Motion-Secondary: JULIE ORTIZ VS. MERCY HIGH SCHOOL, SAN FRANCISCO ET AL

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P. BOBBY SHUKLA (SBN 229736)
SHUKLA LAW

353 Sacramento Street, Suite 400
Sar: Francisco, CA 94111

Tel: (415) 986-1338

Email: bshukla@shuklalawfirm.com

KATHRYN BURKETT DICKSON (SBN: 70636)
EMILY A. NUGENT (SBN: 255048)
ZOE TELLMAN (SBN: 298698)
DICKSON GEESMAN LLP

1999 Harrison Street, Suite 2000
Oakland, CA 94612

Tel: (510) 899-4670

Fax: (510) 899-4671

E-Mail: kathy@dicksongeesman.com
E-Mail: emily@dicksongeesman.com
E-Mail: zoe@dicksongeesman.com

Attorneys for Plaintiff

ELECTRONICALLY
FILED

Superior Court of California,
County of San Francisco

11/14/2017
Clerk of the Court
BY: GARY FELICIANO
Deputy Clerk

Julie Ortiz
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO
UNLIMITED JURISDICTION
JULIE ORTIZ, CASE NO.: CGC-16-549915
Plaintiff,
v. PLAINTIFF'S BRIEF RE SUBSTANCE

OF FEHA RELIGIOUS EXEMPTION
ISSUE

MERCY HIGH SCHOOL, SAN

FRANCISCO, and DOES ONE through Complaint Filed: January 15, 2016

TWENTY, inclusive,
Defendant.

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Trial Date: November 13, 2017

Plaintiff's Brief re Substance of FEHA Exemption Issue
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L. INTRODUCTION.

This is an individual employment action brought by Julie Ortiz, who was terminated
after forty-five years of employment with Mercy High School (MHS), an all-girls Catholic High
School in San Francisco. The jury trial involves three employment claims: age discrimination;
the employer’s failure to take reasonable steps to prevent age discrimination; and wrongful
termination in violation of public policy (based on both the federal and state policies prohibiting
age discrimination).

Less than thirty days before the initial May 8, 2017 trial date — after having never filed a
demurrer or motion for summary judgment — defendant Mercy High School filed an untimely
motion for judgment on the pleadings, claiming the school was exempt from FEHA as a
religious entity. Law and Motion Judge Harold Kahn granted the motion; but based on
arguments raised by plaintiff, granted Ms. Ortiz leave to amend her complaint to address the
belatedly raised exemption issue. MHS filed a demurrer challenging the amended complaint,
raising the same issues included in its earlier motion, and Judge Kahn issued a detailed,
thoughtful opinion overruling the demurrer. Judge Kahn concluded that MHS had not
established as a matter of law it was entitled to the exemption, and the issues must be resolved
at the trial. A copy of Judge Kahn’s opinion overruling the demurrer is attached as Exhibit A.

This court is now presented with the questions raised by MHS’s assertion of the
religious exemption. The parties have agreed to provide the trial judge with two briefs: the first
is this brief addressing the substance and legal arguments about the exemption; the second is an
accompanying brief which addresses trial management questions posed by MHS’s assertion of
the exemption.

This brief is effectively an introduction for the trial Court on the FEHA religious
exemption, the amendments to the religious exemption dealing with religiously-affiliated
schools (and hospitals) including the legislative history, and a discussion of the kinds of

evidence which plaintiff contends supports her position that MHS is not exempt from FEHA as

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Plaintiff's Brief re Substance of FEHA Exemption Issue
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a maiter of law. It also summarizes the kind of evidence which would be presented to the jury
on plaintiff's alternate theories of waiver and estoppel, as discussed by Judge Kahn in his order.
Even if MHS was covered by the FEHA religious exemption, the issue remains whether by its

conduct MHS waived the exemption or should be estopped from claiming the exemption,

tl. = CALIFORNIA’S LEGISLATURE NARROWED FEHA’S RELIGIOUS
EXEMPTION, CARVING OUT RELIGIOUSLY-AFFILIATED HOSPITALS
AND SCHOOLS, SUBJECTING THEM TO FEHA’S PROVISIONS.

A. FEHA was amended to include religiously-affiliated schools and hospitals

within the definition of “employers” covered by the Act.

MHS argues that it is a religious entity and therefore exempt from FEHA based on
Government Code section 12926(d). But, the California Legislature amended FEHA, adding
section 12926.2, first to bring religiously-affiliated hospitals within FEHA’s ambit, and then
further amended the Act in 2002, to expressly exclude from the religious exemption those
religiously-affiliated schools open to the public. Schools like MHS, which are open to the
public — where girls of any faith can apply and be admitted and where the sole or primary
activity is typical high school education -- are subject to FEHA’s anti-discrimination
prohibitions. The only carve-out is that such schools and hospitals may restrict employment to
individuals of a particular religion, a carve-out not relevant to this case. Thus, MHS is subject to
FEHA and its provisions prohibiting age discrimination.

The legislative history for the 1999 addition of Gov. Code section 12926.2 regarding
religiously-affiliated hospitals and its amendment in 2001 to include religiously-affiliated
schools, makes clear the Legislature intended to rein in the seemingly unfettered breadth of
FEHA’s religious exemption as applied to hospitals and schools, which are often significant
employers. Specifically, section 12926,.2 was originally “enacted to bring under FEHA those

religious affiliated hospitals that serve the general public, with respect to the employment of

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persons whose duties are not related to the propagation of faith or pastoral duties in connection
with health care services provided in those hospitals.” See Senate Final History SB504,
California Legislature, Volume (2001-2002 Regular Session), p.3. (For the Court’s
convenience, the legislative history is attached as Exh. 2.)

In 2001, the statute was further amended to exclude from the religious exemption — and
thus include within the ambit of FEHA’s reach -- religious schools that provide educational
services open to the public: “[O]ther than the ability to restrict employment and promotion to
individuals of a particular religion, these nonprofit public benefit religious affiliated educational
institutions are subject to FEHA.” /d., Legislative History at p.3. The Senate Judiciary
Committee went on to clarify that “[u]nder existing law there is no difference between a
‘religious educational institution’ and a ‘nonprofit public benefit corporation formed by a
religious organization with education as its primary or sole activity with respect to Title VII or
FEHA.” Jd. at p.4. MHS’s position eviscerates the impact of these amendments.

The evidence will show that MHS is not a church, seminary, or convent whose sole or
primary purpose is religion. Instead, its articles of incorporation state its “specific and primary
purpose” is “to conduct one or more institutions for the secondary education of children and to
own, maintain and operate properties, facilities and services in furtherance of the foregoing
educational activities and otherwise in furtherance of this corporation’s religious, charitable and
educational purposes.” Its primary purpose is therefore educational.

MHS admits the school is open to the public, admitting girls of any faith or
denomination — they need not be Catholic, and one third of the student body is non-Catholic.
The evidence will firmly establish the school is a general education high school, not one
designed to train priests, ministers, pastors, nuns, or members of a religious order. Instead, the
high school is set up to meet the general graduation requirements for California’s regular public
schools, and to prepare its female students for general college admission. The vast majority of

[MHS’s] curriculum comprises secular subjects and classes. Its curriculum is explicitly geared

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toward the requirements for admission to the University of California and California State
Colleges. The school submits even its religious study courses to UC for review to ensure they
comply with UC’s standards. The MHS faculty is composed almost entirely of lay teachers,
with few priests or nuns having served as teachers [and] only approximately half of the faculty
is even of the Catholic faith.

Importantly, MHS is a stand-alone corporation, “Mercy High School.” It is not
subsumed within an indisputably religious entity like a church or religious order. It has its own
independent incorporation. MHS owns the school and the land on which the school is
constructed. MHS receives only a tiny fraction of its funding from the Sisters of Mercy. The
overwhelming majority of its revenue comes from tuition, private individual and corporate
contributions, and grant funding. Finally, plaintiffs sole employer was a school — MHS — not a
church or a religious order.

The evidence considered collectively will demonstrate that Plaintiff's employer, MHS,
is not a “religious entity” like churches, synagogues, temples, seminaries, or convents whose
sole or primary purpose is religion. Instead, MHS is primarily an educational institution open to
the public. A “religious entity” is one that exists exclusively or primarily for religious purposes.

Cal. Corp. Code §9912(a)(2).

B. Defendant wrongly asserted that its “religious entity” status could not be

questioned and that the court had no jurisdiction to determine otherwise.

Tn the previous motion and demurrer, MHS argued that because it incorporated as a
“religious” nonprofit, as opposed to a “public benefit” nonprofit, its “religious entity” status
could not be questioned. As Judge Kahn’s Order establishes, that is wrong as a matter of settled
law. Exh.1 at 3-5.

In other words, the question is factual - whether MHS is properly classified for purposes
of FEHA’s jurisdiction as an educational institution open to the public (non-profit public benefit

corporation) or a religious entity, which includes strictly religious enterprises like churches,

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synagogues, or temples (non-profit religious entity). If MHS could so easily evade FEHA’s
jurisdiction simply by labeling itself a “religious entity,” that would eviscerate the legislature’s
clear and specific determination that religiously-affiliated schools, to which members of the
public may apply, are subject to the state’s broad anti-discrimination laws respecting age, race,
gender, and other protected characteristics (other than allowing for discrimination in favor of
hiring or promoting employees of the same religion).

C. Henry and Kelly do not MHS’s position.

In its demurrer, MHS relied heavily on Henry v. Red Hill Evangelical Lutheran Church
of Tustin (2012) 201 Cal.App.4" 1041. That case differs greatly from MHS’s circumstances
because the school there was indistinguishable from the church. The Lutheran Church — which
was the plaintiff’s sole employer - was the defendant and the school was not separately
incorporated, but was simply a part of the church. The school was on church property and
located adjacent to the church. The opinion specifically notes “the school has no independent
legal status apart from the church.” /d. 201 Cal.App.4" at 1045, 1050 (emphasis added).
Here, the second amended complaint does not name as a defendant a church or religious order;
instead, the only named defendant is a separately incorporated educational institution open to
the public.

The appellate court in Henry also stressed facts showing the strong religious tenor of the
school, which differ from those relating to MHS. The court noted the school was “Christian-
based and Bible-based.” Both faculty and parents of students had to be practicing Christians
involved in a church-based setting on a regular basis. Henry, supra, 201 Cal.App.4" at 1046-
1047. At the end of the factual presentation, the trial court made a finding that the defendant
“church is a religious institution.” Jd. at 1048.

The second case on which MHS relied — Kelly v. Methodist Hospital of So. California
(2000) 22 Cal.4th 1108, 1111 ~ did not support MHS’s demurrer because it was decided a year

prior to the Legislature’s considered decision to explicitly include within FEHA’s definition of

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Plaintiff's Brief re Substance of FEHA Exemption Issue
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employer, religiously-affiliated hospitals (and religiously-affiliated schools in a later
amendment). 22 Cal.4th at n.2. It was a decision just like Kelly that prompted the Legislature to

end FEHA to capture within FEHA’s jurisdiction such religiously-affiliated hospitals and
schools. That case was McKeon v. Mercy Healthcare System (1998) 19 Cal.4th 321, which held
a religiously-affiliated hospital was exempt from FEHA’s definition of employer. See
Legislative History attached as Exh. 2 at 1 (*AB1541 .. . overturned the McKeon case by
bringing under the coverage of FEHA hospitals, owned or operated by religious corporations,
that provide health care services to persons other than adherents of that religion, and hospitals
that are nonprofit public benefit corporations formed by a religious organization.”)

A close reading of Kelly shows it undermines MHS’s arguments. The Supreme Court
discusses the broad nature of the religious exemption in FEHA as it existed prior to the
amendment, and said that had the Legislature intended to exclude the more secular affiliates of
churches, such as hospitals and schools, from the FEHA religious exemption, it could make that
clear in the statute. Within the following two years, that is exactly what the Legislature did. It
explicitly carved out of the religious exemption both hospitals and schools associated with
religious organizations. Thus, Kelly supports Plaintiff's analysis more than MHS’s.

MHS failed to establish that the school is exempt from FEHA’s definition of “employer”

as a matter of law, and its demurrer was overruled.

Il. EVEN IF THE EXEMPTION WERE APPLICABLE, JUDGE KAHN HAS
RULED THAT WHETHER MHS WAIVED THE EXEMPTION OR SHOULD
BE ESTOPPED FROM ASSERTING IT ARE ISSUES FOR TRIAL.
Judge Kahn rejected MHS’s argument that entitlement to the FEHA religious exemption
could not be waived. Exh. 1 at 6:20 - 7:6. California law is clear that statutory exemptions can
be waived. Cal. Civ. Code § 3513. Statutory rights may be waived if: “(1) the statute does not

prohibit the waiver; (2) the statute’s public purpose is incidental to its primary purpose; and (3)

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the waiver does not seriously undermine any public purpose the statute was designed to serve.”
Lamigan v. City of Los Angeles (2011) 199 Cal.App.4"" 1020, 1030. “A law has been established
for a ‘public purpose’ only if it has been enacted for the protection of the public generally, i.e.,
if its tendency is to promote the welfare of the general public rather than a small percentage of
its citizens.” Benane v. International Harvester Co. (1956) 142 Cal.App.2d 874, 878.

Notably, FEHA contains no provision that expressly prohibits waiver of its religious
exemption. Further, the overriding purpose of FEHA is to prevent, eliminate, and remedy
workplace discrimination. The courts consistently acknowledge that these overarching public
policies prohibiting workplace discrimination inure to the benefit of the public at large. Rojo v.
Kliger (1990) 52 Cal.3d 65, 90. In contrast, the religious exemption carves out only one
particular kind of employer — religious entities not organized for private profit. The religious
exemption is therefore merely incidental (if not contrary) to FEHA’s primary purposes, and the
exemption can be waived.

The evidence will show that MHS personnel policies for employees, far from claiming
any exemption from FEHA’s mandates, instead assure its employees that MHS will follow the
laws prohibiting discrimination and harassment, including the prohibition against age
discrimination, and say there will be no such discrimination with regard to “discharge” of an
employee. In its faculty-staff break room, MHS conspicuously posted large posters informing
employees they were covered by the FEHA and that their employer was prohibited from
discriminating against employees on the basis of age, as well as other protected characteristics.
MHS also required its supervisory employees to attend mandatory training that included the
prohibitions against discrimination and harassment in the FEHA.

Judge Kahn similarly held that the factfinder should determine whether MHS should be
estopped from denying the protections of FEHA to employees like Plaintiff Julie Ortiz. Exh. 1,
at 7:7-18. Again, Mercy’s staff and faculty handbook provided to Plaintiff and other

employees, has consistently contained statements confirming that employees will be protected

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by the anti-discrimination laws; that such discrimination will not affect the terms and conditions
of their employment; and that specifically, ‘discharge’ would not be based upon an employee’s
‘age,

As noted above, the evidence will also show that MHS consistently and prominently
displayed posters required under the FEHA which identified age discrimination as a form of
unlawful conduct forbidden by the state law. Such postings establish that Mercy held itself out
as subject to the Fair Employment and Housing Act, and created a reasonable expectation by
Plaintiff and other employees they were protected by the law. Plaintiff reasonably relied on such
assurances by Mercy.

Again, as noted, during Plaintiff's employment as Dean of Students, Mercy required her
to periodically engage in anti-discrimination supervisory training which specifically identified
age discrimination as unlawful. Through this training, Mercy provided additional assurance it
was bound by the requirements of state and federal law prohibiting discrimination and
harassment, including age discrimination.

The evidence will show that no one at MHS ever informed Julie Ortiz during her 45
years of employment that the state’s employment anti-discrimination laws did not apply to
proiect her and all the other employees. Quite the contrary. MHS recognized its obligations to
comply with the anti-discrimination laws, posted legal information and assurances to its
employees as required under the FEHA, and required repeated training of Ms. Ortiz and other
supervisors as required by the FEHA on the legal requirements and restrictions which protected
them and which they had to follow.
fv. THE WRONGFUL TERMINATION CLAIM BASED ON THE FEDERAL
POLICY AGAINST AGE DISCRIMINATION WILL GO FORWARD
TRRESPECTIVE OF THE FEHA EXEMPTION.

Plaintiff's claim for wrongful termination in violation of public policy basis is based on

the federal policy against age discrimination in employment (the “well-established public policy

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prohibiting age discrimination, as established by the Age Discrimination in Employment Act,
29 USC §621, setting forth the congressional findings regarding the public policy against age
discrimination”). It is also based, alternatively, on the FEHA prohibition against age
discrimination. Wrongful termination involves “those claims finding support in an important
public policy based on a statutory or constitutional provision, including those based on state or
federal law. Green v. Ralee Eng. Co. (1998) 19 Cal.4th 66, 79, 87-88; Grant-Burton y.
Covenant Care, Inc. (2002) 99 Cal.App. 4th 1361, 1372.

Judge Kahn found that plaintiff's wrongful termination claim will go forward
irrespective of any findings or conclusions on the applicability of the FEHA religious

exemption, Exh. 1, at 7:19 — 8:4.

Vv. CONCLUSION.

In summary, plaintiff contends and is prepared to demonstrate that MHS is not covered
by the FEHA religious exemption, or that waiver and estoppel prevent MHS from invoking the
exemption in any event. Plaintiff's proposals for managing these issues at trial is addressed in

the separate brief on the trial management issue.

Dated: November 6, 2017 DICKSON GEESMAN LLP
By: Key ouch Qi bee
KATHRYN BURKETT DICKSON
Attorneys for Plaintiff
Dated: November 6, 2017 SHUKLA LAW

By: /s/ P. Bobby Shukla
P. BOBBY SHUKLA

Attorneys for Plaintiff

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Plaintiff's Brief re Substance of FEHA Exemption Issue
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Prepared by the Court
JUL 2 6 2017
CLERK GOURT
a i
SUPERIOR COURT OF CALIFORNIA
County of San Francisco
Department No. 302
JULIE ORTIZ, No. CGC-16-549915
Plaintiff, : “}ORDER OVERRULING DEMURRER TO

SECOND AMENDED COMPLAINT
v.

MERCY HIGH SCHOOL, SAN
FRANCISCO, et al,

Defendants,

A hearing was held on July 19, 2017 on the demurrer of defendant Mercy High School,
San Francisco to the first three causes of action in the second amended complaint filed by
plaintiff Julie Ortiz. P. Bobby Shukla and Kathryn Dickson appeared for Ms. Ortiz and Shauna
Correia appeared for Mercy High School. At the conclusion of the lengthy hearing where

counsel for both sides impressively argued their positions, I orally overruled the demurrer to the

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third cause of action for wrongful termination in violation of public policy and took the demurrer
to the first two causes of action for discrimination in violation of FEHA under submission so that
I could more fully consider the parties’ arguments and the applicable law. Having now ;
completed that further consideration, I am issuing this order denying the demurrer as to all three
causes of action.

The demurrer as to the first two causes of action raises a host of issues whether Mercy
High School is exempt from liability for discrimination under FEHA and, if $0, whether Ms.
Ortiz has pled around that exemption. The short answers are Mercy High School is
presumptively exempt as a result of being incorporated as a nonprofit religious corporation and
Ms. Ortiz has adequately pled around that presumptive exemption, as she has done in her second
amended complaint, by alleging that Mercy High School: a) operates as a nonprofit public
benefit corporation affiliated with a particular religion that conducts an educational institution as
its sole or primary activity rather than as a nonprofit religious corporation; b) waived its right to
claim that it is exempt from FEHA liability as to Ms. Ortiz; and c) is estopped to assert its
exemption from FEHA as to Ms. Ortiz.

Both sides’ requests for judicial notice are granted. Accordingly, I accept as true for
purposes of this demurrer that Mercy High School is incorporated as a nonprofit religious
corporation. Per the plain language of Government Code 12926(d) and 12926.2(a), a nonprofit
teligious corporation is exempt from FEHA. If, as was at issue in Mercy High School’s motion
for judgment on the pleadings, there were no further allegations as to Mercy High School’s
corporate character or its operations, then Mercy High School would be entitled to a ruling that it
is exempt from FEHA discrimination liability, as I did in my order on the motion for judgment

on the pleadings.24

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But there are further allegations. My prior ruling does not apply to those further
allegations and thus I need to address whether Ms. Ortiz is able to state cognizable FEHA.
discrimination claims against Mercy High School notwithstanding that it is incorporated as a ,
nonprofit religious corporation,

The first set of allegations by Ms. Ortiz seeking to avoid the bar of subsection 12926(d) is
that Mercy High School does not operate as a nonprofit religious corporation but instead operates
as a nonprofit public benefit corporation affiliated with a particular religion that conducts an
educational institution as its sole or primary activity. Per Government Code 12926.2 (a) and
12926(f)(2), a religiously-affiliated nonprofit benefit corporation that operates a school is
excluded from the exemption from FEHA discrimination liability set forth in subsection
12926(d). Ms. Ortiz alleges that Mercy High School is a general education high school open to
girls of all religions and the faculty is largely comprised of lay teachers. Based on these
aliegations, Ms, Ortiz further alleges that Mercy High School is, in reality, a nonprofit benefit
corporation operating a school rather than a nonprofit religious corporation that, per
Corporations Code 9111, is formed “primarily or exclusively for any religious purposes.”

Mercy High School argues that its incorporation as a nonprofit religious corporation is
conclusive and Ms. Ortiz’s efforts to look “behind” its jeden and re-characterize it as a
religiously affiliated nonprofit benefit corporation must not be permitted. While there is no
California appellate decision directly on point, I believe that this argument is mistaken and, if
accepted, would frustrate the legislative intent behind the FEHA exemption by permitting an
entity wishing to avoid FEHA discrimination liability to claim to be a nonprofit religious
corporation when it does not operate as a nonprofit religious corporation. Thus, construing
FEHA as permitting inquiry into whether Mercy High School operates in a manner that is

consistent with being a nonprofit religious corporation is supported by the strong public policy of

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not expanding the FEHA exemption beyond the scope of what was intended and inhibiting a
corporation from falsely or mistakenly receiving the benefit of the exemption. (See Kelly V.
Methodist Hospital of Southern California (2000) 22 Cal. 4" 1108, 1123, n. 7 (it is not
illegitimate” for a court to inquire “whether or not claims to religious belief are sincerely held or
merely a sham put forth in an effort to avoid the reach of laws, such as FEHA ... that would
otherwise apply to the entity’s detriment”).

Mercy relies heavily on Corporations Code 9133, one of the sections in the portion of the
Corporations Code regarding nonprofit religious corporations. Section 9133 provides that “For
all purposes other than an action in the nature of quo warranto, a copy of the articles of a
corporation duly certified by the Secretary of State is conclusive evidence of the formation of the
corporation and prima facie evidence of its corporate existence.” Section 9133 is worded
identically or substantially similarly to other sections of the Corporations Code. (See, e.g.,
Corporations Code 209 and 313 (in the division on general corporation law), 5133 (applying to
nonprofit public benefit corporations), 7133 (applying to nonprofit mutual benefit corporations),
and 12315 ( in the division on corporations for specific purposes)). Neither section 9133 nor any
of the similarly or identically worded statutes has ever been construed to preclude an inquiry into
whether a corporation operates in a manner consistent with the type of corporation that it was
incorporated as. The plain language of section 9133 only bars or limits inquiry into whether the
corporation was actually formed and exists as a corporation. (Accord Barber v. Irving (1964) 226
Cal. App. 2d 560, 565 (construing section 313 as prohibiting inquiry into the “legal existence of
a corporation”). Because Ms. Ortiz does not contest that Mercy High was formed as and exists
as a corporation, section 9133 is inapposite to this demurrer.

The sparse California authority that there is on the subject favors allowing a court to

inquire whether a corporation operates in a manner consistent with the type of corporation it

[Page 4claims to be. (Younger v. Wisdom Society (1981) 121 Cal. App. 3d 683, 688; Kelly, supra).
Mercy High School’s effort to distinguish both Younger and Kelly are unpersuasive. While
Younger is a case filed by the California Attorney General, Younger cites an early California
Supreme Court decision not involving any government agency or officer as a party (Stewart v.
California Medical Missionary & Benevolent Assn. (1918) 17 Cal. 418) for the proposition that
the “character [of a corporation] is not to be determined alone by the powers and purposes.
defined in its articles, but also by the method of transacting business.” And, while the footnote in
Kelly is explicitly focused on the “validity of a religious practice or belief,” the footnote supports
the broader proposition that there is nothing improper about a court permitting an inquiry
whether an entity is entitled to a FEHA religious exemption when there is a challenge, as Ms.
Ortiz has made here, that the entity’s claim to the exemption is not supported by the way it
conducts itself.

The Kelly footnote also requires rejection of Mercy High School’s argument that
inquiring into whether it operates as a nonprofit religious corporation runs afoul of the First
Amendment. Inquiry into whether operation of a general education high school open to girls of
all faiths and denominations is consistent with being a corporation formed “primarily or
exclusively for any religious purposes” does not require consideration of the bona fides of
religious beliefs. But even if it did, the Kelly footnote allows such an inquiry to determine
whether the claimed beliefs were proffered to avoid FEHA liability.

Perhaps the most difficult question is the one highlighted by Mercy High School at the
hearing: whether as a matter of law the operation of a general education high school open to girls
of all faiths and denominations is inconsistent with being a corporation formed “primarily or
exclusively for any religious purposes.” Put another way, even assuming that Mercy High School

could properly be characterized as operating in a manner consistent with being a religiously

Page 5.affiliated nonprofit benefit corporation, does that preclude Mercy High School from being a
nonprofit religious corporation and invoking the FEHA exemption from. discrimination liability?
Another articulation: Is a religiously affiliated nonprofit benefit corporation distinct from and not
overlapping with a nonprofit religious corporation?

With a narrow exception, I have concluded that I do not need to resolve any of these
vexing questions. On this demurrer, the issue is whether Ms. Ortiz has alleged ultimate facts that,
if believed by the trier of fact, support her theory of liability. She has. By alleging that Mercy
High School does not primarily or exclusively focus on religious education or the education of
persons intending to become religious professionals, but instead primarily focuses on secular
education for persons who intend to pursue all walks of life, Ms. Ortiz has adequately alleged
facts that a trier of fact could conclude that Mercy High School operates in a way that is
inconsistent with Corporations Code 9111. Of course, that doesn’t mean that a trier of fact must
or will reach that determination. The trier of fact’s determination will be based on all the
evidence offered by both sides, not just the one-sided allegations made by Ms. Ortiz in her
second amended complaint, which I am required to accept as true on this dernurrer.

Although my conclusion that Ms. Ortiz’s allegations that Mercy High School operates in
a way that falls outside the FEHA exemption from discrimination liability is sufficient to
overrule the demurrer to the first and second causes of action, I will briefly address the
sufficiency of Ms. Ortiz’s allegations of waiver and estoppel.

Mercy High School’s argument that a non-government party cannot waive or be estopped
to assert a statutory exemption is mistaken. California law is replete with examples of a party
found to have waived or was estopped to assert a right afforded to it by a statute, and there is no
authority cited by Mercy High School or that I could find that treats statutory exemptions

different from other statutory rights with regard to waiver and estoppel as long as there is no

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jurisdictional issue involved, as there is not here. Dicta in Santa Barbara County Flower &
Nursery Growers Assn, v. County of Santa Barbara (2004) 121 Cal. App. 4" 864, 876, cited by
Mercy High School, is not to the contrary. The court there did not determine that estoppel could
never apply to a statutory exemption, but only that it did not apply under the facts of that case,
The decision does not contain any language regarding waiver of a statutory exemption, much
less that such a waiver cannot occur.

Ms, Ortiz adequately alleges facts that Mercy High School waived and is estopped to
assert an exemption from FEHA liability. Mercy High School’s handbook states that it has an
“EQUAL EMPLOYMENT OPPORTUNITY POLICY” and it does not make decisions based on
age. This allegation alone suffices to withstand a dermurrer regarding waiver and estoppel. Ms.
Ortiz’s reliance and assumption that Mercy High School would comply with California anti-
discrimination law is not unreasonable as a matter of law. Mercy High School also allegedly
engaged in anti-discrimination training and posted anti-discrimination signs that Ms, Ortiz relied
upon. Mercy High School’s argument this conduct is compelled does not require a
determination that the doctrines of waiver and estoppel are inapplicable. Mercy High School
raises a factual issue not amenable to resolution on a demurrer whether it intended its conduct to
be relied on. Ms. Ortiz. adequately alleges her detrimental reliance on Mercy High School’s
conduct by continuing her employment.

As to the third cause of action for wrongful termination in violation of public policy, I re-
affirm my oral ruling at the hearing that Ms. Ortiz can base a Tameny claim on the ADEA,
without having to allege that she would prevail on an ADEA claim were she to bring one against
Mercy High School. It is the policy against age discrimination embodied in the ADEA that
allows for a Tameny claim, not the specifics of how an ADEA claim need be proved that is

relevant for a Tameny claim. In all events, nothing in Ms. Ortiz’s second amended complaint

Page 7ele @ ; e

1 || necessarily shows that she would be unable to establish liability against Mercy High School if
2 || she pursued an ADEA claim. Stated differently, Ms. Ortiz has not alleged that Mercy High

3 || School terminated her because of “mixed motives” that would preclude a finding of ADEA

4 || liability against Mercy High School.

5 For the reasons stated above, Mercy High School’s demurrer to the first three causes of
6 || action alleged in the second amended complaint is overruled as to all three causes of action.

7 IT IS SO ORDERED.

8 || Dated: July 26, 2017

Harold Kahn
Superior Court Judge

24

25SUPERIOR COURT OF CALIFORNIA

County of San Francisco
JULIE ORTIZ, Case No. CGC-16-549915
Plaintiff,
Vv. CERTIFICATE OF MAILING

(CCP 1013 (4))
MERCY HIGH SCHOOL, SAN FRNACISCO,
ET AL.,

Defendants.

I, Jose Rios Merida, a Deputy Clerk of the Superior Court of the County of San
Francisco, certify that I am not a party to the within action.

On July,27, 2017, I served the attached ORDER OVERRULING DEMURRER TO
SECOND AMENDED COMPLAINT by placing a copy thereof in a sealed envelope, addressed
as follows:

Kathryn B. Dickson, Esq. P. Bobby Shukla, Esq.

Dickson Geesman LLP Law Offices of Stephen Murphy
1999 Harrison Street, Suite 2000 353 Sacramento Street, Suite 1140
Oakland, CA 94612 San Francisco, CA 94111

Shauna Correia, Esq.

Paul E. Gaspari

Weintraub Genshlea Chediak Tobin & Tobin
475 Sansome Street, Suite 1800

San Francisco, CA 94111

I then placed the sealed envelopes in the outgoing mail at 400 McAllister Street, San Francisco, CA.

94102 on the date indicated above for collection, attachment of required prepaid postage, and mailing
on that date following standard court practices.

Dated: July 27, 2017
T. MICHAEL YUEN; Clerk

By:

ee Mofida, Deputy ClerkEXHIBIT 2VOLUME 1

CALIFORNIA LEGISLATURE

2001-2002 REGULAR SESSION:

SENATE ©
FINAL HISTORY

Also list of Membera, Officers, and Commitess of the Senate

ay LEGISLATIVE INTENT SERVICE (800) 698-1917

i

a“,
ieSATURDAY, NOVEMBER 30, 2002 389

S.B. No. 304—Seott (Principal coanthor: Senator Kuehl) (Coauthor: Asseenbly

‘An aot to satertd Section 12926.2 of the Government Code, relating 0 exiployimeat,
BEL
Feb. 22—Jotroduced. Reed first time. To Com. on RLS. for uslgnment, To print.
4 — From pint, By be etn wpe cn ce ee Mesh 26,
Peete

28-—Fron counties with suthor's amendments, Reed sovond time, Amended,

Senin Are? Rocobered & Chen. o8 APPR.

SE GREESESE § Gad BAF?

30—Prom De. “Ho Consent Calondex. > Mone’
a ie, To Coss Coen, UAE Nowe)

ee ‘Sune Cis toes.

Pemsed. 72. Noes 2. Page 3317.) To Senate.

ioe
© 1~Seraecoesuas in Assamily emcee, Ayes 40, ‘Nowe 0, Page 2819.)
Ott,

- GeRaralied. ‘Po Gowernoe at 3 pm.
amet vies
¥ ‘by Saonetary of State. Chapier 910, Stenaes of 2002.

(BREE LEGISLATIVE INTENT SERVICE. (800) 00-1017at
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activity, sander al siastianal totiononts beakbews Mace
promote on the basis of a particular religion. The bill would further provide that
dn all other xeopects, this nonprofit public benefit corporation would be subject to
Fa a eer

Teicnis emcuaieccenten aneanatonbethenioee ttt

AB 1541 (Keeley, Spier ah easter seaR vrestsend to Alcan com ty
bringing under the OL SELLA hoepitals, owned or operated by religious
corporations, that provide’ dadé vertices to persons other than adherents af
that religion, and hospitals that ara nonprofit public benefit corporations formed
LIs-3 (moze)

|

Goi! LEGIGLATIVE INTENT SERVICE — (B00) 88-1917

afby-4 religions onganization, Howrévetr aia -wasthade to allow the hiring
seo ineenane etnies ima, executive or pastoral~

roiandelion with the provisierrof hkel#ti clive, AB 1541 also
pil religtony tarporations snd associations for purposes of FEHA.

‘Thespapowrs of ths bil, wha are nisctptofit Hemet eset
ig a ota ea i er
to use: jaa a basis for hiring cr proicting eniplopees, antl tijend this &

CHANGES TO DUSTING LAW

Existing la povvies totem “exaployer” atibject to prohibitions against
under FEHA does not include a religions corporation or
conden [Gov, Code Sec. 12926(d),]

Edstinglawy provides an exroption to FEFIA covertge of these hogpltls, which
Se eee tec tie

execxtive or pastoral poattion in conection with provision eral eavicea
in the hospital. [Gov. Code Sections 12926 2(c)(1) and 12926.2(c)(2)]

See

x
HE .
gee! LScIsLaTive INTENT SERVICE — (Gon) 886-1017

‘hie il would farther provide dat fl other seepects tae ralighos affliated
educational institutions that are nonprofit public benefit corporations shall be5B 504 (Gcott)
Pages:

subject to the state's prohibitions against discrimination in employment and
honsing (Le., “subject to the provisions of this part,” meaning FEHA).

COMMENT

1, Sbated need for thls bil

The sponser of this bill, the Association of Independent California Colleges
and Universities, contends that this bill is needed in order to correct an.
inadvertent or unintended consequence of the passage of AB 1541,

‘AB 2541 was enucted to bring under FEHA those religious affliated honpitials
thet serve the general public, with respect to employment of pamons for =
diutiga not related to the propagation of faith or pastoval duties in conection
with health care services provided in those hospitals, Thus, thees hospitals

are now eubject to the restrictions ngataik diaeriintiaten san. the basis of all of

epeipt shatvelthepipactté the
of faith or executive/ pastoral positieinsbiative to