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Alexander Lidow v. the Superior Court of Los Angeles County

May 23, 2012

ALEXANDER LIDOW, PETITIONER,
v.
THE SUPERIOR COURT OF LOS ANGELES COUNTY, RESPONDENT; INTERNATIONAL RECTIFIER CORP., REAL PARTY IN INTEREST.



ORIGINAL PROCEEDING. Petition for writ of mandate. William F. Highberger, Judge. (Los Angeles County Super. Ct. No. BC409749)

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

CERTIFIED FOR PARTIAL PUBLICATION*fn1

Petition granted.

The novel question presented in this case is whether, under a conflict of laws principle known as the internal affairs doctrine, California law or foreign law applies to a claim brought by an officer of a foreign corporation for wrongful termination in violation of public policy. We hold that under the circumstances alleged here, specifically where a foreign corporation has removed or constructively discharged a corporate officer in retaliation for that person's complaints of possible harmful or unethical activity, California law applies.

BACKGROUND

The parties do not dispute the following facts for the purposes of summary adjudication:

Petitioner, Alexander Lidow, has a Ph.D. in applied physics. Real party in interest, International Rectifier Corporation (IR) is incorporated in Delaware and based in El Segundo, California. IR is a semiconductor company founded by petitioner's father. Petitioner began working for IR in 1977 after graduating from Stanford University. Petitioner became a member of IR's Board of Directors (Board) in 1994, Co-Chief Executive Officer (CEO) in 1995, and sole CEO in 1999. At no point in time did petitioner have a written employment contract with IR. IR's bylaws provided at all relevant times that the corporation's officers (including the CEO) "shall be chosen annually by, and shall serve at the pleasure of, the Board, and shall hold their respective offices until their resignation, removal, or other disqualification from service[.]" Removal of an officer, according to IR's bylaws, may be "with or without cause, by the Board at any time[.]"

In early 2007, IR commenced an internal investigation after accounting irregularities surfaced at IR's subsidiary in Japan. In late August 2007, the Board placed petitioner on paid administrative leave. Prior to being placed on administrative leave, petitioner had not received any negative criticisms or negative reviews about his performance as CEO. Petitioner stepped down as CEO and Board member in October 2007 pursuant to a negotiated separation agreement entered into by petitioner and IR. Although the separation agreement did not include a release of liability for either party, it did specify that petitioner's resignation was "[a]t the Company's request," and that petitioner had signed the agreement "freely and voluntarily."

Approximately 18 months later, petitioner sued IR in superior court, alleging causes of action for: (1st) breach of contract; (2nd) wrongful termination in violation of public policy; (3rd) breach of employment contract; (4th) failure to pay outstanding wages at the time of termination (Lab. Code, §§ 201 & 203); (5th) failure to make personnel records available in a timely manner (Lab. Code, §§ 266 &1198.5); (6th) tortious interference; and (7th) unfair business practices (Bus. & Prof. Code, § 17200). After IR prevailed on several pleading motions, only petitioner's second, fourth, and fifth causes of action remained.

IR moved for summary adjudication of petitioner's cause of action for wrongful termination on three grounds: First, pursuant to the "internal affairs doctrine," Delaware law governed petitioner's wrongful termination claim. Under Delaware law, a CEO serves at the pleasure of the corporation's Board of Directors and is barred from bringing a wrongful termination claim (unless authorized by specific statutory enactments) as a matter of law. Second, to bring a claim for wrongful termination, a plaintiff must either be terminated or constructively discharged. Here, petitioner freely and voluntarily resigned as CEO. Third, even assuming IR had removed or constructively discharged petitioner, IR had legitimate, non-retaliatory reasons for doing so.

Petitioner opposed the motion for summary adjudication, arguing the following: First, the circumstances underlying his wrongful termination claim did not constitute an internal affair of the corporation, and thus California law (and not Delaware law) governed his claim. Second, petitioner had raised a triable issue of material fact as to whether he was constructively discharged. Third, petitioner had raised a triable issue of material fact as to whether IR had retaliated against him for complaints he raised about the treatment of Japanese employees during the investigation into the alleged accounting irregularities.

The superior court granted IR's motion for summary adjudication on the first ground raised by IR. It reasoned that pursuant to the internal affairs doctrine, Delaware law applied to petitioner's wrongful termination claim, and under Delaware law, petitioner "could be removed without the threat of litigation arising from a wrongful termination claim (except a claim based upon a subsequent statutory enactment such as one relating to discrimination of which there is no allegation or proof before this Court)." Petitioner timely filed the present petition for writ of mandate challenging the superior court's order. After considering IR's preliminary opposition to the petition, this court issued an alternative writ of mandate directing the superior court to set aside its order granting summary adjudication in favor of IR, or show cause why this court should not issue a peremptory writ of mandate ordering the superior court to do so. The superior court elected not to set aside its order. As a result, this court set the matter for argument and received a formal return from IR and reply from petitioner.

Based on our de novo review, we conclude the superior court erred by granting summary adjudication in favor of IR. Accordingly, we direct the superior court to vacate the order in question, and to enter a new order denying IR's motion for summary adjudication of petitioner's cause of action for wrongful termination in violation of public policy.

STANDARD OF REVIEW

The standard of review for an order granting or denying a motion for summary judgment or adjudication is de novo. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 860 (Aguilar).) The trial court's stated reasons for granting summary relief are not binding on the reviewing court, which reviews the trial court's ruling, not its rationale. (Kids' Universe v. In2Labs (2002) 95 Cal.App.4th 870, 878.)

A party moving for summary adjudication "bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law" on a particular cause of action. (Aguilar, supra, 25 Cal.4th at p. 850, fn. omitted.) "There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof." (Ibid, fn. omitted.) "A defendant bears the burden of persuasion that 'one or more elements of' the 'cause of action' in question 'cannot be established,' or that 'there is a complete defense' thereto. [Citation.]" (Ibid.)

DISCUSSION

I. Overview

In the published portion of this decision, we hold that a claim for wrongful termination of public policy brought by an officer of a foreign corporation falls outside the scope of the internal affairs doctrine, and thus is governed by California law.*fn2 In the unpublished portion of this ...

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