September 30, 2013

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In an unpublished opinion last Friday, the Court of Appeal (First Appellate District, Division Five) affirmed a nonsuit on a plaintiff’s punitive damages claim in an employment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.’”