Court Opinion

ID: 8996707
Source: CourtListenerOpinion
Date Created: 2022-11-27 12:42:59.784655+00
Date Added: 2024-06-11T17:11:04.541779
License: Public Domain

ZILLY, District Judge,
dissenting:
This is a diversity case. The majority has refused to follow California law as announced in City of Los Angeles v. Shpegel-Dimsey, Inc., 198 Cal.App.3d 1009, 244 Cal.Rptr. 507 (1988). That decision must be followed “unless there is convincing evidence that the state supreme court would decide differently.” State Farm Fire & Casualty Co. v. Abraio, 874 F.2d 619, 621 (9th Cir.1989). The majority’s attempt to distinguish City of Los Angeles is unpersuasive and they fail to provide convincing evidence that the California Supreme Court would decide the issue differently. I must therefore respectfully dissent.
Westlands is a California water district formed under section 37800, et seq. of the California Water Code. Westlands seeks various relief, including punitive damages, against the defendants. The defendants are alleged to have sold the water district defective pipe, knowing of the defects and failing to disclose the defects to the water district. The district court dismissed the punitive damage claim and this appeal followed.
Punitive damages are not recoverable as a matter of right under California law. Henderson v. Security National Bank, 72 Cal.App.3d 764, 771, 140 Cal.Rptr. 388 (1977). Rather, punitive damages are not favored in California and are allowed with the greatest of caution. Id. at 771, 140 Cal.Rptr. at 392. Punitive damages could not be recovered against Westlands, a public entity, as a matter of public policy in California. Cal.Government Code § 818; McAllister v. South Coast Air Quality etc. Dist., 183 Cal.App.3d 653, 228 Cal.Rptr. 351 (1986). The issue presented in this case is whether a different result is appropriate when the same public entity seek to recover the punitive damages. This is an important issue of public policy which has been decided by a unanimous three-judge panel of the California Court of Appeals expressly holding that a “public entity” cannot “recover punitive damages for public injury from private tortfeasors.” City of Los Angeles, 198 Cal.App.3d at 1026, 244 Cal.Rptr. at 515. City of Los Angeles is the law of the state of California. There is no decision to the contrary. It should be followed by a federal court sitting in diversity unless there is convincing evidence that the state supreme court would decide the issue differently. This is especially true where the California Supreme Court has refused to review the lower appellate court’s decision. Stoner v. New York Life Ins. Co., 311 U.S. 464, 61 S.Ct. 336, 85 L.Ed. 284 (1940); State Farm Fire & Casualty Co., 874 F.2d at 621.
It is the duty of a federal court to “ascertain from all the available data what the state law is. and apply it rather than to prescribe a different rule, however superior it may appear.” West v. American Tel. & Tel. Co., 311 U.S. 223, 237, 61 S.Ct. 179, 183-84, 85 L.Ed. 139 (1940). Westlands argues that the court in City of Los Ange-les “literally re-wrote section 3294, an action that would not be countenanced by the California Supreme Court.” Brief of Appellant at 3. Section 3294 of the California Civil Code permits any plaintiff, including a public entity, to assert a claim for punitive damages under certain limited circumstances. With that section of the Civil Code directly at issue, the City of Los Angeles court refused to allow the City of Los Angeles to recover punitive damages as a matter of public policy. There is no reason to believe the California Supreme Court would decide the issue differently.
The City of Los Angeles decision rests on two bases with which the majority disagrees. It is certainly not the function of this Court to reverse an opinion of the California Court of Appeals merely because it does not agree with that court’s reasoning. In City of Los Angeles, the City of Los Angeles sued Pioneer Plastics for various violations of the city’s fire code seeking the recovery of fire abatement costs, fire suppression costs and punitive damages. The court of appeals expressly held that “[tjhere are sound bases for refusing to permit the recovery of punitive damages in the absence of express statutory authorization.” City of Los Angeles, 198 Cal.App.3d at 1023, 244 Cal.Rptr. at 513-514. That court reasoned that in contrast to a private party who has no power to punish a tort-*1115feasor other than by punitive damages, a municipality has the means to punish a tortfeasor through the use of its police power. Although Westlands lacks the same police power as a municipality, water districts in California do have authority to make rules and regulations regarding the sale and distribution of water and the violation of such rules is punishable as a misdemeanor. Cal.Water Code §§ 35423, 35424. These powers would only apply to persons who purchase water from a water district and would not provide a remedy against the defendants in the instant case. However, the California legislature could supplement the powers of the water districts by providing rules relating to suppliers of labor or materials to California water districts. The majority concludes that the limited powers granted to the water districts are not “sufficient” to remove public water districts from the application of Civil Code § 3294. Federal courts, sitting in diversity, should be very reluctant to state what is “sufficient” under the circumstances. California water districts have rather significant police powers which could be used in connection with the sale and distribution of water. These powers precluded the recovery of punitive damages by the City of Los Angeles. The result should be the same where the legislature has the power to enact specific laws dealing with the suppliers of labor and materials to water districts.
The City of Los Angeles court also held that “permitting a governmental entity to seek the recovery of punitive damages would raise serious questions of equal protection under the law.” City of Los Angeles, 198 Cal.App.3d at 1023, 244 Cal.Rptr. at 514. The majority properly notes that a rational basis exists for a distinction between allowing public entities to recover punitive damages while denying recovery of the same damages from public entities. The City of Los Angeles court recognized this distinction and carefully considered the McAllister case before concluding that public considerations deemed reasonable for upholding Government Code section 818 against an equal protection attack did not support permitting a public entity to recover punitive damages. The Court reasoned that allowing the public entity to recover punitive damages would “clearly raise the spectre of a denial of equal protection of the laws.” Id. at 1026, 244 Cal.Rptr. at 515. This was a carefully considered policy decision not to allow punitive damages in favor of the public entity when others cannot recover punitive damages against the same public entity. A contrary holding would result in an undesirable “asymmetry in the type of damages” a public entity could recover when Government Code section 818 bars any award of punitive damages against a public entity. Id. at 1023, 244 CaLRptr. at 514.
Read in its entirety, the City of Los Angeles case resolved an important issue of public policy in California. Since that time California state courts have been bound by this rule at law. Auto Equity Sales, Inc. v. Superior Court of Santa Clara County, 57 Cal.2d 450, 455, 20 Cal.Rptr. 321, 369 P.2d 937 (1962). The district judge below properly applied this rule in granting the defendant’s motion to strike plaintiffs punitive damage claim. The function of the federal judge, sitting in diversity, “is to ascertain what the state law is, not what it ought to be.” Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 489, 61 S.Ct. 1020, 1022, 85 L.Ed. 1477 (1941).
Even if the majority could distinguish the City of Los Angeles case, their work would only be half done. It would then be necessary to analyze California court decisions to determine what the supreme court of that state would decide on the issue presented. Such an analysis would require recognition of the fact that punitive damages are greatly disfavored and that the courts of California will only allow them when clearly permitted by statute. Punitive damages are only allowed in the clearest of cases after a showing of actual malice, which will not be implied by law. Toole v. Richardson-Merrell, Inc., 251 Cal.App.2d 689, 713, 60 Cal.Rptr. 398 (1967). Essential to an award of punitive damages in California is a finding that the plaintiff was subject to “cruel and unjust hardship” *1116by the defendant. Trammel v. Western Union Tel. Co., 57 Cal.App.3d 538, 557, 129 Cal.Rptr. 361 (1976). Finally, the statute authorizing these damages in California requires “clear and convincing evidence” of “oppression, fraud or malice.” Cal.Civil Code § 3294. As noted in the City of Los Angeles decision, “there is no California authority whatsoever expressly permitting a public entity to seek the recovery of punitive damages” and, moreover, the court noted that with one exception, “no other United States jurisdiction expressly permits such recovery.”1 City of Los Angeles, 198 Cal.App.3d at 1023, 244 Cal.Rptr. at 513. This strongly suggests that the California courts would be most reluctant to do what no other state permits with one exception.2
The purpose of punitive damages is to punish the offender and to deter others committing similar wrongs. McAllister, 183 Cal.App.3d at 660, 228 Cal.Rptr. at 355. Punitive damages are clearly disfavored in California and will be limited by the California courts when possible. There are strong public policy arguments in favor of a rule that would prohibit a public entity from recovering punitive damages when the same entity cannot be sued for them. Under all the circumstances, it cannot be said that there is convincing evidence presented that the California Supreme Court would allow a California water district to recover punitive damages from private tortfeasors. The trial court’s decision should therefore be affirmed.

. Westland’s reliance on State of California v. Hansen, 189 Cal.App.2d 604, 11 Cal.Rptr. 335 (1961), is misplaced. The $100 award in Hansen was for "nominal, actual or punitive” damages and was decided prior to the enactment of California Government Code section 818.

. The Kansas decision, cited by the City of Los Angeles court, United School District v. Celotex Corp., 6 Kan.App.2d 346, 629 P.2d 196 (1981), involving a school district, was not followed in a later case in Kansas involving an administrative agency of that state. State ex rel. Secretary of Social & Rehabilitation Services v. Fomby, 11 Kan.App.2d 138, 715 P.2d 1045 (1986).