This unpublished opinion involves the availability (or not) of punitive damages for spoliation of evidence.

Two foreign investment firms bought an interest in a family trust that owned a $4 million life insurance.  They hired a broker (who was also a lawyer) to help them sell the policy.  The broker did not advise them to pay the renewal premiums on the policy, which lapsed and become worthless.  Before any litigation ensued, the broker deleted or destroyed many of his emails and files relating to the transaction.  The firms then sued him for breach of contact and breach of fiduciary duty and sought punitive damages.

During trial, before the close of evidence, the defendant moved for nonsuit and asked the trial court to strike the punitive damages claim.  The trial court granted the motion in part and denied it in part.  The court found most of the plaintiffs’ punitive damages theories were unsupported by the evidence and the court allowed the plaintiffs to seek punitive damages solely for the defendant’s destruction of evidence.

That ruling was error, because the California Supreme Court has held that a party may not recover any form of tort damages for spoliation of evidence.  (See Cedars-Sinai Medical Center v. Superior Court.)  The trial court realized its error after the fact, and granted the defendant’s motion for JNOV to vacate the jury’s award of punitive damages.

When the plaintiff challenged the JNOV order on appeal, the Court of Appeal (Fourth District, Division Three) affirmed.  First, it held that the trial court correctly ruled that Cedars-Sinai prohibits punitive damages for spoliation of evidence.

Second, the court rejected the plaintiffs’ argument that the punitive damages could be upheld on an alternative theory, namely, that the defendant acted with malice in breaching his fiduciary duties.  The punitive damages could not be upheld on that theory because the plaintiff had not presented that theory to the jury.

Third, the court rejected the plaintiffs’ argument that the jury could have inferred that the records destroyed by the defendant contained evidence of malice, oppression, or fraud.  The Court of Appeal held that juries are permitted to draw adverse inferences from the destruction of evidence, but such inferences cannot constitute the sort of clear and convincing proof required to support punitive damages: “[a] purely permissive adverse evidentiary inference does not rise to that level.”