United States District Court, Northern District of California
November 16, 2004
KELLY GREENFIELD, PLAINTIFF,
AMERICA WEST AIRLINES, INC..; AND DOUGLAS STOLLS, DEFENDANTS.
The opinion of the court was delivered by: Patel, J.
MEMORANDUM AND ORDER
Plaintiff's Motion for Leave to Amend Complaint
Plaintiff Kelly Greenfield brought this action against America West Airlines, Inc., a Delaware corporation, and Douglas Stolls, an individual, alleging the following causes of action: gender discrimination, harassment and retaliation, sexual harassment resulting in a hostile work environment, intentional infliction of emotional distress, negligent infliction of emotional distress, wrongful termination, and interference with prospective economic advantage. Both parties have stipulated to the dismissal of plaintiff's cause of action for interference with prospective economic advantage. Now before the court is plaintiff's motion for leave to amend the complaint to introduce new claims of defamation and negligent supervision under California state law. Having considered the parties' arguments and submissions, and for the reasons set forth below, the court rules as follows.
Kelly Greenfield, age 28, began employment with Defendant America West Airlines, Inc. ("America West") on March 12, 2001 as a Customer Service Representative. Her employment with America West was involuntarily terminated on July 31, 2003. Plaintiff thereafter brought this action against America West under the provisions of 42 U.S.C. §§ 2000(e) et. seq. alleging gender discrimination, harassment, retaliation, and sexual harassment resulting in a hostile work environment, as well as pendent state court claims for gender discrimination, harassment, and retaliation in violation of Fair Employment and Housing Act. Cal. Gov.Code § 12900 et. seq. In addition, she alleged wrongful termination in violation of public policy and a violation of California Labor Code § 201 for failure to pay wages upon plaintiff's alleged wrongful termination against America West. Against both defendants, plaintiff alleged intentional infliction of emotional distress and negligent infliction of emotional distress. The parties have stipulated to dismiss plaintiff's claim against both defendants for interference with prospective economic advantage.
Both defendants have answered the complaint. Defendants have asserted a number of affirmative defenses, including their good faith efforts to prevent sexual harassment, plaintiff's failure to mitigate damages, plaintiff's failure to state facts sufficient to recover punitive damages, and statute of limitations, to name a few. Defendants object to plaintiff's motion to amend her complaint to add new causes of action. First of all, they argue that plaintiff has failed to provide the court with a proposed amended pleading, in violation of the local rules. Secondly, defendants believe that leave to amend would cause unfair prejudice to their case because the amendment would require re-opening discovery and postponing the summary judgment schedule. Thirdly, defendants characterize this motion as a dilatory litigation tactic potentially made in bad faith. Lastly, they argue that leave to amend would be futile for failure to state a claim for defamation or negligent supervision upon which relief can be granted.
The Federal Rules of Civil Procedure provide that leave to amend be "freely given when justice so requires." Fed. R. Civ. Pro 15(a). The Ninth Circuit has construed this broadly, requiring that leave to amend be granted with "extraordinary liberality." Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir.1990); see also DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir.1987) (Rule 15's policy of favoring amendments to pleadings should be applied with "extreme liberality"); Advanced Cardiovascular Sys., Inc. v. SciMed Life Sys., Inc., 989 F.Supp. 1237, 1241 (N.D.Cal.1997) ("[T]he court must be very liberal in granting leave to amend"); Poling v. Morgan, 829 F.2d 882, 886 (9th Cir.1987) (describing a "strong policy permitting amendment").
Despite this liberal policy of amendment, leave will not be given where the district court has "a substantial reason to deny" the motion. J.W. Moore et al., Moore's Federal Practice § 15.14 (3d ed. 1998) ("[D]istrict judge[s] should freely grant leave to amend when justice requires, absent a substantial reason to deny"). The court may decline to grant leave where there is "any apparent or declared reason" for doing so. Foman v. Davis, 371 U.S. 178, 182 (1962); see also Lockman Found. v. Evangelical Alliance Mission, 930 F.2d 764, 772 (9th Cir.1991).
The Ninth Circuit has interpreted Foman as identifying "four factors relevant to whether a motion for leave to amend pleadings should be denied: undue delay, bad faith or dilatory motive, futility of amendment, and prejudice to the opposing party." United States v. Webb, 655 F.2d 977, 980 (9th Cir.1981). See also Poling v. Morgan, 829 F.2d 882, 886 (9th Cir.1987). The enumerated factors are not of equal weight, and delay alone is insufficient to deny leave to amend. Id. (citing Howey v. United States, 481 F.2d 1187 (9th Cir.1973)). By the same token, "[p]rejudice to the opposing party is the most important factor." Jackson v. Bank of Hawaii, 902 F.2d 1385, 1387 (9th Cir.1990). The party opposing leave to amend bears the burden of showing prejudice. DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir.1987). In such cases, justice does not require amendment, as leave to amend would further an injustice upon the defendant.
Plaintiff has moved for leave to amend under Federal Rule of Civil Procedure 15 in the present motion. Defendants have advanced four arguments for denying the present motion to amend the pleadings, namely: (1) that plaintiff has failed to provide the court with a proposed amended pleading, (2) that leave to amend would cause unfair prejudice to defendants, (3) that plaintiff has engaged in dilatory tactics, and (4) that leave to amend would be futile. This court considers these arguments in light of the applicable factors for evaluating a motion to amend. See Foman, 371 U.S. at 182.
I. Procedural Defects
As an initial matter, the local rules of this district require that parties filing or moving to file an amended pleading must reproduce the entire proposed pleading and may not merely incorporate any part of a prior pleading by reference. Civ. Local R. 10-1. Plaintiff failed to submit her proposed amended complaint until requested by the court on October 13, 2004. Failure to reproduce an entire proposed pleading to this court provides an adequate basis to reject her motion. However, because plaintiff subsequently submitted her proposed amended complaint, this court will rule on the merits of her motion.
II. Prejudice to the Opposing Party
Leave to amend may be denied where it would impose undue prejudice on the opposing party. Jackson, 902 F.2d at 1387. Undue prejudice to the opposing party carries the greatest weight in the evaluation of a motion for leave to amend. Eminence Capital, LLC v. Aspeon, 316 F.3d 1048, 1051, 1052 (9th Cir.2003). Indicators of prejudice include a need to reopen discovery or the addition of claims or parties. Lockheed Martin Corp. v. Network Solutions Inc., 194 F.3d 980, 986 (9th Cir.1999) (noting that the addition of claims not only demonstrated prejudice, but might also indicate bad faith by the movants). Absent a showing of prejudice by the opposing party, or a strong demonstration of any of the remaining factors, there is a presumption in favor of granting leave to amend. Eminence, 316 F.3d at 1052.
In the instant action, defendants claim that plaintiff's motion will unduly prejudice their case in two ways. First, defendants argue that plaintiff's unwarranted delay in filing the instant motion constituted a questionable litigation tactic. Second, defendants argue that re-opening discovery and upsetting the schedule for summary judgment will be unduly prejudicial to their case. Def.'s Opp'n at 7.
Plaintiff filed the instant motion on September 3, 2004, more than nine months after the original complaint. While this delay may be inconvenient, it is not unwarranted. In fact, plaintiff notified defendant as early as July 14, 2004 of her desire to file a First Amended Complaint. Pl.'s Exh. A at 1. Defendants assert that plaintiff was made aware of the facts supporting her claims of defamation months ago, yet has suspiciously waited to assert the legal theory of defamation until now. Def.'s Opp'n at 8. More specifically, defendants claim plaintiff was aware of the unattributed rumor that she stole from America West and the alleged rumors of her "sexual relations" with a co-worker no later than her deposition in April, but waited four months to file her motion for leave to amend. Id.
Plaintiff argues that the facts supporting the proposed defamation and negligent supervision claims were not confirmed until discovery. Pl.'s Reply at 8. Late amendments to assert new theories are not reviewed favorably when the facts and the theory have been known to the party seeking amendment since the inception of the cause of action. Acri v. International Ass'n of Machinists & Aerospace Workers, 781 F.2d 1393, 1398 (9th Cir.1986). Plaintiff knew of one fact supporting a potential claim for defamation at the time of the original complaint. Pl.'s Comp. at 5, 6. However, she argues that her confidence in pleading the claim was strengthened after discovery commenced and her amended pleading confirms the addition of new facts supporting a defamation theory. Pl.'s Mot. at 3. Certainly plaintiff could have acted more expeditiously, but the court does not agree, at least at this time, that granting plaintiff's motion for leave to amend would reward questionable litigation tactics.
Defendants assert that amendment of the complaint would also be unfairly prejudicial because it would require re-opening of discovery and upsetting the current scheduling order. Def.'s Opp'n at 10. When dealing with a Rule 15(b) motion to amend to conform to the evidence, the relevant prejudice concerns the late amendment's effect on the opposing party's ability to respond, not whether the amendment will lead to an unfavorable verdict. Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th Cir.2001) (factors such as the need to reopen discovery, delay in the proceedings or additional litigation expense as a result of the amendment support a finding of prejudice). In the instant case, defendants had notice of plaintiff's intent to file a motion to amend since mid-July. Mora Dec. at 1. Both parties have conducted discovery since July with plaintiff's potential new claims in mind, and any further discovery should be minimal. Pl.'s Reply at 9. To the extent that limited additional discovery may be required, the need for additional discovery is insufficient by itself to deny a proposed amended pleading based on prejudice. In re Circuit Breaker Litig., 175 F.R.D. 547, 551 (C.D.Cal.1997) (citing United States v. Continental Ill. Nat'l Bank & Trust, 889 F.2d 1248, 1255 (2nd Cir.1989)).
III. Bad Faith or Dilatory Motive
Bad faith on the part of the moving party also supports denying a motion to amend. Network Solutions, 194 F.3d 980, 983 (9th Cir., 1999); Griggs v. Pace Am. Group, Inc., 170 F.3d 877, 879 (9th Cir.1999). "Where the plaintiff offers to provide 'additional evidence' that would add 'necessary details' to an amended complaint and such offer is made in good faith, leave to amend should be granted." Broudo v. Dura Pharms., Inc., 339 F.3d 933, 941 (9th Cir.2003); McMullen v. Fluor Corp., 81 Fed. Appx. 197, 199 (9th Cir.2003).
Facing a summary judgment motion in Network Solutions, Lockheed sought to amend its complaint to add causes of action on which discovery had not been undertaken. Network Solutions, 194 F.3d at 986. The district court noted that this might reflect bad-faith on the part of Lockheed, because Lockheed's motion to amend came several months after the stipulated deadline for amending or supplementing the complaint, nothing in the proposed amended complaint relied on facts that were unavailable before the stipulated deadline, and Lockheed failed to explain the delay. Id. Cf. DCD Programs, 833 F.2d at 187 (appellants offered a satisfactory explanation for their delay in naming HFB as a defendant because they had waited until they had sufficient evidence of conduct upon which they could base claims of wrongful conduct).
In the instant action, plaintiff filed her motion for leave to amend approximately three months before the summary judgment hearing deadline on December 6, 2004. Furthermore, counsel for plaintiff contacted defendants' counsel as early as July 14, 2004 expressing plaintiff's intent to amend and followed up on August 17, 2004 with a proposed stipulation for a leave to amend. Mora Dec. at 1. In contrast to Network Solutions, the facts supporting the proposed claims of defamation and negligent supervision arose out of discovery that has already been conducted. Network Solutions, 194 F.3d at 986. Both parties agree that the facts giving rise to the proposed causes of action for defamation and negligent supervision were unknown to plaintiff at the time of filing her initial complaint. Def.'s Opp'n at 8; Pl's Mot. at 10. Therefore, it is unlikely that significant further discovery will be necessary, if at all. Pl. Mot. at 9. Thus, the court will not infer bad faith on the plaintiff's part.
IV. Futility of Amendment
The court may also deny leave to amend where the proposed amendment would be futile. DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir.1992); Johnson v. District 2 Marine Eng. Beneficial Ass'n, 857 F.2d 514, 518 (9th Cir.1988). Amendment may be futile where a plaintiff can prove no set of facts that would constitute a valid claim. Miller v. Rykoff-Sexton, Inc, 845 F.2d 209, 214 (9th Cir.1988). Defendants challenge the efficacy of the proposed amendments on the basis that the plaintiff has failed to state claims for defamation and negligent supervision.
A. Failure to State a Claim for Defamation
To state a claim for defamation, plaintiff must establish: (1) an intentional publication to a third person, (2) of a statement of fact, (3) that is false and unprivileged, and (4) has a tendency to injure or cause special damages. Smith v. Maldonado, 72 Cal.App. 4th 637, 642 (Cal.Ct.App.1999). A communication is defamatory if it "tends to harm the reputation of another as to lower him in the estimation of the community or to deter third persons from associating or dealing with him." Restatement (Second) of Torts § 559 (1977). Under principles of respondeat superior, an employer may be held liable for a defamatory statement made by its employee. Kelly v. Gen. Telephone Co., 136 Cal.App.3d 278, 284 (Cal.Ct.App.1982).
Plaintiff alleges that defendant Stolls and employees of America West made false statements to third parties, orally and in writing, concerning plaintiff and her reputation. Plaintiff also alleges that these false statements were assertions of fact. Pl.'s Proposed Am. Comp. at 18. Defendants argue that plaintiff has provided no evidence to support a cause of action for defamation, specifically, that she cannot show the existence of specific defamatory statements and their contents. Def.'s Opp'n at 11. Defendants cite to Lipman v. Brisbane Elementary Sch. Dist., in which the California Supreme Court held that the plaintiff had failed to allege either the specific words or the substance of statements attributed to the declarant, but instead merely alleged the conclusions of the declarant that statements were made which "intimated" and "suggested" that Lipman had done certain wrongful things. 55 Cal.2d 224, 235 (Cal.1961).
By contrast, in the instant case, plaintiff has pled with greater specificity, alleging that defendant Stolls claimed verbally and in writing that plaintiff had sexual relations with a male employee which she denies. Pl.'s Reply at 3. Plaintiff also alleges that defendant Stolls claimed verbally and in writing that plaintiff violated America West's company policies resulting in her termination by stating that plaintiff intentionally moved passengers on July 17, 2003 to travel with her boyfriend. Pl.'s Reply at 3. The truth or falsity of this explanation of the July 17, 2003 incident is a factual determination for a jury, not a judgment as a matter of law.
Defendants also argue that their statements are protected by a presumption of privilege, because all alleged statements were made to employees of America West and to other businesses in the industry. Def.'s Opp'n at 11.
The California Civil Code provides a qualified privilege for publication of a communication made, without malice, to a person interested therein, (1) by one who is also interested, or (2) by one who stands in such a relation to the person interested as to afford a reasonable ground for supposing the motive for the communication to be innocent, or (3) who is requested by the person interested to give the information. Cal. Civ.Code § 47(c). Defendants argue that the persons involved in the alleged defamatory communications were "interested" persons, and thus plaintiff's claim is barred by privilege. See Cal. Civ.Code § 47(3).
While it is true that section 47(3) establishes a qualified privilege for communications between interested parties, this privilege is lost where the statements are made with malice. Agrawal v. Johnson, 25 Cal.3d 932, 944 (Cal.1979); Deaile v. General Tele. Co. of Cal., 40 Cal.App.3d 841, 847 (Cal.Ct.App.1974). "Malice" under section 47(c) means "actual malice or malice in fact, that is, a state of mind arising from hatred or ill will, evidencing a willingness to vex, annoy or injure another person." Agrawal, 25 Cal.3d at 944. Moreover, the malice necessary to prevent application of this qualified privilege may be alleged merely by pleading that defendants' publication was motivated by hatred or ill will toward plaintiff. Kelly, 136 Cal.App.3d at 284-285 (1982). To respond to defendants' affirmative defense of privilege in the present action, plaintiff has pled that the defamatory statements were made with malice, more specifically, that defendants' publications were made with hatred, ill will, and an intent to vex, harass, annoy, and injure plaintiff. Pl.'s Proposed First Am. Comp. at 19. Plaintiff has sufficiently pled the hatred or ill will necessary to allege malice as a bar to defendants' claim for qualified privilege.
Finally, plaintiff alleges damage to her business and professional reputation, embarrassment, humiliation, severe emotional distress, loss of employment, and loss of employability. She has thus pled the final element of defamation. Plaintiff has sufficiently pled the elements of defamation under California law, therefore the court does not find the addition of a claim for defamation to be futile.
B. Failure to State a Claim for Negligent Supervision
An employee who has been harassed or discriminated against, or otherwise injured by the acts of another employee, may attempt to sue the employer for negligence in supervision of the other employee. An employee may state a cause of action for employer negligence in retaining an employee who allegedly sexually harassed the plaintiff. Hart v. Nat'l Mortgage & Land Co., 189 Cal.App.3d 1420, 1426 (Cal.Ct.App.1987). In order to establish a cause of action for negligent supervision, a plaintiff must allege: (1) the existence of a legal duty of employer to employee to use due care; (2) how the defendant-employer breached that duty; (3) how any breach proximately caused plaintiff's damages; and (4) damages. Love v. Motion Indus., 309 F.Supp.2d 1128, 1138 (N.D.Cal.2004); see also, 29 Am.Jur. Trials 267, § 32 (a complaint for damages based on the theory of negligent hiring and retention of an employee should allege the existence of the employment relationship at the time of the injury, the incompetence of the employee, that such incompetence was known or should have been known to the employer, and that the negligence of the employer caused harm to the plaintiff).
Plaintiff alleges that America West recognized their duty in their employee handbook and other memoranda to employees. Pl.'s Mot. at 14. She believes that America West breached this recognized duty when they failed to investigate, intervene, remedy or resolve the situations complained of by numerous employees of America West after the airline received extensive notice of defendant Stolls' propensity towards illegal workplace conduct. Pl.'s Mot. at 14. Plaintiff also alleges that America West's breach is not only a proximate cause of plaintiff's injury, but an actual cause of her emotional distress and resulting physical manifestations of emotional distress. Pl.'s Mot. at 15.
Defendant America West argues that plaintiff fails to allege that defendant Stolls sexually harassed a single employee of America West prior to his alleged sexual harassment of plaintiff. Def.'s Opp'n at 13. However, plaintiff did allege that defendant's actions against plaintiff were consistent with a pattern of sexual harassment, retaliation and defamation which defendant Stolls engaged in prior to harassing plaintiff. Pl.'s Proposed First Am. Comp. at 21:10-13.
Defendant further argues that many of plaintiff's alleged facts fail to indicate that America West was aware of defendant Stolls' various alleged improprieties. Def.'s Opp'n at 14. An employer's duty, as defined by California authority and the Restatement, is breached only when the employer knows, or should know, facts which would warn a reasonable person that the employee presents an undue risk of harm to third persons in light of the particular work to be performed. Federico v. Superior Court, 59 Cal.App. 4th 1207, 1214 (Cal.Ct.App.1997) (holding that the employer could not be held liable for negligent hiring where it could not be reasonably foreseen that an employee's child would be molested by another employee because minors were generally not allowed at the employer's school of hairstyling). It is important to note that the Federico court granted summary judgment in favor of the defendant employer because the plaintiff employee did not meet her burden to set forth specific facts to survive a motion for summary judgment, whereas in the instant action, which is still at the pleadings stage, plaintiff's general allegations of injury resulting from defendant's conduct are sufficient. Id.; Bennett v. Spear, 520 U.S. 154, 158 (1997). In the instant case, plaintiff alleges occasions in which America West was notified of defendant Stolls' workplace misconduct, including a situation in which Mr. Jackson, another employee of America West witnessed the presence of sexually suggestive magazines. Pl.'s Reply at 6.
To preempt plaintiff's claim of negligent supervision under the doctrine of workers' compensation exclusivity, defendant argues that an employee may not sue her employer for negligent supervision resulting in sexual harassment. Coit Drapery Cleaners, Inc. v. Sequoia Insurance Co., 14 Cal.App. 4th 1595, 1606 (Cal.Ct.App.1993) (citing Cole v. Fair Oaks Fire Prot. Dist., 43 Cal.3d 148, 161 (Cal.1987)). Defendant's reliance on the dicta in Coit suggests that an employee of the defendant employer may not sue for its allegedly negligent or improper supervision. Coit, 14 Cal.App. 4th at 1606. However, that case is an anomaly for two reasons: first, the corporate entity in Coit would not functionally have disciplined or supervised the perpetrator of the sexual harassment because he was the president, chairman of the board, and majority shareholder of the corporation; second, the appellate court's dicta in Coit misstates the reasoning of the California Supreme Court in Cole which held that when the misconduct attributed to an employer includes actions which are a normal part of the employment relationship (such as demotions, promotions, criticism of work practices, and frictions in negotiations as to grievances), an employee suffering emotional distress causing disability may not avoid the exclusive remedy provisions of the Labor Code by characterizing the employer's decisions as manifestly unfair, outrageous, harassment, or intended to cause emotional disturbance resulting in disability. In the instant case, defendants' alleged conduct cannot be viewed as a risk of the employment expected to occur with substantial frequency in the working environment. Cole, 43 Cal.3d at 161.
The Workers' Compensation Act, as a matter of policy, does not estop a plaintiff from pursuing sexual harassment claims in civil actions. Claxton v. Waters, 34 Cal.4th 367, 379 (Cal.2004). Recognizing that America West does not argue preemption of all of plaintiff's causes of action, this court nevertheless interprets applicable case law on negligent supervision of employees committing intentional torts to keep such cases outside of workers compensation exclusivity. Plaintiff's case in the present action does not fall within the boundaries of Cole and Coit. Plaintiff has alleged that she has suffered and continues to suffer emotional distress as a result of America West's negligent supervision in hiring and retaining Stolls with the knowledge of Stolls' alleged propensity for harassing women.
The California Supreme Court has described "a tripartite system for classifying injuries arising in the course of employment." Fermino v. Fedco, Inc., 7 Cal.4th 701, 713-715 (Cal.1994). First, there are injuries caused by an employer's negligence or without employer fault that are exclusively governed by and compensable under the workers' compensation system. Second, there are injuries caused by "ordinary employer conduct" that is intentional, knowing, or reckless misconduct; such injuries are also exclusively compensable under the workers' compensation system. Id . at 714. Third, there are certain types of intentional misconduct which are not a normal risk of employment or contrary to fundamental public policy; injuries arising therefrom fall outside the workers' compensation system. Id. at 714-715. Plaintiff's cause of action for negligent supervision with regard to sexual harassment falls within the third category. Accardi v. Superior Court, 17 Cal.App. 4th 341 (Cal.Ct.App.1993) (holding that a claim for emotional and psychological damage arising out of employment is not barred by the Workers' Compensation Act, where the distress is engendered by an employer's illegal discrimination and sexual harassment). While plaintiff may not prevail in ultimately showing that America West engaged in negligent conduct that facilitated its employee's allegedly illegal conduct, the emotional distress of an employee related to the same set of facts as alleged in a claim of sexual harassment is not barred as a matter of law. See id. at 353.
As in Accardi, plaintiff's claim of negligent supervision is related to the same set of facts alleged in her claim of sexual harassment and thus, the claims are based on allegations of acts outside the normal scope of employment. Accardi, 17 Cal.App. 4th at 353; Cole, 43 Cal.3d at 161. To the extent that these acts constitute the underpinnings of plaintiff's negligent supervision claim, the claim does not fall within the exclusivity provisions of the Workers' Compensation Act. Moreover, plaintiff has sufficiently pled the elements of negligent supervision, and therefore the court grants plaintiff's motion for leave to amend to add a claim for negligent supervision.
For the foregoing reasons, the court hereby GRANTS plaintiff's Motion for Leave to Amend. The complaint is deemed amended as of the date of this order and defendant's answer shall be filed within twenty (20) days thereafter.
IT IS SO ORDERED.