**Update 8/17/20: The Cal. Supremes denied review in Colucci on 8/12/20.**
I want to bring your attention to two opinions issued in 2020 where the Court of Appeal limited punitive damages to 1-to-1 and 1.5-to-1 ratios of the compensatory damages in employment cases.
The first is Colucci v. T-Mobile USA, Inc., 48 Cal. App. 5th 442 (4th Dist. Ct. App. (Apr. 29, 2020)) (slip op. here) (Google Scholar here), review denied (Aug. 12, 2020).
In this wrongful-termination action, the plaintiff, a T-Mobile store manager, was fired for purported conflict of interest very shortly after making a disability-discrimination and retaliation complaint against his district manager. The jury returned a verdict of $1,020,042 in compensatory damages and $4,000,000 in punitive damages (approx. 4-to-1 ratio) representing what the plaintiff argued was one day of the employer’s net earnings. The Fourth District Court of Appeal held that a 1.5-to-1 ratio of punitive to compensatory damages was the constitutional maximum allowed under due process given the facts presented and reduced the punitive-damages award from $4,000,000 down to $1,530,063. The decision-maker was a district manager overseeing nine stores. Managing-agent status was affirmed, including because the district manager had discretion to deviate from official policy.
The second case is King v. U.S. Bank National Association, 2020 WL 4333329 (Cal. Ct. App. 3d Dist. no. C085276 (July 28, 2020)) (slip op. here) (Google Scholar here) (citations below are to the Westlaw version).
This was a defamation action brought by a senior vice president of U.S. Bank where the alleged defamation led to termination of employment. The employer had no investigations protocol/policy at the time regarding investigation of the types of complaints made against the plaintiff and the plaintiff was not interviewed before the employer adopted the statements of the plaintiff’s subordinates despite serious reasons to doubt or at least explore the truth of the statements. The Third District Court of Appeal agreed that a 1-to-1 ratio of punitive to compensatory damages was the constitutional maximum allowed under due process in that case. The judgment was reduced from approximately $24.3 million to $17 million, with punitive damages reduced from $15.6 million (U.S. Bank’s net earnings for one day) down to $8,489,696, a one-to-one ratio of the total of $2,489,696 wrongful-termination damages and the $6 million defamation damages. Managing-agent status was affirmed, based in large part on the human-resources investigator where company policy did not govern certain aspects of the investigation, leaving the HR representative with substantial discretion on how to conduct the investigation.
There’s a lot in these cases. Practitioners must read them. But here let’s focus on two key holdings of these opinions: affirming managing-agent status and reducing punitive-damage ratios.
Managing-agent status
First, both cases can be used to support a broad definition of managing agent for punitive-damages purposes in employment cases. See Civ. Code § 3294(b) (corporate employers not liable for punitive damages based on acts of employees unless the wrongful conduct was committed, authorized, or ratified by a corporate officer, director, or managing agent). These cases are not the first to discuss a lower-level employee’s ability to form ad hoc policy or acting with substantial discretion to deviate from policy as evidence supporting managing-agent status. But they are some of the most recent.
Both cases affirmed the managing-agent finding on similar grounds. In Colucci, the decision-maker had substantial discretionary authority to override official company policy (e.g., progressive discipline, what to communicate with employees regarding leaves of absence). See Colucci, 48 Cal. App. 5th at 454.
In King, there was no HR investigation policy at all at the time regarding how to conduct investigations into suspected acts of dishonesty, misconduct, or ethical violations, leading to a lower-level HR representative having discretion in how to conduct the investigation:
In 2012, U.S. Bank’s code of ethics provided that “[s]uspected acts of dishonesty, misconduct, or conduct that is inconsistent with these important ethical standards w[ould] be investigated in a fair and thorough manner.” The bank did not, however, have any rules, policies, procedures, practices, or criteria in place for investigators to follow in performing such investigations. The investigators, like McGovern, were given the discretion and judgment to determine what to do and how to do it, with appropriate support from their managers. It was up to the investigators, however, to determine if/when to consult with their managers on a case-by-case basis.
McGovern was the human resources generalist overseeing the commercial banking division throughout the United States. The commercial banking division comprised of approximately 600 employees in 32 markets in 24 states. There was no evidence suggesting McGovern’s ability to determine who to interview or how to perform an interview or investigation (e.g., whether to obtain written statements) was limited in any respect. Given the breadth of the discretion delegated to her in determining how to fairly and thoroughly investigate suspected acts of dishonesty or unethical misconduct (i.e., a corporate policy) and what constituted a fair and thorough investigation — the results of which would determine (and in this case did determine) whether an employee would be disciplined or terminated — the jury could have reasonably inferred she had the authority and discretion to interpret and apply the investigative policies for U.S. Bank’s commercial banking division as she saw fit, such that her decisions ultimately determined corporate policy.
King, 2020 WL 4333329 at *20.
Reduction of punitive-damage ratios
Second, both cases limited punitive damages to very low ratios despite what can be arguably characterized as pretty egregious conduct.
In Colucci, the store-manager plaintiff was fired after a series of bad incidents. He requested disability accommodations related to an anxiety disorder; he was the target of a complaint by a subordinate who appeared to have a reason to want to hurt the plaintiff (and the substance of the complaint was seriously discredited at trial, according to the opinion); the effective termination date, the plaintiff argued, was backdated to appear that the decision was made before the plaintiff lodged a complaint; and more. The decisions were made and carried out by a district manager whom the jury determined to be a managing agent.
In King, the plaintiff was a senior vice president of U.S. Bank. He was the subject of complaints of serious misconduct (including allegedly falsifying documents, being in the Mafia, taking vacation time without logging it to get paid out more money, making sexual comments, engaging in gender discrimination, stalking one of the subordinates, and more (yes, it was that extreme)). The complaints were made by subordinates whom King had written up, had serious performance concerns with, or who otherwise had serious axes to grind.
Surprisingly, as of 2012, U.S. Bank had “no rules, policy, procedure, practice or criteria to determine whether to allow an employee to respond to accusations against him or her.” The human-resources investigator who handled the investigation for U.S. Bank had to consult with a supervisor on a case-by-case basis depending on the circumstances and could decide what issues to take to her supervisor. The plaintiff was never actually interviewed in connection with the complaints. The investigator’s supervisor knew that the plaintiff was never asked to identify any facts, witnesses, or documents contradicting the allegations. According to the opinion, plenty of contradictory testimony came out on the part of the employer’s witnesses, several witnesses testified that they didn’t believe several of the allegations against the plaintiff, and other evidence of motives to lie were known or could have been discovered by the investigator but were not followed up on.
Regardless, in both opinions the appellate courts limited punitive damages to low ratios on two grounds. First, there was no evidence at trial of a pattern of retaliation against employees:
Notwithstanding the harm to Colucci from Robson’s actions, there is no hint in the record that T-Mobile engaged in a calculated pattern of retaliation against its employees. In fact, it was undisputed that T-Mobile maintained an integrity line to receive employee complaints; the company had a variety of policies and procedures ostensibly designed to prevent workplace misconduct; and managers and employees were trained on T-Mobile’s employment policies.
Colucci, 48 Cal. App. 5th at 458.
Isolated Incident Versus Repeated Actions. Reprehensibility is “influenced by the frequency and profitability of the defendant’s prior or contemporaneous similar conduct.” (Johnson v. Ford Motor Co. (2005) 35 Cal.4th 1191, 1207, 29 Cal.Rptr.3d 401, 113 P.3d 82.) We are looking for repeated corporate misconduct. King argues there were repeated actions because “[t]here were numerous defamatory statements, made by multiple publishers, on several different occasions,” and U.S. Bank also unlawfully terminated King. U.S. Bank argues there was no evidence of a pattern of wrongful terminations and the defamatory statements “were several allegedly reprehensible acts in the series of events that harmed the plaintiff.”
The torts at issue here were committed with respect to a single employment investigation. As in Roby, there is no evidence of repeated corporate misconduct or a corporate culture encouraging continued wrongful terminations or defamation. (Roby, supra, 47 Cal.4th at pp. 715-716, 101 Cal.Rptr.3d 773, 219 P.3d 749.) We thus do not find this factor present.
King, 2020 WL 4333329 at *30-31 (italics in original).
Second, the amount of compensatory damages was already large:
In general, a higher ratio might be necessary where the plaintiff’s injury was hard to detect, or the monetary value of noneconomic harm might have been difficult to determine. But “[w]hen 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. v. Campbell, 538 U.S. 408 (2003)], supra, 538 U.S. at p. 425, 123 S.Ct. 1513, italics added.)
Here, the jury’s award of compensatory damages was substantial. The jury decided Colucci was entitled to a total of $1,020,042 in compensatory damages, the substantial majority of which was for noneconomic harm and/or emotional distress ($700,000). The jury’s award for noneconomic harm “may have reflected the jury’s indignation at [T-Mobile’s] conduct, thus including a punitive component.” (Roby [v. McKesson Corp., 47 Cal. 4th 686 (2009)], supra, 47 Cal.4th at p. 718, 101 Cal.Rptr.3d 773, 219 P.3d 749.) We are cognizant that a large amount of damages awarded for emotional distress may itself serve as a deterrent to further corporate misconduct. (Ibid.) In Roby, at page 719, 101 Cal.Rptr.3d 773, 219 P.3d 749, the court applied a one-to-one ratio between punitive and compensatory damages where there was relatively low corporate reprehensibility and a substantial award of noneconomic damages. Given the low to moderate range of reprehensibility of T-Mobile’s conduct here, we conclude that a 1.5-to-one ratio between punitive and compensatory damages is the federal constitutional maximum.
Colucci, 48 Cal. App. 5th at 458-59 (footnote omitted) (italics in original).
The second guidepost is “ ‘the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award.’ ” (Roby, supra, 47 Cal.4th at p. 718, 101 Cal.Rptr.3d 773, 219 P.3d 749.) The trial court reduced the compensatory damages award to $2,714,696; however, we reinstated the jury’s defamatory damages award in its entirety ante. King’s compensatory damages award is therefore $8,489,696 ($2,489,696 in wrongful termination damages and $6 million in defamation damages). Of this amount, the compensatory damages supported by the testimony of King’s experts was $3,489,696 ($1 million defamation damages to business or profession and $2,489,696 for wrongful termination). The remaining $5 million consisted of a $1 million emotional distress award and a $4 million award for reputation damages. Although reputation damages may be viewed as an economic injury, King introduced no evidence of actual damage to his reputation; it appears the jury awarded presumed damages. The emotional distress and reputation damages “may have reflected the jury’s indignation at [U.S. Bank’s] conduct, thus including a punitive component.” (Roby, supra, 47 Cal.4th at p. 718, 101 Cal.Rptr.3d 773, 219 P.3d 749.)
As noted by our Supreme Court in Roby, “[i]n State Farm, the high court suggested that a ratio of one to one might be the federal constitutional maximum in a case involving, as here, relatively low reprehensibility and a substantial award of noneconomic damages: ‘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.’ ” (Roby, supra, 47 Cal.4th at p. 718, 101 Cal.Rptr.3d 773, 219 P.3d 749.)
King, 2020 WL 4333329 at *31 (italics in original).
There was little (or no) analysis to explain why the size of these awards was too large so as to suggest a punitive component when compared to the actual harm suffered by these plaintiffs. For example, in Colucci, the award for emotional distress was $700,000. There was no discussion in the opinion of why that number suggests a punitive component as compared to actual compensatory damages given the evidence of serious harm that resulted:
The jury heard from Colucci at trial that he had gained up to 100 pounds after being terminated by T-Mobile in 2014; he became depressed, lethargic, and sad; without a job, he was inactive and engaging in unhealthy eating habits; and he suffered stomach problems that disturbed his sleep. Colucci subsequently found a new job, but he made significantly less money, the job had limited growth potential, and he had to travel for his new job, which he viewed as a “big sacrifice” to his home life. As of trial, Colucci testified he had lost “some” but not all the weight he had gained and was still stressed and “depressed at times” about his wrongful termination from T-Mobile. His emotional distress was continuing to manifest physically in the form of stomach discomfort, sleeplessness, and rashes. The jury heard Colucci’s testimony first-hand, evaluated his physical appearance, and was shown pictures of his stress-induced rashes.
Colucci, 48 Cal. App. 5th at 461.
The testimony in King included testimony of the destroyed reputation of a banking senior vice president, reputation being paramount in the banking business, after being accused of such serious acts (and crimes) of stalking, being in the Mafia, making sexual comments, discriminating based on gender, falsifying reports and vacation, unethical and fraudulent/dishonest conduct, and more:
King looked for a similar position and ultimately accepted a position five months later with another bank. In the new position, King earned substantially less than what he was earning at U.S. Bank. King also lost stock options and had to liquidate his retirement account with associated penalties due to the termination. King’s family had to move from a 3,000 square-foot house into a 900 square-foot apartment and had to forego vacations. King also was unable to send his daughter to college as a result of the change in his finances.
When asked what he lost as a result of the termination, King said he lost his career path, confidence, credibility, and pride, and his family and peers lost trust in him. He feared what people were thinking about him and felt like a failure. His reputation was “blown up, annihilated, left with nothing” as a “result of being falsely terminated, accused of being a criminal, accused of stalking, accused of being sexist, accused of being abusive to subordinates.” King explained a banker’s reputation is everything and his reputation would never be the same; he would not be able to regain it. He explained that being accused of being in the Mafia and falsifying documents were criminal acts leading to blackballing in the banking business.
King, 2020 WL 4333329 at *12.
It may be that $700,000 to the plaintiff in Colucci was so excessive that it may include a punitive component, or it might not. But there was no discussion why the Court of Appeal believe the award was so large as to imply a punitive component under the facts of that case.
The King plaintiff was awarded much more than the Colucci plaintiff, largely for defamation damages for harm to reputation. (Note: the plaintiff in King was a high wage-earner. He was awarded almost $2.5 million in lost earnings alone on the wrongful-termination claim with evidence that his total economic loss was north of $5 million. See id. at *3, *24.) It might be that the $4 million for loss of reputation of a senior vice president of a bank whom the jury determined suffered such egregiously bad conduct is so substantial or excessive that it may include a punitive component, or it might not be. But there was little discussion about why the King court came to this conclusion, what factors led to that conclusion, or anything of the sort (other than the number was what it thought was a big number), except that in King, the court did briefly mention that there was no evidence of “actual” harm to reputation and so the jury may have presumed damages while also including a punitive component.
Perhaps the court was looking only for evidence that a prospective employer refused to hire King due to his tarnished reputation? It’s unclear. But otherwise how do we square these brief statements by the King court with this part of the opinion:
There was testimony that statements impacting King’s reputation were made after King had been terminated. In 2013, Gerlach told Walker somebody made an accusation that King was in the Mafia. Thakur and Flinn told Neal after King’s termination that he had instructed them to falsify records. And Murphy heard King was terminated for an ethical issue…. We . . . do not find a substantial basis in the record [for U.S. Bank’s argument] that harm to King’s reputation did not extend beyond his termination.
King, 2020 WL 4333329 at *25.
Takeaways
First, as shown in both opinions, it can be much easier to establish managing-agent status than some might think. C-suite-level executives are not required. In both cases, the key wasn’t the title or where the actors were on the chain of command, but rather the ability to deviate from policy and operate with substantial discretion in how to carry out policy to the point that both appellate courts agreed constituted the ability to formulate ad hoc policy, itself a basis for finding managing-agent status.
Second, practitioners should pay attention to the focus in these opinions on the absence of evidence of a pattern of retaliation against employees. The fight for that evidence happens in discovery. Employers certainly will fight to bar discovery into evidence of conduct against other employees, and many plaintiff’s counsel either give up that fight or never initiate it in the first place. But given that Colucci and King focused on these issues in reducing the punitive-damage ratios to 1:1 and 1.5:1, the importance of this discovery battle is significantly heightened. The absence of evidence on these issues (or failure to present such evidence if it did exist) resulted in a reduction of many millions of dollars in these cases (an approximate $2.5-million reduction in Colluci and more than a $7-million reduction in King).
And most employers of size will have policies and procedures in place to deal with retaliation complaints. Whether or not these procedures are actually followed is another matter that must be explored if a higher ratio is sought. After all, recall this key passage from Colucci:
Notwithstanding the harm to Colucci from Robson’s actions, there is no hint in the record that T-Mobile engaged in a calculated pattern of retaliation against its employees. In fact, it was undisputed that T-Mobile maintained an integrity line to receive employee complaints; the company had a variety of policies and procedures ostensibly designed to prevent workplace misconduct; and managers and employees were trained on T-Mobile’s employment policies.
Colucci, 48 Cal. App. 5th at 458. Note the Colucci court’s use of “ostensibly.” Plaintiff’s counsel will want to dig into whether the policies and procedures in place are actually followed, since they must expect to be confronted with citations to this passage in Colucci. And defense counsel will perhaps want to marshal evidence of the policy working and being followed. (Then again, we’ll see if the Cal. Supremes take this case up on review, although so many punitive-damage cases get rejected by the Cal. Supremes that we shouldn’t count on it…) (update: review was denied on 8/12/20).
This is not a deep dive into punitive-damages law. Practitioners should of course read State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003), Roby v. McKesson Corp., 47 Cal. 4th 686 (2009), and much more. But employment lawyers should include these recent Colucci and King opinions in their research and analysis when evaluating exposure where they believe they either have a punitive-damages case or they are defending against a punitive-damages claim. There’s a lot more in these opinions, so I encourage you to read them.
If you’d like more detail, a writeup of Colucci follows.
Facts
Plaintiff Colucci was a T-Mobile store manager in Ontario, California, from 2007 to 2014. His direct supervisor was the district manager of the “Inland Empire West” region, which consisted of “about nine stores.”
In February 2014, a person, Robson, became the district manager. Robson intended to transfer Colucci from his store to a mall kiosk. But Colucci “suffered from a . . . disability—anxiety disorder—that prevented him from performing his job in the crowded mall location.” Colucci v. T-Mobile USA, Inc., 48 Cal. App. 5th 442 (4th Dist. Ct. App. (Apr. 29, 2020)) (slip op. here) (Google Scholar here), review denied (Aug. 12, 2020)
When Robson told Colucci about the planned transfer, Colucci told Robson of his disability ad requested accommodation. Colucci was willing to transfer to another store—just not a location inside a mall. Id.
Obvious foreshadowing followed: “Robson was highly skeptical of Colucci’s condition (“this is the most ridiculous thing I’ve ever heard”) but referred the matter to HR. An HR representative was likewise doubtful and requested a doctor’s note from Colucci that described his precise limitations. Colucci obtained a medical diagnosis and physician’s letter confirming his limitations. HR ultimately advised Robson that Colucci could not be transferred to the mall location due to his protected medical condition.” Id. at 447-48.
In July 2014, Colucci learned that rumors about him were being spread by sales associates (the defamation incident) (details are not in the opinion). Id. at 448. Colucci asked Robson to investigate; Robson agreed to investigate but allowed the investigation to languish while telling Colucci to “quit complaining” and that he had been “nothing but problems.” Id.
Robson also heard from one of Colucci’s subordinates that Colucci had an outside business in which he was licensed to sell used cars. Id. That subordinate had been disciplined by Colucci and was looking to transfer. Id. The subordinate accused Colucci of using T-Mobile’s store resources to support the outside business, including using the fax machine and requiring a T-Mobile employee to answer a call for Colucci’s business while on the clock for T-Mobile. Id. Robson initiated an investigation into this. Id.
Colucci later complained that he believed Robson was treating him unfairly due to his condition and accommodation request. Id. Colucci requested medical leave of absence. Id. Robson approved Colucci taking the rest of the day off, and Colucci left. Id. at 449.
Two hours after Colucci left, Robson recommended that T-Mobile terminate Colucci’s employment for cause—namely, conflict of interest due to Colucci’s outside business. Id. at 449. Robson bypassed T-Mobile’s progressive discipline policy, the information supporting the termination came almost solely from the subordinate who had been disciplined by Colucci, and no one spoke with Colucci about the alleged conflict. Id. Robson claimed that Colucci refused to be interviewed (Colucci was experiencing severe back pain when Robson and the loss-prevention manager came to interview him—Colucci left on medical leave instead of being interviewed and later would undergo surgery). Id.
Between July 23rd and 24th, unaware of his possible impending termination, Colucci submitted a formal request to HR for medical leave of absence and also lodged a separate complaint on the integrity line, reporting Robson for discrimination and failure to resolve the defamation incident. Id. Robson and T-Mobile proceeded with Colucci’s termination. Id.
On July 25th, Robson prepared and mailed Colucci a letter informing him that his employment had been terminated effective three days before (i.e., effective just before Colucci submitted his formal leave-of-absence request and his integrity-line complaint). Id. Three days later, during a weekly staff call, Robson said that Colucci had been fired because of his complaints and the way he acted; the loss-prevention manager made no mention on the call that Colucci was terminated for conflict of interest. Id.
Colucci then filed a civil action for, among other things, retaliation in violation of the Fair Employment and Housing Act.
Trial and jury verdict
Colucci established at trial that the purported basis for termination was, at minimum, highly suspect:
At trial, the associate’s statements [regarding Colucci’s alleged conflict of interest and use of T-Mobile resources for his side business) were largely discredited. The associate had never been an employee of Auto Compound and was not required to do any Auto Compound work.
…
Colucci’s prior supervisor at T-Mobile was aware of Auto Compound and had even referred someone to Colucci for advice on used cars. This supervisor never had any concerns about Colucci’s side business or that Colucci was misusing T-Mobile’s resources.
…
Colucci [also] established at trial that numerous T-Mobile employees had side businesses. We have not attempted to summarize all the facts Colucci adduced to discredit T-Mobile’s conflict-of-interest rationale; suffice it to say, the factual justification for a conflict of interest was highly tenuous. For example, T-Mobile’s electronic access policy actually allowed employees to occasionally use T-Mobile’s equipment for personal reasons. In addition, multiple witnesses testified that they had never seen Colucci selling used cars during work hours.
Id. at 448 n.1, n.2, 456 n.7.
The jury returned a unanimous verdict for Colucci on his claim for retaliation in violation of the Fair Employment and Housing Act, awarding $1,020,042 in compensatory damages ($130,272 past economic; $189,770 future economic; $500,000 past noneconomic; $200,000 future noneconomic). Id. at 450. The jury also returned a finding of malice or oppression by a managing agent. See id. at 450-51.
During the punitive-damages phase, the jury received financial-condition information, including that T-Mobile had total revenue of $32.1 and $37.2 billion in 2015 and 2016, respectively; net income of $733 million and $1.46 billion; total assets of $62.4 and $65.9 billion, and more. See id. at 450.
From this information, Colucci’s counsel argued that T-Mobile generated $4 million in net income per day. Id. The jury awarded $4 million in punitive damages. Id.
Appeal
T-Mobile challenged the punitive-damages award on grounds that there was insufficient evidence to support that Robson was a managing agent or that he acted with malice or oppression, and the amount of the award was so excessive that it violated T-Mobile’s constitutional right to due process.
Managing Agent
Robson was responsible for managing nine retail stores and 100 employees; he had independent, final authority to hire and fire, and he alone decided to fire Colucci; he had substantial discretionary authority over daily store operations, leading to ad hoc formulation of policy (e.g., deciding whether and when to transfer employees, whether and how to investigate employee concerns, and more). Id. at 452. This was enough to support the managing-agent finding. See id. at 452-53 (discussing and citing White v. Ultramar, 21 Cal. 4th 563 (1999) and Roby v. McKesson Corp., 47 Cal. 4th 686 (2009)).
T-Mobile argued that managing-agent status only applies to “corporate policymakers that affect “formal policies that affect a substantial portion of the company and that are the type likely to come to the attention of corporate leadership.” Id. at 452. Rejecting this argument, the Colucci court reviewed White, Roby, and more was not persuaded, holding that Robson’s ability and authorization to deviate from policies constituted Robson “formulat[ing] operational policies through his discretionary decisions,” and that is enough to constitute a managing agent:
[B]ased on our review of the record, Robson had substantial discretionary authority to override these general policies. For example, T-Mobile’s progressive discipline policy arguably might have prevented Colucci’s firing had it been followed, but Robson testified that discipline was not required to be progressive under the policy and that he decided the appropriate action to take, depending on the circumstances. Likewise, Robson testified that management “typically” would not communicate with employees once they requested leaves of absences, but he could situationally deviate. Robson suffered no consequences for deviating from these policies and indeed, was authorized to do so. Accordingly, Robson formulated operational policies through his discretionary decisions. (White, supra, 21 Cal.4th at p. 577, 88 Cal.Rptr.2d 19, 981 P.2d 944.)
In summary, we conclude substantial evidence supports the jury’s finding that Robson was a managing agent whose conduct could justify an award of punitive damages against T-Mobile.
Id. at 454.
Malice
This one was easy for the court:
Based on our review of the record, we conclude substantial evidence supports the jury’s finding that Robson acted with malice or oppression. “Malice and oppression may be inferred from the circumstances of a defendant's conduct.” (Monge v. Superior Court (1986) 176 Cal.App.3d 503, 511, 222 Cal.Rptr. 64.) Here, the jury could reasonably infer from the evidence that Robson became angered by Colucci’s complaints and decided to concoct a reason for termination, all the while knowing Colucci was in a weak physical and mental state. None of Robson’s actions strike us as inadvertent or careless; even if his initial termination recommendation was hasty, he had several days to reevaluate and reverse his decision. He did not. Moreover, the jury could consider it despicable of Robson to allow Colucci, who was suffering severe back pain, to leave the store under the belief that he was permitted to go on medical leave, and then turn around and use Colucci’s inability to complete an interview that day as a basis for firing him. The record supports that Robson willfully and consciously retaliated against Colucci, in violation of Colucci’s right to complain of discrimination. (Cf. Commodore Home Systems, Inc. v. Superior Court (1982) 32 Cal.3d 211, 220-221, 185 Cal.Rptr. 270, 649 P.2d 912 [punitive damages recoverable under Civ. Code § 3294 in racially-motivated terminations].)
…
[T]here is evidence in this case that T-Mobile attempted to hide its reason for terminating Colucci. Supervisor Robson did not ever admit he was retaliating against Colucci because Colucci had complained about him; Robson maintained that the only reason Colucci was terminated was due to a conflict of interest. As we have noted, the jury could infer that the conflict-of-interest rationale was contrived for many reasons, including that no one at T-Mobile had even asked Colucci about the underlying facts of the supposed conflict prior to firing him. Consequently, the jury in this case could reasonably find that Robson’s retaliatory conduct was malicious or oppressive. (Cloud v. Casey (1999) 76 Cal.App.4th 895, 912, 90 Cal.Rptr.2d 757 [evidence that a decision maker attempted to hide an improper basis for termination with a false explanation is contemptible and supports a finding of willful conduct].)
Id. at 456.
Amount of punitive damages
The Court of Appeal focused on the absence of evidence of a pattern of retaliation against employees in holding that the reprehensibility was low for purposes of punitive damages:
Notwithstanding the harm to Colucci from Robson’s actions, there is no hint in the record that T-Mobile engaged in a calculated pattern of retaliation against its employees. In fact, it was undisputed that T-Mobile maintained an integrity line to receive employee complaints; the company had a variety of policies and procedures ostensibly designed to prevent workplace misconduct; and managers and employees were trained on T-Mobile’s employment policies.
Taking into account all five reprehensibility factors set out in State Farm, supra, 538 U.S. at page 419, 123 S.Ct. 1513, we conclude that T-Mobile's conduct warrants the imposition of sanctions to achieve punishment or deterrence, but the reprehensibility of T-Mobile’s conduct was in the low to moderate range of wrongdoing that can support an award of punitive damages under California law.
Id. at 458 (italics in original).
Where an award of compensatory damages are substantial, a lower ratio, perhaps even just 1:1, can reach the outermost limit of due process. Id. at 458, citing State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408, 425 (2003).
Because the compensatory damages were “substantial” at over a million dollars, the court of appeal noted that “[t]he jury’s award for noneconomic harm ‘may have reflected the jury’s indignation at [T-Mobile’s] conduct, thus including a punitive component.’ [citation] We are cognizant that a large amount of damages awarded for emotional distress may itself serve as a deterrent to further corporate misconduct. [citation]” See id. at 459.
The court then limited the ratio to 1.5 to 1:
In Roby, at page 719, 101 Cal.Rptr.3d 773, 219 P.3d 749, the court applied a one-to-one ratio between punitive and compensatory damages where there was relatively low corporate reprehensibility and a substantial award of noneconomic damages. Given the low to moderate range of reprehensibility of T-Mobile’s conduct here, we conclude that a 1.5-to-one ratio between punitive and compensatory damages is the federal constitutional maximum.
Id.
The Colucci court did note that the $300,000 limit for noneconomic recovery in Title VII cases was not an appropriate comparison and that T-Mobile had therefore not established a relevant civil penalty for comparison purposes. See id.
The court reiterated: “[C]olucci’s compensatory award appeared to already contain a punitive component.” Id. And it was “satisfied” (without explaining why) that a punitive-damages award at the lower 1.5-to-1, or $1,530,063 (instead of the $4 million awarded by the jury) “achieves an appropriate deterrent effect.” Id. at 459-460.
The Colucci court remanded with instructions to reduced the punitive-damages award to $1,530,063 (1.5 times the amount of compensatory damages) and affirmed in all other respects. Id. at 461-462.
Takeaways above.