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CA Appellate Court Reverses Award to Broker CRC in Case Involving Former Star Employee

Source: Bestwire

Posted on 16 Nov 2010

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A California appellate court has reversed a lower court's $4.2 million award to CRC Insurance Services in a case that pits the company against a former star broker. The case involves a former CRC broker, Constance Callan, who won CRC's Broker of the Year award in 2003, 2004 and 2005, based on her sales volume.

According to court documents in Constance Callan v. CRC Insurance Services Inc., Tom Curtin, et. al., Callan was employed by CRC as an insurance broker from March 2000 until May 2006. In 2006, the company began auditing her accounts, suspended her employment, and then placed her on paid leave. Callan then filed a complaint against CRC, Curtin and another employee, Chris Houska, arguing that her employment was suspended in retaliation for her complaints about sexual harassment and other misconduct by Houska and others. She alleged counts for sexual harassment, retaliation for her complaint, sex discrimination, wrongful discipline in violation of public policy, against CRC, wrongful constructive discharge against CRC and breach of contract.

CRC also filed a cross complaint against Callan and another employee, Carl Wheaton, alleging that they had fabricated sales in 2005 to win the Broker of the Year award, committed fraud, breached their contract and breached their fiduciary duty.

Los Angeles County Superior Court Judge Soussan Bruguera, after a long dispute over discovery, dismissed Callan's case with prejudice, citing her alleged failure to comply with court orders and discovery requests. The trial court subsequently entered a default judgment, awarding CRC $582,775 in compensatory damages and $1.745 million in punitive damages (the total is three times the damages alleged in its cross-complaint), and more than $1.9 million in attorney fees.

Callan appealed the judgment, contending she did not willfully fail to comply with any order compelling discovery, and that there was no other basis for terminating sanctions, which were excessive.

The Court of Appeal concluded that Callan did not fail to comply with an order compelling her attendance and testimony at a deposition, and that the terminating sanctions were unauthorized. "The defendants persisted in asserting unreasonable positions with respect to discovery, and … the failure to cooperate in good faith in discovery was mutual," the Court of Appeal said. It added that "the trial court's efforts to encourage or enforce compliance with the parties' discovery obligations have been ineffective" and the case "requires more rigorous case management." Thus, the court reversed the order imposing terminating sanctions, the default judgment and the post-judgment order awarding attorney fees.