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Scott v. Phoenix Schools

June 30, 2009


APPEAL from a judgment of the Superior Court of Placer County, James D. Garbolino, Judge. Reversed in part and affirmed in part. (Super. Ct. No. SCV20328).

The opinion of the court was delivered by: Blease, Acting P. J.


This is a wrongful termination action. Plaintiff Jennifer Scott was employed by defendant Phoenix Schools, Inc. (Phoenix) as the director of its Rocklin, California preschool. She had the responsibility of assigning personnel to comply with the state regulations that set the minimum teacher-student ratios for child care centers. (Cal. Code Regs., tit. 22, §§ 101216.3, 101416.5, and 101516.5.)

Phoenix terminated Scott in August 2006, shortly after she informed the parents of a prospective student that the school had no room for their child. Scott sued Phoenix, alleging her termination violated the public policy embodied in the state regulations. She alleged she was terminated for refusing to violate the staffing ratio regulations, the implication being that the admission of the extra child would have resulted in a regulatory violation. After a jury trial, judgment was entered in favor of Scott, awarding her $1,108,247.00 in compensatory and $750,000.00 in punitive damages.

Phoenix argues there was insufficient evidence to sustain the jury‟s finding that it violated public policy when it terminated Scott, that the trial court erred in refusing to set aside the punitive damages award, that prejudicial evidentiary rulings compromised the fairness of the trial, and that the compensatory damage award was excessive and unsupported by the evidence.

In the published part of the opinion*fn1 we shall conclude there was substantial evidence that Phoenix violated public policy in dismissing Scott but there was insufficient evidence of malice or oppression to sustain the award of punitive damages and shall reverse the punitive damage award on that ground. We shall affirm the remainder of the judgment.


On July 31, 2006, Juanita McMaster arrived at Phoenix‟s Rocklin preschool campus to visit the school in anticipation of sending her child to preschool. McMaster did not have an appointment, and Scott was outside at the time supervising children. Scott gave McMaster an abbreviated tour because she needed to be outside to comply with the required student-teacher ratio. Scott estimated she spent 10 to 15 minutes with Juanita McMaster. Scott told McMaster there was currently no space for her child, but that there would be space available in a couple of weeks, and put her daughter‟s name on a waiting list.

Juanita McMaster came back to the Rocklin school with her husband a couple of days later. This time, they were shown around by Suzie Aguirre, who was part of the school‟s administrative staff. In contrast to the information Scott had given Mrs. McMaster two days earlier, Aguirre told the McMasters there was an immediate opening for their daughter.

Mr. McMaster sent an e-mail to Kelly Lister, who was the regional director for Phoenix. The message expressed the following complaint:

"When my wife arrived for her appointment she got a very cursory tour of the facility and felt that Jennifer was only doing it because she felt she had to, not out of any genuine interest. Jennifer was asked if they taught any Spanish to the child as other schools have this as a part of their curriculum. She was told no they do not teach Spanish. My wife‟s response was "Oh that‟s too bad because my daughter speaks Spanish at home with us.‟ Jennifer‟s response was "Well, all of the instruction is in English, so you should really think about whether she should be in this School.‟ This was delivered in [a] manner my wife understood as seriously trying to discourage her from enrolling our daughter.... My wife asked if they had any spots available and was told "No, but you can get on the waiting list.‟ She did this.... During her entire time with Jennifer she felt that Jennifer could not wait for her to leave and was only doing what she did out of some sense of obligation to her job. Just going through the motions, if you will.

This morning (08/02/2006) my wife and I met at the pre-school and received another tour and introduction.... It was not with Jennifer. When we arrived she remembered my wife and pulled out the "Tickler File‟ to find her information. After looking through the file 3 times she could not find my wife‟s information and took us into the facility for a tour. It was a very good introduction to the facility, in fact, I liked it very much. During the tour it was mentioned that Spanish was taught at the school and our daughter would move from the "ladybugs‟ into the 3 year old class most likely in February. I found [Aguirre] to be very informative, interested in the children and excited about the place she worked. As the tour was concluding, I asked if they had any availability and she said, "Yes, we have 3 or 4 spots right now and it is probably best if you get her in before September, as it tends to fill up quickly around that time.‟... As we left, my wife recounted with me once again what had happened on her tour with Jennifer.

I went back in to the facility and confronted Jennifer and [Aguirre] about how my wife felt she was treated. She responded "Oh, I can‟t imagine why.‟ I asked her about availability and her response was to tell me that she put her on the waiting list and proceeded to show me the list.... I said "[Aguirre] just told me there were 3 or 4 spots available immediately.‟ She gave a blank look to [Aguirre] (who confirmed availability) and then she began the backpedaling about having two teachers transfer, the school year starting on 8/26/06 and how she didn‟t like to start new families before the new school year ended.

None of this made any sense to me in regard to how this would limit my daughter enrolling immediately....

Needless to say, we will not be enrolling our daughter in the Rocklin pre-school.

I await your response and sincerely hope that you can use this as a growth opportunity for your company. I have not decided if I feel further action is necessary on my part, it may be warranted as this type of behavior can not be allowed to continue."

Lister forwarded the e-mail to Char Brohl, the senior vice president of Phoenix‟s parent company, Mini-Skools. Brohl made the decision to suspend Scott the next day. Scott was suspended for a day and a half, after which she took a pre-planned week of vacation. During that week, the decision was made to terminate Scott because of poor job performance due to her failure to enroll the McMaster child.

The McMaster child was two years-old. Out of nine total classrooms, the school had two classrooms for two to three year-old children who were not yet potty trained. The McMaster child would have gone into the Ladybugs classroom, which had only an aide permanently assigned to the room, and no qualified teacher permanently assigned. The Ladybugs classroom was short staffed, because two teachers left during the summer.

Phoenix employed full time, part time, and temporary teachers and aides. The staff arrived at different times during the day, and the number of children attending changed from day to day. No teacher worked the entire eleven and one half hours the school was open. If a teacher stepped out of the room, it was necessary to get another teacher in to replace her. The three administrative staffers at the school, including Scott, were also qualified teachers. They filled in as needed, but they also had their administrative duties to perform. Teachers from another room could be brought in as an emergency measure, but not as a permanent fix because they had their own classroom responsibilities.

Scott was an at will employee. At the time of her termination she was 37 years old, had worked for Phoenix for 13 years, and was earning approximately $42,000 per year.


I. Discharge in Violation of Public Policy

Following the jury verdict in favor of Scott, Phoenix brought a motion for judgment notwithstanding the verdict and for a new trial, which were both denied by the trial court. Phoenix argues the trial court erred in denying the motion for judgment notwithstanding the verdict because there was no substantial evidence Scott was terminated in violation of public policy.

We review the order denying the motion for judgment notwithstanding the verdict for substantial evidence. (Sweatman v. Department of Veterans Affairs (2001) 25 Cal.4th 62, 68.) An employment contract for an indefinite duration is normally terminable at the will of either party. (Lab. Code, § 2922; Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 172 (Tameny).) However, an employer may be liable in tort for discharging an employee for performing an act that public policy encourages, or refusing to perform an act that public policy would condemn. (Gantt v. Sentry Insurance (1992) 1 Cal.4th 1083, 1090, overruled on other grounds in Green v. Ralee Engineering Co. (1998) 19 Cal.4th 66, 80; Tameny, supra, at pp. 174-177.) A wrongful discharge in violation of public policy is commonly referred to as a "Tameny" claim. Determining whether a claim involves a matter of public policy as opposed to an ordinary dispute between the employer and employee depends on whether the matter affects society at large, whether the policy is sufficiently clear, and whether it is fundamental, substantial, and well established at the time of the termination. (Jie v. Liang Tai Knitwear Co. (2001) 89 Cal.App.4th 654, 661.)

Violations of public policy generally fall into four categories: (1) termination for refusing to violate a statute, (2) termination for performing a statutory obligation, (3) termination for exercising a statutory right or privilege, or (4) termination for reporting an alleged violation of a statute of public importance. (Gantt, supra, 1 Cal.4th at pp. 1090-1091.) Refusal to violate a governmental regulation may also be the basis for a tort cause of action where the administrative regulation enunciates a fundamental public policy and is authorized by statute. (Green v. Ralee Engineering Co., supra, 19 Cal.4th at pp. 79-80.)

In this case, Scott asserted she was terminated for refusing to violate California Code of Regulations, title 22, section 101216.3. Subdivisions (a) and (b) of that section provide that there must be one teacher for every 12 children, but if the teacher is fully qualified, one teacher and one aide may supervise no more than 18 children. Phoenix argues the verdict must be overturned because: (1) no substantial evidence exists that enrolling the McMaster child would have violated the regulation, (2) no substantial evidence exists that Scott notified Phoenix that enrolling the McMaster child would have violated the regulation, and (3) the regulation does not reflect a fundamental or important public policy.

A. Substantial Evidence of Violation of Regulation

In DeSoto v. Yellow Freight Systems, Inc. (9th Cir. 1992) 957 F.2d 655, 658-659, the Ninth Circuit held that no public policy violation occurs where the employee‟s belief that the employer‟s directive would result in a violation of law is mistaken. Thus, Phoenix argues there was insufficient evidence that the enrollment of the McMaster child would have actually resulted in a violation of the regulation governing teacher- child ratios. Assuming, without deciding, that there is no public policy violation if the employee merely believes that what she is being asked to do violates the law, we nevertheless shall conclude there was sufficient evidence of violation of the regulation.

Phoenix argues the evidence showed that Scott‟s unwillingness to enroll the McMaster child arose from a personal preference to wait until a permanent teacher was assigned to the classroom for McMaster‟s age group, and not because the enrollment of the child would have violated the regulation. In support of this argument, Phoenix points to Scott‟s testimony that she explained to Lister in reference to the McMaster e-mail, that she did not have the steady staff in the two year-old classroom, and that she would prefer not to enroll children when part of the enrollment process is introducing the teacher. Phoenix argues that Scott continued to staff the Ladybugs classroom after the two teachers left by rotating unassigned teachers and an aid into the classroom, and there was no evidence that enrolling the McMaster child in and of itself would have violated the law.

In reviewing whether there was substantial evidence to show the enrollment of the McMaster child would have violated the teacher-student ratios, we resolve all conflicts and indulge all legitimate and reasonable inferences in favor of the verdict. (Western States Petroleum Assn. v. Superior Court (1995) 9 Cal.4th 559, 571.) If there is substantial evidence from which more than one reasonable inference may be drawn, we are without power to substitute our deductions for those of the trier of fact. (Von Belz v. Stuntman, Inc. (1989) 207 ...

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