Opinion ID: 2805592
Heading Depth: 2
Heading Rank: 2

Heading: Punitive Damages Liability

Text: Abilene's assignment of error 3 reads: The trial court erred when it denied Abilene's Motion to Strike the Punitive Damages Claims – and instructing the jury on punitive damages – as to Abilene. There was no evidence that Abilene had authorized or ratified Egan's actions in filing the criminal charges against Butler or the statements Egan made, and Butler never even pled any ratification or authorization. 9
When reviewing a circuit court's decision on a motion to strike, we must review the evidence in the light most favorable to the non-moving party. Kiddell v. Labowitz, 284 Va. 611, 629, 733 S.E.2d 622, 632 (2012). That is, the nonmoving party must be given the benefit of all substantial conflict in the evidence, and all fair inferences that may be drawn therefrom. Hadeed v. Medic-24, Ltd., 237 Va. 277, 281, 377 S.E.2d 589, 590 (1989) (internal quotation marks and citation omitted). The object of our review depends upon the circuit court's treatment of the motion to strike. Where, as here, the circuit court denied the motion to strike, we must review the evidence to determine if that action was in error because either it is conclusively apparent that [the] plaintiff has proven no cause of action against [the] defendant, or it plainly appears that the [circuit] court would be compelled to set aside any verdict found for the plaintiff as being without evidence to support it. Blue Ridge Serv. Corp. v. Saxon Shoes, Inc., 271 Va. 206, 218, 624 S.E.2d 55, 62 (2006) (internal quotation marks and citation omitted). To the extent we determine what type of evidence must be presented, as an initial matter, to subject an employer to the possibility of punitive damages liability for the actions of an 10 employee is a question of law we review de novo. Cf. Shevlin Smith v. McLaughlin, __ Va. __, __, 769 S.E.2d 7, 17 (2015) (Whether a factual issue constitutes a prima facie element of a claim . . . is a question of law reviewed de novo.). 2. Punitive Damages Liability Against A Corporate Employer The circuit court denied Abilene's motion to strike Butler's claims for punitive damages against Abilene. This was error. A corporate employer may be liable for the compensatory damages caused by the acts of its employees when such actions are done in the scope of [the employee's] employment and which grow out of an act connected with the employment. Oberbroeckling v. Lyle, 234 Va. 373, 381-82, 362 S.E.2d 682, 687 (1987). The analysis for determining whether a corporate employer may be liable for punitive damages, however, is different. A principal, . . . though of course liable to make compensation for the injury done by his agent, within the scope of his employment, cannot be held for . . . punitive damages, merely by reason of wanton, oppressive[,] or malicious intent on the part of the agent. Hogg v. Plant, 145 Va. 175, 180, 133 S.E. 759, 760 (1926) (internal quotation marks and citation omitted). Consequently, punitive damages cannot be awarded against a master or principal for the wrongful act of his 11 servant or agent in which he did not participate, and which he did not authorize or ratify. Id. at 181, 133 S.E. at 761. Alternatively stated, punitive damages may be awarded against a corporate employer only if either (1) that employer participated in the wrongful acts giving rise to the punitive damages, or (2) that employer authorized or ratified the wrongful acts giving rise to the punitive damages. 2 Hewes v. Doddridge, 40 Va. (1 Rob.) 143 (1842) (monographic note) (citing Lake Shore & M. S. Ry. Co. v. Prentice, 147 U.S. 101 (1893)). The evidence at trial failed to establish that Abilene either engaged in, or authorized or ratified, Egan's alleged wrongful conduct. a. Punitive Damages Liability When The Corporate Employer Participated In The Wrongful Acts Although our case law establishes that an employer is subject to punitive damages liability if it participates in the wrongful acts, we have not gone further to address how to determine whether a corporate employer itself is acting for 2 Butler argues that Abilene waived and conceded this issue by failing to object to, and by stipulating to, the fact that Egan was operating within the scope of Abilene's employment when he engaged in the wrongful acts giving rise to the punitive damages awards. This, of course, is important for purposes of establishing Abilene's vicarious liability for compensatory damages. But the fact that Egan was acting within the scope of his employment is not dispositive as to Abilene's liability for punitive damages. Butler ignores this distinction, but once made, Butler's arguments of waiver and concession are meritless. 12 purposes of punitive damages liability. Instead, we have repeatedly focused only on the separate avenue of establishing an employer's punitive damages liability by ascertaining whether a corporate employer authorized or ratified an employee's wrongful conduct. See, e.g., Freeman v. Sproles, 204 Va. 353, 358, 131 S.E.2d 410, 414 (1963); W. T. Grant Co. v. Owens, 149 Va. 906, 913, 141 S.E. 860, 862-63 (1928). Butler argues that any action of any employee taken on behalf of a corporate employer is necessarily the action of the corporate employer. After all, Butler continues, a corporate employer such as Abilene can only act through agents such as Egan. Bardach Iron & Steel Co. v. Charleston Port Terminals, 143 Va. 656, 672, 129 S.E. 687, 692 (1925). Consequently, Butler contends that any employee's action is the corporate employer's action for purposes of punitive damages liability. We hold that this position is inconsistent with established Virginia law, as it would render obsolete establishing a corporate employer's punitive damages liability by way of proving the employer's authorization or ratification of an employee's wrongful conduct. Instead, to subject a corporate employer to punitive damages liability on the basis that the corporate employer itself committed the wrongful acts, the employee who committed the wrongful acts must be in a sufficiently high position in 13 the employer's corporate structure. Restatement (Second) of Torts § 909 (Punitive damages can properly be awarded against a master or other principal because of an act by an agent if . . . (c) the agent was employed in a managerial capacity and was acting in the scope of employment.); see also, e.g., Hodges v. Gibson Prods. Co., 811 P.2d 151, 163 (Utah 1991); Sweet v. Roy, 801 A.2d 694, 713-14 (Vt. 2002). We hold that this standard applies in Virginia. The question then becomes, how high a position in the corporate ranks is sufficient to make the actions of an employee the actions of the corporate employer? This is a fact-sensitive question, dependent upon the power, role, and independence of the employee relative to the nature and structure of the corporate employer. See Bardach, 143 Va. at 672, 129 S.E. at 692 ([When an agent] is a permanent employee or officer of the company, the question as to the authority and power of such a representative should be left to the jury, unless the evidence shows that this authority on the occasion in question was necessarily limited.); see also White v. Ultramar, Inc., 981 P.2d 944, 954 (Cal. 1999) ([S]upervisors who have broad discretionary powers and exercise substantial discretion authority in the corporation could be managing agents. Conversely, supervisors who have no discretionary authority over decisions that ultimately determine corporate policy would 14 not be considered managing agents even though they may have the ability to hire or fire other employees.); Chavarria v. Fleetwood Retail Corp. of N.M., 143 P.3d 717, 725 (N.M. 2006) (An employee has managerial capacity if he or she has the discretion or authority to speak and act independently of higher corporate authority. (internal quotation marks and citation omitted)). We therefore decline to create a brightline rule, and instead supply the facts of this case for future guidance. The record shows that Egan had been working at Abilene for four and a half years, and was the Director of Maintenance. As Director of Maintenance, Egan did the hiring and firing and scheduling work. [He] was in charge of [Abilene's] entire fleet as far as maintenance, purchasing. This is the totality of evidence establishing Egan's position within Abilene's corporate structure. As a matter of law, this limited evidence is insufficient to establish whether Egan was in a sufficiently high position within Abilene's business structure so that employee Egan's actions were actually the corporate employer Abilene's actions for purposes of punitive damages liability. Butler makes additional arguments for why Abilene itself committed the alleged acts of malicious prosecution and defamation. We remain unpersuaded. 15 First, Butler points to the fact that the dismissal of Egan's criminal complaint against Butler was accompanied by Butler's agreement to stay off of Abilene's property for an extended period of time. Butler argues that this establishes that Abilene benefitted from the criminal action, and thus Abilene was involve[d] in the criminal case. Butler also points to the fact that it was Abilene's president, Keith Jones, who notified Butler that a warrant had been issued for Butler's arrest. However, the fact that an aspect of the criminal action related to Abilene's property, without further evidence of Abilene's alleged involvement with the criminal action, does not establish that Abilene itself engaged in malicious prosecution or defamation. Similarly, the fact that Abilene's president was aware of the existence of a warrant does not establish that Abilene itself engaged in malicious prosecution or defamation. Second, Butler points to the fact that various videotapes which should have recorded the areas of Abilene's property where Butler's termination and any subsequent altercation occurred remained in possession of Abilene and were accessible by Abilene's president. But mere possession of such videotapes does not establish that Abilene itself engaged in malicious prosecution or defamation. 16 Seeking to bolster his point, Butler repeats his argument from trial that these tapes were destroyed or altered, because either the video does not show certain locations that should have been recorded, or the video of what is recorded is missing events that actually occurred. Even accepting as true the premise that someone destroyed or altered the relevant videotapes, the record here fails to establish that such party was Abilene. Such evidence alone does not establish that Abilene destroyed or altered the tapes, and this evidence does not establish that Abilene itself engaged in malicious prosecution or defamation. Third, Butler argues that because Abilene knew that the unaltered videotapes exonerated Butler, but did nothing to stop Egan's malicious prosecution or Egan's defamation, Abilene was therefore sufficiently involved with the malicious prosecution and defamation so that Abilene engaged in such wrongful conduct. However, accepting as true that the record is sufficient to warrant an inference that Abilene was aware of the substance of the unaltered videotapes, the record does not establish that Abilene itself engaged in malicious prosecution or defamation. It may be – but we need not establish for purposes of Virginia law – that the person who places before a prosecuting officer information upon which criminal proceedings are begun has an obligation to disclose the discovery of 17 additional information casting doubt upon the accused's guilt. Clarke v. Montgomery Ward & Co., 298 F.2d 346, 348 (4th Cir. 1962) (establishing such a rule for federal courts in Virginia while recognizing that there appear to be no Virginia cases specifically [on] point). But such a duty would apply only to Egan, who filed the misdemeanor complaint against Butler, and whose actions are not those of Abilene. And we have never held that a third party, such as Abilene, who fails to disseminate truth to counteract the false defamation published by another, such as Egan, will be considered to have engaged in another's defamatory act. For these reasons, at the time of Abilene's motion to strike, it plainly appears that the circuit court would have been compelled to set aside, as being without evidence to support it, any punitive damages verdict found for Butler against Abilene based on the theory that Egan's actions were actually the actions of Abilene. Blue Ridge, 271 Va. at 218, 624 S.E.2d at 62. b. Punitive Damages Liability When The Corporate Employer Authorized Or Ratified The Wrongful Acts Butler did not plead, and failed to introduce any evidence at trial to prove, that Abilene authorized or ratified Egan's alleged actions of malicious prosecution and defamation. For these reasons, at the time of Abilene's motion to strike, it 18 plainly appears that the circuit court would have been compelled to set aside, as being without evidence to support it, any punitive damages verdict found for Butler against Abilene based on the theory that Egan's actions were authorized or ratified by Abilene. Id.