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May 1996 
Vol.
2 No. 5 ISSN 1087-6219
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The California Supreme Court has ruled that a landlord may not discriminate against an unmarried couple because of her own religious beliefs. The landlord's conduct violated the statutory ban on discrimination because of "marital status" under the Fair Employment and Housing Act (FEHA).
Evelyn Smith owned and leased four rental units in Chico, California. She believed that it was a sin to rent to couples who would engage in nonmarital sexual relations on her property. Smith canceled a lease agreement with a couple, when she learned that they were not married.
The court rejected the argument that Smith based her refusal on sexual conduct rather than marital status. Smith did not find the conduct itself offensive. The couple's unmarried status made the conduct offensive. It then discussed possible defenses under the federal and state constitutions, and the federal Religious Freedom Restoration Act (RFRA):
1. The federal constitution was no defense, because the First Amendment no longer protects religiously motivated conduct that violates a valid and neutral law of general application, like the FEHA. Employment Division v. Smith, 494 U.S. 872 (1990). The Supreme Court has rejected the balancing approach used in earlier cases such as Wisconsin v. Yoder, 406 U.S. 205 (1972).
2. Congress enacted the RFRA in response to the Supreme Court's abandonment of its free exercise balancing test. It provides that government may "substantially" burden free exercise only if the burden (1) furthers a compelling governmental interest, and (2) is the least restrictive means for doing so. California's ban on marital status discrimination did not "substantially" burden Smith's practice of her religious beliefs. She was not required to rent out her apartments. She could put her capital into other investments. (This reasoning attracted only three votes from the seven justices. Justice Mosk, the fourth vote, would have held the RFRA unconstitutional.)
3. The court did not conclusively define the protection provided by the California constitution. However, the protection is no greater than that of the RFRA. Since the discrimination ban passed muster under the RFRA, it was not invalid under the California constitution.
Smith v. FEHC, 1996 WL 163908 (Cal. Sup. Ct. Apr. 9, 1996).
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The Ninth Circuit has explained how an employer may use after-acquired evidence of an employee's wrongdoing to limit the employee's remedies for employment discrimination. Generally, such evidence will cut off damages for any period after the employer would have fired the employee for a non-discriminatory reason.
Dennis O'Day alleged that McDonnell Douglas denied him a promotion, and then fired him, because of his age. McDonnell Douglas said that it would have fired O'Day anyway, because he removed sensitive information from the company without authorization. The company did not find out about the wrongdoing until discovery in O'Day's wrongful termination lawsuit.
In McKennon v. Nashville Banner Publishing Co., 115 S.Ct. 879 (1995), the Supreme Court ruled that after-acquired evidence of wrongdoing does not absolve an employer of all liability for employment discrimination. The employer may use such evidence to limit the employee's remedy, if it can prove that it would have (not just could have) discharged the employee.
The Ninth Circuit ruled that McDonnell Douglas's summary judgment motion established by a preponderance of the evidence that the company would have fired O'Day. It had submitted an affidavit from a human resources representative. The representative stated that O'Day "would have been terminated immediately," if McDonnell Douglas had discovered his misconduct.
If O'Day is able to prove discrimination on remand, he will probably be limited to an award of backpay from the date of discharge to the discovery of his misconduct. McKennon forecloses an award of front pay, or reinstatement.
O'Day v. McDonnell Douglas Helicopter Co., 79 F.3d 756 (9th Cir. 1996).
For further discussion of the after-acquired evidence doctrine, see Employer may defeat wrongful termination claim with "after-acquired" evidence of wrongdoing , from the July 1995 issue of Appellate Decisions Noted.
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The Ninth Circuit has ruled that a school district may not suspend a student for saying that she would shoot her guidance counselor if her class schedule were not changed. The remark was not a real threat of violence. Therefore, it was protected by the California Education Code.
Sarah Lovell was a 15-year old high school student. She became frustrated at being shuttled back and forth between offices while trying to change her class schedule. Her guidance counselor claimed that Lovell then said: "If you don't give me this schedule change, I'm going to shoot you." The school suspended Lovell for three days.
The United States Supreme Court has ruled that students' constitutional rights at school are limited, although not non- existent. Under the First Amendment, school authorities may regulate the content of student speech so long as their actions are "reasonably related to legitimate pedagogical concerns." Hazelwood School Dist. v. Kuhlmeier, 484 U.S. 260 (1988).
California statutes guarantee students the same free speech rights in school as they would enjoy off campus. Cal. Educ. Code §§ 48907, 48950. Therefore, the court here applied standard First Amendment law, which employs an objective test to determine whether a threat is real (and, therefore, unprotected). No reasonable person would have thought Lovell's threat a real one. Therefore, the school could not discipline her on that basis. Discipline might have been appropriate if the school had been motivated by Lovell's rude, disrespectful attitude. The school did not attempt to justify the suspension on that basis.
In dissent, Judge Noonan wondered "by what magic the court has metamorphosed a case involving at best a student's rights under California Education Code § 48950 into a case under the First Amendment." He could not understand how a possible violation of state law became a claim under 42 U.S.C. § 1983. The majority opinion provides no answer.
Lovell v. Poway Unified Sch. Dist., 1996 WL 140805 (9th Cir. Mar. 29, 1996).
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The Second District Court of Appeal in Los Angeles has ruled that the provision of free business services in California triggered franchise tax liability based on a Missouri corporation's sales in California. Collecting franchise taxes did not offend the federal statutory prohibition on collecting tax from a business whose in-state activity was limited to solicitation of orders.
Brown Group is based in St. Louis, but distributes shoes nationwide. It employed several sales representatives in California, who sent all their orders to St. Louis for approval. Brown Group also had two employees in California who gave business advice to shoe retailers, and facilitated loan applications to Brown Group.
Brown Group argued that it was immune from California tax under 15 U.S.C. § 381. Section 381 provides that a state may not levy a "net income tax" on an out-of-state business whose in-state business activity is limited to "the solicitation of orders . . . in such State for sales of tangible personal property, which orders are sent outside the State for approval or rejection, and, if approved, are filled by shipment or delivery from a point outside the State."
The United States Supreme Court explained what "solicitation" means in Wisconsin Department of Revenue v. William Wrigley, Jr., Co., 505 U.S. 214 (1992):
"Providing a car and a stock of free samples to salesmen is part of the 'solicitation of order,' because the only reason to do it is to facilitate requests for purchases. Contrariwise, employing salesmen to repair or service the company's products is not part of the 'solicitation of orders,' since there is good reason to get that done whether or not the company has a sales force. Repair and servicing may help to increase purchases; but it is not ancillary to requesting purchases, and cannot be converted into 'solicitation' by merely being assigned to salesmen."
Brown Group's business advice services might lead to increased orders. But, they were not aimed at facilitating requests for purchases. Therefore, they were more than "solicitation."
Brown Group Retail, Inc. v. Franchise Tax Board, 1996 WL 190777 (Cal Ct. App. Apr. 22, 1996).
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The San Diego division of the Fourth District Court of Appeal has ruled that emotional distress and loss of use damages may not be recovered for a Lemon Law violation, unless the plaintiff establishes some economic loss. The Lemon Law (Song-Beverly Consumer Warranty Act) incorporates breach of contract damages, not tort damages.
Cathy Bishop bought a new Hyundai when she was 17 years old. Through a manufacturing defect, the car was damaged beyond repair. Hyundai refused to refund the purchase price. Because Bishop remained obligated on the loan used to purchase the car, she could not obtain a replacement vehicle. Bishop suffered emotional distress from the unavailability of a car to attend her college classes.
Bishop sued for damages under the Lemon Law. The jury awarded $8,312 in restitution, $17,223 for loss of use, $1,444 for incidental damages, and $5,000 emotional distress damages. It then added a civil penalty of double the actual damages, for a total award of $95,937. Bishop recovered an additional $50,000 in costs and attorney fees. The Court of Appeal struck the loss of use and emotional distress damages.
Through Civil Code section 1794(b)(2), the Lemon Law incorporates the remedies available under Commercial Code sections 2714 and 2715. Those include "consequential damages," defined as "loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise." The legislature intended to limit damages to the contract measure, which does not include emotional distress.
Civil Code section 1793.2(d)(2)(B) provides that the buyer may recover "rental car costs actually incurred." To allow Bishop to recover "loss of use" damages without any out-of-pocket loss would read that limitation out of the Lemon Law.
Bishop v. Hyundai Motor America, 1996 WL 182201 (Cal. Ct. App. Mar. 27, 1996).
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A California Highway Patrol captain claimed he was wrongfully transferred in retaliation for tickets issued to the CHP commissioner. Since his reassignment did not affect rank, pay or privileges, there was no interference with a liberty or property interest. Therefore, the Ninth Circuit ruled that there was no section 1983 violation.
Stiesberg v. State of California, 1996 WL 141028 (9th Cir. Mar. 29, 1996).
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Subsequent treatment of decisions reported on in earlier issues:
Compassion in Dying v. State of Washington (April 1996 issue), now reported at 79 F.3d 790 (9th Cir. 1996).
Fleming v. Imperial Corp of America (July 1995 issue), review dismissed and cause remanded (Feb. 15, 1996). The decision remains unpublished. Cal. R. Ct. 29.4(c), 976(d), 977.
Kennedy v. Collagen Corp. (November 1995 issue), petition for certiorari filed (Apr. 11, 1996).
Klein v. BIA Hotel Corp. (February 1996 issue), review denied (Mar. 21, 1996).
Lorenz v. Commercial Acceptance Ins. Co. (January 1996 issue), review denied (Mar. 21, 1996).
Macy's California, Inc. v. Superior Court (February 1996 issue), time for granting or denying review extended (Mar. 26, 1996).
Rennick v. O.P.T.I.O.N. Care, Inc. (March 1996 issue), now reported at 77 F.3d 309 (9th Cir. 1996).
Rosenbaum v. Security Bank Corp. (April 1996 issue), rehearing denied (Apr. 9, 1996).
Stephens v. Superior Court (February 1996 issue), reported as Smith v. Superior Court, 41 Cal. App. 4th 1014 (1996).
Williams v. City of Oakland (April 1996 issue), now reported at 915 F. Supp. 1074 (N.D. Cal. 1996).
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