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Court of Appeal, Second District, Division 2, California.

David P. SOLIZ et al., Plaintiffs and Appellants, v. GREAT WESTERN BANK et al., Defendants and Respondents.

No. B107881.

Decided: October 01, 1998

The Law Offices of Thomas Hunter Russell, Thomas Hunter Russell, Hollywood, and David L. Lynch for Plaintiffs and Appellants. Anthony F. Pantoni, La Jolla, for Defendants and Respondents.

Plaintiffs and appellants are David Soliz, Vera Levoff and Maya Kleiner (collectively “the plaintiff employees”), former employees of defendant and respondent Great Western Bank (the “bank”).1  After the bank terminated their employment, the plaintiff employees sued for wrongful termination, alleging an implied agreement to terminate only for good cause.   They further contended that the bank's stated reason for their terminations (a reduction in force) was mere pretext, and that they actually were terminated simply because their supervisor harbored personal animosity towards them.   The trial court found good cause, and granted summary judgment for the bank.

In the published portion of this opinion, we affirm the summary judgment on the wrongful termination claim because the record establishes that the bank did have good cause to terminate due to a reduction in force.   In the unpublished portion of this opinion, we rule on a related issue concerning a claim for overtime pay.


 In moving for summary judgment, the bank evidenced these facts:  Each of the plaintiff employees worked in the Branch Automation Support section of the bank.   The supervisor of that section reported to a bank vice president.   The supervisor and the vice president decided to reorganize the section because of an expected decrease in workload, which they believed could be handled by a decreased number of employees.   The vice president had consulted with an outside vendor who had advised that the work could be performed with significantly fewer employees.   On the recommendation of the supervisor, the vice president decided to implement a staff reduction.   The factors which were considered in determining which employees would be laid off included their overall job performance, the experience and skills of all employees in the section, plus whether a particular employee in question worked well with the supervisor and the other members of the work team.   Nine positions were eliminated, one of which was already vacant, reducing the staff of the section from eighteen to ten employees.   Included among the laid-off employees were the three plaintiff employees.

In opposition, the plaintiff employees admitted that the supervisor and the vice president had decided to reorganize the section, that the business rationale for the reorganization was an expected decrease in workload, and that the supervisor and vice president believed the decreased workload could be performed by a decreased number of employees.   The plaintiff employees disputed the factors which had been considered in deciding which employees to lay off, contending that they had been targeted for lay-off because of their criticism of their supervisor's management style.2  The plaintiff employees also disputed that nine positions had been eliminated, citing as evidence the deposition of plaintiff Kleiner.   Plaintiff Kleiner testified that after she was terminated, she “found out later” that “one person was transferred into the group from outside.”   She stated that two other “members” of the section (persons who had never previously worked on the tasks plaintiff Kleiner had worked on) were given “special formal training and given assignments to do exactly the job I was doing.”   In addition, a third person was given some work of an unspecified nature.   Plaintiff Kleiner claimed that her position had not really been eliminated by opining “that if 3 other people were specifically trained to do, who never before had anything to do with it and they were kept busy enough to do exactly what I was doing, to me it means just that;  that my position was never eliminated-I was eliminated.”   The plaintiff employees additionally cited as evidence two documents, one headed “ Distributed Systems Group” and the other headed “Distributed Computing Group.”   These documents were attached to the plaintiff employees' evidence submission without authentication or evidentiary foundation of any kind.

The bank in response objected to the two documents as lacking foundation and hearsay.   The bank did not object to the declaration of plaintiff Kleiner, but instead filed a reply brief and supplemental declaration of the supervisor.   That declaration explained that new employees were transferred into the supervisor's section, but that these employees worked on other matters, simply had their supervisor changed, and did not “replace” the laid-off plaintiff employees.   The trial court's minute order granting summary judgment stated that the plaintiff employees had failed to demonstrate a triable issue of fact regarding whether the bank had good cause to terminate their employment.3


 The existence of good cause to terminate is an issue of law when the facts are undisputed.  (See, e.g., Moore v. May Dept. Stores Co. (1990) 222 Cal.App.3d 836, 271 Cal.Rptr. 841 [violation of company policy which caused substantial financial loss constituted good cause to terminate].)  Moreover, the existence of “good cause” does not necessarily mean that an employee has performed poorly.  (See, e.g., Joanou v. Coca-Cola Co. (9th Cir.1994) 26 F.3d 96, 99.)   Good cause to terminate can exist even when the terminated employee was “highly qualified and hard-working.”   (Martin v. Lockheed Missiles & Space Co. (1994) 29 Cal.App.4th 1718, 1733, 35 Cal.Rptr.2d 181.)

 In the instant case it was undisputed that the bank decided to reduce its work force.   Courts may not penalize such managerial decisions except to the extent that such decisions or their implementation violate established prohibitions.4  Instead, courts are bound “not to interfere with the legitimate exercise of managerial discretion.”  (Cotran v. Rollins Hudig Hall Internat., Inc. (1998) 17 Cal.4th 93, 100, 69 Cal.Rptr.2d 900, 948 P.2d 412.)  “[T]he jurisprudential significance of employer discretion” has been elaborated as follows:  “ ‘[A]n employer must have wide latitude in making independent, good faith judgments about high-ranking employees without the threat of a jury second-guessing its business judgment.   Measuring the effective performance of such an employee involves the consideration of many intangible attributes such as personality, initiative, ability to function as part of the management team and to motivate subordinates, and the ability to conceptualize and effectuate management style and goals․  [Citations.]   Although the jury must assess the legitimacy of the employer's decision to discharge, it should not be thrust into a managerial role.’ ”  (Cotran, supra at p. 100-101, 69 Cal.Rptr.2d 900, 948 P.2d 412, quoting with approval from Pugh v. See's Candies, Inc. (1988) 203 Cal.App.3d 743, 250 Cal.Rptr. 195, italics added in Cotran.)   The Cotran court decided that the permissible role of the jury in a wrongful termination trial arising out of alleged employee misconduct is simply to assess the objective reasonableness of the employer's factual determination of misconduct, not to determine whether the alleged misconduct actually occurred.  (Cotran, supra at p. 103, 69 Cal.Rptr.2d 900, 948 P.2d 412.)   This refinement of the role of the jury was deemed necessary to avoid destructive interference with managerial discretion in the specific instance of alleged misconduct.

 Although Cotran involved a “high-ranking” employee and alleged misconduct, while the instant case does not, Cotran's teaching that courts must not interfere with managerial discretion is germane here.   Similar concerns have arisen when suits have been filed by employees terminated as part of a reduction in force or reorganization.   The cases have uniformly held that a reduction in force or reorganization constitutes good cause to terminate.  (See, e.g., Clutterham v. Coachmen Industries, Inc. (1985) 169 Cal.App.3d 1223, 215 Cal.Rptr. 795;  Malmstrom v. Kaiser Aluminum & Chemical Corp. (1986) 187 Cal.App.3d 299, 321, 231 Cal.Rptr. 820;  Martin, supra, 29 Cal.App.4th 1718, 35 Cal.Rptr.2d 181;  Gianaculas v. Trans World Airlines, Inc. (9th Cir.1985) 761 F.2d 1391.)   Hence if a reduction in force actually occurred in the instant case, it follows that the bank had good cause to terminate some employees.   The choice of which employees to terminate is a decision the employer may lawfully make, so long as that decision is not tainted by prohibited discrimination.   Once the bank presented evidence that the plaintiff employees were terminated due to a reduction in force, the bank had presented a complete defense to the plaintiff employees' claim of lack of good cause, since that evidence-if uncontradicted or unembellished-would establish good cause to terminate as a matter of law.  (Cf. Code of Civ. Proc., § 437c, subd. (o)(2) [moving defendant meets burden by showing complete defense].)  The burden then shifted to the plaintiff employees to demonstrate a triable issue of material fact.   The context of this case suggests only two potential candidates for such a triable issue:  either (1) whether a reduction in force actually took place (in which case, that type of “good cause” would not be present), or (2) whether the employer acted impermissibly in selecting the plaintiff employees for lay off (perhaps by impermissibly discriminating against them).  (Code of Civ. Proc., § 437c, subd. (o)(2) [after moving defendant shows a complete defense, burden shifts to plaintiff to show a triable issue of material fact].)

The plaintiff employees attempted to meet their burden as to the first question (whether a reduction in force actually took place) in two ways.   First, plaintiff offered the documents entitled “Distributed Systems Group” and “Distributed Computing Group.”   The bank objected to these documents on grounds that they were unauthenticated and consisted of hearsay for which no exception had been established.   These objections were well taken.  (Evid.Code, § 1200, subd. (b) [except as provided by law, hearsay evidence is inadmissible];  1401, subd. (a) [authentication of a writing is required before it may be received in evidence].)  No evidence was presented of exactly what these documents are, where they came from, what they show, why they can be trusted, how they were prepared, etc.5

Second, also as evidence that no reduction in force had taken place, plaintiff offered the deposition testimony of plaintiff Kleiner.   In the face of the bank's evidence that nine positions had been eliminated, and that the plaintiff employees had been laid off due to this reduction in force, plaintiff Kleiner's deposition stated merely that work was shifted among employees in the former Branch Automation Support section (a common feature of a reduction in force), that two or possibly three employees were trained to do work which they had never done before but which plaintiff Kleiner previously had done (consistent with a reduction in force), and that one employee was transferred from elsewhere into the former Branch Automation Support section (a fact of uncertain import, but in any event insufficient to support the proposition that no reduction in force had occurred).   Although all three plaintiff employees filed declarations, none of their declarations deals with the subject of whether a reduction in force had actually occurred.   The evidence established at most that the reduction in force might have been in a lesser number than nine positions, conceivably as few as five, but it did not support the proposition either that no reduction in force at all took place or that the reduction was less than three.6  In their opposition to the bank's motion, the plaintiff employees argued that “of the eight positions eliminated ․ no less than four of those positions were immediately refilled.”   Even if this contention were supported by evidence, the fact would remain undisputed that a reduction in force of at least four or five occurred.7  Moreover, this contention is not supported by evidence.   As support for this claim, plaintiffs cited only the Kleiner deposition and the two documents discussed above.   Neither the deposition nor the documents supports this proposition, and the documents were inadmissible and properly objected to.   Hence the plaintiff employees failed to raise a triable issue regarding whether a reduction in force actually took place.   The bank therefore established that it had good cause to make layoff decisions, and the question resolves into whether the bank acted impermissibly in making the specific decisions it made.

 The plaintiff employees attempted to meet their burden as to the second potential question (whether the bank acted impermissibly in selecting them for lay off) by making a unique claim of “pretext.”   A typical claim of pretext contends that the real reason for termination was prohibited discrimination, and that the disclosed reason was a pretext designed to mask the prohibited discrimination.   In the instant case, however, there is no claim of prohibited discrimination.   Instead, the plaintiff employees claim only that the true motivation for their layoffs was the “personal animosity” of their supervisor, and that “personal animosity” does not constitute good cause.   Whether this is true or not, however, the evidence of a reduction in force independently establishes good cause.   Hence the bank's actions cannot be challenged simply as lacking in good cause, but instead could be challenged only on a claim that the selections made were impermissible for some reason such as discrimination.   There is, for example, no “good cause” duty to implement a reduction in force by retaining employees having a poor working relationship with their supervisor while terminating employees having a better working relationship.   Thus although the plaintiff employees phrase their contention in terms of “good cause,” their claim of “pretext” appears capable of raising only a claim of impermissible discrimination.

Although the bank contended that a reduction in force was the real reason for the layoffs, and was not a mere “pretext,” the bank did not directly deny that the relationship between the plaintiff employees and their supervisor was strained.   Instead the bank inferentially concurred on that point, while phrasing its description of the situation a bit differently and contending that broader considerations were involved.   The bank contended that overall job performance and the experience and skills of all employees in the section were considered in making the layoff decisions, as well as “whether the employees worked well with [the supervisor] and other members of the work team.”   Thus even in the bank's formulation, whether the employee in question “worked well” with the supervisor (and co-employees) was a consideration in differentiating the employees to be retained from those to be terminated.

 It is well established that an employer may not discriminate among its employees on bases such as “race, religious creed, color, national origin, ancestry,” etc.  (Gov.Code, § 12940 et seq.;   cf., e.g., Martin, supra [despite clear establishment of reduction in force, the possibility of age discrimination in choosing those to be laid off also examined].)  Although the word “discriminate” literally means to distinguish or differentiate, the word has taken on an expanded meaning in legal usage as a short summary of the broad concept of differentiating on a legally impermissible basis.   Nevertheless, employers remain legally entitled to differentiate among their employees on the basis of a plethora of attributes, circumstances and managerial considerations.   In the absence of an agreement otherwise, an employer has the right to differentiate among employees on any basis not prohibited by law.  (See, e.g., Gonzales v. MetPath, Inc. (1989) 214 Cal.App.3d 422, 262 Cal.Rptr. 654 [Fair Employment and Housing Act does not prohibit every form of discrimination].)  The instant case concerns a claim that the plaintiff employees were treated differently on the basis of the quality of their personal relationship with their supervisor.   Although the plaintiff employees phrase the issue as one concerning “personal animosity” and lay the blame for this situation on the supervisor, while the employer describes the situation differently, the phrasing and locus of the blame for a poor personal relationship cannot transform the situation into one of prohibited discrimination.   An employer has legitimate management concerns with employee morale, espirit de corps, unit cohesion, productivity, etc., all of which are subject to possibly different managerial treatment according to the numerous different theories of the managerial art.   There is no statute or other source of law which prohibits a manager from considering such intangibles.   The plaintiff employees' evidence that the bank selected them for layoff because of the “personal animosity” of their supervisor thus could not establish a case of “pretext,” at least not in the sense that term is used in discrimination law, because a layoff on such a basis is not legally prohibited.

 We thus return to the issue as the plaintiff employees have phrased it, as one of “good cause.”   Good cause consists of a fair and honest reason, regulated by good faith.  (See, e.g., Cotran, supra, 17 Cal.4th at p. 96, 69 Cal.Rptr.2d 900, 948 P.2d 412.)   Good cause is usually defined by stating what it is not:  “reasons that are ‘trivial, capricious, unrelated to business needs or goals, or pretextual’ ” do not constitute good cause.   (Ibid.) An employee who has an implied contract not to be terminated except for good cause might theoretically be entitled not to be terminated based merely on the “personal animosity” of his supervisor.   Conversely, it might theoretically be that a poor personal relationship, the kind that the plaintiff employees here term “personal animosity,” could so infect the work atmosphere, so damage the quality and quantity of work performed, and so impair the cooperation necessary to an efficient organization, that it might constitute good cause to terminate.  (Cf. Jackson v. Texas A & M University (S.D.Tex.1996) 975 F.Supp. 943[deteriorating work atmosphere legitimate reason to transfer employee];  Mira v. Monroe County School Board (S.D.Fla.1988) 687 F.Supp. 1538 [refusal to promote because of management style which damaged morale doe not constitute discrimination] ).   We need not address this issue here, and instead merely distinguish it from the instant case.   In the instant case the facts were undisputed that the bank did have good cause to terminate due to the reduction in force.   In a different case, the mere personal animosity of a supervisor might not constitute good cause.



The judgment appealed from is affirmed.   All parties to bear their own costs.


1.   Former bank employee Robert Suarez, plaintiffs' former supervisor, is also a defendant.   The term “bank” is used to refer to Suarez and the bank collectively.

2.   Plaintiffs characterized the supervisor's management style as one “based on the intimidation of his subordinates.”

3.   Several other issues were raised in the bank's motion, including whether the plaintiff employees were at-will employees and whether they had released their claims against the bank by signing documents containing a release clause in order to receive severance pay.   The trial court did not rule on these issues.   Since we find that the trial court's ruling that the bank had good cause to terminate must be affirmed on this record, we also do not reach the other issues.

4.   The primary prohibition that comes to mind, the statutory prohibition on certain types of discrimination, is discussed later in the text.

5.   Even if these documents were admitted and considered, they are insufficient to demonstrate a triable issue, because they do not show the lack of a reduction in force.   For its part, the bank offered additional evidence that the documents show a reorganization, and not the lack of a reorganization or the lack of a reduction in force.The plaintiff employees' complaint was filed on July 23, 1993, while the bank's motion was heard on September 25, 1996-over three years later.   The plaintiff employees hence had ample opportunity to obtain and to present admissible evidence showing that no reduction in force had actually taken place, if that were the true fact.   The plaintiff employees did not move for a continuance to conduct more discovery upon seeing the basis for the bank's motion (see Code of Civ. Proc., § 437c, subd. (h)), and thus had a full opportunity to present their best case.

6.   There are three plaintiffs.   So long as the reduction was three or more positions, good cause existed to lay off at least three employees.

7.   One authorized position was already vacant at the time of the reduction in force decision.

FOOTNOTE.   See footnote *, ante.

ZEBROWSKI, Presiding Justice.

FUKUTO, Acting P.J., and NOTT, J., concur.