MEANS v. KINNEY SHOE CORPORATION

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Court of Appeal, Second District, Division 6, California.

Seandee MEANS, Plaintiff and Respondent, v. KINNEY SHOE CORPORATION, dba the Foot Locker, Defendant and Appellant.

No. B093040.

Decided: August 14, 1996

Horvitz & Levy;  S. Thomas Todd, Daniel J. Gonzalez, Holly R. Paul;  Gray, York, Duffy & Rattet, John J. Duffey, Louis A. Cappadona, Jr., Frank J. Ozello, Encino, for Kinney Shoe Corporation dba The Foot Locker, Appellant. John H. Howard, James Doles;  Law Offices of John H. Howard, Ventura, for Seandee Means, Respondent.

Kinney Shoe Corporation dba The Foot Locker (Kinney), appeals from a judgment awarding Seandee Means $750,000 punitive damages for sexual harassment.   Kinney contends that the award is excessive and not supported by the evidence.   Means cross-appeals from an order denying her motion for attorney fees and nonstatutory costs.  (Gov.Code, § 12965, subd. (b).)  We affirm.

Facts and Proceedings

On November 30, 1989, Gary Buntyn hired Means as a part-time cashier at the Ventura Foot Locker store.   Means was a high school student and needed the job to complete a “Work Experience” class.   Buntyn told her to get a pair of black pants and start the next day.

Means did not have time to buy a pair of tailored pants.   On December 1, 1989, she reported to work wearing pants that were too large at the waist.   Buntyn joked about the pants, tugged on the front, and peered down inside the pants.   Buntyn told her to put on a Foot Locker shirt.

After Means changed, Buntyn put his hand inside the shirt pocket, fondled her breast, and pinned a name tag to the shirt.   Buntyn made suggestive comments, snickered and tried to touch her.   Means slapped him on the side of the head but could not stop Buntyn.   Buntyn ran his hands up and down her leg, patted her buttocks, rubbed against her rear end, and instructed her to bounce up and down in front of him.

Means was embarrassed and scared.   When the work shift ended at 10:00 p.m., Buntyn asked her to stay and empty the trash.   Means had a coworker escort her to the parking lot.   Buntyn called her at home over the weekend and asked how she liked the job.   Means reported the incident to her high school counselor, her mother, and the police.   The police conducted a criminal investigation and recommended that Means file a civil action for damages.

Means brought suit against Buntyn and Kinney for sexual harassment, assault, battery, intentional infliction of emotional distress, and constructive discharge.   At trial, Kinney conceded that it was liable for compensatory damages if the jury found that Buntyn sexually harassed Means.   Kinney, however, denied that it was liable for punitive damages because it did not ratify or approve Buntyn's conduct.

The evidence showed that Kinney, a New York corporation, owned Foot Locker and had 15,000 employees.   District managers oversaw the operation of 15 to 20 Foot Locker stores and had the authority to hire, fire, demote or transfer employees.

Kinney hired Buntyn in 1989 to work at the Foot Locker in Las Vegas.   The district manager, Dennis Hosaki, transferred Buntyn to Oxnard after he harassed a female employee.   At the Oxnard store, Buntyn verbally and physically harassed female employees.   The store manager, John Kelly, reported the problem to the district manager, John Kasiancyzk, but was told to drop the matter.1

Valerie Mulvihill worked at the Oxnard store and testified that she was sexually harassed by Buntyn.   Buntyn grabbed her breast, ran his hands up her legs, and rubbed himself against her.   Mulvihill complained to the store manager and was told that nothing could be done.   Kasiancyzk visited the store, put his arm around Buntyn's shoulder, and told Mulvihill, “This is my son.   You can't touch him.”

In August 1989, after another female employee complained, the store manager fired Buntyn.   Kasiancyzk called the store manager (Kelly) minutes later and told him that he had no authority to fire Buntyn.   Kasiancyzk transferred Buntyn to fill the assistant manager position at the Ventura Foot Locker.   Kelly testified that the transfer was a promotion.

Buntyn continued his sexual escapades at the Ventura store.   Buntyn was frequently left in charge of the store and used the opportunity to harass Means and other female employees.   Means was too upset to go back to work.   The store manager, Steven Rauterkus, learned about the incident several days later after the police called.   Rauterkus “wrote Buntyn up” and notified Kasiancyzk.   Kasiancyzk ordered Rauterkus to tear up the report and call back if he heard anything else from the police.   Buntyn was not disciplined or reprimanded.

Kinney officials testified that the district managers were required to report sexual harassment problems to corporate headquarters in New York.   Kinney claimed that it had a “zero tolerance” policy concerning unwelcomed physical touching, but store employees testified that the sexual harassment was open and obvious.   Management did nothing to stop it.

James Kirkpatrick, Ph.D., an expert in sexual harassment, testified that it was “unthinkable” for a company as large as Kinney not to have a more systematic procedure for sexual harassment problems.   Kirpatrick criticized Kinney's policies and procedures because there was “no structure, nothing formal, nothing reduced to written record so that you can go back and look later.   In fact, this case is a case in point because Mr. Pirretti [assistant general counsel] ․ never heard of the Seandee Means case.   So this case never reached the New York office as far as he could recall.”

The jury awarded $65,000 compensatory damages but did not reach a verdict on punitive damages.   Counsel stipulated that the trial court could rule on the issue of punitive damages.   The trial Court found, by clear and convincing evidence, that Kinney knew that Buntyn was unfit, employed him in conscious disregard of the rights and safety of others, and ratified the sexual harassment.   The court awarded $750,000 punitive damages.

Kinney unsuccessfully moved for new trial and judgment notwithstanding the verdict.   Means sought $202,004.95 in attorney's fees and nonstatutory costs.  (Gov.Code, § 12965, subd. (b).)  The trial court denied the motion.

Punitive Damages

Kinney argues that the award for punitive damages was improper because the corporation did not authorize or ratify the sexual harassment.  Civil Code section 3294, subdivision (b) provides that an employer is not liable for punitive damages “unless the employer had advance knowledge of the unfitness of the employee and employed him or her with a conscious disregard of the rights or safety of others or authorized or ratified the wrongful conduct for which the damages are awarded or was personally guilty of oppression, fraud, or malice.   With respect to a corporate employer, the advance knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, or malice must be on the part of an officer, director, or managing agent of the corporation.”  (Emphasis added.)

Kinney contends that Kasiancyzk was a supervisor but not a managing agent.   It asserts that a “managing agent” is an upper echelon employee who makes corporate policy.   The argument lacks merit.   In Egan v. Mutual Of Omaha Ins. Co. (1979) 24 Cal.3d 809, 822-823 (Egan ), our Supreme Court held that “[t]he determination whether employees act in a managerial capacity, ․ does not necessarily hinge on their ‘level’ in the corporate hierarchy.   Rather, the critical inquiry is the degree of discretion the employees possess in making decisions that will ultimately determine corporate policy.   When employees dispose of insureds' claims with little if any supervision, they possess sufficient discretion for the law to impute their actions ․ to the corporation.”

Kinney maintains that Civil Code section 3294, subdivision (b), abrogated Egan and narrowed the concept of “managing agent.”   No court has so held.2  “For purposes of determining an employer's liability for punitive damages, ratification generally occurs where, under the particular circumstances, the employee demonstrates an intent to adopt or approve oppressive, fraudulent, or malicious behavior by an employee in the performance of his job duties.  [¶] The issue commonly arises where the employer or its managing agent is charged with failing to intercede in a known pattern of workplace abuse, or failing to investigate or discipline the errant employee once such misconduct became known.  [Citations.]”  (College Hospital, Inc. v. Superior Court, supra, 8 Cal.4th 704, 726.)

Here, the district managers had the authority to investigate sexual harassment complaints and discipline or fire.   Kinney authorized the district managers to deal with sexual harassment on an ad hoc basis.   Although Kinney asked the store managers and the district managers to refer the sexual harassment complaints to the New York office, the procedure was not followed.

The Las Vegas district manager transferred Buntyn to Oxnard following a sexual harassment problem.   Buntyn continued the sexual harassment and was transferred again.   As assistant manager of the Ventura store, he preyed on Means and other employees.   After the police called the store, Buntyn refused to talk to the store manager or Kasiancyzk.

The evidence further indicated that the regional vice-president, Kerry Barnes, was aware of the Buntyn problem.   In January 1990, Kasiancyzk voluntarily left Kinney to work for another company.   The new district manager, Steven Erickson, talked to Barnes about the Means incident but did not question or discipline Buntyn.   On February 8, 1990, Erickson terminated Buntyn for tardiness.

Kinney argues that Kasiancyzk did not ratify the sexual harassment because decisions concerning company policy were made in New York.   The argument lacks merit.  “ ‘ “California follows the rule laid down in Restatement of Torts, section 909, which provides punitive damages can be properly awarded against a principal because of an act by an agent if, but only if ‘(a) the principal authorized the doing and the manner of the act, or (b) the agent was unfit and the principal was reckless in employing him, or (c) the agent was employed in a managerial capacity and was acting in the scope of employment, or (d) the employer or a manager of the employer ratified or approved the act.’ ”   [ ] [Citations.]' ”  (Agarwal v. Johnson (1979) 25 Cal.3d 932, 950.)

The instant case falls in the categories described in subdivisions (b) and (d).   Kinney knew that Buntyn was unfit and transferred him to the Ventura store in conscious disregard of the rights and safety of female employees.   The district managers ratified the sexual harassment by failing to fire or discipline Buntyn.  (E.g., Herrick v. Quality Hotels, Inns & Resorts, Inc. (1993) 19 Cal.App.4th 1608, 1618 [corporate ratification where hotel manager knew employee possessed gun on premises in violation of company policy].)   After Kasiancyzk's departure, the new district manager (Erickson) and the regional vice-president (Barnes) did not discipline or reprimand Buntyn.   The trial court found that Kinney ratified Buntyn's conduct.  “ ‘Such ratification may be inferred from the fact that the employer, after being informed of the employee's actions, does not fully investigate and fails to repudiate the employee's conduct by redressing the harm done and punishing or discharging the employee.  [Citations.]’  [Citation.]”  (Fisher v. San Pedro Peninsula Hospital (1989) 214 Cal.App.3d 590, 621.)

Kinney's reliance on Kelly-Zurian v. Wohl Shoe Co. (1994) 22 Cal.App.4th 397 is misplaced.   There, a supervisor sexually harassed an employee.   The trial court declined to award punitive damages against the employer because the supervisor's conduct was unrelated to company business.   The Court of Appeal affirmed and held that the company was not liable for punitive damages because the supervisor did not hold a “policymaking position.”  (Id., at p. 422.)   The court cited section 909 of the Restatement of Torts for the rule that punitive damages may be imposed if the corporate employer had advance knowledge of the supervisor's unfitness or ratified the sexual harassment.  (Id., at p. 420.)

Kelly-Zurian v. Wohl Shoe Co., supra, stands for the proposition that a supervisor who sexually harasses an employee cannot ratify his own conduct.   “[T]he rule in California is that liability without ratification or authorization should be limited to those acting in a managerial capacity.   [Citations.]”  (Kuchta v. Allied Builders Corp. (1971) 21 Cal.App.3d 541, 550.)

Here, the sexual harassment was ratified by two district managers (Kasiancyzk and Erickson) and a regional vice-president (Barnes).  (E.g., Hartman v. Shell Oil Co. (1977) 68 Cal.App.3d 240, 249-250 [ratification based on failure to discipline “low-level” employee];  Hale v. Farmers Ins. Exchange (1974) 42 Cal.App.3d 681, 691-695 [ratification by claims supervisor who followed customary procedure].)

Although there was no direct evidence that Kinney's board of directors condoned Buntyn's conduct, the trial court drew the inference that Kinney knew about the sexual harassment and turned a deaf ear to the problem.   Kinney approved the manner in which Kasiancyzk handled the problem, as evidenced by the conduct of his successor.   The failure to discipline or reprimand Buntyn was circumstantial evidence of corporate ratification.  (Coats v. Construction & Gen. Laborers Local No. 105 (1971) 15 Cal.App.3d 908, 914-915 [failure to discharge was implied ratification];  Shoopman v. Pacific Greyhound Lines (1959) 169 Cal.App.2d 848, 856 [same];  Greenfield v. Spectrum Inv. Corp. (1985) 174 Cal.App.3d 111, 119 [totality of circumstantial evidence supported finding of ratification];  Hobbs v. Bateman, Eichler, Hill Richards, Inc. (1985) 164 Cal.App.3d 174, 193 [manager of branch office deemed managing agent].)

We conclude that Kasiancyzk acted as a managing agent.   The purpose of punitive damages is punishment and deterrence of like conduct.  (Stephens v. Coldwell Banker Commercial Group, Inc. (1988) 199 Cal.App.3d 1394, 1404.)   An award of punitive damages was proper here.

Due Process

Kinney next argues that the punitive damage award is excessive and violates the due process clause.   Our Supreme Court has held that punitive damages must bear a rational relationship to the harm caused, the reprehensibility of the defendant's acts, and the wealth of the defendant.  (Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 928;  Adams v. Murakami (1991) 54 Cal.3d 105, 116.)

Here the harm was great and the failure to take corrective action was reprehensible.   Kinney did not terminate Buntyn because he was a top sales producer.   Means sustained $65,000 damages and showed that Kinney had a net worth of $944 million at time of trial.   The $750,000 award was less than one-ten of one percent of Kinney's net worth.

Kinney argues that the Fourteenth Amendment imposes an upper limit on the ratio of punitive damages to compensatory damages.   The United States Supreme Court has suggested that a ratio of four-to-one could be “close to the line” (Pacific Mut. Life Ins. Co. v. Haslip (1991) 499 U.S. 1, 23 [113 L.Ed.2d 1, 23] ), but upheld a punitive damage award that was 526 times the actual damages (TXO Production Corp. v. Alliance Resources Corp. (1993) 509 U.S. 443, 459 [125 L.Ed.2d 366, 380].).

In BMW of North America, Inc. v. Gore (1996) --- U.S. ---- [96 Los Angeles Journal D.A.R. 5747] the purchaser of an automobile was awarded $4,000 compensatory damages and $2 million punitive damages for fraud.   The Supreme Court held that the punitive damages were excessive but stated that “we are not prepared to draw a bright line marking the limits of a constitutionally acceptable punitive damages award.”  (Id., at p. ---- [96 Los Angeles Journal D.A.R. at p. 5752].)   Here the $750,000 award, which is 11.53 times the harm suffered, is not excessive.

Attorney's Fees

Means appeals from the order denying her motion for attorney's fees and nonstatutory costs.   We affirm the order because Government Code section 12965, subdivision (b), vested the trial court with the discretion to deny the request.   During argument on the motion, the trial court stated that an award for attorney's fees would be unfair and “put a further layer of punitiveness into the picture of this case.”   Means did not request a statement of decision.

“Where the court was not asked to and did not make findings on the substantial factual issues involved in determining whether the prevailing party was entitled to attorney fees, we must infer all findings necessary to support the judgment.  [Citations.]  We cannot presume the trial court abused its discretion or found no special circumstance for denying plaintiff's request for attorney fees․”  (Stephens v. Coldwell Banker Commercial Group, Inc. (1988) 199 Cal.App.3d 1394, 1406.)

The trial court made an implied finding that counsel will be adequately compensated.   We may not reverse unless a clear case of abuse of discretion is shown or there has been a miscarriage of justice.  (Blank v. Kirwan (1985) 39 Cal.3d 311, 331.)   An award for attorney's fees and nonstatutory costs would result in a windfall for Means and her attorney.

The judgment is affirmed.   The parties shall bear their own costs on appeal.

NOT TO BE PUBLISHED.

FOOTNOTES

1.   Foot Locker employees referred to Kasiancyzk as “Kaz.”

2.   Nothing in the legislative history to Civil Code section 3294 compels the finding that the Legislature intended to abrogate Egan.   A similar argument was raised and summarily rejected by the Supreme Court in College Hospital Inc. v. Superior Court (1994) 8 Cal.4th. 704, 723.   The court stated that “whatever the meaning of ‘managing agent’ under pre-or poststatutory law, the concept assumes that such individual was acting in a corporate or employment capacity when the conduct giving rise to the punitive damages claim against the employer occurred.  [Citations.]  No purpose would be served by punishing the employer for an employee's conduct that is wholly unrelated to its business or the employee's duties therein.”  (Id., at pp. 723-724.)

YEGAN, Associate Justice.

STEVEN, J. STONE, P.J., and GILBERT, J., concur.

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