estrada v. Wal-Mart Stores 2016 u.S. dist. LeXIS 140089 (n.d. Cal.) OpInIOn By MagIStrate Judge BeeLer In this employment case, Maria Estrada sued her former employer, Wal-Mart. . . . Ms. Estrada alleges that Wal-Mart Market Asset Protection Manager Jason Darham wrongfully accused her of embezzling $4,000, falsely imprisoned her during a related interrogation, and fraudulently induced her to sign a form acknowledging that she owed Wal-Mart $900. After she signed the form, and allegedly because she signed it, Wal-Mart fired her for "Gross MisconductIntegrity Issue." As a result, Ms. Estrada brings claims for false imprisonment, fraud, . . . intentional infliction of emotional distress, [and] defa-mation . . . [among other claims]. Ms. Estrada was a Wal-Mart cashier between Novem-ber 2004 and December 2015. On her last daythe day Wal-Mart terminated her employmentshe was sum-moned to a back office. Ms. Estrada "did not know why she was being summoned, and she did not consent to being interrogated." Yet Market Asset Protection Man-ager Jason Darham nevertheless interrogated her for approximately one hour. The interrogation took place "behind a closed door," and Mr. Darham "accused [Ms. Estrada] of embezzling $4,000." Ms. Estrada had "never embezzled any amount at all," though, and Mr. Darham allegedly "knew, or should have known, that [the accusation] was false." Mr. Darham also "told [her] that he had been inves-tigating her for some time and that he knew that she was stealing." This claim, Ms. Estrada maintains, was also false. She "denied stealing $4,000 or any amount whatsoever." But Mr. Darham "threatened to call the police if she did not confess [to embezzling the funds], and when she refused to do so, he left the room, appar-ently to call the police." When he returned, he closed the interrogation-room door and presented Ms. Estrada with a "filled-out 'Reimbursement Acknowledgment Form.'" The form obligated Ms. Estrada to pay Wal-Mart $900. Mr. Darham told her "that she had to sign the Form if she wanted to leave the room." Ms. Estrada, "rea-sonably believ[ing] that [Mr.] Darham honestly thought that she had been stealing," feared losing her job and being arrested "if she did not does as [he] demanded." She accordingly signed the form "so that she would be allowed to leave," though she did not read it. After she signed the form, Wal-Mart discharged Ms. Estrada for "Gross MisconductIntegrity Issue." Ms. Estrada then sued in California state court and Wal-Mart removed the case [to federal court]. * * * Ms. estrada States a Claim for false Imprisonment Ms. Estrada asserts a claim for false imprisonment. Wal-Mart challenges the claim, arguing: (1) Ms. Estrada does not adequately allege that she was "confined"; (2) employers may reasonably investigate employee theft; and (3) the shopkeeper's privilege protects it against a false-imprisonment claim. "Under California law, the elements of a claim for false imprisonment are: '(1) the nonconsensual, inten-tional confinement of a person, (2) without lawful privi-lege, and (3) for an appreciable period of time, however brief.'" Restraint, or confinement, "may be effectuated by means of physical force, threat of force or of arrest, con-finement by physical barriers, or by means of any other form of unreasonable duress." All that is necessary is that a person must be "in reasonable apprehension that she does not have the freedom to leave a particular place." An employer such as Wal-Mart may have a defense to employees' false imprisonment claims. For exam-ple, employers have the right "to reasonably detain an employee suspected of theft, and indeed to discharge an employeeconsistent with the employee's contrac-tual or other employment rightsif he or she refuses to cooperate with a reasonable investigation." And under the shopkeeper's privilege, "[m]erchants who detain individuals whom they have probable cause to believe are about to injure their property are privileged against a false imprisonment action." * * * Here, Ms. Estrada alleges that she was confined for approximately one hour. She was interrogated in a closed room by Mr. Darham, a manager. Mr. Darham accused her of embezzling $4,000 and threatened to call the police if she did not confess. She further asserts that Mr. Darham left the room, "apparently to call the police," and when he returned, presented her with an acknowledgment form. He told her "she had to sign the Form if she wanted to leave the room." Ms. Estrada was scared of losing her job and of being arrested, and she signed the form "so that she would be allowed to leave." These facts plausibly show that Ms. Estrada was confined to that back-office room.

Wal-Mart's arguments that it was reasonably investi-gating suspected employee theft and is protected by the shopkeeper's privilege are inappropriate on the pleadings. These defenses may have merit. But the essence of the [complaint] is that Wal-Mart's actions were unreasonable and lacked probable causei.e., that Mr. Darham knew or should have known that Ms. Estrada did not embezzle the money. And as such, these defenses are more appro-priately considered at summary judgment. Ms. estrada States a Claim for fraud Ms. Estrada also brings a claim for fraud. Wal-Mart argues that the claim is insufficiently pled because (1) any representation wasby her own allegationsmade honestly and without knowledge of falsity; (2) Ms. Estrada could not reasonably have relied on the representations; and (3) she does not allege that she suf-fered "out-of-pocket" damages. "The elements of a cause of action for fraud in California are: (a) misrepresentation, (false represen-tation, 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." Here, Mr. Darham represented that he "had been investigating [Ms. Estrada] for some time and that he knew that she was stealing." According to Ms. Estrada, this was falsei.e., he was not investigating her and did not know that she was stealing. She alleges that he made these statements to induce her to sign the acknowledg-ment form. And, "[o]ne reason that [she] signed the . . . Form was that she reasonably believed that Darham hon-estly thought that she had been stealing." She thought he "felt justified in continuing to imprison her and in call-ing the police to arrest her," and she believed "that if she did not sign the Form he would continue to imprison her until the police came and arrested her." So, she signed the form and promised to pay Wal-Mart $900. These allega-tions are sufficient to state a claim for fraud. Wal-Mart's arguments do not change this conclusion. Ms. Estrada does not allege that Mr. Darham's represen-tations were "honestly" made, but that she reasonably believed he was being honest. And she could reasonably have relied on these representations: even though she knew she was innocent, she did not necessarily know what Mr. Darham believed or how he might act on those beliefs (i.e., fire her and call the police). Finally, she suf-ficiently alleges resulting damagesshe promised to pay $900 (and lost her job). Ms. Estrada's fraud claim survives. * * * Ms. estrada States a Claim for Intentional Infliction of emotional distress Ms. Estrada asserts a claim for intentional infliction of emotional distress ("IIED"). Wal-Mart argues that (1) California employees cannot maintain standalone emotional distress claims and (2) she does not allege extreme or outrageous conduct. "Under California law, the elements of an IIED claim are: (1) extreme and outrageous conduct by the defen-dants with the intention of causing, or reckless disre-gard of the probability of causing, emotional distress; (2) the plaintiff's suffering severe or extreme emotional distress; and (3) actual and proximate causation of the emotional distress by the defendants' outrageous conduct." Intentional infliction of emotional distress claims may be preempted by California's Workers' Compensation Act. Typically, California employees are limited to work-ers' compensation claims for injuries "arising out of and in the course of employment." "To be within the scope of employment, the incident giving rise to the injury must be an outgrowth of the employment, the risk of injury must be inherent in the workplace, or typical of or broadly incidental to the employer's enterprise." The California Workers' Compensation Act is broadly con-strued, and includes, for example, emotional distress damages resulting from "the act of termination and the acts leading up to termination" because they both "neces-sarily arise out of and occur during and in the course of employment." * * * [However] workers' compensation preempts an employee's claims only "when the misconduct attributed to the employer is actions which are a normal part ofthe employment relationship." An employer's conduct fall-ing outside the "normal" employment relationship may therefore give rise to independent tort liability, for exam-ple, where: an employer's conduct has "a questionable relationship to the employment"; an employee is injured while performing services unrelated to "the employ-ment and which would [not] be viewed as a risk of the employment"; or "the employer . . . stepped outside of [its] proper role[]." Thus, "certain types of intentional employer conduct [may] bring the employer beyond the boundaries of the compensation bargain, for which a civil action may be brought." Here, the determination of whether Wal-Martacting through Mr. Darhamstepped outside the bounds of the employment relationship is a close, fact-based call. It may turn out Mr. Darham's actions were reasonable and in the ordinary course of investigatin

misconduct occurred at the worksite, and the net result (termination) is a normal part of the employment rela-tionship. But the course of conduct allegedi.e., that Mr. Darham falsely accused Ms. Estrada of embezzling $4,000, falsely imprisoned her, fraudulently induced her to sign an acknowledgement form, and then fired hermay fall outside the scope of the normal employer-employee relationship and thus avoid workers' compen-sation preemption. As described elsewhere, Ms. Estrada alleges sufficient facts to support these claims, and because this same course of conduct is sufficient to be "outrageous," Ms. Estrada's claim for IIED survives the current motion to dismiss. Ms. estrada fails to State a Claim for defamation Ms. Estrada asserts a claim for defamation based on the statement that she was fired for "Gross MisconductIntegrity Issue" and the accusation that she embezzled $4,000. Wal-Mart contends that the statement and accusation were not communicated to others, and even if they were, they are privileged. To state a claim for defamation, a plaintiff must allege facts showing "(a) a publication that is (b) false, (c) defamatory, and (d) unprivileged, and that (e) has a natural tendency to injure or that causes special damage." A "publication" is a "communication to some third person who understands both the defamatory meaning of the statement and its application to the person to whom reference is made." The originator of a defamatory statement is not normally liable for damage caused by the defamed person's communication of the statement to others. But under the "compelled self-publication" exception, self-publication "may be imputed to the originator of the statement if the person [defamed] is 'operating under a strong compulsion to republish the defamatory statement and the circumstances that create the strong compulsion are known to the originator of the alleged defamatory statement at the time it was made.'" "This exception has been limited to a narrow class of cases, usually where a plaintiff is compelled to republish the statements in aid of disproving them." Republication may be foreseeably required, for example, if "a job seeker must tell a prospective employer what is in his personnel file in order to explain away a negative job reference." * * * Here, . . . Ms. Estrada does not plausibly allege a theory of compelled self-publication. She alleges that Wal-Mart "knew and foresaw that [she] would be forced to republish to others the statement that she had been fired for "Gross MisconductIntegrity Issue," and, if questioned, "the accusation that she had embezzled money." She then alleges that she "did republish this statement and this accusation to others." But missing . . . is any indication of to whom Ms. Estrada was forced to communicate the statement and accusation. This is important to her compelled self-publication theory for at least three reasons. First, the foreseeability of her republication depends on who she told. For example, it may be foreseeable that she would tell a prospective employer, but not others. Second, who she told also lends to the plausibility of whether she was "compelled" to disclose the statementsi.e., the pressures of telling a prospective employer are different than those encountered with friends or family. Third, her broad allegation that she republished the remarks "to others" does not plausibly support the existence of an actual publicationa required element of the self-publication exception. In her . . . brief, Ms. Estrada asserts that "[w]hen an employer fires an employee for theft, it is foreseeable that the employee [i.e., Ms. Estrada] will be compelled to tell prospective employers, family, and friends the reason given by the employer for the termination." But this assertionthat she was compelled to tell prospective employers, family, and friendsfinds no support . . . (She also does not cite authority for applying the com-pulsion exception in the case of republication to friends or family.) Ms. Estrada therefore does not plausibly allege that she was compelled to republish the allegedly defamatory statements. * * *

1. Based on the evidence presented, how would you have ruled in this case? What specific evidence presented in the case study influences your ruling? In crafting your response, consider the application of proper investigative procedures to this ruling.

Turning to the courts' ruling, what is the legal significance of this case as it relates to investigations and your HR practice?