October 1999 Vol. 5 No. 10 ISSN 1087-6219
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In This Issue

• California Supreme Court upholds State Bar's MCLE program
• Judge not immune from suit for defamatory statements to reporter
• Discharge for refusal to sign pre-dispute arbitration agreement cannot support public policy tort
• Ninth Circuit rules that California law allows some restrictive covenants
• Employee's estate could recover face value of life insurance policy in wrongful termination action
• Reasonable accommodation under the ADA may include placing disabled employee in a newly created, vacant position
• UPDATES

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California Supreme Court upholds State Bar's MCLE program

The California Supreme Court has ruled that the California State Bar's Mandatory Continuing Legal Education program (MCLE) does not violate the constitution. The exemptions for retired judges, state employees and full-time law professors do not violate the Equal Protection Clause. The ruling reverses a decision of the First District Court of Appeal that was discussed in the April 1997 issue of Appellate Decisions Noted.

California's MCLE program exempts (1) retired judges, (2) California officers and elected officials, (3) full-time law professors, (4) full-time state employees, and (5) full-time federal employees. The Court of Appeal had found that there was no rational basis for treating lawyers in those categories differently from other lawyers.

The Supreme Court disagreed. There were two “plausible reasons” for the exemptions. First, the Legislature could have rationally concluded that lawyers in those categories were less likely than others to represent clients on a full-time basis. Second, the Legislature could also have rationally concluded that lawyers in those categories were less likely to need continuing education.

For example, retired judges are more likely to engage in private judging than in representing clients. The skills and qualifications needed to become a judge and the day-to-day exposure to legal developments in the courtroom mean that retired judges have less need for MCLE.

Similarly, state officials must devote most of their time to official duties, and have little time for representing clients. At the same time, their official duties require them to stay abreast of current law.

Warden v. State Bar of California, 21 Cal. 4th 628 (1999).

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Judge not immune from suit for defamatory statements to reporter

The Second District Court of Appeal in Los Angeles has ruled that absolute judicial immunity does not extend to defamatory comments to a news reporter about a litigant. A judge does have immunity for conduct during a settlement conference, no matter how egregious.

Judge Alexander Williams II was presiding over a settlement conference in Los Angeles Superior Court. Robert Soliz, one of the litigants attending the settlement conference, was sitting in the hallway outside Judge Williams's courtroom. According to Soliz's complaint, Judge Williams burst out of the courtroom, pointed his finger, called Soliz's settlement demand “b*******,” and said that he had “s*** for brains,” if he thought there was any money in the case.

Later, Judge Williams spoke to a Los Angeles Daily Journal reporter. He admitted that he acted inappropriately, but denied having acted as Soliz claimed. According to Soliz, Judge Williams's statements to the reporter made Soliz appear to be a liar.

The statements in the hallway outside the courtroom were absolutely privileged, as a communication in a judicial proceeding. The court rejected Soliz's argument that Judge Williams's alleged misconduct was so serious that it should not be considered part of a judicial proceeding.

Judge Williams was not acting in a judicial capacity when he spoke to the reporter. Although statements to journalists may further the judicial function, the absolute immunity does not apply.

Soliz v. Williams, 74 Cal. App. 4th 577 (1999).

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Discharge for refusal to sign pre-dispute arbitration agreement cannot support public policy tort

The Second District Court of Appeal in Los Angeles has ruled that an employer may fire an employee for refusing to sign a pre-dispute arbitration agreement. Requiring an employee to arbitrate employment disputes does not violate a fundamental and substantial public policy.

Donald Lagatree was discharged by two different law firms for refusing to sign pre-dispute arbitration agreements. He claimed that the discharges violated a public policy favoring constitutional rights to a jury trial and a judicial forum. He alleged tort causes of action against his former employers, based on Tameny v. Atlantic Richfield Co., 27 Cal. 3d 167 (1980).

Although the rights that Lagatree identified were important, they are subject to waiver. There is no principle that would invalidate such a waiver just because it was imposed as a condition of employment.

Arbitration clauses are not inherently unfair or oppressive. The California Arbitration Act states a strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution.

Lagatree v. Luce, Forward, Hamilton & Scripps, 74 Cal. App. 4th 1105 (1999).

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Ninth Circuit rules that California law allows some restrictive covenants

The Ninth Circuit has ruled that a six-month restraint on competition with a former employer was enforceable under California law. Business & Professions Code section 16600 does not prohibit restraints that exclude an employee from a small part of the market after employment ends.

Christopher Bajorek received stock options worth more than $900,000 from IBM, his employer. The agreements under which he received the options provided that he would return any profits from the options if he worked for a competitor within six months after exercising the options. The agreements provided that New York law would apply to any disputes.

Bajorek sued IBM in California (where he resided) for a declaration that IBM could not cancel his options. IBM sued Bajorek in New York (its home state) for breach of contract and fraud. Both cases were removed to federal court. The New York case was transferred to California, and consolidated with the California case.

The federal court in California was required to follow the parties' choice of law unless applying New York law would be contrary to a fundamental California policy. Restatement (Second) Conflict of Laws § 187 (1971). Bajorek argued that enforcing the restriction would violate the public policy embodied in Business & Professions Code section 16600. That section states that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”

The Ninth Circuit ruled that the policy was not implicated, because section 16600 did not apply. A restriction on competition is valid if the promisor is barred from pursuing only a small or limited part of his or her trade. In this case, the covenant would have a limited impact:

“Bajorek could have kept the money and gone to work for a competitor immediately upon quitting, had he elected to exercise his stock options six months before he quit. And he was free to work in his profession and in the same industry and keep the money, so long as he did not work for a competitor. And he could work for a competitor if he gave up what was paid in part for his promise not to.” Therefore, there was no impediment to the application of New York law.

International Business Machines Corp. v. Bajorek, 1999 WL 710360 (9th Cir. Sep. 14, 1999).

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Employee's estate could recover face value of life insurance policy in wrongful termination action

The Ninth Circuit has ruled that the estate of an employee who lost her life insurance policy after being unlawfully discharged may recover the face value of the policy, less any proceeds from substitute life insurance. The case turned on the proper measure of damages under California's Fair Employment and Housing Act (FEHA).

Jody Sposato sued Electronic Data Systems (EDS) for wrongful termination in violation of FEHA. Part of her benefit package at EDS had included a life insurance policy, with a double indemnity provision. After EDS terminated her employment, Sposato purchased replacement life insurance that did not have a double indemnity provision. Sposato was accidentally killed while her lawsuit was pending. Her husband was substituted as plaintiff. He claimed the face value of the policy provided by EDS as part of the damages.

EDS argued that the estate should only recover the premiums that would have been paid. That was not a broad enough remedy. The employer must bear the economic consequences of its unlawful decision to terminate Sposato's employment.

EDS also relied on California Code of Civil Procedure section 377.34. That statute provides for the survival of a decedent's causes of action, but limits recovery to “the loss or damage that the decedent sustained or incurred before death.” Sposato's loss occurred before her death, when EDS wrongfully discharged her and denied her further life insurance coverage. Therefore, the limitation did not apply.

Sposato v. Electronic Data Sys. Corp., 1999 WL 646896 (9th Cir. 1999).

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Reasonable accommodation under the ADA may include placing disabled employee in a newly created, vacant position

The Ninth Circuit has reversed a grant of summary judgment for an employer, because of a factual dispute about whether a position had been created that would have accommodated an employee's disability.

Michael Wellington was a maintenance worker for the Lyon County School District. He developed carpal tunnel syndrome, and went off on worker's compensation leave on two separate occasions. When he returned he was assigned to fill temporary light duty positions that were consistent with the work restrictions imposed by his doctor. Eventually the worker's compensation agency told the District to offer Wellington a permanent job consistent with the work restrictions, or he would be retrained for another job outside the District.

The District considered the possibility of making one of Wellington's temporary light duty jobs a permanent one. It involved setting up and administering a safety program. There was testimony that an administrator said: “[I]t's one job we need to have done in this district right now.” That combined with other discussions about the position provided sufficient evidence that the position had already been created to survive a summary judgment motion.

Wellington v. Lyon County Sch. Dist., 1999 WL 637100 (9th Cir. Aug. 23, 1999).

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UPDATES

Subsequent treatment of decisions reported on in earlier issues:

Berger v. Hanlon (December 1997 issue), on remand from the Supreme Court, 1999 WL 651935 (9th Cir. Aug. 27, 1999).

Bernstein v. United States Dep't of Justice (June 1999 issue), rehearing granted and opinion withdrawn, 1999 WL 782073 (9th Cir. Sep. 30, 1999).

Daily Journal Corp. v. Superior Court (August 1999 issue), now reported at 20 Cal. 4th 1117 (1999).

Delgado v. American Multi-Cinema, Inc. (July 1999 issue), review denied (Sep. 15, 1999).

Gilbrook v. City of Westminster (June 1999 issue), petition for certiorari filed (Sep. 16, 1999).

Interstellar Starship Serv., Ltd. v. Epix, Inc. (August 1999 issue), now reported at 184 F.3d 1107 (9th Cir. 1999).

Robi v. Reed (April 1999 issue), petition for certiorari filed (Aug. 26, 1999).

Warden v. State Bar of California (April 1997 issue), reversed, 21 Cal. 4th 628 (1999), time for grant or denial of rehearing extended to Nov. 24, 1999.

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