California Whistleblower Gets Significant Punitive Damages Award

Employees in California are protected when they report their employers for violating the law. They are also protected when they refuse to perform work they reasonably believe would violate the law. In Zirpel v. Alki David Prods., 93 Cal.App.5th 563 (Cal. Ct. App. 2023), the California Court of Appeal considered whether the court erred by allowing a retaliation claim when an employee refused to install hologram equipment because of safety concerns and whether the punitive damages award was excessive.

Karl Zirpel was employed by Alki David Productions (ADP) from 2013 to 2017. The company was initially focused on internet programming but switched to hologram technology beginning in 2014. In his work, Zirpel was focused on holograms, how the technology worked, and how to install it. He rose to the position of vice president of operations at ADP until his termination in 2017 when his salary was $72,800.

In Sept. 2017, Zirpel was directed to install hologram technology equipment for a theater that was being built at a former church. The company had issued press releases about an event scheduled for Sept. 28, 2017, at which it intended to showcase its technology and screen a hologram film. Before that, inspectors from the city came to the property while Zirpel was present on Sept. 25, 2017.

During a walk-through, each of the inspectors denied approval based on 20 code violations they noted, including electrical and plumbing violations. Since the hologram equipment weighed 700 pounds and was supposed to be installed in the ceiling above the attendees, Zirpel was concerned about the electrical and plumbing violations as well as the ceiling's integrity. He was worried that the equipment's weight could cause the ceiling to collapse and everything to fall upon the guests.

Zirpel asked the inspectors whether the work could be completed and brought up to code before the scheduled event date and was told it could not. Alikvaedis David, the owner of ADP, ordered the crew to cover exposed wiring in the walls with plywood, paint it black, and cover it with drapes. This concerned Zirpel because he believed this to create a fire hazard that could endanger both the workers and any event attendees.

On Sept. 26, Zirpel reported his concerns about the failed inspections and code violations to the senior vice president of operations, Ian Robertson. He also told Robertson that he intended to call the fire department about the failed inspections. He called the fire inspector's office and spoke to a receptionist anonymously without giving his name. He stated that the theater was not ready, no approvals had been issued, it had failed inspections, and someone should come out to look at it.

On Sept. 27, fire inspector Eugene Andrews came to the theater and met with Zirpel and "Nick", who was the chief technical officer at ADP. Andrews asked who was in charge and took both men's names and information when both claimed the other one was in charge. He then said everyone needed to exit the building and that no one could reenter without fire exit signs. Nick went to buy fire exit signs, and Zirpel went to retrieve the hologram equipment from a storage facility.

Zirpel texted Manuel Nelson about the inspector and stated he was not comfortable being named as a person in charge since he could be referred for criminal prosecution if anything happened. He told Nelson he would wait for the permit before installing the hologram equipment and asked when the permit would be ready. Nelson responded they would submit the permit application the morning of Sept. 28 and stated that work should continue until they received a denial. David then tried to call Zirpel several times before sending him a text that the work needed to be done and that they would get a permit the next morning.

When Zirpel got back to the theater with the equipment, he went inside and told Nick and Robertson that they shouldn't be doing any work because of safety concerns. He said he was not comfortable with installing the hologram equipment because of the lack of approvals. David arrived and demanded to know why the work had stopped. Zirpel told him that none of the work had been approved, the inspections had failed, and the event needed to be postponed. David then yelled at Zirpel, called him multiple slurs, and screamed in his face to get out. He fired him on the spot. Zirpel, who was gay, was not out to many people. However, David was among the few who knew he was gay, and he called Zirpel a "fa***t" and told him to "suck his d**k" in front of the other workers. This made the incident particularly traumatic for Zirpel. He gave David the keys to the trailer holding the equipment and left.

Zirpel filed a lawsuit against ADP on Nov. 27, 2017. He alleged wrongful termination in retaliation for whistleblowing under Cal. Lab. Code § 1102.5 and Cal. Lab. Code § 232.5.

The case went to trial, and David, Andrews, Robertson, and Zirpel testified. Once Zirpel rested, ADP moved the court for a nonsuit but was denied. Zirpel asked to amend his lawsuit to add a claim under 1102.5(c) for refusing to perform illegal work. While ADP objected, Zirpel stated he had presented enough evidence to show that it would have been illegal for him to perform the work, and the judge agreed. The judge then instructed the jury that the court had found that the work at the theater was unlawful because it had not been permitted.

The jury returned a verdict in Zirpel's favor and awarded him $386,717 in economic damages and $700,000 in non-economic damages. Additionally, the jury found that ADP acted with malice and oppression. The case then moved to a punitive damages phase, and the jury awarded Zirpel punitive damages of $6 million or a 6:1 ratio of punitive to compensatory damages. ADP filed an appeal.

On appeal, ADP argued several things. First, it argued that the trial court erred by allowing Zirpel to amend his complaint to add the claim under (c). ADP argued that it didn't violate the law because Zirpel wouldn't have broken the law by continuing to install the equipment and that the jury's finding was not based on substantial evidence. Second, ADP argued that the punitive damages award was excessive.

Under Sect. 1102.5(c), Employers are prohibited from retaliating against employees when they refuse to perform work that would violate a statute or regulation. Zirpel argued that he was retaliated against for refusing to perform work that would have resulted in a violation of the city's codes.

The court began by looking at whether the claim under 1102.5(c) should have been allowed. It stated that a plaintiff must be able to demonstrate the specific statute or regulation the work would have violated and that they were retaliated against, and the court would then need to determine whether the activity would have violated that law. When the plaintiff meets that initial burden, it shifts to the defendant to prove by clear and convincing evidence that the adverse employment action was taken against the employee for independent reasons unrelated to their refusal to perform the purported illegal activity.

ADP argued that the work would not have violated the municipal code and that the company did receive a permit. However, the permit was not issued until Sept. 28, 2017, which was after the work would have commenced. The court found that ADP had retaliated against Zirpel and that its retaliation was partly motivated by his disclosure of the unsafe working conditions.

The court then reviewed the punitive damages award. ADP argued that it was unconstitutionally excessive. However, it had failed to produce evidence of its financial condition upon Zirpel's request for the determination of punitive damages. While excessive punitive damages awards are prohibited, the court considers multiple factors when determining whether an award is excessive, including the reprehensibility of the defendant's conduct, the disparity between the punitive damages award and the actual harm suffered by the plaintiff, and the difference between the punitive damages award and penalties in other cases.

The court found that the conduct of ADP and its principals was reprehensible. It then looked at the 6:1 ratio of punitive damages to compensatory damages, which ADP argued was unconstitutionally excessive. While there isn't a bright-line rule, the Supreme Court has previously found that a ratio of 10:1 would be unconstitutionally excessive. The court then stated that the evidence supported the large punitive damages award in Zirpel's case.

The Court of Appeal affirmed the jury's verdict and award of punitive damages. Zirpel was awarded his costs on appeal.

If you believe your employer retaliated against you for blowing the whistle or refusing to perform work that you believed was illegal, you should reach out to an experienced whistleblower attorney at the law firm of Steven M. Sweat, APC. Call us for a free consultation today at 866.966.5240.