California Court of Appeal Overturns $1.3 Million in Damages and Attorneys’ Fees against Lucasfilm for Failure to Give Instruction on Business Judgment

On December 10, 2012, in Veronese v. Lucasfilm Ltd., a California Court of Appeal overturned a Marin County jury’s verdict against Lucasfilm based on its finding that several errors in jury instructions prejudicially affected the verdict. Plaintiff had sued under the Fair Employment and Housing Act (“FEHA”) for pregnancy discrimination and related claims when she accepted, but did not start, in a temporary position at Lucasfilm. After eleven days of testimony and three days of deliberation, a jury awarded Veronese a total of $113,800 in damages and the trial court awarded Veronese $1,157,411 in attorneys’ fees. Lucasfilm challenged both the judgment and the fee award. Lucasfilm argued that the trial court judge erred in giving certain instructions proposed by Veronese, failing to give certain instructions proposed by Lucasfilm, and failing to instruct on certain issues submitted to the jury. Notably, this Court of Appeal decision appears to be the first California appellate decision reversing a jury verdict for an employee based on failure to give a business judgment instruction.

It Was Error to Refuse a “Business Judgment” Instruction

Lucasfilm proposed a special instruction stating: “You may not find that Lucasfilm discriminated or retaliated against Julie Gilman Veronese based upon a belief that Lucasfilm made a wrong or unfair decision. Likewise, you cannot find liability for discrimination or retaliation if you find that Lucasfilm made an error in business judgment. Instead, Lucasfilm can only be liable to Julie Gilman Veronese if the decisions made were motivated by discrimination or retaliation related to her being pregnant.” The Court of Appeal found that refusing to give this business judgment instruction to the jury was error.

As the Court of Appeal noted, numerous California cases contain language similar to the proposed special instruction. It is well settled that a plaintiff in a discrimination case must show discrimination, not just that the employer’s decision was wrong, mistaken or unwise. See, e.g., Guz v. Bechtel Nat’l Inc., 24 Cal.4th317, 358 (2000) (defendant’s “true reasons need not necessarily have been wise or correct”). The court also found that several federal cases have held that refusing to give a business judgment instruction was prejudicial error. See, e.g., Walker v. AT&T Technologies, 995 F.2d 846 (8th Cir. 1993) (reversed verdict in age discrimination case because of district court’s refusal to give business judgment instruction stating that an employer has the right to “discharge an employee for good reason, bad reason, or no reason at all absent intentional age discrimination”); Scamardo v. Scott County, 189 F.3d 707, 710-11 (8th Cir. 1999) (same, retaliation case).

Thus, the court concluded that Lucasfilm was entitled to exercise its business judgment, without second guessing; failure to instruct the jury that was prejudicial error.

The Instruction about Potential Hazard to a Fetus Was Error

The trial court judge gave Veronese’s proposed instruction that said: “A potential hazard to a fetus or an unborn child is not a defense to pregnancy discrimination.” While the Court of Appeal acknowledged that the instruction’s words were accurate in the abstract, it found the instruction improper because Lucasfilm never contended that it denied Veronese a position at the company out of concern for her well-being or that of the fetus.  Further, the instruction was likely to mislead the jury because it could leave the impression that Lucasfilm could not have a concern for the health or safety of Veronese or the fetus. That is, the instruction could be interpreted as saying Lucasfilm could not have a conscience and, if it acted with one, it was per se illegal and would violate FEHA.

Failure to Instruct on Failure to Prevent Discrimination Was Error

Veronese’s third cause of action was for “Failure to Prevent and Investigate Discrimination Violation of FEHA.”  The jury found for Veronese on this cause of action, though the judge gave no instruction as to the required elements of the claim. The Court of Appeal found that the trial court must instruct on the law applicable to the facts developed by the evidence and every reasonable theory that the evidence supports to ensure that jurors are properly guided on controlling legal principles. The failure to instruct was thus error.

Failure to Instruct Regarding Difference Between “Termination” Claim and “Failure to Hire/Promote” Claim Was Error

The Court of Appeal also found it was error to deny two proposed instructions for “wrongful discharge” and “failure to hire”, which would have explained they were two separate claims. Similarly, it was error to deny instructions on the measure of damages for each claim. Damages for termination from the temporary position would run only to the end of the temporary employment, whereas damages for the failure to hire claim would run from the date Veronese would have started work if she had been selected. But the trial court judge lumped the two claims together and simply instructed that damages were what Veronese would earn up to the present.  Failing to differentiate between the claims prevented the jury from considering whether the alleged discrimination caused Veronese all of the claimed injury.

Aside from finding the errors as described above, the Court of Appeal ruled that the errors were prejudicial and that a “miscarriage of justice” occurred. The court concluded that the cumulative effect of the errors made it reasonably more probably that a result more favorable to the appealing party would have been reached in the absence of the error. Accordingly, the court reversed the jury verdict, vacated the attorneys’ fee award as premature, and remanded the matter for retrial.

Conclusion

This case highlights the importance of accurate jury instructions, whether or not they are contained in CACI. Further, this decision should bolster any defendant employer’s arguments for the inclusion of an instruction on business judgment, and the exclusion of prejudicial and unrelated instructions.

 

Topics:  Appeals, Business Judgment Rule, Discrimination, Failure To Hire, FEHA, Jury Instructions, Lucasfilm, Pregnancy Discrimination, Reversible Error, Termination

Published In: Civil Procedure Updates, Civil Rights Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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