California Jury Instruction CACI 3947 Punitive Damages—Individual and Entity Defendants—Trial Not Bifurcated

New September 2003; Revised April 2004, October 2004, December 2005, June 2006, April 2007, August 2007, October 2008, May 2020

Nakase Wade | California Business Lawyers & Corporate Lawyers

This instruction is intended to apply if punitive damages are sought against both an individual person and a corporate defendant. When punitive damages are sought only against corporate defendants, use CACI No. 3943, Punitive Damages Against Employer or Principal for Conduct of a Specific Agent or Employee—Trial Not Bifurcated, or CACI No. 3945, Punitive Damages—Entity Defendant—Trial Not Bifurcated. When punitive damages are sought against an individual defendant, use CACI No. 3940, Punitive Damages—Individual Defendant—Trial Not Bifurcated.

For an instruction explaining “clear and convincing evidence,” see CACI No. 201, Highly Probable—Clear and Convincing Proof.

Read the bracketed language at the end of the first sentence of factor (b) only if there is evidence that the conduct of defendant that allegedly gives rise to liability and punitive damages either caused or foreseeably threatened to cause harm to plaintiff that would not be included in an award of compensatory damages. (Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159 [29 Cal.Rptr.3d 379, 113 P.3d 63].) The bracketed phrase concerning “potential harm” might be appropriate, for example, if damages actually caused by the defendant’s acts are not recoverable because they are barred by statute (id. at p. 1176, citing Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 929 [148 Cal.Rptr. 389, 582 P.2d 980] [in a bad faith insurance case, plaintiff died before judgment, precluding her estate’s recovery of emotional distress damages]), or if the harm caused by defendant’s acts could have been great, but by chance only slight harm was inflicted. (Simon, supra, 35 Cal.4th at p. 1177, citing TXO Production Corp. v. Alliance Resources Corp. (1993) 509 U.S. 443, 459 [113 S.Ct. 2711, 125 L.Ed.2d 366] [considering the hypothetical of a person wildly firing a gun into a crowd but by chance only damaging a pair of glasses].) The bracketed phrase should not be given if an award of compensatory damages is the “true measure” of the harm or potential harm caused by defendant’s wrongful acts. (Simon, supra, 35 Cal.4th at pp. 1178–1179 [rejecting consideration for purposes of assessing punitive damages of the plaintiff’s loss of the benefit of the bargain if the jury had found that there was no binding contract].)

Read the optional final sentence of factor (c) only if the defendant has presented relevant evidence regarding that issue.

Read the optional final sentence if there is a possibility that in arriving at an amount of punitive damages, the jury might consider harm that the defendant’s conduct may have caused to nonparties. (See Philip Morris USA v. Williams (2007) 549 U.S. 346, 353–354 [127 S.Ct. 1057, 166 L.Ed.2d 940].) Harm to others may be relevant to determining reprehensibility based on factors (a)(2) (disregard of health or safety of others) and (a)(4) (pattern or practice). (See State Farm Mutual Automobile Insurance Co. v. Campbell (2003) 538 U.S. 408, 419 [123 S.Ct. 1513, 155 L.Ed.2d 585].)

If any of the alternative grounds for seeking punitive damages are inapplicable to the facts of the case, they may be omitted.

See CACI No. 3940, Punitive Damages—Individual Defendant—Trial Not Bifurcated, for additional sources and authority.

“A jury must be instructed … that it may not use evidence of out-of-state conduct to punish a defendant for action that was lawful in the jurisdiction where it occurred.” (State Farm Mutual Automobile Insurance Co., supra, 538 U.S. at p. 422.) An instruction on this point should be included within this instruction if appropriate to the facts.

In an appropriate case, the jury may be instructed that a false promise or a suggestion of a fact known to be false may constitute a misrepresentation as the word “misrepresentation” is used in the instruction’s definition of “fraud.”

Courts have stated that “[p]unitive damages previously imposed for the same conduct are relevant in determining the amount of punitive damages required to sufficiently punish and deter. The likelihood of future punitive damage awards may also be considered, although it is entitled to considerably less weight.” (Stevens v. Owens-Corning Fiberglas Corp. (1996) 49 Cal.App.4th 1645, 1661 [57 Cal.Rptr.2d 525], internal citations omitted.) The court in Stevens suggested that the following instruction be given if evidence of other punitive damage awards is introduced into evidence:

If you determine that a defendant has already been assessed with punitive damages based on the same conduct for which punitive damages are requested in this case, you may consider whether punitive damages awarded in other cases have sufficiently punished and made an example of the defendant. You must not use the amount of punitive damages awarded in other cases to determine the amount of the punitive damage award in this case, except to the extent you determine that a lesser award, or no award at all, is justified in light of the penalties already imposed. (Stevens, supra, 49 Cal.App.4th at p. 1663, fn. 7.)

•When Punitive Damages Permitted. Civil Code section 3294.

•“[E]vidence of ratification of [agent’s] actions by Hamilton, and any other findings made under Civil Code section 3294, subdivision (b), must be made by clear and convincing evidence.” (Barton v. Alexander Hamilton Life Ins. Co. of America (2003) 110 Cal.App.4th 1640, 1644 [3 Cal.Rptr.3d 258].)

•“Subdivision (b) is not a model of clarity, but in light of California’s history of employer liability for punitive damages and of the Legislature’s reasons for enacting subdivision (b), we have no doubt that it does no more than codify and refine existing law. Subdivision (b) thus authorizes the imposition of punitive damages on an employer in three situations: (1) when an employee was guilty of oppression, fraud or malice, and the employer with advance knowledge of the unfitness of the employee employed him or her with a conscious disregard of the rights or safety of others, (2) when an employee was guilty of oppression, fraud or malice, and the employer authorized or ratified the wrongful conduct, or (3) when the employer was itself guilty of the oppression, fraud or malice.” (Weeks v. Baker & McKenzie (1998) 63 Cal.App.4th 1128, 1151 [74 Cal.Rptr.2d 510].)

•“ ‘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.’ The ‘additional’ burden on a plaintiff seeking punitive damages from an employer is to show not only that an employee acted with oppression, fraud or malice, but that the employer engaged in conduct defined in subdivision (b).” (Weeks, supra, 63 Cal.App.4th at p. 1154, internal citation omitted.)

•“Civil Code section 3294, subdivision (b) does not authorize an award of punitive damages against an employer for the employee’s wrongful conduct. It authorizes an award of punitive damages against an employer for the employer’s own wrongful conduct. Liability under subdivision (b) is vicarious only to the extent that the employer is liable for the actions of its officer, director or managing agent in hiring or controlling the offending employee, in ratifying the offense or in acting with oppression, fraud or malice. It is not vicarious in the sense that the employer is liable for the wrongful conduct of the offending employee.” (Weeks, supra, 63 Cal.App.4th at pp. 1154–1155.)

•“ ‘[T]he most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant’s conduct.’ We have instructed courts to determine the reprehensibility of a defendant by considering whether: the harm caused was physical as opposed to economic; the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; the target of the conduct had financial vulnerability; the conduct involved repeated actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident. The existence of any one of these factors weighing in favor of a plaintiff may not be sufficient to sustain a punitive damages award; and the absence of all of them renders any award suspect.” (State Farm Mutual Automobile Insurance Co., supra, 538 U.S. at p. 419, internal citation omitted.)“[I]n a case involving physical harm, the physical or physiological vulnerability of the target of the defendant’s conduct is an appropriate factor to consider in determining the degree of reprehensibility, particularly if the defendant deliberately exploited that vulnerability.” (Bullock v. Philip Morris USA, Inc. (2011) 198 Cal.App.4th 543, 562 [131 Cal.Rptr.3d 382], internal citation omitted.)

•“[W]e have been reluctant to identify concrete constitutional limits on the ratio between harm, or potential harm, to the plaintiff and the punitive damages award. We decline again to impose a bright-line ratio which a punitive damages award cannot exceed. Our jurisprudence and the principles it has now established demonstrate, however, that, in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process. … [A]n award of more than four times the amount of compensatory damages might be close to the line of constitutional impropriety. … While these ratios are not binding, they are instructive. They demonstrate what should be obvious: Single-digit multipliers are more likely to comport with due process, while still achieving the State’s goals of deterrence and retribution, than awards with ratios in range of 500 to 1 … .” (State Farm Mutual Automobile Insurance Co., supra, 538 U.S. at pp. 424–425, internal citation omitted.)

•“Nonetheless, because there are no rigid benchmarks that a punitive damages award may not surpass, ratios greater than those we have previously upheld may comport with due process where ‘a particularly egregious act has resulted in only a small amount of economic damages.’ The converse is also true, however. When compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee. The precise award in any case, of course, must be based upon the facts and circumstances of the defendant’s conduct and the harm to the plaintiff.” (State Farm Mutual Automobile Insurance Co., supra, 538 U.S. at p. 425, internal citation omitted.)

•“In determining whether a punitive damages award is unconstitutionally excessive, Brandt fees may be included in the calculation of the ratio of punitive to compensatory damages, regardless of whether the fees are awarded by the trier of fact as part of its verdict or are determined by the trial court after the verdict has been rendered.” (Nickerson v. Stonebridge Life Ins. Co. (2016) 63 Cal.4th 363, 368 [203 Cal.Rptr.3d 23, 371 P.3d 242].)

•“[T]he Constitution’s Due Process Clause forbids a State to use a punitive damages award to punish a defendant for injury that it inflicts upon nonparties or those whom they directly represent, i.e., injury that it inflicts upon those who are, essentially, strangers to the litigation.” (Philip Morris USA, supra, 549 U.S. at p. 353.)

•“Evidence of actual harm to nonparties can help to show that the conduct that harmed the plaintiff also posed a substantial risk of harm to the general public, and so was particularly reprehensible—although counsel may argue in a particular case that conduct resulting in no harm to others nonetheless posed a grave risk to the public, or the converse. Yet for the reasons given above, a jury may not go further than this and use a punitive damages verdict to punish a defendant directly on account of harms it is alleged to have visited on nonparties.” (Philip Morris USA, supra, 549 U.S. at p. 355.)

•“ ‘Due process does not permit courts, in the calculation of punitive damages, to adjudicate the merits of other parties’ hypothetical claims against a defendant under the guise of the reprehensibility analysis … . Punishment on these bases creates the possibility of multiple punitive damages awards for the same conduct … .’ This does not mean, however, that the defendant’s similar wrongful conduct toward others should not be considered in determining the amount of punitive damages.” (Bullock, supra, 198 Cal.App.4th at p. 560.)

•“Though due process does not permit courts or juries, in the calculation of punitive damages, to adjudicate the merits of other parties’ hypothetical claims against a defendant under the guise of the reprehensibility analysis, this does not mean that the defendant’s similar wrongful conduct toward others should not be considered in determining the amount of punitive damages. … ‘[T]o consider the defendant’s entire course of conduct in setting or reviewing a punitive damages award, even in an individual plaintiff’s lawsuit, is not to punish the defendant for its conduct toward others. An enhanced punishment for recidivism does not directly punish the earlier offense; it is, rather, “ ‘ “a stiffened penalty for the last crime, which is considered to be an aggravated offense because a repetitive one.” ’ ” … By placing the defendant’s conduct on one occasion into the context of a business practice or policy, an individual plaintiff can demonstrate that the conduct toward him or her was more blameworthy and warrants a stronger penalty to deter continued or repeated conduct of the same nature.’ ” (Izell v. Union Carbide Corp. (2014) 231 Cal.App.4th 962, 986, fn. 10 [180 Cal.Rptr.3d 382], internal citations omitted.)

•“[A] specific instruction encompassing both the permitted and prohibited uses of evidence of harm caused to others would be appropriate in the new trial if requested by the parties. We believe that an instruction on these issues should clearly distinguish between the permitted and prohibited uses of such evidence and thus make clear to the jury the purposes for which it can and cannot consider that evidence. A jury may consider evidence of harm caused to others for the purpose of determining the degree of reprehensibility of a defendant’s conduct toward the plaintiff in deciding the amount of punitive damages, but it may not consider that evidence for the purpose of punishing the defendant directly for harm caused to others. In our view, Judicial Council of California Civil Jury Instructions (Aug. 2007 rev.) CACI Nos. 3940, 3942, 3943, 3945, 3947, and 3949 could convey this distinction better by stating more explicitly that evidence of harm caused to others may be considered for the one purpose but not for the other, and by providing that explanation together with the reprehensibility factors rather than in connection with the reasonable relationship issue.” (Bullock v. Philip Morris USA, Inc. (2008) 159 Cal.App.4th 655, 695, fn. 21 [71 Cal.Rptr.3d 775], internal citation omitted.)

•“In light of our holding that evidence of a defendant’s financial condition is essential to support an award of punitive damages, Evidence Code section 500 mandates that the plaintiff bear the burden of proof on the issue. A plaintiff seeking punitive damages is not seeking a mere declaration by the jury that he is entitled to punitive damages in the abstract. The plaintiff is seeking an award of real money in a specific amount to be set by the jury. Because the award, whatever its amount, cannot be sustained absent evidence of the defendant’s financial condition, such evidence is ‘essential to the claim for relief.’ ” (Adams v. Murakami (1991) 54 Cal.3d 105, 119 [284 Cal.Rptr. 318, 813 P.2d 1348], internal citation omitted.)

•“A defendant is in the best position to know his or her financial condition, and cannot avoid a punitive damage award by failing to cooperate with discovery orders. [¶] A number of cases have held that noncompliance with a court order to disclose financial condition precludes a defendant from challenging the sufficiency of the evidence of a punitive damages award on appeal.” (Fernandes v. Singh (2017) 16 Cal.App.5th 932, 942 [224 Cal.Rptr.3d 751].)

•“[T]he purpose of punitive damages is not served by financially destroying a defendant. The purpose is to deter, not to destroy.” (Adams, supra, 54 Cal.3d at p. 112.)

•“[A] punitive damages award is excessive if it is disproportionate to the defendant’s ability to pay.” (Adams, supra, 54 Cal.3d at p. 112, internal citations omitted.)

•“It has been recognized that punitive damages awards generally are not permitted to exceed 10 percent of the defendant’s net worth.” (Weeks v. Baker & McKenzie (1998) 63 Cal.App.4th 1128, 1166 [74 Cal.Rptr.2d 510].)

•“While ‘there is no rigid formula and other factors may be dispositive especially when net worth is manipulated and fails to reflect actual wealth,’ net worth is often described as ‘the critical determinant of financial condition.’ [¶] A plaintiff seeking punitive damages must provide a balanced overview of the defendant’s financial condition; a selective presentation of financial condition evidence will not survive scrutiny.” (Farmers & Merchants Trust Co. v. Vanetik (2019) 33 Cal.App.5th 638, 648 [245 Cal.Rptr.3d 608], internal citation omitted.)

•“[N]et worth is not the only measure of a defendant’s wealth for punitive damages purposes that is recognized by the California courts. ‘Indeed, it is likely that blind adherence to any one standard [of determining wealth] could sometimes result in awards which neither deter nor punish or which deter or punish too much.’ ” (Bankhead v. ArvinMeritor, Inc. (2012) 205 Cal.App.4th 68, 79 [139 Cal.Rptr.3d 849].)

•“[T]he ‘net’ concept of the net worth metric remains critical. ‘In most cases, evidence of earnings or profit alone are not sufficient “without examining the liabilities side of the balance sheet.” [Citations.]’ ” (Soto v. BorgWarner Morse TEC Inc. (2015) 239 Cal.App.4th 165, 194 [191 Cal.Rptr.3d 263], internal citations omitted.)

•“The decision to award punitive damages is exclusively the function of the trier of fact. So too is the amount of any punitive damage award. The relevant considerations are the nature of the defendant’s conduct, the defendant’s wealth, and the plaintiff’s actual damages.” (Gagnon v. Continental Casualty Co. (1989) 211 Cal.App.3d 1598, 1602 [260 Cal.Rptr. 305], internal citations omitted.)

•“The wealth of a defendant cannot justify an otherwise unconstitutional punitive damages award.” (State Farm Mutual Automobile Insurance Co., supra, 538 U.S. at p. 427, internal citation omitted.)

•“[I]n some cases, the defendant’s financial condition may combine with high reprehensibility and a low compensatory award to justify an extraordinary ratio between compensatory and punitive damages. [Citation.]” (Nickerson v. Stonebridge Life Ins. Co. (Nickerson II) (2016) 5 Cal.App.5th 1, 26 [209 Cal.Rptr.3d 690].)

•“An award of punitive damages is not supported by a verdict based on breach of contract, even where the defendant’s conduct in breaching the contract was wilful, fraudulent, or malicious. Even in those cases in which a separate tort action is alleged, if there is ‘but one verdict based upon contract’ a punitive damage award is improper.” (Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949, 960 [17 Cal.Rptr.2d 242], internal citations omitted.)

•“[P]unitive damages are not assessed against employers on a pure respondeat superior basis. Some evidence of fault by the employer itself is also required.” (College Hospital, Inc. v. Superior Court (1994) 8 Cal.4th 704, 724, fn. 11 [34 Cal.Rptr.2d 898, 882 P.2d 894].)

•“Subdivision (b) … governs awards of punitive damages against employers, and permits an award for the conduct described there without an additional finding that the employer engaged in oppression, fraud or malice.” (Weeks, supra, 63 Cal.App.4th at p. 1137.)

•“Section 3294 is no longer silent on who may be responsible for imputing punitive damages to a corporate employer. For corporate punitive damages liability, section 3294, subdivision (b), requires that the wrongful act giving rise to the exemplary damages be committed by an ‘officer, director, or managing agent.’ ” (White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 572 [88 Cal.Rptr.2d 19, 981 P.2d 944].)

•“[I]n performing, ratifying, or approving the malicious conduct, the agent must be acting as the organization’s representative, not in some other capacity.” (College Hospital, Inc., supra, 8 Cal.4th at p. 723.)

•“[T]he concept [of managing agent] 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.” (College Hospital, Inc., supra, 8 Cal.4th at p. 723.)

•“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.” (College Hospital, Inc., supra, 8 Cal.4th at pp. 723–724.)

•“[T]he determination of whether certain employees are managing agents ‘ “does not necessarily hinge on their ‘level’ in the corporate hierarchy. Rather, the critical inquiry is the degree of discretion the employees possess in making decisions … .” ’ ” (Powerhouse Motorsports Group, Inc. v. Yamaha Motor Corp., U.S.A. (2013) 221 Cal.App.4th 867, 886 [164 Cal.Rptr.3d 811].)

•“Although it is generally true … that an employee’s hierarchy in a corporation is not necessarily determinative of his or her status as a managing agent of a corporation, evidence showing an employee’s hierarchy and job duties, responsibilities, and authority may be sufficient, absent conclusive proof to the contrary, to support a reasonable inference by a trier of fact that the employee is a managing agent of a corporation.” (Davis v. Kiewit Pacific Co. (2013) 220 Cal.App.4th 358, 370 [162 Cal.Rptr.3d 805].)

•“[W]e conclude the Legislature intended the term ‘managing agent’ to include only those corporate employees who exercise substantial independent authority and judgment in their corporate decisionmaking so that their decisions ultimately determine corporate policy. The scope of a corporate employee’s discretion and authority under our test is therefore a question of fact for decision on a case-by-case basis.” (White, supra, 21 Cal.4th at pp. 566–567.)

•“In order to demonstrate that an employee is a true managing agent under section 3294, subdivision (b), a plaintiff seeking punitive damages would have to show that the employee exercised substantial discretionary authority over significant aspects of a corporation’s business.” (White, supra, 21 Cal.4th at p. 577.)

•“ ‘[C]orporate policy’ is the general principles which guide a corporation, or rules intended to be followed consistently over time in corporate operations. A ‘managing agent’ is one with substantial authority over decisions that set these general principles and rules.” (Cruz v. Homebase (2000) 83 Cal.App.4th 160, 167–168 [99 Cal.Rptr.2d 435].)

•“The key inquiry thus concerns the employee’s authority to change or establish corporate policy. The fact that an employee has a supervisory position with the power to terminate employees under his or her control does not, by itself, render the employee a managing agent. Nor does the fact that an employee supervises a large number of employees necessarily establish that status.” (CRST, Inc. v. Superior Court (2017) 11 Cal.App.5th 1255, 1273 [218 Cal.Rptr.3d 664].)

•“ ‘[R]atification’ is the ‘[c]onfirmation and acceptance of a previous act.’ A corporation cannot confirm and accept that which it does not actually know about.” (Cruz, supra, 83 Cal.App.4th at p. 168.)

•“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.” (College Hospital, Inc., supra, 8 Cal.4th at p. 726.)

•“Corporate ratification in the punitive damages context requires actual knowledge of the conduct and its outrageous nature.” (College Hospital, Inc., supra, 8 Cal.4th at p. 726.)

•“The high court in TXO [TXO Production Corp., supra] and BMW [BMW of North America, Inc. v. Gore (1996) 517 U.S. 559 [116 S.Ct. 1589, 134 L.Ed.2d 809]] has refined the disparity analysis to take into account the potential loss to plaintiffs, as where a scheme worthy of punitive damages does not fully succeed. In such cases, the proper ratio would be the ratio of punitive damages to the potential harm to plaintiff.” (Sierra Club Found. v. Graham (1999) 72 Cal.App.4th 1135, 1162, fn. 15 [85 Cal.Rptr.2d 726], original italics.)