Punitive Damages

Awards Of Punitive Damages In California

California Civil Code Sections 3294 and 3295 control the standards by which punitive damages are awarded in California. We have been very successful in winning punitive damages in cases of reprehensible employer conduct and find that the very threat of a well-prepared punitive damages case can help in the settlement process. It is important to begin early to lay the ground work for a punitive damages claim.

So, what does the law require in order to win punitive damages? First, the employer or other individual defendant (many times a supervisor who we have named as a defendant) must be shown by “clear and convincing” evidence to have engaged in malice, oppression or fraud. This standard of clear and convincing is sometimes described as higher than the civil burden of “more likely than not” (or my favorite, a “featherweight” more evidence on our client’s side of the scale), and less onerous than the criminal burden of “beyond a reasonable doubt” (and some judges have even added beyond a moral doubt).

After the jury finds that the conduct complained of was malicious, oppressive or fraudulent (severe racial name-calling, use of the “N” word, can easily satisfy this conduct as far as malicious or oppressive, and fraud can be found in a number of circumstances, including hiring an employee with the expectation of continued employment so long as their work was satisfactory, only to fire them and kick them to the curb after they have brought over valuable business contacts. In one such case, our client was actually sued by the former company AND fired by the current company. Talk about a bad day!

Some of the practical problems California employees face in winning punitive damages is proving how much they should win. This has been a very active area of high court decisions and guidelines, and the more the opinions rattle on, the less clear it is. We are now taking the position in all of our California punitive damages cases that the reprehensibility of the conduct and the wealth of the defendant are the most important factors in determining the amount of punitive damages. Some courts have held that the punitive damages must bear a reasonable relationship to actual damages, say in a range of four to ten times actual damages Campbell vs. State Farm Insurance. Clearly, this might result in no incentive at all to a defendant corporation to cease and desist from reprehensible behavior in the California employment context.

How do we find the amount of wealth the corporate defendant (or individual supervisor) has in order for the jury to properly “punish” and “make an example” of the wrongdoing in order to prevent its recurrence? Civil Code 3295 holds that no evidence of wealth shall be placed in front of the jury until a “prima facie” case has been made of malice, etc. As the type, relevancy, and timeliness of data produced in this second phase of the trial is really not known until the court orders the material brought in (sometimes with only a days’ notice to the defendant, we always consider asking the court early on in the litigation–after the malice is clear–to order the defendants to provide their financial data to us for examination by forensic accounting experts. In the last several cases where punitive damages have been a real possibility, defendants have simply agreed to produce the data at this, the second phase of the trial.

Just because “you can win punitive damages, doesn’t mean you should”! That’s because, according to our tax consultants, punitive damages are generally not deductible business expenses to the defendant and are taxable income to the employee. We’ve found that settlement which includes a reasonable amount of enhanced physical or emotional injury in lieu of punitive damages (which no employer will ever easily agree to pay at a mediation), can result in a satisfied client.

Danz & Associates carefully considers setting up and litigating your case with punitive damages in mind from the very first interview until the final settlement or judgment check is cut. California employees are fortunate to have the right to collect punitive damages. Your law firm must be prepared to fight for your rights in this arena. Many claims for punitive damages are lost early in the case in a motion for summary adjudication if facts showing your right to punitive damages has not been established early on.