California Punitives by Horvitz & Levy

  • Court of Appeal rules that trial court properly struck punitive claim against employer as a matter of law (Nadaf-Rahrov v. Neiman Marcus Group, Inc.)

    In an unpublished opinion last Friday, the Court of Appeal (First Appellate District, Division Five) affirmed a nonsuit on a plaintiff’s punitive damages claim in an employment case.  Reinforcing a point that is occasionally overlooked, the court elaborated on the statutory rule that there is no such thing as vicarious liability for punitive damages.  Rather, such damages can be imposed on a company only for conduct directly committed by the company (through its officers, directors or managing agents), and not for malicious conduct by non-managing employees.  In addition, the opinion demonstrates that some mistakes in the hiring and retention of workers, even if tortious, simply could not be found by a reasonable jury to be “malicious.”

    The plaintiff in this case argued that one company vice president was an “officer” whose actions contributed to the plaintiff’s inability to obtain a work reassignment within the company.  The court noted, however, that this person played no role in the employment decisions made with respect to this plaintiff.  Moreover, the court held that the officer’s alleged misconduct–failing to “assure that the company’s human resource managers followed a uniform written policy when dealing with disabled employees who wished to return to work”–did not come close to establishing malice, oppression, or fraud.

    With respect to another employee—a human resource manager—the court held she also was not, as a matter of law, a managing agent with respect to the dispute in this case.  The court applied the rule that the “mere ability to hire and fire employees” does not render a supervisory employee a managing agent, and that “even the highest-ranking employee in one office of a corporation may not qualify as a managing agent when business policies are made at corporate headquarters.”  The human resources manager did not shape corporate policy beyond her authority to hire and fire employees.  Moreover, the court held, even if she were a managing agent, “substantial evidence did not support a finding she was guilty of malice, oppression, or fraud as is necessary to support an award of punitive damages” because some facts relating to plaintiff’s ability to return to work were unclear.  “The evidence supports the jury’s finding (by a preponderance of the evidence) that [the manager] should have done more to try to locate a new position for [plaintiff], but it would not support a finding by clear and convincing evidence that [the manager’s] decision to adopt a “wait-and-see” approach was ‘despicable’ as required by [Civil Code] section 3294, subdivisions (a) and (b), i.e., ‘base,’ ‘vile’ or ‘contemptible.’”

  • Court of Appeal reverses $225,000 punitive damages award due to insufficient evidence of the defendant’s financial condition (Kennedy v. Sadafi)

    Here is yet another unpublished opinion vacating a punitive damages award because the plaintiff failed to meet her burden of presenting meaningful evidence of the defendant’s financial condition. 

    The plaintiff here introduced evidence of the defendant’s income, and partial evidence of her assets, but no evidence of her liabilities.  Thus, the jury had no way to determine her net worth.  Accordingly, the Court of Appeal (Second District, Division Four) reverses the award with directions to enter judgment for the defendant on the issue of punitive damages.

  • Court of Appeal affirms punitive damages award, rejects defendant’s complaint about modified jury instructions (Sacramento Singh Society v. Tatla)

    I have doubts about whether this opinion is correct.  The opinion is only partially published, and the punitive damages analysis appears in the unpublished portion.

     The plaintiff in this action, a nonprofit religious corporation, sued a group of defendants for slander of title and obtained a compensatory damages award of $359,021.22.  The jury also awarded punitive damages in various amounts against the different defendants, ranging from $60,000 to $167,500.  The opinion does not reveal the total amount of punitive damages.

     On appeal, the defendants complained about the trial court’s modifications to the standard CACI jury instructions.  Among other things, the trial court instructed the jury that the defendants could be liable for punitive damages if they acted with malice, or conspired to engage in malice.

    The California Court of Appeal (Third Appellate District) rejected the defendants’ challenge to those modifications.  First, the court said defendants waived their objections because, although they objected to the instruction in an unreported conference with the judge, they did not later specify the precise nature of their objection when they placed the objection on the record, beyond noting that they disagreed with the substance of the instruction.  The court found that was inadequate to preserve the issue:

    It was, of course, incumbent on defendants to place on the record their objection to the instruction in order to preserve it for appeal. Although it is clear defendants had some objection to the instruction, we are left to guess what that might have been.

    That aspect of the court’s opinion seems obviously wrong. The California Code of Civil Procedure provides that a party need not make any objection to a jury instruction in the trial court in order to challenge the validity of that instruction on appeal. All instructions are deemed objected to as a matter of law. (See CCP 647.) So there appears to be no basis for finding a waiver here.

    The court went on to say that, waiver aside, the defendants’ challenge to the instruction fails on the merits because there is nothing wrong with permitting punitive damages for conspiracy to commit malice.  That holding seems pretty shaky too, since the instruction did not require that the defendant be found to have acted with malice in performing any of the acts that effected a conspiracy. Permitting punitive damages against a defendant who merely may have non-maliciously conspired with others who acted with malice is akin to imposing vicarious liability for punitive damages. The Court of Appeal admits as much: “the fact that a given defendant conspired with the others to harm the Society but then left it to the others to do the dirty work and put the plan into action is hardly a reason to deny an award of punitive damages against that defendant.” What about the Supreme Court case law prohibiting vicarious liability for punitive damages? And what about Civil Code section 3294, which authorizes punitive damages only for a defendant who is actually guilty of malice, oppression, or fraud, and says nothing about allowing punitive damages for conspiring with someone else who is guilty of malice?

  • Court of Appeal reverses order granting summary adjudication of punitive damages in harassment case (Davis v. Kiewit)

    This unpublished opinion provides some useful guidance about what exactly a corporate defendant must do to obtain summary adjudication on the ground that misbehaving employees were not “managing agents” within the meaning of Civil Code section 3294.

    The plaintiff sued her employer for gender discrimination and harassment, seeking punitive damages.  The trial court granted the defendant’s motion for summary adjudication on the issue of punitive damages, finding there were no triable issues of fact as to whether the employees who committeed the alleged misconduct were managing agents.  At trial, the jury awarded $270,000 in compensatory damages.  The plaintiff appealed from the order granting summary adjudication on her request for punitive damages.

    The Fourth Appellate District, Division One, reversed.   According to the court, the defendant had not met its burden of producing sufficient evidence to negate all triable issues of fact on the managing agent issue. The defendant had submitted declarations from the two employees involved, stating that “I have never drafted corporate policy or had substantial discretionary authority over decisions that ultimately determine . . . corporate policy.”  The Court of Appeal said the declarations simply parroted the legal standard set forth in White v. Ultramar, and did not contain a sufficient description of the employees’ job duties and responsibilities, and the nature and extent of their authority and discretion.  Accordingly, the court ordered the trial court to reinstate plaintiff’s claim for punitive damages.

  • Court of Appeal hears oral arguments in case with $14.5M punitive damages award

    Law 360 (subscription required) is reporting on yesterday’s oral argument in Pfeifer v. John Crane, a case in which a jury awarded $14.5 million in punitive damages against a manufacturer of asbestos-containing gaskets.  According to the story, John Crane is seeking to vacate the award due to the absence of any evidence of malice, oppression, or fraud.  The story reports that one member of the appellate panel, Justice Manella, was skeptical of Crane’s arguments.  The opinion should be released by the end of the year.

  • Court of Appeal orders reduction of $19M punitive damages award to $350,000 (Nickerson v. Stonebridge) – PART II

    Last week we blogged about this published opinion and its curious disposition.

    In this post, we discuss some interesting aspects of the majority opinion, which held that any punitive damages award over $350,000 would be unconstitutional.

    First, I am confused by this statement at the outset of the legal discussion, indicating that excessiveness is the only issue on appeal:”[t]he contentions on appeal raise only the question of whether the remitted punitive damage award passes constitutional muster under the due process clause.”  That’s confusing because the dissenting opinion says that the appellant challenged not only the amount of the award, but also the sufficiency of the evidence supporting the jury’s finding of fraud: “Stonebridge contends there is no substantial evidence that it intentionally misrepresented or concealed a material fact and therefore there is no substantial evidence to support the fraud finding.”

    So which is it?  Did Stonebridge challenge the sufficiency of the evidence or not?  If so, the majority opinion should have addressed that issue before embarking upon an excessiveness analysis.  Stonebridge’s argument seems to warrant serious consideration, given that the dissenting justice actually agrees with Stonebridge on that point.  The mysterious omission of this argument from the majority opinion makes me suspect that the majority opinion was originally written to be a dissent, but that’s pure speculation.

    Turning to the merits of the majority’s excessiveness analysis, here are some notable aspects:

    1. The court concluded, for purposes of measuring the reprehensibility of Stonebridge’s conduct, that Stonebridge caused no physical harm, despite the jury’s award of emotional distress damages.  The court distinguished Roby, in which the Supreme Court found that the plaintiff’s emotional distress was a form of physical harm.  The Court of Appeal said emotional distress can be treated as physical harm only if the plaintiff suffers some physical symptoms.

    2.  The court concluded, for purposes of computing the ratio of punitive to compensatory damages, that it could not consider the jury’s award of policy benefits or Brandt fees.  The court distinguished Major v. Western Home, a case in which the court included Brandt fees in the ratio analysis.  The court pointed out that in Major the jury awarded Brandt fees before it awarded punitive damages.  Where, as here, the trial court awards Brandt fees after the conclusion of the jury trial, those fees cannot be used to uphold the jury’s punitive damages award.  (This aspect of the majority opinion follows the reasoning of Amerigraphics.)

    3.  The court concluded that any ratio in excess of 10 to 1 would be unconstitutional, even though the court thought Stonebridge’s conduct was particularly bad, implicating four of the five reprehensibility subfactors identified in BMW.  The court described the $35,000 compensatory damages award as “small,” but did not invoke the statement in BMW that “low awards of compensatory damages may properly support a higher ratio . . . if, for example, a particularly egregious act has resulted in only a small amount of economic damages.”

    4.  The court rejected the notion that a higher ratio could be justified by the defendant’s sizable wealth. While that analysis is consistent with the Supreme Court’s admonition that wealth cannot be used to uphold an otherwise unconstitutional award, it seems in tension with this panel’s prior decision in Bullock v. Philip Morris (Bullock II), which cited the defendant’s wealth to justify a 16 to 1 ratio.

    Related post:

    Court of Appeal orders reduction of $19M punitive damages award to $350,000 (Nickerson v. Stonebridge) – PART I

  • Court of Appeal orders reduction of $19M punitive damages award to $350,000 (Nickerson v. Stonebridge) – PART I

    Today, the California Court of Appeal published one of the most interesting punitive damages opinions that court has issued in quite some time.  The opinion has so many interesting aspects, our discussion of the case will be split up into several posts.  In this first post, we’re going to talk about the puzzling disposition of the case.

    This is an insurance bad faith case in which a jury awarded $31,500 in contract damages, $35,000 in tort damages, and $19 million in punitive damages. The defendant, Stonebridge Life Insurance, filed a motion for JNOV and a new trial motion arguing excessive punitive damages, among other things.  The trial court denied the JNOV motion but granted a conditional new trial, giving the plaintiff the option to avoid the new trial by accepting a remittitur of the punitive damages to $350,000.  The plaintiff declined the remittitur and both parties appealed.

    On appeal, the court concludes that the jury’s $19 million award was excessive as a matter of federal due process, and that the maximum constitutionally permissible award is $350,000.  (We’ll have more discussion of the court’s excessiveness analysis in later posts).

    Based on the court’s conclusion that $350,000 is the constitutional maximum, we would have expected the following disposition: the trial court’s order denying JNOV is reversed, and the trial court is directed to grant a partial JNOV reducing the punitive damages to the constitutional maximum of $350,000 (see, e.g., Gober and Simon).  The court’s conditional new trial order would then be moot.

    Instead, the Court of Appeal did exactly the opposite.  It affirmed the order denying the motion for JNOV and reversed the order granting a new trial.  But it nevertheless directed the trial court to reduce the amount of punitive damages to $350,000.  Huh?

    If the constitutional maximum is $350,000, the trial court did exactly the right thing by granting a new trial based on excessive damages.  The trial court’s only error was that it should also have granted partial JNOV to reduce the award to the constitutional maximum, and the new trial should have been merely an alternative ruling.  So why does the Court of Appeal affirm the JNOV ruling and reverse the new trial ruling?  It should be the other way around. The end result is the same in this case either way, but this disposition may cause undue confusion in future litigation. 

    Related posts:

    L.A. trial court reduces punitive damages award against Stonebridge insurance from $19 million to $350,000

    L.A. jury awards $19 million in punitive damages and $35,000 in compensatory damages in insurance bad faith case

  • Paul Hastings knocks out punitive damages claim in malpractice case (Paul Hastings v. Superior Court)

    Earlier today we reported on a rare instance of the California Court of Appeal issuing a writ petition to reinstate a plaintiff’s punitive damages claim.  Here’s another writ proceeding on punitive damages, with the opposite result.    

    This is a malpractice case against law firm Paul Hastings.  Paul Hastings filed a motion for summary judgment, arguing that the claim is meritless because the plaintiff prevailed in the underlying case.  When the trial court denied that motion, Paul Hastings filed a writ petition with the Court of Appeal.

    The California Court of Appeal (Second Appellate District, Division Four) issued this unpublished opinion, declining to throw out the entire case, but agreeing that Paul Hastings is entitled to summary adjudication on the issue of punitive damages.  The court said the plaintiffs identified evidence that might support claims of legal malpractice and breach of fiduciary duty, “but do not rise to the level of extreme indifference to the client’s interests which would support an award of punitive damages.”

  • Unpublished opinion reverses order granting summary adjudication of punitive damages claim (Smith v. Superior Court)

    In the five-plus years since we started this blog, we’ve rarely seen the Court of Appeal grant a writ petition to overturn an order granting summary adjudication on punitive damages.  Maybe never.  Until now, that is.

    In this unpublished opinion, the California Court of Appeal (Fourth Appellate District, Division Two) grants a plaintiff’s writ petition and reverses a grant summary of adjudication for the defense on the plaintiff’s claim for punitive damages.  The opinion states that the defendants failed to meet their burden of demonstrating a lack of evidence supporting the plaintiff’s claim.  The defendants “made no effort to identify the facts upon which plaintiffs are relying to substantiate their claim for punitive damages.”  The court suggested that the defendants could have used the plaintiff’s discovery responses or admissions by the plaintiff to show what plaintiff was relying on, but having cited no such evidence, the defendant was not entitled to summary adjudication. 

  • Unpublished opinion vacates $700,000 punitive damages award due to insufficient evidence of defendant’s financial condition (Hackbart v. Uppal)

    In this unpublished opinion, the California Court of Appeal (Fourth Appellate District, Division One) once again reverses a punitive damages award because the plaintiff failed to present meaningful evidence of the defendant’s financial condition. 

    The plaintiff presented evidence of the defendant’s assets, income, earning capacity, future earning capacity, and the present value of his lifetime earnings.  But that was not enough.  There was no meaningful evidence of the defendant’s liabilities.  Without such evidence ” ‘the jury was unable to ‘assure that the award punishes but [would] not cripple or bankrupt [him].’ ” 

    The plaintiff argued that the defendant waived the issue by failing to produce adequate information about his financial condition.  But the court rejected that argument because the record did not indicate that the defendant failed to comply with a court order or otherwise interfered with the plaintiff’s ability to obtain evidence.  As a result, the court reversed the jury’s $700,000 punitive damages award with directions to enter judgment for the defendant on the punitive damages claim.