Court of Appeal Says There Must at Least Be Circumstantial Showing of Malice by Corporation’s Managing Agents
By a MetNews Staff Writer
Div. One of the Court of Appeal for this district has thrown out a $15 million jury award of punitive damages against a corporation in a toxic tort/asbestos-related action, finding that the plaintiff failed to show at least circumstantially that an officer, director, or managing agent of the corporation acted with willful and conscious disregard to employee safety.
Justice Victoria Chaney’s opinion, which was filed Jan. 27 and certified for publication on Thursday, reverses in part a 2018 judgment by Los Angeles Superior Court Judge Maurice A. Leiter based on a jury award of more than $22 million against New Jersey-based J-M Manufacturing Company (“J-MM”). Left intact is a $7,213,704.39 judgment reflecting J-MM’s proportional liability for compensatory damages.
The action was brought by Norris Morgan, who had contracted mesothelioma after daily exposure to asbestos-cement pipes as part of his duties as a construction worker and supervisor in the 1970s and 1980s. The pipes attributed to Morgan’s illness had been produced and sold by a corporate predecessor-in-interest of the defendant.
He died on Dec. 12, 2018, less than a month after the jury’s awards, and the judgment was defended on appeal by his widow, Lori Morgan.
On appeal, J-MM argued that Morgan had failed to show “oppression, fraud, or malice,” as required by Civil Code §3294 as a requisite for imposing punitive damages. That section, it pointed out, provides:
“An employer shall not be liable for damages pursuant to subdivision (a), based upon acts of an employee of the employer, unless the employer 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 was personally guilty of oppression, fraud, or malice. With respect to a corporate employer, the advance knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, or malice must be on the part of an officer, director, or managing agent of the corporation.”
The widow countered that “the entire organization was involved in the acts giving rise to malice,” which, she asserted, suffices under the Fifth District Court of Appeal’s June 28, 2002 decision in Romo v. Ford Motor Co. The court said in that case:
“When the entire organization is involved in the acts that constitute malice, there is no danger a blameless corporation will be punished for bad acts over which it had no control, the primary goal of the ‘managing agent’ requirement….
“There is no requirement that the evidence establish that a particular committee or officer of the corporation acted on a particular date with ‘malice.’ A corporate defendant cannot shield itself from liability through layers of management committees and the sheer size of the management structure. It is enough if the evidence permits a clear and convincing inference that within the corporate hierarchy authorized persons acted despicably in ‘willful and conscious disregard of the rights or safety of others.’”
“But Morgan only relies on part of the Romo decision. The Romo court went on to explain that a plaintiff can satisfy the ‘managing agent’ requirement ‘through evidence showing the information in possession of the corporation and the structure of management decision making that permits an inference that the information in fact moved upward to a point where corporate policy was formulated. These inferences cannot be based merely on speculation, but they may be established by circumstantial evidence, in accordance with ordinary standards of proof.’ (…italics added.) The court explained that ‘[i]t is difficult to imagine how corporate malice could be showing in the case of a large corporation except by piecing together knowledge and acts of the corporation’s multitude of managing agents’.”
The jurist added:
“It may be that J-MM’s officers, directors, and managing agents acted with the requisite state of mind to support an award of punitive damages in an appropriate case. A plaintiff may be able to provide evidence at trial to ‘piec[e] together knowledge and acts of [J-MM’s] multitude of managing agents.’ But that did not happen here.
“That the defendant is a large company does not relax a plaintiffs burden of proof to the point Morgan argues here. We have reviewed the record for evidence from which the jury could have concluded that an officer, director, or managing agent—someone responsible for J-MM’s corporate policy—had the requisite state of mind to support a punitive damage award. We found none.”
The case is Morgan v. J-M Manufacturing Co., Inc., 2021 S.O.S. 748.
Attorneys on appeal were John T. Hugo of the Boston office of Manning Gross & Massenburg and Carrie S. Lin of its San Francisco office, along with Kent L. Richland, David E. Hackett, and Nadia A. Sarkis of the mid-Wilshire appellate law firm of Greines, Martin, Stein & Richland, for J-MM, and Paul C. Cook, Deborah R. Rosenthal, and William A. Kohlburn of the El Segundo firm of Simmons Hanly Conroy, for Lori Morgan.
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