Court Decides Employer Had No Obligation To Pay Employee’s Attorney

by Allen Matkins
Contact

Mention indemnification to a corporate lawyer, and you’re like to hear about Section 317 of the Corporations Code, the articles of incorporation and bylaws.  But a corporate agent’s indemnification rights are not necessarily cabined by the Corporations Code.  If the agent is an employee, she may have a right to indemnification by her employer pursuant to Labor Code Section 2802, which provides in relevant part:

An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful.

The statute does not explicitly impose a duty to defend.  Nonetheless, an employee’s retention of counsel may be considered necessary in some circumstances and thereby subject to the employer’s statutory obligation to indemnify.

Earlier this week, the Third District Court of Appeal decided the question of whether an employee was entitled to indemnification for his attorney’s fees and costs when his employer had arranged through its insurer to provide a different attorney free of charge.  Carter v. Entercom Sacramento, LLC, 2013 Cal. App. LEXIS 701 (Aug. 3, 2013).  The employee worked for a radio station that had conducted a “Hold Your Wee for a Wii” contest.  Tragically, one of the contestants, a 28 year old mother of three, succumbed from polydipsia.  See Woman Dies After Water-Drinking Contest.  The woman’s husband sued the radio station and the employee, among others.  The District Attorney also opened a criminal investigation.  Although the employer’s insurance company accepted the employee’s tender of defense, the employee continued with his own counsel who ended up billing for over $800,000 in fees and costs.  The trial court found that none of the fees and costs incurred after the insurer had appointed counsel were necessary expenditures under Section 2802.

On appeal, the employee argued that he was entitled to a counsel of his own choosing and invoked Civil Code Section 2778  (See How To Interpret An Indemnity Agreement and Should Your Articles of Incorporation Include A Choice of Law Provision?).  Justice Ronald B. Robie, writing for the court, held that even under Section 2778 an indemnitee doesn’t have an absolute right to conduct his own defense at the expense of his indemnitor.

The employee also argued that his legal fees were necessary because the plaintiff had sought punitive damages and a criminal investigation was opened.  The Court of Appeal held that necessity was a question of fact and reviewed under the “substantial evidence” standard.  With respect to punitive damages, the Court found that the employee had pointed to no reason why it would have been in the insurer’s interest to pursue a theory that would have subjected the employee to punitive damages and that the insurer had an interest in vigorously defending the compensatory damages claim.  As to the criminal investigation, the Court found that the employee “points to absolutely nothing in his offer of proof that has any tendency to show that he needed representation in connection with the criminal investigation”.  The court specifically noted that the employee “points to no evidence of what that investigation entailed, no evidence that he was ever contacted or interviewed in the course of that investigation, and no evidence that the attorney he hired ever did a single thing connected to the criminal investigation”.  In fact, the District Attorney had announced that it would not file criminal charges less than two months after the insurance company had accepted the employee’s tender of defense.  See No Charges Will Be Filed Against Radio Station in Deadly Water-Drinking Contest.

In 2009, a Sacramento jury awarded over $16 million in damages against the employer.  See Jury Rules Against Radio Station After Water-Drinking Contest Kills Calif. Mom.

Was Junipero Serra Really Catalan?

Earlier this week, Governor Jerry Brown issued this proclamation declaring September, 2013, as California Wine Month in the State of California.  In reading the proclamation, I was surprised to see the Governor describe friar Junípero Serra as a ”Catalan”.  As every California fourth grader should know,  Junípero Serra was the founder of the first of California’s 21 missions (San Diego).  He was from Majorca, an island in the Mediterranean sea, not Catalonia, a region in the northeast corner of Spain.

 

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.

© Allen Matkins | Attorney Advertising

Written by:

Allen Matkins
Contact
more
less

Allen Matkins on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.