Smith v. Williams-Sonoma, Inc.

KELLIE SMITH, Plaintiff and Respondent, v. WILLIAMS-SONOMA, INC., et al., Defendants and Appellants.

B305144

California Court of Appeals, Second District, Second Division

October 1, 2021

NOT TO BE PUBLISHED

APPEALS from an order of the Superior Court of Los Angeles County No. 19STCV36093, Terry A. Green, Judge. Affirmed in part, reversed in part, and remanded with directions.

Orrick, Herrington & Sutcliffe, Frank N. Zalom, Lynne C Hermle and Julia C. Riechert for Defendants and Appellants.

Doumanian & Associates, Nancy P. Doumanian; The Arkin Law Firm and Sharon J. Arkin for Plaintiff and Respondent.

LUI P. J.

Respondent Kellie Smith sued appellant Williams-Sonoma, Inc. (WSI) alleging workplace misconduct. WSI moved to strike the complaint as a strategic lawsuit against public participation (SLAPP). (Code Civ. Proc., § 425.16; Bonni v. St. Joseph Health System (2021) 11 Cal.5th 995, 1007, fn. 1 (Bonni).)^[1] An anti-SLAPP motion is “a procedure for weeding out, at an early stage, meritless claims” that chill First Amendment rights. (Baral v. Schnitt (2016) 1 Cal.5th 376, 384 (Baral).)

On de novo review, we conclude that Smith cannot assert claims arising from WSI's (1) protected right to report employee theft to police and (2) preparatory investigation before calling police. However, claims of workplace misconduct under the Fair Employment and Housing Act (FEHA), wrongful termination in violation of public policy, and emotional distress do not arise from WSI's protected conduct in investigating and reporting theft to police and do not fall within section 425.16.

FACTS AND PROCEDURAL HISTORY

Smith's Complaint

WSI hired Smith in 2005. She began as an associate, became a coordinator, and was promoted to assistant store manager in 2010. She voluntarily left WSI in 2011. When she later returned to WSI's employ, she was not given a managerial position. She alleges that WSI has a poor attitude toward female employees and is reluctant to promote them.

In 2012, Smith secured a lead position in inventory control at WSI's distribution center. By 2018, she was the lead person in charge of customer returns. Though she supervised 30 employees, Smith claims she had “no real management duties when compared to her male counterparts.” She believes men are paid more and criticized less than woman employees at WSI. She asserts that WSI created a hostile environment, placing women in entry level positions at undesirable stores, not promoting them as quickly as men, and treating them without respect.

Smith alleges that she complained of violations of law and company policy, specifically about maltreatment of herself and other women. As a result of her complaints, WSI subjected her to adverse employment actions, including criticism, discipline demotions, denial of salary or bonuses, and termination.

WSI terminated Smith's employment on June 14, 2018. It accused her of theft, fraud, dishonesty, and violation of company policy. She denies wrongdoing and alleges that WSI did not give her or other women the opportunity to defend themselves. Male employees who engaged in fraud, theft, and dishonesty were not punished as harshly as their female colleagues.

WSI “initiated the filing of criminal charges and a criminal prosecution” by making a police report. Smith had to hire an attorney and suffered emotional distress by becoming the target of a criminal investigation. Though prosecutors did not press charges against her, the incident damaged her reputation and ability to find work.

Smith's complaint asserts 13 causes of action. This includes six alleged violations of FEHA; wrongful discharge in violation of public policy; defamation; emotional distress; malicious prosecution; and abuse of process.

Appellants' Motion to Strike

WSI's motion detailed the circumstances leading to Smith's termination. In April 2018, WSI's accounting department noticed that returned merchandise designated for resale was “scrapped.” WSI investigated why saleable goods were scrapped.

Operations manager Luz Villanueva declared that WSI has a system to process returns, including furniture and home accessories. Returned goods are inspected and assigned a designation. A “retail” designation means an item will be sent to a retail store or used to fulfill an online order. “Outlet” items are sent to outlet stores for resale. Some items are repaired and resold; some are sold to a liquidator. Valueless items unsuitable for resale are designated “donation” or “scrapped.”

WSI has a charitable program to donate scrapped goods to Habitat for Humanity (Habitat). WSI employees load items designated for donation into trailers; Habitat then hauls the trailers from WSI. Saleable goods are not donated to Habitat.

WSI discovered that Smith was responsible for scrapping saleable goods on April 7, 2018. Documentation showed that four trailers of goods worth hundreds of thousands of dollars were designated “outlet.” Smith manually changed the designation to “scrapped, ” making the goods worthless. When confronted, Smith claimed appellants Sierra and Cuyler walked by her that day; she asked to send the trailers to Habitat and they agreed. Smith also blamed Hashimoto for allowing her to scrap the trailers. The three managers denied authorizing Smith to scrap saleable goods.

WSI's charitable program was run by inventory manager Keith Wong. WSI's investigation revealed that Wong paid a Habitat driver to take trailers bound for Habitat to Wong's home.

Loss prevention manager Torri Piper, a former federal agent, conducted her investigation with an eye toward criminal prosecution or civil litigation. She discovered that Wong diverted goods designated for sale at WSI outlets. He wrote the names of WSI associates on merchandise so they could buy it cheaply at a Habitat thrift store. Trailers scrapped by Smith on April 7 went to Wong. Wong and 12 other WSI employees were involved in this scheme.

As a result of the investigation, WSI's director of human resources (HR), Kecia Bailey, terminated 13 male and female employees. Smith was terminated for improperly scrapping saleable merchandise, causing WSI to lose over $100, 000.

Bailey declared that WSI employees must adhere to polices requiring respect and equality and prohibiting harassment, discrimination, and retaliation, as described in the employee handbook. Bailey is available to hear concerns and investigates complaints about policy violations. WSI's business records contain no complaints from Smith of harassment, discrimination or retaliation, nor did she disclose unlawful conduct or activities. No records show she was denied promotions.

Luz Villanueva was Smith's direct supervisor. They interacted regularly yet Smith never complained of harassment, discrimination, or retaliation. Had Villanueva observed misconduct, she would have intervened and reported it to HR.

The WSI managers named in Smith's complaint denied that they harassed or discriminated against her, or observed any misconduct against her, or heard her complain of harassment, discrimination, or retaliation. They had little interaction with her and did not direct her to scrap goods designated for sale in WSI outlet stores.

Piper presented her findings to the Los Angeles County Sheriff's Department. Based on Smith's conduct in scrapping trailers diverted to Wong and refusal to cooperate with law enforcement, a detective arrested Smith. Criminal charges were brought against Wong. Smith was not prosecuted.

Smith Dismisses Four Claims

After receiving WSI's motion to strike, Smith dismissed, without prejudice, her causes of action for defamation, malicious prosecution, and abuse of process.

Smith's Opposition

Smith asserted that WSI's motion became moot when she dismissed claims arising from WSI's report to law enforcement. She contended that the remaining claims do not arise from protected activity. They relate to FEHA violations, wrongful termination in violation of public policy, and emotional distress. She argued that the “theft incident on the job is but an ancillary component of [her] work experience” at WSI and “the gravamen of the complaint” is gender discrimination, harassment, and retaliation.

Attached to Smith's opposition is her claim to the state Department of Fair Employment and Housing on May 30, 2019. The claim states that WSI took adverse action on June 14, 2018, by terminating her based on “ancestry, sex/gender, ” for complaining about violations of rules, policies, procedures, and law, and due to harassment, discrimination, and retaliation.

Smith declares that she was arrested for grand theft in July 2019. She was not prosecuted but the arrest affects her work opportunities. She states on information and belief that-relative to male employees-female employees are not promoted or equally paid; female employees were criticized more harshly, looked down upon, spoken to in a negative and derogatory way, made to feel weak, helpless, and valueless, and not treated with respect and dignity. Smith's male coworkers were not subject to the same level of scrutiny during WSI's theft and fraud investigation, and Smith believes she is the only female who was terminated.

Appellants' Reply

Appellants observed that Smith concedes that four of her claims fall within the anti-SLAPP statute. They argued that her remaining claims are similarly premised on WSI's protected activity of reporting suspected fraud and theft. Moreover, Smith did not carry her evidentiary burden of proving a probability of prevailing with admissible evidence. She did not recite facts showing she was harassed, or that WSI discriminated or retaliated against her.

The Trial Court's Ruling

At the hearing on WSI's motion to strike, the court stated that WSI's report...