Court Opinion

ID: 9622105
Source: CourtListenerOpinion
Date Created: 2023-08-22 06:11:57.473129+00
Date Added: 2024-06-11T18:05:13.349514
License: Public Domain

MOSK, J.
I dissent.
No doubt there are those whose high hopes of ridding the world of what they apparently perceive to be a social menace were dashed when the Supreme Court recently upheld the constitutionality of punitive damages in Pacific Mut. Life Ins. Co. v. Haslip (1991) 499 U.S._[113 L.Ed.2d 1, 111 S.Ct. 1032] (hereafter Haslip). However, the majority’s alternate route to *125impede a plaintiff’s access to such damages ignores California’s present system for ordering and reviewing punitive damage awards. A brief review of our system may be helpful.
Punitive damage awards have been statutorily authorized in California since 1872. At the time of trial, Civil Code section 3294, subdivision (a), provided: “In an action for the breach of an obligation not arising from contract, where the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.”1 Section 3295 provided, “(a) The court may, for good cause, grant any defendant a protective order requiring the plaintiff to produce evidence of a prima facie case of liability for damages pursuant to Section 3294, prior to the introduction of evidence of: [1] (1) The profits the defendant has gained by virtue of the wrongful course of conduct of the nature and type shown by the evidence. [1] (2) The financial condition of the defendant. [][]... [1] (c) No pretrial discovery by the plaintiff shall be permitted with respect to the evidence referred to in paragraphs (1) and (2) of subdivision (a) unless the court enters an order permitting such discovery pursuant to this subdivision. . . . Upon motion by the plaintiff supported by appropriate affidavits and after a hearing, if the court deems a hearing to be necessary, the court may at any time enter an order permitting the discovery otherwise prohibited by this subdivision if the court finds, on the basis of the supporting and opposing affidavits presented, that the plaintiff has established that there is a substantial probability that the plaintiff will prevail on the claim pursuant to Section 3294. . . .”
The Legislative Counsel’s Digest to Senate Bill No. 227 (1979-1980 Reg. Sess.), adding section 3295, stated that the application of section 3294 was at that time governed by case law providing, “the plaintiff has the burden of proof, that proof is by a preponderance of the evidence, and permits the consideration of various factors in determining the amount of the award.” (Italics added.) It appears from this statement that the Legislature recognized that a plaintiff was permitted, but not compelled, to introduce evidence of the defendant’s profits and financial condition, and attempted to protect defendants by limiting the plaintiff’s pretrial discovery of such information. (See Rawnsley v. Superior Court (1986) 183 Cal.App.3d 86, 91 [227 Cal.Rptr. 806] [“These safeguards were designed to protect the defendant from a specific type of discovery abuse: a situation in which the plaintiff puts forth an easily alleged cause of action for punitive damages, thus requiring a *126defendant to expend the time and money ‘necessary to the compilation of a complex mass of information unrelated to the substantive claim involved in the lawsuit and relevant only to the subject matter of a measure of damages which may never be awarded.’ ”].)
In California, whether punitive damages should be awarded and the amount of such an award are issues left to the jury’s discretion. Under our statutes the plaintiff introduces evidence proving that the defendant is guilty of oppression, fraud, or malice. The plaintiff may also introduce evidence bearing on the amount of the award. The jury is then instructed that it may award punitive damages against the defendant “for the sake of example and by way of punishment” if “you find by a preponderance of the evidence that said defendant was guilty of oppression, fraud or malice in the conduct on which you base your finding of liability.” (BAJI No. 14.71 (6th ed. 1984 pocket pt.).) The jury is also instructed that the amount of the award is left to its sound discretion, exercised without passion or prejudice, and in fixing that amount it is to consider the following: “(1) The reprehensibility of the conduct of the defendant; (2) The amount of punitive damages which will have a deterrent effect on the defendant in the light of defendant’s financial condition; and (3) That the punitive damages must bear a reasonable relation to the actual damages.” (Ibid.)
A reviewing court will reverse an award of punitive damages as excessive only if “ ‘the entire record, when viewed most favorably to the judgment, indicates [it was] rendered as the result of passion and prejudice.’ ” (Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 927 [148 Cal.Rptr. 389, 582 P.2d 980] [hereafter Neal].) Three factors, each grounded in the purpose and function of punitive damages, guide this determination: “One factor is the particular nature of the defendant’s acts in light of the whole record; clearly, different acts may be of varying degrees of reprehensibility, and the more reprehensible the act, the greater the appropriate punishment, assuming all other factors are equal. [Citations.] Another relevant yardstick is the amount of compensatory damages awarded; in general, even an act of considerable reprehensibility will not be seen to justify a proportionally high amount of punitive damages if the actual harm suffered thereby is small. [Citation.] Also to be considered is the wealth of the particular defendant; obviously, the function of deterrence . . . will not be served if the wealth of the defendant allows him to absorb the award with little or no discomfort. [Citations.] By the same token, of course, the function of punitive damages is not served by an award which, in light of the defendant’s wealth and the gravity of the particular act, exceeds the level necessary to properly punish and deter.” (Id. at p. 928.)
Clearly our system permits but does not compel the plaintiff to introduce evidence of the defendant’s financial condition to sustain a punitive damages *127award. This was the Legislature’s choice. The majority focus on the effectiveness of the appellate review process, but ignore the fact that punitive damages issues must be decided in the first instance by the jury and its award is presumed correct. I remain unconvinced of the need to reform this system by judicial fiat.
First, I disagree at the outset with the majority’s characterization of our decision in Neal. There we concluded that an award of punitive damages was not excessive as a matter of law. In so doing, we recognized and took guidance from “certain established principles.” (21 Cal.3d at p. 928.) Contrary to the majority’s reading of Neal, we did not set forth “criteria” that must be examined to determine whether punitive damages should be awarded; instead, we simply recognized factors to guide an appellate’s court determination of whether the jury’s award was a result of passion and prejudice. The distinction is clear. To determine (1) whether the jury should have awarded punitive damages, the reviewing court inquires whether there was sufficient evidence to show that the defendant acted with malice, oppression, or fraud. (See id. at pp. 922-923.) But to determine (2) whether the jury’s award of punitive damages was excessive, the reviewing court inquires whether the award was the result of passion and prejudice. Although Neal declares that evidence of the defendant’s financial condition may be relevant to the latter determination, it does not declare either expressly or impliedly that it is relevant to the former, nor does the opinion place the burden on the plaintiff. Indeed, the Neal court upheld substantial punitive damages.
Nor do the other cases cited by the majority suggest that evidence of the defendant’s financial condition must be introduced to sustain an award of punitive damages. The dispositive issue in those cases was not whether evidence of the defendant’s financial condition was essential and by whom it had to be offered, but rather whether the award was objectively excessive.
The majority’s reliance on a handful of cases that decide to the contrary fails to persuade. Rather, I agree with the more recent decision, Fenlon v. Brock (1989) 216 Cal.App.3d 1174 [265 Cal.Rptr. 324], in which the court expressly rejected Dumas v. Stocker (1989) 213 Cal.App.3d 1262 [262 Cal.Rptr. 311], on a number of grounds. (Fenlon v. Brock, supra, 216 Cal.App.3d at pp. 1180-1182.) Included in these grounds was the court’s apt observation that to require the plaintiff to introduce evidence of the defendant’s financial condition to preserve meaningful appellate review for the defendant is unprecedented: “It is not the duty of a litigant to create a record for an opponent’s potential appeal.” (Id. at p. 1182.) Curiously, that is precisely what the majority order in the instant case.
*128Moreover, I cannot so easily dismiss the multitude of California cases reaching a conclusion contrary to Dumas. The majority attempt to do so by criticizing the seminal decision on which these cases are based, Hanley v. Lund (1963) 218 Cal.App.2d 633 [32 Cal.Rptr. 733]. Their criticism, however, proves hollow.
The majority first state that the Hanley court’s consideration of the issue was minimal. Yet the court gave the issue the limited attention it deserved and failed to cite contrary authority only because no contrary authority apparently existed at the time. (See Hanley v. Lund, supra, 218 Cal.App.2d at p. 646 [“Since no authority, anywhere, expressly directs that the plaintiff must introduce evidence of defendant’s wealth when seeking exemplary damages, we find no merit in defendant’s contention in this regard.”].) The majority also try to distinguish the case on the ground of its “unique rationale,” i.e., that the parties had inferentially stipulated away the issue of the defendant’s net worth. However, our case is in precisely the same posture: defendant did not raise the issue of the excessiveness of the award in light of his financial condition either in the trial or the appellate court.2 Finally, the majority imply that Neal in effect overruled Hanley. As explained above, Neal did no such thing.
Contrary to the majority’s further implication, the vast majority of our sister jurisdictions are in accord with Hanley and its progeny. (See, e.g., Smith v. Lightning Bolt Productions, Inc. (2d Cir. 1988) 861 F.2d 363, 373; Tolliver v. Amici (7th Cir. 1986) 800 F.2d 149, 151; Anderson v. Latham Trucking Co. (Tenn. 1987) 728 S.W.2d 752, 754; Fahrenberg v. Tengel (1980) 96 Wis.2d 211 [291 N.W.2d 516, 527]; Rinaldi v. Aaron (Fla. 1975) 314 So.2d 762, 765 [79 A.L.R.3d 1132]; Poeta v. Sheridan Point Shopping Plaza (1990) 195 Ill.App.3d 852 [552 N.E.2d 1248, 1251]; Elam v. Alcolac, Inc. (Mo.Ct.App. 1988) 765 S.W.2d 42, 223, fn. 102.) There is no persuasive reason for California to depart from this impressive company.
The majority engage in creative lawyering when they attempt to employ the recent United States Supreme Court opinion upholding punitive damages in Haslip to support their position; it lacks all relevance. First, the dispositive issue in that case was the constitutionality of Alabama’s system for the award and review of punitive damages. That scheme significantly differs from the procedure in California. Although the purpose of punitive damages—to punish and deter—is the same, in Alabama the jury is not allowed to *129consider the defendant’s financial condition; rather, the information is introduced at a postjudgment “critique” of the award. (Green Oil Co. v. Hornsby (Ala. 1989) 539 So.2d 218, 222.) Implicit in the Alabama system is a recognition that the jury’s knowledge of the defendant’s financial condition is not a prerequisite to a valid award of punitive damages, i.e, an award that is appropriate to punish and deter.
Second, the defendant in Haslip argued that its financial condition should not be considered even on postjudgment review. (See Arguments Before the Court (Oct. 30, 1990) 59 U.S.L. Week 3315, 3316 [defendant argues that to consider its wealth “only insures that multi-million dollar awards will happen”].) The Supreme Court appeared to be sympathetic to this argument: “While punitive damages in Alabama may embrace such factors as the heinousness of the civil wrong, its effect upon the victim, the likelihood of its recurrence, and the extent of defendant’s wrongful gain, the fact finder must be guided by more than the defendant’s net worth. Alabama plaintiffs do not enjoy a windfall because they have the good fortune to have a defendant with a deep pocket.” (Haslip, supra, 499 U.S. at p__[113 L.Ed.2d at p. 22, 111 S.Ct. at p. 1045, italics added.) This statement implies the court’s belief that the issue of the defendant’s financial condition should be deemphasized.
In summary, neither California’s statutory scheme involving punitive damages, nor case law, nor the Supreme Court’s opinion in Haslip supports the majority’s position that the introduction of evidence of the defendant’s financial condition is necessary to sustain an award of punitive damages. It follows that neither party bears a burden to introduce this evidence. I will, nevertheless, briefly state my objections to placing the burden of proof on the plaintiff.
First, the concept of “burden of proof” is not relevant in considering the relationship between a defendant’s financial condition and the amount of the punitive damages award. The governing statutes and case law make clear that a plaintiff has the burden of proof only on the elements of the plaintiff’s own cause of action; thus to support an award of punitive damages the plaintiff need prove only that the defendant acted with oppression, fraud, or malice. (§ 3294, subd. (a).)
The majority’s arguments that the legislative history and wording support their position are disingenuous. It is first claimed that section 3295, subdivision (a), reflects a legislative awareness that the plaintiff is the party who must introduce evidence of the defendant’s financial condition. As stated previously, however, the cited provision is more correctly interpreted as an effort to protect defendants by limiting the plaintiff’s pretrial discovery of *130such information. In addition, the majority quote the Legislative Counsel’s Digest statement that “the plaintiff has the burden of proof” completely out of its context. The digest in fact states that the application of section 3294 was at the time governed by case law providing that “the plaintiff has the burden of proof, that proof is by a preponderance of the evidence, and permits the consideration of various factors in determining the amount of the award.” The Legislature was obviously referring to the plaintiff’s burden of proving oppression, fraud or malice, rather than any burden of proving the defendant’s financial condition.
As a last resort, the majority assert that “fundamental fairness” requires the plaintiff to introduce evidence of the defendant’s financial condition. In placing this burden on the plaintiff, presumably the majority believe they are being fundamentally fair to defendants. Indeed, in their opinion they rely on a defense-oriented, practice guide (maj. opn., ante, at p. 121).
But is it fundamentally fair not merely to permit, but actually to compel, the plaintiff to probe into and to expose to the world the finances of the defendant: bank accounts and their balance, loans, real property and its value, stocks, bonds and other investments, and any other assets the defendant has or anticipates? If this requirement, this compulsory invasion of privacy, is being fundamentally fair to defendants, one wonders what the majority would consider to be unfair.
To compel the plaintiff to introduce evidence of the financial condition of the defendant would surely result in increased pretrial discovery of the defendant’s finances, with all its attendant burdens on the defendant. (See Rawnsley v. Superior Court, supra, 183 Cal.App.3d 86, 91 [section 3295 was “designed to protect the defendant from a specific type of discovery abuse: a situation in which the plaintiff puts forth an easily alleged cause of action for punitive damages, thus requiring a defendant to expend the time and money ‘necessary to the compilation of a complex mass of information unrelated to the substantive claim involved in the lawsuit and relevant only to the subject matter of a measure of damages which may never be awarded.’ ”].)
Moreover, to require the plaintiff to introduce evidence of the defendant’s financial condition would increase the danger that the jury will focus on this information rather than on the issue of the defendant’s liability for oppression, fraud or malice. A wealthy defendant would likely be prejudiced as a result. (See Farmy v. College Housing, Inc. (1975) 48 Cal.App.3d 166 [121 Cal.Rptr. 658] [judgment awarding compensatory and punitive damages reversed because evidence of defendant’s wealth introduced by plaintiff prejudiced jury on compensatory damages issue]; West v. Johnson & Johnson *131Products, Inc. (1985) 174 Cal.App.3d 831 [220 Cal.Rptr. 437, 59 A.L.R.4th 1] [defendant challenged punitive damages award on ground that evidence of parent corporation’s financial status was admitted].)
As the law stood until today, a defendant of substantial means could sit back and hope that the jury, even though it finds him guilty of oppression, fraud or malice, will not emphasize the extent of his resources. On the other hand, a defendant of lesser means could safely listen to the testimony, assess how well the plaintiff’s case was proceeding, and make a reasoned determination whether to introduce evidence of his modest financial circumstances in order to minimize the amount of any potential award. Now, however, this court gives a defendant no choice in the matter: the plaintiff is required to make the defendant’s wealth a major issue in the trial.
Thus, to spare defendant in this case a punitive damages award that was deemed appropriate by a trial jury, a trial judge and a Court of Appeal, this court now indulges in judicial legislating that will inevitably inure to the detriment of countless friture defendants.
I would affirm the judgment of the Court of Appeal.
Stone (Steven J.), J.,* concurred.

The section now provides that the plaintiff must prove that the defendant has been guilty of oppression, fraud, or malice by clear and convincing evidence. (Civ. Code, § 3294, subd. (a)-)
Unless otherwise noted, all further statutory references are to the Civil Code.

The majority state that plaintiff's argument “rings hollow” because she asked that the jury be instructed to base its punitive damages award on defendant’s financial condition. Plaintiff requested, however, the standard punitive damages instruction. If anyone’s argument “rings hollow” it would be that of defendant, who failed to submit any information about his financial condition to plaintiff or to the court.

Presiding Justice, Court of Appeal, Second Appellate District, Division Six, assigned by the Chairperson of the Judicial Council.