Summary
standing to sue employer for violations of Unruh Civil Rights Act
Summary of this case from Limon v. Circle K Stores Inc.Opinion
B298901
09-27-2021
DEPARTMENT OF FAIR EMPLOYMENT AND HOUSING, Plaintiff and Appellant, v. M&N FINANCING CORPORATION et al., Defendants and Appellants.
Xavier Becerra and Rob Bonta, Attorneys General, Matthew Rodriguez, Acting Attorney General, Michael L. Newman, Senior Assistant Attorney General, Susan E. Slager, R. Erandi-Zamora-Graziano, and Brian J. Bilford, Deputy Attorneys General, for Plaintiff and Appellant. Ivan L. Tjoe ; Ropers Majeski and Terry Anastassiou, San Francisco, for Defendant and Appellant M&N Financing Corporation. Lewis Brisbois Bisgaard & Smith, Roy G. Weatherup, Caroline E. Chan, Los Angeles, and Allison A. Arabian, Costa Mesa, for Defendant and Appellant Mahmood Nasiry.
Certified for Partial Publication.
Pursuant to California Rules of Court, rule 8.1110, this opinion is certified for publication with the exception of part III.A.
Xavier Becerra and Rob Bonta, Attorneys General, Matthew Rodriguez, Acting Attorney General, Michael L. Newman, Senior Assistant Attorney General, Susan E. Slager, R. Erandi-Zamora-Graziano, and Brian J. Bilford, Deputy Attorneys General, for Plaintiff and Appellant.
Ivan L. Tjoe ; Ropers Majeski and Terry Anastassiou, San Francisco, for Defendant and Appellant M&N Financing Corporation.
Lewis Brisbois Bisgaard & Smith, Roy G. Weatherup, Caroline E. Chan, Los Angeles, and Allison A. Arabian, Costa Mesa, for Defendant and Appellant Mahmood Nasiry.
I. INTRODUCTION
KIM, J.
Defendants M&N Financing Corporation (M&N) and Mahmood Nasiry operated a business that purchased retail installment sales contracts (contracts) from used car dealerships. In deciding how much to pay for the contracts, defendants used a formula that considered the gender of the car purchaser. Specifically, defendants would pay more for a contract with a male purchaser than for a contract with a female purchaser or female coborrower (collectively, female borrowers).
The Department of Fair Employment and Housing (the Department) filed a complaint that alleged numerous causes of action. The Department moved for summary adjudication. The trial court entered judgment in favor of the Department on the first and second causes of action, which alleged violations of the Unruh Civil Rights Act ( Civ. Code, § 51 ) and Civil Code section 51.5, and assessed over $6 million in statutory damages pursuant to Civil Code section 52, subdivision (a). The court dismissed the fifth, sixth, and seventh causes of action, which alleged violations of Government Code section 12940, subdivisions (i) and (k) of the Fair Employment and Housing Act (FEHA) (§ 12900 et seq.). Defendants appeal and the Department cross-appeals. We hold that the court erred in dismissing the fifth cause of action. We otherwise affirm.
Further statutory references are to the Government Code unless otherwise indicated.
II. BACKGROUND
"In performing our review, we view the evidence in a light favorable to the losing party ..., liberally construing [the] evidentiary submission while strictly scrutinizing the moving party's own showing and resolving any evidentiary doubts or ambiguities in the losing party's favor." (Serri v. Santa Clara University (2014) 226 Cal.App.4th 830, 859, 172 Cal.Rptr.3d 732 (Serri ).)
Nasiry is the owner of M&N, a California corporation that purchased contracts from used car dealerships and thereafter serviced them by collecting monthly installment payments from the car purchasers and contacting those purchasers who failed to make payments.
In deciding whether and how much to bid on a contract, M&N utilized a risk assessment spreadsheet (spreadsheet) that Nasiry created in 2012. Based on Nasiry's 10 years of experience with loan defaults, he believed that there was "a greater risk of default for female borrowers." Thus, Nasiry included the gender of the used car purchaser as one of the 18 to 20 specific factors on the spreadsheet. For gender, M&N employees, at Nasiry's direction, assessed one point for a contract with a female purchaser, zero points for a contract with a male purchaser, and a half-point for a contract with a female coborrower. Each point on the spreadsheet corresponded to a percentage point so that M&N would pay a car dealership one percent less for a contract with a female purchaser and half a percent less for a contract with a female coborrower than it would pay for a contract with a male purchaser.
M&N purchased approximately half of the contracts that it reviewed. From October 17, 2012, to July 2, 2014, M&N purchased 1,037 contracts with female borrowers from 517 car dealerships.
In 2014, the Department initiated an investigation of M&N's business practices, following which M&N ceased to use gender as a factor in its spreadsheet.
B. Pleadings
The Department filed its initial complaint in 2015. On February 16, 2016, the Department filed the operative second amended complaint, alleging in the first and second causes of action violations of Civil Code sections 51 and 51.5 and section 12948. In lieu of actual damages, the Department sought the statutory minimum penalty of $4,000 per violation, and also sought injunctive relief.
The Department alleged nine causes of action against defendants and eventually voluntarily dismissed the third, fourth, eighth, and ninth causes of action with prejudice. On January 15, 2019, the trial court granted M&N's motion for judgment on the pleadings and dismissed the fifth, sixth, and seventh causes of action. We discuss the fifth, sixth, and seventh causes of action below when we address the Department's cross-appeal.
On July 25, 2016, the Department filed a motion for summary adjudication on the first and second causes of action. On September 14, 2016, the trial court granted summary adjudication on the first and second causes of action, ruling that defendants’ conduct violated Civil Code sections 51 and 51.5 as a matter of law.
On November 4, 2016, the Department filed a motion for an injunction and monetary relief in the amount of $6,216,000, the statutory minimum penalty for 1,554 violations of Civil Code sections 51 and 51.5. On July 25, 2017, the trial court granted the motion, issuing an injunction and awarding statutory damages in the amount of $6,212,000.
The number of violations was the sum of the total number of contracts defendants purchased with female borrowers and the number of car dealerships from whom they purchased such contracts.
On May 24, 2019, the trial court entered judgment. The Department and defendants appealed.
III. DISCUSSION
See footnote *, ante .
B. The Department's Cross-Appeal
On cross-appeal, the Department contends that the trial court erred by granting M&N's motion for judgment on the pleadings as to its fifth, sixth, and seventh causes of action.
1. Background
" ‘ "The standard for granting a motion for judgment on the pleadings is essentially the same as that applicable to a general demurrer, that is, under the state of the pleadings, together with matters that may be judicially noticed, it appears that a party is entitled to judgment as a matter of law." [Citation.]’ " ( Southern California Edison Co. v. City of Victorville (2013) 217 Cal.App.4th 218, 227, 158 Cal.Rptr.3d 204.) We recite the relevant allegations from the second amended complaint as follows.
When Nasiry created the spreadsheet in 2012, Khayyam Etemadi, then an M&N employee, told Nasiry that it was illegal to use gender to assign an additional risk point to women. Nasiry refused to remove gender as a factor in assessing risk and asserted that all banks engaged in such conduct. Etemadi complained again when the spreadsheet was placed on employee laptops, and again in November 2013. Nasiry refused each time to remove gender as a factor on the spreadsheet. After complaining to Nasiry about discrimination in November 2013, Etemadi collapsed at work and was taken to the hospital. Etemadi experienced heart palpitations and was hospitalized overnight.
During the course of Etemadi's employment with M&N, Nasiry threatened to "ruin him financially" and directed him to do his job or be fired, thus coercing him to engage in conduct that was discriminatory and unlawful.
After Etemadi filed a complaint with the Department, M&N falsely reported to various credit agencies that Etemadi had failed to repay a loan from M&N. Etemadi left M&N in March 2014 due to stress at work.
2. Fifth, Sixth, and Seventh Causes of Action
In the operative complaint, the Department alleged for the fifth cause of action that M&N "knowingly compelled and coerced its employees to engage in practices that violated" FEHA and Civil Code sections 51 and 51.5, in violation of section 12940, subdivision (i).
As to the sixth and seventh causes of action, the Department alleged, on behalf of all current and former M&N employees and itself, respectively, that M&N failed to take all reasonable steps to prevent discrimination from occurring, in violation of section 12940, subdivision (k).
3. Motion for Judgment on the Pleadings
On October 9, 2018, M&N moved for judgment on the pleadings as to the fifth, sixth, and seventh causes of action. M&N argued that the fifth through seventh causes of action failed to state a claim because Etemadi did not exhaust his administrative remedies. M&N also argued that the sixth and seventh causes of action failed because the Department did not allege an employment discrimination cause of action under FEHA.
Nasiry also moved for judgment on the pleadings. The trial court denied his motion because he was not a named defendant in the fifth, sixth, and seventh causes of action.
On January 15, 2019, the trial court granted M&N's motion, ruling that section 12940, subdivision (i) did not apply because Etemadi and the current and former employees of M&N were not aggrieved parties under that statute. As to the sixth and seventh causes of action, the court ruled that section 12940, subdivision (k) did not impose a duty on employers to prevent violations of the Unruh Act against nonemployees.
4. FEHA
"In enacting the FEHA, the Legislature spoke at length about its purposes. Section 12920 states: ‘It is hereby declared as the public policy of this state that it is necessary to protect and safeguard the right and opportunity of all persons to seek, obtain, and hold employment without discrimination or abridgment on account of race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, or sexual orientation. [¶] It is recognized that the practice of denying employment opportunity and discriminating in the terms of employment for these reasons foments domestic strife and unrest, deprives the state of the fullest utilization of its capacities for development and advancement, and substantially and adversely affects the interests of employees, employers, and the public in general.’
" Section 12920 further declares: ‘It is the purpose of this part to provide effective remedies that will eliminate these discriminatory practices.’ And section 12920.5 provides: ‘In order to eliminate discrimination, it is necessary to provide effective remedies that will both prevent and deter unlawful employment practices and redress the adverse effects of those practices on aggrieved persons.’
"In addition, section 12921, subdivision (a) says: ‘The opportunity to seek, obtain, and hold employment without discrimination because of race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, or sexual orientation is hereby recognized as and declared to be a civil right.’ Section 12993, subdivision (a) instructs that the FEHA ‘shall be construed liberally for the accomplishment of [its] purposes.’ " ( Harris v. City of Santa Monica (2013) 56 Cal.4th 203, 223, 152 Cal.Rptr.3d 392, 294 P.3d 49.)
Relevant here are subdivisions (i) and (k) of section 12940, which provide: "It is an unlawful employment practice [with exceptions not applicable here]: [¶] ... [¶] (i) For any person to aid, abet, incite, compel, or coerce the doing of any of the acts forbidden under this part, or to attempt to do so. [¶] ... [¶] (k) For an employer ... to fail to take all reasonable steps necessary to prevent discrimination and harassment from occurring."
5. Analysis
We review a trial court's decision on a motion for judgment on the pleadings de novo. ( People ex rel. Harris v. Pac Anchor Transportation, Inc. (2014) 59 Cal.4th 772, 777, 174 Cal.Rptr.3d 626, 329 P.3d 180.) " ‘ "Our role in interpreting statutes is to ascertain and effectuate the intended legislative purpose. [Citations.] We begin with the text, construing words in their broader statutory context and, where possible, harmonizing provisions concerning the same subject." ’ [Citation.] In doing so, we give ‘ "the words their usual and ordinary meaning [citation], while construing them in light of the statute as a whole and the statute's purpose [citation]." ’ [Citation.] Our inquiry ends ‘ "[i]f this contextual reading of the statute's language reveals no ambiguity ...." ’ [Citation.]" ( Lee v. Kotyluk (2021) 59 Cal.App.5th 719, 729, 274 Cal.Rptr.3d 29.)
a. Section 12940, subdivision (i)
The trial court ruled, and we agree, that it is unlawful under section 12940, subdivision (i) for any employer to coerce an employee to violate Civil Code sections 51 and 51.5. (See § 12948.) Nonetheless, the court ruled that Etemadi and former and current M&N employees were not aggrieved within the meaning of section 12965, subdivision (a).
We consider whether the Department can bring suit on behalf of employees for an alleged violation of section 12940, subdivision (i). There is no dispute that the Department can sue on its own behalf. (§ 12930, subd. (f)(1).)
An "aggrieved" party is a person who has standing to sue. (See, e.g., § 12965, subd. (a) ["In any civil action, the person claiming to be aggrieved shall be the real party in interest and shall have the right to participate as a party and be represented by that person's own counsel"]; § 12960, subd. (c) ["Any person claiming to be aggrieved by an alleged unlawful practice may file with the department a verified complaint, in writing ..."].) " ‘To have standing, a party must be beneficially interested in the controversy; that is, he or she must have "some special interest to be served or some particular right to be preserved or protected over and above the interest held in common with the public at large." [Citation.] The party must be able to demonstrate that he or she has some such beneficial interest that is concrete and actual, and not conjectural or hypothetical.’ [Citation.] [¶] The prerequisites for standing to assert statutorily[-]based causes of action are determined from the statutory language, as well as the underlying legislative intent and the purpose of the statute." ( Boorstein v. CBS Interactive, Inc. (2013) 222 Cal.App.4th 456, 466, 165 Cal.Rptr.3d 669.)
We hold that employees who are coerced by their employer to violate Civil Code sections 51 and 51.5 are "aggrieved" within the meaning of section 12965, subdivision (a) and have standing to sue their employer pursuant to section 12940, subdivision (i). As discussed, "[i]t is an unlawful practice under this part for a person to deny or to aid, incite, or conspire in the denial of the rights created by Section[s] 51, 51.5, 51.7, 51.9, 54, 54.1, or 54.2 of the Civil Code." (§ 12948.) Liability for violations of Civil Code sections 51 and 51.5 "extends beyond the business establishment itself to the business establishment's employees responsible for the discriminatory conduct." ( North Coast Women's Care Medical Group, Inc. v. Superior Court (2008) 44 Cal.4th 1145, 1154, 81 Cal.Rptr.3d 708, 189 P.3d 959.) Thus, Etemadi and other employees of M&N who were coerced by M&N into violating Civil Code sections 51 and 51.5 could be individually liable for sex discrimination. These employees would necessarily be "aggrieved" by their employer's unlawful employment practice as their personal interests would be affected by their employer's misconduct. The Department therefore was authorized to file a civil action on behalf of these employees and the trial court erred by dismissing the fifth cause of action.
b. Section 12940, subdivision (k)
The Department also asserts that the trial court erred by dismissing its sixth and seventh causes of action for violation of section 12940, subdivision (k). Section 12940, subdivision (k) proscribes an employer's failure to take reasonable steps to prevent discrimination and harassment. Moreover, in order to state a claim under section 12940, subdivision (k), a plaintiff must be able to prevail on an underlying claim of discrimination. Here, the Department does not allege that M&N discriminated against or harassed Etemadi and other employees. Rather, the Department asserts that "discrimination" under subdivision (k) encompasses violations of various subdivisions of section 12940, including subdivision (i), and cites in support Taylor v. City of Los Angeles Dept. of Water & Power (2006) 144 Cal.App.4th 1216, 1239–1240, 51 Cal.Rptr.3d 206 ( Taylor ), disapproved on other grounds by Jones v. Lodge at Torrey Pines Partnership (2008) 42 Cal.4th 1158, 1162, 72 Cal.Rptr.3d 624, 177 P.3d 232. In Taylor , the court held that retaliation under section 12940, subdivision (h) is a form of discrimination actionable under section 12940, subdivision (k). ( Taylor , supra , 144 Cal.App.4th at p. 1240, 51 Cal.Rptr.3d 206.) The court reached this conclusion, in part, based on the language of subdivision (h), which makes it an unlawful employment practice " ‘[f]or any employer ... to discharge, expel, or otherwise discriminate against any person because the person has opposed any practices forbidden under this part ....’ " ( Taylor , supra , 144 Cal.App.4th at p. 1237, 51 Cal.Rptr.3d 206, italics added.) Thus, an employer who has retaliated against an employee has necessarily discriminated against that employee and has failed to prevent discrimination, within the meaning of section 12940, subdivision (k). ( Taylor , supra , 144 Cal.App.4th at p. 1240, 51 Cal.Rptr.3d 206.)
Section 12940, subdivision (g) also proscribes as an unlawful employment practice "[f]or any employer ... to harass, discharge, expel, or otherwise discriminate against any person because the person has made a report pursuant to [s]ection 11161.8 of the Penal Code that prohibits retaliation against hospital employees who report suspected patient abuse by health facilities or community care facilities." (Italics added.)
By contrast, section 12940, subdivision (i) does not include similar language. (See § 12940, subd. (i) [proscribing as unlawful employment practice "[f]or any person to aid, abet, incite, compel, or coerce the doing of any of the acts forbidden under this part, or to attempt to do so"].) Where, as here, " ‘the Legislature makes express statutory distinctions, we must presume it did so deliberately, giving effect to the distinctions, unless the whole scheme reveals the distinction is unintended.’ " ( Metropolitan Water Dist. v. Superior Court (2004) 32 Cal.4th 491, 502, 9 Cal.Rptr.3d 857, 84 P.3d 966 ; see also Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 59, 124 Cal.Rptr.2d 507, 52 P.3d 685 ["When interpreting statutes, ‘we follow the Legislature's intent, as exhibited by the plain meaning of the actual words of the law .... "This court has no power to rewrite the statute so as to make it conform to a presumed intention which is not expressed" ’ "].) We therefore presume that the Legislature intended the distinction between section 12940, subdivisions (g) and (h), which include the terms "otherwise discriminate" and reference other unlawful acts, and subdivision (i), which does not, and hold that a violation of subdivision (i) is not "discrimination" within the meaning of section 12940, subdivision (k).
The Department therefore failed to allege facts demonstrating that defendants violated section 12940, subdivision (k) and the trial court did not err by dismissing the sixth and seventh causes of action. IV. DISPOSITION
The judgment is reversed as to the dismissal of the fifth cause of action and the matter is remanded for further proceedings. The judgment is otherwise affirmed. The Department is entitled to recover costs pertaining to M&N's and Nasiry's appeals. The parties are to bear their own costs pertaining to the Department's appeal.
We concur:
RUBIN, P. J.
MOOR, J.