Appeals Court Upholds Exclusion of Job Severance Offer

Appeals Court Upholds Exclusion of Job Severance Offer

Metropolitan News-Enterprise
November 17, 2009

Bar of Evidence of Compromise Offers Held Not Limited to Preexisting Disputes

The state law barring admission of offers to compromise applies to an employer’s offer of a severance payment in exchange for a release of potential claims by a newly-terminated employee, the Sixth District Court of Appeal ruled yesterday.

The justices affirmed a judgment in favor of Verity Inc. in a retaliation action brought by Thomas Mangano. The plaintiff claimed that Santa Clara Superior Court Judge John F. Herlihy erred by barring introduction of a proposal by the company, which Mangano rejected, to pay a lump sum equivalent to 17 weeks’ salary if Mangano would release Verity from all past and future claims.

Verity fired Mangano in December 2006, less than a month after summary judgment was entered in the employer’s favor in a prior suit for disability discrimination. Mangano, who was hired by the software company as director of manufacturing in 1991, was diagnosed with Asperger’s Syndrome in 2005 and claimed that he had been treated in a demeaning manner because of it.

At the time of his firing, the company made a written proposal to Mangano, telling him it was willing to “aid you in your employment transition” by making the severance payment. In return, Mangano would have been required to drop his appeal of the earlier judgment and promise not to sue or disparage the company in the future.

He declined the offer, and went forward with his appeal, which the Sixth District rejected in Mangano v. Verity (2008) 167 Cal.App.4th 944. He also filed a new suit, claiming that he was fired in retaliation for having sued earlier.

Herlihy granted the company’s motion in limine, barring evidence of the severance offer under Evidence Code Sec. 1152.

The statute provides, in part:

“Evidence that a person has...offered...money...to another who has sustained or will sustain...loss or damage...is inadmissible to prove his or her liability for the loss or damage or any part of it.”

The jury subsequently found by special verdict that Mangano’s prior suit was not a motivating factor in his termination. The trial judge denied his motion for new trial and granted entry of judgment for the defendant.

Justice Nathan Mihara, writing for the Court of Appeal, said the trial judge was correct, rejecting the plaintiff’s argument that the statute did not apply because there was no pending dispute at the time the agreement was offered.

“We discern nothing in the language of Evidence Code section 1152 which limits it to offers to compromise preexisting disputes,” the justice said, emphasizing the “will sustain” language in the section.

“Here, Verity offered money to Mangano when it terminated his employment,” the jurist explained. “At that time, it was a fact that Mangano’s termination would cause him to sustain some loss of income. It follows that Verity’s offer to compensate him for this prospective loss was inadmissible under Evidence Code section 1152 to show that Verity was liable for this loss.”

Mihara distinguished Cassino v. Reichhold Chemicals, Inc. (9th Cir. 1987) 817 F.2d 1338, which held that a district judge did not commit an abuse of discretion by admitting evidence that a plaintiff in an age discrimination suit was offered $18,000 to release all of his claims, including age discrimination, at the time of his termination.

That case, the justice explained, was decided under Rule 408 of the Federal Rules of Evidence, which excludes evidence of “a claim that was disputed as to validity or amount,” the Ninth Circuit ruling that there was no such dispute at the time the plaintiff was terminated.

The federal rule differs from the broadly worded Sec. 1152, Mihara said, in that the state law “says nothing about any claim, does not require the preexistence of a dispute, and expressly applies to a prospective loss.”

The case is Mangano v. Verity, Inc., H033286.