Peterson v. Surprise

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

ALICIA PETERSON, et al.,
Plaintiffs/Appellees,

v.

CITY OF SURPRISE, a political subdivision of the State of Arizona1,
Defendant/Appellant.

No. 1 CA-CV 16-0415
FILED 2-6-2018

Appeal from the Superior Court in Maricopa County
No. CV2011-055776
The Honorable John R. Hannah, Jr. Judge

REVERSED

COUNSEL

Manolio & Firestone, PLC, Scottsdale
By Veronica L. Manolio
Counsel for Plaintiffs/Appellees

Pierce, Coleman, PLLC, Phoenix
By Justin S. Pierce, Kylie Crawford TenBrook
Counsel for Defendant/Appellant

1 On the court's own motion, it is ordered amending the caption in this
appeal as reflected in this decision. The above-referenced caption shall be
used on all further documents filed in this appeal.
 PETERSON v. SURPRISE
Opinion of the Court

OPINION

Presiding Judge Diane M. Johnsen delivered the opinion of the Court, in
which Judge Michael J. Brown and Judge Jennifer B. Campbell joined.

J O H N S E N, Judge:

¶1 A jury awarded damages to a former police detective who
alleged the City of Surprise constructively discharged her in retaliation for
reporting repeated instances of sexual harassment. We hold that an
employee who fails to exhaust administrative remedies for an alleged
constructive discharge based on sex discrimination may not sue for
retaliation under the Employment Protection Act ("EPA"), Arizona Revised
Statutes ("A.R.S.") section 23-1501(A)(3)(c) (2018).2 Accordingly, we reverse
the judgment.

FACTS AND PROCEDURAL BACKGROUND

¶2 The Surprise Police Department hired Alicia Peterson as a
patrol officer in April 2005 and later promoted her to detective. At the time,
Peterson served in the United States Marine Corps Reserve. In June 2010,
the department announced testing for a vacant sergeant position. Because
Peterson was away on military reserve duty, she did not receive the
announcement until after the application deadline had passed. The
department allowed her to test for the position even though she had missed
the deadline to apply.

¶3 After testing, Peterson advanced to the next phase of the
promotion process, and later that summer, she was ranked first among the
candidates. On August 17, however, Peterson gave notice she intended to
resign. At a meeting with the interim chief of police, Peterson repeated
earlier complaints she had raised with her supervisor that other members
of the department had repeatedly and persistently harassed her during the
promotion process. Peterson resigned effective September 1. Citing "a
negative environment" that had caused Peterson to feel "ridiculed . . .
undermined and . . . subjected to personal attack by fellow members" of the

2 Absent material revision after the relevant date, we cite a statute's
current version.

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Opinion of the Court

department, the interim chief closed the promotion process without filling
the position.

¶4 A year later, Peterson sued the City, alleging constructive
discharge and breach of contract. Peterson asserted she was compelled to
resign because the City failed to protect her from intolerable discriminatory
conduct based on her gender and military status. She also asserted the City
breached an implied-in-fact contract by failing to comply with its employee
manual.

¶5 After discovery, the City moved for summary judgment. The
City did not dispute that the harassment Peterson alleged had occurred, but
argued it was not so bad that it amounted to constructive discharge. The
City argued that to the extent Peterson's wrongful-termination claim was
based on her gender, it was barred by her failure to exhaust administrative
remedies under the Arizona Civil Rights Act, A.R.S. §§ 41-1401 to -1493.04
(2018). The City also denied it had any employment contract with Peterson.

¶6 In response, Peterson argued that exhaustion of
administrative remedies is required only for "firsthand" violations of the
Arizona Civil Rights Act, and not for a whistleblower's retaliation claim
under § 23-1501(A)(3)(c)(ii). She also argued there was a question of fact
about whether the City's manual or policies created an employment
contract.

¶7 The court dismissed Peterson's contract claim but denied the
motion for summary judgment on her claim for retaliatory constructive
discharge. After a four-day trial, the jury found in favor of Peterson and
awarded her $375,000 in damages. The court denied the City's request for
attorney's fees on the contract claim and later denied the City's motion for
judgment as a matter of law or for a new trial.

¶8 The City timely appealed. We have jurisdiction pursuant to
Article 6, Section 9, of the Arizona Constitution and A.R.S. § 12-2101(A)
(2018).

DISCUSSION

A. Constructive Discharge and the EPA.

1. General principles.

¶9 Arizona law allows an employee to claim constructive
discharge based on an employer's "outrageous conduct" or failure to

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remedy "objectively difficult or unpleasant working conditions" that would
compel a reasonable employee to resign. A.R.S. § 23-1502(A) (2018). The
parties agree, however, that although constructive discharge may
transform a resignation into a discharge, by itself, it does not afford an
employee a remedy. Id. (stating elements of constructive-discharge claim
that may be alleged "[i]n any action under the statutes of this state or under
common law") (emphasis added). To prevail on a claim for constructive
discharge, an employee also must prove a common-law or statutory claim
for wrongful termination. See, e.g., City of Fairbanks v. Rice, 20 P.3d 1097,
1102, n.7 (Alaska 2000) ("Constructive discharge is not an independent
cause of action, but merely satisfies the discharge element in a wrongful
discharge claim."); Turner v. Anheuser-Busch, Inc., 876 P.2d 1022, 1030 (Cal.
1994) ("Even after establishing constructive discharge, an employee must
independently prove a breach of contract or tort in connection with
employment termination in order to obtain damages for wrongful
discharge."); Balmer v. Hawkeye Steel, 604 N.W.2d 639, 643 (Iowa 2000)
("[C]onstructive discharge is actionable only when an express discharge
would be actionable in the same circumstances.").

¶10 The EPA limits the potential claims of an employee who has
been terminated, whether directly or through constructive discharge. As
relevant here, the EPA allows a former employee to sue for a discharge that
violates a state statute or that is in retaliation for reporting a violation of the
Arizona Constitution or a state statute. A.R.S. § 23-1501(A)(3)(b), (c).3
Peterson's claim under the EPA was that the City retaliated against her for
reporting violations of state statutes that bar discrimination on the basis of
gender and military service. We first address the gender discrimination
issue, then turn to discrimination based on military service.4

2. Reported violation of the Arizona Civil Rights Act.

¶11 Peterson offered substantial evidence at trial that she suffered
employment discrimination and harassment based on gender. The jury
heard that Peterson's coworkers spread rumors that she had lied about why
she missed the deadline to apply for the sergeant position, that they

3 The EPA also allows a terminated employee to sue for breach of
contract. See A.R.S. § 23-1501(A)(3)(a). Peterson did not cross-appeal from
the superior court's entry of summary judgment against her on her claim
for breach of contract.

4 We review de novo legal conclusions and mixed questions of law and
fact. State v. Spencer, 235 Ariz. 496, 498, ¶ 8 (App. 2014).

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ridiculed her as not intelligent enough or otherwise qualified to be a
sergeant, publicly asserted she had "f'd up" the entire testing process, and
falsely claimed that she received improper assistance on the written test
from a female lieutenant who wanted to see another woman advance in the
department. According to Peterson, the abuse "blew up" after it became
known that she was the top candidate in line for the sergeant's position.
She testified her coworkers and some supervisors, including her lieutenant,
repeatedly made sexually vulgar, suggestive or otherwise derogatory
comments to her based on gender. Many of the comments were made in
online posts, some of which were printed out and placed on her desk
waiting for her when she came to work. She also testified about an instance
in which she needed assistance in the field and called three times for safety
backup, but no one responded.

¶12 The City did not seriously dispute Peterson's accounts, but
contended the ill will she experienced was not based on gender
discrimination and offered evidence that the acting police chief and others
in management expressed support for Peterson. Nevertheless, the evidence
Peterson presented would have been sufficient to state a claim for
discrimination based on sex in violation of the Arizona Civil Rights Act,
A.R.S. § 41-1463(B)(1) (2018) (unlawful "to discharge any individual or
otherwise to discriminate against any individual with respect to the
individual's compensation, terms, conditions or privileges of employment
because of the individual's . . . sex"). And the EPA expressly allows a claim
by an employee who alleges she has been terminated in violation of the
Arizona Civil Rights Act. A.R.S. § 23-1501(A)(3)(b)(i).

¶13 The Arizona Civil Rights Act, however, requires an employee
to file a charge with the Arizona Civil Rights Division within 180 days of an
alleged violation, A.R.S. § 41-1481(A) (2018), and an employee who does
not do so loses her right to sue, see Onelas v. SCOA Indus., Inc., 120 Ariz. 547,
548 (App. 1978). It is undisputed that Peterson could not sue under the EPA
for termination in violation of the Arizona Civil Rights Act because she did
not timely file a charge with the Civil Rights Division.

¶14 For that reason, Peterson crafted her claim against the City to
allege not constructive discharge caused by "firsthand" discrimination, but
constructive discharge caused by illegal retaliation under the EPA, A.R.S. §
23-1501(A)(3)(c). That subsection of the EPA allows an employee to sue
when

[t]he employer has terminated the employment relationship
of an employee in retaliation for . . . :

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* * *

(ii) The disclosure by the employee in a reasonable manner
that the employee has information or a reasonable belief that
the employer, or an employee of the employer, has violated
[or] is violating . . . the statutes of this state . . . .

¶15 Thus, Peterson's claim was that under § 23-1501(A)(3)(c)(ii),
she told her supervisors that her coworkers were violating the Arizona Civil
Rights Act's ban on gender discrimination, but the City did nothing to end
the harassment, allowing it to continue unabated, finally causing the
constructive discharge. Peterson testified she reported the sexual
harassment to the human relations department and to her supervisors, who
she said failed to remedy the situation and only encouraged her to ignore
the disparaging comments and "keep moving forward." Peterson
acknowledged that the acting chief of police urged her not to resign, but
testified she quit because "no one did anything" to address the continued
harassment.

¶16 Viewed closely, Peterson's claim that she was constructively
discharged in retaliation for reporting a violation of the Arizona Civil Rights
Act is indistinguishable from a claim that she was constructively
discharged in violation of the Arizona Civil Rights Act. Both claims are
premised on the same violation — illegal sex discrimination in connection
with employment. See A.R.S. § 41-1463(B)(1). An employee may claim
constructive discharge based on sex discrimination if the employee puts the
employer on 15 days' notice that the employee intends to resign because of
"objectively difficult or unpleasant working conditions to the extent that a
reasonable employee would feel compelled to resign . . . because of these
conditions and the employer fails to respond to the employee's concerns."
A.R.S. §§ 23-1502(A)(1) (constructive discharge); 41-1463(B)(1)
(discrimination based on sex). Peterson's "whistleblower" retaliation claim
required proof of those same facts — she alleged that, after she put the City
on notice that her coworkers were sexually harassing her in violation of the
Arizona Civil Rights Act, the City constructively discharged her by failing
to stop the harassment, allowing the intolerable working conditions to
continue. See A.R.S. § 23-1501(A)(3)(c)(ii) (termination in retaliation for
reporting a violation of law).5

5 A constructive-discharge claim does not require an employee to give
notice and allow the employer an opportunity to cure when there is

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¶17 Peterson's admitted failure to exhaust her administrative
remedies prevented her from bringing the former claim — constructive
discharge based on sex discrimination under A.R.S. § 41-1463(B)(1). Her
claim for retaliatory constructive discharge fails for the same reason. The
EPA strictly limits the claims available to an employee alleging wrongful
termination. The statute allows suit by an employee who is terminated "in
violation of a statute," specifically including a violation of the Arizona Civil
Rights Act. A.R.S. § 23-1501(A)(3)(b). But under the EPA, "if [such a] statute
provides a remedy to an employee for a violation of the statute, the
remedies provided to an employee for a violation of the statute are the
exclusive remedies for the violation of the statute." Id. Because Peterson
forfeited her exclusive remedy for sex discrimination under the Arizona
Civil Rights Act by failing to file an administrative charge, the EPA does
not permit her to refashion her discrimination claim into a retaliation claim
under § 23-1501(A)(3)(c)(ii).

¶18 The evidence at trial showed repeated abusive acts and
comments that Peterson's coworkers — each of them a sworn officer of the
law — made against her throughout the sergeant promotion process. What
happened to Peterson belongs in no workplace, let alone a public workplace
whose purpose is law enforcement. The Arizona Civil Rights Act grants a
remedy to a victim of workplace discrimination based on sex.
Unfortunately, however, for reasons our record does not disclose, Peterson
did not file a timely administrative charge, and that omission prevented her
from seeking relief under the Arizona Civil Rights Act. When an employee
complains of sex discrimination and the employer allegedly retaliates by
failing to remedy the discriminatory conduct, we cannot treat the
employee's resulting constructive-discharge claim differently than a
constructive-discharge claim based on the underlying discrimination under
A.R.S. § 23-1502(A)(1). See Bodett v. CoxCom, Inc., 366 F.3d 736, 746 (9th Cir.
2004) (employee waived claim for retaliation under what is now § 23-
1501(A)(3)(c) by failing to exhaust administrative remedies under Arizona
Civil Rights Act); Taylor v. Graham County Chamber of Commerce, 201 Ariz.
184, 188, ¶ 12 (App. 2001) ("The EPA does not provide a back door method

evidence of "outrageous conduct . . . including sexual assault, threats of
violence directed at the employee, [or] a continuous pattern of
discriminatory harassment." See A.R.S. § 23-1502(A)(2). Because Peterson
alleged she was constructively discharged in retaliation for reporting the
harassment, she could not proceed under § 23-1502(A)(2), but was required
as a factual matter to show she gave notice and that the City failed to
respond, causing her constructive discharge.

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of suing . . . in tort for wrongful termination in violation of [the Arizona
Civil Rights Act] or its public policy.").

¶19 Accordingly, because Peterson failed to exhaust her
administrative remedies as required to maintain a suit under the Arizona
Civil Rights Act, the City was entitled to judgment as a matter of law on
Peterson's retaliatory constructive discharge claim under the EPA.

3. Reported violation of statutes pertaining to military service.

¶20 Peterson also alleged a retaliation claim under the EPA based
on her contention that coworkers were harassing her in violation of state
statutes barring discrimination against service members. She argues the
conduct she reported to her superiors constituted violations of A.R.S. §§ 26-
167(A) (2018) and -168(B) (2018), which she argues together "provide
protection for members of the National Guard and military reservists from
employment discrimination."

¶21 Under § 26-167(A), "[a] member of the national guard shall
not, because of membership therein or absence from employment under
competent military orders, be deprived of employment or prevented or
obstructed in obtaining employment in his trade, occupation or profession."
During her employment with the City, Peterson served in the United States
Marine Corps Reserve; she does not claim she was a member of the National
Guard during any time relevant to her claim. Therefore, § 26-167(A) is
inapplicable.

¶22 Although § 26-168(B) applies to military reservists such as
Peterson, the statute does not protect against the type of harm Peterson
alleged. In relevant part, § 26-168(B) states:

A member of . . . the United States armed forces reserves shall
not lose seniority or precedence while absent under
competent military orders. On return to employment the
employee shall be returned to the employee's previous
position, or to a higher position commensurate with the
employee's ability and experience as seniority or precedence
would ordinarily entitle the employee.

¶23 Peterson offered no evidence that she was deprived of any
seniority or "precedence" due to her military orders in violation of § 26-
168(B). Indeed, she testified coworkers complained that she was allowed
to participate in the promotion process even though she missed the
application deadline because she was on reserve duty. One coworker filed

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a formal complaint to that effect. The police department allowed Peterson
to test, despite the coworkers' complaints, because it accepted her reason
for missing the deadline — she was away on military service.

¶24 Further, Peterson cites no evidence that she reported any
violation of § 26-168(B) to her superiors. And no evidence supports her
contention on appeal that the City retaliated against her in violation of the
EPA by failing to remedy any such violation.6

B. Attorney's Fees.

¶25 The City also argues the superior court abused its discretion
when it denied the City's request for $227,261 in attorney's fees pursuant to
A.R.S. § 12-341.01(A) (2018) based on its dismissal of Peterson's claim for
breach of contract. We review an attorney's fee order under A.R.S. § 12-
341.01(A) for an abuse of discretion, see State Farm Mut. Auto. Ins. Co. v.
Arrington, 192 Ariz. 255, 261, ¶ 27 (App. 1998), and may affirm such a
decision if it has any reasonable basis, Tucson Estates Prop. Owners Ass'n v.
McGovern, 239 Ariz. 52, 57, ¶ 12 (App. 2016).

¶26 Under A.R.S. § 12-341.01(A), "[i]n any contested action arising
out of a contract, express or implied, the court may award the successful
party reasonable attorney fees." In denying the City's request for fees, the
court found that Peterson's action "sounded primarily in tort, not contract;
and that in any event Plaintiffs were the successful party in the litigation."
Although Peterson is no longer the successful party, the court did not abuse
its discretion by concluding that her contract claim was incidental to her
statutory wrongful-discharge claim. See West v. Salt River Agri. Imp. & Power
Dist., 179 Ariz. 619, 626 (App. 1994).

6 On appeal, Peterson argues she gave notice that coworkers were
harassing her in violation of criminal statutes, including those forbidding
endangerment, threatening or intimidating, assault and refusing to aid a
peace officer. We will not address this argument because she did not raise
it at trial (with the exception of her claim that the City retaliated against her
for reporting criminal harassment, which the superior court barred as
untimely, a ruling Peterson did not cross-appeal). See Hannosh v. Segal, 235
Ariz. 108, 115, ¶ 25 (App. 2014) ("[W]e generally will not consider
arguments that were not presented to the trial court for the first time on
appeal.").

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CONCLUSION

¶27 For the reasons stated, we reverse the judgment and award of
damages on Peterson's wrongful-termination claim, but affirm the superior
court's denial of the City's request for attorney's fees pursuant to § 12-
341.01(A).

AMY M. WOOD • Clerk of the Court
FILED: AA

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