Opinion ID: 1275413
Heading Depth: 4
Heading Rank: 3

Heading: Policy to Avoid Conflicts of Interest and Chilling of Effective Management[3]

Text: The Janken court stated that imposing liability on individual supervisory employees would do little to enhance the ability of victims of discrimination to recover monetary damages, while it can reasonably be expected to severely impair the exercise of supervisory judgment. The minimal potential for benefit to an alleged victim juxtaposed with the potentially severe adverse effects of imposing personal liability on individual supervisory employees is an additional reason for our conclusion that this is not the result intended by the Legislature. Many courts have noted the importance of maintaining the conditions in which impartial judgment can be exercised by officials performing duties in the public sector. (See, e.g., Caldwell v. Montoya, supra, 10 Cal.4th 972, 982 [42 Cal.Rptr.2d 842, 897 P.2d 1320][[N]oting `vital public interest in securing free and independent judgment' of public sector employees in `dealing with personnel problems.']; Lipman v. Brisbane Elementary Sch. Dist. (1961) 55 Cal.2d 224, 230 [11 Cal.Rptr. 97, 359 P.2d 465] [`There is a vital public interest in securing free and independent judgment of school trustees in dealing with personnel problems, ...']; ... ) Judge Learned Hand made a similar point long ago in Gregoire v. Biddle (2d Cir.1949) 177 F.2d 579, 581, stating: `It does indeed go without saying that an official, who is in fact guilty of using his powers to vent his spleen upon others, or for any other personal motive not connected with the public good, should not escape liability for the injuries he may so cause; and, if it were possible in practice to confine such complaints to the guilty, it would be monstrous to deny recovery. The justification for doing so is that it is impossible to know whether the claim is well founded until the case has been tried, and that to submit all officials, the innocent as well as the guilty, to the burden of trial and to the inevitable danger of its outcome, would dampen the ardor of all but the most resolute, or the most irresponsible, in the unflinching discharge of their duties ... the answer must be found in a balance between the evils inevitable in either alternative.... `rather than in subjecting `those who try to do their duty to the constant dread of retaliation.' (See also Tietz v. Los Angeles Unified Sch. Dis. (1965) 238 Cal.App.2d 905, 910 [48 Cal.Rptr. 245], quoting Judge Learned Hand.) No one could reasonably doubt that effective and efficient management of industrial enterprises and other economic organizations is also important to the public welfare. The societal interest in effective private sector personnel management may be less direct, but only marginally (if at all) less compelling.... Yet it is manifest that if every personnel manager risked losing his or her home, retirement savings, hope of children's college education, etc., whenever he or she made a personnel management decision, management of industrial enterprises and other economic organization would be seriously affected. (See, e.g., Birkbeck v. Marvel Lighting Corp., supra, 30 F.3d 507, 510 [`personal liability would place a heavy burden on those who routinely make personnel decisions'].) . . . . Plaintiffs' theory would place a supervisory employee in a direct conflict of interest with his or her employer every time that supervisory employee was faced with a personnel decision.... [It] would coerce the supervisory employee not to make the optimum lawful decision for the employer. Instead, the supervisory employee would be pressed to make whatever decision was least likely to lead to a claim of discrimination against the supervisory employee personally, or likely to lead only to that discrimination claim which could most easily be defended. The employee would thus be placed in the position of choosing between loyalty to the employer's lawful interests at severe risk to his or her own interests and family, versus abandoning the employer's lawful interests and protecting his or her own personal interests. The insidious pressures of such a conflict present sobering implications for the effective management of our industrial enterprises and other organizations of public concern. We believe that if the Legislature intended to place all supervisory employees in California in such a conflict of interest, the Legislature would have done so by language much clearer than that used here. Moreover, imposing personal liability against individual supervisory employees adds little to an alleged victim's legitimate prospects for monetary recovery. The plaintiff-employee's primary target remains the employer. Adding individual supervisors personally as defendants adds mostly an in terrorem quality to the litigation, threatening individual supervisory employees with the spectre of financial ruin for themselves and their families and correspondingly enhancing a plaintiffs possibility of extracting a settlement on a basis other than the merits. Enhancing the prospects for obtaining a settlement on a basis other than the merits is hardly a worthy legislative objective.... The only marginally legitimate purpose for adding individual supervisory employees as defendants is the possibility that the employer will file for bankruptcy protection and be unable to respond fully in damages. This prospect cuts both ways, however. Employment with an employer about to go bankrupt is in jeopardy in the first instance, and hence is of inherently lesser value than employment with a healthy and solvent employer. Loss or impairment of employment with an employer on the brink of bankruptcy would thus cause correspondingly less compensable damage. At the same time, it is often when companies are struggling for their financial survival that the most difficult personnel decisions must be made. A legal regime in which individual supervisory employees were personally liable after bankruptcy of the employer (a bankruptcy which would potentially result in unemployment for the supervisory employees as well) would mean that salvage of a troubled business would be all that less likely, as managers declined to make decisions necessary to save the enterprise.... ... The construction we choose avoids conflicts of interest by harmonizing the FEHA statutory provisions with the duties of supervisory employees, and does so without doing any significant harm to plaintiffs' legitimate interests. ( Janken, supra, 46 Cal. App.4th at pp. 72-76, 53 Cal.Rptr.2d 741, fns. omitted.)