Carmen P. Ortiz, Plaintiff-appellee, v. Bank of America National Trust and Savings Association,defendant-appellant, 824 F.2d 692 (9th Cir. 1987)

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U.S. Court of Appeals for the Ninth Circuit - 824 F.2d 692 (9th Cir. 1987) Argued and Submitted June 8, 1987. Decided Aug. 5, 1987

Martin F. Jennings, Jr., Sacramento, Cal., for plaintiff-appellee.

Morton H. Orenstein, San Francisco, Cal., for defendant-appellant.

Appeal from the United States District Court for the Eastern District of California.

Before CHAMBERS, TANG and NELSON, Circuit Judges.

TANG, Circuit Judge:

The Bank of America appeals a judgment upon a jury verdict in favor of Ortiz on a claim of breach of the implied covenant of good faith and fair dealing. The Bank contends the verdict is erroneous as a matter of law both because Ortiz refused an offer of reinstatement and thus failed to mitigate her damages and because her recovery of Workers' Compensation benefits for emotional injuries arising from the Bank's actions bars her claim for breach of covenant. The Bank also argues that the district court erred in refusing to grant a new trial and in refusing to permit it to discuss the details of Ortiz's complaint in closing argument. We affirm.


Ortiz worked in clerical jobs for the Bank in various locations during the years from 1961 until her termination on April 20, 1979. When the Bank terminated her employment, Ortiz filed three workers' compensation claims for psychic injuries producing a continuing disability. In December 1980 Ortiz and the Bank entered into a settlement of the three workers' compensation claims. The Compromise and Release indicated Ortiz's psychic injury arose from her employment. The Bank paid Ortiz $12,500 and Ortiz agreed to "release and forever discharge [the Bank] ... from all claims and causes of action, whether now known or ascertained, or which may hereafter arise or develop as a result of said injury."

Ortiz also filed discrimination charges with the California Division of Fair Employment Practices and the EEOC, alleging discrimination based on her Puerto Rican national origin. The Bank offered unconditional reinstatement on August 1, 1980, but Ortiz rejected the offer. She received right to sue letters and filed suit in state court on February 2, 1981. The Bank removed the case to federal court on May 18, 1981. The Title VII national origin discrimination claim was tried to the court and dismissed. The claims of race discrimination under 42 U.S.C. § 1981, breach of an express or implied contract, and breach of the covenant of good faith and fair dealing were tried to a jury.

In special verdicts the jury found that the Bank did not discriminate against Ortiz on the basis of national origin and that it did not discharge her in violation of an express or implied contract. It found that the discharge breached the covenant of good faith and fair dealing and awarded $250,000 damages for lost wages, pension benefits and other fringe benefits. The jury found she was not entitled to punitive damages or damages for emotional distress. In the verdicts the jury also found that the Workers' Compensation release executed by Ortiz barred her claim for breach of contract, but not her claim for breach of covenant. The jury reached this decision after a colloquy with the court and additional instruction on the effect of the release.

The Bank filed motions to alter or amend the judgment, for judgment notwithstanding the verdict, for relief from the judgment, for remittitur of damages, and for a partial new trial. The district court denied the motions. The Bank timely appeals from the judgment on the breach of covenant claim.


The Bank did not object to the instructions on mitigation of damages and thus we review for abuse of discretion the trial court's decision to uphold the jury's verdict. Philippine Nat'l Oil Co. v. Garrett Corp., 724 F.2d 803, 806 (9th Cir. 1984).

The Bank fired Ortiz on April 20, 1979 and offered unconditional reinstatement to her original job on August 1, 1980. Ortiz refused the offer although she testified that she thought she could work at that time. In addition to her testimony there was evidence from a mental health practitioner and doctors that Ortiz could not work at all or, as one said, should never work at any branch of the Bank of America again.

The Bank argues that the duty to mitigate damages, see e.g., Ford Motor Co. v. EEOC, 458 U.S. 219, 102 S. Ct. 3057, 73 L. Ed. 2d 721 (1982); Sangster v. United Air Lines, Inc., 633 F.2d 864, 867 (9th Cir. 1980), cert. denied, 451 U.S. 971, 101 S. Ct. 2048, 68 L. Ed. 2d 350 (1981), absolutely precludes Ortiz's recovery of damages for the period after August 1, 1980, when she rejected reinstatement for no reason. Under California law a party has a duty to act reasonably to minimize damages flowing from a breach of contract and the question of whether the injured party has acted reasonably is one of fact. Sackett v. Spindler, 248 Cal. App. 2d 220, 239, 56 Cal. Rptr. 435, 447 (1967). This is the rule given in the instruction on mitigation.

As the district court found, the mitigation question is a pure question of fact and there was substantial evidence to support the jury. Because there was evidence of Ortiz's poor mental condition, the jury did not clearly err in finding reinstatement was not a reasonable alternative mandated by the duty to mitigate damages.

Whether the workers' compensation settlement bars relief on the covenant claim is a question of interpretation of state law which we review de novo. Matter of McLinn, 739 F.2d 1395, 1397 (9th Cir. 1984) (en banc).

The Bank argues that Ortiz's claim is for injuries arising out of and during the course of her employment and is thus covered by the California Workers' Compensation Act (WCA) which provides the exclusive remedy for her claimed injuries. See Cal.Labor Code Sec. 3602(a) (West Supp.1987). The Bank contends that the district court erred in permitting Ortiz to characterize her injuries as flowing from a tortious breach of covenant and as compensable in a civil suit because the WCA provides the exclusive remedy for intentional injuries arising out of employment. Id.; Johns-Manville Products Corp. v. Contra Costa Superior Court, 27 Cal. 3d 465, 467, 165 Cal. Rptr. 858, 859, 612 P.2d 948, 949 (1980) (except there is an action at law for flagrant acts causing aggravation of injuries, id. at 478, 165 Cal. Rptr. 858, 612 P.2d 948). The WCA has been held to provide the remedy for injuries flowing from abusive treatment by supervisors, Albertson's, Inc. v. Workers' Compensation Appeals Bd., 131 Cal. App. 3d 308, 313, 182 Cal. Rptr. 304, 307 (1982), and stress caused by termination, Pacific Tel. & Tel. Co. v. Workers' Compensation Appeals Bd., 112 Cal. App. 3d 241, 169 Cal. Rptr. 285 (1981). California courts have held that a civil suit for intentional infliction of emotional distress is barred by settlement of a workers' compensation claim based on a course of abusive and harassing conduct culminating in termination of employment. Hollywood Refrigeration Sales Co. v. Superior Court, 164 Cal. App. 3d 754, 756-57, 210 Cal. Rptr. 619, 619-20 (1985). But see Hart v. National Mortgage & Land Co., 189 Cal. App. 1420, 235 Cal. Rptr. 68, 72-76 (1987) (rejecting application of exclusivity doctrine of workers' compensation system in actions for intentional infliction of emotional distress); Young v. Libbey-Owens Ford Co., 168 Cal. App. 3d 1037, 214 Cal. Rptr. 400 (1985) (criticizing application of exclusivity doctrine in Hollywood Refrigeration) .

None of these cases is pertinent and the Bank's argument fails because Ortiz did not sue for infliction of emotional distress, nor did she receive any damages for emotional injuries resulting from her treatment by the Bank. Rather she prevailed on a claim of breach of the covenant of good faith and fair dealing, i.e., a claim that the Bank unfairly and in bad faith deprived her of her right to receive the benefits of employment. Under California's doctrine of primary rights, the right protected by the WCA is the right not to be physically or emotionally injured on the job, while the right protected by the covenant of good faith is the right not to be unfairly deprived of the benefits of employment. The harm Ortiz suffered was the loss of employment and the damages she received were for loss of income and fringe benefits. The WCA covers the injuries and risks of employment, not injuries flowing from unemployment. See Howland v. Balma, 143 Cal. App. 3d 899, 905, 192 Cal. Rptr. 286, 289 (1983) (slander and resulting damage to reputation not within purview of workers' compensation law).

A release of claims in a workers' compensation settlement does not eliminate the right to pursue other remedies for the invasion of other interests in other forums, absent a specific provision to that effect.1 

A district court's decision on a motion for a new trial under Fed. R. Civ. P. 59(a) is reviewed for abuse of discretion. Robins v. Harum, 773 F.2d 1004, 1006 (9th Cir. 1985). When the motion is based on a challenge to jury verdicts, the reviewing court must determine whether the verdicts are supported by substantial evidence. Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001, 1013-14 (9th Cir. 1985), cert. denied, 474 U.S. 1059, 106 S. Ct. 802, 88 L. Ed. 2d 778 (1986). The court has a duty to reconcile the jury's special verdict responses on any reasonable theory consistent with the evidence. Gallick v. Baltimore & O.R.R., 372 U.S. 108, 119-22, 83 S. Ct. 659, 666-67, 9 L. Ed. 2d 618 (1963); Bourque v. Diamond M. Drilling Co., 623 F.2d 351, 353 (5th Cir. 1980) (the seventh amendment right to a jury trial requires validation of verdicts if at all possible); 9 C. Wright & A. Miller, Federal Practice & Procedure Sec. 2513 (1971).

The Bank argues that the special verdicts were so inconsistent, confusing and ambiguous that a partial new trial is necessary. We disagree. There is no reason to assume that the final verdict is at odds with what the jury said in court. There is no hopeless conflict or confusion; in fact the resolution suggests that the judge's explanation clarified matters so the jury could see it was possible for one claim to be barred but not the other.

The Bank also contends that the jury could not find the breach of contract claim barred by the settlement and then award damages of lost wages and fringe benefits for breach of the covenant. The Bank cites no authority for this proposition and there appears to be none.

Finally, the Bank argues that the findings are inconsistent with the evidence offered on the settlement agreement. The evidence showed that Ortiz had told the Bank through her attorney that she intended to pursue claims other than the WCA claims despite the settlement. We find the verdict on the covenant is consonant with the evidence.

Given the duty to reconcile jury verdicts, Gallick, 372 U.S. at 119-22, 83 S. Ct. at 666-67, there is no basis for vacating the verdict and ordering a new trial.

This court reviews the district court's rulings on admissibility of arguments and evidence for abuse of discretion. Kisor v. Johns-Manville Corp., 783 F.2d 1337, 1340 (9th Cir. 1986).

The Bank requested the opportunity to refer to Ortiz's Complaint in its closing argument to demonstrate that it contained "admissions" at variance with her covenant claim. The Bank points to a statement that Ortiz was "terminated solely because of her national origin" as relevant to its argument that there was no other bad faith motivation for the termination.

The district court ruled that reference to the Complaint should be excluded under Fed.R.Evid. 403. Exclusion under Rule 403 was appropriate because the court thought the quoted language would mislead the jury in that the complaint "also generally complains that the defendant tortuously, (sic) wrongfully interfered with plaintiff's contractual relation."

The district court did not abuse its discretion in ruling the reference to the Complaint inadmissible.

The judgment is AFFIRMED.


We recognize that the Bank has woven its two main arguments together to say that if Ms. Ortiz's reason for rejecting the reinstatement offer was her emotional condition, and if that emotional condition rendered her unable to work ever again, she should have sought compensation for total disability under WCA and should be barred from recovery for lost wages and fringe benefits on her covenant claim. But that is not this case. This argument ignores the important facts that Ms. Ortiz did not claim permanent disability due to psychic injury and that the evidence at trial indicated only that she refused reinstatement because it would have been detrimental to her emotional well being to work for the Bank. At that point the burden was on the Bank to show that there were other reasonable ways Ms. Ortiz could have reduced her damages. The Bank produced no such evidence. Ms. Ortiz's experts testified to her inability to find comparable employment due to her age and lack of skills