Melman v. PDF Solutions CA6 ( 2013 )

Filed 3/22/13 Melman v. PDF Solutions CA6
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
PHILIP STEVEN MELMAN, H037703
(Santa Clara County
Plaintiff and Appellant, Super. Ct. No. CV158798)
v.
PDF SOLUTIONS, INC., et al.,
Defendants and Respondents.
I. INTRODUCTION
Appellant Philip Steven Melman was employed by respondent PDF Solutions, Inc.
(PDF) from 1998 until 2009, when he was terminated during a reduction in force from his
position as vice president of investor relations and strategic initiatives. Melman filed a
wrongful termination action against PDF and its chief executive officer (CEO),
respondent John Kibarian (hereafter, sometimes collectively PDF), alleging that PDF‟s
decision to terminate him was based upon his physical disability. His complaint included
two causes of action for disability discrimination in violation of the Fair Employment and
Housing Act (FEHA) (Gov. Code, § 12940 et seq.),1 as well as causes of action for
“failure to prevent discrimination,” fraud, breach of contract, breach of the implied
1
All further statutory references are to the Government Code unless otherwise
indicated.
covenant of good faith and fair dealing, and wrongful discharge in violation of public
policy.
PDF moved for summary judgment on the ground that the undisputed facts
showed that Melman‟s employment agreement provided that his employment was at-will
and he was terminated for a nondiscriminatory reason: his position was eliminated for
legitimate business reasons during a reduction in force. The trial court granted the
summary judgment motion, finding that Melman had failed to present evidence that
created a triable issue of fact as to whether PDF‟s reasons for his termination were
pretextual or PDF had acted with discriminatory intent. The trial court also found as a
matter of law that even assuming the at-will provision in Melman‟s written employment
agreement was modified by Kibarian‟s later oral statement that Melman could have the
vice president position for as long as he wanted it, there was good cause for his
termination due to PDF‟s financial condition.
On appeal, Melman contends that the trial court erred because Kibarian promised
that Melman could have the vice president position for as long as he wanted it in
exchange for stepping down from his prior position as chief financial officer (CFO).
Melman also argues that the evidence shows that PDF used the reduction in force as a
pretext and therefore a triable issue of fact exists as to whether PDF terminated his
employment due to his physical disability. For the reasons stated below, we determine as
a matter of law that (1) the at-will provision in Melman‟s employment agreement was not
modified by Kibarian‟s later oral promise of continued employment; and (2) PDF met its
burden on summary judgment to show legitimate, nondiscriminatory reasons for
terminating his at-will employment. (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th
317, 357 (Guz).) We also determine that Melman produced no evidence from which it
could be reasonably inferred that PDF terminated his employment on the basis of his
physical disability. (Id. at p. 360.) Therefore, we will affirm the judgment in PDF‟s
favor.
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II. FACTUAL BACKGROUND
Our factual summary is drawn from the parties‟ separate statements of fact and the
evidence they submitted in connection with PDF‟s motion for summary judgment.
A. The Employment Agreement
Melman was employed as the CFO of PDF between 1998 and 2006. He executed
an employment agreement dated July 9, 1998, that included the following at-will
provision: “At-Will Employment. By signing below, you acknowledge that your
employment at the Company is for an unspecified duration, and neither this letter nor
your acceptance thereof constitutes a contract of employment. You acknowledge that
your employment will be on an „at-will‟ basis, which means that the employment
relationship may be terminated by you or the Company at any time for any reason or no
reason, without further obligation or liability.”
The July 9, 1998 agreement also included the following clause regarding
modifications: “This letter, together with the Confidentiality Agreement, set forth the
terms of your employment with the Company and supersedes any prior representations or
any agreements, whether written or oral. This letter may not be modified or amended
except by a written agreement, signed by the Company and by you.”
Melman‟s employment agreement was amended twice, on December 29, 2008,
and March 18, 2009. Melman executed both amendments, which included revisions only
to the severance pay and benefits provisions. The December 29, 2008 amendment
expressly stated, “Except as otherwise amended in this letter agreement, the Offer Letter
remains in full force and effect.” The March 18, 2009 amendment similarly stated, “All
other terms of the Amended Offer remain unchanged.”
B. Melman’s Employment History with PDF
In 1999, Melman learned that he had multiple sclerosis. He continued to be
employed as the CFO of PDF, where his achievements included taking the company
public with an initial public offering in 2001. In approximately 2002, Melman told
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Kibarian, PDF‟s CEO, that he had multiple sclerosis. In July 2005 Melman informed
Kibarian that his multiple sclerosis was getting worse and he was not sure how long he
could do his job. By that time, Melman had hired Keith Jones as his “number 2” in
PDF‟s finance department with the idea that Jones would be his replacement.
Sometime in 2005, Jones accepted an offer of employment from another company.
Melman encouraged Jones to retract his acceptance and remain at PDF. In September or
October of 2005, Melman proposed to Kibarian that Jones assume Melman‟s position as
CFO. Melman‟s decision to step down as CFO was “purely voluntary.” Melman sent an
email to Kibarian in October 2005 stating, “Basically, I need to hire my replacement with
the idea that he/she does [Keith Jones‟s] job until we can transition smoothly—
considering my health recently, I figure . . . 1 year. I just can‟t keep up the pace I‟ve kept
for the last 30 years. I need to slow down.”
PDF offered the CFO position to Jones, which he accepted on October 12, 2005.
Melman then discussed the creation of his new title and position with Kibarian. Melman
recalled, as stated in his declaration, that “[w]e both knew I would continue doing much
of the same work I was doing but the goal was to also mentor Jones, make him a success,
help Wall Street understand there was no problem in finance, and create a title that would
cover a lot of territory. We picked VP of Investor Relations and Strategic Initiatives to
cover all bases.” In his newly created position of vice president of investor relations and
strategic initiatives, effective January 2006, Melman received an increase in his annual
salary from $200,000 to $205,000. Later, Melman began to worry about his “quick
decision to give up” the CFO position and his ability to find a comparable position if
“something went sideways at PDF.”
At an executive staff meeting held in mid-December 2005, Kibarian announced
Melman‟s transition from CFO to vice president of investor relations and strategic
initiatives. Melman recalls, as he noted in his declaration, that Kibarian stated during the
meeting that “[Melman] can have this position for as long as he wants it.” Upon hearing
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Kibarian‟s statement, Melman “was touched and immediately relieved of [his] concerns.”
In his deposition testimony, Melman admitted that he had agreed to make the transition
from CFO to vice president before Kibarian stated at the executive staff meeting that
Melman could have the vice president position for as long as he wanted it, and he did not
rely upon Kibarian‟s statement in deciding to step down as CFO.
On December 19, 2005, Kibarian sent an email to all PDF employees announcing
the appointment of Jones as CFO and Melman‟s appointment as vice president of
investor relations and strategic initiatives. In the email, Kibarian complimented Melman
for “being more public about his personal situation and . . . signal[ing] to the investor
community that this change [was] solely due to a medical situation.” Melman did not
believe there was anything discriminatory about Kibarian‟s December 2005 email. In
February 2006 Melman sent an email to Kibarian in which he stated that, “You, the
Board and the company have been very supportive of my personal health situation . . . .”
PDF had accommodated Melman‟s health situation by, among other things, setting up a
home office for him. Melman acknowledges that “PDF provided him with reasonable
accommodations . . . at least until September 21, 2008, if not April 14, 2009.”
In 2007 and 2008, as Kibarian stated in his deposition testimony, members of
PDF‟s board of directors expressed concerns about Melman‟s effectiveness as vice
president of investor relations and strategic initiatives. In particular, the board was
concerned about Melman‟s ability to communicate effectively with investors and his
involvement in certain financial tasks although he was not in the finance department and
did not report to the CFO. Melman was aware, as he acknowledged in his deposition
testimony, that the board had communicated through Kibarian or Jones that his
presentations to investors were not “good enough.”
By February 2008, Melman knew that PDF‟s stock price was dropping. As the
stock price continued to drop between February 2008 and April 2008 and the company
was about to lay off employees, Melman communicated to Kibarian his desire that
5
executive pay and compensation be increased. Melman was particularly concerned that
Jones would leave the company, although Jones had never told Melman that he would
leave if he did not get a pay increase. Jones later met with Kibarian and told him that
Melman did not speak for him. Additionally, during an April 2008 meeting with
Kibarian, Melman suggested that one of the options for PDF‟s future was to sell the
company.
Kibarian began to lose confidence in Melman as a result of Melman‟s statements
in April 2008, which he perceived as “motivated by greed and avarice.” At that time,
Melman also had business disagreements with some board members and company
executives.
Melman stated in his deposition testimony that he was not subjected to any
discriminatory treatment before July 2008, when PDF hired Joy Leo as chief
administrative officer (CAO). Although PDF had announced that Leo‟s responsibilities
included investor relations, Melman continued to report to Kibarian. Melman believed
that Leo had a board-driven agenda that put his position at risk, along with the positions
of Jones and another executive, David Joseph. Jones later told Melman that Leo had
asked Jones if a “restructuring accrual” had been established to “deal with Melman‟s
termination.”
According to Melman, 80 percent of his work in the vice president position was
finance and 20 percent was investor relations. Between January 2008 and the end of
June 2008, Melman spent about 80 hours per quarter on investor relations work. From
July 2008 to December 2008, Melman spent less time on investor relations,
approximately 40 hours per quarter. In September 2008, the president of PDF‟s Japanese
subsidiary raised an issue regarding the accuracy of the timecard irregularity reports for
which Melman was responsible. At the end of September 2008, Steve Heinrichs, a board
member and chair of the audit committee, instructed Jones to remove Melman‟s finance-
related duties and to have those duties performed in the finance department.
6
After PDF‟s controller left in September 2008, Jones, who had continued in the
CFO position, recommended that Melman be given the controller position and that he
report to Jones. Leo, the CAO, did not accept the recommendation because she felt that
board member Heinrichs would object, and Melman was not appointed to the controller
position.
C. Termination of Melman’s Employment
PDF‟s first reduction in force took place in April 2008. The second reduction in
force began in the fall of 2008. By the end of 2009, PDF had laid off 103 employees and
reduced its “global headcount” by approximately 25 percent.
In December 2008, Kibarian and Melman had a meeting in which Melman offered
to “relieve the pressure on [Kibarian] to cut some costs” by contracting to work through
2010 at a reduced salary in exchange for an increase in his PDF stock options from
150,000 to 400,000. Kibarian then delegated the negotiations with Melman to Leo. On
January 12, 2009, Leo told Melman that his proposal was not acceptable and that he
would be laid off. Kibarian told Melman in February 2009 that PDF could no longer
afford the position of vice president of investor relations.
In March 2009, Kibarian offered Melman employment through December 31,
2009, at his current salary plus 30,000 shares of PDF. Melman did not respond to the
offer. Thereafter, on April 14, 2009, PDF notified Melman that his position of vice
president of investor relations and strategic initiatives was being eliminated as part of a
reduction in force and his employment would be terminated as of April 28, 2009. At
Melman‟s request, Kibarian extended his termination date to May 15, 2009, so that
Melman could take a preplanned family vacation. Kibarian also told Melman that
“ „between the time you come back from your vacation and May 15, I‟d like to negotiate
an arrangement with you that‟s satisfactory.‟ ”
The record reflects that no further negotiations between PDF and Melman took
place. After his termination date was extended, Melman complained to Jones that he
7
“was suffering from disability discrimination at the hands of [board member] Steve
Heinrichs and others.” PDF hired an independent investigator to investigate Melman‟s
claims of disability discrimination. Melman refused to meet with the investigator. After
the investigation was concluded, PDF determined that Melman‟s complaint of disability
discrimination had no basis and formally terminated his employment effective
September 2, 2009.
Melman asserts that he was the “only high-ranking PDF executive to be
terminated via reduction in force.” PDF states that another vice president was terminated
in the August 2009 reduction in force. After Melman‟s termination, another company
employee stated in a declaration that she had resigned from PDF because Leo made
derogatory comments about that employee‟s race.
III. PROCEDURAL BACKGROUND
A. The Complaint
In December 2009, Melman filed a verified complaint naming PDF and Kibarian
as defendants. In the first cause of action for disability discrimination (wrongful
termination) and the second cause of action for disability discrimination (disparate
treatment), Melman alleged that PDF was “substantially motivated by Melman‟s
disability when it terminated his employment” in violation of the FEHA, section 12940 et
seq. In the third cause of action for “failure to prevent discrimination,” Melman alleged
that PDF had “failed to take reasonable steps to prevent PDF directors and officers from
discriminating against [him] because of his disability, causing [him] to suffer demotion
and termination” in violation of section 12940 et seq.
In the fourth cause of action for fraud, Melman claimed that defendants had
“induced [him] to resign and publicly announce his disabled condition” by declaring that
they intended to provide him with employment “ „for as long as he wants to keep it.‟ ” In
the fifth cause of action for breach of contract, Melman alleged that PDF breached the
contract created by its promise to provide him with employment “ „for as long as he
8
wants to keep it‟ ” when it terminated his employment in September 2009. The sixth
cause of action was for breach of the implied covenant of good faith and fair dealing.
In the seventh cause of action for wrongful discharge in violation of public policy,
Melman alleged that PDF‟s decision to terminate him was substantially motivated by his
disability and thus constituted a violation of public policy under the FEHA.
B. The Motion for Summary Judgment
PDF filed a motion for summary judgment, or, in the alternative, summary
adjudication, arguing that all of Melman‟s claims lacked merit as a matter of law.
In its points and authorities, PDF argued that the first, second, third and seventh
causes of action, which were all based on Melman‟s allegations of disability
discrimination, lacked merit because the evidence showed that he had voluntarily stepped
down from the CFO position; he was terminated from the position of vice president of
investor relations and strategic initiatives for economic reasons after PDF‟s stock price
plummeted and the company could no longer afford a stand-alone position for investor
relations; and his finance duties were transferred due to concerns about finance functions
being handled by a person outside the finance department.
PDF also argued that Melman had provided no evidence from which it could be
reasonably inferred that the company‟s stated reasons for his termination were a pretext
for disability discrimination. Additionally, PDF argued that since as a matter of law
Melman could not state a claim for disability discrimination, he also could not state a
claim for failure to prevent discrimination.
Alternatively, PDF argued that Melman‟s disability discrimination claims failed
because he was not a qualified disabled person within the meaning of FEHA (since he
claimed he was not able to work due to his disability) and also because he had not timely
served PDF with his Department of Fair Employment and Housing (DFEH) complaint.
As to the fourth cause of action for fraud, the fifth cause of action for breach of
contract, and the sixth cause of action for breach of the covenant of good faith and fair
9
dealing, PDF contended that those claims also lacked merit as a matter of law. PDF
maintained that even assuming that Kibarian had orally promised Melman that he could
have the vice president position for as long as he wanted it, the at-will provision in the
parties‟ written integrated employment agreement could not be modified by an oral
statement; the claim for breach of the covenant of good faith and fair dealing necessarily
failed in the absence of a breach of contract; and the fraud claim failed because Melman
did not and could not reasonably rely upon Kibarian‟s oral promise when he voluntarily
stepped down from the CFO position.
C. Opposition to the Motion for Summary Judgment
Melman argued that he had submitted sufficient admissible evidence to create
triable issues of fact that precluded summary judgment.
Regarding the causes of action arising from his claim of disability discrimination,
Melman contended that the evidence showed that PDF had targeted Melman for
termination after his public announcement of his disability and the decision to terminate
his employment was substantially motivated by his disability, particularly since he was
the only executive to be terminated “via reduction in force.” Melman also contended that
the evidence showed that PDF‟s reasons for terminating his employment were a pretext
for disability discrimination, since (1) his finance-related tasks were taken away by board
member Heinrichs although the company‟s auditors did not require that those tasks be
performed in the finance department; (2) his timecard reporting irregularities were minor
and easily resolved; and (3) Leo and Kibarian refused to consider him for the controller
position for which he was “eminently qualified” because Heinrichs would be upset.
Additionally, Melman argued that PDF had failed to accommodate his disability
when it refused to consider him for the controller position and had also failed to engage
in a good faith, interactive process regarding the controller position. Melman claimed
that PDF “had a duty to honor Melman‟s request for reassignment when the position of
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Controller became available.” Melman also stated that he timely served his DFEH
complaint on PDF‟s attorneys during discovery in this case.
As to the causes of action for breach of contract and breach of the covenant of
good faith and fair dealing, Melman asserted that a contract was created when he
promised to step down from the CFO position in exchange for Kibarian‟s promise that he
would be employed in the vice president position for as long as he wanted it. According
to Melman, he fulfilled his part of the contract by stepping down and publicly
announcing his disability.
Finally, Melman argued that his fraud claim has merit because the evidence
showed that Kibarian had fraudulently induced him to step down from the CFO position
by promising that he could stay in the vice president position for as long as he wanted it.
D. The Trial Court’s Order
In its order of August 15, 2011, the trial court granted PDF‟s motion for summary
judgment.
Regarding Melman‟s claims of disability discrimination, the trial court found the
following facts were undisputed: (1) Melman voluntarily stepped down from the CFO
position because his health was deteriorating; (2) after he stepped down, he received a
raise; (3) his finance duties were transferred to the finance department due to legitimate
business concerns in October 2008; and (4) PDF had to lay off approximately 25 percent
of its workforce due to the economic crisis. Noting that it has been held that a reduction
in force is a legitimate reason to terminate an employee, the trial court ruled that “[i]n
light of Defendants‟ evidence, Defendants have met their initial burden of showing that
Plaintiff was laid off for economic reasons and that his responsibilities as Vice President
of Investor Relations and Strategic Initiatives were modified due to legitimate business
concerns.”
The trial court further found that “there is no evidence with which the jury could
draw an inference that PDF‟s decision to terminate Plaintiff or remove his finance-related
11
duties was based on his disability.” Additionally, the court found that “[t]here is also no
evidence that Plaintiff was not considered for the open Controller position because of his
disability. Plaintiff only provides evidence that he was not allowed to apply for the
Controller position because Heinrichs would be upset.” The court noted that it has been
held that “[e]ven „[a] personal grudge can constitute a “legitimate, nondiscriminatory
reason” for an adverse employment decision.‟ [Citation.]”
Having made these findings, the trial court determined that Melman‟s “allegations
of disability discrimination are mere speculation.” The court accordingly found that the
discrimination-related causes of action lacked merit as a matter of law.
The trial court also determined that the contract causes of action lacked merit as a
matter of law, finding that defendants had shown that the at-will provision in Melman‟s
employment agreement could only be modified by a written agreement, and, in any event,
defendants had shown that there was good cause for Melman‟s termination “due to the
depressed financial condition of PDF.”
As to the fraud cause of action, the trial court found that Melman‟s claim that he
had relied on Kibarian‟s promise of continued employment in deciding to step down as
CFO was not supported by any evidence that Melman had relied on the promise to his
detriment, since he had not provided “any evidence that his responsibilities were taken
away because of his announcement or that he was terminated because of his
announcement.”
The trial court also made a number of rulings regarding the parties‟ evidentiary
objections. The only ruling at issue in this appeal is the order sustaining PDF‟s objection
to the handwritten investigator‟s notes submitted by Melman.
Judgment in PDF‟s favor was entered in October 2011 and judgment in Kibarian‟s
favor was entered in November 2011. An amended judgment in PDF‟s favor that
includes costs was entered in January 2012. Melman filed a timely notice of appeal.
12
IV. DISCUSSION
On appeal, Melman contends that the trial court erred in granting PDF‟s motion
for summary judgment since triable issues of fact exist as to all causes of action. Before
addressing Melman‟s contentions, we will outline the applicable standard of review.
A. The Standard of Review
The standard of review for an order granting a motion for summary judgment is de
novo. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 860 (Aguilar).) The trial
court‟s stated reasons for granting summary judgment are not binding on the reviewing
court, “which reviews the trial court‟s ruling, not its rationale. [Citation.]” (Ramalingam
v. Thompson (2007) 151 Cal.App.4th 491, 498.)
In performing our independent review, we apply the same three-step process as the
trial court. “Because summary judgment is defined by the material allegations in the
pleadings, we first look to the pleadings to identify the elements of the causes of action
for which relief is sought.” (Baptist v. Robinson (2006) 143 Cal.App.4th 151, 159
(Baptist).)
“We then examine the moving party‟s motion, including the evidence offered in
support of the motion.” (Baptist, supra, 143 Cal.App.4th at p. 159.) A defendant moving
for summary judgment has the initial burden of showing that a cause of action lacks merit
because one or more elements of the cause of action cannot be established or there is a
complete defense to that cause of action. (Code Civ. Proc., § 437c, subd. (o); Aguilar,
supra, 25 Cal.4th at p. 850.)
If the defendant fails to make this initial showing, it is unnecessary to examine the
plaintiff‟s opposing evidence and the motion must be denied. However, if the moving
papers make a prima facie showing that justifies a judgment in the defendant‟s favor, the
burden shifts to the plaintiff to make a prima facie showing of the existence of a triable
issue of material fact. (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar, supra, 25 Cal.4th
at p. 849.)
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In determining whether the parties have met their respective burdens, “the court
must „consider all of the evidence‟ and „all‟ of the „inferences‟ reasonably drawn
therefrom [citation], and must view such evidence [citations] and such inferences
[citations], in the light most favorable to the opposing party.” (Aguilar, supra, 25 Cal.4th
at p. 843.) “There is a triable issue of material fact if, and only if, the evidence would
allow a reasonable trier of fact to find the underlying fact in favor of the party opposing
the motion in accordance with the applicable standard of proof.” (Id. at p. 850,
fn. omitted.) Thus, a party “ „cannot avoid summary judgment by asserting facts based
on mere speculation and conjecture, but instead must produce admissible evidence raising
a triable issue of fact. [Citation.]‟ [Citation.]” (Dollinger DeAnza Associates v. Chicago
Title Ins. Co. (2011) 199 Cal.App.4th 1132, 1144-1145.)
B. Causes of Action Arising from Disability Discrimination
We will begin our independent evaluation of the merits of PDF‟s motion for
summary adjudication of the first cause of action for disability discrimination (wrongful
termination), the second cause of action for disability discrimination (disparate
treatment), the third cause of action for “failure to prevent discrimination,” and the
seventh cause of action for wrongful discharge in violation of public policy, with a brief
overview of the legal framework governing summary adjudication of an employee‟s
claim for disability discrimination.
1. The Legal Framework for a Disability Discrimination Claim
California has adopted the three-stage, burden-shifting test known as the
McDonnell Douglas test (McDonnell Douglas Corp. v. Green (1973) 411 U.S. 792) for
determining the merits of a discrimination claim, including a claim for disability
discrimination. (Guz, supra, 24 Cal.4th at p. 354; Reid v. Google, Inc. (2010) 50 Cal.4th
512, 520, fn. 2 (Reid).)
“At trial, the McDonnell Douglas test places on the plaintiff the initial burden to
establish a prima facie case of discrimination.” (Guz, supra, 24 Cal.4th at p. 354.) In
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general, the elements of a prima facie case of discrimination are (1) the plaintiff was a
member of a protected class; (2) the plaintiff was qualified for the position sought or
performed competently; (3) the plaintiff suffered an adverse employment action, such as
termination; and (4) “some other circumstance suggests discriminatory motive.
[Citations.]” (Id. at p. 355.) “If, at trial, the plaintiff establishes a prima facie case, a
presumption of discrimination arises. [Citations.]” (Ibid.)
If the plaintiff makes the required prima facie showing at trial, the burden shifts to
the employer to produce admissible evidence sufficient to show a legitimate,
nondiscriminatory reason for the adverse employment action. (Guz, supra, 24 Cal.4th at
pp. 355-356.) “If the employer meets this burden, the employee then must show that the
employer‟s reasons are pretexts for discrimination, or produce other evidence of
intentional discrimination. [Citation.]” (Reid, supra, 50 Cal.4th at p. 520, fn. 2.)
With respect to summary adjudication of a discrimination claim, this court has
stated that an employer seeking summary judgment in a discrimination case may meet its
burden by showing that one or more of the elements of a prima facie case are lacking or
that the adverse employment action was based on a legitimate, nondiscriminatory reason.
(Cucuzza v. City of Santa Clara (2002) 104 Cal.App.4th 1031, 1038 (Cucuzza).)
If the employer meets its initial burden in moving for summary judgment, the
burden then shifts to the employee to “demonstrate a triable issue by producing
substantial evidence that the employer‟s stated reasons were untrue or pretextual, or that
the employer acted with a discriminatory animus, such that a reasonable trier of fact
could conclude that the employer engaged in intentional discrimination or other unlawful
action. [Citations.]” (Cucuzza, supra, 104 Cal.App.4th at p. 1038.)
In Guz, the California Supreme Court emphasized that “the great weight of federal
and California authority holds that an employer is entitled to summary judgment if,
considering the employer‟s innocent explanation for its actions, the evidence as a whole
is insufficient to permit a rational inference that the employer‟s actual motive was
15
discriminatory.” (Guz, supra, 24 Cal.4th at p. 361, fn. omitted.) “[A]n inference is
reasonable if, and only if, it implies the unlawful motive is more likely than defendant‟s
proffered explanation. [Citation.]” (Cucuzza, supra, 104 Cal.App.4th at p. 1038.)
Speculation regarding the employer‟s unlawful motive in terminating the employee is
insufficient to raise a triable question of fact regarding whether the employer‟s
explanation was pretextual or false. (Martin v. Lockheed Missiles & Space Co. (1994)
29 Cal.App.4th 1718, 1735 (Martin).)
Having reviewed the legal framework for summary adjudication of an employee‟s
claim of disability discrimination and the applicable standard of review, we turn to our
evaluation of PDF‟s motion for summary adjudication of the causes of action arising
from Melman‟s claim of disability discrimination.
2. Analysis
To determine whether PDF met its initial burden to show on undisputed facts that
the termination of Melman‟s employment was based on a legitimate, nondiscriminatory
reason (Cucuzza, supra, 104 Cal.App.4th at p. 1038), we first examine the undisputed
material facts, as presented in PDF‟s motion for summary judgment, as follows.
In 2002, Melman told Kibarian, PDF‟s CEO, that he had multiple sclerosis.
Melman voluntarily stepped down from the CFO position in 2005 after informing
Kibarian that his multiple sclerosis was getting worse and he was not sure how long he
could do his job. Melman and Kibarian together created a new position for Melman of
vice president of investor relations and strategic initiatives, effective January 2006.
In 2007 and 2008, board members had become concerned about Melman‟s
effectiveness as vice president of investor relations. PDF‟s stock price began to decline
in 2008 and the company started laying off employees. During that time period, Melman
nevertheless asked for increases in executive pay and compensation and suggested that
the company be sold. Kibarian then began to lose confidence in Melman due to his
perceived greed.
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Melman admits that PDF accommodated him by setting up his home office and he
was not subjected to any discriminatory treatment before July 2008. In September 2008,
there was an issue with time card irregularities for which Melman was responsible. Also
in September 2008, board member Heinrichs instructed that Melman‟s finance-related
tasks be removed and performed in the finance department.
PDF conducted reductions in force beginning in 2008 that ultimately reduced the
company‟s workforce by 25 percent. In December 2008, Melman voluntarily began
negotiations with PDF to end his employment in exchange for an increase in his PDF
stock options. Those negotiations failed and Kibarian told Melman in February 2009 that
PDF could no longer afford his vice president position. Melman did not respond to
Kibarian‟s March 2009 offer of employment through December 31, 2009, at his current
salary plus 30,000 shares of PDF. PDF then notified Melman that his vice president
position was being eliminated as part of a reduction in force and his employment would
be terminated in April 2009.
At Melman‟s request, Kibarian extended Melman‟s termination date to May 15,
2009. Melman then complained that he was suffering from disability discrimination and
PDF hired an independent investigator to investigate his claims. As a result of the
investigation, PDF concluded that Melman‟s claims of disability discrimination had no
basis and terminated his employment as of September 2, 2009.
Based on these undisputed facts, we find that PDF‟s nondiscriminatory business
reason for eliminating Melman‟s position as vice president of investor relations and
strategic initiatives and terminating his employment during a reduction in force of
25 percent of the company‟s employees “was creditable on its face.” (Guz, supra, 24
Cal.4th at p. 357.) Melman therefore “had the burden to rebut this facially dispositive
showing by pointing to evidence which nonetheless raises a rational inference that
intentional discrimination occurred. [Citation.]” (Ibid.)
17
On appeal, Melman claims that he met his burden to provide evidence from which
it could be reasonably inferred that PDF intentionally discriminated against him due to
his physical disability, as follows. When Leo was appointed CAO, she inquired as to
whether a “restructuring accrual” had been established to “deal with Melman‟s
termination.” Board member Heinrichs removed Melman‟s finance-related duties with
the false justification that the company‟s auditors required those duties to be performed in
the finance department, and by doing so, “breached the PDF organizational structure.”
Leo, who has a history of discriminatory conduct and who lacked credibility, “precluded”
Melman from applying for the vacant controller position although he had superior
qualifications. Melman also asserts that he was the only executive to be terminated due
to a reduction in force.
Based on this showing, Melman contends that triable issues of fact exist as to
whether PDF terminated his employment due to disability discrimination, and therefore
the trial court erred in granting summary adjudication of the first and second causes of
action for disability discrimination, the third cause of action for failure to prevent
discrimination, and seventh causes of action for wrongful discharge in violation of public
policy.
We are not convinced that Melman‟s showing is sufficient to create a triable issue
of fact as to whether PDF‟s true reason for terminating him was disability discrimination.
The California Supreme Court instructed in Guz that “summary judgment for the
employer may . . . be appropriate where, given the strength of the employer‟s showing of
innocent reasons, any countervailing circumstantial evidence of discriminatory motive,
even if it may technically constitute a prima facie case, is too weak to raise a rational
inference that discrimination occurred.” (Guz, supra, 24 Cal.4th at p. 362.)
In Guz, the plaintiff employee alleged that he had been terminated by his employer
due to age discrimination. (Guz, supra, 24 Cal.4th at p. 357.) The defendant employer,
Bechtel National, Inc. (Bechtel), moved for summary judgment on the ground that Guz
18
was terminated for reasons unrelated to age bias during a company reorganization. (Id. at
pp. 359-360.) Although Guz argued that the evidence raised a triable issue of fact as to
whether Bechtel‟s proffered reasons for his termination were false, our Supreme Court
determined that “the record contains no direct evidence, and little if any circumstantial
support, for such a finding.” (Id. at p. 363.) The court concluded, “[i]n sum, even
without considering Bechtel‟s explanation, Guz‟s evidence raised, at best, only a weak
suspicion that discrimination was a likely basis for his release. Against that evidence,
Bechtel has presented a plausible, and largely uncontradicted, explanation that it
eliminated [Guz‟s business unit], and chose others over Guz, for reasons unrelated to
age. . . . [¶] Under these circumstances we conclude, as a matter of law, that Guz has
failed to point to evidence raising a triable issue that Bechtel‟s proffered reasons for its
actions were a pretext for prohibited age discrimination.” (Id. at pp. 369-370; see also
Cucuzza, supra, 104 Cal.App.4th at pp. 1045-1046 [no reasonable fact finder could infer
that the plaintiff employee‟s gender was part of the employer‟s decision to hire another
for the permanent position she sought].)
The present case is similar to Guz and Cucuzza. PDF presented a plausible and
largely uncontradicted explanation for its termination of Melman‟s employment:
(1) Melman‟s position of vice president of investor relations and strategic initiatives,
which was specially created for him after he voluntarily stepped down from the CFO
position at his request, was eliminated during a reduction in force—in which 25 percent
of PDF‟s workforce was laid off—because PDF could no longer afford Melman‟s
position; and (2) Melman was laid off after the parties‟ mutual efforts to negotiate his
voluntary departure from the company had failed. Moreover, as in Guz, “even without
considering [PDF‟s] explanation, [Melman‟s] evidence raised, at best, only a weak
suspicion that discrimination was a likely basis for his release.” (Guz, supra, 24 Cal.4th
at pp. 369-370.)
19
We recognize that “[i]n discrimination cases, proof of the employer‟s reasons for
an adverse action often depends on inferences rather than on direct evidence.” (Cucuzza,
supra, 104 Cal.App.4th at p. 1038.) However, “even though we may expect a plaintiff to
rely on inferences rather than direct evidence to create a factual dispute on the question of
[the employer‟s] motive, a material triable controversy is not established unless the
inference is reasonable. And an inference is reasonable if, and only if, it implies the
unlawful motive is more likely than defendant‟s proffered explanation. [Citation.]”
(Ibid.)
Here, Melman‟s showing is too weak to support a reasonable inference that it is
more likely that PDF terminated him due to his physical disability, rather than for PDF‟s
proffered explanation that he was terminated for business reasons when his position was
eliminated during reduction in force. Although Melman‟s evidentiary showing may be
sufficient to draw an inference that board member Heinrichs and CEO Kibarian were
dissatisfied with Melman and wanted him to leave the company, his showing was
insufficient to create more than speculation that they had a discriminatory motive. As we
have noted, speculation regarding an employer‟s motive for terminating an employee is
insufficient to raise a triable issue of fact regarding whether the employer‟s showing was
pretextual or false. (Martin, supra, 29 Cal.App.4th at p. 1735.) And, although Melman
asserts that Leo engaged in racial discrimination, even assuming that an inference of
disability discrimination may be drawn from evidence of racial discrimination, there is no
evidence that Leo authorized the termination of Melman‟s employment.
Finally, Melman argues that a triable issue of material fact exists as to whether
“PDF unlawfully withdrew reasonable accommodations for his disability” when Leo
precluded him from applying for the vacant controller position. We observe that the
complaint does not include a causes of action for failure to accommodate. “ „The
complaint serves to delimit the scope of the issues before the court on a motion for
summary judgment [citation], and a party cannot successfully resist summary judgment
20
on a theory not pleaded.‟ [Citation.]” (Bosetti v. United States Life Ins. Co. in City of
New York (2009) 175 Cal.App.4th 1208, 1225.) Thus, an “appellant may not defeat a
summary judgment motion by producing evidence to support claims that are outside the
issues framed by the pleadings. [Citations.]” (Vournas v. Fidelity Nat. Tit. Ins. Co.
(1999) 73 Cal.App.4th 668, 674, fn. 6.) Even assuming that Melman has sufficiently
pleaded a cause of action for failure to accommodate, we determine that the claim lacks
merit as a matter of law since there is no evidence that Melman ever requested
assignment to the controller position as a reasonable accommodation of his physical
disability. (See Scotch v. Art Institute of California (2009) 173 Cal.App.4th 986, 1013
[burden is on the employee to suggest a reasonable accommodation under section 12940,
subdivision (n)].)
Although we acknowledge that “sadly, economically dictated reductions in force
can and often do victimize highly qualified and hard-working people” (Martin, supra,
29 Cal.App.4th at p. 1733), we conclude that in the absence of a triable issue of material
fact regarding whether PDF acted with a discriminatory motive, the trial court did not err
in granting PDF‟s motion for summary adjudication of the first cause of action for
disability discrimination (wrongful termination), the second cause of action for disability
discrimination (disparate treatment), the third cause of action for “failure to prevent
discrimination,” and the seventh cause of action for wrongful discharge in violation of
public policy.
Having reached this conclusion, we need not address PDF‟s contentions that
summary judgment was proper because Melman is not a qualified person under the
FEHA and he failed to timely serve his DFEH complaint.
C. Contract Causes of Action
In the fifth cause of action for breach of contract, Melman alleged that PDF
breached the contract it had created by its promise to provide him with employment “ „for
as long as he wants to keep it‟ ” when it terminated his employment in September 2009.
21
The sixth cause of action asserts breach of the implied covenant of good faith and fair
dealing. Melman contends that the trial court erred in granting summary adjudication of
both causes of action because the evidence shows that he and Kibarian “entered into an
oral agreement, by which Melman promised to step down as CFO and publicly announce
his medical condition to Wall Street as the cause of the transition, and in return Kibarian
promised to employ Melman in a lower-ranked Vice President position for as long as
Melman wanted.”
PDF responds that as a matter of law, Kibarian‟s oral statement could not modify
the at-will provision in Melman‟s employment agreement. It is undisputed that
Melman‟s employment agreement included the following at-will provision: “At-Will
Employment. By signing below, you acknowledge that your employment at the
Company is for an unspecified duration, and neither this letter nor your acceptance
thereof constitutes a contract of employment. You acknowledge that your employment
will be on an „at-will‟ basis, which means that the employment relationship may be
terminated by you or the Company at any time for any reason or no reason, without
further obligation or liability.”
The California Supreme Court has defined at-will employment: “ „An at-will
employment may be ended by either party “at any time without cause,” for any or no
reason, and subject to no procedure except the statutory requirement of notice.‟
[Citation.]” (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 392.) Where there
is a valid integrated contract creating at-will employment, it cannot be contradicted or
defeated by evidence of an oral agreement purporting to guarantee employment for a
certain period of time or upon the occurrence of certain conditions. (Starzynski v. Capital
Public Radio, Inc. (2001) 88 Cal.App.4th 33, 37-38 (Starzynski).) The express at-will
provision controls because there cannot be a valid express contract and an oral side
agreement that each embrace the same subject but require different results. (Ibid.; Camp
22
v. Jeffer, Mangels, Butler & Marmaro (1995) 35 Cal.App.4th 620, 630; Slivinsky v.
Watkins-Johnson Co. (1990) 221 Cal.App.3d 799, 806 (Slivinsky).)
Melman‟s employment agreement also expressly provided that the agreement
could “not be modified or amended except by a written agreement, signed by the
Company and by you.” This court has ruled that where, as here, the employment
agreement includes an at-will provision and expressly states that the agreement may be
modified only by a formal written agreement, no contract implied from subsequent oral
statements or conduct can modify the at-will provision. (Haggard v. Kimberly Quality
Care, Inc. (1995) 39 Cal.App. 508, 521; see also Starzynski, supra, 88 Cal.App.4th at
p. 38 [supervisor‟s oral assurance of continued employment did not create implied
contract in face of written acknowledgment signed by employee that employment was at-
will].) As a matter of law, therefore, Kibarian‟s oral statement that Melman could have
the vice president position for as long as he wanted it did not modify the at-will provision
in Melman‟s written employment agreement.2
Melman‟s alternative argument is that PDF is estopped from denying an implied
contract because he “relied on Kibarian‟s [oral] promise before abandoning his CFO
position and publicly disclosing his [multiple sclerosis].” We find no merit in this
2
At oral argument, we requested the parties to submit supplemental briefing on
the California Supreme Court‟s decision the day before in Riverisland Cold Storage, Inc.
v. Fresno-Madera Production Credit Assn. (2013) 55 Cal.4th 1169 (Riverisland).) In
Riverisland, the court overruled its prior decision in Bank of America etc. Assn. v.
Pendergrass (1935) 4 Cal.2d 258 and instructed that the fraud exception to the parole
evidence rule, codified at Code of Civil Procedure section 1856, subdivision (f), “broadly
permits evidence relevant to the validity of an agreement and specifically allows evidence
of fraud.” (Riverisland, supra, at p. 1175.) The court further ruled that Code of Civil
Procedure section 1856, subdivision (f) “rests on the principle that the parol evidence
rule, intended to protect the terms of a valid written contract, should not bar evidence
challenging the validity of the agreement itself.” (Id. at p. 1174.) Since the issues in the
present case concern the terms of Melman‟s employment agreement, not the validity of
the agreement itself, the decision in Riverisland is not applicable here.
23
argument because it is undisputed, as Melman testified in his deposition, that he had
agreed to make the transition from CFO to vice president before Kibarian stated at the
executive staff meeting that Melman could have the vice president position for as long as
he wanted it, and Melman did not rely upon Kibarian‟s statement in deciding to step
down as CFO.
Since we have determined as a matter of law that the at-will provision in
Melman‟s employment contract was not modified by Kibarian‟s subsequent oral
statement that Melman could have the vice president position for as long as he wanted it,
we also determine that the fifth cause of action for breach of contract lacks merit as a
matter of law and the trial court properly granted summary adjudication.
For the same reason, the sixth cause of action for breach of the implied covenant
of good faith and fair dealing also fails as a matter of law. “The covenant is designed to
effectuate the intentions and reasonable expectations of parties reflected by mutual
promises within the contract. [Citation.] Here the parties agreed that their relationship
was terminated at will. Therefore, „terminating an employee without good cause does not
deprive the employee of the benefits of the agreement.‟ [Citations.]” (Silivinsky, supra,
221 Cal.App.3d at p. 806.)
D. Fraud Cause of Action
Melman contends that triable questions of material fact preclude summary
adjudication of the fourth cause of action for fraud, in which he alleged that defendants
had fraudulently induced him “to resign and publicly announce his disabled condition” by
declaring that they intended to provide him with employment “ „for as long as he wants to
keep it.‟ ” According to Melman, the evidence shows that Kibarian knew that his
promise that Melman could have the vice president position for as long as he wanted it
was false and Kibarian intended to induce Melman‟s reliance on the false promise of
continued employment.
24
PDF responds that Melman cannot establish the elements of a cause of action for
fraud, since, among other things, it is undisputed that Melman did not rely on Kibarian‟s
promise when he voluntarily stepped down from the CFO position prior to the promise
being made. We agree.
“ „The elements of fraud, which give rise to the tort action for deceit, are (a)
misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of
falsity (or “scienter”); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance;
and (e) resulting damage.‟ [Citations.] [¶] „Promissory fraud‟ is a subspecies of the
action for fraud and deceit. A promise to do something necessarily implies the intention
to perform; hence, where a promise is made without such intention, there is an implied
misrepresentation of fact that may be actionable fraud. [Citations.]” (Lazar v. Superior
Court (1996) 12 Cal.4th 631, 638.) “[P]romissory fraud, like all forms of fraud, requires
a showing of justifiable reliance on the defendant‟s representation. [Citation.]”
(Riverisland, supra, 55 Cal.4th at p. 1183.)
We determine that Melman cannot demonstrate a triable factual issue regarding
the element of justifiable reliance in his fraud cause of action. In Slivinsky, supra, 221
Cal.App.3d 799, this court granted the employer‟s summary judgment motion in a
wrongful termination action on the basis of a written at-will agreement. In addition to
breach of contract and breach of the implied covenant of good faith and fair dealing, the
plaintiff employee had also alleged fraud. This court found that the plaintiff‟s reliance on
the employer‟s promises of continuing employment was “simply not justifiable because
the representations contradict the parties‟ integrated employment agreement which
provided that the employment was at will. [Citations.] Justifiable reliance is a necessary
element of a cause of action for fraud. [Citation.]” (Id. at p. 807; see also Shapiro v.
Wells Fargo Realty Advisors (1984) 152 Cal.App.3d 467, 482 [employee cannot
reasonably rely on promise in conflict with at-will provision], disapproved on another
point in Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 667.)
25
Similarly, as a matter of law Melman could not justifiably rely on Kibarian‟s oral
promise of continued employment since that promise conflicted with the at-will provision
in his integrated employment agreement. Summary adjudication of the fraud cause of
action was therefore proper.
E. Evidentiary Ruling
Finally, Melman argues that the trial court abused its discretion in sustaining
PDF‟s evidentiary objection to the independent investigator‟s handwritten interview
notes, which Melman asserts shows that several board members wanted to fire him and
were therefore admissible as “nonhearsay statements evidencing the mental state of the
declarants,” as well as party admissions and prior inconsistent statements.
According to PDF, the trial court properly sustained the evidentiary objection to
the investigator‟s notes on the grounds of inadmissible multiple hearsay, lack of personal
knowledge, and lack of authentication.
The standard of review for for a trial court‟s evidentiary rulings is abuse of
discretion. (Shaw v. County of Santa Cruz (2008) 170 Cal.App.4th 229, 281.) However,
we need not determine whether the trial court abused its discretion in excluding the
investigator‟s notes because Melman has not shown that the claimed error was
prejudicial. “ „Anyone who seeks an appeal to predicate a reversal of [a judgment] on
error must show that it was prejudicial. (Cal. Const., art. VI, § 13.)‟ [Citation.]”
(Carnes v. Superior Court (2005) 126 Cal.App.4th 688, 694 [plaintiff challenging
summary judgment failed to show she was prejudiced by the trial court‟s adoption of
evidentiary rulings proposed by defendant‟s attorneys].)
According to Melman, the investigator‟s notes include the following statements:
“(1) PDF Board Chairman Lucio Lanza, Audit Chair Steve Heinrichs, and Board Member
Albert Yu discussed their desire to fire Steve Melman at one or more PDF Board
meetings. [¶] (2) Board Member Sue Billat stated that she was bothered by Lanza‟s
desire to get rid of Melman, given that Melman had done so much for the company and
26
had taken so little money out of the company. [¶] (3) Lanza, specifically, shouted at
multiple Board meetings about the need to get rid of Melman. Although Lanza also
wanted to fire two other employees, Keith Jones and Dave Josephs, he targeted Melman
especially. [¶] (4) Billat did not become aware of how strongly Lanza wanted Melman
out of the company until after Melman publicly announced that he has Multiple
Sclerosis.” (Fns. omitted.)
Melman argues that “because these statements demonstrated the discriminatory
animus of PDF decision-makers, [he] should have prevailed on summary judgment.”
Assuming, without deciding, that Melman has accurately paraphrased the handwritten
and partially unintelligible handwritten notes of the investigator, we find that the
statements do not serve to create a triable issue of fact as to whether PDF had a
discriminatory motive in terminating Melman‟s employment. As we have discussed,
although Melman‟s evidentiary showing may be sufficient to draw an inference that
board members were dissatisfied with Melman and wanted him to leave the company, his
showing was insufficient to create more than speculation that they had a discriminatory
motive. (Martin, supra, 29 Cal.App.4th at p. 1735.) Additional evidence that various
board members wanted to terminate Melman‟s employment, without more, does not
support a reasonable inference that his termination was motivated by disability
discrimination.
We therefore determine that Melman has not demonstrated prejudicial error
because, even if the investigator‟s notes had been admitted into evidence in support of
Melman‟s opposition to the motion for summary judgment, the result would be the same:
summary adjudication of the first, second, third and seventh causes of action arising from
disability discrimination was properly granted.
V. DISPOSITION
The judgment is affirmed.
27
___________________________________________
BAMATTRE-MANOUKIAN, J.
WE CONCUR:
__________________________
ELIA, ACTING P.J.
__________________________
MÁRQUEZ, J.
28