Unpublished Disposition, 855 F.2d 861 (9th Cir. 1987)

MEMORANDUM^* 

Appellant Hewko appeals summary judgment of her complaint against her former employer, appellee Digital Equipment Corporation. Appellant originally filed her action in state court; appellee removed to federal district court on the basis of diversity and, after discovery, moved for summary judgment. The district court granted summary judgment in July, 1987 and dismissed the complaint's Doe defendants without prejudice.

Appellee is in the business of selling computer hardware and services. Appellant was one of appellee's sales people. Prior to mid-1984, appellant's work reviews were positive and there is no evidence that she was not meeting her hardware sales budget. However, in 1984 one of appellant's customers withdrew its $1.6 million commitment to buy hardware. As a result, appellant's sales for the first three quarters of 1984 were significantly under her yearly hardware budget. After the sale withdrawal, appellant's supervisors began disciplinary action because of her deficient hardware sales.

Appellee's Personnel Policies and Procedures Manual provides a four-step discipline process when an employee is not performing at an acceptable level. In accordance with that procedure, appellant's supervisor counseled her in September of 1984, devised a performance plan and gave her 30 days to attain certain goals; appellant and appellee dispute whether appellant completed these goals. In October of 1984, appellee gave appellant a verbal warning which included new goals; appellant did not attain all these goals.

Appellant's supervisor then placed her on written warning. New goals were established in the written warning and appellant took classes in order to improve her abilities. However, at the end of the written warning period, appellant had still not met her hardware budget. Despite that fact, appellant's supervisor gave appellant a 30-day extension to investigate new business. At the end of the extension period, appellant's supervisors reviewed her performance, determined that she had not met the established goals and terminated her.

Appellant brought suit in state court claiming that appellee fired her in bad faith. After removal by appellee to federal court, the case was sent to arbitration pursuant to Local Rule 500. After arbitration, appellant requested a jury; the district court denied her request as untimely. The court later granted appellee's motion for summary judgment, holding that appellee had good cause to fire appellant and that appellant's emotional distress claims were barred by workers' compensation.

Appellant first argues that this case must be remanded to the state court because of the presence of Doe defendants upon removal. See Bryant v. Ford Motor Co., 832 F.2d 1080 (9th Cir. 1987), amended, 844 F.2d 602 (9th Cir. 1988). In Bryant, this court ruled that the presence of Doe defendants upon removal of a state action to federal court deprives the federal court of jurisdiction. 844 F.2d at 606. While the Bryant rule applies retroactively, "Bryant does not require remand in cases where 'Doe' defendants were stricken by the district court prior to the November 6, 1987 decision in Bryant." Brandchaft v. E.F. Hutton & Co., Inc., 841 F.2d 886, 886 (9th Cir. 1988). In this case, the district court dismissed the Doe defendants without prejudice in July, 1987 after granting summary judgment against the named defendants. Thus, this court has jurisdiction.

This court reviews grant of summary judgment de novo. Huber v. Standard Ins. Co., 841 F.2d 980, 983 (9th Cir. 1988). Viewing the evidence in the light most favorable to the nonmoving party, the court must determine whether there are any genuine issues of material fact and whether the district court properly applied the substantive law. Id. Summary judgment is proper if, after adequate time for discovery, the plaintiff "fails to make a showing sufficient to establish the existence of an element essential to [the plaintiff's] case." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

California law presumes that an employee without an agreement concerning the time period of employment is an "at will" employee terminable at any time for any reason. Cal. Labor Code Sec. 2922. However, California courts allow exceptions to the presumption, including a tort claim for breach of the covenant of good faith and fair dealing and a contract claim for breach of an implied agreement to terminate only for cause. Shapiro v. Wells Fargo Realty Advisors, 152 Cal. App. 3d 467, 475, 199 Cal. Rptr. 613, 616-17 (1984).

California cases discuss these exceptions separately. However, the proof needed for each exception is similar and the burdens of proof are identical. Thus,

[s]ince the implied in law covenant and implied in fact covenant are similar in that both require just cause for dismissal ... the burdens of producing evidence and proof articulated [for implied in fact covenants are] a reasonable approach to a discharge allegedly in violation of the covenant of good faith and fair dealing.

Crosier v. United Parcel Service, Inc., 150 Cal. App. 3d 1132, 1138, 198 Cal. Rptr. 361, 365 (1983); Huber, 841 F.2d at 985. Plaintiff initially bears the burden of overcoming the presumption of "at will" employment and showing an implied covenant. The burden then shifts to the defendant to come forward with evidence of legitimate reasons for termination. The burden finally shifts back to the plaintiff to show that defendant's offered explanation is either pretextual or insufficient to meet the defendant's contract or legal obligations. Crosier, 150 Cal. App. 3d at 1137-38, 198 Cal. Rptr. at 364-65.

The presumption that an employment contract is terminable at will may be overcome by evidence of an express or implied agreement that the relationship will continue for a fixed period of time, or that the relationship will continue until the employer is dissatisfied with the employee's services. Pugh v. See's Candies, Inc., 116 Cal. App. 3d 311, 324-25, 171 Cal. Rptr. 917, 924 (1981). In determining whether there exists an implied in fact promise, a variety of factors must be considered including the personnel policies or practices of the employer, the employee's length of service, actions or communications by the employer reflecting assurances of continued employment, and the practices of the industry. Id., 116 Cal. App. 3d at 327, 171 Cal. Rptr. at 925-26. If the court finds that the employer's conduct has created an implied contract to terminate only upon good cause, the court must determine whether the employer kept that promise. "Good cause" on the part of the employer consists of "a fair and honest cause or reason, regulated by good faith on the part of the party exercising the power." Id., 116 Cal. App. 3d at 330, 171 Cal. Rptr. at 928 (quoting R.J. Cardinal Co. v. Ritchie, 218 Cal. App. 2d 124, 144 (1963)).

In this case, appellant met her burden of proving that appellee's actions had created an implied in fact contract; appellee's Personnel Manual contained detailed instructions concerning the warning procedure prior to termination. However, appellee offered evidence that it had a legitimate business reason for terminating appellant and, therefore, had good cause; appellant did not meet her hardware sales budget, did not meet a number of goals set for her during the disciplinary process and did not improve her sales technique. The only evidence that appellant offered to rebut appellee's evidence of a legitimate business reason for termination was her unsupported allegation that the goals set were unreasonably difficult, her opinion that she was harassed and her speculation that her supervisors had ulterior motives. Because of the wide latitude given employers in personnel decisions, and because appellant offered little evidence to support her speculations, appellant did not show a disputed issue of fact concerning the legitimacy of appellee's offered business reason for terminating her. See Crosier, 150 Cal. App. 3d at 1139, 198 Cal. Rptr. at 365. Therefore, the district court was correct in granting summary judgment for appellee on this claim. The implied in fact contract was not breached. There was no termination without cause.

For similar reasons, summary judgment was proper with respect to the claim for breach of the covenant of good faith and fair dealing. Good faith requires that an employer treat like cases alike; thus, the employer must make personnel decisions similarly in similar circumstances. Rulon-Miller v. International Business Machines Corp., 162 Cal. App. 3d 241, 247-48, 226 Cal. Rptr. 524, 529 (1984). The employer breaches the implied covenant of good faith and fair dealing if it engages in "bad faith action extraneous to the contract, combined with the [employer's] intent to frustrate the [employee's] enjoyment of contract rights." Khanna v. Microdata Corp., 170 Cal. App. 3d 250, 262, 215 Cal. Rptr. 860, 867 (1985) (quoting Shapiro, 152 Cal.App.3d at 478-79); Huber, 841 F.2d at 985. Once again, then, the employer must show that it terminated its employee for legitimate business reasons, and the employee bears the burden of proving that these reasons were pretextual. See Crosier, 150 Cal. App. 3d at 1138, 198 Cal. Rptr. at 364-65.

As previously discussed, the appellee in this case offered legitimate business reasons for terminating appellant. Appellant did not meet her burden of producing any evidence that these reasons were pretextual or in bad faith. She merely speculated that her employer may have had an improper motive without any factual basis; this is insufficient. Id., 150 Cal. App. 3d at 1139, 198 Cal. Rptr. at 565. Thus, the district court did not err in granting summary judgment for appellee on this issue.

In addition to claiming wrongful termination, appellant sued appellee for infliction of emotional distress based upon her termination. Appellee claims that the California Workers' Compensation Act bars appellant's claims. That Act states that injuries resulting from the employment relationship are exclusively compensated under the statutory scheme. Cal.Labor Code Sec. 3602.

However, the California Supreme Court has recently held that workers' compensation is available only for physical injuries.

The basis of compensation and the exclusive remedy provisions is an injury sustained and arising out of the course of employment (citations omitted), and when the essence of the wrong is personal physical injury or death, the action is barred by the exclusiveness clause....

Cole v. Fair Oaks Fire Protection Dist., 43 Cal. 3d 148, 160, 233 Cal. Rptr. 308, 315 (1987) (en banc) (emphasis added). Thus, we have held that California workers' compensation law does not bar claims for infliction of emotional distress if the injuries are purely emotional. Robards v. Gaylord Bros., Inc., No. 87-2574, slip op. at ---- (9th Cir., ----, 1988).

In this case, appellant only alleges emotional injuries, such as humiliation and embarrassment. Thus, summary judgment for appellee was not available on grounds of preclusion by workers' compensation remedies.

However, even though the Workers' Compensation Act does not bar appellant's claims, her claim for intentional infliction of emotional distress fails. The tort of intentional infliction of emotional distress includes:

(1) outrageous conduct by the defendant;

(2) the defendant's intention of causing or reckless disregard of the probability of causing emotional distress;

(3) the plaintiff's severe or extreme emotional distress; and

(4) actual and proximate causation of the emotional distress by the defendant's outrageous conduct.

Wallis v. Superior Court, 160 Cal. App. 3d 1109, 1119-20, 207 Cal. Rptr. 123, 130 (1984). The outrageous conduct which must cause the emotional distress is conduct "exceeding all bounds usually tolerated by a decent society, of a nature which is especially calculated to cause, and does cause, mental distress." Id., 160 Cal. App. 3d at 1120, 207 Cal. Rptr. at 130 (quoting Newby v. Alto Riviera Apts., 60 Cal. App. 3d 288, 297 (1976)).

After full discovery, appellant has not been able to make any showing of outrageous conduct. She offers nothing of substance to rebut her employer's evidence that it followed its standard disciplinary procedure in terminating her. In addition, she has not shown that her inadequate performance resulting in her termination was due to her employer's outrageous acts. Finally, she merely speculates on possible improper motives on the part of her employer. Thus, appellant has not shown that appellee's conduct was outrageous enough to be intentional infliction of emotional distress. The district court correctly granted summary judgment on this issue. Celotex Corp., 477 U.S. at 322.

To show negligent infliction of emotional distress, a plaintiff must show

(1) negligent conduct on the part of the defendant;

(2) that it was foreseeable that defendant's conduct would cause plaintiff distress; and

(3) severe emotional distress.

Molien v. Kaiser Foundation Hospitals, 27 Cal. 3d 916, 930, 167 Cal. Rptr. 831, 839, (1980); Kelly v. General Telephone Co., 136 Cal. App. 3d 278, 286, 186 Cal. Rptr. 184, 187 (1982). The injuries for which damages may be claimed may be purely emotional. Molien, 27 Cal. 3d at 930, 167 Cal. Rptr. at 839. However, "defendants will not be exposed to potentially unlimited liability for invasions of emotional tranquility that are trivial and transient if recovery is limited to claims of serious mental distress." Id., 27 Cal. 3d at 928, 167 Cal. Rptr. at 837. Plaintiffs may receive damages only if a reasonable person would be unable to cope with the substantial and enduring mental stress resulting from defendant's actions. Id., 27 Cal. 3d at 928, 167 Cal. Rptr. at 838; Bogard v. Employers Casualty Co., 210 Cal. Rptr. 578, 588, 164 Cal. App. 3d 602, 617 (1985).

In this case, appellant has not shown negligent conduct on her employer's part. Her only "evidence" that her employer did not follow the company's procedural rules is her unsupported allegations that the goals set for her were unattainable. In addition, the only evidence of negligence appellant offers is a typographical error in her written warning that indicated the warning would not begin for 60 days; in reality, the written warning period began on the date she was given the warning and ended at the end of 60 days.

Appellant claims that she relied on the error, believing she had more time to meet her budget. However, the warning was entitled "written warning" and she was told at the time she received it that she was on written warning. Given the fact that her supervisors had followed the discipline procedures exactly up until the written warning, a reasonable person would not have believed that the written warning period did not begin at the time appellant was notified that she was on written warning. Nor could that typographical error foreseeably engender the stress alleged by appellant. Therefore, summary judgment was appropriate on appellant's negligent infliction of emotional distress claim, as well as the other claims.

AFFIRMED.