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The Downward Spiral: Poor Litigation Often Leads to A Meritless Appeal

Author: Michael Kutzner

Guest Editor: Allen Aho

September 9, 2020 11:00am

Employment discrimination cases may present unique opportunities for plaintiffs and defendants alike. Although typically barred in civil litigation, if a plaintiff prevails in an employment discrimination case, s/he may request attorney’s fee under Washington statute, and said attorney’s fees will likely be awarded. A unique element of employment discrimination cases for defense counsel pertains to case theory. Often, defense counsel wishes to present many alternate theories of a case to a jury to negate many possibilities of liability. However, in an employment discrimination case, defense counsel typically strives to maintain one theory for the case. This is because presenting multiple alternative (usually conflicting) explanations for why an employee was terminated may be used against an employer as evidence the employer’s expressed reasons for the termination are pretextual. Bengtsson v. Sunnyworld International, Inc., 2020 WL 4591768 (2020), explores how poor litigation techniques and strategy will lead to a sizable award for plaintiff and a sizable bill from plaintiff’s counsel.

Bengtsson was hired by Yin and Kong to work as director of Sunnyworld preschool in August 2015. Over the next 15 months, she received two raises for her positive efforts. In January 2017, Bengtsson informed Kong she was pregnant, and planned to take maternity leave in June 2017. Bengtsson was fired by Sunnyworld’s agent Lei on February 3, 2017.

Lei informed Bengtsson Sunnyworld wanted her to “take unemployment and rest before the baby,” and that “people in China rest before the baby.” Bengtsson protested and said she did not want to rest or seek unemployment. Lei then told Bengtsson the Sunnyworld owners were not happy with her work, making a general reference to a concern regarding receipts. Bengtsson sought clarification from Kong, who informed her Sunnyworld’s board, which Bengtsson did not know existed, had decided to terminate her employment due to financial concerns with enrollment numbers. Kong indicated Bengtsson’s job would be available after her child was born and she had taken approximately one year off.

Bengtsson filed suit, alleging Sunnyworld had violated Washington law against discrimination, chapter 49.60 RCW, by terminating her employment due to her pregnancy. Sunnyworld answered with an affirmative defense of unclean hands, asserting Bengtsson had embezzled money from Sunnyworld. However, when pressed to provide the factual basis for this accusation, Sunnyworld admitted it had no factual basis to believe Bengtsson had embezzled funds and did not actually believe that she had done so. This affirmative defense was later dismissed on summary judgment.

During discovery, Sunnyworld asserted its board was comprised of three members, Kong, Yin, and a 51 percent majority shareholder, Wu. Bengtsson attempted to depose Wu on multiple occasions, but Sunnyworld never presented him for deposition. Sunnyworld informed Bengtsson Wu was suffering from the mental illness of severe depression, was living in China, and was too ill to travel or be deposed. However, these assertions were not corroborated by evidence, such as a sworn declaration or affidavit. Wu was never seen or questioned by Bengtsson or her attorneys.

Despite failing to produce Wu for deposition, Sunnyworld planned to offer, statements Wu allegedly made regarding the decision to terminate Bengtsson. The Wu statements sought to be admitted were set forth solely in an offer of proof by defense counsel: “Mr. Wu [says], ‘Look, we’re losing money. You have to do something about this, or we’re going to have to close the company down.’ . . . [H]e [also] says, ‘Either shut the company down or replace the director.’” Bengtsson moved in limine to exclude any evidence of Wu’s alleged out of court statements. The trial court ruled the statements were hearsay, under ER 802, and more prejudicial than probative, under ER 403.

At trial, Bengtsson argued her termination was motivated by discrimination against her due to her pregnancy. Sunnyworld argued Bengtsson’s termination was premised solely on financial mismanagement. The jury returned a verdict for Bengtsson, awarding her $400,000 in emotional harm damages and $66,430 in past and future earnings. Sunnyworld unsuccessfully moved for a new trial and subsequently, Bengtsson successfully sought an award of attorney fees. Sunnyworld appealed.

Sunnyworld assigned error as follows: (1) excluding testimony regarding Wu’s alleged statements to Sunnyworld’s board about terminating Bengtsson’s employment, (2) excluding evidence that Sunnyworld had, after firing Bengtsson, discovered that she had failed to provide receipts for 110 transactions on the company debit card, and (3) denying Sunnyworld’s motion for a new trial because those evidentiary errors individually or cumulatively prejudiced Sunnyworld.

Washington evidentiary rule ER 403 provides for the exclusion of relevant evidence “if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.” ER 802 provides for the general exclusion of hearsay, which “is a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.”

Sunnyworld asserted the trial court incorrectly concluded Wu’s alleged statements were offered for their truth, despite assertions Sunnyworld wanted to admit them to show the effect they had on Yin’s and Kong’s states of mind. Sunnyworld’s defense at trial was that “lost profit was the only substantial factor the board of directors used in their decision to terminate Ms. Bengtsson.” Both Yin and Kong testified at trial the Sunnyworld board terminated Bengtsson’s employment because of her failure to make the business profitable.

Sunnyworld’s trouble began. Wu’s alleged out of court statements, if admitted for their truth, would have been relevant to, and entirely supportive of, Sunnyworld’s expressed theory of the case—the school was losing money and they had no choice but to fire Bengtsson to avoid financial ruin. However, if the statements were admitted solely to show Wu’s statements caused Kong and Yin to fire Bengtsson, which is the argument Sunnyworld presented on appeal, they would not have supported Sunnyworld’s theory of the case at trial. A guiding case for this situation is  Renz v. Spokane Eye Clinic, P.S., 114 Wn. App. 611, 623, 60 P.3d 106 (2002), which noted provision of several incompatible reasons for an adverse employment action “may support an inference that none of the reasons given is the real reason.”

Sunnyworld’s trouble continued. Under ER 403, a judge must be convinced evidence is relevant, meaning it must be both probative—tending to prove or disprove some fact—and material—of consequence to the ultimate outcome of the case. On appeal, Sunnyworld argued Wu’s statements were material to a critical element of Bengtsson’s case. Unfortunately for Sunnyworld, ER 403 is concerned with probative value, not with whether evidence is material. Sunnyworld did not present any argument in its briefing disputing a lack of any verification Wu actually existed. As such, any probative value of Wu’s alleged statements was minimal at best. The court further reasoned, even if the trial court had erred in disallowing Wu’s statements, the trial court’s decision would not be reversed, as Sunnyworld failed to show it had been prejudiced.

Sunnyworld’s main argument on appeal propounded the theory Wu’s statements would have supported an inference that Yin and Kong were forced to fire Bengtsson because Wu, a majority shareholder, ordered it. However, Wu’s statements did not include an assertion Wu was a controlling board member or majority shareholder. The trial court ruled the size of Wu’s ownership interest was not admissible, and Sunnyworld did not assign error to the exclusion of this evidence. The fact that a third board member wanted to fire Bengtsson was already admitted into evidence, and thus, Sunnyworld could not establish prejudice from the exclusion of Wu’s alleged statements.

Sunnyworld’s trouble maintained its course when Sunnyworld asserted the trial court erred by denying its motion for a new trial. Tragically, the court had already concluded the trial court did not abuse its discretion in making the challenged evidentiary rulings, and rejected Sunnyworld’s challenge to the trial court’s ruling denying its motion for a new trial.

Under Washington law, RCW 49.60.030(2) authorizes prevailing plaintiffs in civil rights cases to recover reasonable attorney fees. Bengtsson requested an award of attorney fees on appeal, and the court granted her request.

Unfortunately, we have no way of knowing whether the tactical decisions made in this case were a product of the attorney or the client. Although Sunnyworld’s troubles had finally drawn to a close, Sunnyworld’s counselor’s troubles may have just begun, if indeed it was counsel who concocted the strategy behind this defense and appeal. With the extensive litigation in this case, I cannot imagine opposing counsel’s fees being anything short of, “What?! …how much?!?”

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