Executive Security Management, Inc. v. Dahl
830 F.Supp.2d 870, 2011 U.S. Dist. LEXIS 132537, 2011 WL 5570106 (2011)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under California law, claims for intentional infliction of emotional distress may proceed when a defendant's conduct, considered in totality and with knowledge of a plaintiff's peculiar susceptibility, could be found "outrageous," and a jury must decide "knowing use" for misappropriation of name where unauthorized commercial use continues after demands for cessation. However, the administrative exemption precludes overtime and wage statement claims for employees performing managerial duties with discretion and a qualifying salary, and employer indemnification for legal expenses is limited to third-party lawsuits based on job duties, while minority shareholder fiduciary duty claims must demonstrate harm to specific shareholder interests.
Facts:
- Apex and CSC are corporations providing executive security, event security, event accreditation, event staffing, and crowd management services.
- Jack Dahl and Jeanette Johnson, husband and wife, were former employees of Apex and CSC, respectively.
- On January 27, 2008, Damon Zumwalt (majority owner and CEO of Apex/CSC) was denied entry to a Super Bowl credentialing office because he lacked proper credentials.
- Zumwalt became enraged, threatened to fire Dahl and another Apex employee, and yelled he was “going to shut the [expletive]-ing place down.”
- Zumwalt allegedly made numerous misrepresentations to NFL employees, including defamatory accusations that Dahl and Johnson had stolen money, company property, confidential information, were incompetent, planned to start their own business, and were working for competitors.
- These statements were allegedly made with the express intent of damaging Dahl and Johnson and inflicting substantial financial and emotional distress upon them.
- Johnson and Dahl were both suffering from potentially life-threatening cancer, a condition Zumwalt allegedly knew about.
- Johnson was suspended on February 4, 2008, and resigned the same day; Dahl was "constructively terminated" on February 11, 2008.
- After their departure, Apex allegedly continued to use Dahl’s full biography and Johnson’s name on its website.
- Dahl and Johnson's counsel sent letters on February 28, 2008, and March 5, 2008, demanding the removal of their names from Apex's website, but their names remained on the website until at least sometime after April 30, 2008.
- Johnson was hired as a salaried employee at CSC, earning more than double the minimum wage, and served in roles such as operations manager for Super Bowl contracts and director of accreditation services for the PGA, where she managed staff and represented herself as a project manager.
Procedural Posture:
- On April 9, 2008, plaintiffs Executive Security Management, Inc. (Apex) and Contemporary Services Corporation (CSC) filed an initial action in Los Angeles County Superior Court against Jack Dahl, Jeanette Johnson, Populous Holdings, Inc., HOK Group, Inc., Juan Melendez, and Yvette Rocha.
- On November 11, 2009, plaintiffs filed a First Amended Complaint (FAC) with leave of court.
- On December 17, 2009, defendant Populous timely removed the action to the U.S. District Court for the Central District of California.
- On February 8, 2010, the District Court granted in part and denied in part defendants’ motion to dismiss the FAC.
- On March 10, 2010, plaintiffs filed a Second Amended Complaint (SAC) against all defendants except Melendez and Rocha.
- On February 9, 2011, the District Court signed an order on the parties’ stipulation, permitting the filing of a cross-complaint by Dahl and Johnson (cross-complainants) against Apex, CSC, Damon Zumwalt, and others (cross-defendants).
- On August 1, 2011, the parties entered into a stipulation to dismiss several claims from the cross-complaint.
- On August 4, 2011, cross-defendants filed a motion for summary judgment as to the second, third, fourth, seventh, eighth, thirteenth, fourteenth, and fifteenth claims from the cross-complaint.
- On September 23, 2011, cross-complainants opposed the motion for summary judgment.
- On October 6, 2011, cross-defendants filed a reply to the opposition.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Should summary judgment be granted against cross-complainants Dahl and Johnson on their cross-claims for (1) intentional infliction of emotional distress, (2) misappropriation of name for advertising or selling, (3) failure to pay overtime wages and provide itemized wage statements, (4) failure to reimburse expenses, and (5) breach of fiduciary duty?
Opinions:
Majority - Christina A. Snyder
No, summary judgment is not granted for Johnson's intentional infliction of emotional distress (IIED) claim. The court found a triable issue as to whether Zumwalt’s behavior toward Johnson amounted to IIED, rejecting the application of the "law of the case" doctrine from a prior state court ruling that struck some allegations. The "extreme and outrageous character of the conduct may arise from the actor’s knowledge that the other is peculiarly susceptible to emotional distress, by reason of some physical or mental condition or peculiarity." Here, Zumwalt knew both Dahl and Johnson were suffering from potentially life-threatening cancer. A rational jury could find Zumwalt’s alleged insults, harassment, humiliation, intimidation, complaints about Johnson's cancer-related insurance premium increases, and forcing her to lie about business prospects, amounted to "extreme and outrageous conduct" based on the totality of the circumstances. No, summary judgment is not granted for Dahl and Johnson's misappropriation of name claims. There is a triable issue of fact as to whether the cross-defendants "knowingly" maintained Dahl and Johnson’s photographs and biographies on the company’s website without their prior consent, in violation of Cal. Civ. Code § 3344. Despite two written demands from their counsel on February 28, 2008, and March 5, 2008, for removal, their names and profiles remained on Apex's website until at least April 30, 2008. Whether this constitutes "knowing use" for commercial purposes is a question for the jury. Any prior consent was revoked upon resignation or through the demands for removal. Yes, summary judgment is granted for Johnson's claims for failure to pay overtime wages and failure to provide itemized wage statements. The court found that Johnson met the definition of an "administrative" employee under Cal. Lab. Code § 515 and Cal.Code Regs., tit. 8, § 11040(1)(A)(2), and thus fell within the administrative exemption. Uncontroverted evidence showed she was a salaried employee earning more than double minimum wage, served as operations manager for Super Bowl contracts, director of accreditation services for the PGA, had project management skills, was listed under "CSC Management," and managed staff at events. These duties align with performing non-manual work directly related to management and regularly exercising discretion and independent judgment, not merely producing a good or service. Therefore, she was not entitled to overtime payments or itemized wage statements. Yes, summary judgment is granted for Dahl and Johnson's claims for failure to reimburse expenses. Indemnification under Cal. Lab. Code § 2802 is required only if a third-party lawsuit is based on "the employee’s conduct within the course and scope of his or her job duties." The lawsuit filed by Apex and CSC against Dahl and Johnson relates to alleged conduct outside the scope of their duties, such as breach of fiduciary duty, intentional interference with prospective economic advantage, and violations of the Wiretap Act. Dahl and Johnson failed to prove these alleged actions fell within their employment scope. Indemnification is intended to protect employees from third-party lawsuits for conduct done on behalf of the employer and within their duties. Yes, summary judgment is granted for Dahl's claim for breach of fiduciary duty. Dahl’s allegations regarding Zumwalt’s wrongdoing (e.g., misappropriation of name, failure to pay wages) cannot form the basis for a direct breach of fiduciary duty suit by a minority shareholder against a majority shareholder. Such a claim requires proving injury to Dahl’s interests as a minority shareholder, not merely seeking damages related to other individual claims or employment issues. Dahl offered no evidence of damage to his specific interests as a minority shareholder.
Analysis:
This case offers critical insights into the fact-intensive nature of certain California tort claims, demonstrating that the "totality of circumstances" can be key in establishing "outrageous conduct" for IIED, especially when defendants have knowledge of a plaintiff's particular vulnerabilities. It also clarifies that continued unauthorized commercial use of a person's name, despite explicit demands for removal, creates a triable issue of "knowing use" for misappropriation claims. Conversely, the ruling provides a strong precedent for applying the California Labor Code's administrative exemption, emphasizing that the actual duties performed, level of discretion, and salary are determinative, not merely a job title, in precluding overtime and wage statement claims. Furthermore, it strictly interprets employer indemnification under Cal. Lab. Code § 2802, limiting it to defense of third-party actions directly stemming from an employee's scope of duties, and reinforces that minority shareholder breach of fiduciary duty claims must articulate harm specific to the shareholder's ownership interests.
