Stockett v. Assoc. of CA Water Agencies 5/30/02 CA3

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State: California

Court: 1st District Court of Appeal 1st District Court of Appeal

Docket No: C035330

Case Date: 08/29/2002

Preview:Filed 5/30/02

NOT TO BE PUBLISHED
California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Sacramento) ---JERRY STOCKETT et al., Plaintiffs and Respondents, v. ASSOCIATION OF CALIFORNIA WATER AGENCIES JOINT POWERS INSURANCE AUTHORITY, Defendant and Appellant. JERRY STOCKETT et al., Plaintiffs and Appellants, v. ASSOCIATION OF CALIFORNIA WATER AGENCIES JOINT POWERS INSURANCE AUTHORITY, Defendant and Respondent. C035469 (Sup.Ct.No. 96AS04669) C035330 (Sup.Ct.No. 96AS04669)

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After plaintiff Jerry Stockett's employment with defendant Association of California Water Agencies Joint Powers Insurance Authority (JPIA) was terminated, he and his wife, Judith, filed the required government claim and then brought suit for unlawful termination and loss of consortium. The case proceeded to trial

on the theory of unlawful termination in violation of public policy, based on alleged retaliation for the following acts: supporting claims of sexual harassment and objecting to an attempt to weaken JPIA's sexual harassment policy, objecting to a conflict of interest that violated Government Code section 87100, and free speech to the press. A jury awarded the JPIA appeals

Stocketts over $4.5 million dollars in damages.

from the judgment, contending the trial court improperly allowed the case to go to the jury on factual theories not set forth in the government claim; there was juror misconduct; and the million dollar damage award for loss of consortium was excessive. The Stocketts also appeal, contending it was error

to strike their memorandum of costs. We find merit in JPIA's first contention. While the

Stocketts's claim included facts that would support an action for unlawful termination in violation of public policy based on retaliation for objecting to sexual harassment, it contained no facts to support theories of recovery based on retaliation for opposing a conflict of interest or exercising free speech in speaking to the press. The case was presented to the jury on

all three theories of unlawful termination in violation of public policy with a general verdict, and there is no way to 2

determine that the jury did not rely on the legally improper theories. Further, a review of the record indicates it is

reasonably probable that a result more favorable to JPIA would have been reached absent the inclusion of the improper theories at trial. Therefore, the judgment must be reversed. Since we

reverse the judgment, we need not address the remaining contentions. FACTUAL AND PROCEDURAL BACKGROUND The Association of California Water Agencies is a nonprofit organization of about 425 water districts, created to advocate water rights for member agencies. Numerous of these water

agencies joined forces and created JPIA to provide insurance services and risk management services. three main programs: In August 1995, JPIA had

a liability program, a worker's

compensation program, and a property program. Each water agency that is a member of JPIA sends a director to the JPIA board of directors. executive committee. This board elects a 10-member

In 1995, Warren Buckner was president of

the executive committee and Wesley Bannister was vice-president. In 1983, Stockett was hired as general manager of JPIA. The general manager of JPIA was the head staff person and reported to the executive committee. The general manager made

all day-to-day decisions, analogous to a chief executive officer of a corporation. Originally, Stockett had employment contracts In 1992, he signed an employment

for specified periods.

contract with no specified period; it was terminable at will. In January 1995, Stockett received 97 percent of the bonus for 3

which he was eligible.

His salary was about $120,000 per year.

On August 25, 1995, after a closed meeting of the executive committee, Stockett's employment was terminated. $65,000-68,000 in severance pay. The Stocketts filed a government claim for damages pursuant to Government Code section 910. complaint for damages. In August 1996, they filed a He received

After various demurrers, amended

complaints, and an unsuccessful motion for summary judgment, the case proceeded to jury trial, which lasted over three months. The central dispute at trial was the reason for Stockett's termination. Much of the testimony centered on conflicts

between Stockett and William Malone, JPIA's insurance broker. Malone had been involved with JPIA's excess liability insurance since 1979; first as an underwriter and since 1991 as a broker. There were discussions about him becoming JPIA's in-house broker, but they could not reach an agreement on salary. At one time Malone bought dinners for the executive committee before their meetings. practice. Stockett stopped that

Beginning in 1995, Malone had to fill out Form 730, This practice

Statement of Economic Interests, as a consultant. stopped after Stockett was terminated.

In the spring of 1995, JPIA was looking into ways to market its programs and increase membership. John Sacco, JPIA's risk

manager, presented a proposal for in-house marketing, which stressed controlled growth and aggressive risk control. Malone

presented a competing proposal for a joint venture marketing

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plan between JPIA and his company; he offered a reduced commission. The executive committee adopted the joint venture.

There was tension between Malone and Stockett over the marketing plan. Stockett did not think Malone could effectively Malone thought Stockett was not being

do the marketing. supportive.

Malone also got upset that Stockett was not The conflict

providing him all the information he sought.

between Stockett and Malone was discussed in a closed session of the executive committee. Afterwards Stockett, Malone and After a candid

Bannister met to discuss the conflicts.

discussion, Stockett believed they came to a resolution and each would make an effort to make the joint venture work. venture was not a success. In October 1994, JPIA agreed to a three-year contract of excess liability insurance. insurance. Malone was the broker for this The joint

In the Spring of 1995, Stockett asked an old friend,

Gary Rimler of Jardine Insurance, to check out the market for this insurance. Stockett did not tell the executive committee

he was testing the market. Malone learned Rimler was soliciting bids; he asked Stockett for a meeting in Tahoe to discuss the apparent conflict with the existing contract and asked that Buckner and Bannister be included. Stockett declined to include Buckner and Bannister Two

in the meeting, so Malone invited them himself.

representatives from the insurer and Dan Klaff, the assistant general manager for JPIA, were also in attendance. Malone

expressed the concern that Stockett was in the marketplace when 5

there were three years left to run on the contract.

Stockett

said he had every right to be in the marketplace and Buckner agreed, but Stockett had no right to change insurance without the executive committee's approval. At the end of the meeting,

Stockett understood he could be in the market and make inquiries, but that he was not to solicit formal bids. Stockett later reported to Buckner and Bannister that Rimler was indeed soliciting proposals and the bidder had been told that JPIA would break its existing contract if adequate savings were shown. He took "full responsibility for any

misunderstandings that now exist" and apologized for the position he had put JPIA in. He requested advice on whether he

should "kill the Jardine proposals at this time" or accept them and use them only for market information. Buckner responded with a harshly worded handwritten memo to Stockett, that began: of ethics." "I am appalled at your duplicity and lack

Buckner stated he expected both sides to honor the

existing contract and ordered Stockett to kill the Jardine proposal. At trial Bannister explained that going into the

market while a contract is in place gives one the image of a shopper who does not honor contracts and that image is very injurious. He further explained that it is difficult to get If you use multiple

quotes if there is more than one broker.

brokers, you should allocate the market, so two brokers do not contact the same carrier.

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Malone then proposed a contract extension at a substantial savings. This proposal was adopted immediately after Stockett

was terminated. Another dispute over competing bids for insurance arose with respect to property insurance. For two years JPIA had been

attempting to change some policy language in an excess property coverage policy. The problem became acute when there was a mud The executive committee instructed Malone reported he was

slide that was not covered.

Malone to get quotes for coverage.

having trouble dealing with insurers because another broker, Goldman, was shopping the same market. Bannister called Klaff

and told him to get Goldman out of the market. John Sacco, JPIA's risk control manager, reported to Stockett that one of his administrative assistants, Ashley Smalley, complained that Malone came up behind her at the copy machine and rubbed against her. Sacco also mentioned another Stockett

incident where Malone had stroked a woman's hair.

showed Malone Sacco's memo and Malone said he was sorry and it would not happen again. Stockett told Buckner and Bannister

about the incident and considered it closed. Bannister then wrote Stockett about a perceived problem with sexual harassment claims. He asked that the current

procedures be reviewed and perhaps revised, particularly since the accused person was being confronted by someone other than the accuser. Although Bannister expressed no tolerance for

sexual harassment or abuses of any kind, he was also concerned about damaging the party accused and potential litigation 7

against JPIA.

He proposed a detailed agenda item about handling Among his suggestions were

sexual harassment situations.

consideration of a unisex uniform and training in dress codes. Bannister had not reviewed JPIA's sexual harassment policies. Bannister continued to dwell on the Malone incident, telling Stockett that Malone had denied the conduct and was threatening to sue. In response to Bannister's concerns,

Stockett conducted an additional investigation of the incident, which included obtaining a statement from Smalley. Stockett

admitted part of his motivation for the investigation was to protect himself in the event of a confrontation with Malone. At a personnel committee meeting, Bannister expressed his concern about revising the policies to protect the "innocently accused." Stockett was directed to meet with counsel to draft

new procedures for handling sexual harassment complaints and present them at the next executive committee meeting. and others met with counsel; they believed Bannister's suggestions were nonsense, but made changes to placate him. No Stockett

one took Bannister's suggestion for unisex uniforms seriously. Bannister complained that the changes to the sexual harassment policy were not occurring quickly enough. concerned. When Bannister received a copy of the tentative agenda for the August 25 executive committee meeting he was unhappy that the agenda item concerning sexual harassment was directed to the executive committee rather than to staff. He wrote Stockett, No one else was

castigating him for his inability to follow instructions. 8

Buckner took Stockett's side that the agenda item was appropriate; Buckner thought Bannister was over-reacting. Bannister then put Stockett's performance on the agenda for the next executive committee meeting. In June 1995, JPIA decided to purchase group worker's compensation insurance from California Compensation Insurance Company (Cal Comp), rather than continue to self-insure. Stockett was interviewed about the change by Smart's Worker's Comp Bulletin. In an article published in early August,

Stockett was quoted as saying Cal Comp was willing to incur some losses on the business to obtain the JPIA account. "The big

thing from my perspective is that they're buying business and willing to take some loss on it." Buckner was very upset about

the article; he thought the comments were ill-advised and did not reflect well on JPIA. He sent Stockett a copy of the "Calling Cal Comp liars

article with a note that read in part:

and accusing them of breaking the law by selling insurance below cost are very serious accusations." Buckner indicated apologies

had been made to Cal Comp and Malone was trying to avert a cancellation of the policy. In anticipation of his performance being evaluated by the executive committee, Stockett obtained Buckner's permission to contact the members of the executive committee about their concerns. After speaking with several members of the executive

committee, Stockett prepared a defense of his position, responding to their concerns. He apologized for the Smart's

article and insisted he was only answering a reporter's 9

question.

With respect to the Goldman situation, he explained

that Klaff had asked to permit Goldman to bid on property coverage and Stockett told him market assignments would need to be made. When Malone was asked his preference for markets, he

made his plea for assignment of all remaining markets directly to Buckner and Bannister, without responding to staff. Stockett

relied on Buckner's letter to show that he had followed the instructions to review and revise sexual harassment policies. Stockett defended his comments that were perceived as lacking in support of the marketing plan and he blamed staff for the failure to get an acceptable property program in two years. At the August 25 meeting of the executive committee, a closed session was held to discuss Stockett's performance. members voted to terminate his contract; there was one abstention. Stockett was not allowed to address the executive Nine

committee and was not certain all members saw his written defense. manager. Buckner testified there were four incidents that showed Stockett's disregard for executive committee orders and poor judgment, which were the reasons for his termination. At the Klaff was immediately appointed interim general

meeting in Tahoe Stockett loudly proclaimed his right to be in the market. Jardine was procuring quotes that would require In Buckner's view JPIA

JPIA to break its existing contracts. should honor its contracts.

When there was a flood and mudslide

in San Diego County they thought they were covered, but discovered they were not. Stockett resisted any action except 10

maybe filing a lawsuit.

The executive committee asked Malone to He ran into difficulty because there Buckner had to tell Buckner

get replacement coverage.

was another broker shopping the market.

Klaff to call Goldman and tell him to cease and desist.

claimed everyone agreed you do not have two brokers shopping the same market. Finally, Stockett told Smart's that Cal Comp was

buying their insurance by quoting a rate lower than what they could hope to sustain. Bannister testified repeatedly two things triggered his desire to terminate Stockett: his marketing the liability program midstream against Buckner's instructions and his comments to Smart's. He said Stockett's delay in reviewing the

sexual harassment policy was discussed in the closed session, but was not part of the decision to terminate him. Ronald Vickery, a member of the executive committee, testified Stockett was terminated due to his unwillingness to carry out the requests of the executive committee, his inability to deal with people, and because he wanted to take JPIA nationwide and it was hard to get him to stop pursuing that. Stockett used JPIA funds to get involved in nationwide pools and the executive committee told him to stay out. Jim Edwards described the closed executive committee meeting discussing Stockett as a "general gripe session." He

suggested that if everyone was unhappy, they should buy out Stockett's contract. Buckner thought that was premature. After

a 20-minute discussion, the executive committee voted to terminate the contract. There was no discussion of sexual 11

harassment or Malone, but the Smart's article did play a role in the decision. The jury returned a general verdict, finding JPIA liable for wrongful termination in violation of public policy. It

awarded Stockett $2,514,615 in economic damages and $1,000,000 in noneconomic damages. The jury awarded Judith Stockett

$1,000,000 for loss of consortium. DISCUSSION JPIA contends the trial court committed reversible error in allowing the jury to consider theories of recovery based on facts that differed from those in the claim form. The Stocketts filed a claim against JPIA pursuant to Government Code section 910, a prerequisite to a suit for damages. (Gov. Code,

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