Presenting persuasive evidence of punitive damages

This article reviews general principles regarding proving punitive damages and then goes over the unpublished portion of Vardanyan v. AMCO Ins. Co., F069953, (5th App. Dist., January 2016). Specific references to that portion cannot be cited in a brief or at oral argument (see CRC 8:115(a)), but the concepts and analyses therein should be "fair game" for use in another case. (The published portion of this decision, emphasizing efficient proximate cause, is found at 243 Cal. App. 4th 719.)

General Principles

Civil Code Section 3294 is the fountainhead for the recovery of punitive damages in California. Such recovery must be premised upon certain tort causes of action (not all torts - usually those based on an intentional act). Punitive damages is not a cause of action.

Through "clear and convincing evidence," the plaintiff has the burden of proving each element required for an award of punitive damages. Adams v. Murakami, 54 Cal. 3d 105, 119 (1991). A plaintiff must therefore introduce evidence within the meaning of Section 3294 of "oppression," "fraud" and/or "malice"; each of those terms is further defined (e.g., "despicable conduct"). Depending upon the circumstances, Section 3294 may require other evidence (e.g., "ratification" or "managing agent"). Id. at 110; see also Tomaselli v. Transamerica Ins. Co., 25 Cal. App. 4th 1269, 1287-88 (1994).

The "clear and convincing" standard enhances a defendant's chance to strike a claim for punitive damages, because opposing evidence must be analyzed within the prism of the higher evidentiary burden. Johnson & Johnson v. Superior Court, 192 Cal. App. 4th 757, 762 (2011). It has been said that standard is "so clear as to leave no room for substantial doubt." In re Angelia P., 28 Cal. 3d 908, 919 (1981); Shade Foods Inc. v. Innovative Products Sales & Marketing Inc., 78 Cal. App. 4th 847, 890 (2000). See also Mock v. Michigan Millers Mut. Ins. Co., 4 Cal. App. 4th 306 (1992) ("clear and convincing evidence requires a finding of high probability"). However, if the evidence is conflicting, it can be difficult to satisfy that standard. Weiner v. Fleischman, 54 Cal. 3d 476, 490 (1991).

It has been suggested that "clear and convincing" might best be explained by contrasting it to "preponderance of evidence" (normal civil burden) and "beyond a reasonable doubt" (criminal burden). This approach seems to dovetail with the relevant jury instruction, CACI 201:

"Certain facts must be proven by clear and convincing evidence, which is a higher burden of proof. This means the party must persuade you that it is highly probable that the fact is true. I will tell you what facts must be proven by clear and convincing evidence."

If requested by the defendant, the trial judge must grant a motion for bifurcation so that evidence of the defendant's finances is not introduced until the jury finds plaintiff has satisfied the elements of Civil Code Section 3295(d). The plaintiff thus must initially prove a prima facie case of "oppression, fraud or malice." Civil Code Section 3295(a).

A declaration supporting a motion for summary adjudication regarding whether someone acted as a "managing agent" cannot simply parrot specific legal standards (e.g., I "did not exercise substantial discretionary authority in determining corporate policy"). Davis v. Kiewit Pac. Co., 220 Cal. App. 4th 358, 367-69 (2013). It is often important where in the corporate hierarchy is, for instance, the person who made the decision to terminate the plaintiff. Compare Roby v. McKesson Corp.,47 Cal. 4th 686, 714 (2009) (corporate policy must affect a "substantial portion of the company") with Major v. Western Home Ins. Co., 169 Cal. App. 4th 1197, 1218-21 (2009) (claim manager had substantial discretionary authority).

Few reported decisions have evaluated these concepts after a trial. One example is Travelers Ins. Co. v. Lesher, 187 Cal. App. 3d 169 (1986) (disapproved on other grounds in Buss v. Superior Court, 16 Cal. 4th 35 (1997). There, Travelers delayed appointing competent defense counsel for Lesher, its policyholder defendant, and expressed interest in limiting the related expenditures. Such evidence "establishes Travelers' obvious reluctance to defend this case, but it is not sufficient to establish that Travelers knew that its conduct would probably leave Lesher unprepared for trial, or that it willfully disregarded that adverse consequence as it proceeded with Lesher's defense."

Vardanyan

After referencing Kelly v. Haag, 145 Cal. App. 4th 910 (2006), and Baxter v. Peterson, 150 Cal. App. 4th 673 (2007), the unpublished portion of Vardanyan stated that, even "though we reverse the judgment and remand for retrial of the breach of contract and bad faith claims ... we must consider whether the motion for directed verdict on plaintiff's claim for punitive damages was properly granted."

Did the plaintiff present sufficient evidence that Brooke Reid and Stephen Vidmar were managing agents within the meaning of Section 3294? After citing White v. Ultramar Inc., 21 Cal. 4th 563, 566-67 (1999), and observing that the "Legislature intended the term 'managing agent' to include only those corporate employees who exercise substantial independent authority and judgment in their corporate decision-making so that their decisions ultimately determine corporate policy," the court noted that analysis usually involves a question of fact.

Still, "No one but Reid and Vidmar [the "claims manager" and Reid's supervisor] was involved in the decision to deny the claim. The evidence was sufficient to raise an issue of fact for the jury regarding whether Reid and Vidmar were managing agents for purposes of an award of punitive damages."

With respect to the sufficiency of plaintiff's trial evidence, the court opined "the directed verdict may stand only if, when so considered, and keeping in mind the clear and convincing standard of proof, there was no evidence of sufficient substantiality to support a verdict [for punitive damages] in plaintiff's favor."

After going over some testimony at trial, the court held: "Disregarding conflicting evidence, giving plaintiff's evidence all the value to which it is legally entitled, indulging in every legitimate inference which may be drawn from that evidence in favor of plaintiff, and keeping in mind plaintiff's burden to prove malice, fraud, or oppression by clear and convincing evidence, we conclude, as the trial court did, that there is no evidence of sufficient substantially to support a verdict in favor of the plaintiff on his claim for punitive damages. The evidence may be consistent with some improprieties in claims handling, but it does not rise to the level of reprehensibility necessary to support an award of punitive damages. Even plaintiff's own expert did not state with assurance that defendant's personnel acted intentionally, despicably, or fraudulently; he only opined their conduct was 'kind of... intentional' and 'they had kind of almost an intent.' Accordingly, we find no grounds to reverse the trial court's order directing a verdict in favor of defendant on plaintiff's claim for punitive damages."

What are the lessons to be learned from the unpublished portion of Vardanyan? Should a plaintiff's evidence track Section 3294? For instance, what was "despicable" or "malicious" about the defendant's acts or words? But isn't such testimony in effect a legal conclusion? To address that concern, plaintiff's counsel turned to expert witnesses in Vardanyan. Such testimony, though, was found wanting there.

What is the right path for a plaintiff's counsel? What should a defense counsel do or not do? Obviously, it turns upon the issues and the case. Furthermore, different judges view trial evidence in different ways and thus the need "to know thy judge."

Perhaps, more important is the development of a plan to present (or resist, depending upon your perspective) persuasive evidence about punitive damages for the consideration of the judge and the jury. However, that is frequently "easier said than done."

Good luck!