October 28, 2015

Punitive damages vacated because senior management did not approve misconduct of lower-level employees (Bryant v. SDG&E)

This unpublished opinion is a useful reminder of the principle that, under California law, punitive damages are not available against an employer for an employee's misconduct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.