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January 1996 
Vol. 2 No. 1 ISSN 1087-6219
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In two recent cases, the California Supreme Court has ruled that employers are not vicariously liable in tort for sexual harassment. The rulings may foreshadow reconsideration of the decision in Mary M. v. City of Los Angeles, 54 Cal. 3d 202 (1991), which held the City of Los Angeles vicariously liable for the rape of a motorist by an on-duty police officer.
In the first case, a deputy sheriff sexually harassed three female deputies at the Santa Clara County jail. The carrier for his homeowner's policy settled the ensuing litigation, and sued the county for what it had to pay. In the other, a woman patient sued a private hospital after a technician sexually molested her during a medical examination.
The test used for vicarious liability was the same for both employers-whether the employee's conduct is "not so unusual or startling that it would seem unfair to include the loss resulting from it among other costs of the employer's business." The court concluded that it would be unfair to impose liability for harassment, because the torts were not "engendered" by the employment. It distinguished Mary M. as involving the extraordinary coercive authority that the police exercise over members of the public. Neither a hospital technician nor a deputy sheriff interacting with fellow officers has that same coercive authority.
Three justices believed that Mary M. should be overruled. However, the signals from the two cases are mixed. Two of the 5-member Mary M. majority (Justices Broussard and Panelli) have left the court. A third (Justice Arabian) will leave next month. Justice Broussard's replacement (Justice George) said that Mary M. should be overruled. However, Justice Panelli's replacement (Justice Werdegar) suggested in her opinion for the court in the hospital case that Mary M. might support vicarious liability for sexual exploitation by a hospital psychotherapist.
The decisions will not affect employer liability for sexual harassment under Title VII or the state Fair Employment and Housing Act. Nor will they bar potential liability for negligent hiring or supervision.
Farmers Ins. Group v. County of Santa Clara, 1995 Cal. LEXIS 6796 (Cal. Sup. Ct. Dec. 6, 1995); Lisa M. v. Henry Mayo Newhall Memorial Hospital, Case No. S042581 (Cal. Sup. Ct. Dec. 26, 1995)
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The Third District Court of Appeal in Sacramento has ruled that supervisors may be fired for preparing to open a business that would compete with their employer. Employers have the right to expect undivided loyalty from their employees.
The employees had argued that Bancroft-Whitney Co. v. Glen, 64 Cal. 2d 327 (1966) required a different result. That opinion states that a corporate officer does not necessarily breach his fiduciary duty by making some preparations for a new position before leaving the old one. However, that case involved a different issue-whether the employee had committed a tort. Discharge from employment need not wait until the employee commits a tort.
Stokes v. Dole Nut Co., 1995 Cal. App. LEXIS 1259 (Cal. Ct. App. Dec. 21, 1995).
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The Santa Ana division of the Fourth District Court of Appeal has ruled that a lender's full credit bid at a foreclosure sale bars a later negligence action against an appraiser. The court distinguished the Supreme Court's recent decision in Alliance Mortgage Co. v. Rothwell, 10 Cal. 4th 1226 (1995), which held that a full credit bid did not bar a claim that fraud caused the lender to make the bid. Alliance Mortgage was discussed in the October 1995 issue of Appellate Decisions Noted.
Pacific Inland Bank relied on an erroneous appraisal by Charles Ainsworth when it made a real estate loan to Santiago Investors. After Santiago defaulted, the bank acquired the real property security at a nonjudicial foreclosure sale with a full credit bid. When the property proved to be worth only a fraction of the appraised value, the bank sued Ainsworth for negligence.
However, the bank's full credit bid had established the value of the property as at least equal to the amount of its lien. Therefore, it had not suffered any legal damage. Alliance Mortgage could not save the claim. The Supreme Court stated there that the full credit bid rule would continue to apply unless a defendant's fraudulent misrepresentations caused the lender's full credit bid.
A footnote at the close of the present opinion offered this quotation from the leading treatise on California real estate law:
"It is astounding that beneficiaries still enter full credit bids without consideration of their effect. The full credit bid rule is so clearly established that it would be apparent malpractice for an attorney who conducts a foreclosure sale to fail to advise a client of its effect prior to the sale." 4 Miller & Starr, Cal. Real Estate § 9:158 (1995 pocket part).
Pacific Inland Bank v. Ainsworth, 1995 Cal. App. LEXIS 1248 (Cal. Ct. App. Dec. 21, 1995).
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The Sixth District Court of Appeal in San Jose has ruled that automatic relief from default based on an attorney's affidavit is available even when a judge enters the default. The court decided that an insurer was entitled to relief under Code of Civil Procedure section 473 after its answer was stricken for failure to post a bond required of non-admitted foreign insurers.
Mary Ross sued Commercial Acceptance to recover a $2.25 million judgment that she had obtained against its insured. Insurance Code section 1616 required Commercial Acceptance to post a bond before answering the complaint. It did not post the bond, and its answer was stricken. However, the insurer's counsel had over a month to post the bond and have the answer reinstated. He never did, and the court entered a $2.25 million default judgment.
Commercial Acceptance's counsel submitted an affidavit pursuant to section 473, asserting that entry of the judgment was his fault. The trial court granted relief, and the Court of Appeal affirmed.
The attorney affidavit portion of section 473 refers to a default "entered by the clerk." Ross argued that automatic relief was not available because a judge had entered the default against Commercial Acceptance. Her argument relied on two cases that held the attorney affidavit procedure inapplicable to discretionary dismissals for failure to prosecute under Code of Civil Procedure section 583.410. Graham v. Beers, 30 Cal. App. 4th 1656 (1994); Tustin Plaza Partnership v. Wehage, 27 Cal. App. 4th 1557 (1994). Those decisions were not controlling because section 583.410 dismissals require an exercise of judicial discretion based on an evaluation of the reasons for delay. The Insurance Code provision left no room for discretion.
The reasoning that the Court of Appeal used to distinguish Graham and Tustin Plaza may raise questions about the availability of automatic relief under section 473 for defaults resulting from discovery sanctions. Like dismissals for failure to prosecute, discovery sanctions are imposed in the exercise of judicial discretion after consideration of the excuses for failure to make discovery.
The issue awaits a definitive appellate decision. In Sugasawara v. Newland, 27 Cal. App. 4th 294 (1994), the San Bernardino division of the Fourth District Court of Appeal applied the attorney affidavit provision to a default entered as a discovery sanction. However, the decision did not discuss whether it was appropriate to apply the provision in such circumstances.
The report on Todd v. Thrifty Corp. in the June 1995 issue of Appellate Decisions Noted discusses other aspects of the availability of automatic relief from default based on an attorney's affidavit of fault.
Lorenz v. Commercial Acceptance Ins. Co., 1995 Cal. App. LEXIS 1173 (Cal. Ct. App. Dec. 1, 1995).
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The Second District Court of Appeal in Los Angeles has ruled that residents of a public housing project may pursue arson-related personal injury claims against the City of Los Angeles and the Housing Authority. Plaintiffs alleged that they told the police on a weekly basis about threats and physical assaults by various drug dealers. The repeated notices of criminal activity and the undertaking by the Housing Authority to provide housing were sufficient to impose a tort duty on the public entities. See Cal. Gov. Code §§ 820, 835.
The immunity provided in Government Code section 820.2 for discretionary acts was unavailable at the demurrer stage because the complaint did not describe the decision-making process that led to plaintiffs' injuries. To prevail, the public entities would have to present evidence of an exercise of discretion involving conscious balancing of risks and advantages.
The immunity provided by Government Code section 845 for failure to provide police protection was not a complete defense. A claim that the injuries resulted from failure to provide sufficient police would be barred. However, if the gravamen of plaintiffs' claim turned out to be a failure to warn of danger, a failure to evict dangerous tenants, or a failure to transfer to safer housing, the immunity would not apply.
The court went on to decide that plaintiffs had also stated a cause of action under 42 U.S.C. § 1983. They sufficiently identified a federally protected right by alleging that actions of the City and the Housing Authority had placed them in danger. See, e.g., L.W. v. Grubbs, 974 F.2d 119 (9th Cir. 1992), cert. denied, 113 S.Ct. 2442. The requisite government involvement was contained in the allegations of a policy of deliberate indifference to the dangers posed by public housing.
Zuniga v. Housing Authority of the City of Los Angeles, 1995 Cal. App. LEXIS 1231 (Cal. Ct. App. Dec. 14, 1995).
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The Second District Court of Appeal in Los Angeles has reminded trial courts that terminating sanctions should not be imposed for failure to pay monetary discovery sanctions.
Discovery sanctions should be no more severe than necessary to accomplish the purposes of discovery. Terminating sanctions are not necessary to coerce the payment of monetary sanctions, which may be enforced under the execution of judgment laws.
Therefore, it is never appropriate to issue a terminating sanction for failure to pay a monetary sanction. Doing so is an automatic abuse of discretion. Terminating sanctions are appropriate only for conduct related to the provision of discovery.
Newland v. Superior Court, 40 Cal. App. 4th 608 (1995).
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An armed robber invaded a Kentucky Fried Chicken restaurant, and held a gun to customer Kathy Brown's back, demanding that the restaurant's cashier open the cash register. The cashier stalled, and opened the register only after the robber threatened to shoot Brown. Brown claimed that the cashier's unreasonable delay subjected her to increased threats of injury. The Second District Court of Appeal in Los Angeles held that Kentucky Fried Chicken was not entitled to summary judgment, even though it had no notice of prior similar incidents.
The court disagreed with an earlier decision by the same division in Vandermost v. Alpha Beta Co., 164 Cal. App. 3d 771 (1985), which had rejected a similar claim by a restaurant customer where there was no proof of prior similar incidents. Such proof was unnecessary because the duty arose after the robbery was under way. The cashier should have foreseen that harm would result if she did not immediately obey the robber.
The court distinguished the Supreme Court's decision in Ann M. v. Pacific Plaza Shopping Ctr., 6 Cal. 4th 666 (1993). That case held that the owner of a strip mall did not have a duty to hire a roving security patrol without prior notice of similar criminal activity. Brown did not contend that KFC should have hired security guards.
An Appellate Decisions Noted report on the subsequently depublished decision in Phillips v. Perils of Pauline Food Prod., Inc. contains a discussion of issues similar to those raised in this case.
Kentucky Fried Chicken of California, Inc. v. Superior Court, 40 Cal. App. 4th 798 (1995).
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Subsequent treatment of decisions reported on in earlier issues:
Fleming v. Imperial Corp. of America (July 1995 issue), reprinted for tracking pending review, 40 Cal. App. 4th 53.
Kennedy v. Collagen Corp. (November 1995 issue), now reported at 67 F.3d 1453 (1995).
Lafayette Morehouse, Inc. v. Chronicle Publishing Co. (September 1995 issue), review denied and requests for depublication denied (Nov. 30, 1995).
Mackinney v. Nielsen (December 1995 issue), now reported at 69 F.3d 1002 ( 9th Cir. 1995).
Smiley v. Citibank (South Dakota), N.A. (October 1995 issue), petition for cert. filed (Nov. 30, 1995).
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