Equal Employment Opportunity Commission v. Farmer Bros.
Docket: Nos. 92-56012, 92-56123
Court: Court of Appeals for the Ninth Circuit; August 3, 1994; Federal Appellate Court
The district court found Farmer Brothers liable for intentional gender discrimination against Diana Estrada, violating Title VII and the California Fair Employment and Housing Act (FEHA). Estrada was awarded $83,343.48 in backpay and $833,434.80 in punitive damages. Farmer Bros. appealed, and Estrada cross-appealed. The appeals court affirmed the district court's decision 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 her employment in January 1980 as an unskilled machine operator, receiving positive feedback from her supervisors and no disciplinary actions. In June 1982, she was laid off as part of a plan by President Roy F. Farmer to reduce the percentage of women in production roles, circumventing a collective bargaining agreement that protected laid-off employees' seniority and recall rights for nine months. During this period, no one was recalled, and no new employees were hired. Once the nine-month period expired, Farmer Bros. began hiring only men to fill the vacancies. Notably, male employees were allowed to "bump" less senior employees to retain their jobs, while no women had the same opportunity despite having more seniority. The layoffs were ostensibly justified by financial difficulties, despite the company experiencing significant financial growth during that time.
Farmer Bros. increased employee overtime following layoffs to meet heightened production demands. Shortly after the expiration of recall rights for laid-off employees in July 1983, the company announced five job openings, ultimately hiring 16 male applicants by the end of the year, including two previously laid-off men. Estrada applied for a machine operator position in August 1983 but was misled by personnel manager Beverly Stillson, who claimed there were no openings, despite subsequently hiring an inexperienced male for the role. Between September 1983 and February 1988, Farmer Bros. hired 64 production employees—63 men and 1 woman—with all 43 machine operator positions filled by men. Stillson admitted to screening out female applicants starting in 1983 and expressed discontent with the lack of female hires to a colleague.
On September 23, 1983, Estrada filed a Charge of Discrimination with the California Department of Fair Employment and Housing (DFEH), which forwarded her claim to the EEOC under a work-sharing agreement, informing her of her right to file a civil suit under the Fair Employment and Housing Act (FEHA) within one year. The EEOC concluded its investigation in August 1987 and initiated a class action in February 1988, alleging discrimination against over thirty former female employees, including Estrada. Estrada intervened in the EEOC lawsuit in June 1988 and later amended her complaint to include gender discrimination claims under the FEHA, which the court approved.
The EEOC lawsuit was settled on September 17, 1990, resulting in a consent decree requiring Farmer Bros. to implement measures to eliminate gender discrimination and pay $126,152 to the plaintiff class. However, the district court found that Estrada failed to mitigate damages after September 1985 and granted partial summary judgment in favor of Farmer Bros. In July 1991, the court bifurcated the liability and damages phases of the action, with Farmer Bros. opting for a bench trial. After an eleven-day trial, the court concluded that there was substantial evidence of gender discrimination motivating the layoffs of Estrada and her female coworkers.
The court's conclusion regarding Estrada's layoff was significantly influenced by the testimonies of officers and managers involved in the decision. James Alger, a former employee, provided credible evidence that supervisor Ward reported President Farmer's intent to prevent the rehiring of women, asserting that only men would be hired for production roles. Vice-President Roy E. Farmer noted the low number of women employed and advised his father that the company needed to treat women equally in hiring practices. Another Vice-President, Bennett, expressed his belief that women lacked the physical capability for various jobs, reflecting widespread sexist attitudes among management. The court determined that Farmer Bros.' justifications for the layoffs were pretextual, citing record growth during the layoffs and concluding that Estrada's gender was the sole reason for not rehiring her. The company failed to demonstrate that Estrada would have been dismissed due to attendance issues. Despite having a non-discrimination policy, Farmer Bros. lacked enforcement mechanisms. The court ruled Farmer Bros. liable for intentional gender discrimination under Title VII and FEHA, with the damages phase commencing on May 4, 1992, and a final judgment in favor of Estrada on July 20, 1992.
In terms of sexual harassment evidence, Farmer Bros. claimed reversible error for allowing Estrada to present testimony about harassment by Lesser while limiting their rebuttal evidence. The district court's evidentiary rulings were reviewed for abuse of discretion and affirmed. Estrada's witnesses, including Joyce Ellis and James Alger, testified about Lesser's offensive behavior and comments towards female employees. Estrada sought to introduce further evidence of harassment but was restricted by the court to the testimonies of Ellis and Alger.
Lesser was permitted to counter the sexual harassment allegations against him during his testimony. The defense, represented by Cummings, denied that Lesser had engaged in inappropriate touching. However, the district court upheld Estrada’s objection when Farmer Bros. attempted to introduce further testimony from Cummings regarding her lack of observation of other harassment incidents. Additionally, the court did not allow Bobby Southern's proffered testimony, which also aimed to assert that she had not witnessed any sexual harassment by Lesser. Farmer Bros. contended that the testimonies of Ellis and Alger regarding Lesser's sexual harassment should have been excluded, arguing that such evidence is irrelevant to a gender discrimination claim and that its emotional weight rendered its admission harmful. The court rejected this assertion, clarifying that sexual harassment can indeed be relevant to gender discrimination claims under Rule 401 of the Federal Rules of Evidence, which allows for evidence that could make the existence of a fact more or less probable. The document explains that sexual harassment may stem from various motives, including the desire to exert power over an employee, which can create a hostile work environment. The distinction between harassment motivated by sexual desire and that driven by gender hostility is highlighted, supported by case law establishing that both forms can be actionable in discrimination claims. Overall, evidence of sexual harassment often serves as relevant context in assessing gender-based employment discrimination.
The finder of fact must evaluate whether the employer's or supervisor's conduct indicative of sexual harassment demonstrates intent to discriminate against women in employment decisions, contingent upon access to relevant evidence. Any potential evidentiary error regarding the testimony of Ellis and Alger is deemed harmless; the disputed testimony could not have influenced the verdict. In bench trials, the risk of unfair influence from irrelevant evidence is significantly lower compared to jury trials. The district court did not rely on Ellis' testimony and concluded, based solely on Lesser's testimony, that he held sexist views about women employees. Allowing rebuttal evidence minimized potential prejudice against Farmer Bros. Evidence of Lesser’s behavior was deemed tangential, while overwhelming evidence of Farmer Bros.'s discriminatory practices clearly established motivation and outcome.
Regarding Estrada’s discriminatory layoff claim, Farmer Bros. argued that the district court lacked jurisdiction due to Estrada not including the claim in her EEOC and DFEH filings. To establish federal jurisdiction, exhaustion of EEOC remedies is required, as outlined in Sosa v. Hiraoka. The court can assert jurisdiction if the layoff claim aligns with the scope of the EEOC investigation. The district court's determination that Estrada had exhausted her administrative remedies was reviewed de novo. Under Ninth Circuit law, EEOC charges are interpreted liberally. Estrada’s claim was found to be included in her EEOC charge, or, if not explicitly stated, was related sufficiently to her other claims to confer jurisdiction.
Estrada alleges that Farmer Bros. intentionally laid off an equal number of men and women, did not rehire anyone during the nine-month recall period, and subsequently hired only men, effectively reducing the percentage of women employees while maintaining an appearance of gender neutrality. This layoff was integral to Estrada's claim of discriminatory failure to recall or rehire, which was adequately communicated to Farmer Bros. through the EEOC charge. The district court concluded that Farmer Bros. intentionally discriminated against Estrada based on gender, referencing legal standards from *Price Waterhouse v. Hopkins* and *McDonnell Douglas Corp. v. Green*. Farmer Bros. argued that its failure to recall an equivalent number of men and women negated liability, but the court found this reasoning flawed. It determined that Farmer Bros. had a deliberate plan to reduce women employees while appearing neutral, and Estrada successfully proved that the layoffs and subsequent hiring decisions were part of this scheme. The court dismissed Farmer Bros.' claim that it maintained gender neutrality, asserting that Title VII aims to eliminate actual discriminatory practices, not just their appearance. Additionally, Farmer Bros. contended that no machine operator positions were available when Estrada reapplied; however, the court found evidence that several such positions were filled during her application period, and that Farmer Bros. did not consider Estrada or any other women for these roles.
The district court determined that Farmer Bros. acted against Estrada based on her gender when it rejected her job application, laid her off, and failed to rehire her, thereby holding Farmer Bros. liable under Title VII. On appeal, Farmer Bros. introduced an after-acquired evidence defense, claiming Estrada misrepresented her high school graduation status and the reason for leaving her previous job. Farmer Bros. argued that this evidence should preclude Estrada from receiving relief under Title VII and the FEHA, despite not using these misrepresentations as the basis for her termination. However, the appellate court found that Farmer Bros. failed to properly raise this defense during the trial, as it was not included in proposed findings, pre- or post-trial motions, or the issues for appeal. The court emphasized that the after-acquired evidence defense was aimed solely at undermining Estrada's credibility and not formally presented as a defense. The court also noted that even if the issue were considered, it would be inequitable to deny a successful plaintiff damages based on after-acquired evidence of misrepresentation, referencing a precedent that allowed for some damages even in cases of application fraud.
The Massey court established a rule that balances the interests of employers and employees regarding illegally discharged employees. The decision on whether an employee should forfeit remedies beyond damages is contingent on the specific circumstances of each case. For instance, an employer should not deny reinstatement to a long-term employee who exaggerated her educational qualifications decades ago if she performed her job well, while an employee without a medical license cannot expect reinstatement despite an unlawful discharge.
In terms of damages, Farmer Bros. argued that the district court used the incorrect legal standard for calculating Estrada’s lost health insurance benefits from 1982 to 1985 following her wrongful termination. The Ninth Circuit precedent, as established in Galindo, dictates that lost insurance benefits should be based on actual expenses incurred by the employee, rather than potential benefits. Although this approach may disadvantage those unable to afford premiums post-termination, the court must adhere to this precedent and has remanded the case for recalculating Estrada’s benefits based on her out-of-pocket costs, while affirming the awards for other fringe benefits and backpay.
Regarding 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 against the punitive damages under Title VII, asserting that the 1991 Civil Rights Act should not apply retroactively. However, the Supreme Court has ruled that the relevant section of the 1991 Act does not apply retroactively, necessitating a determination of whether Estrada’s FEHA claim was timely. Under California Government Code 12965(b), a claimant has one year from the issuance of a right-to-sue letter by the Department of Fair Employment and Housing (DFEH) to file a civil action.
The DFEH issued a right-to-sue letter to Estrada on October 7, 1983. Estrada amended her complaint-in-intervention to include a FEHA claim in December 1989, but the amendment related back to her original filing on June 7, 1988. Consequently, her FEHA claim was filed over four years after receiving the right-to-sue letter. However, the district court determined that Estrada’s FEHA claim was not time-barred under section 12965(b) because the statute of limitations was tolled during the EEOC investigation of her claim. This conclusion is supported by the precedent set in Salgado v. Atlantic Richfield Co., which establishes that pursuing an EEOC remedy tolls the FEHA statute of limitations. Farmer Bros. argued against this precedent, but the court affirmed adherence to it, thus upholding the district court's ruling that Estrada’s FEHA claim was timely and that punitive damages were appropriate.
The court also addressed Farmer Bros.'s contention regarding the non-retroactive application of Section 102 of the 1991 Civil Rights Act, which precluded the need to evaluate whether the Act's punitive damages cap affected Estrada's recovery. The court is bound by the Supreme Court's ruling in Landgraf, irrespective of the implications for Title VII plaintiffs.
Farmer Bros. further challenged the district court's punitive damages award of $833,434.80, which was ten times Estrada's compensatory damages, claiming it was excessive. The review for abuse of discretion considers whether punitive damages are reasonably related to compensatory damages. Farmer Bros. cited a trend limiting punitive damages to a maximum of four times compensatory damages since Pacific Mut. Life Ins. Co. v. Haslip, and argued that a two-to-one ratio is reasonable under California law, referencing Bouman. However, the court countered that Bouman did not establish a strict limit on punitive damage ratios, nor did it endorse a formulaic approach to determining the reasonableness of such awards.
The Bouman court effectively applied the Supreme Court's ruling in Haslip, which clarifies that a strict mathematical ratio between punitive and compensatory damages is not constitutionally required. Farmer Bros. incorrectly interprets the case of Las Palmas Assoc. v. Las Palmas Center Assoc., asserting a four-to-one ratio from the case, while in reality, the compensatory damages were $232,393, and the court supported a 7.9 to 1 ratio as reasonable. Farmer Bros. argues that cases with minimal compensatory damages should not influence punitive damages determinations, yet fails to provide any precedent for this position. The court rejects the notion of capping punitive damages at four times the compensatory amount for substantial awards while allowing higher ratios for minimal damages, as it contradicts the principle that compensatory damages serve as a benchmark for punitive awards. The intent of punitive damages is to punish past misconduct and deter future violations, and California law mandates that the amount of punitive damages reflect the severity of the misconduct, the injury caused, and the defendant's financial status. Imposing a rigid ratio would hinder the court's ability to achieve these objectives. While the court agrees with Farmer Bros. that the reprehensibility of the defendant's actions and any mitigating factors should be considered, it finds no evidence in the record supporting Farmer Bros.'s claim of abuse of discretion regarding the assessment of its reprehensibility.
The district court found that Estrada provided clear and convincing evidence of Farmer Bros.'s fraudulent, oppressive, and malicious discrimination against her. Consequently, the court awarded ten times her backpay, amounting to 0.05% of Farmer Bros.'s net worth in punitive damages. Farmer Bros. argued that the court erred in ordering Estrada’s reinstatement without considering its objections, including claims of application fraud, potential effects on current employees, and alleged hostility between the parties. Estrada countered that Farmer Bros. waived its right to contest reinstatement by not challenging the order earlier. The court's March 10, 1992, ruling on liability indicated Estrada was entitled to reinstatement, but it was not final until the damages phase was completed. Farmer Bros. later proposed that reinstatement would only occur after the damages phase and any appeals. During the damages phase, Farmer Bros. initially stated that Estrada needed to prove her physical capability to perform her job, but subsequently withdrew this objection, failing to raise any further challenges to her reinstatement throughout the proceedings. The record indicates that Farmer Bros. had multiple opportunities to contest the reinstatement but did not do so and failed to provide evidence supporting its claim that challenging the reinstatement would have been futile.
Farmer Bros initially contested Estrada’s reinstatement but later retracted their objection before the district court could rule, leading to a waiver of the issue on appeal. Estrada cross-appealed, asserting that the district court wrongly granted partial summary judgment to Farmer Bros regarding her failure to mitigate damages post-September 1985. The court reviews summary judgment de novo, affirming it if the record shows no genuine material fact issues favoring the non-moving party. Farmer Bros had to demonstrate that substantially equivalent jobs were available and that Estrada failed to diligently seek employment.
Evidence indicated that comparable jobs existed from 1985 to 1990, with two former colleagues securing similar employment. Farmer Bros presented reliable statistical data showing job availability in Estrada’s area during the relevant period, while Estrada's counter-evidence was insufficient to create a material fact dispute.
Estrada’s job search ceased after September 1985; although stopping may sometimes be reasonable, her situation did not justify this decision. Farmer Bros established that continuing her job search would not have been futile, and Estrada did not pursue any alternative activities that could have improved her employment prospects. The court distinguished her case from precedents where plaintiffs had valid reasons to halt their job searches, concluding that Estrada did not take reasonable steps to mitigate her damages.
The district court's partial summary judgment in favor of Farmer Bros. is affirmed, finding that the company's employment practices aimed to exclude women from its production workforce, despite attempts to project gender neutrality. Farmer Bros. is held liable under Title VII and the FEHA, which mandate more than superficial equality. The judgment is affirmed except for the calculation of Estrada’s lost health and life insurance benefits, which is reversed and remanded for further proceedings, with costs awarded to Estrada.
Testimonies revealed a hostile work environment, including derogatory comments and sexual harassment by an employee named Lesser, who made inappropriate remarks about women's bodies and engaged in unwanted physical contact. The district court did not adopt the proposed finding of sexual harassment based on Ellis' testimony. Relevant case law indicates that claims not included in an EEOC charge may still be addressed in court if they relate to the original allegations. Farmer Bros. failed to request a finding regarding application fraud, believing the district court would not find it pertinent to Estrada's discrimination claim. The court found this reasoning unpersuasive, stating the company must present all claims at the appropriate time to preserve the right to appeal.
The excerpt outlines developments related to the after-acquired evidence defense and references an impending Supreme Court decision in McKennon v. Nashville Banner Publishing Co., which is significant for the legal context. It addresses the calculation of lost insurance benefits for plaintiffs, noting that an employer's contribution to a union health fund should reflect a plaintiff's inability to afford replacement coverage rather than a lack of desire. The Bouman case is highlighted, where the district court awarded over $100,000 in punitive damages, prompting the court of appeals to remand for clarification on the punitive damages rationale. The Bouman court referenced Gagnon v. Continental Casualty Co., affirming that a punitive to compensatory damages ratio of 190.5 to 1 is permissible, and clarified that it does not mandate a four-to-one ratio. Additionally, Estrada contested the consideration of supplemental evidence from Farmer Bros. as untimely under F.R.Civ.P. 56(e), but the affirmance of partial summary judgment based on properly submitted evidence rendered this point moot.
