Appellate Standard of Review of Punitive Damages Against Corporate Defendants

As the name implies, punitive damages are intended to punish a defendant for particularly egregious conduct. These awards differ from compensatory damages, which compensate the plaintiff for his or her losses. When asserted against corporate defendants, punitive awards can be substantial.

Generally speaking, however, it is more difficult to win punitive damages and even harder to retain them on appeal. And because California statutes regulate them fairly closely and they can have substantial impact on the defendant, a punitive award will often be challenged. If you’re a plaintiff seeking punitive damages, or you’ve had them awarded, the defendant may appeal. You deserve to know how the appellate courts will frame their review.

Trial Courts Can Award Punitive Damages Upon “Clear and Convincing Evidence”

Understanding the appellate standard of review for punitive damages begins with understanding the circumstances upon which the law permits such damages. California trial juries are only permitted to award punitive damages if the plaintiff has established by clear and convincing evidence that the defendant engaged in oppression, fraud, or malice. Here is a more detailed review of these terms:

  • Oppression: despicable conduct subjecting a person to cruel and unjust hardship in conscious disregard of that person’s rights
  • Fraud: intentional misrepresentation, deceit, or concealing material facts so as to injure or deprive someone of their rights or property
  • Malice: intending to injure others or showing a willful and conscious disregard for others’ rights

Additional Requirements for Corporate Defendants

Punitive damages are not intended to financially destroy a defendant. But they are intended to send a message to the at-fault party. Courts focus on the balance of deterrence without ruining the defendant.

When punitive damages are asserted against corporate defendants, there is an additional requirement to the standards discussed above. The plaintiff must show by clear and convincing evidence that a corporate officer, director, or managing agent authorized or ratified the wrongful conduct. That requires identifying someone with sufficient power within the corporation to affect policy.

A Different Standard on Appeal

Although proving entitlement to punitive damages requires clear and convincing evidence at the trial level, once a plaintiff has been awarded such damages, the appellate court engages in a different inquiry. The question is whether the record – as a whole – contains substantial evidence from which a reasonable factfinder could have found it highly probable that the fact was true. The appellate court will not reweigh evidence or determine whether the evidence was clear and convincing. Instead, the court will determine whether a reasonable trier of fact could have regarded the evidence as satisfying the clear and convincing standard of proof.

In the case of corporate defendants, the appellate court will also review evidence that individual(s) within a corporation, who are responsible for corporate policy, were liable. These individuals may be top executives or lower-level ones with decision-making duties. Simply blaming an entire company, as a whole, for wrongdoing will likely not suffice. Sometimes, for instance, corporate decision makers simply ratified malicious conduct of their subordinates without any malicious intent of their own, and the court will look for evidence from which the intent of the subordinate may be imputed to the ultimate decision maker.

The proof of misconduct may be found by piecing together a number of different lines of evidence. Corporations are complex, with myriad agents and managers making decisions across an entire organization. Appellate courts understand this. They will therefore review the record as a whole in determining whether there is substantial evidence to support the jury’s findings under the heightened standard of proof. For example, there may be internal emails, reports, employee testimony, and more. Ultimately, however, the clear and convincing evidence standard must be satisfied before a punitive damages award will stand.

Let Gusdorff Law Handle Your Appeal

Winning punitive damages against a corporate defendant can give a plaintiff a sense that justice has been done. But that feeling could be fleeting if the defendant decides to appeal the decision. In that case, you must be able to show the appellate court there is substantial evidence justifying punitive damages. Give Gusdorff Law a call to discuss your appeal and how we can help.