By John Gomez and Max Halpern
You have spent the last few weeks deposing company employees and PMKs in your slip and fall case. You have done everything you can to prove notice pursuant to CACI 1006. You have a solid premises liability case. You have found your way around the notice requirement. (CACI 1012; See also Sanders v. MacFarlane’s Candies (1953) 119 Cal.App.2d 497, 510.) You’ve got your liability case sealed and want to explore whether punitive damages are available.
Conscious Disregard: You are Already Halfway There
California courts have allowed punitive damages claims in premises liability cases. (Penner v. Falk (1984) 153 Cal. App. 3d 858.) Plaintiffs need only establish that the Defendant acted with a “conscious disregard” for safety. (Id., See also Nolan v. Nat’l Convenience Stores, Inc. (1979) 95 Cal. App.3d 279.) In a premises case if the plaintiff established that the defendant was aware of the dangerous consequences of his conduct, and willfully failed to avoid those consequences a jury may award punitive damages. (Seimon v. So. Pacific Trans. Co. (1977) 67 Cal. App. 3d 600; see also Allen v. Mall (2014 U.S. Dist. LEXIS 53026 (N.D. Cal. April 16, 2014).) A three –part test identifies the elements necessary to raise a negligent act to the level of “conscious disregard”: 1) actual or constructive knowledge of the peril to be apprehended, 2) actual or constructive knowledge that injury is a probable, as opposed to possible, result of the danger, and 3) a conscious failure to act to avoid the peril. (New v. Consolidated Rock Products Co. (1985) 171 Cal. App. 3d 681, 689-690.)
In other words, if you have already established notice, you are halfway there…Was the waitress really the only person that knew the ice machine was leaking for the last couple of weeks, or did the regional manager choose to not spend the extra $3,000 to fix the machine? Was the stocking clerk really the only person that knew there was a crack in the shelf holding the television sets that fell on your client’s head, or did he tell the store manager he might need to have new shelves built? Either way, you are already deposing these employees and PMKs so find out who the employee told, what the employee expected to come of his or her recommendation to management, what management did, and what company policy dictates the manager should have done.
In Nolin, supra at 279, the Appellate Court found substantial evidence supported a jury’s punitive damages award against the corporate owner of a gas station where the plaintiff slipped and fell in a puddle of motor oil and gasoline. The evidence presented at trial indicated that customers and employees had warned managers about a gasoline pump that tended to overflow at the station. Management did nothing to fix the leaks and ultimately a man fell due to the overflow.
Likewise, in Penner, supra at 867, the plaintiff alleged he was attacked in the common area of his apartment building. His complaint alleged that the defendants knew that the building’s security was inadequate and thus had the power to make corrective changes but failed to do so. On appeal, the court reversed the trial court’s grant of the defendants’ motion to strike punitive damages because plaintiff’s allegations “[i]f proven…would support an award for punitive damages.”
The Managing Agent Problem
You are now confident you have demonstrated a conscious disregard for safety, but of course you have one last hurdle…who ignored the problem? Civil Code section 3294 requires that “malice must be on the part of an officer, director, or managing agent of the corporation.” Even if you have proved conscious disregard for safety, if the person ignoring the problem wasn’t the president of the company, you are almost certain to receive a summary judgment motion on the issue of whether or not the offender was a managing agent.
In White v. Ultramar, Inc. (1999) 21 Cal.4th 563, the Supreme Court held that “the legislature intended the term ‘managing agent’ to include those corporate employees who exercise substantial independent authority and judgment in their corporate decision-making so that their decisions ultimately determine corporate policy.” (Id. at 566-67.)The Court emphasized whether or not a decision-maker held that authority was a “question of fact for decision on a case-by-case basis.” (Id. at 567.)
Corporate policymaking can occur on any level. For example, if the general manager who decided not to replace the ice maker has certain hiring and firing abilities, that may be helpful in certain cases. Also, a manager’s ability to make decisions like creating a safety committee or ordering repairs demonstrates substantial discretionary authority. If the Regional Vice President who failed to bring in a contractor to fix the shelves has the discretion to reorganize the setup of the store and make repairs, that too is potentially enough. Significantly, there is no requirement that the evidence establish that a particular committee or officer of the corporation acted on a particular date with ‘malice’ only that they have the authority to do so in their role in general. (Romo v. Ford Motor Co. (2002) 99 Cal. App. 4th 1115, 1140 (Romo II).)
During your deposition of potential “managing agents,” try to bolster the manager into talking about his ability to create “corporate policy.” Ask your potential managing agents about their ability to create employee incentive programs, authority in training their underlings, and get the number of people working not only directly, but indirectly under the manager. Get the company’s employee handbook and search for policy that grants substantial discretionary authority to the general/store manager. For example, can your manager grant payroll advances, make permanent changes to attire requirements, allow employees to accept gifts and tips, approve bereavement leave, or approve employee charges? All inferences, gleaned from the managing agent’s deposition or company documents are prime for the laundry list that is your separate statement of facts in opposing a motion for summary adjudication.
Note that the supervisory employee’s title does not control. (White Supra at 563; see also Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 822-823.) Supervisors who have broad discretionary powers and exercise substantial discretionary authority in the corporation may be considered managing agents. (Wysinger v. Automobile Club of Southern California, 157 Cal. App.4th 413, 428.)
In Egan, for example, the Supreme Court found two insurance claims representatives with authority to dispose of an insured’s claims had sufficient involvement in the “ad hoc formulation of policy” to be considered managerial employees. (Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 822-823.) Similarly, in Ginda v. Exel Logisitics, Inc. (E.D. Cal. 1999) 42 F.Supp. 2d 1019, the court applied California law in finding sufficient evidence that the general manager of one of the defendant’s facilities was a “managing agent” in a lawsuit alleging racial discrimination. The court relied on the fact that the general manager had “complete discretion in the handling of employee complaints at the facility, and there was no mechanism in place to communicate complaints to anyone with greater authority.”
The defendant will likely cite to a recent California Supreme Court case, Roby v. McKesson Corp. (2009) 47 Cal.4th 686. In Roby, the Court emphasized that the managing agent cannot merely carry out corporate policy, but must have “substantial discretionary authority” to make corporate policy. (Id. at 715) Do not fret. You can distinguish your facts from Roby. In Roby, the supervisor managed only four out of the company’s 20,000 employees and did not affect a substantial portion of the company’s policies. (Id.) Your managing agent will hopefully direct more than four employees and will have the ability to shape corporate policy on safety, security, and property layout and improvement policy.
But what if you are not suing a corporation? For example, what if you are suing a Limited Liability Company. There is at least an argument that the managing agent rule would not apply at all. For example, under Michigan Law “LLCs are not corporations.” (Alliance Obstretrics & Gynecology v. Dept. of Treasury (Mich. Ct. App. 2009) 285 Mich. App. 284, 288.) Therefore, it is important to determine both where the company you are suing is formed, and also how those companies are treated under the law in those states.
Punitive Damages: Are They Even Worth It?
Punitive damages can be a double-edged sword in personal injury cases due to the danger of pleading yourself out of insurance coverage. See City Prods. Corp. v. Globe Indem. Co. (1979) 88 Cal.App.3d 31, 26-42 (finding that insurance coverage for punitive damage awards contravenes California public policy that prohibits indemnity for willful wrongs.) Likewise, you are most likely buying yourself an appeal should you prevail. Most punitive damage verdicts are appealed and a relatively high percentage of punitive damage awards are overturned on appeal. (See 1-3 California Environmental Law & Land Use Practice § 3.48.)
However, in premises cases, you are generally dealing with large companies with plenty of assets. At the very least, establishing your prima facie punitive damages case could put significant pressure on the defendant.
Another benefit of going to trial with a punitive damages claim is the universe of what constitutes relevant evidence is expanded. In weighing a punitive damages claim, a jury may decide whether “the entire nature of the defendant’s operation…reflected defendant’s overriding concern for minimum-expense operation, regardless of the peril involved.” (Nolin, supra, at 288). Now, not only the oily puddle at the gas station where your client slipped is relevant, but the jury can consider “the method of deployment of the clerks, the absence of maintenance personnel, and the absence of necessary equipment for handling oil. (Id.) This will allow you to present the bigger-picture operational failures of the defendant company, rather than have evidence limited to the singular incident. This is especially helpful in opposing Motions in Limine and getting to present a wider array of evidence in your opening.
