In this unpublished opinion, the California Court of Appeal (Second District, Division One) upholds a jury’s award of $160,000 in compensatory damages and $50,000 in punitive damages in a case involving claims of disability discrimination, retaliation, and wrongful termination. There’s nothing particularly remarkable about the opinion, except that the amount of punitive damages is modest for a California jury.

This published opinion addresses an issue of first impression: can an Elder Abuse plaintiff obtain a pretrial right to attach order (RTAO) based on a claim for punitive damages?  The answer is no.

The Attachment Law (Code of Civil Procedure sections 481.010-493.060) is a set of statutes that allows plaintiffs, under certain narrow circumstances, to seize a defendant’s property in advance of trial and judgment.  The law is generally limited to contract claims, but the remedy of pretrial attachment is also available for enforcement of certain statutes, including the Elder Abuse Act (Welfare & Institutions Code section 15600 et seq.)

The Court of Appeal held here that, although the Elder Abuse Act permits recovery of punitive damages, a plaintiff in such an action cannot obtain a pretrial RTAO based on an anticipated punitive damages award.  The court explained that an RTAO must be based on a claim for “indebtedness,” which cannot include punitive damages because they are meant to punish and deter, not to satisfy a debt.  The court also noted that the Attachment Law expressly contemplates the application of the preponderance of the evidence standard of proof, whereas punitive damages are governed by the higher clear and convincing evidence standard.  Finally, the court noted that punitive damages always present a risk of arbitrary deprivation of property, and given the “less than fully developed record” presented in attachment proceedings, attachment orders based on claims for punitive damages would present too great a due process risk.

Yesterday, the Court of Appeal issued this published opinion reversing a $3 million punitive damages award against a talc supplier, on the ground that the plaintiff failed to introduce sufficient evidence of malice, oppression, or fraud as required by California Civil Code section 3294.

The plaintiff claimed he developed mesothelioma from exposure to various asbestos-containing products.  He claimed that one source of exposure was Old Spice talcum powder, which included talc supplied by defendant Whittaker, Clark & Daniels.  Plaintiff claimed Whittaker’s talc was contaminated with trace amounts of asbestos.

The case proceeded to trial with Whittaker as the sole defendant.  A jury awarded $1.75 million in compensatory damages, allocated 42 percent fault to Whittaker, and added an additional $3 million in punitive damages.  Whittaker appealed, challenging only the punitive damages award.

The Court of Appeal (Second District, Division Eight) agreed with Whittaker that plaintiff’s evidence was insufficient to establish that Whittaker acted with malice, oppression, or fraud.  The 52-page opinion recites the plaintiff’s evidence in great detail but ultimately concludes that none of that evidence, even construed in the light most favorable to the plaintiff, could support the conclusion that the defendant’s executives knew, during the relevant time period, that trace levels of asbestos contamination in talc created a risk of “probable dangerous consequences,” as required for an award of punitive damages.  This passage captures the essence of the court’s reasoning:

Yes, defendant knew asbestos was an “unsafe ingredient” if there were enough of it in the talc—meaning amounts experts would consider “significant enough to, over time, produce  injury or illness.” But no one knew exposure to talcum powder could cause mesothelioma until 1994—years after plaintiff’s exposure to talc ended in 1980. Medical or scientific developments years after plaintiff’s injury cannot establish defendant’s executives knew of “probable dangerous consequences” of contaminated talc before plaintiff’s injury.

The opinion rests on well-established law, but it is nevertheless very significant for California products liability and toxic torts litigation.  Plaintiffs in such cases often argue that, if a defendant is aware that a substance in its product represents a possible health hazard at some level of exposure, that shows the defendant acted with malice by including that substance in its product.  That shouldn’t be enough, because as this opinion points out, California law requires an awareness of “probable dangerous consequences.”  A defendant might be aware that high levels of exposure to a substance are potential harmful, and yet be unaware of any probable dangerous consequences from lower levels of exposure.  Many, many substances can be toxic if the dose is high enough.

We see this issue often in California products liability litigation, and many courts are willing to let plaintiffs seek punitive damages based on the sort of evidence presented here.  This opinion may help to remind trial courts that punitive damages should be imposed only when the evidence shows the defendant was aware of probable dangerous consequences associated with its product and  deliberately did nothing to avoid those consequences.

Justice Wiley issued a dissenting opinion.  In his view, the jury’s award of punitive damages was supported by evidence that Whittaker knew about the presence of trace amounts of asbestos in its talc in 1972, and knew by 1976 that asbestos was dangerous.  The dissenting opinion also argues that punitive damages are necessary to promote consumer safety.  But the dissenting opinion doesn’t confront the point made by the majority opinion—that Whittaker might have known in the 1970s that high levels of asbestos exposure could be dangerous, but Whittaker had no knowledge that trace amounts of asbestos in talc presented any similar risk.

This unpublished opinion is the latest chapter in a long-running saga involving Sage Automotive Group, a family-owned car dealership.

Leonard Schrage accused his brothers Michael and Joseph of mismanaging the family business and misappropriating assets for their own personal use.  After a bench trial on Leonard’s claim for breach of fiduciary duty, he obtained a judgment for $21 million in compensatory damages and $10 million in punitive damages against his brothers, who appealed.

The Court of Appeal (Second District, Division Seven) reversed, finding that Leonard did not have standing to pursue the breach of fiduciary duty claim because he was complaining primarily about harm to Sage Automotive Group, not harm to himself.  The claim for harm to the corporation could only be pursued as a derivative action, not by Leonard as an individual action.  Because Leonard did not assert a derivative claim, the Court of Appeal vacated his recovery on the fiduciary duty claim and all the associated damages, both compensatory and punitive.

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.”

This unpublished opinion illustrates a rule of California punitive damages law that sometimes gets overlooked.

In a survival action, where the plaintiff is asserting claims for injuries to a decedent, the plaintiff cannot recover punitive damages unless the defendant caused some actual economic loss to the decedent or the decedent’s estate.  This rule derives from two other rules: (1) actual damages are a prerequisite for punitive damages (see Kizer v. County of San Mateo), and (2) noneconomic damages are not recoverable in survival actions (see Civil Code section 377.34).  Thus, because economic damages are the only recoverable form of compensatory damages in a survival action, the plaintiff must prove economic damages in order to recover punitive damages.

Here, the trial granted a motion for nonsuit on the plaintiff’s punitive damages claim after the plaintiff conceded that the decedent and his estate suffered no economic loss. On appeal, the plaintiff argued that punitive damages could be based on statutory remedies available on the plaintiff’s claim for elder abuse.  That argument, however, has already been rejected in a published opinion.  See Berkley v. Dowds.  The Court of Appeal in this case (the Second Appellate District, Division One), followed Berkley and affirmed the nonsuit.