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Sami Mitri v. Walgreen Co.

October 27, 2011



(Doc. Nos. 102, 105)

Plaintiff Sami Mitri ("Mitri") alleged one cause of action against his former employer Defendant Walgreen Company, Inc. ("Walgreens") for state law wrongful termination in violation of public policy. A jury trial was held in August 2011. The jury returned a verdict in favor of Mitri. The jury awarded $88,000 in economic damages, $0 in non-economic damages, and $1.155 million in punitive damages. Pursuant to Rule 50(b), Walgreens now renews its request for judgment as a matter of law on the issues of liability and punitive damages. Pursuant to Rule 59(a), Mitri now moves for a new trial on the limited issue of non-economic damages. For the reasons that follow, Walgreens's motion will be denied as to liability, but granted as to punitive damages, and Mitri's motion will be denied.


Defendant's Argument

Walgreens argues that there is no legally sufficient evidence that supports liability. Scalzitti, Guillen, Murray, and Hasty testified without contradiction that they terminated Mitri for failing to follow a final written warning. Mitri did not establish that he had actually received permission to work beyond schedule on the dates identified on Scalzziti's list. Mitri also failed to establish the existence of any scheme by Scalzitti. Further, Mitri's "timing argument' is not persuasive because he was not subject to discipline when he complained about billing practices in June and October 2009. Further, two other employees were treated similarly to Mitri for working beyond schedule, and they had not complained about billing issues. Finally, other employees, like Lisa Warriner, raised concerns about "old fashioned IOU's" yet suffered no retaliation. The evidence presented at trial could lead to only one reasonable conclusion, and that is that Mitri's complaints were not a motivating reason for his termination.

Walgreens also argues that there is legally insufficient evidence to support the imposition of punitive damages. Walgreens contends inter alia that there is not clear and convincing evidence that Robert Hasty was a managing agent. Hasty testified that he has no authority to make formal policies that affect a substantial portion of Walgreens, and only 253 of Walgreens's 7,742 stores come within Hasty's authority. Punitive damages are only available against a corporate defendant for the actions of a corporate officer, director, or managing agent. Since the evidence failed to establish that Hasty was a managing agent, punitive damages are unavailable as a matter of law.

Plaintiff's Opposition

Mitri argues that there is sufficient evidence to support the jury's finding on the liability and punitive damages issues. With respect to liability, Mitri argues that Walgreens has inverted the standard for a Rule 50 motion and seeks the benefits of presumptions that rightfully belong to him. Further, several pieces of evidence support the conclusion that Walgreens unlawfully retaliated. Walgreens knew about the complaints of fraudulent billing, and shortly following the complaints, investigation and/or retaliatory conduct occurred. The evidence indicated that Scalzitti focused solely on Mitri, despite the de minimus periods of working "beyond shift," and in the absence any corroborating evidence that Mitri's store had gone over budget. Further, despite new complaints of billing fraud involving Scalzitti, Walgreens did not investigate or discipline Scalzitti, even though Walgreens's policies required such investigation. Further, Hasty, Guillen, Murray, and Scalzitti contradicted each other in numerous areas. Further, the investigation was done without obtaining any information from Mitri. Finally, Warinner told Mitri that it was not his job to report fraudulent billing to government agencies. Such evidence demonstrate a discriminatory/retaliatory motive.

With respect to punitive damages, Mitri argues inter alia that Hasty had extensive experience with Walgreens, and was one of twenty-nine market vice presidents. This position put Hasty four levels down from the head of Walgreens, and gave Hasty the ability to ultimately determine who would be a store manager in his region. Hasty's region included either all or portions of five states. As indicated by Murray, managers in the field had final authority to make employment decisions. Hasty described his duties in broad and vague terms, yet he had the clout to contact upper level employees in the compliance department about Mitri's complaints. It was after Hasty contacted compliance that the decision was made to send the pharmacists in Guillen's district to retraining. Hasty did not get instruction on every aspect of his job from his superiors, and could be involved in the selection of pharmacy managers "if he liked." Hasty also supervised and evaluated Guillen, and Guillen was Scalzitti's supervisor, and Scalzitti was Mitri's supervisor. Further, Hasty gave instructions to Mitri about how to comply with the final written warning, as if he had the authority to clarify or correct the instructions. Hasty also acknowledged that he was involved in the terminating conversations and approved of Mitri's termination. Additionally, despite corporate policy to the contrary, Hasty exercised his discretion by not initiating an investigation of Guillen or Scalzitti in 2009 when Mitri complained about Scalzitti. Thus, the testimony indicates that Hasty defined his own job duties, he could choose whether to be involved in employee discipline matters, and could give interpretations of final written warnings in the absence of subordinates. Hasty created a new corporate policy by allowing Guillen and Scalzitti to require Mitri to call before staying late. Despite this, there was no evidence presented by Walgreens that Hasty's discretion was in any way limited. See Opposition at 24-27.

Legal Standards

1. Rule 50(b)

After a jury has returned a verdict, Rule 50(b) permits a party to renew its prior Rule 50(a) motion for judgment as a matter of law. See Fed. R. Civ. P. 50(b); EEOC v. Go Daddy Software, Inc., 581 F.3d 951, 961 (9th Cir. 2009); Freund v. Nycomed Amersham, 347 F.3d 752, 761 (9th Cir. 2003). "A renewed motion for judgment as a matter of law is properly granted if the evidence, construed in the light most favorable to the nonmoving party, permits only one reasonable conclusion, and that conclusion is contrary to the jury's verdict." Harper v. City of L.A., 533 F.3d 1010, 1021 (9th Cir. 2008); see Winarto v. Toshiba Am. Elecs. Components, Inc., 274 F.3d 1276, 1283 (9th Cir. 2001). When considering a motion to set aside a jury verdict, the court should review all of the evidence in the record in the light most favorable to the non-moving party, and must draw all reasonable inferences in favor of the nonmoving party. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150-51 (2000); see Harper, 533 F.3d at 1021. However, "a reasonable inference cannot be supported by only threadbare conclusory statements instead of significant probative evidence," nor may a jury's conclusion be based on mere speculation. Lakeside-Scott v. Multnomah County, 556 F.3d 797, 802-03 (9th Cir. 2009). The court "may not make credibility determinations or weigh the evidence" and "must disregard all evidence favorable to the moving party that the jury is not required to believe." Reeves, 530 U.S. at 150-51; see Harper, 533 F.3d at 1021. "The court must accept the jury's credibility findings consistent with the verdict . . . [and] may not substitute its view of the evidence for that of the jury." Winarto, 274 F.3d at 1283. "A jury's verdict must be upheld if it is supported by substantial evidence, which is evidence adequate to support the jury's conclusion, even if it is also possible to draw a contrary conclusion." Harper, 533 F.3d at 1021. Finally, because a Rule 50(b) motion is a renewed motion, "a party cannot properly raise arguments in its post-trial motion for judgment as a matter of law under Rule 50(b) that it did not raise in its pre-verdict Rule 50(a) motion." Go Daddy, 581 F.3d at 961; Freund, 347 F.3d at 761.

2. California Civil Code § 3294 -- Punitive Damages

In non-contract cases, California law provides that a plaintiff may seek punitive damages "where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice." Cal. Civ. Code § 3294(a). A corporate employer may not be held liable for punitive damages arising from the acts of an employee unless "an officer, director, or managing agent of the corporation . . . 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." Id. at § 3294(b). Managing agents are "those corporate employees who exercise substantial independent authority and judgment in their corporate decision-making so that their decisions ultimately determine corporate policy." White v. Ultramar, Inc., 21 Cal.4th 563, 566-67 (1999). These are corporate policies that "affect a substantial portion of the company and that are the type likely to come to the attention of corporate leadership." Roby v. McKesson Corp., 47 Cal.4th 686, 714 (2009). "Corporate policies" are generally viewed as the "general principles which guide a corporation, or rules intended to be followed consistently over time in corporate operations." Cruz v. Homebase, 83 Cal.App.4th 160, 167 (2000). Whether "a supervisor is a managing agent within the meaning of Civil Code section 3294 does not necessarily hinge on their level in the corporate hierarchy." Muniz v. UPS, 731 F.Supp.2d 961, 976 (N.D. Cal. 2010); Myers v. Trendwest Resorts, Inc., 148 Cal.App.4th 1403, 1437 (2007); see White, 21 Cal.4th at 576-77. "Rather, the critical inquiry is the degree of discretion the employees possess in making decisions that will ultimately determine corporate policy." Muniz, 731 F.Supp.2d at 977; Myers, 148 Cal.App.4th at 1437. A plaintiff must demonstrate that an alleged managing agent exercises "substantial discretionary authority over significant aspects of a corporation's business." White, 21 Cal.4th at 577. Whether employees exercise sufficient authority is determined on a case-by-case basis. White, 21 Cal. 4th at 567. Finally, each requirement of Civil Code § 3294(b) must be established by "clear and convincing evidence," including an employee's status as a managing agent. Barton v. Alexander Hamilton Life Ins. Co. of Am., 110 Cal.App.4th 1640, 1643-44 (2003). "Clear and convincing evidence" is a higher evidentiary standard than "preponderance of the evidence." See Johnson & Johnson v. Superior Court, 192 Cal.App.4th 757, 762 (2011); People v. First Fed. Credit Corp., 104 Cal.App.4th 721, 732 (2002). To meet this standard, the evidence must indicate that something is "highly probable." See In re Agnelia P., 28 Cal.3d 908, 919 (1983). That is, the evidence must be "so clear as to leave no substantial doubt; sufficiently strong to command the unhesitating assent of every reasonable mind." Id.; Scott v. Phoenix Schools, Inc., 175 Cal.App.4th 702, 715 (2009).


A. Liability

The Court is not persuaded by Walgreens's arguments. There is circumstantial evidence that supports the jury's verdict on liability. For example, the timing of the discipline and termination, the failure to follow the progressive disciplinary system as written, the inclusion on Scalzitti's list of instances of working beyond schedule that were actually approved, the nature of the investigation against Mitri (including the failure to obtain his version), Mitri's complaints about Scalzitti, the failure of Scalzitti or Guillen to tell Oliveras (Mitri's store manager) about Mitri's need to obtain permission to stay "beyond schedule," and Mitri being told by Warriner that it was not his job to report fraud to the government, are all supportive of a liability finding. This evidence is significant, and is not "threadbare" or unduly speculative. Cf. Lakeside-Scott, 556 F.3d at 802-03. Further, Mitri argued that Walgreens's explanation for the termination was not believable partly because the amount of time that Mitri worked beyond schedule was de minimis, especially in light of the profits that Mitri generated on behalf of Walgreens. This is not an unreasonable view of the evidence.

The Court recognizes that Walgreens's position with respect to the above evidence is contrary to Mitri's position. However, not all of Walgreens's interpretations and positions are fully supported. Moreover, the jury was not required to believe any particular aspect of the defense theories or the defense evidence, including the express denials of wrong doing by Scalzitti, Guillen, Murray, and Hasty.*fn1 Cf. Guy v. City of San Diego, 608 F.3d 582, 588 (9th Cir. 2010). What Walgreens is doing is highlighting positions or evidence that it believes supports its theories, and, in essence, requests that its positions be believed and that all inferences be made in its favor. That is not the proper standard, and the Court will not weigh the strength of Walgreens's interpretation of the evidence. See Reeves, 530 U.S. at 150-51; Harper, 533 F.3d at 1021. Viewing the evidence in the light most favorable to Mitri, and making all reasonable inferences in his favor, there was sufficient evidence to support the jury's finding of liability. Reeves, 530 U.S. at 150-51; see Harper, 533 F.3d at 1021. Because the evidence does not clearly support only one reasonable conclusion, Walgreens's Rule 50(b) motion as to liability will be denied. See Harper, 533 F.3d at 1021.

B. Punitive Damages

In imposing punitive damages upon Walgreens, the jury determined that Robert Hasty was a managing agent.*fn2 The evidence presented to the jury regarding Hasty was his entire deposition and then live testimony during Walgreens's case in chief.

In relevant part, Hasty's deposition indicated that: (1) he is currently one of twenty-nine Market Vice Presidents; (2) his jurisdiction includes all of Utah and Idaho, central California from Redding to Visalia, Las Vegas, Nevada, and four stores in northwest Arizona; (3) he is not a director or officer of Walgreens; (4) he was previously an Operations Vice President; (5) he has worked for Walgreens for approximately 34 years; (6) he met with Mitri following Mitri's final written warning and gave Mitri guidance on how to behave in light of the final written warning; and (7) he participated in telephone conversations and collaborated in, and approved of/agreed to, the termination of Mitri. See Court's Docket Doc. No. 105-2.

Hasty's trial testimony contained the same information listed above. See id. at Doc. No. 105-3. In addition, Hasty explained that he is four levels down from the ultimate head of Walgreens.*fn3 See id. at 17:15-17. Hasty testified that he does not have the discretion to make decisions that ultimately determine corporate policy, he does not have the discretion to establish formal policies that are used company-wide, and he does not have the discretion to make formal policies that affect a substantial portion of Walgreens. See id. at 5:8-6:1. When asked to describe his job duties, Hasty testified: "My duties include focusing on improving sales, bottom-line profit, improve market share, and coaching and mentoring DM's*fn4 and store manager support." Id. at 4:20-24. Hasty testified that, "from time to time," he makes decisions without consulting his superiors. Id. at 18:16-21. As examples of the kinds of things he does without consulting his superiors, Hasty responded: "Day-to-day business activities, where I'm going to go, which market I'm going to work in, which district manager I'm working with, that kind of thing." Id. 19:1-7. Hasty explained that he mentored district managers in "day-to-day activities in their job and how they're performing and what I can do to help them improve." Id. at 19:16-23. Hasty testified that he is not involved in selecting district managers, he can be involved in selecting pharmacy managers but has not done so recently,*fn5 and he is the person who will ultimately determine who will be a store manager after his district managers bring names forward to him. See id. at 20:3-25. Hasty testified that he has no involvement in disciplining pharmacists. See id. at 21:2-8. Hasty confirmed that he is Robert Guillen's (who was Mitri's district manager) direct supervisor and that he does Guillen's performance reviews. See id. at 35:16-19. Additionally, Chris Murray testified that it was his understanding that Hasty had the ability to terminate employees within his (Hasty's) region. Finally, Hasty testified that if he became aware of a supervisor pressuring an employee to engage in fraudulent billing, then Walgreens's policies required that he contact employee relations and an investigation would be opened. See id. at 27:1-8.

To the Court's understanding, the above evidence is all the evidence that relates to Hasty's job duties, and is all that the parties have specifically cited to the Court on the issue of Hasty's job duties. Viewing this evidence in the light most favorable to Mitri, the Court cannot find that the above recited evidence is sufficient to show, by clear and convincing evidence, that Hasty is a "managing agent" of Walgreens.

It is true that Hasty is one of twenty-nine "market vice presidents," and this position is fourth from the top in Walgreens's corporate hierarchy. However, even though Hasty's title includes the term "vice president," an employee's job title does not necessarily determine an employee's status as a managing agent. See White, 21 Cal.4th at 566-67, 576-77; Myers, 148 Cal.App.4th at 1437. Hasty's title allows him to hire store managers and to be involved in the hiring of pharmacy managers if he chooses. Hasty also has the ability to terminate employees within his region. However, the mere ability to hire and fire does not turn an employee into a managing agent. See White, 21 Cal.4th at 566-67. Hasty's title also allows him to mentor district managers, but it does not give him the authority to hire the district managers whom he mentors. The district managers are hired instead by the five corporate operations vice presidents who are over Hasty.*fn6 The inability to hire district managers, who are under Hasty in the corporate hierarchy, indicates that Hasty's position does not give him complete authority within his "jurisdiction" or region.

The critical inquiry in determining if an employee is a managing agent is whether that employee has the ability to determine corporate policy for a substantial portion of the corporation. See Roby, 47 Cal. 4th at 714; White, 21 Cal.4th at 576; Myers, 148 Cal.App.4th at 1437. Hasty indicated that his duties focused generally on mentoring and what may be termed in shorthand as "profitability." It is unknown exactly how Hasty focused on profitability and mentoring within his region. When asked to describe the activities that he does without consulting his superiors, Hasty did not give examples that indicated an ability to set policies within his jurisdiction. Instead, the examples were more along the lines of which particular district or district manager he would visit or review that day. Further, Hasty's response to the hypothetical question about a supervisor who required improper billing practices indicated that Hasty was to follow Walgreens policy and contact employee relations. Hasty's response did not indicate that he determined policy.*fn7 Finally, there was no testimony or evidence that Hasty actually had the ability to originate new practices that were to be followed within his region. That is, there was no evidence that Hasty's decisions ultimately set the general principles which guide the corporation, or set the rules intended to be followed consistently over time in corporate operations. See White, 21 Cal.4th at 566-67; Cruz, 83 Cal.App.4th at 187. To the contrary, Hasty testified without contradiction that he had neither the ability to set company wide policies, nor the ability to set policies that affected a substantial portion of Walgreens. Thus, there is no evidence (either to the Court's knowledge or that has been cited by the parties) that shows Hasty had the ability to set or determine any policies, whether they affected a substantial portion of Walgreens or not.*fn8

Mitri had the burden of establishing by clear and convincing evidence that Hasty was a managing agent of Walgreens. See Barton, 110 Cal.App.4th at 1643-44. The evidence presented does not do so because it does not sufficiently address or establish Hasty's ability to actually set corporate policy. See Muniz, 731 F.Supp.2d at 976-77; Gelfo v. Lockheed Martin Corp., 140 Cal.App.4th 34, 63 (2006); Barton, 110 Cal.App.4th at 1643-44; Cruz, 83 Cal.App.4th at 167-68; Kelly-Zurian v. Wohl Shoe Co., 22 Cal.App.4th 397, 421-22 (1994). The evidence does not reasonably support the conclusion that Hasty was a "managing agent" as defined by White and Roby, and the jury's ...

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