Equal Employment Opportunity Commission v. Farmer Brothers Company, Defendant-Appellant-Cross-Appellee v. Diana Estrada, Plaintiff-Intervenor-Appellee-Cross-Appellant
Docket: 92-56012
Court: Court of Appeals for the Ninth Circuit; August 3, 1994; Federal Appellate Court
Farmer Brothers Company was found liable for intentional gender discrimination against Diana Estrada, violating Title VII and the California Fair Employment and Housing Act (FEHA). The district court awarded Estrada $83,343.48 in backpay and $833,434.80 in punitive damages. Farmer Bros. appealed the decision, while Estrada cross-appealed. The Ninth Circuit affirmed the district court's ruling on all claims except for the calculation of Estrada's lost health and life insurance benefits, which was reversed and remanded for further proceedings.
Estrada began working at Farmer Bros. in January 1980 as a machine operator, receiving positive evaluations and having no attendance issues. In June 1982, after being transferred to the Coffee Department, she was laid off as part of a plan initiated by President Roy F. Farmer to reduce the percentage of women in production jobs. This plan involved laying off 21 employees (10 men and 11 women) and did not include recalling any employees or hiring new ones during the nine-month recall period. Once this period expired, the company hired only men to fill the vacancies, despite the collective bargaining agreement that protected laid-off employees' rights. Male employees were allowed to retain their positions by bumping less senior workers, a practice not available to any women. The last layoff occurred on September 17, 1982.
Farmer Bros. justified layoffs by citing financial difficulties, yet it experienced significant financial growth during the layoff period and increased employee overtime to meet rising production demands afterward. Shortly after the expiration of laid-off employees' recall rights, Farmer Bros. advertised for five production jobs and subsequently hired 16 male applicants, including two previously laid off. Estrada applied for a machine operator position but was misled by the personnel manager, Beverly Stillson, who claimed there were no openings. Despite her application being filed, Estrada was never contacted, and a male with no prior experience was hired instead. From September 1983 to February 1988, Farmer Bros. hired 64 production employees, with only one being female. Stillson admitted to screening out women for machine operator roles and expressed discontent about the lack of female hires. Estrada filed a Charge of Discrimination with the California Department of Fair Employment and Housing (DFEH) in September 1983. Her claim was forwarded to the EEOC, which allowed her to pursue a civil suit under the Fair Employment and Housing Act (FEHA). The EEOC concluded its investigation and filed a class action in February 1988, alleging discrimination against former female employees, including Estrada. Estrada intervened in this lawsuit and subsequently amended her complaint to include FEHA claims. A consent decree was approved in September 1990, requiring Farmer Bros. to implement measures to prevent gender discrimination and to compensate the affected female employees. However, the district court found that Estrada failed to mitigate her damages after September 1985 and granted partial summary judgment for Farmer Bros. A bench trial on liability revealed substantial evidence of gender discrimination in the layoffs, as indicated by testimonies from decision-makers involved in Estrada's termination.
James Alger, a former employee of Farmer Bros., provided credible testimony indicating that President Farmer expressed a commitment to prevent women from returning to work, stating he would "spend every last dime" to ensure that only men would be hired for production roles. Vice-President Roy E. Farmer acknowledged the company’s low employment of women and advised President Farmer to consider women equally to men. Another Vice-President, Bennett, admitted he would not consider women for various production jobs due to perceived physical limitations. The district court found pervasive sexist attitudes among management and determined that the reasons given by Farmer Bros. for laying off and terminating Estrada and her colleagues were pretextual, primarily based on gender. Notably, Farmer Bros. had its most significant growth year during the layoffs and failed to substantiate claims regarding Estrada's attendance impacting her employment status. Although the company maintained a written anti-discrimination policy, it lacked effective enforcement mechanisms. The court ruled Farmer Bros. liable for intentional gender discrimination under Title VII and the FEHA, leading to a final judgment in favor of Estrada.
In the damages phase, Farmer Bros. contested the district court's decision to allow Estrada to present sexual harassment testimony from former employees while limiting the company's rebuttal evidence. Estrada's witnesses described incidents of harassment by supervisor Lesser, while the court restricted additional testimonies. In rebuttal, Lesser and other defense witnesses denied the harassment allegations, but the court upheld objections limiting the extent of this rebuttal evidence.
The district court's admission of testimony regarding Lesser's sexual harassment is deemed relevant to Estrada's gender discrimination claim, countering Farmer Bros.' assertion that such evidence is irrelevant. According to Rule 401 of the Federal Rules of Evidence, relevant evidence can affect the probability of a consequential fact in the case. The testimony about sexual harassment and disparaging remarks about women could make it more plausible that Estrada's termination was related to her gender. Various motivations behind sexual harassment are acknowledged; it can stem from a desire to exert power or from gender-based hostility. The distinction between harassment motivated by sexual desire and that motivated by animus towards women is critical, as both can inform claims of gender discrimination. Relevant case law supports the notion that sexual harassment reflects underlying hostility towards women and can be indicative of discriminatory practices in employment. The factfinder must evaluate the evidence to determine the intent behind the harassment and its relevance to the discrimination claim.
Evidentiary errors related to the admission of testimonies from Ellis and Alger are deemed harmless in this case, as their influence on the bench trial's outcome is considered negligible. The district court explicitly stated that it would have reached the same conclusion regarding Lesser's sexist views based solely on Lesser's testimony. Additionally, the introduction of rebuttal evidence by Farmer Bros. effectively reduced any potential bias from the contested testimonies. Although the evidence regarding Lesser's behavior was somewhat peripheral, the overwhelming direct evidence of Farmer Bros.' discriminatory practices confirmed the motivation behind their actions.
Regarding Estrada's discriminatory layoff claim, Farmer Bros. argued that the district court lacked jurisdiction because Estrada did not include this claim in her EEOC charges. However, to establish federal jurisdiction, a claimant must exhaust EEOC remedies, which can include claims that fall within the scope of the EEOC's investigation. The district court's jurisdictional determination is reviewed de novo, with a liberal interpretation of the EEOC charge. Contrary to Farmer Bros.' claims, Estrada did include her layoff allegation in her EEOC charge, and even if it were not explicitly stated, the district court reasonably related this claim to her other allegations of discrimination, confirming that Estrada had exhausted her administrative remedies.
Estrada contends that Farmer Bros. intentionally designed a layoff strategy to reduce the number of women employed by planning to lay off equal numbers of men and women, not rehiring anyone during a nine-month recall period, and subsequently hiring only men. This strategy was deemed discriminatory, as it effectively lowered the percentage of women in the workforce without overtly showing gender bias. The district court found that Estrada's layoff was integral to her claims of gender discrimination, thus affirming its jurisdiction over these claims.
Under Title VII, the court concluded that Farmer Bros. had intentionally discriminated against Estrada based on her gender, referencing key legal precedents—Price Waterhouse v. Hopkins and McDonnell Douglas Corp. v. Green. Farmer Bros. argued that its failure to recall an equal number of men and women invalidated the district court's findings. However, the court determined that Estrada successfully demonstrated that the layoffs and the decision not to rehire her were part of a deliberate plan to diminish female employment, which Farmer Bros. could not refute.
The court emphasized that the appearance of gender neutrality in Farmer Bros.'s employment decisions does not absolve the company from liability under Title VII, which seeks to eliminate actual discriminatory practices rather than merely their appearance. Thus, the evidence supported that Farmer Bros.'s actions constituted gender discrimination, despite their claims of neutrality.
Farmer Bros. argued that Estrada did not demonstrate the availability of machine operator positions when she reapplied for a job. However, the district court found multiple machine operator openings were filled during the six-month period Estrada's application was active. Testimony from Farmer Bros.'s personnel manager indicated that Estrada and other women were not considered for these positions. Additionally, after Estrada's application was rejected, a completely inexperienced male was hired for the role. Consequently, the court affirmed that Farmer Bros.'s actions regarding Estrada's layoff, failure to recall, and failure to rehire were gender-based discrimination, making the company liable under Title VII.
Farmer Bros. also raised an "after-acquired evidence" defense on appeal, claiming Estrada should be denied relief due to misrepresentations in her job application. Specifically, they alleged she falsely stated she graduated high school and misrepresented her reason for leaving her previous job. While Farmer Bros. did not use this evidence to justify Estrada's termination, they argued it should absolve them from damages if proven. The court, however, did not address this defense because Farmer Bros. failed to preserve it for appeal. The record showed that efforts to introduce a witness related to Estrada's prior employment were aimed at impeaching her credibility, not raising the after-acquired evidence defense. The defense was not included in proposed findings or any motions, and the court concluded that Farmer Bros. did not properly raise the issue, which requires factual development. Thus, the court declined to consider it for the first time on appeal.
Holding after-acquired evidence of misrepresentations in a job application should not prevent a successful plaintiff from recovering damages, as established in Massey v. Trump's Castle Hotel and Casino. The court argued that while such evidence may affect an employee's reinstatement and front pay rights, it does not absolve a defendant from liability for employment discrimination or from paying other damages. The ruling aims to balance employer and employee interests fairly, with case-specific evaluations determining forfeiture of remedies besides damages. For instance, it would be unreasonable to deny reinstatement to a long-serving employee over past exaggerations in their job application, whereas a doctor without a medical degree would not be reinstated, regardless of the circumstances of their discharge.
Regarding damages, Farmer Bros. challenged the district court's calculation of Estrada's lost health insurance benefits, asserting that the wrong legal standard was applied. The proper measure, according to Galindo v. Stoody Co., is actual expenses incurred by the employee, as lost insurance is not a monetary benefit unless replaced or expenses are incurred. This standard may disadvantage those unable to afford premiums post-termination, but the court must adhere to Ninth Circuit precedent, thus remanding for recalculation based on Estrada's out-of-pocket costs while affirming her other fringe benefits and back pay.
On punitive damages, the district court awarded Estrada $833,434.80 under the Fair Employment and Housing Act (FEHA) and Title VII. Farmer Bros. contested the FEHA claim as untimely and argued that the 1991 Civil Rights Act should not retroactively apply to Title VII punitive damages.
The Supreme Court has determined that Section 102 of the 1991 Civil Rights Act does not apply retroactively, necessitating a review of whether Estrada's FEHA claim was time-barred. Under California Government Code Section 12965(b), a claimant may bring a civil action within one year of receiving a right-to-sue letter, which Estrada received on October 7, 1983. Estrada's FEHA claim was added in December 1989 but related back to her original complaint filed on June 7, 1988, making it more than four years after the right-to-sue letter. Despite this, the district court ruled that the claim was not time-barred because the statute of limitations was tolled during the EEOC's investigation, a position supported by the precedent set in Salgado v. Atlantic Richfield Co. The court stated it is bound by Ninth Circuit precedent, rejecting Farmer Bros.’s argument against Salgado.
The court affirmed the district court's ruling that Estrada's FEHA claim was not time-barred and that punitive damages were warranted. The applicability of the $300,000 punitive damages cap under the 1991 Act was deemed unnecessary to address, given the retroactivity ruling. Farmer Bros. challenged the punitive damages award of $833,434.80, arguing it was excessive. The review of punitive damages must maintain a reasonable relationship to compensatory damages, with Farmer Bros. citing a trend to limit punitive damages to no more than four times the compensatory amount in substantial cases, following the Supreme Court's decision in Pacific Mutual Life Insurance Co. v. Haslip.
Farmer Bros. incorrectly interprets Bouman, which states that a two-to-one ratio of compensatory to punitive damages is reasonable, as a limitation on damages awards. The Bouman court clarified that it was rejecting the notion that such an award was excessive and did not endorse any fixed ratio for punitive damages under California law. It referenced the Supreme Court's Haslip decision, which indicated that a strict mathematical ratio for punitive damages is inappropriate. Farmer Bros. also misrepresents Las Palmas, citing a four-to-one ratio, while the actual compensatory damages were lower than claimed, and the court recognized a 7.9 to 1 ratio as reasonable. The argument that punitive damages should be capped at four times compensatory damages for substantial awards, while allowing higher ratios for lower awards, is rejected. Such a position contradicts the principle that compensatory damages are a relevant measure for punitive damages. Punitive damages aim to punish and deter, with considerations including the severity of misconduct, the injury inflicted, and the financial condition of the defendant being critical to determining appropriate awards under California law.
The excerpt addresses the criteria for awarding punitive damages, emphasizing that these damages should serve to punish and deter the defendant without being restricted to a specific ratio relative to compensatory damages. It asserts that the determination of punitive damages must consider the defendant's reprehensibility and any mitigating factors, with the court finding that Estrada provided clear and convincing evidence of Farmer Bros.'s fraudulent and malicious conduct in her discrimination case. Consequently, the court's decision to award punitive damages equivalent to ten times Estrada's backpay, representing 0.05% of Farmer Bros.'s net worth, is affirmed.
Regarding reinstatement, Farmer Bros. argues that the district court made an error by ordering Estrada's reinstatement without addressing its objections, including concerns about after-acquired evidence of her alleged application fraud, the implications for current employees, and existing hostility. Estrada contends that Farmer Bros. waived its right to contest reinstatement by not challenging the district court's initial order. The district court clarified that its earlier ruling on March 10, 1992, was not final and that reinstatement would be deferred until after the damages phase of the trial, with a stay in place until any appeals were resolved. On April 27, 1992, Farmer Bros. submitted a memorandum addressing remaining damage issues, arguing that Estrada must demonstrate her capability to perform the duties of a machine operator to be reinstated.
On August 14, 1992, Farmer Bros. voluntarily withdrew its defense regarding Estrada's physical capability to perform as a machine operator, thereby eliminating its only objection to her reinstatement. Throughout the damages phase of the trial, Farmer Bros. did not raise the issue of Estrada's reinstatement or any objections related to it, including in a post-judgment motion. This indicates that Farmer Bros. had multiple opportunities to contest reinstatement but chose not to do so, leading to a waiver of the issue.
Additionally, Farmer Bros. failed to provide evidence supporting its claim that it would have been futile to challenge the district court's ruling on Estrada's reinstatement. Initially, Farmer Bros. did challenge the reinstatement but withdrew its objection before the court could rule on it. The argument that the grounds for appeal were futile is undermined by the fact that they did not persist with their initial challenge.
In Estrada's cross-appeal, she argues that the district court improperly granted partial summary judgment to Farmer Bros. regarding her failure to mitigate damages post-September 1985. The court reviews such judgments de novo, affirming only if no genuine issue of material fact exists. Farmer Bros. needed to demonstrate that equivalent jobs were available and that Estrada did not diligently seek employment. The record shows that Farmer Bros. successfully proved there were comparable jobs accessible between 1985 and 1990, as evidenced by the employment success of two fellow laid-off workers and statistical data from 148 nearby companies.
Moreover, Estrada's job search effectively ceased after September 1985, and while a cessation may sometimes be warranted, her decision lacked justification based on the evidence that alternative employment opportunities were not hopeless. Farmer Bros. established that Estrada could have continued her search for work.
The plaintiff's decision to cease searching for substantially equivalent employment is deemed unreasonable, distinguishing this case from precedents where plaintiffs were found to act reasonably in similar circumstances. Notable cases include Nord v. U.S. Steel Corp., where stopping a hopeless job search to assist a spouse was justified, and Brady v. Thurston Motor Lines, where accepting lesser employment while attending school was considered reasonable. In contrast, Estrada's complete abandonment of her job search fails to meet the expected standards for mitigating damages. The district court's ruling that Farmer Bros. intentionally excluded women from its workforce is upheld, affirming liability under Title VII and the FEHA, which demand more than mere appearances of equality. The judgment is confirmed except for the calculation of Estrada's lost health and life insurance benefits, which is reversed and remanded for further proceedings. Costs are awarded to Estrada. Additionally, while Judge Brunetti concurs with the overall opinion, he dissents from the merits discussion regarding the after-acquired evidence defense, criticizing the limited treatment of this complex issue as inappropriate for the case. Testimonies highlight a hostile work environment, including sexual harassment and discrimination against women, further supporting the court's findings against Farmer Bros.
Exhaustion of administrative remedies in employment discrimination cases is addressed through various precedents. In Gibbs v. Pierce County Law Enforcement Support, the court ruled that plaintiffs satisfied exhaustion requirements even if their EEOC charge did not explicitly include all claims, as those claims would likely fall within a "reasonably thorough investigation." Similarly, Serpe v. Four-Phase Systems, Inc. established that the district court retains jurisdiction over claims not stated in the EEOC charge if they are reasonably expected to arise from it. Oubichon v. North American Rockwell Corp. further supported that judicial complaints can include discrimination claims related to the original EEOC charge.
Farmer Bros. failed to request a finding of fact regarding allegations of application fraud, arguing that the district court had deemed such fraud irrelevant to Estrada's discrimination claim. However, the court found this argument unpersuasive, stating that Farmer Bros. needed to present its defense in a timely manner to preserve it for appeal. This ruling implies that all claims must be brought before the district court to avoid bypassing appellate review.
The excerpt also references the upcoming Supreme Court decision on the after-acquired evidence defense in McKennon v. Nashville Banner Publishing Co. Lastly, it discusses the calculation of lost insurance benefits as based on employer contributions to a union fund, and notes the remand in Bouman for the district court to articulate reasons for punitive damages, with the court acknowledging a precedent supporting a high punitive to compensatory damages ratio without mandating a specific ratio. Estrada's challenge to the timeliness of Farmer Bros.'s supplemental evidence was rendered moot by the court's affirmation of the summary judgment based on properly submitted evidence.
