## Facts

- Elizabeth Rene Raymond was hired in March 2000 as an executive assistant for two executives at L.F.P., Inc., a company owned by Larry Flynt that published adult and nonadult content (including Hustler Magazine).
- At the outset of employment, Raymond signed an employee handbook containing a mandatory arbitration provision requiring employment disputes—including claims for sexual discrimination or harassment—to be arbitrated.
- The arbitration provision also included a judicial-review clause authorizing a court to review the award (including findings of fact) to determine whether it was supported by competent evidence and by a proper application of law to the facts, and to enter a different judgment or order further arbitration if necessary.
- Raymond alleged she was subjected to sexual harassment during her employment. Her allegations included being required to participate in a scheme to warn Flynt when his wife was coming so the wife would not discover Flynt’s sexual activity in his office.
- Raymond also alleged Flynt made a handful of sexually suggestive remarks over the years she worked at the company.
- L.F.P. terminated Raymond on August 5, 2002, citing a breach of confidentiality requirements.
- After exhausting administrative remedies, Raymond filed suit alleging, among other claims, hostile work environment sexual harassment under the Fair Employment and Housing Act (FEHA).
- The trial court granted the Flynt defendants’ motion to compel arbitration.
- After a hearing, the arbitrator found for Raymond, concluding that Flynt’s conduct created a hostile work environment, and awarded $175,000 in compensatory damages.
- In a later punitive-damages phase, the arbitrator found malice and oppression and awarded $500,000 in punitive damages against Flynt and $250,000 against L.F.P., Inc. (total $750,000).
- The Flynt defendants moved to vacate the award. The trial court denied vacatur and confirmed the award.
- In a prior appeal, the Court of Appeal remanded for review consistent with the parties’ judicial-review clause (in light of California law permitting contractual expansion of post-arbitration merits review).
- On remand, the trial court again confirmed the award, concluding the arbitrator had not committed legal error in finding FEHA hostile work environment harassment.
- The Flynt defendants appealed again, arguing the arbitrator’s factual findings did not, as a matter of law, satisfy FEHA’s requirements for hostile work environment harassment.

## Issues

1. Whether, accepting the arbitrator’s factual findings, those facts legally established hostile work environment sexual harassment under FEHA (i.e., harassment “because of sex” that was sufficiently severe or pervasive).
2. Whether, under the parties’ contractual judicial-review clause, the trial court erred in confirming the arbitration award despite a claimed misapplication of FEHA law to the facts.

## Decision

- The Court of Appeal reversed the judgment confirming the arbitration award.
- The court held that, even taking the arbitrator’s factual findings as given, the conduct found by the arbitrator did not amount to actionable hostile work environment harassment under FEHA as a matter of law.
- The court remanded with directions for the trial court to vacate the arbitration award.

## Legal Principles

- FEHA hostile work environment harassment requires conduct that is because of the plaintiff’s sex and that is sufficiently severe or pervasive to alter the conditions of employment and create an abusive working environment, evaluated based on the totality of the circumstances.
- Workplace conduct that is boorish, sexualized, or morally questionable does not by itself establish FEHA harassment; the conduct must meet the legal threshold for severity or pervasiveness and must be tied to the employee’s sex.
- Although arbitration awards are ordinarily subject to very limited judicial review, parties may contract for expanded judicial review of an arbitrator’s merits determinations, including review for legal error in applying the law to the facts.
- When a contract authorizes judicial review for proper application of law to facts, courts may correct legal error—while treating the arbitrator’s factual determinations as binding—and may refuse to confirm (and instead vacate) an award that rests on a legally incorrect application of governing law.

## Conclusion

Raymond v. Flynt held that, under a contractual judicial-review clause allowing merits review for legal error, the arbitrator’s findings about Raymond’s participation in a workplace “warning” scheme and a limited number of sexually suggestive remarks did not, as a matter of law, satisfy FEHA’s requirement of severe or pervasive sex-based harassment; the Court of Appeal therefore reversed the confirmation judgment and directed the trial court to vacate the arbitration award.


Raymond v. Flynt, 2010 WL 3751524 (2010)