing requirement is fixed by Government Code section 12960, which sets the limitations period for the administrative complaint. The continuing-violation doctrine can extend that period where unlawful conduct straddles the deadline: under Richards v. CH2M Hill, Inc. (2001) 26 Cal.4th 798, conduct is treated as a single continuing violation — and the clock does not start — until it acquires a degree of “permanence,” which arrives when the misconduct stops, the employee resigns, or further informal efforts at resolution would be futile. CACI No. 2508 is the pattern instruction for that scenario; the court here invoked it only in passing, as explained below. (See Kim, supra, 226 Cal.App.4th at pp. 1346–1347.)

Esther Kim began working for Konad USA Distribution, Inc., a nail-art-kit distributor, in 2006 as an account manager. (Kim, supra, 226 Cal.App.4th at p. 1340.) The company’s CEO and sole shareholder, Dong Whang, “commenced a pattern of sexually harassing Plaintiff” around 2007. (Ibid.) The trial court — which found Kim “very credible” and Whang “not credible at all” — recounted that Whang “would regularly make comments to Plaintiff concerning sexual matters,” leered at her “almost on a daily basis,” and ultimately progressed to “unwanted touching,” including patting her buttocks and placing his hand on her thigh during a drive back from Las Vegas. (Id. at pp. 1340–1341.) Kim “finally found the hostile environment so stressful that she wrote to Whang on November 12, 2010, that she would not be returning to work,” and claimed Whang fired her by telling her to “‘take her last paycheck and go and make a lot of love with her boyfriend.’” (Id. at p. 1341.) The trial court found that Konad “usually” had “four other people” working there during Kim’s tenure, excluding Whang and his wife. (Id. at p. 1340, fn. 1.)

Procedural history

Kim filed suit in July 2011, pleading four relevant causes of action: sexual harassment (quid pro quo), sexual harassment (hostile work environment), and retaliation — all under FEHA — plus a fourth, common law count for wrongful termination in violation of public policy. (Kim, supra, 226 Cal.App.4th at p. 1342.) Defendants’ answer raised an affirmative defense that Kim “had failed to exhaust her administrative remedies as required by Government Code section 12960,” but defendants “did not demur to the complaint, file a motion for summary judgment, or file any other pretrial motion” to dispose of the claims. (Ibid.) Defendants also filed a cross-complaint, ultimately recovering $7,500 against Kim for breach of contract, which netted Kim’s recovery to $52,500. (Id. at p. 1342, fn. 2.)

At the February 2013 bench trial, defense counsel never raised exhaustion or any jurisdictional bar in opening or closing, and “[t]he record does not disclose the existence of any motions filed or argued during the trial by defendants to dismiss plaintiff’s FEHA claims based on a failure to exhaust administrative remedies or an insufficient number of employees.” (Kim, supra, 226 Cal.App.4th at p. 1342.) On a Code of Civil Procedure section 631.8 motion at the close of Kim’s case, the court granted judgment for defendants on the FEHA retaliation count but denied it on the two harassment counts and the wrongful-termination count. (Ibid.) The only trial mention of exhaustion came when defense counsel led Kim to admit she had not produced a government-agency harassment complaint; on redirect, plaintiff’s counsel introduced exhibit No. 19, a January 24, 2011 DFEH “Notice of Case Closure” and right-to-sue notice referencing Whang. (Id. at pp. 1342–1343.)

Only after submission did defendants press the jurisdictional theory in earnest — in objections to the statement of decision, then “supplemental” objections, and finally an April 2013 motion to set aside the judgment as void under Code of Civil Procedure section 473, subdivision (d). (Kim, supra, 226 Cal.App.4th at pp. 1343–1344.) Opposing that motion, Kim appended verified administrative complaints filed in January 2011 against both Konad and Whang — alleging “termination, harassment, constructive discharge, retaliation, and failure to prevent harassment” because of her sex and marital status — with matching right-to-sue notices her counsel obtained by a public-records request to DFEH. (Id. at p. 1344.) The trial court denied the motion, rejecting the premise that a FEHA complaint must be admitted into evidence to confer jurisdiction and noting exhibit No. 19 was itself evidence of exhaustion. (Ibid.) Defendants appealed; the Court of Appeal, Division Three of the Fourth Appellate District, affirmed in an opinion by Justice Ikola, with Acting Presiding Justice Fybel and Justice Thompson concurring. (Id. at pp. 1340, 1352.)

Issue

The appeal presented two principal questions. First, does a FEHA plaintiff’s failure to prove exhaustion of administrative remedies at trial deprive the court of fundamental subject matter jurisdiction — such that the defense may be raised at any time and the reviewing court is confined to the trial record — or is exhaustion merely a procedural prerequisite that a defendant forfeits by sleeping on it? (Kim, supra, 226 Cal.App.4th at pp. 1344–1345.) Second, may a plaintiff maintain a sexual-harassment claim — and a common law wrongful-termination claim premised on the same public policy — against an employer with fewer than five employees, notwithstanding FEHA’s general five-employee threshold? (Id. at pp. 1349–1351.) The court reviewed these questions of statutory construction and jurisdiction independently. (Id. at pp. 1344–1345.)

Holding

Reasoning

The black-letter exhaustion rule is uncontroversial — but its label is misleading. The court began by reciting the settled framework: a FEHA plaintiff must exhaust by timely filing a sufficient DFEH complaint and obtaining a right-to-sue letter, and courts “have referred to this requirement as a ‘“jurisdictional prerequisite.”’” (Kim, supra, 226 Cal.App.4th at pp. 1345–1346, quoting Johnson v. City of Loma Linda (2000) 24 Cal.4th 61, 70.) The difficulty, the court observed, is “what should happen if the issue of exhaustion of administrative remedies is basically ignored until after FEHA claims have been submitted to the fact finder for decision.” (Id. at p. 1346.) Ordinarily that would not happen, because “most failure-to-exhaust issues do not involve triable questions of fact and will therefore be resolved by dispositive motions prior to trial.” (Ibid.) Here, by contrast, “defendants took the road less travelled and waited until after the case was submitted for decision to raise their contentions about exhaustion.” (Id. at p. 1347.)

The decisive move: distinguishing “jurisdictional prerequisite” from fundamental subject matter jurisdiction. Everything turned on what kind of “jurisdiction” the label denotes. Defendants’ theory “hinge[d] on the theory that by referring to exhaustion as a ‘jurisdictional prerequisite,’ courts have intended to classify exhaustion as necessary to trial courts having subject matter jurisdiction” — which matters because the adequacy of subject matter jurisdiction “‘can be raised at any time (even on appeal) and is not subject to forfeiture or waiver.’” (Kim, supra, 226 Cal.App.4th at p. 1347, quoting Keiffer v. Bechtel Corp. (1998) 65 Cal.App.4th 893, 896.) The court rejected that premise. Drawing on Mokler v. County of Orange (2007) 157 Cal.App.4th 121, it explained that the concept of jurisdiction “‘embraces a large number of ideas,’” some fundamental and some “‘based upon mere procedural rules … by precedent made mandatory and jurisdictional,’” and that while “‘earlier cases tended to view the exhaustion doctrine as invalidating a court’s subject matter jurisdiction,’” “‘later cases have generally … conclude[d] a defendant waives the defense by failing to timely assert it.’” (Kim, supra, 226 Cal.App.4th at p. 1347.) The exhaustion requirement, the court held, “does not implicate the court’s subject matter jurisdiction. It is ‘jurisdictional’ in the sense only that a court’s failure to apply the rule is judicial error and can be corrected by issuance of a writ of prohibition.” (Ibid.)

Forfeiture follows from the fairness rationale. Having reclassified the defense, the court enforced the consequence. While a court “must decide the merits” of an exhaustion challenge that a defendant “timely presents,” it “‘would be grossly unfair to allow a defendant to ignore this potential procedural defense at a time when facts and memories were fresh and put a plaintiff to the time and expense of a full trial, knowing it could assert the failure to exhaust administrative remedies if it received an adverse [judgment].’” (Kim, supra, 226 Cal.App.4th at pp. 1347–1348, quoting Keiffer, supra, 65 Cal.App.4th at p. 900.) The court refused to treat defendants’ scattered trial-time references — a few questions to Kim and an evidentiary objection to exhibit No. 19 — as adequately raising the issue. (Id. at p. 1348 & fn. 4.) Because defendants “did not request dismissal of the FEHA causes of action based on plaintiff’s failure to exhaust” before submission, they “forfeited any right they may have had (in the abstract) for a judgment of dismissal.” (Id. at p. 1348.) The court underscored the prejudice the late timing caused: had defendants moved for a defense verdict before submission, “plaintiff could have moved to reopen her case to present the evidence she submitted with her postjudgment briefing.” (Ibid.)

Because the defense is not fundamental, the reviewing court could look past the trial record — and Kim plainly exhausted. The court then put the non-jurisdictional characterization to a second use. Defendants tried “to have it both ways” — “claiming they can raise exhaustion at any time but the evidence of exhaustion should be limited to that submitted at trial.” (Kim, supra, 226 Cal.App.4th at p. 1348.) That conflated two distinct questions: whether sufficient evidence was admitted at trial on the elements of the FEHA claims, and whether subject matter jurisdiction existed. (Ibid.) “If it truly is a question of subject matter jurisdiction,” a court may “‘consider all admissible evidence then before it … whatever the procedural posture of the case.’” (Ibid., quoting Great Western Casinos, Inc. v. Morongo Band of Mission Indians (1999) 74 Cal.App.4th 1407, 1418.) On that record — verified complaints against both defendants on all claims, plus right-to-sue letters — “the only reasonable inference is that plaintiff did exhaust,” and it did not matter that the electronically filed complaints were unsigned. (Id. at pp. 1346, 1349.) The court would therefore affirm “even if we were to conclude that exhaustion of administrative remedies is a necessary precondition to the exercise of subject matter jurisdiction.” (Id. at p. 1349.)

A sexual-harassment claim — statutory or common law — reaches an employer of any size. On the wrongful-termination count, defendants argued that because FEHA reaches only employers of five or more (Gov. Code, § 12926, subd. (d)), and because they identified FEHA as “the sole policy basis” for the claim, terminating Kim could not violate public policy. (Kim, supra, 226 Cal.App.4th at pp. 1349–1350.) The court found “two problems.” First, the claim was “based on sexual harassment rather than age discrimination,” and FEHA defines “employer” far more broadly for harassment than for other claims: “‘all employers (not just those with five or more employees) accused of harassment … are subject to a FEHA harassment claim.’” (Id. at p. 1350, applying Gov. Code, § 12940, subd. (j)(4)(A).) Because Kim’s common law claim rested on sexual harassment, “the applicable FEHA public policy applies to employers with less than five employees.” (Ibid.) Second, and independently, the claim rested on the California Constitution as well as FEHA. Under Rojo v. Kliger (1990) 52 Cal.3d 65, “‘sex discrimination in employment may support a claim of tortious discharge in contravention of public policy’” because article I, section 8 “‘unquestionably reflects a fundamental public policy against discrimination in employment — public or private — on account of sex,’” and “‘sexual harassment … is merely one form of sex discrimination.’” (Kim, supra, 226 Cal.App.4th at pp. 1350–1351.) Accordingly, “a wrongful termination against public policy common law tort based on sexual harassment can be brought against an employer of any size.” (Id. at p. 1351.) The court declined to resolve whether Mrs. or Mr. Whang counted toward the five-employee tally, noting it could “affirm on another ground.” (Id. at p. 1350 & fn. 7.)

The continuing-violation discussion — and what it did not decide. The continuing-violation doctrine and its pattern instruction surface only in passing, as explanatory dicta rather than as part of the holding. Cataloguing how exhaustion issues normally arise, the court noted that “the CACI jury instructions make no mention of a plaintiff’s obligation to prove exhaustion of administrative remedies as an element of a FEHA cause of action,” and that “CACI No. 2508 identifies one circumstance in which the exhaustion requirements present a triable issue of fact” — where “‘the plaintiff relies on the continuing-violation doctrine in order to avoid the bar of the limitation period of one year within which to file an administrative complaint.’” (Kim, supra, 226 Cal.App.4th at pp. 1346–1347.) The court added that CACI No. 2508 “is silent as to which party has the burden of proof with regard to showing that the complaint was or was not filed on time with DFEH in the context of a continuing-violation assertion.” (Ibid.) But the court did not apply the doctrine, did not analyze when a violation becomes “permanent” under Richards v. CH2M Hill, Inc., supra, 26 Cal.4th 798, and did not allocate the burden of proof on timeliness; the limitations question never controlled the disposition, which rested on forfeiture and the non-jurisdictional character of exhaustion.

Whang’s individual liability — left undecided. Whang separately argued he could not be liable for wrongful termination because Konad, not he, was the employer, citing the rule that such a claim “‘can only be asserted against an employer’” and that a non-employer “‘can only be the agent by which an employer commits that tort.’” (Kim, supra, 226 Cal.App.4th at p. 1351, quoting Miklosy v. Regents of University of California (2008) 44 Cal.4th 876, 900.) But the court declined to resolve whether that rule barred Kim’s claim. It was “unclear whether this issue was ever raised with the trial court in a timely fashion,” and in any event Whang failed to carry his burden “to affirmatively demonstrate reversible error”: he devoted “only half of one page” to the point and never showed prejudice, given the undifferentiated $60,000 award resting on all three causes of action against both defendants. (Id. at pp. 1351–1352.)

Significance

Kim sits in the line of cases — Keiffer v. Bechtel Corp., supra, 65 Cal.App.4th 893, and Mokler v. County of Orange, supra, 157 Cal.App.4th 121 — that have steadily drained the word “jurisdictional” of its fundamental-jurisdiction connotation in the FEHA-exhaustion context. Its contribution is to make that reclassification cut two ways at once. The holding is a forfeiture trap for defendants: a non-exhaustion defense, however meritorious in the abstract, must be raised by dispositive motion or at least before submission, or it is gone. Yet the same non-jurisdictional characterization aids plaintiffs on review, because a court is not confined to the trial record to confirm exhaustion actually occurred — it may consider admissible materials presented post-trial. The decision thus rewards a plaintiff who can prove exhaustion happened even if she did not prove it cleanly at trial, while penalizing a defendant who treats exhaustion as a back-pocket reversal argument.

The opinion is equally important for its small-employer holding. Reading Government Code section 12940, subdivision (j)(4)(A) together with Rojo v. Kliger, the court confirms that the five-employee floor limiting most FEHA claims does not apply to harassment — and that a common law tortious-discharge claim grounded in the constitutional policy against sex discrimination reaches even the smallest employer. For practitioners screening cases against tiny businesses that pairing is decisive: a sexual-harassment victim is not left remediless merely because her harasser ran a four-person shop. Finally, the case is a caution about the limits of its own dicta. Although the continuing-violation doctrine and CACI No. 2508 appear in the opinion, they are dicta; Kim is not authority on when a continuing violation becomes “permanent” under Richards, and should not be cited for that proposition. Its value on the limitations axis is narrow — chiefly the observation that CACI No. 2508 does not itself allocate the burden of proving timely filing.

Key quotes

“[T]he administrative exhaustion requirement does not implicate the court’s subject matter jurisdiction. It is ‘jurisdictional’ in the sense only that a court’s failure to apply the rule is judicial error and can be corrected by issuance of a writ of prohibition.” (Kim, supra, 226 Cal.App.4th at p. 1347.)

“As explained in the procedural history above, however, defendants took the road less travelled and waited until after the case was submitted for decision to raise their contentions about exhaustion of administrative remedies.” (Id. at p. 1347.)

“In sum, a wrongful termination against public policy common law tort based on sexual harassment can be brought against an employer of any size.” (Id. at p. 1351.)

Read the full opinion (Justia) →

Practice pointer

Open questions

The opinion leaves several threads loose. Most pointedly, the court “assume[d] without deciding that exhibit No. 19 was insufficient to prove exhaustion with regard to all parties and claims,” and never resolved whether Government Code section 12965, subdivision (b) “does define subject matter or fundamental jurisdiction” — it simply held it would affirm either way, leaving open whether any sliver of the exhaustion requirement remains truly jurisdictional after Kim. (Kim, supra, 226 Cal.App.4th at p. 1349 & fn. 6.) Second, the court reserved whether Whang — owner and CEO, not merely a supervisor — could be individually liable for wrongful termination, resolving the point on burden-of-error grounds rather than reaching the Miklosy question. (Id. at pp. 1351–1352.) Third, it flagged but declined to resolve whether the owner’s spouse, or the owner himself, counts toward the five-employee threshold. (Id. at p. 1350, fn. 7.) Fourth, it noted but did not address the “potentially tricky questions” that arise if a common law wrongful-discharge claim rests on the FEHA policy against retaliation rather than harassment. (Id. at p. 1350, fn. 8.) And because the continuing-violation discussion was only passing dicta, the burden-of-proof allocation that CACI No. 2508 leaves open — who must prove the administrative complaint was or was not timely filed in a continuing-violation case — remains unsettled by this decision. (Id. at pp. 1346–1347.)