Free Appendix - District Court of California - California

Case 5:07-cv-04808-JF

Document 50-9

Filed 07/03/2008

Page 1 of 30
Page 17

11 CaI. 4th 85, *; 900 P.2d 669, **; 44 Cal. Rptr. 2d 420, ***; 1995 Cal. LEXIS 4963
broad and overly narrow. It was overly narrow because,
frstrations that attend breached contracts, unreliable

as numerous authorities cited by the majority point out, there is no logical reason to distinguish between the tort
of "bad faith denial of the existence of a contract" and

suppliers, and the like are part of the realities of com-

"bad faith denial of liability under a contract." The former is but a subspecies of the latter. Both form of bad
faith are equally reprehensible on the defendant's part

and equally injurious to plaintiff.

Seaman's was overly broad because, for a number of

merce. Society expects the business enterprise to go to the marketplace to seek substitutes to mitigate its losses, and to seek contract damages for those losses that cannot be mitigated. But there are some commercial cases in which the harm intentionally inflcted on an enterprise cannot be mitigated, and in which ordinary contract damages are insuffcient compensation. Seaman's is such
a case. In Seaman's, because of

reasons, it appears to have been unwise to impose tort liabilty for all breaches that involve bad faith denial of a contract or liability under the contract. Although the bad
faith denial of contractual

the unusual combination

of market forces and governent regulation set in motion by the 1973 oil embargo, Standard's conduct had a

liability may be ethically inex-

cusable, we should hesitate to categorically impose tort

liability on such activity for fear it may overly deter legitimate activities that we wish to permt or encourage.
Specifically, the bad faith denial of the existence of a
contract consists of two actions on the defendant's part

significance beyond the ordinary breach: its practical effect was to shut Seaman's out of the oil market entiely, forcing it out of business. In other words, Standard inten-

tionally breached its contract with Seaman's with the
knowledge that the breach would result in Seaman's demise. Having thus breached its contract with blithe disregard for the severe and, under these rare circumtances,
untigatable injur it caused Seaman's, Standard was

that do not, taken individually, give rise to tort liability: First, the defendant intentionally breaches its contract. As discussed above, because of our notions of effcient
breach and the freedom of the marketplace, we have
generally not considered an intentional breach tortous.

justly subject to tort damages.

In sum, I would permt an action for tortous breach of contract in a commercial setting when a part intentionally breaches a contractual obligation with neither

Second, the defendant asserts a bad faith defense to liability under the contract--or, more precisely, threatens
to assert such a defense We have consistently refused to
recogne a tort of "malicious defense" that would be

probable cause nor belief that the obligation does not exist, and when the part intends or knows that the
breach will result in severe consequential damages to the
other part that are not readily subject to mitigation, and

equivalent to that of malicious prosecution. The refusal
to recogne such a tort "protect( s) the right of a defen-

dant, involuntarily haled into cour, to conduct a vigorous defense." (Bertero v. National General Corp. (1974)
13 CaL. 3d 43, 52 (118 CaL. Rptr. 184, 529 P.2d 608, 65

AL.R.3d 878). Instead, the Legislatue has fashioned a more limited punshment to fit the "crime" OF BAD
FAITH DEFENSE TO A CIVIL ACTION: the awarding of attorney fees and other reasonable expenses incured by a part to litigation as the result of another's bad faith
actions "that are frivolous or solely intended to cause

such harm in fact occurs. This rule is a variant of the more general rule of tort law that, as Holmes said, "the intentional infiction of temporal damage 3 is a cause of action, which, as a matter of substantive law, ... requires a justification if the defendant is to escape." ( Aikens v.
Wisconsin (1904) 195 U.S. 194,204 (49 L. Ed. 154, 159,

25 S. Ct. 3).) A breach should not be considered tortous
if the cour determnes that it was justified by avoidance

of some substantial, unforeseen cost on the part of the
breachig part, even if such cost does not excuse that

unecessary delay." ( Code Civ. Proc., § 128.5, subd.

part's nonperformnce. (See 3A Corbin on Contracts

(a).) So too, the proper remedy to deter intentional breaches that are combined with bad faith denials of liability is to consistently award attorney fees to the plaintiffs as a sanction. (See Putz & Klippen, supra, 21 U.S.F. L.Rev. at pp. 493-495). But if a bad faith defense is not a tortious act, then the threat of such defense, as occured
in Seaman's, also cannot be considered tortious.

(1994 Supp.) § 654E, p. 109.) Nor should a tortious

breach under these circumstances be recogned if it is
clear that the part suffering the harm voluntarily ac-

cepted that risk under the contract. But the intentional or knowing infliction of severe consequential damages on a

business enterprise through the unjustified, bad faith (* 117) breach of a contract is reprehensible and costly
both for the part suffering the breach and for society as

Seaman's was nonetheless correctly decided, in my view, on narrower grounds than bad faith denial of the contract's existence. As discussed (*116) above, a number of cases allow tort damages for an intentional breach which the breaching part knows wil probably result in significant emotional distress or personal hardship. In the
commercial sphere, we do not as a rule permt such

a whole, and is therefore appropriately sanctioned

tlough the tort system.
3 Standard's breach "intentionally" inflcted

harm on Seaman's in the sense in which the term "intentional" is commonly used in tort law, i.e., extending "not only to having in the mind a purpose (or desire) to bring about given conse-

(***440) recovery for (**689) personal distress--the

197

Case 5:07-cv-04808-JF

Document 50-9

Filed 07/03/2008

Page 2 of 30
Page 18

11 Cal. 4th 85, *; 900 P.2d 669, **; 44 Cal. Rptr. 2d 420, ***; 1995 Cal. LEXIS 4963

quences but also having in mind a belief (or
knowledge) that given consequences are substantially certain to result from the act." (Prosser &
Keeton on Torts, supra, Intentional Interference With the Person, p. 34, fn. omitted, italics added.)
III.
The present case, on the other hand, is essentially a

transgression is the awarding of

lution which the Legislatue has devised for ths kind of the other part's attorney

fees, and this is precisely what occured--Freeman & Mils was awarded $ 212,891 in attorney fees pursuant to Code of Civil Procedure sections 128.5 and 2033, subdi-

biling dispute between two commercial entities. Belcher Oil Company claimed, apparently in bad faith and without probable cause, that it had no contractual agreement with Freeman & Mils. That is, Belcher Oil not only intentionally breached its contract, but then asserted a bad faith defense to its liability. As explained above, the so-

vision (c). To permt the award of puntive damages in addition to ths sum would upset the legislative balance established in the litigation sanctions statutes and make tortous actions--intentional breach of contract and the
asserton of a bad faith defense--which we have consis-

tently held not to be tortious.
On this basis, I concur in the majority's disposition in favor of Belcher Oil on the bad faith denial of contract cause of action.

198

Case 5:07-cv-04808-JF

Document 50-9

Filed 07/03/2008

Page 3 of 30

EXHIBIT 1 7

Case 5:07-cv-04808-JF

Document 50-9

Filed 07/03/2008

Page 4 of 30
Page 1

LEXSEE 24 CAL. 4TH 317

JOHN GUZ, Plaintiff and Appellant, v. BECHTEL NATIONAL, INC., et al., Defendants and Respondents.

No. S062201.

SUPREME COURT OF CALIFORNIA
24 Cal. 4th 317; 8 P.3d 1089; 100 Cal. Rptr. 2d 352; 2000 Cal. LEXIS 7498; 16 I.E.R. Cas. (BNA) 1345; 84 Fair Empl. Prac. Cas. (BNA) 64; 142 Lab. Cas. (CCH) P59,072; 2000 Cal. Daily Op. Service 8230; 2000 Daily Journal DAR 10929
October 5, 2000, Decided

NOTICE:

proceedings. The cour held that the trial cour erred in
granting sumary judgment to defendant on plaintiffs claim of breach of an implied contract, since there was a triable issue of fact as to whether plaintiff had implied
contractual rights under specific portons of defendant's

MENT HAS BEEN SPLIT INTO MUTIPLE PARTS ON LEXIS TO ACCOMMODATE ITS LARGE SIZE.
EACH PART CONTAINS THE SAME LEXIS CITE.)

(EDITOR'S NOTE: PART 1 OF 2. THIS DOCU-

wrtten personnel policies. Although the record negated

PRIOR HISTORY: Superior Cour of the City and
County of San Francisco. Super. Ct. No. 964836. William J. Cahill, Judge.

Cour of Appeal of Californa, First Appellate District, Division Four. A072984.

DISPOSITION: For the reasons set forth herein, the judgment of the Cour of Appeal is reversed. The cause is remanded to the Cour of Appeal for fuer proceedings consistent with this opinon.
SUMMARY:

any inference of an implied contract restricting defendant's right to implement work force reductions at will, written company policies and guidelines guaranteed fair layoff protections, such as objective employee ranking and placement assistance. There were triable issues as to whether those specific provisions became an implicit part of plaintiffs employment contract, and whether defendant breached that implied contract. The cour also held, however, that the trial cour did not err in granting sum-

mary judgment to defendant on plaintiffs claim that,
even if he was an at-will employee, defendant's actions

breached the implied covenant of good faith and fair
dealing. The covenant of good faith and fair dealing cannot impose substantive term and conditions beyond

CALIFORNIA OFFICIAL REPORTS SUMMARY
A longtime employee who was termnated at age 49
when his work unt was eliminated brought a wrongful termnation action against his former employer, alleging

those to which the parties actually agreed. Because employment at wil gives the employer the freedom to terminate the relationship as it chooses, the employer does
not frstrate the employee's contractual rights merely by

doing so. The cour also held that the trial cour did not
err in granting summary judgment to defendant on plaintiffs age discrimination claim. In the face of defendant's

age discrimination in violation of the Fair Employment
and Housing Act (Gov. Code, § 12941), breach of an

implied contract to be termnated only for good cause,
and breach of the implied covenant of good faith and fair
dealing. The trial cour granted defendant's motion for

strong and umebutted showing that it took its actions for
nondiscriminatory reasons, the evidence of age favorit-

ism proffered by plaintiff lacked suffcient probative
force to allow a finding of intentional age discrimiation. (Opinon by Baxter, J., with George, C. J., Mosk, Werdegar, Chin, and Brown, JJ., concuring. Concuring opinion by Mosk, J. (see p. 370). Concuring opinon by Chin, J., with Brown, J., concurng. (see p. 371).) Con-

summary judgment and dismissed the action. (Superior
Cour of the City and County of San Francisco, No.

964836, Wiliam J. Cahil, Judge.) The Cour of Appeal,
First Dist., Div. Four, No. A072984, reversed.
The Supreme Cour reversed the judgment of the
Cour of Appeal and remanded to that cour for fuher

curing and dissenting opinon by Kennard, J. (see p.
378).)

199

Case 5:07-cv-04808-JF

Document 50-9

Filed 07/03/2008

Page 5 of 30
Page 2

24 Cal. 4th 317, *; 8 P.3d 1089, **; 100 Cal. Rptr. 2d 352, ***; 2000 Cal. LEXIS 7498
business needs or goals, or pretextual. The contractual understanding need not be express, but may be implied

HEADNOTES

CALIFORNIA OFFICIAL REPORTS HEADNOTES Classified to California Digest of Offcial Reports

in fact, arising from the parties' conduct evidencing their actual mutual intent to create such enforceable limitations. Factors that indicate an implied-in-fact agreement might include the personnel policies or practices of the employer, the employee's longevity of service, actions or

(1) Summary Judgment § 26--Appellate Review-Scope of Review. --On appeal after a motion for sum-

communications by the employer reflectig assurances
of continued employment, and the practices of the indus-

mary judgment has been granted, the appellate cour reviews the record de novo, considering all the evidence set forth in the moving and opposition papers except that to which objections have been made and sustained. Under Californa's traditional rules, the reviewing cour determnes with respect to each cause of action whether the defendant has conclusively negated a necessary element of the plaintiffs case, or has demonstrated that under no hypothesis is there a material issue of fact that requires
the process of tral, such that the defendant is entitled to

try in which the employee is engaged. The natue of an
implied-in-fact contract must be determned from the totality of the circumstances. Every case tus on its own facts. Where there is no express agreement, the issue is whether other evidence of the parties' conduct has a tendency in reason ( Evid. Code, § 210) to demonstrate the

existence of an actual mutual understanding of partcular

term and conditions of employment. If such evidence logically permts conflcting inferences, a question of fact is presented. But where the undisputed facts negate
the existence or the breach of the contract claimed,

judgment as a matter oflaw.
(2) Employer and Employee § 8--Employment Rela-

summary judgment is proper.

tionship--Duration and Termination--Presumption of At-wil Employment--Policy Considerations. -- Lab.
Code, § 2922, provides that employment that has no

(4a) (4b) (4c) (4d) (4e) Employer and Employee § 9.4-

specified term may be termnated at the wil of either
part with notice. An at-wil employment relationship

-Actions for Wrongful Discharge--Evidence--Written Personnel Policies--Implied-in-fact Contract--Layoff Protections. --In a wrongful termation action based on
an implied contract, the tral cour erred in granting

may be ended by either part at any time without cause,

sumary judgment to defendant employer, since there
was a triable issue of fact as to whether the employee had implied contractual rights under specific portons of the employer's wrtten personnel policies. The employer had

for any or no reason, and subject to no procedure except

the statutory requirement of notice. The statutory and common law rule presuming that employment contracts
without a stated duration are at will is required by special
policy considerations. The cours have not deemed it to
be their fuction, in the absence of contractual, statutory,

the absolute right to elimiate plaintiffs work unt and to transfer the unt's responsibilities to another company
entity; thus, the record negated any inference of an im-

or public policy considerations, to compel a person to
accept or retain another employee, or to compel any per-

plied contract restrictig defendant's right to implement
work force reductions at wil. Furher, the undoubted

son against his or her wil to remain in the employ of another. Indeed, cours have consistently held that in such a confidential relationship, the privilege to termnate is absolute, and the presence of il wil or improper
motive wil not destroy it.
(3) Employer and Employee § 8--Employment Rela-

length and merit of plaintiffs career with defendant did not bolster his claim that his at-wil status had been altered by an implied contract, and defendant's personnel

documents contained an express at-will termation pro-

tionship--Duration and Termination--Agreement Re-

vision. Nevertheless, written company policies and guidelines guaranteed fair layoff protections, such as objective employee rankng and placement assistance,
and there was a triable issue as to whether those specific

quiring Termination Only for Good Cause--Implied

in Fact--Required Showing. --While the statutory pre-

sumption of at-wil employment ( Lab. Code, § 2922) is strong, since the employment relationship is fundamentally contractual, the presumption does not prevent an
employer and employee from agreeing to any limitation,

provisions became an implicit part of plaintiffs employment contract, and whether defendant breached that im-

plied contract. It is a question of fact whether an employer's written policy of preferential hiring for its laidoff employees is to be considered an implied contractual promise on which its employees could reasonably rely. There was, however, no triable issue of an implied contract on term broader than the specific provisions of
those documents.

otherwise lawful, on the employer's termnation rights. For example, the parties can agree that the employee wil be termated only for good cause, in the sense of a fair and honest cause or reason, regulated by good faith, as opposed to one that is trivial, capricious, unelated to

(See 2 Witk, Summary of CaL. Law (9th ed. 1987) Agency and Employment, § 171 et seq.)

200

Case 5:07-cv-04808-JF

Document 50-9

Filed 07/03/2008

Page 6 of 30
Page 3

24 Cal. 4th 317, *; 8 P.3d 1089, **; 100 Cal. Rptr. 2d 352, ***; 2000 CaI. LEXIS 7498
rewards for the employee's continuing valued service;

(5) Employer and Employee § 9.4--Actions for Wrongful Discharge--Evidence--Signifcance of Atwil Employment Provision in Written Personnel Materials. --At-wil employment termnation provisions in

they do not, in and of themselves, additionally constitute
a contractual guaranty of future employment security. A

rule granting such contract rights on the basis of successful longevity alone would discourage the retention and

personnel handbooks, manuals, or memoranda do not
bar, or necessarily overcome, other evidence of the employer's contrary intent, particularly where other provi-

promotion of employees. On the other hand, long and
successful service is not necessarily irrelevant to the existence of such a contract. In addition, the employment

sions in the employer's personnel documents themselves

suggest limits on the employer's termation rights. On the other hand, an at-wil provision in an express wrtten
agreement, signed by the employee, cannot be overcome
by proof of an implied contrary understanding. The rea-

relationship is fundamentally contractual, and the implied covenant of good faith and fair dealing cannot sup-

ply limitations on termnation rights to which the partes have not actually agreed.

soning, express or implied, is that parol evidence is admissible to explain, supplement, or even contradict the
term of an unitegrated agreement, and handbook dis-

Wrongful Discharge--Implied-in-fact Evidence of
Employment Contract--Personnel Manual or Policies.

(7a) (7b) Employer and Employee § 9.4--Actions for

claimers should not permt an employer, at its whim, to repudiate promises it otherwise made in its own selfinterest, and on which it intended an employee to rely. Even if a handbook disclaimer is not controlling in every case, such a provision cannot be ignored in determing whether the partes' conduct was intended, and reasonably understood, to create binding limits on an employer's

--In a wrongful termnation action, the trier of fact can infer an agreement to limit the grounds for termnation
based on the employee's reasonable reliance on the com-

statutory right to termnate the relationship at wil. Like any direct expression of employer intent, communicated
to employees and intended to apply to them, such lan-

pany's personnel manual or policies. Provisions of this tye which offer additional advantages to employees are, in effect, offers of a unlateral contract which is accepted if the employee continues in the employment, and are not mere offers of gifts. When an employer promulgates
forml personnel policies and procedures in handbooks,

manuals, and memoranda disseminated to employees, a
strong inference may arise that the employer intended

guage must be taken into account, along with all other
pertent evidence, in ascertainig the term on which a

workers to rely on these policies as term and conditions

worker was employed. The more clear, promient, complete, consistent, and all-encompassing the disclaimer

of their employment, and that employees did reasonably so rely. An employer may intend, and employees may

language, the greater the likelihood that workers could not form any reasonable contrary understanding. An employer could promulgate a disclaimer clause that establishes beyond contrary inference that the employment is at will.

understand, such generally promulgated policies as a systematic approach to personnel relations, providing a clear and uniform alternative to haphazard practices,
understandings, and arrangements within the company. Therefore, where the employer has chosen to maintain

such written policies, the term they describe must be a

(6) Employer and Employee § 9.4--Actions for Wrongful Discharge--Implied-in-fact Evidence of Employment Contract--Signifcance of Duration of
Service. --Long duration of service, regular promotions, favorable performnce reviews, praise from supervisors, and salary increases do not, without more, imply an employer's contractual intent to relinquish its at-wil employment termnation rights. Such events are but natual
consequences of a well-fuctionig employment rela-

central focus of

the contractual analysis.

(8) Employer and Employee § 9--Actions for Wrong-

ful Discharge--Based on Breach of Implied Covenant
of Good Faith--At-wil Employment--Implied-in-fact
Contract. --In a wrongful termnation action brought by

an at-wil employee, based on breach of the implied

tionship, and thus have no special tendency to prove that
the employer's at-wil implied agreement, reasonably

understood as such by the employee, has become one
that limits the employer's futue termnation rights. An employee's mere length of time in the employer's service,

covenant of good faith and fair dealing, the trial cour did not err in granting summary judgment to defendant employer. The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent
one contracting part from unfairly frstratig the other

part's right to receive the benefits of the agreement actually made. It cannot impose substantive duties or limits
on the contracting parties beyond those incorporated in

even where marked with tangible indicia that the employer approves the employee's work, cannot alone form

an implied-in-fact contract that the employment is no
longer at wilL. Absent other evidence of the employer's

the specific terms of their agreement. Lab. Code, § 2922, establishes the presumption that an employer may
termnate its employees at wilL. Precisely because em-

intent, longevity, raises, and promotions are their own

ployment at wil gives the employer the freedom to ter-

201

Case 5:07-cv-04808-JF

Document 50-9

Filed 07/03/2008

Page 7 of 30
Page 4

24 Cal. 4th 317, *; 8 P.3d 1089, **; 100 Cal. Rptr. 2d 352, ***; 2000 Cal. LEXIS 7498

minate the relationship as it chooses, the employer does
not frstrate the employee's contractual rights merely by

(10) Civil Rights § 3--Employment--Discrimination-Required Showing--Burden-shiftng Test: Employer

doing so. In addition, even though an employer's personnel policies and practices may become implied-in-fact

term of the employment contract, a claim that merely realleges that breach as a violation of the implied covenant is superfluous. The remedy for breach of an employment agreement is solely contractual, and an implied covenant theory affords no separate measure of recovery. There is no tort of bad faith breach of an employment
contract. (Disapproving, to the extent they are contrary:

and Employee § 9--Actions for Wrongful Discharge. -Because of the similarity between state and federal employment discrimiation laws, Californa cours look to pertinent federal precedent. In particular, Californa has

adopted the tlee-stage burden-shiftig test established by the United States Supreme Cour for tryig claims of discrimination based on a theory of disparate treatment. Disparate treatment is intentional discrimination against
one or more persons on prohibited grounds. Prohibited

Rulon-Miler v. International Business Machines Corp.
(1984) 162 Cal.App.3d 241 (208 CaI.Rptr. 524); Gray v.
Superior Court (1986) 181 Cal.App.3d 813 (226

discrimination may also be found on a theory of disparate impact, i.e., that regardless of motive, a facially neutral employer practice or policy, bearing no manifest

Cal.Rptr. 570); Khanna v. Microdata Corp. (1985) 170 Cal.App.3d 250 (215 Cal.Rptr. 860); Pugh v. See's Candies, Inc. (1981) 116 Cal.App.3d 311 (171 CaLRptr. 917); Cleary v. American Airlines, Inc. (1980) ILL
Cal.App.3d 443 (168 Cal.Rptr. 722).

relationship to job requirements, in fact had a disproportionate adverse effect on members of the protected class. Direct evidence of intentional discrimination is rare, and such claims must usually be proved circumstantially.
Thus, by successive steps of increasingly narrow focus,

(See 2 Witki, Sumary of CaI. Law (9th ed. 1987) Agency and Employment, § 175 et seq.)

Age Discrimination--Burden-shifting Test-Employer's Nondiscriminatory Explanation: Em-

(9a) (9b) (9c) (9d) Civil Rights § 3.3--Employment-ployer and Employee § 9--Actions for Wrongful Dis-

the three-stage burden-shifting test allows discrimiation to be inerred from facts that create a reasonable likelihood of bias and are not satisfactorily explained. At tral, the plaintiff has the initial burden to establish a prima facie case of discrimination. The specific elements of a

prim facie case may vary depending on the partcular
facts. Generally, the plaintiff must provide evidence that (1) he or she was a member of a protected class, (2) he or she was qualified for the position sought or was perform-

charge. --The trial cour did not err in granting an em-

ployer summary adjudication against a former employee's claim that he was termnated because of his age in violation of the Fair Employment and Housing Act ( Gov. Code, § 12941). Summry judgment for the employer may be appropriate where, given the strength of the employer's showing of innocent reasons, any countervailing circumstantial evidence of discriminatory motive, even if it may techncally constitute a prima facie
case, is too weak to raise a rational inference that discrimination occured. In the face of defendant's strong

ing competently in the position held, (3) he or she suffered an adverse employment action, such as termation,

demotion, or denial of an available job, and (4) some other circumstance suggests discriminatory motive. At
trial, if the plaintiff establishes a prima facie case, a presumption of discrimination arises, which, though rebuttable, is legally mandatory. The burden then shifts to the employer to rebut the presumption by producing admissible evidence that its action was taken for a legitimate,

and umebutted showing that it took its actions for nondiscriminatory reasons, the evidence of age favoritism

nondiscriminatory reason. If the employer sustains this burden, the presumption disappears. The plaintiff must
then have the opportity to attack the employer's prof-

proffered by plaintiff manifestly lacked suffcient probative force to allow a finding of intentional age discrimi-

fered reasons as pretexts for discrimination, or to offer
any other evidence of discriminatory motive.
(11) Civil Rights § 3.3--Employment--Age Discrimination--Burden-shiftng Test--Employer's Explana-

nation. Defendant's explanation, that it eliminated plaintiffs work unt because its functions could be better performed by another work unt, was creditable on its face. Indeed, plaintiff largely conceded the trth of that explanation. Furher, the comparative-age evidence cited by

tion--Downsizing: Employer and Employee § 9-Actions for Wrongful Discharge. --Downsizing alone

plaintiff was insuffcient for trial in the face of defendant's strong contrary showing that its reasons were ume-

is not necessarily a suffcient explanation under the Fair
Employment and Housing Act (Gov. Code, § 12941) for

lated to age bias. The premise that defendant purosely
favored two workers on the basis of youth was weakened, for statistical puroses, by the small size of the working unit (only six persons); and retained employees were, like plaintiff, in their mid-career 40's.

the consequent dismissal of an age-protected worker. An employer's freedom to consolidate or reduce its workforce, and to eliminate positions in the process, does not

mean it may use the occasion as a convenient opportnity to get rid of its older workers. Invocation of a right to downsize does not resolve whether the employer had a

202

Case 5:07-cv-04808-JF

Document 50-9

Filed 07/03/2008

Page 8 of 30
Page 5

24 Cal. 4th 317, *; 8 P.3d 1089, **; 100 Cal. Rptr. 2d 352, ***; 2000 Cal. LEXIS 7498

discriminatory motive for cutting back its work force, or engaged in intentional discrimination when deciding which individual workers to retain and release. Where these are issues, the employer's explanation must address
them. On the other hand, if nondiscriminatory, the em-

Paul, Hastings, Janofsky & Walker, Paul Grossman, Paul W. Cane, Jr., John C. Oakes; Thelen, Marrin, Johnson &

Bridges, Thelen Reid & Priest, Curis A. Cole, Janet F. Bentley, Clarice C. Liu, Michael Hallerud and Thomas
M. Mcinerney for Defendants and Respondents.

ployer's tre reasons need not necessarily have been wise

or correct. While the objective soundness of an employer's proffered reasons supports their credibility, the ultimate issue is simply whether the employer acted with a motive to discriminate ilegally. Thus, legitimate reasons in this context are reasons that are facially umelated

Gibson, Dun & Crutcher, Pamela L. Hemmnger and

Katheen M. Vanderziel for Californa Chamber of
Commerce as Amicus Curiae on behalf of Defendants
and Respondents.

to prohibited bias, and which, if tre, would thus preclude a finding of discrimination.

Law Offces of Steven Drapkin and Steven Drapkin for the Employers Group as Amicus Curiae on behalf of
Defendants and Respondents.

(12) Civil Rights § 3--Employment--Discrimination-Burden-shiftng Test--Employer's Explanation for

Alleged Discriminatory Act--Effect of Lying. --An
inference of intentional employment discrimiation cannot be drawn solely from evidence that the employer lied about its reasons for an action that affected an employee

Lloyd C. Loomis for California Employment Law Coun-

cil as Amicus Curiae on behalf of Defendants and Respondents.

within a protected class. The pertent statutes do not
prohibit lyig--they prohibit discrimination. Proof that

JUGES: Opinon by Baxter, J., with George, C. J.,
Mosk, Werdegar, Chin, and Brown, JJ., concuring.

the employer's proffered reasons are unworty of credence may considerably assist a circumstantial case of
discrimination, because it suggests the employer had
cause to hide its tre reasons. Still, there must be evi-

Concurg opinon by Mosk, J. (see p. 370). Concurg
opinon by Chin, J., with Brown, J., concuring. (see p. 371). Concurg and dissenting opinion by Kennard, J.
(see p. 378).

dence supporting a rational inerence that intentional discrimination, on grounds prohibited by the applicable

OPINION BY: BAXTER

federal or state statute, was the tre cause of the employer's actions. Accordingly, the great weight of federal

OPINION

and Californa authority holds that an employer is entitled to summary judgment if, considering the employer's

(*325) (**1094) (***357) BAXTER, J.
This case presents questions about the law govern-

inocent explanation for its actions, the evidence as a whole is insuffcient to permt a rational inference that
the employer's actual motive was discriminatory. Even

where the plaintiff has presented a legally suffcient
prima facie case of discrimination, and has also adduced

some evidence that the employer's proffered inocent reasons are false, the fact finder is not necessarily entitled to find in the plaintiffs favor. Whether judgment as a matter of law is appropriate in any particular case wil depend on a number of factors. These include the strength of the plaintiffs prima facie case, the probative
value of the proof that the employer's explanation is

ing claims of wrongful discharge from employment as it applies to an employer's motion for summary judgment. Plaintiff John Guz, a longtime employee of Bechtel National, Inc. (BNI), was released at age 49 when his work unt was elimiated and its tasks were transferred to another Bechtel offce. Guz sued BNI and its parent, Bechtel Corporation (hereinafter collectively Bechtel), (*326) alleging age discrimiation, breach of an implied contract to be termnated only for good cause, and breach of the implied covenant of good faith and fair dealing. The trial cour granted Bechtel's motion for summary judg-

false, and any other evidence that supports the employer's case.

ment and dismissed the action. In a split decision, the
Cour of Appeal reversed. The majority found that Bechtel had demonstrated no grounds to foreclose a tral on
any of the claims asserted in the complaint.
Having closely reviewed the Cour of Appeal's deci-

COUNSEL: Bianco & Murhy, Stephen M. Murhy;
Quackenbush & Quackenbush and Wiliam C. Quackenbush for Plaintiff and Appellant.

sion, i we reach the following conclusions:

Thomas W. Osborne and Melvin Radowitz for the American Association of Retired Persons as Amicus
Curiae on behalf of Plaintiff and Appellant.

1 We heard argument in ths case on February 8,
2000, and the matter was thereupon submitted.

(CaL. Supreme Ct., Internal Operating Practices and Proc. VII A, Submission.) However, on April 14, 2000, we vacated submission in light of the

203

Case 5:07-cv-04808-JF

Document 50-9

Filed 07/03/2008

Page 9 of 30
Page 6

24 Cal. 4th 317, *; 8 P.3d 1089, **; 100 Cal. Rptr. 2d 352, ***; 2000 Cal. LEXIS 7498
United States Supreme Cour's pending decision

in Reeves v. Sanderson Plumbing Products, Inc., No. 99-536 (argued Mar. 21, 2000) (Reeves), a
case presenting issues pertinent to Guz's age dis-

ages for such a breach remains solely contractual. Hence, where breach of an actual term is alleged, a separate implied covenant claim, based on the same breach, is superfluous. On the other hand, where an implied covenant

crimination claim. The high cour's decision in
Reeves was fied on June 12, 2000. (530 U.S.

claim alleges a breach of obligations beyond the agreement's actual term, it is invalid.

133 (120 S. Ct. 2097, 147 L. Ed. 2d 105). The
partes were thereupon given the opportty to

brief the significance of Reeves. Having received the parties' briefs, we resubmitted the matter on July 12, 2000.
(***358) First, the Cour of Appeal used errone-

Finally, we disagree with the Cour of Appeal that Guz's claim of prohibited age discrimination has triable
merit. Bechtel presented evidence, largely undisputed,
that the reasons for its personnel decisions leading to

Guz's release had nothig to do with his age. In the face

of this showing, evidence cited by Guz that certain
workers preferred over him were substantially younger is
insuffcient to permt a rational inference that age played

ous grounds to reverse summary judgment on Guz's im-

plied contract cause of action. The Cour of Appeal found triable evidence (1) that Guz had an actual agree-

any significant role in his termation.
For the reasons set fort above, we will reverse the

ment, implied in fact, to be discharged only for good
cause, and (2) that the elimination of Guz's work unit

lacked good cause because Bechtel's stated reason--a

judgment of the Cour of Appeal and wil remand to that
cour for fuer proceedings consistent with this opin-

"downtu in . . . workload"--was not justified by the
facts, and was, in trth, a pretext to discharge the unit's

ion.

workers for poor performnce without following the company's "progressive discipline" policy. We acknowledge a triable issue that Guz, like other Bechtel workers, had implied contractual rights under specific provisions

FACTS

In October 1994, Guz sued Bechtel, challenging the
June 1993 termation of his Bechtel employment. The

of Bechtel's written personnel policies. But neither the
policies, nor other evidence, suggests any contractual

complaint alleged causes of action for breach of an implied employment contract (see Foley v. Interactive Data
Corp. (1988) 47 CaL. 3d 654 (254 CaL. Rptr. 211, 765

restriction on Bechtel's right to eliminate a work unit as it saw fit, even where dissatisfaction with unt performnce
was a factor in the decision. The Cour of Appeal's ruling

on Guz's implied contract claim must therefore be reversed. The Cour of Appeal did not reach the additional ground on which Guz claims a contractual breach--i.e., that Bechtel failed to follow its fair layoff policies when,
during and after the reorganization, it made individual
personnel decisions leading to Guz's release. Accord-

the covenant of good faith and fair dealing, and age discrimination in violation of the California Fair Employment (***359) and Housing
P.2d 373) (Foley)), breach of

Act (FEHA; Gov. Code, § 12941).

After extensive discovery, Bechtel fied a motion for

sumary judgment in August 1995. The motion, and
Guz's opposition thereto, attached numerous supporting

ingly, we leave that issue to the Cour of Appeal on remand.
Second, the Cour of Appeal erred in restoring Guz's

documents, including declarations and deposition excerpts. On the basis of these submissions, the following
facts appear to be essentially undisputed:

separate cause of action for breach of the implied covenant of good faith and fair dealing. Here Guz claims that even if his employment included no express or impliedin-fact agreement limitig Bechtel's right to discharge

In 1971, Bechtel hied Guz as an admnistrative assistant at a salary of $ 750 per month. Throughout his Bechtel career, Guz worked in "management information," performg, at various times, duties on both the
(*328) "awarded" and "overhead" sides of

ths specialty.

him, and was thus "at wil" ( Lab. Code, § 2922), the

covenant of good faith and fair dealing, implied by law in every contract, precluded Bechtel from termnating him (*327) arbitrarily, as by failing to follow its own policies, or in bad faith. But while the implied covenant
requires mutual faimess in applying a contract's actual

He received steady raises and promotions. His performance reviews were generally favorable, though his March 1992 evaluation indicated he needed to follow through on ideas and should become "fully computer literate in order to improve his long-term job success."

term, it cannot (** 1095) substantively alter those
term. If an employment is at wil, and thus allows either
part to termate for any or no reason, the implied
covenant cannot decree otherwise. Moreover, although

BNI, a division of Bechtel Corporation, is an engineering, constrction, and environmental remediation

any breach of the actual term of an employment contract also violates the implied covenant, the measure of dam-

company that focuses on federal governent programs, principally for the Departents of Energy and Defense. Prior to 1993, BNI had its own in-house management
informtion unit, the BNI Management Information

Group (BNI-MI). BNI-MI itself represented a 1986 con-

204

Case 5:07-cv-04808-JF

Document 50-9

Filed 07/03/2008

Page 10 of 30
Page 7

24 Cal. 4th 317, *; 8 P.3d 1089, **;

100 Cal. Rptr. 2d 352, ***; 2000 Cal. LEXIS 7498

solidation of two Bechtel management informtion units, which resulted in the work of these groups being done by fewer people. Between 1986 and 1991, BNI-Ml's size was fuher reduced from 13 to six persons, and its costs

Bechtel employee who was several months older than
Guz, had overhead reporting duties for SFRO-MI that were similar to Guz's job within BNI-MI.

were reduced from $ 748,000 in 1986 to $ 400,000 in
1991.

3 Throughout the record and briefs, the last name of ths individual sometimes is spelled
"Sheaffer" and at other times is spelled

Guz had worked for BNI-MI since 1986. In 1992, at
age 49, he was employed as a financial reports supervi-

"Shaeffer." We use the latter spelling.

sor, responsible for supervising BNI-Ml's overhead section, which included himself and 44-year-old Dee Minoia. At salary grade 27, Guz earned $ 5,940 per month. BNI-Ml's six-member staff also included its manager, Ronald Goldstein (age 50), Goldstein's secretary Pam
Fung (age 45), Robert Wraith (age 41), and Christine Siu
(age 34). Guz's immediate superior was his longtime friend and colleague Goldstein. Goldstein, in tu, re-

Johnstone soon became unhappy with the size, cost, and performnce of BNI-MI. In April 1992, he advised
Dewey, Goldstein, and Guz that BNI-Ml's work could be done by three people. A May 1992 memo from Dewey to Goldstein warned that Dewey and Johnstone had agreed
BNI-Ml's 1992 overhead budget of $ 365,000 was a

"maximum not to be exceeded" and was "subject to futher analysis and review, since the real guideline was far below ths leveL."
Between April and October 1992, Guz and Gold-

ported to Edward Dewey, BNl's manager of governent services.

During this time, Bechtel maintained Personnel Policy 1101, dated June 1991, on the subject of termnation

of employment (Policy 1101). Policy 1101 stated that
"Bechtel employees have no employment agreements

stein discussed how to reduce BNI-Ml's work force. In September 1992, Dee Minoia was told to look for another job. In October 1992, on Dewey's recommendation, Goldstein advised Guz to seek another Bechtel position, citig BNI-Ml's reduced budget as the "biggest factor." By that time, as Guz knew, BNI-Ml's overhead costs for 1992 had already ru well over its strict budget.
In preparation for his departe, Guz compiled a list of his job tasks, together with his suggestions about who should perform his work once the BNI-MI staff was reduced. Guz recommended that most of his duties go to Shaeffer in SFRO-MI, and that the small remainig por-

guaranteeing continuous service and may resign
(** 1096) at their option or be tem1ated at the option of
BechteL. "

Policy 1101 also described several "Categories of Tem1ation," including "Layoff' and "Unsatisfactory Performnce." With respect to Unsatisfactory Performance, the policy stated that "(e)mployees who fail to per-

form their jobs in a satisfactory manner may be termnated, provided the employees have been advised of the
specific shortcomings and given an opportty to im-

prove their performnce." 2 A layoff was defined as "a Bechtel-initiated tem1ation(J of employees caused by a reduction in workload, reorganiations, changes in job requirements, or other circumstances. . . ." Under the Layoff policy, employees subject to tem1ation for this
reason "may be (*329) placed on 'holding status' ifthere

tion of his work, involving the governent's Defense Contract Audit Agency, be transferred to a unt headed
by Ann Dersheimer, BNl's 46-year-old controller, which regularly performed governent audit and contract work.
In mid-November, Goldstein managed to persuade

Dewey, at least temporarily, that Guz was necessary to BNI-Ml's work. With Dewey's consent, Goldstein asked
Guz to stay, and Guz accepted.

is a possible Bechtel assignment within the following 3month period." Guz understood that Policy 1101 applied
to him.

2 Such provisions are sometimes referred to as "progressive discipline" policies. We sometimes
hereafter use that phrase to describe Bechtel's

Meanwhile, however, Dewey and Johnstone were discussing the possibility of involving SFRO-MI more actively in BNl's management inormtion needs. In late November 1992, Goldstein received from Dewey, and discussed with Guz, a memo setting BNI-Ml's target
overhead budget for 1993 (*330) at $ 250,000. The

version.

memo again suggested staff reductions as a means of

bringing the unt's overhead withn the budget limits.

In January 1992, Robert Johnstone became president of BNI. While previously ruing another Bechtel

About the same time, Johnstone asked Tevis to
submit a proposal to provide BNl's management information services through SFRO-MI. In early December, Tevis submitted a proposed budget of $ 200,000, which
Johnstone accepted.

entity, Johnstone had received management informtion services from the San Francisco Regional Offce Management Informtion Group (SFRO-MI) headed by

James Tevis. BNI-MI and SFRO-MI performed similar functions, and John Shaeffer, 3 a veteran (***360)

205

Case 5:07-cv-04808-JF

Document 50-9

Filed 07/03/2008

Page 11 of 30
Page 8

24 Cal. 4th 317, *; 8 P.3d 1089, **; 100 Cal. Rptr. 2d 352, ***; 2000 Cal. LEXIS 7498
On December 9, 1992, Goldstein informed Guz that

BNI-MI was being disbanded, that its work would be
done by SFRO-MI, and that Guz was being laid off. Goldstein told Guz the reason he had been selected for layoff was to reduce costs. On December 11, 1992, Guz received a confiratory letter from Dewey, which referred to "the downtu in our workload" and placed Guz on holding (**1097) status. In a December 17, 1992, memo to BNI managers, Johnstone announced the transfer of BNI-MI to SFRO-MI effective February 1, 1993.
During the transition period, as he had earlier recommended, Guz transferred his overhead reportg work to

quired a close working relationship with another Bechtel entity, Bechtel Civil, where Stenho had previously been employed. Stenho was placed in her new job at the specific request of Bechtel Civil's manager.

Though Guz insists he let it be known he wanted to stay at Bechtel, even at a reduced salary, he appears to

concede he did not specifically apply for any of the
SFRO-MI positions. Tevis never saw Guz's resume before filling them, and he admitted he never considered Guz for these jobs. Tevis variously indicated he did not
realize Guz was available, thought Guz "only did overhead," understood from Goldstein that Guz lacked com-

Shaeffer and his governent audit work to Dersheimer.

As part of the transition plan, Tevis consulted with Goldstein "about the positions (Tevis) would need that (he) could cover in (his) group and that (he) couldn't cover." According to Tevis's uncontradicted deposition testimony, Goldstein recommended Wraith and Siu as the best additions to SFRO-Ml's staff. The reasons, according to Tevis, were that Siu had necessary skils in

puter skils, and did not know Guz had supervisory experience. Tevis also noted Guz did not have the Bechtel Civil relationship necessary for the Stenho position. After Tevis was asked, at his deposition, to examine Guz's

resume, Tevis acknowledged it indicated Guz might have qualified for the positions taken by Wraith and Wallace.

Guz's original three-month holding status was renewed for an additional three months, but he obtained no other position within BechteL. He was termnated on June
11, 1993.

Bechtel's ORS computer operatig system and occupied a salary grade commensurate with the duties Tevis wished her to assume, and that Wraith "knew the project side" of management (***361) informtion. Guz's name came up in the discussion, but Tevis and Goldstein "both decided" Shaeffer and another curent SFRO-MI employee, Chris Gee, were suffcient to assume Guz's over-

Guz sought to fush evidence that the cost reduction and workload downtu reasons given him for the
elimination of BNI-MI, and his own consequent layoff,
were arbitrary, false, and pretextual. To rebut the impli-

head work.

cation that a general business slowdown required BNI to
layoff workers, Guz submitted an excerpt from Bechtel

Wraith and Siu, the two youngest members of BNIMI, were transferred to SFRO-MI, while all the remaining BNI-MI employees, including Guz, were laid off. Guz was placed on holding status pending possible reassignment to another Bechtel position.
During early 1993, while Guz was on holding status, three other positions became available in SFRO-MI,
partly because of that unt's expanded responsibilities for

Corporation's 1992 Anual Report. There, Bechtel Corporation's president stated that the "Bechtel team had an

exceptional year," and that the company as a whole had achieved healthy gains in both revenue from curent pro-

jects and new work booked. In his own declaration,
Goldstein stated that BNI-Ml's 1992 and projected 1993 workload was high, that BNI-Ml's work volume was not

directly related to the overall job hours of BNI, and
(**1098) that because much ofBNI-Ml's overhead cost was recoverable under BNl's governent contracts, the net savings from elimiation of BNI-MI were only a
small fraction of its budget.

BNI. An existing SFRO-MI employee, 42-year-old John
Wallace, was selected for a new SFRO-MI position as

supervisor of SFRO-Ml's work for BNI. Wallace's former SFRO-MI subordinate, 52-year-old Jan Vreim, was placed in Wallace's old job. The thd position, vacated
by the transfer of another SFRO-MI member, was filled

by 38-year-old Barbara (*331) Stenho, who also already worked for Bechtel but was a newcomer to SFROMI.

documents discussing specific company personnel policies and practices, including those policies pertainng to laid-off employees. These documents included Bechtel's

(*332) Guz also submitted additional Bechtel

1989 Reduction-in-Force Guidelines (RIF (***362)
Guidelines) and Bechtel's Personnel Policy 302 (Policy
302).

Tevis explained that Wallace was selected for his position because it required his computer skils, and because his supervisory and project experience suited him
for the responsibility of working directly with BNI presi-

dent Johnstone, who was project oriented. Vreim was also chosen for her ORS computer ability, her history of working with high-level managers, and her project experience. The SFRO-MI position taken by Stenho re-

Policy 302 described a system of employee ranking (sometimes hereafter called force ranking), which was to be "used alone or in conjunction with other management
tools in making personnel decisions in such areas as .. .

(s)taffing." Rankngs were to be based on the fair, objective, and consistent evaluation of employees' compara-

206

Case 5:07-cv-04808-JF

Document 50-9

Filed 07/03/2008

Page 12 of 30
Page 9

24 Cal. 4th 317, *; 8 P.3d 1089, **; 100 Cal. Rptr. 2d 352, ***; 2000 Cal. LEXIS 7498
tive job-relevant skils and performnce. However, Policy 302 also provided that "(u)nique situations may occur

to people," meaning that Bechtel works on a
"project-by-project basis" and "if the work is not
there, the employee does not have the job." Thus,

in which employee rankg may be inapplicable based on
the natue of the personnel decision or the limited size of the rankng group." (Italics omitted.)

Johnstone understood, Bechtel's policy was to
termnate employees when "there was a good reason to do so" or "there was lack of work."
In their declarations, Goldstein and Guz insisted Guz was qualified for each of the several vacant positions in SFRO-MI, as well as for several other positions that became available within BechteL. Addressing Tevis's specific qualms about Guz, Guz and Goldstein declared that
Guz had supervisorial experience, and had worked on
both the awarded and overhead sides of management

The RIF Guidelines specified that when choosing among employees to be retained and released during a reduction in force, the forml rankng system set forth in Policy 302 was to be employed. For this purose, the RIF Guidelines said, employees should "(i)deally" be ranked, by similarity of function or level of work activity, in groups of from 20 to 100. The partes disputed
whether Bechtel actually used ths force rankng system when eliminating entire units of fewer than 20 employ-

ees. Bechtel's manager of human resources declared that force rankng was inappropriate for small unts, such as BNI-MI, whose employees had dissimilar duties, grades,

informtion. Guz fuher stated that he had taken training for the ORS computer system, "had more than adequate computer skills for (his) (** 1 099) position," and was
never told his computer skills were deficient.

and skils. However, both Guz and Goldstein declared their recollection that force rankng was an established
Bechtel policy and was used in 1986 when two management informtion units, containng 13 employees, were

ment. The cour reasoned that "(Guz) was an at-wil employee and has not introduced any evidence that he was

(***363) The tral cour granted sumary judg-

consolidated into a six-member unt, BNI-MI.
The RIF Guidelines also explained the term "holding status" and its benefits. According to the RIF Guidelines, this status could be granted upon layoff, for a renewable thee-month period, while the employee awaited possible

ever told at any time that he had permnent employment

or that he would be retained as long as he was doing a good job. . . . (P) Plaintiff is unable to establish a prima facie case of age discrimination. . . . Plaintiff is also unable to rebut (Bechtel's) legitite business reason for

reassignment. The employee would not receive salary, but Bechtel would maintain his medical, dental, voluntary personal accident, and term life insurance. Bechtel
should also provide the employee with "(t)ransfer and (p )lacement (a )ssistance." The "releasing organization" should determne if the employee was qualified for other

his tem1ation and/or his failure to obtain another position withi BechteL. . . ."
Over a vigorous dissent by Presiding Justice Ander-

son, the Cour of Appeal, First Appellate District, Divi-

vacant positions withn the same unit, and "open requisitions" (i.e., solicitation of outside applicants for available positions) should generally be cancelled during a reduction in force. "Efforts should (also) be made to contact discipline counterparts in other Bechtel entities/services"
in hopes of placing the employee, and the employee

sion Four, reversed. The majority, Justices Poche and Reardon, reasoned as follows: Under Foley, supra, 47 Cal. 3d 654, Guz's longevity, promotions, raises, and
favorable performnce reviews, together with Bechtel's

wrtten progressive discipline policy and Bechtel offcials' statements of company practices, raised a triable

issue that Guz had an implied-in-fact contract to be dis-

should be considered for futue positions. (Italics added.)
In his deposition, BNI (*333) president Johnstone

missed only for good cause. There was evidence that Bechtel breached ths term by eliminating BNI-MI, on the false ground that workload was declinng, as a pretext to weed out poor performers without applying the
company's progressive discipline procedures. As to Guz's

agreed that Bechtel's practice was to place an employee

on holding status prior to termnation, to attempt to reassign the employee during this period, and to "continue to

age discrimination claim, Bechtel was required to advance a credible nondiscriminatory reason for Guz's ter-

look for positions even after the employee has been laid
off." 4

mination, after which the burden shifted to Guz to produce evidence that the proffered reason was discrimina-

4 In his deposition, Johnstone also indicated his

understanding of Bechtel's fudamental policies

regarding employment security. Johnstone did
not believe Bechtel's policy was to termnate em-

tory or pretextual. As already noted, however, whether (*334) a downtu in workload was the real reason for Bechtel's action was in legitimate dispute. Hence, summary judgment on the age discrimination claim was improper.

ployees "arbitrarily and without any reason." On
the other hand, Johnstone stated, "I have always

The dissent argued that the trial cour properly dismissed all Guz's causes of action. It reasoned as follows: As to the contract claim, Policy 1101 expressly provided

known that Bechtel employed people--you call it 'at wil,' I call it we don't guarantee employment

207

Case 5:07-cv-04808-JF

Document 50-9

Filed 07/03/2008

Page 13 of 30
Page 10

24 Cal. 4th 317, *; 8 P.3d 1089, **;

100 Cal. Rptr. 2d 352, ***; 2000 Cal. LEXIS 7498

that Bechtel employment was at will. The progressive discipline policy did not apply to general reductions in force, and nothing in Bechtel's personnel policies otherwise limited its right to eliminate positions. Guz's mere successful longevity could not prove a contractual right
to be termnated only for good cause. Moreover, there

7 Bechtel and one of its amici curiae have ques-

tioned whether such traditional standards apply to
this case. Bechtel suggests that, to survive sum-

mary judgment, Guz had the burden to present
evidence of an implied employment securty

agreement suffcient to overcome the statutory

was no evidence the elimination of BNI-MI was pretextual, or that Bechtel violated the implied covenant of fair dealing by engaging in intentional, bad faith conduct to deprive Guz of the benefits of his employment. As to age
discrimination, Bechtel gave legitimate nondiscrimina-

presumption of at-wil employment (see discussion, post), and also to establish, under the generally accepted thee-step procedure for testig

such claims (see discussion, post), a prim facie
case of intentional age discrimination. The Californa Chamber of Commerce argues more

tory reasons for elimiating BNI-MI, and Guz presented no evidence these reasons were false, let alone excuses for intentional discrimination against Guz on the basis of
his age. 5

broadly that 1992 and 1993 amendments to the
California summary judgment statute ( Code Civ.
Proc., § 437c) adopted then extant federal stan-

5 Subsequent references to the Cour of Appeal's
decision refer to the majority opinon uness the contrary clearly appears.
We granted review.

dards, under which a moving defendant could obtain sumry judgment solely by showing, after
opportty for discovery, that the opposing
plaintif had failed to present triable evidence

DISCUSSION 6

crucial to his case (see Celotex Corp. v. Catrett (1986) 477 U.S. 317, 322-326 (106 S. Ct. 2548, 2552-2554, 91 L. Ed. 2d 265)). We need not belabor these matters. As we explain below, Bechtel did adduce, in support of its motion for sumary

6 We note that the Californa Chamber of
Commerce, The Employers Group, and the Californa Employment Law Council have each filed
amicus curae briefs in support of BechteL. The

judgment, affrmative evidence which, uness materially contradicted or rebutted, would establish
that each of Guz's causes of action lacked merit. (See Code Civ. Proc., § 437c, subd. (0)(2).) By any interpretation of the sumary judgment stat-

American Association of Retied Persons has

fied an amicus curae brief in support of Guz.
i. Summary judgment rules.

(1) On appeal after a motion for sumary judgment has been granted, we review the record de novo, considering all the evidence set forth in the moving and opposi-

ute, the burden thereupon shifted to Guz to show the existence of one or more trable issues of material fact (ibid.; see Calvilo-Silva, supra, 19 Cal.

4th 714, 735), and, as to each cause of action,
Guz did submit or point to evidence which, in his

tion papers except that to which objections have been made and sustained. (Artiglio v. Corning Inc. (1998) 18
Cal. 4th 604,612 (76 Cal. Rptr. 2d 479,957 P.2d 1313).)

view, indicated such triable issues. Thus, as to each count of Guz's complaint, the issue on appellate review is simply whether, and to what extent, the evidence submitted for and against the motion for summary judgment discloses issues
warranting a triaL.

Under Californa's traditional rules, we determne with
respect to each cause of action whether the defendant

seeking summary judgment has conclusively negated a necessary element of the plaintiffs case, or has demonstrated that under no hypothesis is there a material issue of fact that requires the process of (***364) trial, such that the defendant is entitled to judgment as a matter of law. (E.g., Calvilo-Silva v. Home Grocery (1998) 19 Cal. 4th 714, 735-736 (80 Cal. Rptr. 2d 506, 968 P.2d

II. Implied contract claim. employment, having no specified term may be termnated at the wil of either part on notice to the other."

(2) Labor Code section 2922 provides that "(a)n

65) (Calvilo-Silva); Flatt v. Superior Court (1994) 9
Cal. 4th 275, 279 (36 Cal. Rptr. 2d 537, 885 P.2d 950);
Ann M. v. Pacifc Plaza Shopping Center (**1100)
(1993) 6 Cal. 4th 666, 673-674 (25 Cal. Rptr. 2d 137,

An at-wil employment may be ended by either part "at any time without cause," for any or no reason, and subject to no procedure except the statutory requirement of
notice. (E.g., Foley, supra, 47 Cal. 3d 654, 680; Gantt v.
Sentr Insurance Co. (1992) 1 Cal. 4th 1083, 1094 (4

863 P.2d 207); Molko v. (*335) Holy Spirit Assn. (1988)

46 Cal. 3d 1092, 1107 (252 Cal. Rptr. 122, 762 P.2d
46). 7

Cal. Rptr. 2d 874, 824 P.2d 680); Marin v. Jacuzzi
(1964) 224 Cal. App. 2d 549, 553-554 (36 Cal. Rptr. 880); see Crosier v. United Parcel Service, Inc. (1983) 150 Cal. App. 3d 1132,1137 (198 Cal. Rptr. 361). 8

208

Case 5:07-cv-04808-JF

Document 50-9

Filed 07/03/2008

Page 14 of 30
Page 11

24 Cal. 4th 317, *; 8 P.3d 1089, **; 100 Cal. Rptr. 2d 352, ***; 2000 Cal. LEXIS 7498

8 As this cour has explained, the statutory and
common law rule presumng that employment
contracts without a stated duration are at wil is

termnation.' " ( Foley, supra, 47 Cal. 3d 654, 680, quot-

ing Pugh, supra, 116 Cal. App. 3d 311,324-325, italics

required by "( s )pecial policy considerations." (

Consolidated Theatres, Inc. v. Theatrical Stage
Employees Union (1968) 69 Cal. 2d 713, 727, fu.
12 (73 Cal. Rptr. 213, 447 P.2d 325).) " TT)he

cours have not deemed it to be their fuction, in
the absence of contractual, statutory or public

policy considerations, to compel a person to accept or retain another in his employ, nor to com-

added.) Among the many available options, the partes may agree that the employer's termnation rights wil vary with the particular circumstances. The partes may define for themselves what cause or causes wil permt an employee's termnation and may specify the procedures under which tem1ation shall occur. The agreement may restrict the employer's termnation rights to a greater degree in some situations, while leaving the employer freer to act as it sees fit in others.

pel any person against his wil to remain in the
employ of another. Indeed, they have consistently held that in such a confidential relationship, the

The contractual understanding need not be express,
but may be implied in fact, arising from the partes' con-

privilege (to tem1ate) is absolute, and the presence of il wil or improper motive wil not de-

stroy it.' (9 Wiliston on Contracts ((3d ed. 1957))
§ 1017, p. 134.)" (Ibid.)

duct evidencing their actual mutual intent to create such enforceable limitations. ( Foley, supra, 47 Cal. 3d 654, 680.) In Foley, we identified several factors, apart from

express term, that may bear upon "the existence and
content of an . . . (implied-in-fact) agreement" placing

(3) Whle the statutory presumption of at-wil employment is strong, it is subject to several

limitations. For instance, as we have observed, "the employment relationship is fundamentally contractuaL" (Foley, supra, 47 (*336) Cal. 3d 654, 696.) Thus, though Labor Code sec-

tion 2922 prevails where the employer and employee
have reached no other understanding, it does not overcome their "fundamental. . . freedom of contract" to de-

limits on the employer's right to discharge an employee. (Ibid., italics added.) These factors might include" 'the personnel policies or practices of the employer, the employee's longevity of service, actions or (*337) communications by the employer reflectig assurances of con-

tiued employment, and the practices of the industr in which the employee is engaged.' " (Ibid., quotig Pugh,
supra, 116 Cal. App. 3d 311, 327.)
Foley asserted that "the totality of the circum-

part from at-wil employment. (47 Cal. 3d at p. 677.)
The statute does not prevent the parties from agreeing to

any limitation, otherwise lawful, on the (***365) employer's termnation rights. (Id., at pp. 677, 680.)
One example of a contractual departe from at-wil

status is an agreement that the employee wil be termnated only for "good cause" (Foley, supra, 47 Cal. 3d 654, 677) in the sense of " , "a fair and honest cause or reason, regulated by good faith. . ." , (citation), as opposed to one that is 'trivial, capricious, unrelated to busi-

stances" must be examined to determne whether the parties' conduct, considered in the context of surounding circumstances, gave rise to an implied-in-fact contract limiting the employer's termnation rights. (Foley, supra, 47 Cal. 3d 654, 681.) We did not suggest, however, that

every vague combination of Foley factors, shaken together in a bag, necessarily allows a finding that the employee had a right to be discharged only for good cause,

ness needs or goals, or pretextual . . . .' (Citations.)" ( Scott v. Pacifc Gas & Electric Co. (1995) 11 Cal. 4th
454, 467 (46 Cal. Rptr. 2d 427, 904 P.2d 834) (Scott);

as detem1ed in cour.
On the contrary, "cours seek to enforce the actual
un