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Nichols v. Mgmt. Co.

Dec 19, 2011
G043710 (Cal. Ct. App. Dec. 19, 2011)




KATHERINE NICHOLS, Plaintiff and Appellant, v. THE MANAGEMENT COMPANY, LLC, Defendant and Respondent.

The Armenta Law Firm and M. Cris Armenta for Plaintiff and Appellant. Quinn Emanuel Urquhart & Sullivan, Eric J. Emanuel, John M. Potter and Diane M. Doolittle for Defendant and Respondent.


California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Super. Ct. No. 30-2009-00118329)


Appeal from a judgment of the Superior Court of Orange County, Derek W. Hunt, Judge. Reversed and remanded.

The Armenta Law Firm and M. Cris Armenta for Plaintiff and Appellant.

Quinn Emanuel Urquhart & Sullivan, Eric J. Emanuel, John M. Potter and Diane M. Doolittle for Defendant and Respondent.

This is an appeal from a defense judgment in a termination-against-public-policy case. The plaintiff, Katherine Nichols, claimed that her employer, The Management Company (TMC), fired her for testifying before a federal grand jury investigating possible illegal drug use by Henry T. Nicholas, billionaire co-founder of Broadcom Corporation.

In this appeal Plaintiff Nichols claims the trial court erred in excluding certain items of relevant evidence. The two most dramatic items are: (1) evidence that TMC, acting at Nicholas's behest, may have offered a bribe to her attorney, and (2) evidence that Nichols was told by Nicholas's own head of security to stay away from Nicholas's house, which was the place of her employment. The trial judge also excluded (3) evidence of several specific instances in the aftermath of the grand jury testimony where Nicholas had acted unreasonably toward Nichols in the normal course of their working relationship.

We agree there was error. The evidence was relevant. Its exclusion was not harmless. The evidence (particularly items (2) and (3) above) would have helped Plaintiff prove that Nicholas had essentially tried to retaliate against Nichols by making her working conditions so intolerable that she would quit on her own. The jury was entitled to weigh those items in evaluating TMC's true motive for the discharge. Most important was the message from Nicholas's head of security. The jury was entitled to consider the possibility that the message effectively kept Nichols from showing up to work at the very place where she needed to be to do her job. Not showing up for work at Nicholas's house was the given reason for Nichols's eventual discharge by TMC.


The two main characters in this case are Katherine Nichols and Henry T. Nicholas. Henry T. Nicholas set up TMC to manage his domestic household. To avoid confusion from the close similarity of last names, we refer to Katherine Nichols as "Plaintiff and to Henry T. Nicholas as "Nicholas." We recognize the asymmetry, but we cannot call Nicholas the "Defendant." Technically, he is not the "defendant" as this case has reached us on appeal. Nor can we call him the "Employer," because Plaintiff's "employer" was TMC, though, of course, Nicholas controls TMC.

1. Plaintiff's Job Duties

TMC was created to manage Nicholas's household affairs. Plaintiff was hired as a part-time assistant in early 2007. She was promoted to full-time status in June 2007. Her precise duties as Nicholas's "personal assistant" are hard to characterize. She clearly acted as an assistant chief-of-domestic staff. She had power to hire and fire other employees. Her place of work was Nicholas's Newport Beach house, known as "Masters." She reported to the chief operating officer of TMC, Robert Magnuson. Magnuson's boss was Nicholas. Plaintiff supervised other personal assistants, including nannies and security guards. She was responsible for approving the time sheets of the employees she supervised. Having been a former human resources manager herself, she was involved in developing a new benefits package for TMC employees.

Plaintiff may also have performed more mundane duties. According to her own testimony, her duties included organizing Nicholas's cuff links, organizing his closet, and stocking his bedroom suite with his favorite beverages. She also testified she did a lot of shopping for him.

But Plaintiff was clearly more than a valet. She made $125,000 a year. She prepared benefit plans for other employees. She was required to insure compliance with workplace rules. Upon becoming a full-time employee she was, in theory, available round the clock.

2. The Grand Jury Investigation

Sometime prior to January 2008 Plaintiff was contacted by the FBI regarding an investigation into the allegations of possible illegal drug use by Nicholas. Plaintiff told her supervisor, Magnuson, about the contact. She requested TMC to provide her with a lawyer. Magnuson agreed. Attorney William Kopeny was hired by TMC to represent Plaintiff on a flat fee basis.

In January 2008 Plaintiff was subpoenaed to appear before a federal grand jury. She told Nicholas about it. Nicholas supplied a Towncar to travel to the grand jury room. Towncars were the "normal way that people who worked for Mr. Nicholas traveled." She testified. It was "scary." She was not allowed to have her attorney with her. She was just by herself.

Plaintiff's actual testimony was heard January 9, 2008. Later she told supervisor Magnuson she didn't believe anything she said "would have incriminated" Nicholas.

3. Events after Plaintiff's Testimony

The following evidence, concerning events after Plaintiff testified before the federal grand jury in January 2008, was heard by the jury:

After Plaintiff had testified to the grand jury, Plaintiff noticed a "big change" in Nicholas's attitude toward her. She "couldn't do anything right." Nicholas would "find things to just to call up and yell at [her] about."

-- One incident involved a search for a blanket that Nicholas wanted. When Nicholas called Plaintiff about the blanket, he was upset. Plaintiff testified: "He was screaming profanities at me, asking me why I couldn't 'F-ing blank' --" and, after an overruled objection, completed her sentence, " -- find a blanket." After searching, Plaintiff found the blanket and observed "balloons and medical clips" in it. That information came out in response to a question -- to which the trial judge overruled a relevance objection -- asking: "Did you obtain any information during the course of your search for that blanket that related directly to the kinds of questions that either the grand jury or the FBI was asking you?"

-- In a conversation at the end of February 2008, Nicholas indicated that he thought that Plaintiff "had gone to the FBI" on her "own accord" and that she was "giving them information" to try to "put him in jail."

-- In another late night conversation, Nicholas asked Plaintiff: "Do you expect that you would have gotten some sympathy or some special treatment for going to the grand jury."

-- In March 2008 Nicholas threw a birthday party for Plaintiff at the Ritz. Nicholas gave Plaintiff a Cartier watch. Plaintiff invited Nicholas's former girlfriend to the party. The former girlfriend's presence made things awkward for Nicholas's current girlfriend, who was also attending the party. The awkwardness was compounded by Plaintiff's behavior at the bar. As Nicholas's current girlfriend testified, Plaintiff was "drinking heavily with her friends." Plaintiff would "point and look over at me and laugh with all her friends, and it was embarrassing and hurtful." At the same party, Plaintiff was in the restroom when Nicholas's new girlfriend entered. Plaintiff announced: "The bitch is here."

-- Plaintiff normally reported to Master's for work on a "daily basis." However, in late March, she "stopped reporting to that location" because she was "scared." A "lot of things were going on." Plaintiff had received a phone call from Nicholas's head of security. The nature of the phone call, explaining precisely why Plaintiff stopped showing up for work, was excluded from the jury. We give more details below.

-- In early April 2008, Plaintiff's attorney sent a letter to TMC stating she wished to terminate her employment. The letter demanded one year's compensation and benefits as severance. TMC refused the demand.

-- In the period after April, Plaintiff's supervisor Magnuson called and told her that "we needed her back at work." Plaintiff, however, gave no indication that she wanted to come back. Magnuson raised the issue of firing her with Nicholas "periodically" in the period after late March. Nicholas's "reaction was to wait." He told Magnuson to "wait to work it out." Magnuson's decision to fire Plaintiff was also motivated by a letter that arrived in late April from her attorney. The letter proposed termination of employment "after she had not been working at the workplace for a number of months." The ultimate decision to fire her, however, came in June. At the same time several other TMC employees were also "let go" as part of a TMC efficiency move.

-- In all, Plaintiff gave three separate interviews with FBI personnel, in which she was asked about Nicholas's use of drugs. The last interview was on June 19, 2008. Plaintiff told one of Nicholas's aides about it. This was the same aide who would later figure in the excluded evidence concerning money offered to Plaintiff's attorney, discussed below. Four days after June 19 interview, Plaintiff received a packet of papers, including a letter terminating her employment.

4. The Litigation

a. the pleadings

In February 2009 Plaintiff filed this action against TMC, Nicholas, and Nicholas's girlfriend (the one humiliated at the party). Two causes of action are relevant to this appeal. The first is for tortious termination in violation of public policy. This cause of action alleged that Plaintiff's "testifying before the grand jury was a factor in the decision of TMC and Nicholas to terminate her." The complaint mentioned, in this regard, Labor Code section 230, subdivision (b), which precludes employers from retaliating "for taking time off to appear in court or comply with a subpoena or other court order as a witness in any judicial proceeding."

The second relevant cause was for failure to pay overtime compensation. The latter was based on the idea that Plaintiff was not an exempt "administrative, executive, or professional" employee under California regulations governing overtime compensation. (See Cal. Code Regs., tit. 8, § 11040, subd. 1(A).)

All causes of action against Nicholas personally were winnowed out in pretrial proceedings or otherwise withdrawn. All claims against Nicholas's current girlfriend were dismissed pursuant to a demurrer without leave to amend. The one issue concerning Nicholas personally that remains on appeal is whether the trial court should have allowed a third amended complaint asserting liability against Nicholas personally as Nichols's employer for overtime compensation.

b. the trial

The case went to jury trial. Trial was bifurcated. Part one was tried before the jury on the merits of Plaintiff's claim that she was terminated in violation of public policy. During this first part, the trial court excluded three major items of evidence proffered by Plaintiff:

i. a possible bribe

Plaintiff attempted to establish that TMC, via an agent sent from Nicholas, had tried to bribe the attorney hired to represent her in the federal grand jury proceedings. It is not clear from the record, though, what TMC actually wanted the attorney to do. We relate the record in detail:

After Plaintiff finished her testimony on direct examination, her attorney attempted to call attorney Kopeny, who had represented her in connection with the grand jury proceedings. Defense counsel objected to Kopeny's taking the stand, but did not specifically state an objection, except to allude to unspecified "rulings that the court made this morning."

In a sidebar conference, the trial judge turned to Plaintiff's counsel and said that defense counsel "wants you to make an offer of proof." Plaintiff's counsel told the court she hoped to establish that Kopeny had been offered $20,000 at a time when his fees had already been "paid in full," i.e., Kopeny perceived that he was the object of a bribe attempt so as to "influence" Plaintiff's "testimony" and "cooperation with the FBI." Defense counsel replied that the proposed evidence was an "extremely inflammatory collateral issue." The judge determined to put the "jury in the jury room" and do a "quick preview" of Kopeny's testimony.

Kopeny took the stand. As Kopeny related events, one of Nicholas's aides told him that "he was interested in seeing the relationship between my client and her employer not disintegrate." The aide asked "if there was something that I could do or that he could do to ensure" that the relationship "not disintegrate." Specifically, the aide "suggest[ed] that I write a letter to the attorneys for her employer regarding how the matter could be resolved amicably." Plaintiff's attorney did not, at that point, inquire into precisely what Kopeny meant by "the matter." Rather, Kopeny then related how he had been "fully paid" a "flat fee" for his services.

On the stand, Kopeny was asked the question of whether the proffered payment was a bribe. His exact words were that he "didn't reach that conclusion." Rather, he testified that he said to the aide: "well, my client is potentially adverse to her employer at this point," given the "purpose of my representation."

Kopeny then explained to the aide that "I thought it would be inappropriate for me to accept this," so he just said "'take it back and tell him that I didn't accept it.'" Kopeny then told the aide "not to be delivering money to lawyers without knowing why." A "third party looking at this could interpret this as being an attempt to influence someone who is adverse to Dr. Nicholas."

Kopeny's proposed testimony also included a story about an approach by the FBI: "The FBI approached me two or three times for further interviews with my client, with Ms. Nichols, and at some point in time it was my conclusion that the FBI really wanted her to be an undercover agent for them to go back to work and to keep her eyes and ears open and to ask certain kinds of questions." But Kopeny told the FBI, "she wasn't going to do that."

Along those lines, in other proffered testimony Kopeny added: "I think every lawyer that I spoke to who was associated with the defense camp [meaning Nicholas's defense vis-a-vis the federal investigation] was unsure whether or not my client felt that she had something incriminating or bad to say about her employer." But then he told the aide, "you know, that wasn't the case." Kopeny "made clear to Dr. Nicholas's lawyers that the plaintiff had nothing incriminating or bad to say about Dr. Nicholas."

At one point the trial judge turned to Kopeny and said: "The question is whether or not Ms. Nichols was wrongfully terminated by her employer as a retaliation for her having testified before the grand jury. Phrased that way, do you have any direct evidence one way or the other on that subject that you can confide to this court? I don't want opinion. I just want specific[s]. I saw it. I heard it. Something like that."

Kopeny then said "here's what I have" in response to the trial judge's request for "direct evidence" on the subject of whether Plaintiff "was wrongfully terminated by her employer as a retaliation for her having testified before the grand jury": At the end of January 2008 "a lawyer, I believe from Munger Tolles, was attempting to interview my client. It was clear to me that -- that they were going to interview her regardless of the fact that I was representing her, regardless of the fact that I had verbally instructed them not to talk to my client who was represented by a lawyer."

The trial judge then asked if Kopeny "understood that they represented Dr. Nicholas." Kopeny answered yes.

Kopeny then continued that he wrote a letter to Nicholas's attorneys "in fairly strong language" reiterating his instructions "not to try to interview my client." He added that "at some time later it was suggested to me that the employment relationship was breaking down and what was happening at the same time --."

At that point the trial judge stopped Kopeny and asked what he meant by "later time." Kopeny answered that approximately April 1 he "wrote a letter in response to a suggestion that I write a letter to an attorney whose name I was given to suggest a way to amicably end the employment relationship. And around that time . . . . [T]here were two things happening that I perceived." Kopeny then specified the two things:

"One was a desire to know what -- what, if anything, my client had told the grand jury, which I wasn't willing to tell anyone."

The second thing concerned another witness: "And there was another witness who was a Navy Seal who was, I believe, either in custody or was being threatened with contempt for not saying anything to the grand jury. And it was my understanding that Dr. Nicholas wanted my client to act as an intermediary."

The trial judge then interjected: "I don't want your understanding. I want the facts. This was speculation or you are engaging in logical conclusions, I can understand that, but I have a jury that I have to decide whether or not you have evidence for them."

Kopeny replied that what he had "in that regard is hearsay" from the aide who had come to his office. Plaintiff's attorney quickly mentioned that the aide was an "agent."

Defense counsel soon asked Kopeny if he actually believed he was "being bribed." Kopeny's precise answer was: "I didn't really reach any conclusion. I never --certainly never reached the conclusion that I was but something else was going on at that time that I -- that connected in my mind to that check." The nature of that "something else" was not followed up.

After Kopeny had finished his "preview" testimony, the judge ruled: "I asked Mr. Kopeny -- I told Mr. Kopeny what the issue was. I asked him if he had any direct evidence that would contribute to the conclusion that Ms. Nichols was fired because she testified before the grand jury. He said no, that it was hearsay. Everything that he had was hearsay, which is to say that what he has is indirect evidence."

The trial judge then digressed to the subject of future jury instructions concerning wrongful termination in violation of public policy. He mentioned the instruction that the violation of public need only be "a reason," not the "single reason" for the discharge. The trial judge then defined the issue he perceived before him this way: "So now the question becomes whether or not there is indirect evidence, circumstantial evidence, if you would, from which the jury could draw the inference that there was some motivating reason to which Mr. Kopeny drew the jury's attention from which they could infer that she was discharged because she testified before the grand jury." He then noted that under the "timeline" of the case, there was nothing to indicate that Plaintiff was threatened prior to her testimony.

The trial judge summed up his ruling: "This takes me to the timeline which we visit periodically throughout this trial. Question, did -- is there any information that Mr. Kopeny gives us from which a jury could infer that Ms. Nichols was threatened that she should not testify before the grand jury? My answer to that question is no."

The judge then asked, "Is there any indication that the incident with the check was an effort to influence the testimony of Ms. Nichols before the grand jury? Once again, the answer is no. It occurred two to three weeks after she had given the testimony." The judge stated "So what I'm concluding is . . . that it would be unfair to think that a jury could legitimately draw the conclusion that [Plaintiff's attorney] wants them to draw."

Then, after digressing about how the judge had "never been entirely successful in thinking the way a jury thinks" and had "never been entirely successful in thinking how certain justices of the Court of Appeals thinks [sic]," the judge announced: "And so my conclusion is I don't think that what Mr. Kopeny has testified to in the course of this voir dire is sufficiently pertinent to the issue in the case that it would make sense to let him do it in front of the jury unless, and I come back to Mr. Potter [defense counsel] because this is a big question . . . ."

At this point the judge turned to defense counsel, and asked him, "So the question is do you want to force me to make this decision on the question of indirect circumstantial evidence and have it in the record? It's your call. You know the way I'm going to rule."

Defense counsel wanted the judge to rule. Plaintiff's counsel spoke and argued that the bribery evidence "was part of an ongoing effort to influence her testimony and her cooperation with the FBI." But the trial judge immediately noted that "testimony with the FBI was really not the issue in the case."

After more discussion in which the trial judge defined the issue as "whether or not she got sacked from the job because of her testimony to the grand jury or possibly from the fact that she was suspected by Mr. Nicholas of working surreptitiously with the FBI," the judge finally ruled: "I'm going to rule in favor of Mr. Potter's motion to exclude Mr. Kopeny from talking in front of this jury along the subject matters that we've identified."

ii. the message from head of security

Plaintiff also attempted to establish that in March 2008, TMC, via its head of security, had telephoned her about the possibility her life was in danger if she continued to stay with Nicholas. The words of the message were: "What are you still doing there with that nut? Get out of there right now. Your life is in danger." The evidence was excluded. Again, we recount the details as they unfold in the reporter's transcript:

During her case-in-chief Plaintiff testified that "at some point" she stopped reporting" to Nicholas's house. She was asked why. "Because I was scared." She was asked why again. "A lot of things were going on. One night, when Nick and I had a conversation, I received a phone call from Otter, who was head of security that (References to "Otter" in the transcript appear to refer to Mr. Stephen Otten, whose nickname appears to be "Otter.")

At that point defense counsel made a hearsay objection.

The trial judge replied that "So far it's not."

But then the trial judge said (apparently speaking to the Plaintiff), "but if you're about to tell us the contents of the phone call it would be [hearsay]." So he asked, "Let's put some timeline on this, okay?"

Plaintiff's counsel then asked (without objection) a series of questions which established that the phone call from the head of security was at the beginning of March 2008. The call came while Plaintiff was talking to Nicholas at about 3 or half past 3 in the morning, and then she left. When asked why she left, Plaintiff started to explain that she received a phone call from the head of security "saying that he got a threatening phone call." At that point defense counsel made relevance and hearsay objections. The trial judge let "the testimony" stand, then said: "I'm going to be very interested in the next question. I'm going to possibly have a conversation about what your offer of proof is going to be."

Plaintiff's counsel then established that Otter, the head of security, was an ex-Navy Seal, and that he told Plaintiff "something that made [Plaintiff] do something." Specifically, what this ex-Navy Seal had told Plaintiff made her "Pick my backpack up and go get in my car." She went home.

Plaintiff's counsel then asked how she felt when she left. Her answer: "Scared." Then Plaintiff's counsel asked "What did Mr. Otten say on the telephone to you that made you leave?" Defense counsel made a hearsay objection.

At that point the trial judge asked for a sidebar conference. He asked for an offer of proof. It was: "'What are you still doing there with that nut? Get out of there right now. Your life is in danger.' Or words to that effect." The judge asked what "does this tell us about the issue at hand?"

Plaintiff's counsel's answer was that it showed "a constant pattern of retaliation between January --" At that point the judge cut Plaintiff off and launched into a disquisition. He began with the comment, "It doesn't sound like retaliation. It sounds like -- I mean, one might put a stretch or interpretation on that." Then he continued: "So far the one thing I haven't heard is, 'Did anybody tell you, anybody at the defendants, do not testify to the grand jury?' or 'Did anybody tell you don't testify to the grand jury or something bad will happen?' 'After you testified to the grand jury, did anybody tell you shouldn't have done that? Because your job is in jeopardy.' I mean, that's the kind of testimony that one would look for."

The trial judge continued on with the same theme: "Even if the testimony didn't come from the mouth of Mr. Nicholas, if somebody in his coterie were to have said to her, 'Boy, you put your foot in it. Your job is in jeopardy,' or you know, if there's something, then we would have a link here. But you know, just to start putting dots together, it's like drawing one of those pictures up in the planetarium, you know, by drawing lines between stars. I mean, you aren't -- "

Plaintiff's counsel broke in with the comment that defendants were "too sophisticated to say something as direct" as "that." The trial judge replied that if Plaintiff's "offer of proof is what you just said, without more, I'm not going to permit it to come into evidence."

Plaintiff's counsel returned to the point that the evidence was relevant to the reason Plaintiff had stopped showing up for work. The trial judge replied: "That's not the issue right now." Rather, the "issue right now is not whether or not she was fired" because "she testified about -- to the Grand Jury and that this was retaliation for her having testified to the Grand Jury." The judge finished up by saying he saw no "link" between what Plaintiff was told on the phone and the Grand Jury." He ruled, "without more, I'm not going to permit the answer to come in."

iii. specific instances showing Nicholas being unreasonable in his day-to-day working relationship with Plaintiff

Just prior to the attempt to offer evidence of the telephone call from head of security, the trial judge excluded as irrelevant a question trying to establish that on January 19 Nicholas had Plaintiff "up all night yelling about the electrical system in his limousine." In sustaining the objection, the trial judge said: "We're not going to get into the personal dynamics between the boss and the employee, unless it relates to the issue at hand, which is, 'Because you did this, you're losing your job.'"

Plaintiff also tried to testify that after late January (when she was reporting to Nicholas's house every day) she was required to be on-call 24 hours a day, even at a time when her daughter had swallowed a penny and needed medical attention. But the trial judge would not let her finish the story. The trial judge also excluded evidence about Plaintiff being berated for not attending the funeral of her supervisor Magnuson's father when she had been directed to host a birthday party for one of Nicholas's friend's 16-year old daughter that same night.

c. the verdict and appeal

In part one of the bifurcated trial, dealing with the wrongful termination claim, the jury returned a defense verdict. The jury found that plaintiff had not "proved by a preponderance of the evidence that her grand jury testimony was a motivating reason for defendant The Management Company to fire her."

In part two, the court heard the question of whether Plaintiff was exempt from requirements of overtime pay. The trial court ruled that TMC had proved its affirmative defense by a preponderance of the evidence that Plaintiff was exempt.


1. Exclusion of Relevant Evidence Not Harmless

In evaluating the proffered evidence of the possible bribe, the message from the head of security, and specific instances of Nicholas's change of attitude toward Plaintiff, the trial judge continually emphasized that he wanted nothing less than smoking-gun "direct evidence." As shown by his comments in regard to the telephone call from head of security, it appears the trial judge considered nothing that did not explicitly "link" up to the January 2008 grand jury proceedings to be relevant.

We conclude that the trial judge's focus was too narrow. The trial judge was incorrect in his limitation of evidence to only "direct" evidence linking the ultimate termination to Plaintiff's grand jury testimony. (See Colarossi v. Coty US Inc. (2002) 97 Cal.App.4th 1142, 1153 (Colarossi) ["Both direct and circumstantial evidence can be used to show an employer's intent to retaliate."].)

The trial judge limited the full nature of Plaintiff's retaliation claim. As framed in the second amended complaint, Plaintiff had engaged in the statutorily protected activity of obeying a federal subpoena. (See Lab. Code, § 230, subd. (b).) Retaliation for that activity would not have been just trying to influence Plaintiff's activity before testifying, but punishing Plaintiff for the very fact of honoring a federal subpoena, rather than, as Kopeny indicated a gung-ho ex-Navy Seal had done, defy the federal authorities and risk contempt and custody.

The complaint had alleged that the protected activity of honoring the federal grand jury subpoena was an impermissible factor in the "decision to terminate" Plaintiff. But the "decision to terminate" would necessarily include any efforts to force Plaintiff out of her job by making circumstances look as if she had left of her own volition. This would be "constructive discharge" or "constructive termination." Constructive termination occurs when an employer creates or knowingly permits working conditions so intolerable or aggravated that the employee quits on his or her own. (See Turner v. Anheuser-Busch, Inc. (1994) 7 Cal.4th 1238, 1244-1245 (Turner) ["Constructive discharge occurs when the employer's conduct effectively forces an employee to resign. Although the employee may say, 'I quit,' the employment relationship is actually severed involuntarily by the employer's acts, against the employee's will. As a result, a constructive discharge is legally regarded as a firing rather than a resignation."]; Jones v. Department of Corrections and Rehabilitation (2007) 152 Cal.App.4th 1367, 1381 [defining constructive termination in passing as the employer having "intentionally created or knowingly permitted working conditions so intolerable or aggravated that a reasonable employee in her position would have felt compelled to resign"].)

The telephone call from Nicholas's head of security was particularly relevant to support the contention that Nicholas was trying to force Plaintiff to resign on her own. In Turner our Supreme Court specifically noted that a crime of violence would readily constitute constructive termination. (See Turner, supra, 7 Cal.4th at p. 1247, fn. 3 ["In some circumstances, a single intolerable incident, such as a crime of violence against an employee by an employer, or an employer's ultimatum that an employee commit a crime, may constitute a constructive discharge. Such misconduct potentially could be found "aggravated.'"].)

The offer of proof was that Plaintiff received a phone call from Nicholas's own head of security who was an ex-Navy Seal. To be sure, the telephone call was susceptible to varied interpretations. (Perhaps the head of security, acting on his own, was simply afraid Nicholas might do something he would later regret?) But one interpretation was that the message was ultimately authorized by Nicholas himself to provide "cover" for Plaintiff's eventual, formal discharge. Since that possibility would tend to show constructive discharge, Plaintiff should have been allowed to introduce the evidence supporting it.

The excluded evidence concerning the marked post-testimony deterioration in the Plaintiff-Nicholas relationship further strengthens Plaintiff's evidence that Nicholas had begun a campaign of constructive termination in the aftermath of Plaintiff's grand jury testimony. There is no question that Plaintiff's job necessarily brought her into close, personal and often daily contact with Nicholas. It was the sort of job in which Nicholas could readily impose "intolerable" conditions. The trial judge excluded instances by which Plaintiff sought to establish the imposition of such conditions, whether by nitpicking imperfections in a limousine or not allowing time off to attend to a sick daughter.

To be sure, there is much substantial evidence supporting the conclusion that Nicholas was wholly supportive of Plaintiff's testifying. This evidence included providing a limousine for her ride to the grand jury room, paying for an independent lawyer to represent her interests in the grand jury proceedings, throwing a lavish party for Plaintiff's birthday and Magnuson's actually asking Plaintiff to come back to work at Master's. Moreover, substantial evidence readily supported TMC's and Nicholas's position that Plaintiff was terminated not for testifying to the federal grand jury, but for her own job performance. Such evidence included the disparagement of Nicholas's current girlfriend at the birthday party and the refusal to return to Master's after being asked.

But we cannot assume that the jury's calculus of Nicholas's motivations would not have been affected by the telephone call from head of security prompting Plaintiff to vacate the place of her employment, or by additional instances where Nicholas found Plaintiff could do nothing right. Plaintiff had the right to put on evidence that Nicholas's ostensible support of Plaintiff was in fact pretextual. (See Wilson v. Murillo (2008) 163 Cal.App.4th 1124, 1134.)

If Kopeny's proffered testimony showed anything, it was that Nicholas and his legal team were intensely interested in the contents of Plaintiff's testimony. But those lawyers could not be sure of what exactly Plaintiff had told to the federal grand jury. Kopeny's testimony showed that Nicholas's lawyers were not necessarily satisfied with assurances that it was non-incriminatory. In fact, Nicholas himself was indicted for drug-related offenses in early June 2008 (prior to Plaintiff's formal discharge), which would not have reassured him about the purportedly "non-incriminating" nature of Plaintiff's testimony.

Evidence Code section 210 defines relevant evidence this way: "'Relevant evidence' means evidence, including evidence relevant to the credibility of a witness or hearsay declarant, having any tendency in reason to prove or disprove any disputed fact that is of consequence to the determination of the action." The proffered evidence of the possible bribe, the telephone call telling Plaintiff to vacate Nicholas's house and deterioration in the personal relationship between Nicholas and Plaintiff all had a "tendency in reason" to demonstrate a campaign by TMC to make conditions sufficiently intolerable to force Plaintiff out of her job. Had the jury heard that evidence, the result might very well have been different. (O'Mary v. Mitsubishi Electronics America, Inc. (1997) 59 Cal.App.4th 563, 569, 576 [error in refusing evidence of manager's statement in age discrimination case that management wanted to get rid of managers over 40 and replace them with younger "more aggressive" managers was not harmless because it "might have easily made a difference"].)

The argument that Kopeny's testimony relayed inadmissible hearsay is not persuasive. The statements of the aide (a man named Uhler) would have constituted a party admission. (See Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. (1968) 69 Cal.2d 33, 36 [offer of proof that should have been accepted included admissions by adversary's agents].) Moreover, Kopeny certainly had personal knowledge of what FBI personnel had told him directly.

The argument that the evidence of the telephone call from head of security was inadmissible hearsay is a close one, but ultimately is unpersuasive. The jury was entitled to consider the possibility that the message had been a threat authorized by Nicholas himself, as distinct from a mere voluntary warning from a concerned head of security. As such it went indirectly to Plaintiff's state of mind in staying away from her place of employment.

Reversal of the defense judgment on the wrongful termination count and retrial in which the improperly excluded evidence is allowed will be necessary.

2. Other Issues

Because the case must be sent back for retrial, we are required to determine the remaining questions of law presented in this appeal which are necessary to a final determination of this action. (Code Civ. Proc., § 43.)

a. other excluded evidence

In cross-examination of Plaintiff's supervisor Magnuson, Plaintiff's attorney tried to establish that during the period of her absence from work, Nicholas himself was "largely unavailable." Apparently Nicholas had checked into the Betty Ford Center. The judge ruled the proposed evidence irrelevant. In that regard, the judge also ruled as irrelevant an attempt to show that during Nicholas's absence "several employees who were personal assistants were moved off site to work in a warehouse, inventorying items that came out" of Nicholas's house. This evidence was not sufficiently probative of any campaign of constructive termination to have required its admission under an abuse of discretion standard. (See Evid. Code, § 352.)

b. the overtime claim

Plaintiff asserts that she spent more than half her worktime engaged in duties that did not fall into the categories of "administrative, executive or professional." California Department of Industrial Relations regulations exempt employees who come within the categories of "administrative, executive or professional" from required overtime pay. (Cal. Code Regs., tit. 8, § 11040, subd. 1(A) ["Provisions of sections 3 through 12 shall not apply to persons employed in administrative, executive, or professional capacities."].)

The overtime issue is a simple matter of substantial evidence. Plaintiff shared an office with Magnuson, her direct supervisor. Magnuson testified that "menial tasks," such as "shopping for personal items" was not "consistent" with how he "saw her spending the majority of her time." When asked the question of "what percentage of time did she spend in performing" administrative duties such as "human resources functions," work "on employee benefits," insuring "compliance" with employment rules, "approv[ing] invoices" for the purchase and procurement of various items, he answered "conservatively 70 to 75 percent of her time," because that's what "she was hired to do."

While Plaintiff now asserts that Magnuson was not in a position to see how she spent her time, Magnuson's testimony that "We'd see each other throughout the day" and that the two had shared an office together wholly undercuts any idea that his evidence was insufficient to establish that she spent more than half her time on exempt duties. (See In re Marriage of Mix (1975) 14 Cal.3d 604, 614 [testimony of one credible witness enough to establish a point].) In any event, other evidence readily corroborated Magnuson's testimony. Plaintiff's own resume indicating she was responsible for the scheduling, management, hiring and firing of TMC employees.

Plaintiff's argument that the trial court excluded evidence of her work hours is based on an incorrect factual premise. What the trial judge excluded was not testimony about her hours as such, but testimony about notes she made "immediately after meeting with Nicholas." In fact, almost immediately thereafter she was allowed to testify about her basic hours. She testified that Nicholas "said that I would work, you know, 40 hours, like a normal week, if we didn't have the kids, and if we had the kids, I would probably work, you know, a little more."

c. belated proposed amendment to include Nicholas

Plaintiff further contends the trial court abused its discretion in denying her the opportunity to file a third amended complaint in which Nicholas himself would be responsible as her employer for the alleged wrongful termination and overtime claim. She implicitly admits, in her opening brief, that because the new complaint was proposed six weeks before trial, it was proposed too late, and obviously prejudicial to Nicholas, who would have had to prepare his own defense to her claims. She merely invites us to require the filing of a third amended complaint in the event of a retrial.

To be sure, retrial is necessary on the wrongful termination claim. But that retrial is independent of any alter ego claims against Nicholas personally. Prior to this appeal Plaintiff had plenty of opportunity to make the case that the corporate veil of TMC should be pierced. She did not take advantage of the opportunity. Allowance of an amendment now would be palpably prejudicial to Nicholas. He would be forced to prepare to defend a claim that might readily have been presented at the beginning, quite independent of the trial court's erroneous rulings on certain evidence. The trial court was within its discretion to refuse the belated amendment. We decline to order a contrary result in this appeal.


The judgment is reversed insofar as it provides that Plaintiff shall take nothing on her fourth cause of action for wrongful termination in violation of public policy. On that cause of action, the cause is remanded to the trial court for further proceedings not inconsistent with this opinion. In all other respects the judgment is affirmed.

In the interests of justice each of the parties shall bear its own costs on appeal.





Summaries of

Nichols v. Mgmt. Co.

Dec 19, 2011
G043710 (Cal. Ct. App. Dec. 19, 2011)
Case details for

Nichols v. Mgmt. Co.

Case Details

Full title:KATHERINE NICHOLS, Plaintiff and Appellant, v. THE MANAGEMENT COMPANY…


Date published: Dec 19, 2011


G043710 (Cal. Ct. App. Dec. 19, 2011)