Punitive damages are meant to serve two purposes: punish the defendant for the conduct at issue in the lawsuit and deter similar conduct in the future. But, sometimes a punitive damages award goes beyond serving these two purposes and moves into the territory of violating the Due Process Clause of the 14th Amendment to the United States Constitution. The 14th Amendment, through the Due Process Clause, prohibits the imposition of grossly excessive or arbitrary punishments.

Punitive damages are allowed in California under California Civil Code section 3294(a), which states “In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.” Although California law does not define “clear and convincing evidence”, it carries a higher burden of proof than “preponderance of the evidence,” which is the burden of proof necessary to prevail in a civil lawsuit. In determining whether to award punitive damages, the jury considers: (1) the reprehensibility of the defendant’s conduct; (2) whether there is a reasonable relationship between the amount of punitive damages and the plaintiff’s harm; and (3) what amount will punish the defendant and discourage similar future conduct. In determining this amount, the jury considers the defendant’s financial condition. In California, there is no official cap on punitive damages.
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In September 2018, Governor Jerry Brown signed a series of bills aimed at drastically reshaping California’s approach to claims of discrimination and harassment amidst the “#MeToo” Movement. Among the legislation is Senate Bill 1300 which clarifies and expands employee rights under the California Fair Employment and Housing Act (“FEHA”). SB 1300, which was met with both opposition and support, became effective January 1, 2019. In addition to Senate Bill 1300, Gov. Brown also signed into law a series of bills on issues relating to workplace harassment, gender equality and human trafficking.

CALIFORNIA SENATE BILL 1300: HEIGHTENED EXPOSURE FOR EMPLOYERS

SB 1300 intends to close loopholes in the law that discourage or prevent victims from speaking out, and allow employers to avoid sexual harassment and discrimination laws and leave employees vulnerable to sexual harassment at work. In an attempt to aid these efforts, SB 1300 provides the following enhancements, further described below: 1) a new “single occurrence” standard for sexual harassment cases; 2) increases the challenges of recovering litigation costs for defendants; 3) potentially holds employers liable for third-party harassment; 4) prohibits release of both claims and non-disparagement agreements; and 5) provides for workplace accommodation and bystander training.

“SINGLE OCCURRENCE” STANDARD

One highly significant implication of SB 1300 is that it now makes a single instance of sexually harassing conduct a potentially triable sexual harassment claim by statute. Under FEHA, action was required to be so “severe or pervasive” so as to create a hostile work environment before it was actionable. However, the term “severe or pervasive” was subjective, leaving room for interpretation as to what conduct would be significantly severe or pervasive to support a claim under the existing law. For example, in Brooks v. City of San Mateo, 229 F.3d 917 (9th Cir. 2000), the Ninth Circuit Court of Appeals found that an employee touching another employee’s chest under her sweater was not significant enough to rise to the level of “severe or pervasive,” and, thus, granted the employer’s motion for summary judgment.

SB 1300 narrows the definition of “severe or pervasive” by clarifying that a single incident of harassing conduct is sufficient to create a triable issue, so long as the conduct limited the employee’s work performance or created a hostile work environment. The Legislation specifically rejects the court’s holding in Brooks and states that the case opinion shall not be used in determining what kind of conduct is sufficiently severe or pervasive to constitute a violation of the FEHA.

Of significance to litigation resulting from employment claims, SB 1300 affirms the court’s opinion in Nazir v. United Airlines, Inc. (2009) 178 Cal.App.4th 243. In Nazir, the Plaintiff filed a lawsuit against his former employer, United Airlines, and his former supervisor (“Defendants”). Defendants filed a motion for summary judgment/summary adjudication, seeking adjudication of 44 issues. The appellate court found that hostile work environment cases involve issues that are “not determinable on paper.” SB 1300’s reference to the finding in the Nazir case that employment issues are too complex for motions for summary judgment may be a threat to the validity of future motions for summary judgment in employment law cases which has been a common and successful defense tactic.
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Recently, a team of attorneys from MG+M successfully obtained a dismissal of all claims against their client, based on the lack of personal jurisdiction.  The case was Howell v. Asbestos Corporation, pending in Los Angeles County Superior Court before the coordinating asbestos judge, the Honorable Steven J. Kleifield.  In his decision dismissing the claims, Judge Kleifield applied the stringent personal jurisdiction standards recently set forth in Bristol-Meyers Squibb Co. v. Superior Court of California 137 S. Ct. 1773 (2017).

In Bristol-Meyers, the United States Supreme court examined whether a state court could exercise personal jurisdiction over the claims of non-resident plaintiffs against a non-resident corporate defendant for injuries occurring out of the forum state.  Id. at 1778  Specifically, a group of plaintiffs sued Bristol-Myers Squibb (Bristol) in a California court for injuries sustained after ingesting a drug manufactured and supplied by Bristol.  Many of the plaintiffs were not from California. Bristol was incorporated in Delaware with its principal place of business in New York; however, it did have some connections with California, as it sold its drug within the state.

Ultimately, the Court ruled that California courts could not exercise specific personal jurisdiction over Bristol with respect to any plaintiffs who did not reside in California, because any conduct giving rise to the non-resident plaintiffs’ claims occurred outside of California. The Court noted that specific jurisdiction necessitates “an affiliation between the forum and underlying controversy, principally, [an] activity or an occurrence that takes place in the forum state.”  Id. at 1781.  Thus, because the complaint did not allege any acts or occurrences in California that specifically resulted in injury, the Court ruled that California could not exercise personal jurisdiction over the claims against Bristol.

In the Howell v. Asbestos Corporation case decided last week, the plaintiffs alleged that Mr. Howell developed malignant epithelial mesothelioma as a result of exposure to various asbestos-containing products. Although the plaintiff did reside in California for a short period of time, the vast majority of the plaintiff’s alleged exposure to asbestos occurred in the state of Texas. On behalf of one of the defendants, attorneys from MG+M argued that California courts lacked personal jurisdiction over our client pursuant to the standard set forth in Bristol-Meyers. Specifically, MG+M attorneys argued the plaintiff’s claims did not relate to any contacts that the defendant had with the state of California. For example, the defendant was not incorporated in California, did not have its principal place of business in California, and had less than 1 percent of employees residing in California, meaning there was no general jurisdiction. Additionally, the plaintiff’s alleged injury from the defendant’s product occurred outside of the state of California, meaning there was no specific jurisdiction. Ultimately, Judge Kleifield applied the Bristol-Meyers standard and held that because the plaintiffs’ claims did not bear a substantial connection to the non-resident defendant’s forum contacts, the exercise of personal jurisdiction was not appropriate.

The Future of Bristol-Meyers

 

Since the decision in Bristol-Meyers,
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A California appellate court recently ruled that Tinder’s age-based pricing strategy violated the state’s Unruh Civil Rights Act, which broadly outlaws discrimination based on sex, race, sexual orientation, age, and other classes. California’s Second District Court of Appeal in Los Angeles reversed the trial court’s dismissal of a class action brought by a putative group of customers over 30 years of age, who claim Tinder improperly charged them more for a premium service than it did users in the 18-29 age range.

This case, which has drawn a great deal of publicity, may appear to signal the beginning of a judicial push against age-based price differences, but the implications outside California are likely limited.

In March 2015, the free dating service switched to a “freemium” pricing model. Users could still join Tinder without cost, but for a fee, they could upgrade their membership to Tinder Plus and receive additional features, including the ability to undo mistaken swipes or expand their geographic filter for potential matches. For this membership upgrade, users over 30 paid a $20 subscription fee, while users under 30 paid only $14.99 (or $9.99, depending on any promotions in effect).

Tinder claimed that before setting the price, it conducted market research that showed that users under 30 were more likely to be “budget constrained” and were less likely to pay an increased fee. The named plaintiffs (one of whom previously sued a women-only networking event to allow the inclusion of men) argued that this stated basis failed to justify what amounted to a surcharge on older customers, some of whom might actually have had less disposable cash than younger users.

The court found that, under the Unruh Civil Rights Act, Tinder’s stated basis failed to justify what amounted to age discrimination. The court acknowledged that while this practice might make business sense, it violated the spirit of California’s law, which treats people equally unless the legislature provides an explicit basis to do otherwise (as it has for discounts for elderly persons and minor children). The court found no such legislative basis for young adults generally.

Many other products lend themselves well to different pricing tiers like the one challenged in the Tinder case: software licenses, content subscriptions, club memberships, etc. This scrutiny of Tinder’s pricing suggests that potential plaintiffs may scrutinize any pricing benefitting a non-elderly or minor age group. However, because the age-based claim that will now proceed in California is cutting-edge and largely untested, the full impact of this ruling remains to be seen. In several states (California, Maryland, Pennsylvania, and Wisconsin), courts have found that ladies’ nights violate state discrimination laws, but have not clearly addressed age-based pricing in a similar context.  Regardless, the case law in California and elsewhere will continue to develop. For example, it remains an open question whether student discounts would pass the Appeal Court’s “legislative-findings” standard as applied in the Tinder case.

 
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A group of companies that advertised job opportunities through Facebook’s ad-serving platform discriminated against older members of the applicant pool, claims a proposed class action filed in the U.S. District Court for the Northern District of California. This filing suggests potential liability for any employer that posts jobs via ads that target recipients based on demographic metadata.

 

As Facebook’s roughly two-billion active users view, like, and share content, they give Facebook concrete information about their preferences and behaviors. Facebook’s ad platform leverages this data by allowing advertisers to reach the users most likely to find their ads relevant. Because Facebook also collects information on its users’ demographic factors, such as  age, race, and gender, critics note a potential for discriminatory ad targeting. In a December 20th filing, a proposed class of older job-seekers on Facebook argued that this discriminatory potential came to fruition when a group of employers (including Amazon, Cox, and T-Mobile) used an age filtering feature for their job postings to target younger cohorts and screen out older ones in violation of the Age Discrimination Employment Act (ADEA).

Largely in response to concerns about the opacity of Facebook’s ad-targeting, Facebook offers a feature on each ad that allows users to determine “Why am I seeing this ad?” Based on job postings like the one above, class members claim they were screened off from job postings that reached younger Facebook users. Since this filing, Facebook, which was not named a defendant, commented in response to this suit that its ads could be part of a broader media campaign by hiring employers, and that targeting is a permissible part of a diversified hiring strategy. Facebook further noted that its ads are no different from TV and magazine ads, which inherently reach different demographics by virtue of their viewer and subscriber bases.

Several important implications from this filing:

  • Targeting may not equal discrimination, but it can get you sued.

The defendant employers likely share Facebook’s view—that targeting is not per se discrimination. Whether or not this argument prevails, this filing shows that applicants scrutinize potential discrimination in posting criteria as well as in the hiring decision. The plaintiffs argue that Facebook ads are so ubiquitous and pervasive that being screened off from those ads is to be effectively eliminated from the pool. Courts will have to decide whether or not targeting gives rise to ADEA liability, but before the question can be settled, employers accused of targeting will be dragged into expensive, broad-ranging suits like this one if their postings facially preference a certain age.

  • This is bigger than Facebook postings.

Facebook is not the only platform with targeted ads. A 12/20/17 ProPublica and New York Times report highlighting potentially discriminatory employment ads found that Google’s AdSense and LinkedIn ads had the same age-filtering capability (LinkedIn since eliminated this function). Going forward, postings through these and other, smaller ad-serving platforms can expect the same scrutiny by potential plaintiffs and their lawyers. The proposed class
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