Veronese v. Lucasfilm Ltd.

Facts

The case arises under the California Fair Employment and Housing Act (Gov. Code, § 12900 et seq.; FEHA), which makes it unlawful for an employer to take adverse action “because of” a protected characteristic, including pregnancy. (Gov. Code, § 12940, subd. (a); see Veronese v. Lucasfilm Ltd. (2012) 212 Cal.App.4th 1, 19.) A companion provision, section 12940, subdivision (k), separately prohibits an employer from failing “to take all reasonable steps necessary to prevent discrimination”; as the court explained, that provision “creates a statutory tort action with the usual tort elements (duty of care to plaintiff, breach of duty, causation and damages).” (Veronese, supra, 212 Cal.App.4th at p. 28.)

The court described the dispute as “an unusual case in several respects,” because the parties’ dealings were “relatively brief, over a period of less than four months,” were conducted almost entirely by e-mail, and ended before the plaintiff “ever worked one day in defendant’s employ.” (Veronese, supra, 212 Cal.App.4th at p. 4.) Plaintiff Julie Gilman Veronese, then 36, applied in 2008 for the position of assistant to Sarita Patel, the estate manager for the home of George Lucas — a role that “involved significant family caretaking.” (Id. at pp. 5–6.) After a five-hour interview and a day “shadowing” Patel, Veronese signed a written offer on June 25, 2008, to “join Lucasfilm” on a “temporary, project-only basis,” a position she acknowledged at trial “was a tryout so [she] could prove [her] skills.” (Id. at pp. 9–10.)

On June 27, Veronese telephoned Patel to report that she was pregnant and feeling “nauseous and sick,” and Patel — who Veronese conceded may have responded “out of concern” — told her, “Your health is the most important thing. You take care of yourself. The job isn’t going anywhere.” (Veronese, supra, 212 Cal.App.4th at p. 10.) Patel postponed the tryout, telling a colleague she thought it “the right thing to do.” (Id. at pp. 10–11.) Days later Veronese reported she was carrying twins, and Patel responded warmly (“I’m so happy for you guys!!!”); after one twin’s heart stopped, Patel testified she felt “really, really bad,” having suffered miscarriages herself. (Id. at p. 11.)

Patel’s internal e-mails reflected concern about the demands of the job on a pregnant applicant. She wrote that she was “afraid to bring on a pregnant person” because of how “the stress that is around here can affect health,” citing ongoing estate construction, paint fumes (which Veronese’s doctor had warned her to avoid), and angry neighbors. (Veronese, supra, 212 Cal.App.4th at p. 12 & fn. 2.) The tryout, rescheduled for August 11, was shortened from one month to roughly two weeks. (Ibid.)

The relationship broke down over a lengthy August 7 e-mail from Veronese stating that she “can’t help but think that things have changed because I am pregnant” and felt “set up to fail.” (Veronese, supra, 212 Cal.App.4th at pp. 13–14.) Patel testified she was “furious,” perceiving “red flags” of entitlement and a lack of service orientation in the e-mail. (Id. at p. 14.) After a telephone conversation on August 8 — the one materially disputed exchange — Patel understood the parties had reached a “mutual” agreement not to work together; Veronese testified Patel told her the position was filled by no one. (Id. at pp. 16–17 & fn. 4.) A confirming letter ended the employment effective August 8, 2008, and the permanent position later went to another candidate, Kelly Wolfe, whom Lucas deemed superior. (Id. at p. 17.)

Procedural history

Veronese filed suit in Marin County Superior Court on April 1, 2009, pleading six causes of action — five under the FEHA (gender discrimination/wrongful termination; gender discrimination/failure to promote or hire; failure to prevent and investigate discrimination; retaliation; and failure to accommodate) and one common law claim for wrongful termination in violation of public policy. (Veronese, supra, 212 Cal.App.4th at pp. 17–18.) After an 11-day trial before Judge Lynn O’Malley Taylor, a retired judge sitting by assignment, the jury deliberated three days and returned a special verdict for Veronese on three claims: pregnancy discrimination, failure to prevent discrimination, and wrongful termination in violation of public policy; it found for Lucasfilm on retaliation and failure to accommodate. (Id. at p. 18.) The jury awarded $93,830 in past economic damages and $20,000 in noneconomic damages, totaling $113,830, and found Patel acted with “undue oppression or fraud” but was not a managing agent. (Ibid.) The “substantial factor” causation finding was not unanimous; it was 10 to 2. (Id. at p. 32 & p. 18, fn. 5.)

The trial court denied Lucasfilm’s motions for a new trial and partial judgment notwithstanding the verdict, and later awarded Veronese $1,157,411 in attorney fees. (Veronese, supra, 212 Cal.App.4th at pp. 18–19.) Lucasfilm appealed both the judgment (No. A129535) and the fee order (No. A131660); the appeals were consolidated. (Id. at p. 19.) A unanimous panel of the First District, Division Two, reversed the judgment and vacated the fee award. (Id. at pp. 4, 32–33.) There was no dissent. The Supreme Court denied review on March 27, 2013, S208118. (Id. at p. 33 [postscript].)

Issue

The dispositive questions are instructional. First, in a FEHA jury trial, is the defendant employer entitled, on request, to a “business judgment” instruction telling the jury that liability turns on discriminatory motive, not on whether the employer’s decision was “wrong or unfair” — a principle previously articulated only in summary-judgment cases? Second, was it error to give Veronese’s requested instruction that “[a] potential hazard to a fetus or an unborn child is not a defense to pregnancy discrimination,” where no fetal-protection policy or defense was at issue? Third, did the failure to instruct on the elements of the failure-to-prevent claim and to differentiate the “termination” claim from the “failure to hire/promote” claim constitute error? And finally, were the errors cumulatively prejudicial under article VI, section 13 of the California Constitution? The court expressly declined to reach a separate, much-litigated question — whether CACI No. 2500’s “motivating reason” causation standard is correct — because reversal was required on the other grounds. (Veronese, supra, 212 Cal.App.4th at pp. 19–20.)

Holding

Reasoning

The court set the standard of review by the lights of instructional error, not the verdict. Because the appeal turned on jury instructions, the court declined to view the evidence in the light most favorable to the judgment. Instead, it recited the facts “in the light most favorable to the claim of instructional error,” assuming the jury “might have believed [Lucasfilm’s] version of the facts” and “might have drawn different inferences more favorable to the losing [party]” had it been properly instructed. (Veronese, supra, 212 Cal.App.4th at pp. 4–5, quoting Whiteley v. Philip Morris, Inc. (2004) 117 Cal.App.4th 635, 655, and Mize-Kurzman v. Marin Community College Dist. (2012) 202 Cal.App.4th 832, 839, fn. 1.) That orientation drives the entire analysis: the question was not whether substantial evidence supported the verdict, but whether the misdirected jury might have come out differently.

The causation question was reserved. Lucasfilm’s lead argument was that CACI No. 2500’s “motivating reason” standard misstates FEHA causation, which Lucasfilm contended requires that discrimination be a “determining factor” or satisfy a “but for” test. (Veronese, supra, 212 Cal.App.4th at pp. 19–20, citing Gross v. FBL Financial Services, Inc. (2009) 557 U.S. 167, 176–177.) The court noted the issue was then pending before the California Supreme Court in Harris v. City of Santa Monica, but “deem[ed] it unnecessary to weigh in,” because “even if the giving of CACI No. 2500 is held to be proper under California law, reversal would be required due to errors in other instructions.” (Id. at p. 20.) The decision thus rests entirely on the instructions it does reach.

The business-judgment instruction: a summary-judgment principle imported into the jury room. Lucasfilm’s special instruction No. 9 told the jury it could not find liability “based upon a belief that Lucasfilm made a wrong or unfair decision” or “an error in business judgment,” but only if “the decisions made were motivated by discrimination or retaliation related to her being pregnant.” (Veronese, supra, 212 Cal.App.4th at pp. 20–21.) Judge Taylor refused it without explanation, saying she was “not giving special instructions.” (Id. at p. 21.) The Court of Appeal held this was error. It anchored the principle in a line of California authority — “a plaintiff in a discrimination case must show discrimination, not just that the employer’s decision was wrong, mistaken, or unwise” (Reeves v. MV Transportation, Inc. (2010) 186 Cal.App.4th 666, 673–674) — and the familiar formulation from Arteaga v. Brink’s, Inc. (2008) 163 Cal.App.4th 327, 344, and Guz v. Bechtel National Inc. (2000) 24 Cal.4th 317, 358, that “the ultimate issue is simply whether the employer acted with a motive to discriminate illegally.” (Veronese, supra, 212 Cal.App.4th at pp. 21–22.)

Engaging the gap candidly — no California jury-instruction precedent existed. The court acknowledged the doctrinal difficulty Lucasfilm itself flagged: “the numerous California cases that have articulated the business judgment rule in the employment context are all summary judgment cases,” and neither party nor the court could find “any California case discussing this principle in connection with a jury instruction in a FEHA case.” (Veronese, supra, 212 Cal.App.4th at p. 22.) The court bridged that gap with persuasive federal authority holding that refusing such an instruction is prejudicial error, principally Walker v. AT & T Technologies (8th Cir. 1993) 995 F.2d 846, 849–850, and Scamardo v. Scott County (8th Cir. 1999) 189 F.3d 707, 710–711, which held that “in an employment discrimination case, a business judgment instruction is ‘crucial to a fair presentation of the case,’ [and] the district court must offer it whenever it is proffered by the defendant.” (Veronese, supra, 212 Cal.App.4th at pp. 22–23.) State decisions accorded. (Id. at p. 23.)

Rejecting Veronese’s “covered” and “incorrect” arguments. Veronese contended the instruction was unnecessary because the jury was told pregnancy had to be a “motivating reason,” and was “incorrect and redundant.” The court disagreed on both counts. The “motivating reason” instruction did not convey the affirmative principle that an employer may act on a poor or mistaken — but nondiscriminatory — judgment without incurring liability. (Veronese, supra, 212 Cal.App.4th at pp. 23–24.) And even if the proposed wording were imperfect, that was no answer: when a proposed instruction “addresses an issue that is crucial to a fair presentation of the case,” the trial court “has the obligation to give an appropriate instruction on that issue, not necessarily in the wording of the proposed instruction,” and “courts have an obligation to fix incorrect instructions, especially if the fix is easy.” (Id. at pp. 23–24, quoting Walker and citing Laird v. Moss (1959) 173 Cal.App.2d 48, 53.) Concretely: “the jury could have reacted to Veronese’s August 7 e-mail differently than did Patel, or perhaps concluded that she overreacted. Regardless, under the law Patel was entitled to exercise her business judgment, without second guessing. But Judge Taylor refused to tell the jury that. That was error.” (Id. at p. 24.)

The fetal-hazard instruction: abstractly true but untethered to the evidence. Veronese obtained an instruction that “[a] potential hazard to a fetus or an unborn child is not a defense to pregnancy discrimination,” supported only by Automobile Workers v. Johnson Controls, Inc. (1991) 499 U.S. 187 — a case striking down a categorical “fetal-protection policy” excluding fertile women from lead-exposed jobs. (Veronese, supra, 212 Cal.App.4th at pp. 24–25.) The court held the instruction had no place in this case: “Lucasfilm had no such policy, and no policy was involved here, only one 36-year-old pregnant woman who had already miscarried one twin.” (Id. at p. 25.) Invoking the settled rule that “‘[a]n instruction is erroneous if, though abstractly correct as a statement of law, it is not within the issues developed by the evidence … . And if it is likely to mislead the jury the error is prejudicial,’” the court found the instruction “had no relation to the evidence developed, or to any theory of [Lucasfilm’s] case.” (Id. at pp. 25–26, quoting DeGeorge v. Crimmins (1967) 254 Cal.App.2d 544, 547.)

The mischief: telling the jury an employer “could not have a conscience.” The instruction’s danger, the court reasoned, was that it “could be interpreted as telling the jury that any potential hazard to an unborn child is necessarily irrelevant to the employer’s legitimate decisionmaking” — when Johnson Controls itself had cautioned that “Title VII does not prevent the employer from having a conscience,” only sex-specific fetal-protection policies. (Veronese, supra, 212 Cal.App.4th at p. 26, quoting Johnson Controls, 499 U.S. at p. 208.) Because the evidence was saturated with Patel’s genuine concern about construction, fumes, and stress on Veronese’s remaining twin, the instruction risked converting that very concern into liability — especially after Veronese’s counsel argued in closing that it is no “‘defense to pregnancy discrimination to be so caring.’” (Id. at pp. 26–27.) The court treated the jury’s defense verdicts on retaliation and failure to accommodate as confirmation that the jury credited Patel’s concern, and catalogued the uncontradicted evidence of Lucasfilm’s and Patel’s consistent support for pregnant employees and maternity leave. (Id. at pp. 27–28.) The court declined, however, to decide Lucasfilm’s further argument that the instruction contradicted section 12940, subdivision (a)(1). (Id. at p. 26, fn. 13.)

Two failures to instruct. The jury found for Veronese on the failure-to-prevent-discrimination claim despite never being instructed on its elements — Judge Taylor began the instruction but stopped after Veronese’s counsel wrongly suggested it duplicated another. (Veronese, supra, 212 Cal.App.4th at p. 28.) Because “the complete failure to instruct on material issues and controlling legal principles … may amount to reversible error,” that omission was error, though the court acknowledged it would not have been prejudicial standing alone, since the verdict form elicited the elements. (Id. at pp. 28–29 & fn. 14, quoting Agarwal v. Johnson (1979) 25 Cal.3d 932, 951.) More consequentially, the court faulted the failure to differentiate the “termination” claim (discharge from the temporary tryout) from the “failure to hire/promote” claim (denial of the permanent post), each carrying different damages. (Id. at pp. 29–30.) Lumping them — and giving only CACI No. 2433, a public-policy-discharge damages instruction not even in the FEHA chapter — “prevented the jury from considering whether, in the end, the alleged discrimination caused Veronese all of the claimed injury,” including whether Lucasfilm would have chosen Wolfe for the permanent position regardless. (Id. at pp. 29–30 & fns. 15–16.)

Prejudice: a close, three-day verdict and no curative instructions. Applying the no-automatic-reversal standard of Soule v. General Motors Corp. (1994) 8 Cal.4th 548, the court asked whether it was “‘reasonably probable’” the errors “‘prejudicially affected the verdict.’” (Veronese, supra, 212 Cal.App.4th at pp. 30–31.) Several factors aligned against the judgment: the jury deliberated three days and sent “no fewer than six notes”; the “substantial factor” causation finding was a non-unanimous 10-to-2 — “a ‘close verdict is a key indication that the jury was misled’”; and “there was no mitigating effect from other instructions, because the jury was not given any.” (Id. at pp. 31–32, quoting Whiteley, supra, 117 Cal.App.4th at pp. 664–665.) The “cumulative effect” of “multiple errors” made it reasonably probable a more favorable result would have followed. (Id. at p. 32, quoting Johnson v. Tosco Corp. (1991) 1 Cal.App.4th 123, 141.) With the judgment reversed, the attorney fee award was “premature” and had to be vacated. (Id. at pp. 32–33.)

Significance

Veronese is the California decision most often cited for a defense proposition that until 2012 lived almost entirely in summary-judgment opinions: that the “business judgment” principle is not merely a screening device for the judge but a substantive rule of law the defendant may put before the jury. By holding that an employer “had the right to have the jury instructed as to this principle of substantive law” (Veronese, supra, 212 Cal.App.4th at p. 23), the First District filled an acknowledged gap in California instructional law and gave defense counsel a concrete, citable basis to demand such an instruction at trial. The decision is the principal authority cited in connection with CACI No. 2513 (“Disparate Treatment — ‘Business Judgment’/‘Wrong or Mistaken Reason’”), the pattern instruction that grew up around exactly this need.

Its second contribution is a clean application of the rule that an abstractly correct instruction is still erroneous if it floats free of the evidence and is likely to mislead. The fetal-hazard instruction was a true statement of law in the abstract; the vice was its disconnection from any defense Lucasfilm actually raised, and its tendency to recast an employer’s humane concern for a pregnant applicant’s health as proof of discrimination. That holding is a useful general weapon against “correct but irrelevant” instructions in any civil trial, not just FEHA cases. The limits are equally clear: the court reserved both the FEHA causation question (then headed to the Supreme Court in Harris) and whether the fetal-hazard instruction contradicted section 12940, subdivision (a)(1), so Veronese resolves neither. (Id. at pp. 20, 26 & fn. 13.)

Key quotes

“a plaintiff in a discrimination case must show discrimination, not just that the employer’s decision was wrong, mistaken, or unwise.” (Veronese, supra, 212 Cal.App.4th at p. 21.)

“Here, for example, the jury could have reacted to Veronese’s August 7 e-mail differently than did Patel, or perhaps concluded that she overreacted. Regardless, under the law Patel was entitled to exercise her business judgment, without second guessing. But Judge Taylor refused to tell the jury that. That was error.” (Id. at p. 24.)

“It is correct to say that Title VII does not prevent the employer from having a conscience. The statute, however, does prevent sex-specific fetal-protection policies.” (Id. at p. 26, quoting Automobile Workers v. Johnson Controls, Inc. (1991) 499 U.S. 187, 208.)

Read the full opinion (free full text · Justia) →

Practice pointer

Open questions

The court expressly reserved the FEHA causation question that dominated Lucasfilm’s briefing: whether CACI No. 2500’s “motivating reason” standard correctly states the law, or whether a “determining factor” or “but for” test applies. It “deem[ed] it unnecessary to weigh in,” flagging that the issue was pending before the Supreme Court in Harris v. City of Santa Monica. (Veronese, supra, 212 Cal.App.4th at p. 20.) The Supreme Court’s subsequent decision in Harris answered that question; Veronese did not. The court also “need not decide” whether the fetal-hazard instruction “contradict[ed]” Government Code section 12940, subdivision (a)(1), which permits an employer to decline to employ someone who cannot perform the job without endangering health or safety — leaving the interaction of that subdivision with a pregnancy-discrimination claim unresolved. (Id. at p. 26, fn. 13.) Finally, because the disposition was a reversal for retrial, the court did not decide whether Veronese’s claims succeed on a properly instructed record, nor did it reach Lucasfilm’s separate juror-misconduct and damages-support argument. (Id. at pp. 19 & fn. 6, 32–33.)