California Civil Jury Instructions (CACI)

3943. Punitive Damages Against Employer or Principal for Conduct of a Specific Agent or Employee - Trial Not Bifurcated

If you decide [name of employee/agent]'s conduct caused [name of plaintiff] harm, you must decide whether that conduct justifies an award of punitive damages against [name of defendant] for [name of employee/agent]'s conduct. The purposes of punitive damages are to punish a wrongdoer for the conduct that harmed the plaintiff and to discourage similar conduct in the future.

You may award punitive damages against [name of defendant] for [name of employee/agent]'s conduct only if [name of plaintiff] proves by clear and convincing evidence that [name of employee/ agent] engaged in that conduct with malice, oppression, or fraud.

"Malice" means that [name of employee/agent] acted with intent to cause injury, or that [name of employee/agent]'s conduct was despicable and was done with a willful and knowing disregard of the rights or safety of another. A person acts with knowing disregard when he or she is aware of the probable dangerous consequences of his or her conduct and deliberately fails to avoid those consequences.

"Oppression" means that [name of employee/agent]'s conduct was despicable and subjected [name of plaintiff] to cruel and unjust hardship in knowing disregard of [his/her] rights.

"Despicable conduct" is conduct that is so vile, base, or contemptible that it would be looked down on and despised by reasonable people.

"Fraud" means that [name of employee/agent] intentionally misrepresented or concealed a material fact and did so intending to harm [name of plaintiff].

[Name of plaintiff] must also prove [one of] the following by clear and convincing evidence:

1. [That [name of employee/agent] was an officer, a director, or a managing agent of [name of defendant], who was acting on behalf of [name of defendant]; [or]]

2. [That an officer, a director, or a managing agent of [name of defendant] had advance knowledge of the unfitness of [name of employee/agent] and employed [him/her] with a knowing disregard of the rights or safety of others; [or]]

3. [That an officer, a director, or a managing agent of [name of defendant] authorized [name of employee/agent]'s conduct; [or]]

4. [That an officer, a director, or a managing agent of [name of defendant] knew of [name of employee/agent]'s wrongful conduct and adopted or approved the conduct after it occurred.]

An employee is a "managing agent" if he or she exercises substantial independent authority and judgment in his or her corporate decision making such that his or her decisions ultimately determine corporate policy.

There is no fixed standard for determining the amount of punitive damages, and you are not required to award any punitive damages. If you decide to award punitive damages, you should consider all of the following in determining the amount:

(a) How reprehensible was [name of defendant]'s conduct?

(b) Is there a reasonable relationship between the amount of punitive damages and [name of plaintiff]'s harm?

(c) In view of [name of defendant]'s financial condition, what amount is necessary to punish [him/her/it] and discourage future wrongful conduct? You may not increase the punitive award above an amount that is otherwise appropriate merely because [name of defendant] has substantial financial resources. [Any award you impose may not exceed [name of defendant]'s ability to pay.]

Directions for Use

This instruction is intended for use when the plaintiff is seeking to hold only an employer or principal liable for punitive damages based on the conduct of a specific employee or agent. When the plaintiff is seeking punitive damages from both the employer/principal and the employee/agent, use CACI No. 3947, Punitive Damages—Individual and Entity Defendants—Trial Not Bifurcated. When punitive damages are sought against a corporation or other entity for the conduct of its directors, officers, and managing agents, use CACI No. 3945, Punitive Damages— Entity Defendant—Trial Not Bifurcated.

For an instruction explaining "clear and convincing evidence," see CACI No. 201, More Likely True—Clear and Convincing Proof.

Read the bracketed language in subdivision (c) only if the defendant has presented relevant evidence regarding this issue.

If any of the alternative grounds for seeking punitive damages are inapplicable to the facts of the case, they may be omitted.

"A jury must be instructed . . . that it may not use evidence of out-of-state conduct to punish a defendant for action that was lawful in the jurisdiction where it occurred." (State Farm Mutual Automobile Insurance Co. v. Campbell (2003) 538 U.S. 408, 422 [123 S.Ct. 1513, 155 L.Ed.2d 585].) An instruction on this point should be included within this instruction if appropriate to the facts.

In an appropriate case, the jury may be instructed that a false promise or a suggestion of a fact known to be false may constitute a misrepresentation as the word "misrepresentation" is used in the instruction's definition of "fraud."

In June 2003, the United States Supreme Court restated the due process principles limiting awards of punitive damages in State Farm Mutual Automobile Insurance Co., supra, 538 U.S. at p. 418. Several subsequent California Court of Appeal cases have responded to various aspects of the United States Supreme Court's reasoning. (See, e.g., Romo v. Ford Motor Co. (2003) 113 Cal.App.4th 738 [6 Cal.Rptr.3d 793] [in light of Campbell, it is error to give BAJI 14.71].)

The California Supreme Court recently granted review in three appellate decisions that involve post-Campbell punitive damages awards. (Henley v. Philip Morris, Inc. (2004) 114 Cal.App.4th 1429 [9 Cal.Rptr.3d 29], review granted Apr. 28, 2004, S123023; Simon v. San Paolo U.S. Holding Co. (2003) 113 Cal.App.4th 1137 [7 Cal.Rptr.3d 367], review granted Mar. 24, 2004, S121933; Johnson v. Ford Motor Co., review granted Mar. 24, 2004, S121723.) At this time, because of the recent and rapidly developing state of California law, the Advisory Committee has elected not to make substantive modifications to the CACI instructions on punitive damages in response to these holdings. Because state and federal law in this area is volving, the court should assess whether changes to the instruction are appropriate based on any recent decisions.

See CACI No. 3940, Punitive Damages—Individual Defendant—Trial Not Bifurcated for additional sources and authority.

Courts have stated that "[p]unitive damages previously imposed for the same conduct are relevant in determining the amount of punitive damages required to sufficiently punish and deter. The likelihood of future punitive damage awards may also be considered, although it is entitled to considerably less weight." (Stevens v. Owens-Corning Fiberglas Corp. (1996) 49 Cal.App.4th 1645, 1661 [57 Cal.Rptr.2d 525], internal citations omitted.) The court in Stevens suggested that the following instruction be given if evidence of other punitive damage awards is introduced into evidence:

If you determine that a defendant has already been assessed with punitive damages based on the same conduct for which punitive damages are requested in this case, you may consider whether punitive damages awarded in other cases have sufficiently punished and made an example of the defendant. You must not use the amount of punitive damages awarded in other cases to determine the amount of the punitive damage award in this case, except to the extent you determine that a lesser award, or no award at all, is justified in light of the penalties already imposed. (Stevens, supra, 49 Cal.App.4th at p. 1663, fn. 7.)

Regarding the relationship between punitive and compensatory damages, case law suggests that a jury may consider harm that could have been caused by the defendant's conduct, even if that harm did not come to pass: "The high court in TXO [TXO Production Corp. v. Alliance Resources Corp. (1993) 509 U.S. 443 [113 S.Ct. 2711, 125 L.Ed.2d 366]] and BMW [BMW of North America, Inc. v. Gore (1996) 517 U.S. 559 [116 S.Ct. 1589, 134 L.Ed.2d 809]] has refined the disparity analysis to take into account the potential loss to the plaintiffs, as where a scheme worthy of punitive damages does not fully succeed. In such cases, the proper ratio would be the ratio of punitive damages to the potential harm to plaintiff." (Sierra Club Foundation v. Graham (1999) 72 Cal.App.4th 1135, 1162, fn. 15 [85 Cal.Rptr.2d 726], internal citations omitted.)

Sources and Authority

Civil Code section 3294 provides, in part:

(a) In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.

(b) An employer shall not be liable for damages pursuant to subdivision (a), based upon acts of an employee of the employer, unless the employer had advance knowledge of the unfitness of the employee and employed him or her with a conscious disregard of the rights or safety of others or authorized or ratified the wrongful conduct for which the damages are awarded or was personally guilty of oppression, fraud, or malice. With respect to a corporate employer, the advance knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, or malice must be on the part of an officer, director, or managing agent of the corporation.

(c) As used in this section, the following definitions shall apply:

(1) "Malice" means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.

(2) "Oppression" means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.

(3) "Fraud" means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

"[E]vidence of ratification of [agent's] actions by Hamilton, and any other findings made under Civil Code section 3294, subdivision (b), must be made by clear and convincing evidence." (Barton v. Alexander Hamilton Life Ins. Co. of America (2003) 110 Cal.App.4th 1640, 1644 [3 Cal.Rptr.3d 258].)

"Subdivision (b) is not a model of clarity, but in light of California's history of employer liability for punitive damages and of the

Legislature's reasons for enacting subdivision (b), we have no doubt that it does no more than codify and refine existing law. Subdivision (b) thus authorizes the imposition of punitive damages on an employer in three situations: (1) when an employee was guilty of oppression, fraud or malice, and the employer with advance knowledge of the unfitness of the employee employed him or her with a conscious disregard of the rights or safety of others, (2) when an employee was guilty of oppression, fraud or malice, and the employer authorized or ratified the wrongful conduct, or (3) when the employer was itself guilty of the oppression, fraud or malice." (Weeks v. Baker & McKenzie (1998) 63 Cal.App.4th 1128, 1151 [74 Cal.Rptr.2d 510].)

" 'California has traditionally allowed punitive damages to be assessed against an employer (or principal) for the acts of an employee (or agent) only where the circumstances indicate that the employer himself was guilty of fraud, oppression, or malice. Thus, even before section 3294, subdivision (b) was added to the Civil Code in 1980, the courts required evidence that the employer authorized or ratified a malicious act, personally committed such an act, or wrongfully hired or retained an unfit employee.' The 'additional' burden on a plaintiff seeking punitive damages from an employer is to show not only that an employee acted with oppression, fraud or malice, but that the employer engaged in conduct defined in subdivision (b)." (Weeks, supra, 63 Cal.App.4th at p. 1154, internal citation omitted.)

"Civil Code section 3294, subdivision (b) does not authorize an award of punitive damages against an employer for the employee's wrongful conduct. It authorizes an award of punitive damages against an employer for the employer's own wrongful conduct. Liability under subdivision (b) is vicarious only to the extent that the employer is liable for the actions of its officer, director or managing agent in hiring or controlling the offending employee, in ratifying the offense or in acting with oppression, fraud or malice. It is not vicarious in the sense that the employer is liable for the wrongful conduct of the offending employee." (Weeks, supra, 63 Cal.App.4th at pp. 1154-1155.)

"An award of punitive damages is not supported by a verdict based on breach of contract, even where the defendant's conduct in breaching the contract was wilful, fraudulent, or malicious. Even in those cases in which a separate tort action is alleged, if there is 'but one verdict based upon contract' a punitive damage award is improper." (Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949, 960 [17 Cal.Rptr.2d 242], internal citations omitted.)

"We have instructed courts to determine the reprehensibility of a defendant by considering whether: the harm caused was physical as opposed to economic; the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; the target of the conduct had financial vulnerability; the conduct involved repeated actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident. The existence of any one of these factors weighing in favor of a plaintiff may not be sufficient to sustain a punitive damages award; and the absence of all of them renders any award suspect." (State Farm Mutual Automobile Insurance Co., supra, 538 U.S. at p. 419, internal citation omitted.)

"[P]unitive damages are not assessed against employers on a pure respondeat superior basis. Some evidence of fault by the employer itself is also required." (College Hospital, Inc. v. Superior Court (1994) 8 Cal.4th 704, 724, fn. 11 [34 Cal.Rptr.2d 898, 882 P.2d 894].)

"Subdivision (b) . . . governs awards of punitive damages against employers, and permits an award for the conduct described there without an additional finding that the employer engaged in oppression, fraud or malice." (Weeks, supra, 63 Cal.App.4th at p. 1137.)

"Section 3294 is no longer silent on who may be responsible for imputing punitive damages to a corporate employer. For corporate punitive damages liability, section 3294, subdivision (b), requires that the wrongful act giving rise to the exemplary damages be committed by an 'officer, director, or managing agent.' " (White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 572 [88 Cal.Rptr.2d 19, 981 P.2d 944].)

"[I]n performing, ratifying, or approving the malicious conduct, the agent must be acting as the organization's representative, not in some other capacity." (College Hospital, Inc., supra, 8 Cal.4th at p. 723.)

The concept of "managing agent" "assumes that such individual was acting in a corporate or employment capacity when the conduct giving rise to the punitive damages claim against the employer occurred." (College Hospital, Inc., supra, 8 Cal.4th at p. 723.)

"No purpose would be served by punishing the employer for an employee's conduct that is wholly unrelated to its business or to the employee's duties therein." (College Hospital, Inc., supra, 8 Cal.4th at pp. 723-724.)

" 'The determination whether employees act in a managerial capacity [i.e., are managing agents] does not necessarily hinge on their "level" in the corporate hierarchy. Rather, the critical inquiry is the degree of iscretion the employees possess in making decisions that will ultimately determine corporate policy.' " (Kelly-Zurian v. Wohl Shoe Co., Inc. (1994) 22 Cal.App.4th 397, 421 [27 Cal.Rptr.2d 457], internal citation omitted.)

"[W]e conclude the Legislature intended the term 'managing agent' to include only those corporate employees who exercise substantial independent authority and judgment in their corporate decisionmaking so that their decisions ultimately determine corporate policy. The scope of a corporate employee's discretion and authority under our test is therefore a question of fact for decision on a case-by-case basis." (White, supra, 21 Cal.4th at pp. 566-567.)

"In order to demonstrate that an employee is a true managing agent under section 3294, subdivision (b), a plaintiff seeking punitive damages would have to show that the employee exercised substantial discretionary authority over significant aspects of a corporation's business." (White, supra, 21 Cal.4th at p. 577.)

" '[C]orporate policy' is the general principles which guide a corporation, or rules intended to be followed consistently over time in corporate operations. A 'managing agent' is one with substantial authority over decisions that set these general principles and rules." (Cruz v. Homebase (2000) 83 Cal.App.4th 160, 167-168 [99 Cal.Rptr.2d 435].)

" '[R]atification' is the '[c]onfirmation and acceptance of a previous act.' A corporation cannot confirm and accept that which it does not actually know about." (Cruz, supra, 83 Cal.App.4th at p. 168, internal citations omitted.)

"For purposes of determining an employer's liability for punitive damages, ratification generally occurs where, under the particular circumstances, the employer demonstrates an intent to adopt or approve oppressive, fraudulent, or malicious behavior by an employee in the performance of his job duties." (College Hospital, Inc., supra, 8 Cal.4th at p. 726.)

"Corporate ratification in the punitive damages context requires actual knowledge of the conduct and its outrageous nature." (College Hospital, Inc., supra, 8 Cal.4th at p. 726.)

Secondary Sources

6 Witkin, Summary of California Law (9th ed. 1988) Torts, §§ 1344-1348, pp. 807-810

4 Levy et al., California Torts, Ch. 54, Punitive Damages, § 54.07 (Matthew Bender)

California Tort Damages (Cont.Ed.Bar 1988) Punitive Damages, §§ 14.13- 14.14

15 California Forms of Pleading and Practice, Ch. 177, Damages (Matthew Bender)

6 California Points and Authorities, Ch. 65, Damages (Matthew Bender)

(Revised December 2005)