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Roby v. McKesson Corp.

November 30, 2009

CHARLENE J. ROBY, PLAINTIFF AND RESPONDENT,
v.
MCKESSON CORPORATION ET AL., DEFENDANTS AND APPELLANTS.



Ct.App. 3 C047617/C048799 Yolo County Super. Ct. No. CV01573, Judge: Timothy L. Fall.

The opinion of the court was delivered by: Kennard, J.

A jury found that plaintiff employee, Charlene J. Roby, was wrongfully discharged based on her medical condition and related disability. The jury found both harassment and discrimination, and it awarded $3,511,000 in compensatory damages and $15 million in punitive damages against the employer, as well as $500,000 in compensatory damages and $3,000 in punitive damages against the supervisor who was responsible for the harassment. Defendants appealed.

The Court of Appeal concluded that some of the non-economic damages awards overlapped one another, and that the evidence was insufficient to establish harassment. It ordered the trial court to enter judgment in favor of the supervisor, and it ordered the trial court to modify the judgment against the employer to reflect a reduction of compensatory damages to $1,405,000. The court further concluded that the award of punitive damages against the employer exceeded the federal constitutional limit, and it ordered a reduction of punitive damages to $2 million. The Court of Appeal then affirmed the judgment as modified.

We granted plaintiff's petition for review, which raised three issues. First, did the Court of Appeal err in concluding that some of plaintiff's non-economic damages awards overlapped one another? Second, did the Court of Appeal err in allocating plaintiff's evidence between her harassment claim and her discrimination claim, and, based on that allocation, in finding insufficient evidence to support the harassment verdict? Third, did the Court of Appeal err in concluding that the punitive damages against the employer exceeded the federal constitutional limit?

With respect to the first issue, we conclude that the jury's non-economic damages awards are hopelessly ambiguous. In a letter to this court and again at oral argument, plaintiff's counsel stated that plaintiff preferred to concede this issue rather than face a new trial, and defendants accepted this concession. Therefore, the validity of the Court of Appeal's conclusion that some of the non-economic damages awards overlapped one another is no longer in dispute. With respect to the second issue, we conclude that the Court of Appeal erred in allocating the evidence between the harassment claim and the discrimination claim, and we reject its determination that the record included insufficient evidence to support the harassment verdict. With respect to the third issue, we agree with the Court of Appeal that the punitive damages exceeded the federal constitutional limit, but we disagree with the Court of Appeal on the amount of this limit. We hold that in the circumstances of this case the amount of compensatory damages sets the ceiling for the punitive damages.

I.

A.

This matter is before us on appeal from a judgment in favor of plaintiff Charlene J. Roby, after a jury trial. In summarizing the facts, we view the evidence in favor of the judgment. (Bickel v. City of Piedmont (1997) 16 Cal.4th 1040, 1053.)

Roby worked for defendant McKesson Corporation from 1975 until 2000. McKesson is a distributor of pharmaceutical and health care products, supplying both hospitals and pharmacies. At the end of her career with McKesson, Roby was a customer service liaison at a local distribution center, processing forms and handling customer problems related to product delivery. She did her job well and received favorable performance reviews. Starting in 1997, Roby began experiencing "panic attacks" that temporarily (and on short notice) restricted her ability to perform her job. During a panic attack, Roby suffered heart palpitations, shortness of breath, dizziness, trembling, and excessive sweating.

In 1998, McKesson instituted a complex attendance policy. The policy put particular emphasis on 24-hour advance notice for all absences, including medical absences. An absence without notice that lasted more than half the scheduled workshift was denominated an "occasion," and two incidents of tardiness or early departure also counted as an "occasion," but the term "occasion" referred to a period of absence that began without the required 24-hour notice, not to each day of absence. For example, if an employee suddenly became ill and was absent (without 24-hour advance notice) for three consecutive workdays, the three-day absence would be deemed a single occasion.

McKesson imposed progressive levels of discipline based on the number of occasions an employee accrued in any 90-day period. The discipline proceeded in a "3-3-2-2 sequence." Three occasions in any 90-day period would result in an oral warning, and an additional three occasions in any subsequent 90-day period would result in a written warning. After the written warning, two more occasions within any 90- day period would result in a final written warning. After the final written warning, two more occasions within any 90-day period would result in termination of employment.

An employee would repeat a level in the sequence (rather than progressing to the next, more severe disciplinary level) if the employee became eligible for discipline but had received no discipline during the preceding six months. If the employee became eligible for discipline but had received no discipline during the preceding 12 months, the level of discipline would be one level below the level last imposed (though the minimum discipline was always an oral warning). For example, if an employee received a final written warning but then received no discipline for six months before becoming again eligible for discipline, a second final written warning would be issued. If the same employee had received no discipline for 12 months before becoming again eligible for discipline, there would be a written warning (non-final), rather than a final written warning.

McKesson's attendance policy operated to the disadvantage of employees who, like Roby, had disabilities or medical conditions that might require several unexpected absences in close succession. Roby accrued a large number of occasions in a relatively short time span, and most of them were directly or indirectly related to her panic attacks. Roby's supervisors - including defendant Karen Schoener - were aware that Roby suffered from these unpredictable panic attacks and that many, if not all, of her absences without notice resulted from this condition.

Roby struggled to overcome her disability and to improve her attendance record, but after Schoener took over as Roby's immediate supervisor, Roby's frequent absences resulted in tension between them. Compounding this problem, Roby's medication caused her body to produce an unpleasant odor, and in connection with her panic attacks she also developed a nervous disorder that caused her to dig her fingernails into the skin of her arms, producing open sores.

Schoener made negative comments in front of other workers about Roby's body odor, although Schoener knew from Roby that medication was causing the odor. Schoener also called Roby "disgusting" because of the sores on her arms and her excessive sweating. Schoener openly ostracized Roby in the office, refusing to respond to Roby's greetings and turning away when Roby tried to ask questions, and Schoener made a facial expression of disapproval when Roby took rest breaks because of her panic attacks.

Schoener also ignored Roby at staff meetings, and she overlooked Roby when handing out specialty food items, holiday gifts, and travel trinkets, although Schoener regularly gave these small gifts to the other employees on her staff. Schoener effectively excluded Roby from office parties by designating her to cover the office telephones. In addition, Schoener frequently reprimanded Roby in front of her co-workers. She spoke about Roby in a demeaning manner and openly belittled Roby's contribution to the company, calling her job a "no brainer." According to the testimony of one co-worker, when Roby would telephone the office in the morning to report that she would be absent, Schoener "would always make this announcement that was degrading; say, `Charlene's absent again' - you know - that type of response." Roby's complaints to more senior managers about Schoener's conduct went unanswered.

In early 1999, Roby accrued three occasions within a 90-day period. Although Roby told her then supervisor (not Schoener) that these absences were due to her medical condition, she nevertheless received an oral warning on April 2, 1999. By June 8, 1999, Roby had accumulated three and a half more occasions. She again informed her supervisors (who at this time included Schoener) that her absences were because of her medical condition, but she nevertheless received a written warning.

Roby then had two more occasions - July 27-28, 1999 and October 18, 1999. She gave her supervisors (including Schoener) a note, signed by her psychiatrist, stating that her July 27-28 absence was necessitated by a medical condition that was not contagious. Nevertheless, on October 22, 1999, Roby received a final written warning. She responded by telling Schoener that all her absences were because of her panic disorder.

After the final written warning, Schoener told Roby that if she had no further occasions before January 2000, she would have a "new start." Roby interpreted that statement to mean that she would clear her poor attendance record if she succeeded in having no occasions between then and January. Roby met that goal and went to Schoener to express her delight, but Schoener said nothing.

In 2000, Roby had two more occasions, one on February 25, because of laryngitis, and the second on April 11, because of a panic attack. On April 13, 2000, two of McKesson's local managers (including the head of the distribution center where Roby worked) met with Roby and told her that she had abused the company's attendance policy and was subject to termination. Roby protested, explaining that in 1999 Schoener had assured her a "new start" if she lasted until January 2000 without any occasions. Roby also asserted that McKesson had applied the attendance policy unevenly, overlooking instances when other employees were absent without notice. Roby requested that her occasions be retroactively reclassified as protected medical leave under the Family and Medical Leave Act of 1993 (29 U.S.C. § 2601 et seq.) (FMLA), but the documentation she relied upon in support of this reclassification was limited to the brief medical notes that were already in her personnel file. These notes stated only that Roby "has been diagnosed with panic disorder," that it is "not contagious," and that the "[p]anic episodes have been stabilized [with medication]." The notes did not describe the panic disorder, and they did not connect any of Roby's absences to the panic disorder.

McKesson suspended Roby pending an investigation. The main focus of the investigation was to confirm that the number of Roby's occasions had been calculated correctly, that nothing in her personnel file excused these occasions, and that the frequency of the occasions justified termination under the attendance policy. During this investigation, Schoener reported that Roby had misunderstood her statement about a "new start"; in making the statement, Schoener had meant only that, after the beginning of the new year, Roby would be able to use newly accrued vacation leave to take days off.

On April 14, 2000, McKesson terminated Roby by telephone, and it sent a follow-up letter on April 17, 2000. On April 24, 2000, Roby submitted a "Request for Action" contesting McKesson's decision and asserting that her absences were because of her disability. McKesson reaffirmed Roby's termination on May 10, 2000.

After the termination, Roby was devastated emotionally and financially. She depleted her savings and lost her medical insurance, which led her to forgo necessary treatment. She developed agoraphobia (anxiety in public places) and became suicidal. In 2001, the United States Social Security Administration found Roby to be completely disabled.

B.

In 2001, Roby sued employer McKesson and supervisor Schoener. The matter proceeded to trial, with the jury instructions outlining the following theories of recovery: wrongful termination in violation of public policy (against McKesson only); harassment in violation of the California Fair Employment and Housing Act (FEHA) (Gov. Code, § 12940, subd. (j))*fn1 (against McKesson and Schoener); discrimination in violation of the FEHA (§ 12940, subd. (a)) (against McKesson only); and failure to accommodate in violation of the FEHA (§ 12940, subd. (m)) (against McKesson only).

Three of the claims against McKesson - wrongful termination in violation of public policy, discrimination in violation of the FEHA (§ 12940, subd. (a)), and failure to accommodate in violation of the FEHA (§ 12940, subd. (m)) - were based, at least in part, on Roby's termination, and therefore the damages for these causes of action necessarily overlapped. The trial court instructed the jury that if it found liability on more than one of these theories, it should determine the total economic damages resulting from Roby's termination and insert that total figure as the economic damages for each of the separate theories of recovery. The court emphasized that the jury should not divide the total economic damages into parts and distribute those parts among the separate theories of recovery; the court assured the jury that the court would count the economic damages only one time no matter how many times the jury inserted the same dollar amounts on the special verdict form.*fn2 As to non-economic damages, however, the trial court instructed the jury that damages could vary for each of the three theories of recovery and that the jury should therefore determine the appropriate amount applicable for each theory.*fn3

In closing argument, plaintiff's counsel told the jury that plaintiff was seeking a total of $1.5 million in non-economic damages on all causes of action, and no more.

When the jury first reported that it had reached a verdict, an irregularity appeared. The portion of the verdict that the trial court read specified $1.5 million in damages for each of the four damages categories listed on the special verdict form (past and future economic damages, and past and future non-economic damages) and then specified $1.5 million as the total of these amounts. At that point, the trial court stopped reading the verdict. The court instructed the jury further, and the jury resumed its deliberations. The court's additional instructions restated what it had explained earlier, again making clear that, in calculating the total judgment, the court would not add together the economic damages for the three termination-related causes of action, but it would add together the non-economic damages for those same three causes of action.*fn4

The jury found in favor of Roby on all causes of action. Its special verdict stated these damages:

Wrongful termination in violation of public policy - McKesson

Economic losses Past $605,000

Future $706,000

Non-economic losses Past $250,000

Future $250,000

Discrimination - McKesson Economic losses Past $605,000

Future $706,000

Non-economic losses Past $200,000

Future $100,000

Failure to accommodate - McKesson Economic losses Past $605,000

Future $706,000

Non-economic losses Past ...


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