November 28, 2018

Published opinion exacerbates split over application of clear-and-convincing evidence standard on appeal (Morgan v. Davidson)

This published opinion may cause the California Supreme Court to finally settle a long-simmering split of authority.

The issue in question is whether appellate courts should consider the clear-and-convincing evidence standard of proof when reviewing the sufficiency of the evidence to support a punitive damages award.

By statute, California plaintiffs must prove all the prerequisites for a punitive damages award by clear and convincing evidence.  When a defendant challenges a punitive damages award on appeal, arguing that the plaintiff failed to meet the burden of proof, appellate courts often take the heightened standard of proof into account, and ask whether a reasonable factfinder could have found that plaintiff's evidence amounted to clear and convincing proof of malice, oppression, or fraud. (See, e.g. Shade Foods v. Innovative Products ["since the jury’s findings were subject to a heightened burden of proof, we must review the record in support of these findings in light of that burden . . . . we must inquire whether the record contains substantial evidence to support a determination by clear and convincing evidence' "]; Pfeifer v. John Crane ["we review the evidence in the light most favorable to the Pfeifers, give them the benefit of every reasonable inference, and resolve all conflicts in their favor, with due attention to the heightened standard of proof"].)

Some courts have concluded, however, that the clear-and-convincing standard applies only in the trial court and "disappears" in the Court of Appeal.  As we have observed, that view is supported by some older opinions and continues to pop up in unpublished decisions.

Earlier this year, Division Four of the First Appellate District attempted to put and end to the notion that the clear-and-convincing evidence standard disappears on appeal.  T.J. v. Superior Court explained why it is important for appellate courts to take the heightened standard of proof into account:

If the clear and convincing evidence standard "disappears" on appellate review, that means the distinction between the preponderance standard and the clear and convincing standard imposed by statute is utterly lost on appeal, an outcome we believe undermines the legislative intent as well as the integrity of the review process. . . . If that standard is ignored on appeal, the heightened standard of proof . . . loses much of its force, or at least the ability of the appellate court to correct error is unacceptably weakened.
We hoped that would put an end to the debate, but yesterday Division Two of the Fourth Appellate District reached the opposite conclusion and embraced the older cases holding that the higher standard of proof disappears.  The court did not cite the T.J. v. Superior Court opinion, but did acknowledge some of the other recent decisions that applied the clear-and-convincing standard on appeal.  The court rejected these cases as inconsistent with Supreme Court precedent, citing Crail v. Blakely, a 1973 decision in which the Supreme Court indicated outside the punitive damages context that the clear and convincing standard was adopted only "for the edification and guidance of the trial court." 

The court failed to recognize, however, that the Supreme Court has held otherwise, more recently, in the punitive damages context.  The Supreme Court's decision in In re Angelia P. adopted the view that the clear and convincing evidence standard is incorporated into the substantial evidence standard on appeal.  And the Supreme Court has continued to follow that approach in more recent decisions in other contexts.  (See Conservatorship of Wendland (2001) ["The 'clear and convincing evidence' test requires a finding of high probability . . . we ask whether the evidence [on the issue before the court] has that degree of clarity"]; Estate of Ford (2004) [finding that certain testimony "was not clear and convincing evidence" on the issue of equitable adoption].)

We can only hope that the Supreme Court will grant review to sort this out.  The Supreme Court actually attempted to do that a decade ago.  In an unpublished decision, Harvey v. Sybase, the Court of Appeal took the same position as the Court of Appeal here (i.e., that the clear-and-convincing standard disappears on appeal), and the Supreme Court granted review to address that issue.  But the parties settled that case and the issue became moot.  Perhaps the defendant in this case will seek review, providing the Supreme Court with another opportunity to take up the issue.