Posted on September 26, 2008 by Aaron Morris

Deviant Employees Protected from Termination

As you know, Megan's Law set up a website that lists registered sex offenders.  Before extending an offer of employment, one might think that checking that website would be a quick way to make sure a sex offender is not being hired, especially if the job involves contact with children.  One would be wrong.

California is an at-will employment state, meaning that employers can terminate employees for any reason or no reason at all. Although there are statutory exceptions prohibiting employers from taking adverse employment action on the basis of race, gender, and other protected groups, a loophole in Megan’s Law serves to make sex offenders a protected group giving them rights that other employees do not have.

Sex offenders are filing claims for wrongful termination, utilizing Megan’s Law as the legal grounds to secure and retain employment. The Megan’s Law Statute, set forth in California Penal Code Section 290.46, states that a person is authorized to use information disclosed pursuant to the statute -- that a person is a registered sex offender --  "only to protect a person at risk."  California Penal Code § 290.46(1).  The statute specifically "prohibits, except as authorized to protect a person at risk or pursuant to another provision of law, the use of any information that is disclosed through the statute for purposed related to any of the following:

(A) Health insurance.
(B) Insurance.
(C) Loans.
(D) Credit.
(E) Employment.
(F) Education, scholarships, or fellowships.
(G) Housing or accommodations.
(H) Benefits, privileges, or services provided by any business
establishment.  (California Penal Code § 290.46(2)(A-H).

In other words, California employers may not discriminate in employment of an employee on the basis of his or her status as a registered sex offender, if such status is discovered through the Megan’s Law website, unless it is to protect a person at risk or pursuant to some other provision of law.  One such provision of law is Labor Code section 432.7, which addresses what questions an employer can ask an employment applicant.  Labor Code section 432.7 allows an employer to ask and use the fact of a "conviction" in determining any condition of employment; however, legal practice guides have interpreted it to apply only to hiring.  As such, California employers may discriminate in "hiring" sex offenders if that information comes from a questions about convictions.  However, if the employer fails to ask whether the applicant has any convictions, and later discovers through the Megan’s law website that its employee is a registered sex offender, the employer is liable for wrongful termination if it terminates the sex offender employee based on that information.

This serves to put the employer in an unenviable position: it may be held liable for the sex offender employee’s negligent conduct (for instance, if the sex offender employee physically abuses a co-worker) or face a claim by the sex offender employee for wrongful termination if it fires said employee.

Further, it is nonsensical that an employer can learn this information through other sources (i.e. public records search) and legally terminate the employee on that basis, yet is liable if obtained on the Megan’s Law website.  I suppose an employment attorney could suggest to clients that they check the Megan website to see if the employee is listed as a sex offender, and if so, then find the same information from some other source so the termination or rejection would not be based on what was found on the Megan site.  But that would circumvent the absurd result intended by our fine Legislature that sex offenders receive special protections, and I would never suggest such a thing.

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Posted on September 20, 2008 by Aaron Morris

Employer Loses Communication Privilege if ill-will is Shown

California Civil Code Section 47 affords certain privileges that protect a person from liability, even if he speaks or writes something that would otherwise be defamatory. Civil Code section 47, subdivision (c), provides that a communication is privileged if it is made "without malice, to a person interested therein, (1) by one who is also interested...." Trial courts, anxious to clear their dockets, sometimes read far too much into this simple statute, and find a privilege in cases the statute was never intended to cover.

In Mamou v. Trendwest Resorts, Inc., an employee brought action against his employer, alleging national origin discrimination, retaliation, and defamation. The Superior Court, Santa Clara County, granted Trendwest’s motion for summary adjudication, and employee appealed.

The defamation claim was based on Mamou’s assertion that Trendwest had told other employees that he was starting his own competing business, and had used Trendwest information for that purpose. This would be both illegal and unethical, and therefore qualifies as defamation. However, the trial court found that the communications were covered by Section 47, and on that basis granted Trendwest’s motion for summary judgment, thereby dismissing Mamou’s case.

Application of the Section 47 privilege, as with any conditional privilege in defamation law, involves a two-step inquiry. The first question is whether the factual predicate for the privilege was present-whether, in traditional terms, the "occasion" was "privileged." (Taus v. Loftus.)  At trial the defendant bears the burden of proof on this question.  If he succeeds, the burden shifts to the plaintiff to show that the statement was made with malice.

For purposes of a statutory qualified privilege, "[t]he malice referred to ... is actual malice or malice in fact, that is, a state of mind arising from hatred or ill will, evidencing a willingness to vex, annoy or injure another person.  The factual issue is whether the publication was so motivated.  ‘Thus the privilege is lost if the publication is motivated by hatred or ill will toward plaintiff, or by any cause other than the desire to protect the interest for the protection of which the privilege is given’." (Agarwal v. Johnson.)

The Court of Appeal found that a jury could easily find that the statements by Trendwest personnel were motivated by ill will towards plaintiff.  Mamou alleged that one was hostile toward him as a member of the "Syrian regime" some members of Trendwest management had, inferentially, undertaken to purge.  A jury would be entitled to find that these feelings would naturally engender spite and ill will toward Mamou, and that this was what motivated Trendwest personnel to make the statements Mamou claimed were defamatory.

This was just one example, but the Court of Appeal concluded that it was enough for Mamou to show evidence of a single triable issue of fact. Since he obviously did, the trial court erred by granting summary judgment on the defamation cause of action.

The analysis is somewhat circular, and sometimes escapes trial courts. Inter-office communications about an employee may well be privileged under Section 47. Say, for example, an employer believes that an employee stole from the company, and fires the employee on that basis.  Thereafter, when asked why the employee was fired, the employer tells other employees that he had stolen from he company. If the employee sues for defamation, and can prove that he never stole from the company, would he prevail?  Probably not, because in this hypothetical the employer genuinely believed that the employee was guilty.  With no showing of malice, the Section 47 privilege applies.

But where the situation gets more complicated is when the employee is claiming that the defamation itself is the evidence of the ill-will constituting malice. If in our hypothetical there was no basis for the employer to believe that plaintiff was responsible for the theft, then telling that story may be sufficient showing of malice. This is a distinction that is sometimes difficult to get through to the trial court.

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Posted on September 20, 2008 by Aaron Morris

Defamation and On-Line Reviews

A Strategic Lawsuit Against Public Participation ("SLAPP") is a lawsuit or a threat of lawsuit that is intended to intimidate and silence critics by burdening them with the cost of a legal defense until they abandon their criticism or opposition. Winning the lawsuit is not necessarily the intent of the person filing the SLAPP. The plaintiff's goals are accomplished if the defendant succumbs to fear, intimidation, mounting legal costs or simple exhaustion and abandons the criticism. A SLAPP may also intimidate others from participating in the debate.

To guard against the use of lawsuits designed to quash free speech, California passed an anti-SLAPP statute. Code of Civil Procedure Section 425.16 provides a quick procedure a defendant can use to stop a SLAPP suit. Rather than goes through a year of costly litigation, a defendant can bring a simple motion to strike the complaint. The court then decides whether the speech in question is protected free speech. Claims stemming from these acts are subject to a special motion to strike unless the trial court determines that the plaintiff has demonstrated a probability of prevailing on the merits. (§ 425.16, subd. (b)(1).)

Section 425.16 applies to causes of action "against a person arising from any act of that person in furtherance of the person's right of petition or free speech under the United States or California Constitution in connection with a public issue." (§ 425.16, subd. (b)(1).) Such acts include: "(1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law; (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law; (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest; (4) or any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest." ( Id., subd. (e).)

But note that the section requires a "public issue." Many parties and judges forget this element, as illustrated by the recent, unreported decision, European Spa, Inc. v. Kerber, decided by the First District Court of Appeal on August 28, 2008.

In European Spa, a Yahoo.com user posted a review of the Spa, which stated: "My first impression was its tacky décor. Then I encountered an extremely rude European gentlemen, I believe this is the owner. From what I could see, the employees are miserable and tired. When I went into the steam room I saw mildew and brown spots on the walls.... I could not even sit in there. I went for my massage, and that was ok. But the room had a strange smell and the blankets were dingy. It was also very cold. I guess the owner does not put on the heat. There is just too much to go on about. I will never go there again, and I will make sure I will tell as many people as I can about the horrible experience that I had."

Another review, posted on Yelp.com, stated: "One star is even too much for this place. First of all, when I walked in there it looked like selling a whole bunch of useless things you'll wind up selling at a garage sale. The service was horrible. I had this creepy old European man helping me and he was just outright rude. The guy was acting as if he was doing me a favor by letting me come to his spa.... And what was with the 18 percent service charge? ? ? It's questionable that the therapists or the providers ever receive it. My massage was ok and that was the only highlight of this.... And their sauna and steam room ... was really disgusting. Their lounge are was just full of tacky decorations as what I've heard they've been around for a long time, and I really don't understand why.... I would never come back and much would rather go to the spa at my gym."

The owners of the spa were convinced that these posts came from a former employee that had started her own competing spa, not from customers. (As it turned out they were right, but they suspected the wrong employee.) They sued the former employee, who brought an anti-SLAPP motion, claiming that whether or not she was the person who had made the posts, they were protected free speech.

Resolving the merits of an anti-SLAPP motion requires a two-part analysis, concentrating initially on whether the challenged cause of action arises from protected activity within the meaning of the statute and, if so, proceeding next to whether the plaintiff can establish a probability of prevailing on the merits. (Overstock.Com, Inc. v. Gradient Analytics, Inc. (2007) 151 Cal.App.4th 688, 699.)

Several years ago the court in Rivero v. American Federation of State, County and Municipal Employees, AFL-CIO (2003) 105 Cal.App.4th 913, 924 (Rivero) made inroads into articulating the boundaries of what constitutes a "public issue" or issue of "public interest" as those terms are used in section 425.16, subdivision (e). Surveying the pertinent case law, the Rivero court identified three categories of statements that fit the bill: (1) the subject of the statement concerned a person or entity in the public eye; (2) the statement or activity involved conduct that could directly affect large numbers of people beyond the direct participants; or (3) the statement or activity concerned a topic of widespread public interest.

The court in Weinberg v. Feisel (2003) 110 Cal.App.4th 1122, 1132 also addressed the issue, delineating some attributes of an issue which would render it one of public, rather than merely private, interest: "First, ‘public interest’ does not equate with mere curiosity. Second, a matter of public interest should be something of concern to a substantial number of people. Thus, a matter of concern to the speaker and a relative small, specific audience is not a matter of public interest. Third, there should be some degree of closeness between the challenged statements and the asserted public interest; the assertion of a broad and amorphous public interest is not sufficient. Fourth, the focus of the speaker's conduct should be the public interest rather than a mere effort ‘to gather ammunition for another round of [private] controversy....’ Finally, ... [a] person cannot turn otherwise private information into a matter of public interest simply by communicating it to a large number of persons."

In European Spa, the court concluded defendant was wrong in concluding that reviews posted on the Internet are subject to an anti-SLAPP motion, because they did not meet the"public interest" element. The reviews did not connect with or encourage any larger discussion or public debate of general societal or consumer issues related to the spa industry. For example in Gilbert v. Sykes (2007) 147 Cal.App.4th 13, a patient/consumer created a Web site that related the consumer's experiences with plastic surgery performed by a prominent, widely known plastic surgeon, as well as information and advice for those considering plastic surgery. As the reviewing court explained, these statements concerned a matter of public interest within the meaning of section 425.16. The assertions that a high profile surgeon produced nightmare results that prompted extensive revision surgery contributed toward public discussion about the risks and benefits of plastic surgery in general. Equally important, the Web site was not limited to attacking the plastic surgeon, but contained advice, information and other features, including tips on choosing a plastic surgeon, that contributed to the general debate over the pros and cons of undertaking cosmetic surgery. (Gilbert v. Sykes, supra, at pp. 23-24.) The (fraudulent) spa reviews did not rise to that level, and the trial court denied the anti-SLAPP motion on that basis.

The same week, the Second District Court of Appeal came to a different conclusion in the unpublished decision of Kim v. IAC/InterActive Corp. There, a review about a dentist was posted on Citysearch, which read:

"Don't go there-worse dentist in Glendale

I do not recommend Dr. Kim. I randomly selected him as my dentist but after my initial visit, I was very discouraged. He made it very clear that he did not like HMO patients (which I was). His attitude towards me was poor as if I was a second-class citizen. I waited 5 weeks to schedule an initial visit, and he made me wait another 6 weeks to schedule my first cleaning. "Because you're an HMO patient, we cannot schedule you at convenient times." He is also understaffed. His receptionist doubles as his dental assistant. She was quite unprofessional and made comments about my age and marital status when I turned in my patient information card. All in all, DO NOT use this dentist!"

The dentist filed a complaint and subpoenaed the records from Citysearch, and then filed an action against the poster, Citysearch.com and other defendants. The defendants filed an anti-SLAPP motion, which the trial court granted based entirely on the fact that the dentist was unlikely to prevail in his action.

The result was correct, but the reasoning was flawed. The statement did not cross the line into defamation or trade libel, and the action against Citysearch.com would never have survived under the Communications Decency Act, which shields Websites from liability for information posted by others. But the court never considered whether the post was a matter of public interest.

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Posted on September 12, 2008 by Aaron Morris

Maine Court First to Find that Print-On-Demand Publisher Cannot be Liable for Defamation

When is a publisher not a publisher? When it is a copy machine. Confused? Consider the following case.

In Sandler v. Calcagni, a defamation action was filed in the federal district court in Maine over a book that was printed and distributed by BookSurge, a print-on-demand service owned by Amazon.com. In case you are not yet familiar with these services, they are “publishers” that permit anyone to upload a tome and have it made into a book. The author can buy copies of his own book to sell or distribute, and in the case of BookSurge and others, the book will be added to Amazon’s catalog of available books. If someone comes across the author’s book, it can be ordered, printed and shipped.

In the Sandler case, a dispute arose among some high school students and one of the parents came up with the creative idea of publishing a book in order to tell her side of the story. The target of her vitriol responded by suing her for defamation, along with BookSurge as the publisher of the book. With traditional books, the publisher can be held liable for defamatory content, because it is presumed that the publisher reviewed and edited the book and therefore had the opportunity to make certain the author could back up the claims. But can that model be applied to a print-on-demand service that never sees the material?

In Sandler, the court said no. The court correctly concluded that print-on-demand publishers are really no different than electronic copy machines. The author uploads the text to BookSurge’s servers, and whenever someone wants a copy they can cause the book to be printed. Since the “publisher” has nothing to do with the content of the book, the court found that it could not be held responsible for the defamatory content

This is just one case, and it is not controlling on other states, but I predict every state will reach the same conclusion. If the publisher is merely acting as a copy machine, it makes no more sense to hold it liable than you would hold Microsoft or Adobe liable for providing the publishing tools.

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Posted on September 7, 2008 by Aaron Morris

Employment Agreements Can Limit Time for Action

By law, an employee has one year to file an action with the Department of Fair Employment and Housing (DFEH) if he is claiming discrimination.  But what if an employment agreement contains an arbitration provision, and that agreement also provides that the notice of arbitration must be served within one year?  Is that provision invalid since it could interfere with State law?

That was the issue presented in Pearson Dental Supplies, Inc. v Superior Court (Turcios). Plaintiff signed an arbitration agreement, but when he felt he was the victim of age discrimination, he filed a complaint with the DFEH.  After the DFEH closed the file and issued the "right-to-sue letter," the plaintiff filed an action in Superior Court.  Defendant employer argued that the case was barred by the arbitration provision, and since plaintiff had failed to make the arbitration claim within one year, he had waived any right to sue.

The Court of Appeal agreed, and ruled that under these specific facts the employee's age discrimination claim was barred for failing to make a demand for arbitration.

Moral of the story?  If your company has decided to utilize arbitration agreements, be sure to insert a deadline for filing such claims.  Your company is best served by speed in employment claims, as opposed to trying to justify an employment decision years later.  An employee has a year to file a claim with the DFEH, which typically takes nine months to investigate the claim and issue a right-to-sue letter (if the employee has not retained counsel and asked for the right-to-sue letter to be fast tracked).  Then, the employee has another year to file the action in court.  All told, almost three years can pass before the action is filed in court.  By inserting a time limitation in your arbitration  agreement, you can be assured such cases will present themselves for decision within one year.

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Posted on September 7, 2008 by Aaron Morris

The Supremes Open Small Window to Arbitration Appeals

The very purpose of contractual arbitration is to avoid the courts.  Therefore, the courts have long held that there is no right of appeal from an arbitrator's award; any decision is final and binding.  The only exceptions are where the arbitrator clearly exceeds his authority or had a conflict of interest.  In the recent decision of Cable Connections, Inc. v. DirecTV, Inc., the California Supreme Court applied a contract interpretation that recognizes one more basis for appeal from an arbitrator's award.  The courts have refused to honor appeal rights in arbitration agreements that call for the right of appeal on the merits of the case.

In Cable Connections, the agreement between the parties provided for binding arbitration, but contained the unusual language that "the arbitrators shall not have the power to commit errors of law or legal reasoning, and the award my be vacated or corrected on appeal to a court of competent jurisdiction for any such error."  Thus, the agreement does not permit a review on the merits, but does allow for an appeal to question the arbitrator's interpretation of the law.

The Supreme Court had no problem with that approach, and even went so far as to state that the language of the arbitration agreement would not need to be as clear as the one before it to confer such a right of appeal on the law.

You may be asking yourself, why would anyone want to proceed in this manner?  After all, if the point of arbitration is to avoid court, why build in a right of appeal?  The answer is that binding arbitration without the right of appeal can be very scary, and some want to plot a middle course.

In one case my client agreed to submit a case we were pursing in court to non-binding arbitration.  We went before the arbitrator, and after the matter was concluded and the parties were leaving, the arbitrator asked the defendant if my client had ever made certain disclosures.  The defendant lied and denied that she had received such disclosures.  I objected to this impromptu questioning and asked the arbitrator to resume the arbitration so that my client could testify on the point he had raised.  The arbitrator responded that would not be necessary, because defendant had never raised the disclosure issue, and therefore his decision would have nothing to do with what defendant had just said.

A few weeks later we received the arbitrator's decision, wherein he found for defendant based entirely on the alleged lack of disclosure.  Since this was non-binding, I simply rejected the award and proceeded to trial, where we handily prevailed.  This case showed me, however, how arbitrary an arbitrator's award can be, and why binding arbitration can be risky. 

Large companies have also learned this lesson, and reason that if they throw in an opening for appeal, it is more likely to inure to the company's benefit than the other side's.  Even if it means the occasional appeal, at least the issues will be limited to the law.  A major motivation for large companies in selecting arbitration is to keep cases away emotional juries, and that is accomplished even with an appeal provision.

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