January 1997 Vol. 3 No. 1 ISSN 1087-6219
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In This Issue

• Jurisdiction upheld in case about E. coli contamination of Jack-in-the Box food in Washington
• Statute for wrongful termination claims runs from actual termination
• False comments that seriously damage public employee's standing may give rise to due process claim
• Reasonable accommodation of an employee with an alcohol problem
• No right to jury trial on enforceability of agreement to arbitrate
• UPDATES

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Jurisdiction upheld in case about E. coli contamination of Jack-in-the Box food in Washington

The California Supreme Court has ruled that out-of-state franchisees are subject to jurisdiction in California for claims related to their relationship with a California franchiser. The case arose from E. coli contamination of hamburgers sold at Washington Jack-in-the-Box restaurants in 1993. Jack-in-the-Box's principal place of business is in San Diego.

In litigation following the contamination, Jack-in-the-Box claimed that Vons had supplied contaminated hamburger. Vons cross-complained against Jack-in-the-Box and a number of its franchisees, alleging that proper cooking would have avoided the contamination. Two franchisees in the State of Washington challenged the jurisdiction of the San Diego Superior Court.

The court relied principally on the United States Supreme Court's decision in Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985). That case upheld jurisdiction over a Michigan franchisee in Burger King's home state of Florida. By entering into a long-term contractual relationship with a Florida franchiser, the franchisee had subjected itself to jurisdiction in Florida for disputes arising out of the relationship.

The present case is different from Burger King, because the claimant (Vons) was not a party to the franchise agreement. Therefore, Vons's claim did not arise directly out of the Washington franchisees' contact with California. However, the United States Supreme Court has not said that such a direct relationship is required. For the California Supreme Court, it is enough that the claim bears a “substantial connection” to defendant's forum contacts. Cornelison v. Chaney, 16 Cal. 3d 143 (1976) (upholding jurisdiction for California resident's claim against Nebraska trucker who caused an accident in Nevada en route to California, based on trucker's frequent deliveries to California).

The Supreme Court disapproved the reasoning of two decisions, which had said that the defendant's forum contacts must be the proximate cause of the plaintiff's damages. See Sklar v. Princess Properties Int'l, Ltd., 194 Cal. App. 3d 1202 (1987); Circus Circus Hotels, Inc. v. Superior Court, 120 Cal. App. 3d 546 (1981). It also rejected the view that forum contacts count only if they relate to the substance of the plaintiff's claim. See Brilmayer, How Contacts Count: Due Process Limitations on State Court Jurisdiction, 1980 Sup. Ct. Rev. 77.

Vons Companies, Inc. v. Seabest Food, Inc., 1996 WL 711312 (Cal. Sup. Ct. Dec. 12, 1996).

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Statute for wrongful termination claims runs from actual termination

The California Supreme Court has ruled that the statute of limitations for wrongful termination claims runs from actual termination, not from notice of intent to terminate. The Court declined to follow contrary federal authority involving federal civil rights claims. It affirmed a lower court decision that was discussed in the November 1995 issue of Appellate Decisions Noted.

In December 1988, Rockwell informed William Romano that it would terminate his employment in May 1991. It hired a replacement in December 1989. Romano continued in another position until June 1, 1990, when he started a one-year teaching fellowship. He “retired” on May 31, 1991. On December 9, 1991 Romano filed a complaint, alleging contract, tort and FEHA claims.

None of the causes of action accrued until actual discharge. Until Romano's employment ended, there was no breach of contract, no wrongful termination, and no unlawful employment practice. The Court felt that this rule had the “obvious benefit” of simplicity. In addition, a contrary rule might destroy any chance of reconciliation following an adverse employment decision.

The Court rejected the United States Supreme Court's reasoning in two employment cases involving educational employees. Chardon v. Fernandez, 454 U.S. 6 (1981); Delaware State College v. Ricks, 449 U.S. 250 (1980). It also disapproved a lower court decision that relied on Ricks. Regents of the University of California v. Superior Court, 33 Cal. App. 4th 1710 (1995) (discussed in the June 1995 issue of Appellate Decisions Noted). In a concurring opinion, Justice Kennard suggested that decisions about tenure might warrant different treatment.

Romano v. Rockwell Int'l, Inc., 1996 WL 718121 (Cal. Sup. Ct. Dec. 16, 1996).

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False comments that seriously damage public employee's standing may give rise to due process claim

The Ninth Circuit has reversed the dismissal of former UC Berkeley basketball coach Lou Campanelli's lawsuit based on negative public comments about his discharge. Campanelli sufficiently alleged that university officials had wrongfully interfered with his employment opportunities by falsely stigmatizing him.

The university fired Campanelli midway through the 1992-93 college basketball season. A week later, university officials told the San Francisco Chronicle that he was fired for a post-game speech, in which he was “profane and abusive.” They said that Campanelli had been “tear[ing] the kids down,” and that point guard Jason Kidd had become physically ill from Campanelli's pressure. Campanelli alleged that those statements made it very difficult for him to find comparable employment.

Campanelli's complaint adequately alleged the elements of a section 1983 due process claim under Board of Regents v. Roth, 408 U.S. 564 (1972). Those elements are (1) a stigmatizing charge that is (2) false, and (3) made in the course of a discharge.

Statements about general incompetence are not sufficiently stigmatizing to support a claim. However, Campanelli might be able to prove that the comments charged him with morally reprehensible behavior. The fact that the statements came a week after his discharge would not prevent Campanelli from proving that they were “in the course of” his firing. It is enough that the defamatory statements were so closely related to the discharge that the discharge itself may become stigmatizing.

Campanelli v. Bockrath, 1996 WL 673538 (9th Cir. Nov. 22, 1996).

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Reasonable accommodation of an employee with an alcohol problem

The First District Court of Appeal in San Francisco has affirmed summary judgment against an employee who claimed that his employer had not reasonably accommodated his alcohol problem. The case is a valuable lesson for other employers who wish to avoid liability in similar circumstances.

Richard Gosvener was a shift supervisor at a refinery operated by Pacific Refining. In 1991 he told his supervisor that he had an alcohol problem. Pacific Refining referred him to a private clinic, paid for a private doctor, and reassigned him temporarily to a less stressful position at the same pay.

Gosvener and Pacific Refining also agreed in writing that continued employment was dependent upon success in dealing with his alcohol problem. Gosvener made some progress, but by June 1993 he was again having a serious problem. Pacific Refining gave him one more chance, and entered into a further written agreement, which reiterated that Gosvener had to remain drug and alcohol free to continue in his employment. When Pacific Refining learned that he had begun drinking again, it discharged him in January 1994.

The court ruled that Gosvener had no disability discrimination claim. An employer who has attempted to accommodate an employee's alcohol problem by arranging for treatment does not have to grant repeated chances to overcome the problem. If the rule were otherwise, an employer could never discharge an employee who was unfit to perform his or her job because of drugs or alcohol.

Gosvener v. Coastal Corp., 1996 WL 721659 (Cal. Ct. App. Dec. 16, 1996).

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No right to jury trial on enforceability of agreement to arbitrate

The California Supreme Court has ruled that neither the federal arbitration act nor the state constitution require a jury trial on the enforceability of an agreement to arbitrate. The Court also explained the circumstances under which fraud will prevent arbitration.

Several investors in mutual funds sued Great Western for investment losses. Great Western petitioned for an order compelling arbitration. The investors claimed that the arbitration clauses in the client agreements that they signed were unenforceable because of fraud. The trial court, without a jury, denied the petition because the investors had presented evidence to support their fraud claims.

Under state practice, a party seeking to compel arbitration files a petition, which is determined in a motion proceeding. The trial court generally resolves factual disputes on declarations and documentary evidence. In its discretion, it may take oral testimony. There is no right to a jury trial. Cal. Civ. Proc. Code §§ 1280 et seq.

The United States Arbitration Act provides that arbitration clauses are generally valid, irrevocable and enforceable. 9 U.S.C. § 2. That provision preempts any contrary state law. The Act also provides for a jury trial. 9 U.S.C. § 4. However, that portion of the Act was intended only to apply to enforcement proceedings in the federal courts. It did not abrogate the general rule that state courts enforcing federal rights may use their own procedures so long as they do not impede federal policy.

There was no right to a jury trial under the California constitution. A petition to compel arbitration is analogous to a suit in equity to compel specific performance. Because such suits were not tried to a jury at common law, there is no constitutional right to a jury.

The Court also considered the merits of the fraud claims. The arbitrator, not the court, generally determines whether there is fraud in the inducement of a contract containing an arbitration clause. Prima Paint Corp. v. Flood & Conklin, 388 U.S. 395 (1967). The court does decide claims of fraud in the “execution” or “inception” of the entire contract. If a party does not know what he or she is signing, there can be no agreement to arbitrate.

To establish fraud in the execution, however, a party must show that he or she acted reasonably. If the party had a reasonable opportunity to learn the essential terms of the agreement, a claim that the terms were misrepresented will fail. Restatement (Second) of Contracts § 163.

In this case, most of the fraud claims failed, because the investors claimed only that they had trusted Great Western employees who told them not to bother reading the client agreement. The Court returned the claims of three investors to the trial court for fact-finding: (1) an 81-year old Italian immigrant who claimed to speak only a few words of English and to have relied on Great Western representatives for her understanding of the documents; (2) a legally blind investor who relied on a representative's description of the agreement; and (3) an 80-year old woman with Alzheimer's disease who may have lacked capacity to enter into a contract.

Rosenthal v. Great Western Fin. Sec. Corp., 1996 WL 711297 (Cal. Sup. Ct. Dec. 12, 1996).

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UPDATES

Subsequent treatment of decisions reported on in earlier issues:

Cammack v. GTE Corp. (September 1996 issue), review granted (Nov. 26, 1996). The decision may no longer be cited. Cal. R. Ct. 976(d), 977.

Cheng-Canindin v. Renaissance Hotel Assoc. (December 1996 issue), now reported at 50 Cal. App. 4th 676 (1996).

City and County of San Francisco v. Stacy & Witbeck and Nationwide (August 1996 issue), review denied (Oct. 16, 1996).

City of Moorpark v. Superior Court (October 1996 issue), review granted (Nov. 26, 1996). The decision may no longer be cited. Cal. R. Ct. 976(d), 977.

County of Los Angeles v. Superior Court (December 1996 issue), now reported at 58 Cal. Rptr. 2d 358 (Ct. App. 1996).

DeCastro West Chodorow & Burns, Inc. v. Superior Court (August 1996 issue), review denied (Oct. 30, 1996).

Doe v. Capital Cities (December 1996 issue), now reported at 50 Cal. App. 4th 1038 (1996).

Dove Audio, Inc. v. Rosenfeld, Meyer & Susman (August 1996 issue), review denied (Oct. 16, 1996).

Fiol v. Doellstedt (December 1996 issue), now reported at 58 Cal. Rptr. 2d 308 (Ct. App. 1996).

General Motors Corp. v. Superior Court (September 1996 issue), review denied (Nov. 13, 1996).

Hecht v. Superior Court (December 1996 issue), now reported at 50 Cal. App. 4th 1289 (1996).

Janken v. GM Hughes Electronics (July 1996 issue), review denied (Aug. 28, 1996).

NBC Subsidiary (KNBC-TV), Inc. v. Superior Court (October 1996 issue), review granted (Dec. 18, 1996). The decision may no longer be cited. Cal. R. Ct. 976(d), 977.

Nizam-Aldine v. City of Oakland (August 1996 issue), review denied (Nov. 13, 1996).

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