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United States District Court, Northern District of California

April 21, 2003


The opinion of the court was delivered by: Maxine Chesney, United States District Judge


In this action, plaintiff Taufui Piutau alleges he advised his former employer, defendant Federal Express Corporation, that he had been arrested for driving under the influence.*fn1 After this disclosure, defendant suspended plaintiff, initially with pay and then without pay. On July 25, 2002, the Court determined that the suspension without pay violated plaintiffs rights under state law and, accordingly, found in favor of plaintiff on the issue of liability. (See Order Granting in Part and Denying in Part Def.s Mot. for Summ J; Granting Pl.'s Mot for Summ. Adjudication, filed July 25, 2002, at 6-15 ("Summary Adjudication Order").)*fn2

On March 17 and 18, 2003, the Court conducted a trial on the remaining issues, specifically, the issues of economic damages, non-economic damages, punitive damages and declaratory relief. Stephen M. Murphy appeared on behalf of plaintiff. Sandra C. Isom appeared on behalf of defendant. Having considered the evidence presented, the submissions on behalf of the respective parties, and the arguments of counsel, the Court finds and rules as follows.

A. Economic Damages

Plaintiff seeks recovery of lost wages for the period of October 21, 1999 through March 1, 2000. The parties agree, and the Court finds, that the total amount of lost wages, absent mitigation, is $21,176, which figure is based on an hourly rate of $19.61.*fn3 The parties further agree, and the Court finds, that during the subject period, plaintiff earned a total of $4,450 for work performed for two other employers, See's Candies and Infineon Technologies, thus decreasing the maximum amount of recovery for lost wages to $16,726. Defendant argues that this figure should be further reduced on the ground plaintiff failed to mitigate his damages when he did not accept alternative employment offered by defendant during the subject period, specifically, a part-time position as a foot courier and a full-time position as a foot courier.

Under California law, "[t]he general rule is that the measure of recovery by a wrongfully discharged employee is the amount of salary agreed upon for the period of service, less the amount which the employer affirmatively proves the employee has earned or with reasonable effort might have earned from other employment." See Parker v. Twentieth Century-Fox Film Corp., 3 Cal.3d 176, 181 (1970). "However, before projected earnings from other employment opportunities not sought or accepted by the discharged employee can be applied in mitigation, the employer must show that the other employment was comparable, or substantially similar, to that of which the employee has been deprived; the employee's rejection of or failure to seek other available employment of a different or inferior kind may not be resorted to in order to mitigate damages." See id. at 182.

With respect to the part-time position, the Court finds that a part-time position is, by its very nature, "employment of a different or inferior kind" where, as here, the initial employment was full-time. See Currieri v. City of Roseville, 50 Cal.App.3d 499, 507 (1975) (observing plaintiff who had worked full-time had no duty to mitigate by accepting part time work); Priest v. Rotary, 634 F. Supp. 571, 580 (N.D. Cal. 1986) (holding, for purposes of mitigation, part-time employment "not comparable employment" to full-time employment). Consequently, plaintiff was not required to accept the part-time position in order to mitigate his damages.

With respect to the full-time position, the Court finds that defendant offered plaintiff the alternative of working full-time as a foot courier for approximately $1 less per hour than what plaintiff earned as a driving courier. The Court further finds that, as indicated in defendant's internal documentation, defendant's offer was contingent on plaintiff having to remain at the alternative full-time position for one year and waiving back pay. (See Pl.'s Ex. 31.) Plaintiff argues that the full-time foot courier position, under the conditions offered by defendant, was not comparable or substantially similar to his driving courier position.

Under California law, "the deprivation or infringement of an employee's rights held under an original employment contract converts the available `other employment' relied upon by the employer to mitigate damages, into inferior employment which the employee need not seek or accept." Parker, 3 Cal.3d at 184 (holding where defendant terminated employment agreement under which actress had right to approve screenplay and director, defendant's offer of alternative employment agreement under which actress did not have such approval rights "constituted an offer of inferior employment"). Courts in other jurisdictions similarly have held that "a discharged employee need not accept an offer of reemployment where to do so would constitute a disadvantageous renegotiation of his rights and remedies thereunder." Schwartz v. Solo Cup Co., 445 N.E.2d 872, 876 (Ill. App. Ct. 1983) (collecting cases; holding plaintiff not obligated to mitigate damages caused by wrongful termination where defendant's offer of "lesser position" required plaintiff to permanently relocate to another state and to pay relocation expenses).

Here, had plaintiff taken the alternative full-time position, plaintiff would have been required to accept less pay, to remain in that lesser-paying position for one year, and to waive his right to obtain any back pay. The Court finds that such conditions constituted a deprivation or infringement of plaintiffs rights held under his original employment contract, and thus concludes that plaintiff was not obligated to accept the full-time foot courier position in order to mitigate his damages.

Accordingly, plaintiff is entitled to recover $16,726 as compensation for lost wages.

Additionally, plaintiff seeks to recover the sum of $655.51, which amount corresponds to late mortgage payment charges. (See Pl.'s Exs. 9, 10.) According to plaintiffs wife, who testified she managed the family's finances, the late charges were incurred when she could not timely pay the mortgage on the family's home as a result of the loss of income caused by plaintiffs suspension. The Court credits such testimony and, accordingly, finds that plaintiff is entitled to the additional sum of $655.51.

Accordingly, plaintiff is entitled to recover $17,381.55 in economic damages.

B. Non-Economic Damages

Plaintiff seeks to recover damages for emotional distress he alleges he suffered as a result of the unlawful suspension.

At trial, plaintiff testified that after the suspension, he was sad, ashamed and very depressed, suffered from dizziness, loss of appetite and headaches, and had trouble sleeping. Plaintiff also testified that while he was suspended, he was worried about losing his home and was upset by his inability to provide new clothes and other items for his children. Plaintiff further testified that he began to feel better in late February 2000 when he started working for Infineon Technologies. Plaintiffs testimony as to his emotional symptoms was corroborated by plaintiffs wife, who testified that after the suspension, plaintiff was depressed, unhappy, worried, irritable, had trouble sleeping, and would stay inside the home and just stare at the walls. Plaintiffs testimony was also corroborated by plaintiffs former supervisor, William Delgado ("Delgado"), who testified that prior to the suspension plaintiff was a "rock," but after the suspension plaintiff appeared anxious. The Court credits the testimony concerning plaintiffs emotional distress and finds that plaintiff did incur emotional distress as a result of his suspension without pay.

Defendant argues that any emotional distress plaintiff incurred was the result of a number of factors in addition to the suspension, in particular, the arrest itself, concern about whether plaintiff would face criminal charges*fn4 and dissatisfaction with his criminal defense attorney's tactics, which resulted in plaintiffs case being publicized in the local media. Plaintiff testified that he was "stressed" by the pending criminal matter and that he was upset with both the district attorney and his criminal defense attorney. In light of plaintiffs testimony and other evidence regarding these events, the Court finds that factors other than the suspension caused plaintiff to suffer emotional distress. The Court further finds, however, that much of plaintiffs emotional distress was attributable to plaintiffs financial difficulties, and that such difficulties, in turn, were the result of the suspension.

With respect to the amount of damages, the Court finds plaintiff is entitled to, and defendant is liable for, non-economic damages in the amount of $35,000.

C. Punitive Damages

Plaintiff seeks punitive damages on the ground that defendant, when it suspended plaintiff, acted with malice.

Under California law, punitive damages are available under limited circumstances:

a) In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.
(b) An employer shall not be liable for damages pursuant to subdivision (a), based upon acts of an employee of the employer, unless the employer had advance knowledge of the unfitness of the employee and employed him or her with a conscious disregard of the rights or safety of others or authorized or ratified the wrongful conduct for which the damages are awarded or was personally guilty of oppression, fraud, or malice. With respect to a corporate employer, the advance knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, or malice must be on the part of an officer, director, or managing agent of the corporation.
(c) As used in this section, the following definitions shall apply:

(1) "Malice" means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.
(2) "Oppression" means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.
(3) "Fraud" means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.
See Cal. Civ. Code § 3294. The California Supreme Court has defined "despicable conduct" as "circumstances that are `base,' `vile,' or `contemptible.'" See College Hospital, Inc. v. Superior Court, 8 Cal.4th 704, 725 (1994).,

Here, plaintiff argues that defendant acted with "malice" under the second of the two statutory definitions of that term, specifically, by engaging in "despicable conduct" that was carried on with a willful and conscious disregard of plaintiffs rights. See Cal. Civ. Code § 3294(c)(1). Plaintiff further argues that such despicable conduct was committed by defendant's managing agents.

To establish "corporate punitive damages liability," the plaintiff must prove the "wrongful act giving rise to the exemplary damages [was] committed by an `officer, director, or managing agent.'" White v. Ultramar, Inc., 21 Cal.4th 563, 572 (1999) (quoting Cal. Civ. Code § 3294(b)). "In order to demonstrate that an employee is a true managing agent under section 3294, subdivision (b), a plaintiff seeking punitive damages would have to show that the employee exercised substantial discretionary authority over significant aspects of a corporation's business." See id. at 577 (holding defendant's "zone manager" exercised substantial discretionary authority over significant aspects of corporation's business, and thus was managing agent, where she supervised 8 stores and 65 employees, and her supervisors had "delegated most, if not all, of the responsibility for running these stores" to her). Stated otherwise, a "managing agent" is one who "exercise[s] substantial independent authority and judgment in their corporate decisionmaking so that their decisions ultimately determine corporate policy." See id. at 566-67.

At trial, plaintiff argued that Matthew Wensko ("Wensko") and Gregory B. Richards ("Richards") acted with the requisite state of mind to support an award of punitive damages.*fn5

At the time plaintiff was suspended by Wensko without pay, Wensko was the Senior Manager of Operations at defendant's facility in South San Francisco. Wensko testified that he understood defendant to have a policy under which an employee arrested for driving under the influence was to be suspended without pay until the charge had been dismissed, and that it was the employee's responsibility to provide information regarding the incident to defendant, rather than defendant's, responsibility to investigate the incident. Wensko also testified that he believed he had consulted defendant's written policy, contained in defendant's "People Manual," in his handling of plaintiffs situation. Wensko testified that plaintiff was unable to provide documentation about the arrest*fn6 and that another of defendant's managers had attempted to learn the facts of the incident from the police, but was unsuccessful in obtaining any such information. Wensko further testified that he kept plaintiff on suspension because he was concerned that both he and defendant could be held liable if plaintiff were allowed to continue driving and then injured someone. Finally, Wensko testified that he personally told plaintiff that defendant could offer him other positions, such as customer service agent or handler.

Plaintiff has offered insufficient evidence concerning the scope of Wensko's duties to support a finding that Wensko was a managing agent. Assuming, arguendo, Wensko qualifies as a managing agent, plaintiff has not met his burden to prove, by clear and convincing evidence, that Wensko's decision to suspend plaintiff without pay was "despicable conduct" carried on with a "willful and conscious disregard" of plaintiffs rights. See Cal. Civ. Code § 3294(c)(1). In suspending plaintiff, Wensko followed what he perceived, albeit incorrectly, to be defendant's policy. Nothing in the record supports a finding that Wensko acted in willful disregard of plaintiffs rights as there is no evidence Wensko was aware that a suspension without pay, pending resolution of criminal charges based on an arrest for driving under the influence, would violate California law.*fn7 Moreover, Wensko's conduct, especially in light of his efforts to keep plaintiff employed by offering him alternative employment, can hardly be described as "base, vile, or contemptible."*fn8 See College Hospital, 3 Cal.4th at 725.

With respect to Richards, a managing attorney in defendant's Legal Department, the only evidence concerning his conduct is found in two exhibits. Those exhibits establish that Richards, in response to correspondence from plaintiffs attorney, Scott Ennis ("Ennis"), advised Ennis that defendant required plaintiff to submit documentation to support plaintiffs contentions concerning the status of the criminal case, (see Pl.'s Exs. 25, 27), and that plaintiff had been suspended "because the conduct with which he has been charged would violate Federal Express' employment policies." (See Pl.'s Ex. 27.) Nothing in said exhibits, however, supports a finding that Richards "exercise[d] substantial discretionary authority over significant aspects of [defendant's] business." See White, 21 Cal.4th at 577. Moreover, plaintiff has not established, by clear and convincing evidence or otherwise, that Richards understood defendant's policy to be contrary to law or that he engaged in base, vile, or contemptible behavior. See College Hospital, 8 Cal.4th at 725.

Accordingly, plaintiff is not entitled to an award of punitive damages.

D. Declaratory Relief

Plaintiff, in his Seventh Cause of Action, seeks a declaration that defendant's written policy concerning employees arrested for driving under the influence is "overbroad, illegal and infringes on its employees' statutory rights." (See Second Amended Complaint ¶ 50.) Defendant argues that plaintiffs claim for declaratory relief is moot because plaintiff is no longer employed by defendant. Plaintiff contends there is a reasonable expectation that defendant will continue to enforce the policy, and thus the Court should rule on its legality.

"Generally, an action is mooted when the issues presented are no longer give and therefore the parties lack a legally cognizable interest for which the courts can grant a remedy." Alaska Center for the Environment v. U.S. Forest Service, 189 F.3d 851, 855 (9th Cir. 1999). "However, the Supreme Court has established an exception to the general principle of mootness for cases in which the challenged conduct is capable of repetition but evades review." See id. "The exception is limited to extraordinary cases where (1) the duration of the challenged action is too short to allow full litigation before it ceases, and (2) there is a reasonable expectation that the plaintiff[] will be subjected to it again." See id. at 855-56 (internal quotations and citation omitted).

As plaintiff no longer works for defendant and has presented no evidence that he is likely to seek employment with defendant in the future, plaintiff has failed to establish any likelihood he will be subjected again to plaintiffs policy. Consequently, the exception to the general principle of mootness is inapplicable to the instant action. See Application Group. Inc. v. Hunter Group, Inc., 61 Cal.App.4th 881, 894 (1998) (holding former employee's claim for declaration concerning rights under covenant not to compete "were and are entirely moot" where one-year term in covenant had expired and there was no evidence plaintiff was interested in seeking further employment with defendant "any time in the near future").

Moreover, even if plaintiff could demonstrate that this is the type of "extraordinary case" in which the Court should apply the exception to the general principle of mootness, see Alaska Center, 189 F.3d at 855, plaintiff would not be entitled to relief. Defendant's policy provides that an employee who is arrested for driving under the influence may not be suspended without pay unless "the evidence appears to confirm that the employee was driving under the influence." (See Def.'s Ex. C.) California law provides that an employer may not suspend an employee without pay solely on the ground that the employee has been arrested. See Cal. Labor Code § 432.7(a). Defendant's policy, however, does not allow for suspension without pay merely because of an arrest for driving under the influence, but only where "evidence" confirms that the employee was in fact driving under the influence. Plaintiff cites no law, and the Court finds none, that such a policy violates California law.

Accordingly, plaintiffs claim for declaratory relief will be dismissed.

E. Prejudgment Interest

Plaintiff seeks an award of prejudgment interest on his lost wages, at a rate of 7%, beginning March 1, 2000.*fn9 "In an action for the breach of an obligation not arising from contract . . . interest may be given, in the discretion of the jury." Cal. Civ. Code § 3288. Where, as here, the trial court acts as the trier of fact, the court has discretion to award prejudgment interest under § 3288. See Bullis v. Security Pacific Nat'l Bank, 21 Cal.3d 801, 814 n. 16 (1978). If prejudgment interest is awarded in a tort action, a rate of 7% per annum applies. See Michelson v. Hamada, 29 Cal.App.4th 1566, 1585 (1995) (holding 7% per annum prejudgment interest rate applicable as to award of economic damages in tort action).

"Prejudgment interest is awarded to compensate a party for the loss of the use of his or her property." Bullis, 21 Cal.3d at 815. Here, plaintiff was deprived of the use of his salary as a result of defendant's unlawful suspension. The Court, exercising its discretion, finds that an award of prejudgment interest on plaintiffs lost wages is appropriate.

Prejudgment interest, when awarded, accrues from the time the plaintiff incurs the loss. See id. at 1588. As noted, plaintiff seeks an award of prejudgment interest beginning March 1, 2000. As the entirety of the economic loss was incurred by that date, the Court will award prejudgment interest at the rate of 7% per annum from March 1, 2000, through the date of judgment.

Accordingly, plaintiff will be awarded prejudgment interest as set forth above.


For the reasons stated above:

1. Plaintiff shall be awarded economic damages in the amount of $17,381.55 and non-economic damages in the amount of $35,000, for a total of $52,381.55.

2. Plaintiff is entitled to prejudgment interest on the sum of $16,726, at a rate of 7% per annum, from March 1, 2000 to the date of judgment, in the amount of $3,679.38.

3. Plaintiff is not entitled to punitive damages.

4. Plaintiffs Seventh Cause of Action (declaratory relief) is hereby DISMISSED.

5. The Clerk shall enter judgment in favor of plaintiff and against defendant in the amount of $56,060.93, together with costs according to proof.


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