In Divided Ruling, Justices Side With Domino's on Franchisor Liability

In Divided Ruling, Justices Side With Domino's on Franchisor Liability Jason Doiy / The Recorder Justice Marvin Baxter, California Supreme Court

SAN FRANCISCO — Plaintiffs may have a harder time holding corporations responsible for the actions of franchise employees, following the California Supreme Court’s decision Thursday to release Domino’s Pizza from sexual harassment claims.

Domino’s isn’t liable for alleged sexual harassment by a manager in one of its independently operated franchise locations, the panel ruled. In a 4-3 decision, the court found the owner of the Southern California franchise implemented his own sexual harassment policy and made hiring, training and disciplinary decisions without input from Domino’s.

“Domino’s lacked the general control of an ‘employer’ or ‘principal’ over relevant day-to-day aspects of the employment and workplace behavior of [the franchise] employees,” Justice Marvin Baxter wrote.

The decision covers new ground, according to Baxter, who wrote that California courts have never decided a franchisor’s liability for sexual harassment claims under the Fair Employment and Housing Act, or FEHA.

Chief Justice Tani Cantil-Sakauye and Justices Ming Chin and Carol Corrigan concurred with Baxter’s majority opinion. Justice Kathryn Werdegar wrote the dissenting opinion, with Justices Goodwin Liu and Victoria Gerrard Chaney concurring. Chaney, a justice on the Second District Court of Appeal, was filling in for retired Justice Joyce Kennard.

Werdegar wrote that she would have held that the case raised a triable issue with regards to Domino’s liability. “Our principal responsibility in FEHA cases is not to give effect to private contracts intended to shift or avoid liability,” she wrote.

Snell & Wilmer partner Mary-Christine Sungaila, who argued on behalf of Domino’s, said the ruling is an important win for businesses on both sides of the franchise relationship.

“I think if the decision was otherwise, the industry in California might be in peril,” she said.

Plaintiff Taylor Patterson, a female employee at a Domino’s franchise location, sued the company in 2009 alleging sexual harassment, retaliation, and assault and battery. The suit, filed in Ventura County Superior Court, also named the franchise’s assistant manager and owner. Patterson alleged her supervisor, Renee Miranda, made lewd comments and gestures and grabbed her breasts and buttocks when they worked the same shift.

The lower court granted summary judgment to Domino’s, ruling the corporation, as franchisor, was not vicariously liable for Miranda’s conduct. The Second District Court of Appeal reversed, finding Domino’s imposed standards and policies on its franchisees and had meddled in the store’s employment decisions.

The Supreme Court granted review to address what it called a “novel” question: “Does a franchisor stand in an employment or agency relationship with the franchisee and its employees for purposes of holding it vicariously liable for workplace injuries allegedly inflicted by one employee of a franchisee while supervising another employee?”

By allowing the franchise to sell pizza under its name and imposing a business plan to guide the franchise’s operations, Domino’s did not assume responsibility for a rogue employee’s conduct, Baxter wrote.

“We cannot conclude that franchise operating systems necessarily establish the kind of employment relationship that concerns us here,” he wrote. “A contrary approach would turn business format franchising on its head.”

Patterson’s attorney, Alan Charles Dell’Ario, a Napa solo, said he plans to file a petition for rehearing.

“I think the ruling’s unfortunate,” he said. “They didn’t make any new law. They just proceeded to adjudicate facts instead of letting the jury do it.”

Contact the reporter at mkendall@alm.com.

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