                            NOT FOR PUBLICATION

                    UNITED STATES COURT OF APPEALS
                                                                           FILED
                            FOR THE NINTH CIRCUIT
                                                                            JUL 12 2017
                                                                        MOLLY C. DWYER, CLERK
                                                                         U.S. COURT OF APPEALS
VICTOR GUERRERO,                                 Nos. 15-17001
                                                      16-16096
              Plaintiff-Appellee,
                                                 D.C. No. 3:13-cv-05671-WHA
 v.

CALIFORNIA DEPARTMENT OF                         MEMORANDUM*
CORRECTIONS AND
REHABILITATION; JEFFREY A.
BEARD, Secretary of the California
Department of Corrections and
Rehabilitation; K. CARROLL, Lieutenant;
D. SHARP, Sergeant; C. HESTER,
Lieutenant; V. MAYOL, Lieutenant; S.
COX, Lieutenant; V. MYERS, Sergeant,

              Defendants-Appellants,

 and

CALIFORNIA STATE PERSONNEL
BOARD; SUZANNE M. AMBROSE,
Executive Officer of State Personnel
Board; BARBARA LEASHORE, Hearing
Officer,

              Defendants.



       *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
VICTOR GUERRERO,                          No.   15-17043

            Plaintiff-Appellee,           D.C. No. 3:13-cv-05671-WHA

v.

CALIFORNIA DEPARTMENT OF
CORRECTIONS AND
REHABILITATION; JEFFREY A.
BEARD, Secretary of the California
Department of Corrections and
rehabilitation; K. CARROLL, Lieutenant;
D. SHARP, Sergeant; C. HESTER,
Lieutenant; V. MAYOL, Lieutenant; S.
COX, Lieutenant; V. MYERS, Sergeant,

            Defendants,

and

CALIFORNIA STATE PERSONNEL
BOARD; SUZANNE M. AMBROSE,
Executive Officer of State Personnel
Board; BARBARA LEASHORE, Hearing
Officer,

            Defendants-Appellants.



VICTOR GUERRERO,                          No.   16-16098

            Plaintiff-Appellee,           D.C. No. 3:13-cv-05671-WHA

v.

CALIFORNIA STATE PERSONNEL


                                     2
BOARD; SUZANNE M. AMBROSE,
Executive Officer of State Personnel
Board; BARBARA LEASHORE, Hearing
Officer,

             Defendants-Appellants,

 and

CALIFORNIA DEPARTMENT OF
CORRECTIONS AND
REHABILITATION; JEFFREY A.
BEARD, Secretary of the California
Department of Corrections and
Rehabilitation; K. CARROLL, Lieutenant;
D. SHARP, Sergeant; C. HESTER,
Lieutenant; V. MAYOL, Lieutenant; S.
COX, Lieutenant; V. MYERS, Sergeant,

             Defendants.


                   Appeal from the United States District Court
                     for the Northern District of California
                    William Alsup, District Judge, Presiding

                       Argued and Submitted May 16, 2017
                            San Francisco, California

Before: THOMAS, Chief Judge, WARDLAW, Circuit Judge, and MORRIS,**
District Judge.




       **
             The Honorable Brian M. Morris, United States District Judge for the
District of Montana, sitting by designation.

                                        3
        The California Department of Corrections and Rehabilitation (“CDCR”) and

the California State Personnel Board (“the Personnel Board”) appeal the district

court’s judgment entered after a bench trial. We affirm in part and reverse in part.

Because the parties are familiar with the history of this case, we need not recount it

here.

                                            I

                                           A

        We review the district court’s findings of fact concerning a claim of

disparate impact for clear error. Paige v. California, 291 F.3d 1141, 1144 n.3 (9th

Cir. 2002). “In particular, we give deference to a district court’s findings regarding

statistical evidence.” Id. The district court’s findings in this case were not clearly

erroneous. The general facts were undisputed. All applicants whose applications

were withheld on the basis of the one question at issue were Latino. The district

court was entitled to credit Guerrero’s statistical expert who testified that the

expected percentage of Latinos adversely affected was 42.1%. The district court

also found that CDCR’s statistical expert had conceded that even if two of the

seven applicants had their applications withheld in part due to the question, then

the question had a statistically adverse affect on Latinos. The record supports the

district court’s conclusion that the question was the deciding factor for at least two


                                           4
of the seven relevant applicants. Under our deferential standard of review, the

district court’s findings were not clearly erroneous.

      Given those factual findings, the district court did not err in concluding that

Guerrero had established a prima facie case of disparate impact in CDCR’s

employment selection, a decision we review de novo. Id. Under the Equal

Employment Opportunity Commission’s four-fifths rule, a selection practice is

considered to have a disparate impact if it has a “selection rate for any race, sex, or

ethnic group which is less than four-fifths . . . (or eighty percent) of the rate for the

group with the highest rate.” 29 C.F.R. § 1607.4(D) (2001). Applying the EEOC

rule to the district court’s factual findings, the district court properly concluded that

Guerrero had established a prima facie case of disparate impact in its employment

selection practices.

                                            B

      If the plaintiff establishes a prima facie case of disparate impact, then the

employer may invoke a “business necessity” defense, which permits “hiring

criteria with a ‘manifest relationship’ to job performance.” Tex. Dep’t of Hous. &

Cmty. Affairs v. Inclusive Communities Project, 135 S. Ct. 2507, 2517 (2015)

(quoting Griggs v. Duke Power Co., 401 U.S. 424, 432 (1971)). To successfully

establish a business necessity defense, an employer must prove that “the


                                            5
challenged selection device or criteria and the important elements of the job or

training program” have a “significant relation” between them, “not merely some

‘rational basis’ for the challenged practice.” Contreras v. City of L.A., 656 F.2d

1267, 1276 (9th Cir. 1981) (quoting Craig v. Cty. of L.A., 626 F.2d 659, 664 (9th

Cir. 1980)). The CDCR argues that the question was an important screening tool,

and that it individually assesses and interviews every applicant, not just those it

rejects at screening. However, the district court found that “there is no evidence

that CDCR paid anything more than lip service to Guerrero’s circumstances under

the EEOC factors.” The court further found that CDCR did not actually engage in

an individualized assessment of Guerrero and at least three other Latino candidates,

and likely misunderstood the answer to the question. These findings are supported

by the record and are not clearly erroneous.

                                           C

      CDCR further argues that, overall, it has an excellent record in hiring

Latinos and, therefore, it cannot be held liable under a disparate impact theory.

However, the Supreme Court has rejected the so-called “‘bottom-line’ theory of

defense,” holding that even “if the ‘bottom-line’ result of the promotional process

was an appropriate racial balance,” that result will “not preclude . . . employees

from establishing a prima facie case, nor does it provide [the] employer with a


                                           6
defense to such a case.” Connecticut v. Teal, 457 U.S. 440, 442 (1982). It

explained that Title VII “speaks, not in terms of jobs and promotions, but in terms

of limitations and classifications that would deprive any individual of employment

opportunities.” Id. at 448 (emphases in original). “A disparate-impact claim

reflects . . . Congress’ basic objectives . . . to achieve equality of employment

opportunities and remove barriers that have operated in the past to favor an

identifiable group of white employees over other employees.” Id. (emphasis in

original).

       We applied Teal in Stout v. Potter, 276 F.3d 1118 (9th Cir. 2002), where

female postal inspectors directed their disparate impact claim at an intermediate

screening stage in a promotions process. Id. at 1121. Echoing Teal, we explained

that the “nonadverse results of the ultimate promotion decisions cannot refute a

prima facie case of disparate impact at the dispositive interview selection stage.”

Id. at 1122. Therefore, it was appropriate to “separate the results of the interview

selection stage from the results of the overall promotion process because the

intermediate stage functioned as a pass or fail barrier to further consideration for

promotion.” Id.




                                           7
      CDCR’s theory that it cannot be held liable for disparate impact because of

its “bottom line” excellent record of hiring Latinos is precluded by binding

Supreme Court and Ninth Circuit precedent.

                                          II

      The district court did not abuse its discretion when it denied CDCR the

opportunity to pursue further investigation of Guerrero. See Chance v. Pac-Tel

Teletrac, Inc., 242 F.3d 1151, 1161 (9th Cir. 2001) (no abuse of discretion where

district court denied additional time to conduct discovery). In order to “rely upon

after-acquired evidence of wrongdoing, [an employer] must first establish that the

wrongdoing was of such severity that the employee in fact would have been

terminated on those grounds alone if the employer had known of it at the time of

the discharge.” McKennon v. Nashville Banner Publ’g Co., 513 U.S. 352, 362–63

(1995). Here, CDCR merely hoped that a further investigation would produce

additional evidence of wrongdoing that might justify its initial decision not to hire

Guerrero, and the district court actually permitted CDCR to complete its

background check to the extent it was unfinished.

      “A district court is vested with broad discretion to permit or deny discovery,

and a decision ‘to deny discovery will not be disturbed except upon the clearest

showing that the denial of discovery results in actual and substantial prejudice to


                                          8
the complaining litigant.’” Laub v. U.S. Dep’t of Interior, 342 F.3d 1080, 1093

(9th Cir. 2003). Under these circumstances, the district court did not abuse its

wide discretion in managing discovery.

                                          III

      The district court erred in imposing liability on the Personnel Board. The

Personnel Board did not participate in the hiring decision, nor did it participate in

the formulation of the question at issue. It reviewed the case only administratively.

“A direct employment relationship is not a prerequisite to Title VII liability.”

Ass’n of Mex.-Am. Educators v. California, 231 F.3d 572, 580 (9th Cir. 2000) (en

banc) (AMAE). It is possible for Title VII liability to extend to a third party entity

if that entity “interferes with an individual’s employment opportunities with

another employer.” Id. (quoting Gomez v. Alexian Bros. Hosp., 698 F.2d 1019,

1021 (9th Cir. 1983) (per curiam)). However, Title VII liability is extended to

indirect employers only if they “discriminated against and interfered with the

employees’ relationship with their employers.” Anderson v. Pac. Mar. Ass’n,

336 F.3d 924, 931 (9th Cir. 2003).

      The Personnel Board is a “statewide administrative agency which is created

by, and derives its adjudicatory power from, the state Constitution.” Dep’t of

Parks & Recreation v. State Pers. Bd., 284 Cal. Rptr. 839, 844 (Cal. App. Ct.


                                           9
1991). It is “empowered to ‘review disciplinary actions’” and in so doing, “acts in

an adjudicatory capacity.” Id. (quoting Kristal v. Cal. State Pers. Bd., 123 Cal.

Rptr. 512, 516 (Cal. App. Ct. 1975)). In its purely adjudicatory role in this case,

there is no evidence that it discriminated against or interfered with the CDCR’s

relationship with Guerrero, nor is the Personnel Board in a position analogous to

California in AMAE, where the state was “so entangled with the operation of

California’s local school districts that individual districts are treated as ‘state

agencies’ for purposes of the Eleventh Amendment.” AMAE, 231 F.3d at 582.

Therefore, the Personnel Board cannot be liable under a third party disparate

impact theory.

                                            IV

       Because the attorney fee award was based, in part, on the fact that the

judgment was entered against all defendants, we must vacate the award and remand

for the district court to reassess in light of our reversal of the judgment against the

Personnel Board.



AFFIRMED IN PART; REVERSED IN PART; REMANDED.1

       Each party shall bear its own costs.

       1
           The motion for judicial notice is denied.

                                            10
