In this disability discrimination case against DirecTV, the plaintiff won a jury verdict for $1.18 million in compensatory damages.  But she could not get punitive damages because the trial court granted a motion DirecTV’s for summary adjudication on that issue.  DirecTV argued, and the trial court agreed, that plaintiff could not obtain punitive damages because she could not prove that any corporate officer, director, or managing agent was responsible for the alleged misconduct against the plaintiff.

The Court of Appeal (Second Appellate District, Division Three) reversed in an unpublished opinion.  The court noted that, under Supreme Court precedent, an employee does not qualify as a “managing agent” within the meaning of Civil Code section 3294 unless the employee has substantial discretionary authority over decisions that ultimately determine company policy.  In this case, DirecTV submitted declarations from several employees who stated, “I have no discretion or independent authority over decisions that ultimately determine corporate policy.”  The Court of Appeal said these declarations were insufficient because they merely restated the legal standard, and  the declarants should instead have provided descriptions of their job duties and responsibilities so that the trial court could decide for itself whether they might qualify as managing agents.  Accordingly, the Court of Appeal reinstated the plaintiff’s punitive damages claims and sent the case back to the trial court for further proceedings.

This analysis of this opinion closely tracks this 2013 decision, which was originally unpublished but was later ordered published.

This unpublished opinion is a useful reminder of the principle that, under California law, punitive damages are not available against an employer for an employee’s misconduct unless the employer’s upper-level management authorized, ratified, or committed the misconduct.

In this wrongful termination case, a jury awarded the plaintiff $860,000 in compensatory damages and $1.3 million in punitive damages.  The California Court of Appeal (Fourth District, Division One) vacated the punitive damages award because the plaintiff failed to prove that the employer’s management either participated in or approved the misconduct at issue. At trial, the plaintiff identified a specific member of the employer’s management team who purportedly approved the malicious and oppressive treatment of the plaintiff.  But the plaintiff apparently realized his argument on that point was weak, so on appeal he placed the blame on three additional members of the management team.

The Court of Appeal, however, refused to consider the three new individuals.  (“We do not consider whether Aguilar, Heiner, and DaSilva were managing agents as they were not presented as such to the jury.”)  That approach is consistent with the general principle of California appellate procedure that a party cannot change its factual theory of the case on appeal.  Our courts will not affirm a jury verdict based on theories not litigated below, because that would unfairly deprive the opposing party of the opportunity to develop the evidence on that new factual issue.

The Court of Appeal agreed that the one individual identified at trial (Boland) was indeed a managing agent within the meaning of Civil Code section 3294(b).  But the court found no evidence that Boland, who made the final decision to terminate the plaintiff’s employment, had any actual knowledge of any malicious or oppressive conduct by his subordinates who recommended firing the plaintiff.  In the absence of any awareness by the managing agent of the “outrageous character” of the actions of the lower-level employees, the punitive damages could not stand.

This published opinion affirms a judgment awarding $1.1 million in compensatory damages and $200,000 in punitive damages against Yamaha Motor Corp. in a dispute between Yamaha and a former franchisee.

Yamaha argued on appeal, among other things, that the punitive damages should be vacated under Civil Code section 3294, which provides that punitive damages cannot be awarded for the breach of obligations arising solely from a contract.  Yamaha claimed the plaintiff’s various claims all arose from Yamaha’s alleged breach of a franchise agreement.  The California Court of Appeal (Second Appellate District, Division Six) disagreed, finding that the plaintiff had a valid tort claim for interference with a separate contract (to which Yamaha was not a party), between the plaintiff and a third party.

Yamaha also argued that the plaintiff failed to prove, as section 3294 requires, that any misconduct was committed by an officer, director, or managing agent of Yamaha.  Again, the Court of Appeal disagreed.  It held that Yamaha’s regional sales manager, who testified that he was responsible for the total well-being of between 140 and 240 dealerships, was a managing agent within the meaning of section 3294.

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.’”

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.

In October 2010 we reported about this $4.8 million punitive damages award against Rite Aid in a disability discrimination case.  Yesterday, the California Court of Appeal (Second Appellate District, Division Seven) vacated that award in an unpublished opinion. 

The Court of Appeal based its decision on Civil Code section 3294, subdivision (b), which provides that a corporation cannot be liable for punitive damages based on the acts of an employee unless a corporate officer, director, or managing agent committed, authorized, or ratified those acts.  The Supreme Court has defined a managing agent as a person who has the authority to determine corporate policy, meaning formal policies that affect a substantial portion of the company and are likely to come to the attention of corporate leadership.

The Court of Appeal held that none of the three different corporate employees who allegedly discriminated against the plaintiff qualified as managing agents within the meaning of section 3294.  One was a “human resources manager,” one was a “store district manager,” and the third was a “pharmacy district manager.”  The court found that, although all of them had “manager” in their title, none of them had any real authority to establish formal company policies for a substantial portion of the company.  As a result, the court reversed the punitive damages award, entitling Rite Aid to judgment in its favor on that issue.  (For unrelated reasons, the court also reversed the jury’s $3.4 million compensatory damages award and ordered a new trial on that issue.)

This unpublished opinion (Betson v. Rite Aid) allows a plaintiff to proceed with her claims for disability discrimination and retaliation, but prohibits her from seeking punitive damages.  Although she accused her manager of numerous malicious acts, she presented no evidence that the manager’s misconduct was authorized or ratified by the defendant’s upper management.

The plaintiff worked as a shift supervisor at a Rite Aid drug store in Beverly Hills.  She sued Rite Aid for various theories of discrimination, retaliation and harassment.  She claimed that the store manager routinely mocked her because she had a limp, refused to accommodate her disability, and fired her based on false accusations of stealing money from a cash register.  The trial court granted summary adjudication on many of plaintiff’s claims, including her claim for punitive damages.  The case went to trial on the remaining claims and the jury awarded the plaintiff $500,000.  The trial court, however, granted Rite Aid’s motion for judgment notwithstanding the verdict and entered judgment for Rite Aid.

Plaintiff appealed and the California Court of Appeal (Second Appellate District, Division Four), held that the trial court erred in granting JNOV and erred in granting summary adjudication on plaintiff’s claims for disability discrimination and retaliation.  Nevertheless, the court affirmed the trial court’s decision to toss out the plaintiff’s claim for punitive damages, because plaintiff presented no evidence that the store manager’s misconduct was ratified by any officer, director, or managing agent of Rite Aid.  The plaintiff argued that Rite Aid’s continued employment of the store manager was sufficient evidence of ratification, but the Court of Appeal rejected that contention as a matter of law.

This case is a reminder that a corporate employee with the title of “manager” may not qualify as a “managing agent” within the meaning of Civil Code section 3294. As the California Supreme Court has explained, managing agents include only those corporate employees who have sufficient authority in the corporation such that their decisions ultimately determine corporate policy.  (See White v. Ultramar.)

In this unpublished opinion, the California Court of Appeal (Second Appellate District, Division Five) permits a plaintiff in an employment case to seek punitive damages from her employer.

The plaintiff, a drug store employee, accused her supervisor of sexual harassment.  She sued her employer for compensatory and punitive damages, but the trial court granted the defendant’s motion for summary adjudication on the issue of punitive damages.  The court ruled that the plaintiff presented no evidence that her supervisor’s misconduct was was approved by a corporate “managing agent,” as required to obtain punitive damages against a corporation under California Civil Code section 3294.

The Court of Appeal disagreed.  It said the plaintiff presented evidence that she complained to the defendant’s regional manager, who was responsible for managing every aspect of the day-to-day operations at approximately 25 stores.  The court said this evidence demonstrated a sufficient level of independent discretionary authority to support a finding that the regional manager was a managing agent.  Curiously, the court did not cite Roby v. McKesson, the California Supreme Court’s latest decision on the requirements for establishing managing agent status.

Many of the cases we blog about raise unresolved issues on the margins of the law. Not this one. Here, the trial court seems to have overlooked one of the most basic principles of punitive damages law.

California law has long provided that employers are not vicariously liable for punitive damages based on the acts of their employees. Punitive damages can be imposed against an employer only upon a finding that (1) an officer, director, or managing agent authorized or ratified the misconduct, or (2) the employer knowingly retained an unfit employee. (See Civil Code section 3294.)

The trial court in this case found that a corporation failed to supervise one of its agents, who committed fraud. The trial court made no findings that any officer or managing agent personally participated in, authorized, or ratified the fraud, or that the corporation employed the agent with knowledge of his unfitness. Nevertheless, the court awarded $100,000 in punitive damages against the corporation.

The Court of Appeal (Second Appellate District, Division Four) reversed the punitive damages in an unpublished opinion. The court correctly held that the trial court’s findings were sufficient to find the corporation liable for compensatory damages (under a theory of respondeat superior) but not punitive damages. This seems like such a straightforward and obvious result, I’m amazed the issue didn’t get resolved earlier in the litigation process.