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McCaskey v. California State Automobile Association

October 29, 2010

FRANCIS A. MCCASKEY, PLAINTIFF AND APPELLANT,
v.
CALIFORNIA STATE AUTOMOBILE ASSOCIATION ET AL., DEFENDANTS AND RESPONDENTS.
CHARLES LUKE, PLAINTIFF AND APPELLANT,
v.
CALIFORNIA STATE AUTOMOBILE ASSOCIATION ET AL., DEFENDANTS AND RESPONDENTS.



(Santa Clara County Super. Ct. Nos. CV042782, CV042792 & CV042793). Trial Judge: The Honorable Neal A. Cabrinha.

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

CERTIFIED FOR PUBLICATION

Plaintiffs Charles Luke, Francis McCaskey, and John Mellen brought these actions against California State Automobile Association (CSAA) and California State Automobile Association Inter-Insurance Bureau charging breach of contract and age discrimination.*fn1 The gist of the claims was that defendant brought about plaintiff's discharges by breaching a promise to permit senior sales agents to continue in their employ under relaxed sales quotas. The trial court entered summary judgment for defendants primarily on the grounds that they were contractually entitled to rescind the promise, and that plaintiffs failed to raise a triable issue of fact concerning defendants' claimed nondiscriminatory reasons for eliminating the policy. We find that the record raises a triable issue of fact on the contract claim over the question whether defendants honored the policy for an agreed time, or if no agreement as to time can be inferred from the terms and circumstances of the employment contract, for a reasonable time. The record also presents triable issues of fact concerning the genuineness of defendants' claimed reasons for eliminating the policy. Accordingly, we will reverse the judgment.

BACKGROUND

At the outset of the events giving rise to this suit, each of the plaintiffs was employed by CSAA as a sales agent (sales representative ) at its San Jose-Oakridge branch office. CSAA hired plaintiff Mellen in 1969 at the age of 25, McCaskey in 1971 at the age of 27, and Luke in 1976 at the age of 31. When hired, each signed an "Appointment Agreement." Although the version signed by Mellen and McCaskey differed slightly from the one signed by Luke, both versions recited that CSAA would pay commissions on new and renewal business in accordance with a "Compensation Plan," which CSAA reserved the right to modify. Each provided that either party could terminate the agreement either "forthwith" or "without prior notice."

The compensation plan set out formulas for calculating the commissions plaintiffs would be paid for the various kinds of insurance they were expected to sell. The plan included sales quotas, called "Minimum Sales Quotas" in 1969, and later known as "minimum production requirements," "MPR's," or sometimes "MSPR's." In the early versions of the plan these were expressed as a minimum number of new or reinstated policies or memberships the agent was required to sell each month in four categories. By 2001 they had come to be expressed in the dollar value of "New Gross Written Premium," apparently meaning premiums on newly sold policies. At least some versions of the plan, including the 1969, 2001, and 2005 versions, expressly provided that failure to meet sales quotas was grounds for discipline or termination.*fn2

In 1973 CSAA amended the compensation plan to provide that quotas would be reduced by 15 percent for agents who reached the age of 55 with at least 15 years of service, and by a further 25 percent (for a total of 40 percent) for agents who reached 60 with 20 years of service. The effect of this provision was to permit agents to work less hard to produce new business without risking termination of employment for failure to satisfy the MPR's. It remained in effect through 2000. By that time all of the plaintiffs had qualified for the MPR reductions; each had more than 20 years in service to CSAA, and Mellen and McCaskey were 57 years old, while Luke was 55 years and 4 months old.

In early 2001, CSAA adopted a compensation plan that did not provide any reduction in MPR's for senior agents. Copies of this plan were transmitted to affected employees in late February. The plan included a signature page for agents to acknowledge that it was "Accepted and Approved." None of the plaintiffs signed it. Instead they engaged counsel, who wrote to CSAA on their behalf stating that elimination of the MPR reductions as to plaintiffs would violate the Fair Employment and Housing Act (FEHA) (see Gov. Code, §§ 12900 et seq.), as well as the existing employment agreement, and that they would not sign it. This triggered an exchange of correspondence culminating in a statement by CSAA that plaintiffs would not be fired for failing to sign the new plan, but that its terms would govern their compensation, and that the prior plan, including the reduction in MPR's based on age and seniority, was "no longer in effect."

Plaintiffs continued to work for CSAA. Mellen and Luke at all times continued to produce new business sufficient to meet quota with no adjustment for seniority. McCaskey, however, failed to do so, and CSAA "counseled" him on several occasions beginning in 2002. Each such occasion resulted in issuance of a "Corrective Action Form" with the recital that "[f]ailure to maintain minimum production will result in corrective action, up to and including termination." On February 22, 2005, CSAA discharged him for the stated reason that he had not met MPR's for the preceding month.

Meanwhile, CSAA had prepared a newly revised compensation plan, to take effect April 1, 2005. Copies of the plan were apparently transmitted to all agents in February, 2005. CSAA told agents they would have to choose between signing the agreement by its effective date or terminating their employment as of that date. Because the plan still allowed no reduction in MPR's for veteran employees, Luke and Mellen refused to sign it. As of April 1, 2005, CSAA viewed them as having "left [its] employ."*fn3

The compensation plans generally entitled agents to commissions not only on sales of new policies (new business), but also on renewals of policies originally sold by them. Policies sold by an agent, and the customers who had bought them, were known as "book of business." Books of business could grow quite large as an agent's time in service lengthened.*fn4

Plaintiffs all declared that prior to 2001 it was CSAA's standard practice to transfer a departing sales representative's book of business to other representatives in the same office. From this it may be inferred that, prior to 2001, CSAA would generally owe a renewal commission to someone, whether or not the original seller of the policy was still in its employ. This approach apparently reflected a business model under which sales representatives bore significant if not primary responsibility for customer service. Defendant attempted below to depict this responsibility as a burden on sales representatives from which it sought to relieve them so that they could devote more time and energy to the development of new business. Plaintiffs attempted to depict it as a minimal burden but as an opportunity to generate new business from existing customers, which opportunity CSAA was intent on diverting to hourly employees so as to avoid any obligation to pay commissions on the resulting sales. Whatever part of the truth each side's depiction may constitute, it is undisputed that beginning in the 1990's CSAA began to move many of its customer service functions and at least some of its sales functions into telephonic "call centers" where hourly employees fielded calls from existing and potential customers. At the same time, the 2001 Compensation Plan provided for a category of accounts, known as "House Accounts," on which "[c]ommissions are not payable to a Sales Representative." CSAA's chief witness, Matthew Newcomer, testified in deposition that when plaintiffs were discharged, none of their accounts were reassigned to anyone: "We don't reassign books of business any longer." It may be inferred that their existing books of business all became "house accounts," terminating any liability CSAA would otherwise have for renewal commissions.

Plaintiffs each filed an action against CSAA on June 6, 2005, asserting claims for breach of contract, age discrimination in violation of FEHA, and "Tortious Wrongful Termination - Retaliation." CSAA answered with a general denial and 36 affirmative defenses. The court ordered the three cases consolidated for trial. CSAA moved against each plaintiff for summary judgment or, in the alternative, summary adjudication on each cause of action. The trial court granted the motions. It entered judgment, and denied plaintiffs' motions for reconsideration. Plaintiffs filed timely notices of appeal.

DISCUSSION

I. Breach of Contract

A. Introduction

"We summarized the principles governing an appeal of this type in Reeves v. Safeway Stores (2004) 121 Cal.App.4th 95, 106-107 (Reeves): 'On appeal from an order granting summary judgment "we must independently examine the record to determine whether triable issues of material fact exist. [Citations.]' [Citation.] The question is whether defendant " ' "conclusively negated a necessary element of the plaintiff's case or demonstrated that under no hypothesis is there a material issue of fact that requires the process of trial." [Citation.]' [Citation.]" [Citations]; see Guz v. Bechtel National Inc. (2000) 24 Cal.4th 317, 335, fn. 7, . . . (Guz) ["the issue . . . is simply whether, and to what extent, the evidence submitted for and against the motion . . . discloses issues warranting a trial"].) . . . [Citation.] Moreover, "we must view the evidence in a light favorable to plaintiff as the losing party [citation], liberally construing [his] evidentiary submission while strictly scrutinizing defendants' own showing, and resolving any evidentiary doubts or ambiguities in plaintiff's favor. [Citations.]" [Citations.] And a plaintiff resisting a motion for summary judgment bears no burden to establish any element of his or her case unless and until the defendant presents evidence either affirmatively negating that element (proving its absence in fact), or affirmatively showing that the plaintiff does not possess and cannot acquire evidence to prove its existence. [Citations.]' " (Mamou v. Trendwest Resorts (2008) 165 Cal.App.4th 686, 710-711 (Mamou).) In determining whether a triable issue was raised or dispelled, we must disregard any evidence to which a sound objection was made in the trial court, but must consider any evidence to which no objection, or an unsound objection, was made. (See Reid v. Google, supra, 50 Cal.4th 512, 534; Code of Civ. Proc., § 437c, subds. (b)(5), (c), (d).) Such evidentiary questions, however, are subject to the overarching principle that the proponent's submissions are scrutinized strictly, while the opponent's are viewed liberally.

"The first step in analyzing a motion for summary judgment is to identify the issues framed by the pleadings. It is these allegations to which the motion must respond by showing that there is no factual basis for relief or defense on any theory reasonably contemplated by the opponent's pleading." (6 Witkin, Cal. Procedure (5th ed. 2008) Proceedings Without Trial, § 212, p. 650.) Here plaintiffs alleged that CSAA breached the parties' contract by (1) discontinuing the MPR reductions after plaintiffs had qualified for those reductions; (2) interfering with plaintiffs' performance of the contract by making it unreasonably difficult to meet quota; and (3) discharging them for, in McCaskey's case, failing to meet quota, and in Mellen's and Luke's cases, refusing to agree to be bound by the full, unadjusted quotas.

CSAA contended that none of these theories presented an issue of fact for trial because (1) the statute of limitations expired before plaintiffs filed their complaints; (2) the at-will character of the employment entitled CSAA to fire plaintiffs regardless of its grounds for doing so; (3) CSAA in any case had good cause to do so; and (4) CSAA did not breach the contract by eliminating the MPR reductions, because it had satisfied the preconditions giving it the power to do so under the principles applied in Asmus v. Pacific Bell (2000) 23 Cal.4th 1 (Asmus). We do not find the summary adjudication of the contract claims sustainable on any of these grounds.

B. Statute of Limitations

The trial court sustained CSAA's limitations defense as to two of plaintiffs' three contract theories. The court understood CSAA to argue that the claims were governed by the four-year statute of limitations applicable to claims based on a written contract. (Code Civ. Proc., § 337, subd. (1).) Since plaintiffs' complaints were filed on June 9, 2005, the question presented was whether, as a matter of law, the limitations period began to run before June 9, 2001. Defendant argued, and the court concluded, that the period began to run on April 1, 2001, when defendant first adopted a compensation plan omitting the MPR reductions. Plaintiffs argued that this conduct was at most an anticipatory breach, and that they sustained no compensable harm until defendant took detrimental action in violation of the alleged contract.

These contentions raise pure issues of law, which we will address without deference to the trial court's ruling.

CSAA relies on the "[g]eneral [r]ule" that a contract cause of action runs from the date of the breach. (3 Witkin, supra, Actions, § 520, p. 664.) They contend that the claimed breach with respect to the elimination of the MPR reductions necessarily occurred on the effective date of the 2001 compensation plan, which omitted the provision allowing those reductions. But a breach of contract ordinarily occurs upon the promisor's failure to render the promised performance. Therefore, to pinpoint the time of an alleged breach for purposes of the statute of limitations, it is necessary to establish what it was the defendant promised to do, or refrain from doing, and when its conduct diverged from that promise. Here the alleged promise, reduced to essentials, was that CSAA would permit plaintiffs to remain in its employ--and thus to draw whatever other emoluments might accompany such employment--under a relaxed sales quota. Stated another way, it was a promise not to fire them for failing to meet the full quotas, so long as they met the relaxed ones. This was in one sense a promise of forbearance, i.e., to refrain from terminating plaintiffs' employment based upon underproduction; in another sense it could be viewed as a promise to treat them as if they were meeting quota even though they were only meeting the adjusted quota.

CSAA did not breach this promise merely by announcing that it would no longer honor it. As plaintiffs correctly observe, such a repudiation may constitute an anticipatory breach, giving the aggrieved promisee the option of suing immediately. (3 Witkin, supra, Actions, § 527, pp. 674-675.) But it does not accelerate the accrual of a cause of action for limitations purposes; the promisee remains entitled to wait until performance is due and the promisor has failed to perform, i.e., to do the thing promised. (Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479, 489 (Romano); see p. 488 [" 'A cause of action for breach of contract does not accrue before the time of breach.' "]; Taylor v. Johnston (1975) 15 Cal.3d 130, 137 ["There can be no actual breach of a contract until the time specified therein for performance has arrived."].) Here CSAA could have no occasion to perform unless and until a qualifying agent's sales fell into the zone between the unadjusted quota and the reduced quota. Only then could CSAA be called upon to perform by honoring the latter, and only then could it breach the promise by failing to do so. Unless and until that occurred, defendant's renunciation of the promise was, at plaintiff's election, an "empty threat" to breach the contract. (Taylor v. v. Johnston, supra, 15 Cal.3d at p. 137.)

In this light, the earliest arguable breach suggested by this record was some time in 2002 when CSAA first counseled plaintiff McCoskey for failing to meet MPR's. Since Mellen and Luke apparently never fell below the unadjusted MPR's, no arguable breach appears as to them before 2005, when they were actually discharged. But even in McCaskey's case the earliest arguable breach occurred well within the four years preceding the filing of his complaint.

CSAA seeks to avoid this logic by depicting the mere adoption of the 2001 plan as injurious to plaintiffs. Thus it describes that act as having "eliminated the . . . right to the [quota] reduction." Similarly, it alludes to the " 'right' CSAA took away" and "the remov[al] [of] a benefit [plaintiffs] previously had." These characterizations are inaccurate to the extent they are relevant, and irrelevant to the extent they are accurate. A promisor does not "eliminate" or "take away" the promisee's rights merely by announcing that he will not perform his promise. The promisee still has his rights; the promisor's announcement merely gives him the choice between suing immediately to vindicate his rights, and waiting to see whether the promisor will redeem himself when the time for performance comes. The promisor's repudiation deprives the promisee of no right and subjects him to no obligation; it merely empowers him to declare the contract breached and to seek recompense in court. Unless he exercises that power, the repudiation does not constitute a breach of contract in the eyes of the law, and cannot commence the running of the statute of limitations.

This rule seems particularly apt here, where the four years preceding plaintiffs' discharges were marked by an uneasy truce, or stalemate, in which each side insisted on its view of the contract while neither was willing to force the issue to a head, except as McCaskey could be said to do so when he began to fall below the unadjusted quotas. When CSAA finally discharged him in flat violation of the policy, followed shortly by the discharge of Mellen and Luke for refusing to accede to its abolition, plaintiffs moved with alacrity to seek administrative and then judicial relief. To hold their claims barred would be to reduce the statute of limitations to a legally deadly game of maneuver rather than the protective rule of repose it is intended to be.

Similar reasoning establishes that the adoption of the 2001 plan, with its omission of the MPR reductions, inflicted no compensable harm on plaintiffs. As defendant concedes, the statute of limitations cannot ordinarily begin to run until "the plaintiff possesses a true cause of action," meaning that "events have developed to a point where the plaintiff is entitled to a legal remedy, not merely a symbolic judgment such as an award of nominal damages." (Marketing West, Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 614 (Marketing West).) Defendant offers no persuasive reason to suppose that this condition was satisfied here before plaintiffs were fired. The essential effect of the MPR reductions was to shield plaintiffs from being discharged so long as they met the reduced quotas. Had they sued over the mere repudiation of that shield, it is impossible to see how they could have shown any injury. They would still remain employed, and fully compensated, so long as they met the higher quotas applicable to all employees, as Mellen and Luke did, or still had an opportunity to do so, as McCaskey did under defendant's progressive counseling system. Therefore, CSAA's renunciation of the MPR reductions caused, and seemingly could cause, no remediable harm unless and until CSAA actually fired plaintiffs, or docked their pay, or otherwise inflicted an injury of a type that could translate into damages in an action for breach of contract. As it was, plaintiffs were fully compensated for their labors up to the day they were discharged, which was less than two years before they filed suit. Prior to that day there was no way of knowing when, or whether, defendant's renunciation of the policy would have any effect at all on their actual tenure or compensation. They might have continued to satisfy the unadjusted MPR's until they chose, or were forced by medical or other extrinsic necessity, to stop working entirely. In either event defendant's refusal to honor the MPR reductions would have proven harmless. For the same reason, they could not have fixed the proof of damages by voluntarily resigning.

CSAA cites Marketing West, supra, 6 Cal.App.4th 603, 614, for the proposition that the statute began to run when defendants presented plaintiffs with the 2001 plan modifications. To some extent this argument seems to overlap the contention, which we address below, that merely by continuing to work plaintiffs accepted the plan modifications, became bound by them, and thus suffered a legally cognizable injury if, as they insist, defendants had no right to impose them. The cited decision may indeed be understood to lend some weight to such a theory. The precise tenor of the plaintiffs' claims there is unclear, but they apparently alleged that the defendant employer had breached their employment contracts by discharging them without cause. The court held that their causes of action were barred, having accrued at an earlier time when the employer compelled the plaintiffs, under threat of firing, to sign a written agreement converting their employment relationship to one terminable at will. (Id. at pp. 608-609.) At this moment, said the court, the plaintiffs "were harmed by giving up their right to be terminated only for good cause." (Id. at p. 614.)

This analysis might be on point if plaintiffs here had signed the 2001 agreement and thereby acceded to the destruction of the promised rights. As it is, they explicitly refused to do so. Unless their rights were destroyed by some other means, they were preserved for another day. Nothing in Marketing West suggest that the attempted imposition of a superseding agreement starts the statute of limitations running on a claim for breach of the previous agreement.

Indeed the court's treatment of the later agreement points to a discrepancy in its reasoning. If the plaintiffs there had predicated their claims on the employer's forcing them to sign the intermediate agreement, then it might well be that their claims would have accrued when that agreement was signed. But from the court's somewhat vague account it appears that their claims sounded in wrongful discharge. By logical necessity, then, they rested on a claimed breach of a promise not to discharge them without good cause. The only suggestion of such a promise is in the earlier agreement, which the employer clearly meant the later agreement to supersede. Thus a claim predicated on the earlier agreement necessarily presupposed that the later agreement was ineffectual to have the intended effect. If that was the case, the later agreement inflicted no harm on the plaintiffs, compensable or otherwise, and could not possibly commence the running of the statute of limitations. If, on the other hand, that agreement injured the plaintiffs, as the court supposed, by destroying their erstwhile right not to be terminated without cause, then they had no claim based on that earlier right; the promise sued upon was no longer in effect, and therefore could not have been breached, when they were fired. From a limitations perspective, a cause of action based on that theory had never accrued, and could never accrue.

In short, the later agreement could not inflict the harm on which the court predicated its holding unless it rendered the original promise substantively unenforceable. But if it did that, a claim based on the original promise failed on the merits. The net result of the court's analysis, seemingly, was to beg the truly dispositive question, which is whether the later agreement actually did excuse the employer from complying with the earlier one. If it did, the plaintiffs had no claim. If it did not, they had a claim. The statute of limitations had no proper place in either alternative.*fn5

Even if we thought Marketing West were soundly reasoned, we would see no basis for extending it to the facts here, where plaintiffs never signed a superseding agreement. It is true that CSAA contends plaintiffs were bound by the terms of the 2001 plan whether they signed it or not, but that contention is most appropriately addressed as a defense on the merits. To the extent it becomes a necessary component of the limitations defense, it renders that defense is at best superfluous.

For purposes of the present analysis it must be supposed that defendant wrongfully repudiated its undertaking to permit qualifying employees to continue in its employ under a relaxed performance standard. To hold that this repudiation instantly gave rise to a cause of action, even though plaintiffs remained employed by defendant for most of the next four years and were fully compensated throughout that time in accordance with the contract--while making clear their refusal to accede to the attempted destruction of their rights--would unjustifiably penalize plaintiffs for giving defendant the opportunity to retract the repudiation if and when the issue of compliance actually arose. The statute of limitations is supposed to be a shield by which defendants are protected against stale claims, faded memories, and the nasty surprise of a long-dead grievance brought back to life. (See Davies v. Krasna (1975) 14 Cal.3d 502, 512.) It is not supposed to operate as a minefield on which meritorious claims are obliterated by technicalities. Nor is it a force of nature falling blindly on the diligent and indolent alike. It is an act of man, and as such, is supposed to reflect that faculty by which man distinguishes himself, when he does, from the rest of nature: his reason. To accept defendant's limitations defense here would dishonor that faculty.

C. Breach: Discharge in Violation of Promise to Honor Reduced Quotas

1. Introduction

Plaintiffs' chief claim of breach is that CSAA failed to perform a promise, which it held out to them continuously for some 28 years, to employ them, once they reached age 55 with 15 years in service, under a relaxed standard of job performance. It is undisputed that all three plaintiffs fulfilled the stated conditions before the promise was renounced, and by the time of their discharge had satisfied the conditions for a further reduction in quotas. None of them, however, was ever permitted to enjoy the reduced ...


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