In King v. U.S. Bank National Association, 53 Cal.App.5th 675 (2020), the California Court of Appeal affirmed a massive judgment—ultimately totaling roughly $17.18 million—in favor of a terminated 69-year-old employee who alleged wrongful termination, defamation, and breach of the implied covenant of good faith and fair dealing.
While the opinion covers numerous legal issues, one theme cuts through the entire decision: U.S. Bank conducted a deeply flawed, biased, and incomplete internal investigation, and those investigative failures played a significant role in the jury’s verdict and the Court of Appeal’s conclusions.
For employers and workplace investigators, King stands as one of California’s clearest judicial warnings about the consequences of a poorly conducted investigation.
Case Overview
Plaintiff Timothy King (“King”) managed U.S. Bank’s commercial banking division in the Sacramento region. King had performance concerns with two of his direct reports, Kim Thakur (“Thakur”) and John Flinn (“Flinn”). King placed Thakur on a Performance Improvement Plan and gave Flinn a negative performance review.
Thakur then lodged a complaint with Maureen McGovern (“McGovern”), a human resources generalist at U.S. Bank, alleging claims of gender discrimination and harassment against King. During the investigation, Thakur and Flinn raised other allegations as well, including that King told them to falsify expense reports and input entries in the system related to initiative meetings that had not occurred. Based on the findings from McGovern’s investigation, U.S. Bank terminated King’s employment.
King sued U.S. Bank for defamation, wrongful termination in violation of public policy, and breach of the implied covenant of good faith and fair dealing. The jury found in favor of King on all causes of action.
U.S. Bank’s Investigation
At the time McGovern conducted her investigation, there were no rules, policies, procedures, practices, or criteria to determine whether to allow an employee to respond to accusations against him or her. McGovern had also never prepared a written investigation plan, attended any training, or read any materials on how to conduct an investigation prior to the King investigation.
The Court focused on the following critical flaws in McGovern’s handling of the King investigation:
- Investigator failed to interview Respondent King and relied solely on Thakur and Flinn’s allegations, stating she “did not care” if King had contradictory evidence.
- Investigator took no steps to evaluate the credibility of Thakur and Flinn or determine whether they had any motive to lie.
- Investigator neglected to gather and evaluate potential contradictory evidence relating to what initiative meetings were and how they are entered into the system.
Key Holdings
In evaluating “actual malice” with respect to the defamation claim, the Court held that while the failure to conduct a thorough and objective investigation, standing alone, does not prove actual malice, the purposeful avoidance of the truth or the inaction, i.e., failure to investigate, which was “a product of a deliberate decision not to acquire knowledge of facts that might confirm the probable falsity of [the subject] will support a finding of actual malice.” Id. at 701. Therefore, the Court found that there was substantial evidence to support a finding of malice.
Further, in evaluating the wrongful termination in violation of public policy claim, the Court again pointed to the inadequate investigation and the investigator’s deliberate failure to acquire knowledge of facts that could have confirmed the probable falsity of claims against King—supporting an inference of pretext. Id. at 705.
Finally, the Court upheld the jury’s award of punitive damages (though it was modified from $15.6 million to $8.5 million), finding that McGovern was a “managing agent” for U.S. Bank because of the degree of discretion she possessed in making decisions with respect to how to conduct the King investigation. Id. at 713–714.
The Takeaway for Employers
To avoid becoming the next potential cautionary tale, it is critical that employers conduct workplace investigations using qualified investigators in a manner that is thorough, objective, and fair. If your organization does not have someone who is qualified to conduct a critical investigation, employers should strongly consider hiring an external independent investigator to avoid significant potential liability.