Opinion ID: 1296967
Heading Depth: 2
Heading Rank: 4

Heading: Malice Under Civil Code Section 3294

Text: The next question is whether plaintiffs have stated and demonstrated a triable punitive damages claim under section 425.13(a). The basic elements of such claims are set forth in Civil Code section 3294. As previously stated, there must be proof of oppression, fraud, or malice. ( Id., subd. (a).) [8] Moreover, the punishable acts which fall into these categories are strictly defined. Each involves intentional, willful, or conscious wrongdoing of a despicable or injur[ious] nature. ( Id., subd. (c).) [9] Civil Code section 3294, subdivision (b) imposes additional requirements on plaintiffs attempting to hold an employer liable for punitive damages based upon acts of an employee. The employer must have 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 [been] personally guilty of oppression, fraud, or malice. ( Ibid. ) Subdivision (b) also states that, [w]ith respect to a corporate employer, the offending conduct must be on the part of an officer, director, or managing agent of the corporation. ( Ibid. ) The statute does not purport to exclude any particular type of employer, such as health care providers, from its coverage. We will independently review the proposed amended complaint and the evidence submitted in support of and in opposition to the motion under section 425.13(a) to determine whether plaintiffs have stated and substantiated a legally sufficient punitive damages claim against the Hospital. (Cf. Ann M. v. Pacific Plaza Shopping Center (1993) 6 Cal.4th 666, 673-674 [25 Cal. Rptr.2d 137, 863 P.2d 207]; Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967 [9 Cal. Rptr.2d 92, 831 P.2d 317].) Even if we view the evidence in a light most favorable to plaintiffs, it is clear they have not met the requirements of section 425.13(a).
The proposed amended complaint alleges the following facts. Berry met Laura at the Hospital where he worked in the cardiopulmonary unit. To further his own personal interests, Berry courted Laura and tried to become involved in her treatment in unspecified ways. Laura became emotionally attached to Berry and succumbed to his requests for sex, money, and gifts. Laura suffered great distress when Berry ended the relationship. The proposed amended complaint also states that Berry had engaged in a prior sexual relationship with another hospital patient. His conduct towards Laura allegedly occurred within the course and scope of his employment. Evidence submitted in support of these allegations under section 425.13(a) consists primarily of Laura's declaration and describes Berry's conduct as follows. Berry was the Hospital's director of cardiopulmonary services. His office was located near the psychotherapy unit. He approached Laura in the Hospital shortly after her admission in June 1990 and expressed a personal interest in her condition. He stated that he was not a psychotherapist but that he had read her chart and could help treat her agoraphobia and other problems. Berry and Laura began socializing outside the Hospital and practiced the relaxation and desensitization exercises she learned in therapy, such as driving on freeways and visiting shopping malls. During these trips, Berry solicited cash and gifts totaling about $8,000 from Laura. The pair became sexually intimate and discussed marriage. In December 1990, Berry ended the relationship. Laura became distraught and required hospitalization. [10] (7) Plaintiffs contend that punitive damages can be assessed against the Hospital under Civil Code section 3294, subdivision (b) because Berry was an officer, director, or managing agent who personally committed malicious acts while Laura was a patient. The Hospital and its amici curiae argue that Berry's position in the corporate hierarchy was not that of an officer, director, or managing agent under the statute. We need not resolve this dispute because plaintiffs' theory necessarily fails for another reason. 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. For corporate or other large organizations, such conduct must have been performed by an `agent ... employed in a managerial capacity and ... acting in the scope of employment,' or ratified or approved by a `managerial agent' of the organization. ( Egan v. Mutual of Omaha Ins. Co., supra, 24 Cal.3d 809, 822 ( Egan ), quoting Rest.2d Torts, § 909, italics added; see also Deevy v. Tassi (1942) 21 Cal.2d 109, 125 [130 P.2d 389]; Warner v. Southern Pacific Co. (1896) 113 Cal. 105, 111-112 [45 P. 187]; Merlo v. Standard Life & Acc. Ins. Co. (1976) 59 Cal. App.3d 5, 18 [130 Cal. Rptr. 416]; Ebaugh v. Rabkin (1972) 22 Cal. App.3d 891, 896 [99 Cal. Rptr. 706]; McChristian v. Popkin (1946) 75 Cal. App.2d 249, 256-257 [171 P.2d 85]; 6 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, §§ 1344-1346, pp. 807-808.) The obvious point is that in performing, ratifying, or approving the malicious conduct, the agent must be acting as the organization's representative, not in some other capacity. The Hospital and its amici curiae argue that Civil Code section 3294, subdivision (b) abrogated Egan insofar as that case applied the managing agent concept to rank-and-file employees in whom the corporation has vested substantial discretion. (24 Cal.3d 809, 822-823 [punitive damages imposed on insurer for malicious settlement practices by claims adjusters].) But whatever the meaning of managing agent under pre- or poststatutory law, the concept 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. (See, e.g., Pusateri v. E.F. Hutton & Co. (1986) 180 Cal. App.3d 247, 253-255 [225 Cal. Rptr. 526] [branch manager fails to intervene in stockbroker's known flagrant mishandling of account]; Grimshaw v. Ford Motor Co. (1981) 119 Cal. App.3d 757, 812-814 [174 Cal. Rptr. 348] [auto executives fail to correct known potentially lethal design defect in car]; Nolin v. National Convenience Stores, Inc. (1979) 95 Cal. App.3d 279, 288-289 [157 Cal. Rptr. 32] [store supervisor refuses to correct known highly dangerous condition on premises]; Hartman v. Shell Oil Co. (1977) 68 Cal. App.3d 240, 248-250 [137 Cal. Rptr. 244] [oil company representatives commit fraud against service station operator].) 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. We cannot conceive that Civil Code section 3294, subdivision (b) intended such a result. [11] Contrary to conclusory allegations in the proposed amended complaint, the scope-of-employment element is missing from plaintiffs' case. The only inference that can be drawn from the proposed factual allegations and from the evidence submitted under section 425.13(a) is that Berry was acting in his personal capacity and for his own private benefit when he allegedly exploited Laura. The pertinent allegations and evidence suggest at most that Berry, a cardiopulmonary supervisor, engaged in a consensual, off-premises sexual affair with an adult patient not under his care. The mere fact that the couple met at the Hospital or that Berry purported to take a personal interest in Laura's therapy is insufficient as a matter of law to establish that Berry was acting as a corporate representative or in a professional capacity. Thus, whether or not Berry qualifies as a managing agent, plaintiffs have failed to state or substantiate a punitive damages claim against the Hospital based on his conduct under section 425.13(a) and Civil Code section 3294, subdivision (b).
The proposed amended complaint identifies Westbrook as the Hospital administrator ultimately responsible for Laura's care. It alleges that Westbrook knew or should have known about the relationship between Berry and Laura and about Berry's prior sexual relationship with another patient. Fairly understood, the allegations in the proposed amended complaint charge that Westbrook approved or tolerated Berry's relationship with Laura by failing to adequately investigate the matter or discipline Berry. Evidence submitted under section 425.13(a) concerning Westbrook consists primarily of excerpts from his deposition testimony. These materials were included in plaintiffs' reply papers, and suggest the following about Westbrook's involvement. In the fall of 1990, Westbrook, the chief administrator of the Hospital, heard third hand that a relationship might have developed between Laura and Berry  something more than just a patient passing an individual in the hallway. The information was given to Westbrook by an assistant administrator, who apparently attributed it to members of Laura's treatment team. Westbrook promptly confronted Berry with the rumor. Berry seemed shocked by the information and adamantly denied any personal contact with Laura. Westbrook advised Berry that the organization expected certain behavior of its managers and that anything other than a casual relationship with a patient might be perceived as questionable. Westbrook took no further action in the matter. (8a) Plaintiffs argue that punitive damages are appropriate against the Hospital under Civil Code section 3294, subdivision (b) because Westbrook personally exhibited malice towards plaintiffs in performing his managerial duties. They imply that any personal contact between a therapy patient and a hospital employee is presumptively harmful and that Westbrook's acceptance of Berry's denial without further investigation was inherently malicious. Such an approach overlooks the plain language of Civil Code section 3294. Malice is defined as conduct 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. ( Id., § 3294, subd. (c)(1).) As noted earlier, the italicized words were added by the 1987 Reform Act. We assume they are not surplusage. ( Moyer v. Workmen's Comp. Appeals Bd. (1973) 10 Cal.3d 222, 230 [110 Cal. Rptr. 144, 514 P.2d 1224].) By adding the word willful to the conscious-disregard prong of malice, the Legislature has arguably conformed the literal words of the statute to existing case law formulations. (See Taylor v. Superior Court, supra, 24 Cal.3d 890, 895-896 [malice involves awareness of dangerous consequences and a willful and deliberate failure to avoid them].) (9) However, the statute's reference to despicable conduct seems to represent a new substantive limitation on punitive damage awards. Used in its ordinary sense, the adjective despicable is a powerful term that refers to circumstances that are base, vile, or contemptible. (4 Oxford English Dict. (2d ed. 1989) p. 529.) As amended to include this word, the statute plainly indicates that absent an intent to injure the plaintiff, malice requires more than a willful and conscious disregard of the plaintiffs' interests. The additional component of despicable conduct must be found. (Accord, BAJI No. 14.72.1 (1992 re-rev.); Mock v. Michigan Millers Mutual Ins. Co. (1992) 4 Cal. App.4th 306, 331 [5 Cal. Rptr.2d 594].) (8b) As a matter of law, plaintiffs have not established malicious conduct by Westbrook. The proposed amended complaint and the evidence submitted under section 425.13(a) do not show Westbrook knew or possessed information indicating that Berry was engaged in harmful activities towards plaintiffs. Specifically, such materials do not show that Westbrook was aware that the rumored relationship between Berry and Laura was sexual or destructive, that Berry had been involved in a prior relationship with a patient (destructive or otherwise), or that Berry lied when confronted with the rumor about Laura. As a result, plaintiffs have necessarily failed to state or demonstrate that Westbrook intended to injure plaintiffs or willfully disregarded their safety and well-being by accepting Berry's denial. For similar reasons, no vile or despicable conduct by Westbrook appears from the face of the proposed complaint or the evidence before us. Plaintiffs also have not established that Westbrook ratified Berry's conduct under Civil Code section 3294, subdivision (b). (10) 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. The issue commonly arises where the employer or its managing agent is charged with failing to intercede in a known pattern of workplace abuse, or failing to investigate or discipline the errant employee once such misconduct became known. (See, e.g., Roberts v. Ford Aerospace & Communications Corp. (1990) 224 Cal. App.3d 793, 800-801 [274 Cal. Rptr. 139] [management knows Black employee is racially abused by colleagues at work and fires him after he complains]; Hart v. National Mortgage & Land Co. (1987) 189 Cal. App.3d 1420, 1432-1433 [235 Cal. Rptr. 68] [management fails to stop known on-the-job sexual harassment of employee by coworkers]; Greenfield v. Spectrum Investment Corp. (1985) 174 Cal. App.3d 111, 118-121 [219 Cal. Rptr. 805], overruled on other grounds in Lakin v. Watkins Associated Industries (1993) 6 Cal.4th 644, 664 [25 Cal. Rptr.2d 109, 863 P.2d 179] [employee is retained even though management knows about his violent temper and assault upon a customer at work]; Hale v. Farmers Ins. Exch. (1974) 42 Cal. App.3d 681, 691-692 [117 Cal. Rptr. 146], overruled on other grounds in Egan, supra, 24 Cal.3d 809, 822, fn. 5 [insurer directs, reviews, and approves malicious claims settlement practices]; Schanafelt v. Seaboard Finance Co. (1951) 108 Cal. App.2d 420, 423-424 [239 P.2d 42] [employee follows finance company's directions and falsely imprisons pregnant customer while collecting on delinquent loan].) Corporate ratification in the punitive damages context requires actual knowledge of the conduct and its outrageous nature. (8c) Under no view of the proposed amended complaint or the evidence submitted under section 425.13(a) can Westbrook's conduct be characterized as ratification. As noted above, plaintiffs have presented no evidence that Westbrook knew about the relationship's allegedly sexual or harmful nature. Berry denied any contact with Laura, and there is no indication that Westbrook had personal knowledge to the contrary. By cautioning Berry against patient involvement, Westbrook attempted to repudiate  not adopt  such conduct on the Hospital's behalf. Thus, as a matter of law, plaintiffs have failed to state or substantiate a claim that Westbrook knowingly approved Berry's manipulative relationship with Laura. Accordingly, as with Berry, no basis appears for assessing punitive damages against the Hospital based on malicious or oppressive acts of its employees. [12]