CACI No. 3945. Punitive Damages - Entity Defendant - Trial Not Bifurcated

Judicial Council of California Civil Jury Instructions (2020 edition)

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3945.Punitive Damages - Entity Defendant - Trial Not Bifurcated
If you decide that [name of defendant]’s conduct caused [name of plaintiff]
harm, you must decide whether that conduct justifies an award of
punitive damages. 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] only if
[name of plaintiff] proves that [name of defendant] engaged in that conduct
with malice, oppression, or fraud. To do this, [name of plaintiff] must
prove [one of] the following by clear and convincing evidence:
1. [That the conduct constituting malice, oppression, or fraud was
committed by one or more officers, directors, or managing agents
of [name of defendant], who acted on behalf of [name of defendant];
[or]]
2. [That the conduct constituting malice, oppression, or fraud was
authorized by one or more officers, directors, or managing agents
of [name of defendant]; [or]]
3. [That one or more officers, directors, or managing agents of
[name of defendant] knew of the conduct constituting malice,
oppression, or fraud and adopted or approved that conduct after
it occurred.]
“Malice” means that [name of defendant] acted with intent to cause
injury or that [name of defendant]’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 the person is aware of the
probable dangerous consequences of the person’s conduct and
deliberately fails to avoid those consequences.
“Oppression” means that [name of defendant]’s conduct was despicable
and subjected [name of plaintiff] to cruel and unjust hardship in knowing
disregard of [his/her/nonbinary pronoun] 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 defendant] intentionally misrepresented or
concealed a material fact and did so intending to harm [name of
plaintiff].
An employee is a “managing agent” if the employee exercises substantial
independent authority and judgment in corporate decisionmaking such
that the employee’s decisions ultimately determine corporate policy.
There is no fixed formula for determining the amount of punitive
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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 factors in determining the amount:
(a) How reprehensible was [name of defendant]’s conduct? In deciding
how reprehensible [name of defendant]’s conduct was, you may
consider, among other factors:
1. Whether the conduct caused physical harm;
2. Whether [name of defendant] disregarded the health or safety
of others;
3. Whether [name of plaintiff] was financially weak or vulnerable
and [name of defendant] knew [name of plaintiff] was financially
weak or vulnerable and took advantage of [him/her/nonbinary
pronoun/it];
4. Whether [name of defendant]’s conduct involved a pattern or
practice; and
5. Whether [name of defendant] acted with trickery or deceit.
(b) Is there a reasonable relationship between the amount of punitive
damages and [name of plaintiff]’s harm [or between the amount of
punitive damages and potential harm to [name of plaintiff] that
[name of defendant] knew was likely to occur because of [his/her/
nonbinary pronoun/its] conduct]?
(c) In view of [name of defendant]’s financial condition, what amount
is necessary to punish [him/her/nonbinary pronoun/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.]
[Punitive damages may not be used to punish [name of defendant] for the
impact of [his/her/nonbinary pronoun/its] alleged misconduct on persons
other than [name of plaintiff].]
New September 2004; Revised April 2004, June 2004, December 2005, June 2006,
April 2007, August 2007, October 2008, May 2020
Directions for Use
This instruction is intended for use when the plaintiff is seeking punitive damages
against a corporation or other entity for the conduct of its directors, officers, or
managing agents. When the plaintiff seeks to hold an employer or principal liable
for the conduct of a specific employee or agent, use CACI No. 3943, Punitive
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Damages Against Employer or Principal for Conduct of a Specific Agent or
Employee - Trial Not Bifurcated. 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.
For an instruction explaining “clear and convincing evidence,” see CACI No. 201,
Highly Probable - Clear and Convincing Proof.
Read the bracketed language at the end of the first sentence of factor (b) only if
there is evidence that the conduct of defendant that allegedly gives rise to liability
and punitive damages either caused or foreseeably threatened to cause harm to
plaintiff that would not be included in an award of compensatory damages. (Simon
v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159 [29 Cal.Rptr.3d 379,
113 P.3d 63].) The bracketed phrase concerning “potential harm” might be
appropriate, for example, if damages actually caused by the defendant’s acts are not
recoverable because they are barred by statute (id. at p. 1176, citing Neal v. Farmers
Ins. Exchange (1978) 21 Cal.3d 910, 929 [148 Cal.Rptr. 389, 582 P.2d 980] [in a
bad faith insurance case, plaintiff died before judgment, precluding her estate’s
recovery of emotional distress damages]), or if the harm caused by defendant’s acts
could have been great, but by chance only slight harm was inflicted. (Simon, supra,
35 Cal.4th at p. 1177, citing TXO Production Corp. v. Alliance Resources Corp.
(1993) 509 U.S. 443, 459 [113 S.Ct. 2711, 125 L.Ed.2d 366] [considering the
hypothetical of a person wildly firing a gun into a crowd but by chance only
damaging a pair of glasses].) The bracketed phrase should not be given if an award
of compensatory damages is the “true measure” of the harm or potential harm
caused by defendant’s wrongful acts. (Simon, supra, 35 Cal.4th at pp. 1178-1179
[rejecting consideration for purposes of assessing punitive damages of the plaintiff’s
loss of the benefit of the bargain if the jury had found that there was no binding
contract].)
Read the optional final sentence of factor (c) only if the defendant has presented
relevant evidence regarding that issue.
Read the optional final sentence if there is a possibility that in arriving at an amount
of punitive damages, the jury might consider harm that the defendant’s conduct may
have caused to nonparties. (See Philip Morris USA v. Williams (2007) 549 U.S. 346,
353-354 [127 S.Ct. 1057, 166 L.Ed.2d 940].) Harm to others may be relevant to
determining reprehensibility based on factors (a)(2) (disregard of health or safety of
others) and (a)(4) (pattern or practice). (See State Farm Mutual Automobile
Insurance Co. v. Campbell (2003) 538 U.S. 408, 419 [123 S.Ct. 1513, 155 L.Ed.2d
585].)
If any of the alternative grounds for seeking punitive damages are inapplicable to
the facts of the case, they may be omitted.
See CACI No. 3940, Punitive Damages - Individual Defendant - Trial Not
Bifurcated, for additional sources and authority.
“A jury must be instructed . . . that it may not use evidence of out-of-state conduct
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to punish a defendant for action that was lawful in the jurisdiction where it
occurred.” (State Farm Mutual Automobile Insurance Co., supra, 538 U.S. at p.
422.) 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.”
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].) 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.)
Sources and Authority
• When Punitive Damages Permitted. Civil Code section 3294.
• “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].)
• “[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].)
• “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.)
• “ ‘[T]he most important indicium of the reasonableness of a punitive damages
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award is the degree of reprehensibility of the defendant’s conduct.’ 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.)
• “[I]n a case involving physical harm, the physical or physiological vulnerability
of the target of the defendant’s conduct is an appropriate factor to consider in
determining the degree of reprehensibility, particularly if the defendant
deliberately exploited that vulnerability.” (Bullock v. Philip Morris USA, Inc.
(2011) 198 Cal.App.4th 543, 562 [131 Cal.Rptr.3d 382], internal citation
omitted.)
• “[W]e have been reluctant to identify concrete constitutional limits on the ratio
between harm, or potential harm, to the plaintiff and the punitive damages
award. We decline again to impose a bright-line ratio which a punitive damages
award cannot exceed. Our jurisprudence and the principles it has now established
demonstrate, however, that, in practice, few awards exceeding a single-digit ratio
between punitive and compensatory damages, to a significant degree, will satisfy
due process. . . . [A]n award of more than four times the amount of
compensatory damages might be close to the line of constitutional
impropriety. . . . While these ratios are not binding, they are instructive. They
demonstrate what should be obvious: Single-digit multipliers are more likely to
comport with due process, while still achieving the State’s goals of deterrence
and retribution, than awards with ratios in range of 500 to 1 . . . .” (State Farm
Mutual Automobile Insurance Co., supra, 538 U.S. at pp. 424-425, internal
citation omitted.)
• “Nonetheless, because there are no rigid benchmarks that a punitive damages
award may not surpass, ratios greater than those we have previously upheld may
comport with due process where ‘a particularly egregious act has resulted in
only a small amount of economic damages.’ The converse is also true, however.
When compensatory damages are substantial, then a lesser ratio, perhaps only
equal to compensatory damages, can reach the outermost limit of the due process
guarantee. The precise award in any case, of course, must be based upon the
facts and circumstances of the defendant’s conduct and the harm to the plaintiff.”
(State Farm Mutual Automobile Insurance Co., supra, 538 U.S. at p. 425,
internal citation omitted.)
• “In determining whether a punitive damages award is unconstitutionally
excessive, Brandt fees may be included in the calculation of the ratio of punitive
to compensatory damages, regardless of whether the fees are awarded by the
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trier of fact as part of its verdict or are determined by the trial court after the
verdict has been rendered.” (Nickerson v. Stonebridge Life Ins. Co. (2016) 63
Cal.4th 363, 368 [203 Cal.Rptr.3d 23, 371 P.3d 242].)
• “[T]he Constitution’s Due Process Clause forbids a State to use a punitive
damages award to punish a defendant for injury that it inflicts upon nonparties or
those whom they directly represent, i.e., injury that it inflicts upon those who
are, essentially, strangers to the litigation.” (Philip Morris USA, supra, 549 U.S.
at p. 353.)
• “Evidence of actual harm to nonparties can help to show that the conduct that
harmed the plaintiff also posed a substantial risk of harm to the general public,
and so was particularly reprehensible - although counsel may argue in a
particular case that conduct resulting in no harm to others nonetheless posed a
grave risk to the public, or the converse. Yet for the reasons given above, a jury
may not go further than this and use a punitive damages verdict to punish a
defendant directly on account of harms it is alleged to have visited on
nonparties.” (Philip Morris USA, supra, 549 U.S. at p. 355.)
• “ ‘Due process does not permit courts, in the calculation of punitive damages, to
adjudicate the merits of other parties’ hypothetical claims against a defendant
under the guise of the reprehensibility analysis . . . . Punishment on these bases
creates the possibility of multiple punitive damages awards for the same
conduct . . . .’ This does not mean, however, that the defendant’s similar
wrongful conduct toward others should not be considered in determining the
amount of punitive damages.” (Bullock, supra, 198 Cal.App.4th at p. 560.)
• “Though due process does not permit courts or juries, in the calculation of
punitive damages, to adjudicate the merits of other parties’ hypothetical claims
against a defendant under the guise of the reprehensibility analysis, this does not
mean that the defendant’s similar wrongful conduct toward others should not be
considered in determining the amount of punitive damages. . . . ‘[T]o consider
the defendant’s entire course of conduct in setting or reviewing a punitive
damages award, even in an individual plaintiff’s lawsuit, is not to punish the
defendant for its conduct toward others. An enhanced punishment for recidivism
does not directly punish the earlier offense; it is, rather, “ ‘ “a stiffened penalty
for the last crime, which is considered to be an aggravated offense because a
repetitive one.” ’ ” . . . By placing the defendant’s conduct on one occasion into
the context of a business practice or policy, an individual plaintiff can
demonstrate that the conduct toward him or her was more blameworthy and
warrants a stronger penalty to deter continued or repeated conduct of the same
nature.’ ” (Izell v. Union Carbide Corp. (2014) 231 Cal.App.4th 962, 987 [180
Cal.Rptr.3d 382], internal citations omitted.)
• “[A] specific instruction encompassing both the permitted and prohibited uses of
evidence of harm caused to others would be appropriate in the new trial if
requested by the parties. We believe that an instruction on these issues should
clearly distinguish between the permitted and prohibited uses of such evidence
and thus make clear to the jury the purposes for which it can and cannot
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consider that evidence. A jury may consider evidence of harm caused to others
for the purpose of determining the degree of reprehensibility of a defendant’s
conduct toward the plaintiff in deciding the amount of punitive damages, but it
may not consider that evidence for the purpose of punishing the defendant
directly for harm caused to others. In our view, Judicial Council of California
Civil Jury Instructions (Aug. 2007 rev.) CACI Nos. 3940, 3942, 3943, 3945,
3947, and 3949 could convey this distinction better by stating more explicitly
that evidence of harm caused to others may be considered for the one purpose
but not for the other, and by providing that explanation together with the
reprehensibility factors rather than in connection with the reasonable relationship
issue.” (Bullock v. Philip Morris USA, Inc. (2008) 159 Cal.App.4th 655, 695, fn.
21 [71 Cal.Rptr.3d 775], internal citation omitted.)
• “In light of our holding that evidence of a defendant’s financial condition is
essential to support an award of punitive damages, Evidence Code section 500
mandates that the plaintiff bear the burden of proof on the issue. A plaintiff
seeking punitive damages is not seeking a mere declaration by the jury that he is
entitled to punitive damages in the abstract. The plaintiff is seeking an award of
real money in a specific amount to be set by the jury. Because the award,
whatever its amount, cannot be sustained absent evidence of the defendant’s
financial condition, such evidence is ‘essential to the claim for relief.’ ” (Adams
v. Murakami (1991) 54 Cal.3d 105, 119 [284 Cal.Rptr. 318, 813 P.2d 1348],
internal citation omitted.)
• “A defendant is in the best position to know his or her financial condition, and
cannot avoid a punitive damage award by failing to cooperate with discovery
orders. [¶] A number of cases have held that noncompliance with a court order
to disclose financial condition precludes a defendant from challenging the
sufficiency of the evidence of a punitive damages award on appeal.” (Fernandes
v. Singh (2017) 16 Cal.App.5th 932, 942 [224 Cal.Rptr.3d 751].)
• “[T]he purpose of punitive damages is not served by financially destroying a
defendant. The purpose is to deter, not to destroy.” (Adams, supra, 54 Cal.3d at
p. 112.)
• “[A] punitive damages award is excessive if it is disproportionate to the
defendant’s ability to pay.” (Adams, supra, 54 Cal.3d at p. 112, internal citations
omitted.)
• “It has been recognized that punitive damages awards generally are not
permitted to exceed 10 percent of the defendant’s net worth.” (Weeks v. Baker &
McKenzie (1998) 63 Cal.App.4th 1128, 1166 [74 Cal.Rptr.2d 510].)
• “While ‘there is no rigid formula and other factors may be dispositive especially
when net worth is manipulated and fails to reflect actual wealth,’ net worth is
often described as ‘the critical determinant of financial condition.’ [¶] A plaintiff
seeking punitive damages must provide a balanced overview of the defendant’s
financial condition; a selective presentation of financial condition evidence will
not survive scrutiny.” (Farmers & Merchants Trust Co. v. Vanetik (2019) 33
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Cal.App.5th 638, 648 [245 Cal.Rptr.3d 608], internal citation omitted.)
• “[N]et worth is not the only measure of a defendant’s wealth for punitive
damages purposes that is recognized by the California courts. ‘Indeed, it is likely
that blind adherence to any one standard [of determining wealth] could
sometimes result in awards which neither deter nor punish or which deter or
punish too much.’ ” (Bankhead v. ArvinMeritor, Inc. (2012) 205 Cal.App.4th 68,
79 [139 Cal.Rptr.3d 849].)
• “[T]he ‘net’ concept of the net worth metric remains critical. ‘In most cases,
evidence of earnings or profit alone are not sufficient “without examining the
liabilities side of the balance sheet.” [Citations.]’ ” (Soto v. BorgWarner Morse
TEC Inc. (2015) 239 Cal.App.4th 165, 194 [191 Cal.Rptr.3d 263], internal
citations omitted.)
• “The decision to award punitive damages is exclusively the function of the trier
of fact. So too is the amount of any punitive damage award. The relevant
considerations are the nature of the defendant’s conduct, the defendant’s wealth,
and the plaintiff’s actual damages.” (Gagnon v. Continental Casualty Co. (1989)
211 Cal.App.3d 1598, 1602 [260 Cal.Rptr. 305], internal citations omitted.)
• “The wealth of a defendant cannot justify an otherwise unconstitutional punitive
damages award.” (State Farm Mutual Automobile Insurance Co., supra, 538
U.S. at p. 427, internal citation omitted.)
• “[I]n some cases, the defendant’s financial condition may combine with high
reprehensibility and a low compensatory award to justify an extraordinary ratio
between compensatory and punitive damages. [Citation.]” (Nickerson v.
Stonebridge Life Ins. Co. (Nickerson II) (2016) 5 Cal.App.5th 1, 26 [209
Cal.Rptr.3d 690].)
• “[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. v. Superior Court (1994) 8 Cal.4th 704, 723 [34
Cal.Rptr.2d 898, 882 P.2d 894].)
• “[T]he 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.)
• “[T]he determination of whether certain employees are managing agents ‘ “does
not necessarily hinge on their ‘level’ in the corporate hierarchy. Rather, the
critical inquiry is the degree of discretion the employees possess in making
decisions . . . .” ’ ” (Powerhouse Motorsports Group, Inc. v. Yamaha Motor
Corp., U.S.A. (2013) 221 Cal.App.4th 867, 886 [164 Cal.Rptr.3d 811].)
• “Although it is generally true . . . that an employee’s hierarchy in a corporation
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is not necessarily determinative of his or her status as a managing agent of a
corporation, evidence showing an employee’s hierarchy and job duties,
responsibilities, and authority may be sufficient, absent conclusive proof to the
contrary, to support a reasonable inference by a trier of fact that the employee is
a managing agent of a corporation.” (Davis v. Kiewit Pacific Co. (2013) 220
Cal.App.4th 358, 370 [162 Cal.Rptr.3d 805].)
• “[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].)
• “The key inquiry thus concerns the employee’s authority to change or establish
corporate policy. The fact that an employee has a supervisory position with the
power to terminate employees under his or her control does not, by itself, render
the employee a managing agent. Nor does the fact that an employee supervises a
large number of employees necessarily establish that status.” (CRST, Inc. v.
Superior Court (2017) 11 Cal.App.5th 1255, 1273 [218 Cal.Rptr.3d 664].)
• “The high court in TXO [TXO Production Corp., supra] 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
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 Found. v. Graham (1999) 72
Cal.App.4th 1135, 1162, fn. 15 [85 Cal.Rptr.2d 726], original italics.)
Secondary Sources
6 Witkin, Summary of California Law (11th ed. 2017) Torts, §§ 1752-1756
Haning et al., California Practice Guide: Personal Injury, Ch. 3-E, Punitive
Damages, ¶¶ 3:255-3:281.15 (The Rutter Group)
California Tort Damages (Cont.Ed.Bar 2d ed.) Punitive Damages, §§ 14.1-14.12,
14.18-14.31, 14.39
4 Levy et al., California Torts, Ch. 54, Punitive Damages, § 54.07 (Matthew
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Bender)
15 California Forms of Pleading and Practice, Ch. 177, Damages, § 177.51
(Matthew Bender)
6 California Points and Authorities, Ch. 64, Damages: Tort, §§ 64.141 et seq.,
64.174 et seq. (Matthew Bender)
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