Opinion
CASE NO. 05cv1218 BTM (WMc).
December 15, 2005
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
On April 30, 2004, Plaintiff Steven Paul Morales filed suit in California Superior Court against his former employers, Home Depot U.S.A., Inc. and Maintenance Warehouse ("MWH"), alleging wrongful termination. Morales's original complaint alleged six causes of action: (1) conversion; (2) intentional misrepresentation; (3) negligent misrepresentation; (4) breach of implied contract; (5) breach of the covenant of good faith and fair dealing; (6) wrongful termination in violation of public policy; and (7) violation of Cal. Lab. Code § 2802. See Pl.'s Mem. of P. A. in Support of Mot. to Remand, Ex. A. Defendants subsequently brought a motion for summary judgment or, in the alternative, summary adjudication. The Superior Court granted Defendants' motion in part, holding that there was no triable issue of fact as to Plaintiff's first three causes of action, which were for conversion, intentional misrepresentation, and negligent misrepresentation. Exs. TT RRR of Def.'s Notice of Removal ("NOR"). The Superior Court, however, denied Defendants' motion as to the remaining four claims, which were for breach of implied contract; breach of the covenant of good fair and fair dealing; wrongful termination in violation of public policy; and violation of Cal. Lab. Code § 2802. Id. The Court also granted Plaintiff leave to amend his complaint to state a cause of action for misappropriation. Ex. RRR to NOR.
In May 2005, Plaintiff filed his First Amended Complaint ("FAC") in Superior Court. The complaint alleged the following five causes of action: (1) misappropriation in violation of Cal. Civ. Code § 3344(a) and the Lanham Act, 15 U.S.C. 1125(a)(1)(A); (2) breach of implied-in-fact contract; (3) breach of duty of good faith and fair dealing; (4) wrongful termination in violation of public policy; and (5) violation of Cal. Lab. Code § 2802(a) — duty to defend and indemnify. Ex. YYY to NOR. On June 14, 2005, Defendants, based on the newly pleaded misappropriation claim under the Lanham Act, removed the case to this Court. On June 21, 2005, Plaintiffs filed a motion to remand. The Court denied Plaintiff's motion to remand, finding that the FAC, on its face, clearly pleaded a federal cause of action. See Order Denying Pl.'s Mot. to Remand, entered Aug. 12, 2005, at 3. The Court held that removal was therefore proper under 28 U.S.C. § 1441(b). Id.
On September 29, 2005, Defendants filed a motion for summary judgment, or in the alternative, a motion for partial summary judgment. For the reasons discussed below, Defendants' motion is GRANTED IN PART and DENIED IN PART.
I. FACTUAL BACKGROUND
The following facts, pursuant to the summary judgment standard, are presented in the light most favorable to the Plaintiff, the non-moving party. Morales first began working for Defendant Home Depot in 1993. Pl.'s Opp'n at 1. Beginning as a retail sales associate, Morales eventually rose to the position of director.Id. He received no negative reviews or warnings. Id. In early 2001, Morales obtained a contractor's license for the state of Wyoming, becoming involved with construction projects there on behalf of Home Depot. Id. See Ross Decl., Ex. 2. Morales's name was listed as the Qualifying Supervisor for the Wyoming license. Pl.'s Opp'n at 1. In February 2002, Plaintiff transferred and relocated to accept a position with Maintenance Warehouse ("MWH"), a company wholly owned by Home Depot. Id. After Morales's transfer, the company informed him that it would not continue to use his name and license to continue work in Wyoming. Morales Decl. at 2, ¶ 4.
At MWH, Morales worked with another employee named Paul Raymond. Raymond was terminated in October 2002. Pl's Opp'n at 2. In January 2003, a few months after he was terminated, Raymond, an African-American, sent a letter to MWH CEO Lew Klessel, alleging discrimination due to color and race. Id.; Def.'s Request for Judicial Notice, Ex. A at 4 (Raymond Compl.) Raymond alleged that Plaintiff Morales sent him an October 2002 e-mail, which stated "you people can never be good managers so stop trying." Pl.'s Opp'n at 2. Raymond filed charges of discrimination with the California DFEH and the EEOC in February 2003, and eventually filed suit in Superior Court. Opp'n at 3; Def.'s Mot. at 6.
MWH also initiated its own internal investigation, after which it determined that the offensive e-mail had been sent from Plaintiff's computer. Def.'s Mot. at 6-7. Furthermore, through a cross check of phone records, MWH determined that both Morales and Raymond likely had been at their desks at the time the e-mail was sent. This fact, according to Defendants, precluded the possibility that Raymond had gone into Morales's office to send the e-mail. Id. As a result, MWH terminated Morales on or about May 1, 2003. Id.
Plaintiff, on the other hand, contends that he was told in early 2003 that he would be terminated if Raymond brought suit so that the company could avoid having to defend and indemnify him. Morales Decl. at 3. He claims that MWH "falsely claimed it had evidence that conclusively showed [he] sent the e-mail to Mr. Raymond" to justify the termination. Id.
II. LEGAL STANDARD
Summary judgment is appropriate if the moving party demonstrates that "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact." Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A fact is material when, under the governing substantive law, it could affect the outcome of the case. See Anderson, 477 U.S. at 248; Freeman v. Arpaio, 125 F.3d 732, 735 (9th Cir. 1997). A dispute is genuine if a reasonable jury could return a verdict for the nonmoving party. See Anderson, 477 U.S. at 248.
A party seeking summary judgment always bears the initial burden of establishing the absence of a genuine issue of material fact. See Celotex, 477 U.S. at 323. Although the nonmoving party bears the burden of proof on a matter at trial, the moving party need only demonstrate to the Court that there is insufficient evidence to support the nonmoving party's case.Id. at 325. The moving party can satisfy this burden in two ways: (1) by presenting evidence that negates an essential element of the nonmoving party's case; or (2) by demonstrating that the nonmoving party failed to establish an essential element of the nonmoving party's case on which the nonmoving party bears the burden of proof at trial. See Id. at 322-23. "Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment." T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987).
Once the moving party establishes the absence of genuine issues of material fact, the burden shifts to the nonmoving party to set forth facts showing that a genuine issue of disputed fact remains. See Celotex, 477 U.S. at 314. The nonmoving party cannot rest on the mere allegations or denials of his pleading, but must "go beyond the pleadings and by his own affidavits, or by the `depositions, answers to interrogatories, and admissions on file' designate `specific facts showing that there is a genuine issue for trial.'" Id. at 324 (citing Fed.R.Civ.P. 56(c)). When making this determination, the court must view all inferences drawn from the underlying facts in the light most favorable to the nonmoving party. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986);Fontana v. Haskin, 262 F.3d 871, 876 (9th Cir. 2001). The court must not weigh the evidence or make credibility determinations in evaluating a motion for summary judgment. See Anderson, 477 U.S. at 255.
III. DISCUSSION
As a preliminary matter, this Court has jurisdiction to consider the summary judgment motion. When a federal claim (here the Lanham Act) is joined with non-removable state claims, "the entire case may be removed." 28 U.S.C. § 1441(c). Plaintiff argues that the Superior Court's previous denial of the Defendants' motion for summary judgment precludes this Court's consideration of the issues. Plaintiff claims that because his claims for breach of implied contract, breach of the covenant of good faith and fair dealing, wrongful termination, and violation of Labor Code § 2802 survived summary judgment in state court, the case is ready for trial, at least as to those causes of action. However, the Ninth Circuit has expressly stated that a "state court's denial of summary judgment [does] not preclude the federal court from revisiting the issue after removal." Crane v. Arizona Republic, 972 F.2d 1511, 1516 n. 3 (9th Cir. 1992). Thus, the Court may proceed to the merits of the summary judgment motion.
A. Cause of Action Under Lanham Act and Cal. Civil Code § 3344(a)
Plaintiff's first cause of action claims misappropriation under Cal. Civil Code § 3344(a) and the Lanham Act, 15 U.S.C. § 1125. § 3344(a) provides that "[a]ny person who knowingly uses another's name . . . in any manner, on or in products, merchandise, or goods, or for purposes of advertising or selling, or soliciting purchases of, products, merchandise, goods or services, without such person's prior consent . . . shall be liable for any damages sustained by the person or persons injured as a result thereof." To establish a claim for misappropriation under this section, a plaintiff must prove "(1) the defendant's use of the plaintiff's identity; (2) the appropriation of plaintiff's name or likeness to defendant's advantage, commercially or otherwise; (3) lack of consent; and (4) resulting injury." Downing v. Abercrombie Fitch, 265 F.3d 994, 1001 (9th Cir. 2001). In addition, plaintiff must allege "a knowing use by the defendant as well as a direct connection between the alleged purpose and the commercial use." Id.
Here Morales alleges that his name was used on the Wyoming contractor license's after he was transferred to a position with MWH without his permission. Decl. of Morales, ¶ 12. To dispute Morales's allegation, defendants point to the declaration of Randy Lutostanski, who oversaw Home Depot's installed sales program in Wyoming and other western states. Lutostanski Decl., ¶ 2. He states that Home Depot never used Morales's name for the purpose of advertising, selling, or soliciting the purchase of installed sales, nor did the company ever use his name "in any manner on or in products, merchandise or goods sold in Wyoming or elsewhere." Id. at ¶ 3.
However, Plaintiff presents testimony which raises a triable issue of fact regarding the use of Morales's name on the license. Specifically, the deposition of Julia Afflick, Home Depot's manager of corporate compliance, suggests that Home Depot may well have used this license to promote and advertise its installation services. Afflick testified that they placed the license "in a conspicuous place . . . usually on a bulletin board in installed sales." Damiani Decl., Ex. 1 at 11:11-25, 12:20-21. She admitted that display of the license was "something that we would like to provide to our customers, that we as a company hold a class A contractor's license." Id. at 11:22-23. Furthermore, Afflick testified that the qualified supervisor operating under the license from March through September 2003 was Steven Morales.Id. at 13:15-16. By 2003, however, Morales had already transferred to work at MWH, a position from which he was terminated in May 2003. Morales Decl. at ¶ 4, 10.
Given this testimony, summary judgment as to the misappropriation claims is inappropriate. Morales's evidence, at a minimum, shows that Home Depot knowingly used his license without permission for advertising purposes and did so to promote its installation services. Lutostanski's conclusory statements that Home Depot did not use Morales's name can not be accepted at this summary judgment stage. Summary judgment as to the misappropriation claim is therefore DENIED.
The Lanham Act imposes liability on any party who places "in commerce" a good or service which "is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person." 15 U.S.C. 1125(a)(1)(a). The accused shall be liable in a civil action to any person who establishes that he or she has been damaged by such act. Id. 15 U.S.C. § 1127 defines the word "commerce," for purposes of the Lanham Act, as including "all commerce which may lawfully be regulated by Congress." The Ninth Circuit has stated "that so defined `commerce' includes intrastate commerce which `affects' interstate commerce." Thompson Tank Mrf. Co., Inc. v. Thompson, 693 F.2d 991, 993 (9th Cir. 1982). In Arrow United Indus., Inc. v. Hugh Richards, Inc., 678 F.2d 410, 413 n. 5 (2d Cir. 1982), the Second Circuit noted that "Congress's expressed intent in passing the Lanham Act was, inter alia, `to regulate commerce within the control of Congress by making actionable the deceptive and misleading use of marks in such commerce.'"
In United States v. Lopez, 514 U.S. 549, 559 (1995), the Supreme Court stated that the "proper test [for determining the constitutionality of Congressional regulation under the Commerce Clause] requires an analysis of whether the regulated activity ` substantially affects' interstate commerce." (emphasis added). However, purely intrastate disputes do not fall under Lanham Act.Jellibeans, Inc. v. Skating Clubs of Georgia, Inc., 716 F.2d 833, 838 (11th Cir. 1983); Mother Waddles Perpetual Mission, Inc. v. Frazier, 904 F. Supp. 603, 611 (E.D. Mich. 1995).
Morales contends that Home Depot's use of his name on the contractor license creates confusion or mistake which is actionable under the Lanham Act. However, Defendants argue that because Morales's name and license were used exclusively for projects undertaken within Wyoming, their alleged conduct, even if true, would not implicate interstate commerce. Defs.' Mot. At 10-11. In response, Plaintiff argues that while his license was used to perform installment work exclusively within Wyoming, Defendants' use of the license substantially affected interstate commerce. Morales points to the size and breath of Home Depot's interstate business generally, as well as to the fact that almost all of the material installed came from outside Wyoming, to establish a substantial effect on interstate commerce. See Opp'n at 10-11.
Normally, a plaintiff can satisfy the Lanham Act's "in commerce" requirement by showing that its business is interstate.See, e.g., Boustany v. Boston Dental Group, Inc., 42 F. Supp. 2d 100, 107 (D. Mass. 1999) (holding that doctor's service of out-of-state patients satisfied interstate commerce requirement);Mother Waddles, 904 F.Supp. at 611 (interstate commerce requirement met because plaintiffs' business "extends beyond the borders of Michigan"). However, purely intrastate use of the false statement can be within the reach of the Lanham Act if the statement's use has a substantial effect on interstate commerce. See Summit Technology, Inc. v. High-Line Medical Instruments Co., 933 F. Supp. 918, 934 n. 10 (C.D. Cal. 1996) ("under § 1127, a Lanham Act claim may be brought with regard to any statement used in such a way as to `substantially affect' interstate commerce.") (citations omitted); Mother Waddles, 904 F. Supp. at 610-11 ("In a trademark case, the interstate commerce jurisdictional requirement may be met by showing that the infringing mark was used in connection with goods in commerce, or that the defendant's use, while intrastate, substantially affected interstate business").
The Court notes that some courts have viewed the Lanham Act's interstate commerce requirement more narrowly. See Ditri v. Coldwell Banker Residential Affliates, Inc., 954 F.2d 869, 872 (3d Cir. 1992) (in Lanham Act claims, plaintiffs must allege in their complaint, among other things, "that the advertised goods traveled in interstate commerce. . . ."); Licata Co., Inc. v. Goldberg, 812 F. Supp. 403, 409 (S.D.N.Y. 1993) ("The Lanham Act's reach, while long, does not extend to the full outer limits of the commerce power. Its plain meaning . . . reflects a legislative judgment that for the statute to apply, the questioned advertising or statements, and not merely the underlying commercial activity, must be disseminated in commerce- i.e., not be purely local"). The Court sees these cases as contrary to the Ninth Circuit statement in Thompson Tank, 693 F.2d at 993, and the plain meaning of 15 U.S.C. § 1127.
Here, Plaintiff does not allege that the false statement was disseminated beyond Wyoming nor can he show that the installation services performed using his license took place outside Wyoming.See Lutostanski Decl. at ¶ 4. His contentions, however, are that Defendants' business in Wyoming affects interstate commerce and that the installed goods themselves were transported in interstate commerce. The Court concludes that the evidence presented in this motion satisfies the interstate commerce requirement of the Lanham Act. Morales's declaration establishes for this motion that the goods installed pursuant to his license came from other states. Morales Decl., ¶ 14 ("almost all the products that were installed under my license in Wyoming were manufactured in other States throughout the U.S. and shipped to Wyoming"). Presumably, if Home Depot had ceased performing installation work when Morales accepted employment with MWH (or at least performing work using his license), the delivery of these out-of-state products to Wyoming for use in projects performed under Morales's contractor's license would have slowed. Clearly, this consequence, though it may only have been temporary (until Home Depot could have procured another license with someone else's name), would substantially affect interstate commerce in building materials. The alleged false use of Morales's name in order to obtain home improvement projects in Wyoming using out of state materials is sufficient to create Lanham Act jurisdiction. Berghoff Restaurant Co., Inc. v. Berghoff, 357 F. Supp. 127, 130 (N.D. Ill. 1973). See also Daniel v. Paul, 395 U.S. 298, 305 (1969).
Given the definition of commerce as encompassing activities that can be subject to Congressional regulation, Home Depot's installation activities in Wyoming affect interstate commerce, despite the local nature of the projects. Home Depot's purchase of goods shipped through interstate commerce satisfy the Lanham Act's "sweeping reach." Steele v. Bulova Watch Co., 344 U.S. 280, 287 (1952). Defendants' use of Plaintiffs' license did implicate interstate commerce. This fact is enough to meet the Lanham Act jurisdictional requirements at this stage of the proceedings. See Arrow United, 678 F.2d at 413 n. 5 (2d Cir. 1982) (finding jurisdictional requirement satisfied where both parties were New York corporations and all of activities relating to subcontract at issue took place in New York because the false designation of origin claims asserted against defendants could adversely affect its interstate business). Morales must, of course, prove at trial that his name was actively used in "commerce" as defined in 15 U.S.C. § 1127. Summary judgment as to the Lanham Act claim is therefore DENIED.
B. Cause of Action for Breach of Implied Contract
Defendants argue that summary judgment is appropriate on the breach of contract claim because it is undisputed that Morales was an at-will employee. They argue that an at-will relationship precludes any implied contract requiring good cause for termination. California law provides that any employee contract with no specified term is at-will and can therefore be terminated by either party at any time without cause. Cal. Lab. Code § 2922. The statutory presumption of at-will employment is strong. Guz v. Bechtel Nat'l., Inc., 24 Cal. 4th 317, 336 (2000). Additionally, "an express at-will agreement precludes the existence of an implied contract requiring good cause for termination." Halvorsen v. Aramark Uniform Servs. 65 Cal. App. 4th 1383, 1388 (1998). See also Guz, 24 Cal. 4th at 340 n. 10.
Defendants argue that Morales signed written express agreements acknowledging the at-will nature of his employment on four separate occasions. The first time was in June 1993, when he signed an "Employment Application." Ross Decl, Ex. G. Second, Morales signed an "Acknowledgment Form" in July 1993 in connection with the start of his employment which included the same language. Id. at Ex. F. Third, Morales signed a letter agreement in February 2002 when he transferred to a position at MWH from a position at Home Depot. Id. at Ex. D. This letter agreement stated that it was confirming several items regarding Morales's employment, including its at-will nature. Morales signed a statement that he read and agreed to the terms of the letter agreement. The fourth and final time that Defendants claim that Morales acknowledged his status as an at-will employee was in January 2003, when he signed a qualifier agreement that provided that "[n]othing in this Agreement changes the status of Qualifier [Morales] as an `at-will' employee of Maintenance Warehouse." Id. at Ex. E. Morales does not deny signing these documents.
The application provided as follows:
Should I become an employee of The Home Depot, I understand that my employment will be for no definite term, such that I will enjoy the right to terminate my employment at any time, at my convenience, with or without cause or reason. I further understand that The Home Depot will have the same right. This status can only be modified if such modification is in writing and signed by both me and the President of the Company.
Based on the language of these documents, it is clear that Morales had an express at-will employment contract with the Defendants. Despite these agreements, Plaintiff attempts to argue that the Defendants' policies and practices gave rise to an implied contract that he could only be discharged for good cause. Morales essentially argues that the documents are not employment contracts and that his long service substantially changed the nature of his contract. The Court finds that the evidence submitted by Morales does not rebut the statutory presumption of at-will employment. See Hawkins v. Home Depot USA, Inc., 294 F. Supp. 2d 1119, 1124 (N.D. Cal. 2003) (holding that Home Depot employment application with language similar to Morales's confirmed at-will agreement). As for Morales's arguments regarding length of service and seniority, these factors "have no relevance when there is an express contract of employment which states the terms of employment." Halvorsen, 65 Cal. App. 4th at 1388.
Morales also contends that he was shown a video by Home Depot in 1993 that promised all employees a job for life as long as they adhered to certain principals. However, Morales thereafter signed his most recent employment agreement on April 12, 2002, wherein he acknowledged at will employment. To the degree that any prior promises of employment for life on good behavior were in fact made, they were superceded by the subsequent employment agreement for Morales' new position at MWH. Morales also relies on the "Employee Manual." Ex. BB of Defs.' NOR at 792. However, this manual expressly provides that the employment between "all employees and Maintenance Warehouse is an `at-will' relationship. . . . employment may be terminated, either by the employee or the employer, at any time, with or without cause. . . . [this] relationship can not be modified by any oral or implied agreement or conduct." Morales signed agreements on four separate occasions which stated the at-will nature of his employment. Because these express provisions control and there is no evidence of an implied contract requiring good cause for his termination, the Defendants were free to terminate Morales at any time without cause. The Court therefore GRANTS Defendants' motion for summary judgment as to this claim.
C. Breach of Implied Covenant of Good Faith and Fair Dealing
Morales's third cause of action is for the breach of the implied covenant of good faith and fair dealing. "Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement." Foley, 47 Cal. 3d at 683 (quoting Restatement (Second) of Contracts, § 205). Morales's claim largely fails as a matter of law for many of the same reasons relating to his claim for breach of the implied contract. Morales argues that this implied covenant was breached because assurances of continued employment and length of service gave rise to an implied contract. However, as discussed, Plaintiff and Defendants had an express at-will employment relationship. By definition, an at-will employee may be terminated at any time by the employer without cause. Cal Lab. Code § 2922. As the California Supreme Court stated in Guz "in an at-will relationship, there is no agreement to terminate only for good cause, [and] the implied covenant standing alone cannot be read to impose such a duty." 24 Cal.4th at 350. Because the implied covenant of good faith and fair dealing "cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement," Morales's claim for breach of the covenant necessarily fails as a matter of law. Id. at 349-50. See also Hawkins, 294 F. Supp. at 1124 (finding that at-will employee's failure to show implied contract resulted in failure to show breach of implied covenant of fair dealing and good faith).
While this implied covenant cannot be read to impose a good cause termination requirement, it does prevent "a party from acting in bad faith to frustrate the contract's actual benefits. . . . [such as] if termination of an at-will employee was a mere pretext to cheat the worker out of another contract benefit to which the employee was clearly entitled." Guz, 24 Cal. 4th at 353 n. 18. Morales, in his declaration, asserts that a member of the Human Resources department told him that he would be fired if Raymond brought suit so that the company could avoid having to indemnify him. Morales Decl. ¶ 9. He claims that MWH "falsely claimed" that it had e-mail evidence of his racially charged statements to "justify its termination." Id. at ¶ 10. The right to indemnification is a contract benefit to which Morales is clearly entitled. See infra Part III.D. If Defendants falsely used an alleged ethics violation as a pretext to avoid having to indemnify him for his legal costs, they would have breached the covenant of good faith and fair dealing. Therefore, Defendants' motion for summary judgment as to this claim is GRANTED IN PART and DENIED IN PART. Morales may proceed on his claim for breach of the implied covenant, but it is limited to his claim for termination to deny him the benefit of indemnification.
D. Wrongful Termination in Violation of Public Policy
Morales's fourth cause of action alleges that Defendants wrongfully terminated him in violation of public policy. Defendants argue that this cause of action fails because termination for the purpose of avoiding a duty to indemnify under Lab. Code § 2802 does not implicate public policy. Instead, they assert that the alleged termination to avoid § 2802 is a private dispute between Morales and them. They also argue that Morales cannot demonstrate he was terminated because of Defendants' desire to avoid this duty. Cal Lab. Code § 2802 provides that an "employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties. . . ."
An employer's right to discharge an at-will employee is still subject to limits imposed by public policy. Foley v. Interactive Data Corp., 47 Cal. 3d 654, 665. The policy in question must involve a matter that affects society at large rather than a purely personal or proprietary interest of the plaintiff or employer. The policy must also be fundamental and substantial, but also well established at the time of the discharge.Stevenson v. Superior Ct., 16 Cal. 4th 880, 889 (1997) (internal quotations omitted). Additionally, the policy must be supported by constitutional or statutory provisions. Id. at 889-90. This last requirement "ensure[s] that employers have adequate notice of the conduct that will subject them to tort liability to the employees they discharge." Id. at 889.
"The cases in which California courts have recognized a separate tort cause of action for wrongful termination in violation of public policy generally fall into four categories, where the employee is discharged for: (1) refusal to violate a statute . . .; (2) performing a statutory obligation . . .; (3) exercising (or refusing to waive) a statutory or constitutional right or privilege . . .; or (4) reporting an alleged violation of a statute of public importance. . . ." Lagatree v. Luce, Forward, Hamilton Scripps, 74 Cal.App.4th 1105, 1112 (1999) (internal citations and quotations omitted). However, "the principle underlying the public policy exception is more easily stated than applied. The difficulty, of course, lies in determining where and how to draw the line between claims that genuinely involve matters of public policy, and those that concern merely ordinary disputes between employer and employee."Stevenson, 16 Cal. 4th at 889. Because defining `public policy' precisely proves difficult, courts should "should proceed cautiously if called upon to declare public policy absent some prior legislative expression on the subject." Lagatree, 74 Cal. App. 4th at 1112.
The Court believes that an employee's right to indemnification for expenses and losses does implicate a fundamental public policy. A review of the case law shows that there are many provisions of the Labor Code which do implicate public policy. See, e.g., Freund v. Nycomed Amersham, 347 F.3d 752, 758-760 (9th Cir. 2003) ("public policy behind § 6310 [prohibiting discrimination or discharge for complaining about unsafe work conditions or practices] . . . is to prevent retaliation against those who in good faith report working conditions they believe to be unsafe");Green v. Ralee Eng. Co., 19 Cal. 4th 66, 76-77 (1998) (Labor Code § 1102.5 — prohibiting retaliation against employees for disclosing employer violation of state or federal regulations to a government agency — protects public at large from illegal, unethical, or unsafe practices); Ali v. L.A. Focus Publication, 112 Cal. App. 4th 1477, 1487-88 (2002) (Labor Code §§ 1101 and 1102 — protecting an employee from retaliation for political activity); Grant-Burton v. Covenant Care, Inc., 99 Cal. App. 4th 1361, 1376-77 (2002) (Labor Code § 232 — protecting right to engage in `concerted activities'); Gould v. Maryland Sound Industries, Inc., 31 Cal. App. 4th 1137, 1147 (1995) (Labor Code § 216(a) — requiring prompt payment of earned wages for discharged employee). Such a policy does seem to be implicated here, and is closely related to the fundamental public policy requiring prompt payment of wages discussed in Gould.
In Gould, the court pointed to the statutory authority requiring prompt payment of wages following discharge and stated that "[w]ages are not ordinary debts . . . because of the economic position of the average worker, and in particular, his family, it is essential to the public welfare that he receive his pay promptly." Id. (citing Pressler v. Donald L. Bren Co., 32 Cal 3d 831, 837 (1982). The Court continued: "[t]hus, the prompt payment of wages serves society's interests . . . through a more stable job market, in which its most important policies are safeguarded." Id. (internal quotations and citations omitted). Just as employers must promptly pay wages owed, they are required by § 2802 to indemnify employees for the "necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties." An employee's right to be repaid for ordinary costs like travel expenses or other necessary expenditures or losses serves the same interests as prompt payment of wages. Therefore, the right of indemnification implicates a fundamental public policy.
Furthermore, in determining whether a substantial public policy has been violated, courts look to see whether an employee or employer could circumvent the policy by way of agreement without violating public policy. See Foley, 47 Cal. 3d at 671 n. 12;Lagatree, 74 Cal. App. 4th at 1112. Cal Labor Code § 2804 expressly provides that any "contract or agreement, express or implied, made by any employee to waive the benefit of this article [Art. 2: Obligations of Employer] or any part thereof, is null and void. . . ." See also Desimon v. Allstate Ins., Co., No. C 96-036606, WL 33226248 at *10 (N.D. Cal. Sept. 14, 1999);Liberio v. Vidal, 240 Cal. App. 2d 273, 276 n. 1 (1996) ("Labor Code, section 2804 makes all contracts waiving the benefits of section 2802 null and void"). This statutory provision's refusal to permit waiver of § 2802's indemnification provision underscores its essential fundamental public function. In fact, Cal Civ. Code § 3513 recognizes the importance of non-waivable rights by providing that "[a]ny one may waive the advantage of a law intended solely for his benefit. . . . [b]ut a law established for a public reason cannot be contravened by a private agreement." Thus, § 2802 implicates a fundamental public policy and termination to avoid compliance can support a claim for wrongful termination in violation of public policy. As Morales alleges that he was told he "would be terminated in order for the company to avoid having to defend and indemnify me in the even [of suit]," Morales Decl. ¶ 9, Defendants' motion for summary judgment on Plaintiff's claim of wrongful termination in violation of public policy is DENIED.
The Court notes, however, that Defendants could not have avoided their duty to indemnify Morales even if they had fired him. The issue here though is not whether or not Defendants would have had to indemnify Morales as a former employee, but rather whether, operating on a misunderstanding of the law, they did believe that firing Morales would allow them to avoid indemnifying him.
E. Violation of Labor Code § 2802
Plaintiff's fifth and final cause of action alleges violation of Cal. Labor Code § 2802, which provides that an "employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties. . . ." "The test for recovery under section 2802 is whether the conduct defended against was within the course and scope of employment."Jacobus v. Krambo Corp., 78 Cal. App. 4th 1096 (2000). Defendants argue that because Morales's alleged racial harassment was not within the scope of his duties as an employee, they are not required to indemnify him. Though Morales admits that racial harassment of Raymond was not within the scope of his duties, Ross Decl. Ex. A 70:4-12 (Morales Depo), he denies that such conduct occurred. Opp'n at 19 (quoting Morales depo.) In fact, Morales has submitted evidence that he was ultimately vindicated on the charges of harassment when the Superior Court entered judgment in his favor on July 22, 2005. Damiani Decl., ¶ 20.
Both parties point to the Jacobus case to support their respective arguments. In Jacobus, an employee who had been sued for sexual harassment brought a suit seeking indemnification for legal costs incurred in successively defending against the claim. While the court admitted that such conduct fell outside the course and scope of employment, it noted that the jury in the harassment suit had found the employee not guilty of harassment.Id. at 1102-03. It also explicitly stated that the "question whether an employee's acts are within the scope of employment is ordinarily a question of fact, but the issues may be determined as a question of law when the material facts are undisputed and no conflicting inferences are possible." Id. at 1103. Here the parties dispute the material facts; Morales insists he did not harass Raymond, while Defendants insist that he did. Accordingly, there is a triable issue of fact as to whether Morales even committed the alleged acts. The Court therefore DENIES summary judgment as to the indemnification claim.
IV. CONCLUSION AND ORDER
For the reasons discussed, Defendants' motion for summary judgment is GRANTED in part and DENIED in part. The Court concludes that there are no triable issues as to Defendants' breach of implied contract. Summary judgment is therefore GRANTED as to this claim. Summary judgment as to Plaintiff's claim for breach of the implied covenant of good faith and fair dealing is GRANTED IN PART and DENIED IN PART. This cause of action, however, is limited to Plaintiff's claim that he was fired to deny him the benefit of indemnification. The Court DENIES the motion for summary judgment as to Plaintiff's causes of action for (1) misappropriation; (2) wrongful termination in violation of public policy; and (3) violation of Cal. Lab. Code § 2802.
The Court declines to strike the Plaintiff's opposition because it was several days late. Defendants have made no showing of actual prejudice resulting from Plaintiff's untimely service. The Court warns the parties to be timely in filing in the future. The Court would have to consider the merits of Defendants' motion on the record even if Plaintiff failed to file an opposition. See Henry v. Gill Indus., Inc., 983 F.2d 943, 950 (9th Cir. 1993).
Finally, Defendants filed objections to evidence offered by the Plaintiff. The vast majority of the evidence objected to is not relied upon by the Court. Furthermore, the evidence submitted on a motion for summary judgment need not be in its admissible form so long as it is clear that it will ultimately be admissible at trial. See Fraser v. Goodale, 342 F.3d 1032, 1036-37 (9th Cir. 2003). For these reasons, the objections are overruled.
IT IS SO ORDERED.