Personal Injury Lawyer Blog

(Please note: the names and locations of all parties have been changed to protect the confidentiality of this wrongful death case and its proceedings.)

The Kentucky Supreme Court reversed a punitive damages award and remanded for a new trial in a suit against an insurance company alleged to have made a bad-faith effort to settle a auto-injury claim, because the trial court improperly admitted evidence of the defendant’s allegedly similar effort to stonewall another claimant. Citing State Farm, the court held that the evidence was improperly admitted because the Constitution sharply limit[s] the use of evidence of other transgressions to prove entitlement to punitive damages. Ky. Farm Bureau Mut. Ins. Co. v. Rodgers, 179 S.W.3d 815, 819 (Ky. 2005).

In each of the above cases, just as in this case, the plaintiff wished to tell the jury about other acts the defendant committed, beyond the acts that caused the harm for which compensatory damages were awarded. In each of the above cases, just as in this case, there was a plausible connection between those acts and the conduct that harmed the plaintiff. In each of the above cases, just as in this case, the plaintiff was able to describe a course of conduct that encompassed both the conduct that harmed him and the evidence of other acts. And in each of the above cases, the appellate courts eventually held that it was error to admit the evidence of other acts.

Indeed, there are striking parallels between the evidence that plaintiff wants to introduce here and the evidence at issue in the above cases. Just as the plaintiff in this case argues that USA Tobacco engaged in a decades-long scheme of fraudulently inducing consumers to buy dangerous defective products, the plaintiff in State Farm claimed that the defendant had a national scheme to meet corporate fiscal goals by capping payouts on claims company wide. And just as plaintiff in this case argues that USA Tobacco blames anything and anyone except itself for the results of its conduct, the Holdgrafer plaintiffs argued that the evidence of other oil spills demonstrated a company policy of denying responsibility for such accidents. Time and again, the appellate courts have rejected these arguments. Even where other bad acts are sufficiently connected to the conduct that harmed the plaintiff to be marginally relevant to demonstrate the reprehensibility of that conduct, the potential for prejudice usually far outweighs the probative value.

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(Please note: the names and locations of all parties have been changed to protect the confidentiality of this wrongful death case and its proceedings.)

H. Universal Fails to Negate Plaintiffs’ Fraud/Conspiracy and Punitive Damages Claims

To satisfy its initial burden, Universal must either negate a necessary element of each of plaintiffs’ causes of action or demonstrate that under no hypothesis is there a material issue of fact that requires the process of trial. [Ann M. v. Pacific Plaza Shopping Center (1993) 6 Cal.4th 666, 673-674.] Universal fails to show with competent evidence any lack of proof that Tina Gomez was exposed to Universal’s asbestos-containing, or otherwise, defective product. Regardless, plaintiffs need not prove that Ms. Gomez was exposed to asbestos from Universal products to recover against Universal for injuries stemming from its participation in a conspiracy to suppress from Ms. Gomez, and others similarly situated, material information about asbestos-related health hazards. Hence, Universal may be liable to plaintiffs here from Ms. Gomez’s exposure to any asbestos from any source as a result of the conspiracy in which Universal participated.

The elements of a civil conspiracy are an agreement, a wrongful act by any of the conspirators pursuant to the agreement, and damages. [Stone v. Regents of University of Cal. (1999) 77 Cal.App.4th 736, 748 fn. 9 (emphasis added).] The active concealment of facts by even a non-fiduciary (such as Universal here) is the equivalent of a false representation, i.e., actual fraud. [5 Witkin, Cal. Procedure (4th ed. 1997) Pleading § 678, p. 136 (emphasis added).] In a case directly on point, it was held that a viable fraud cause of action was stated against multiple defendants who were accused of having intentionally concealed the ingredients of a defective product. [Quirici v. Freeman (1950) 98 Cal.App.2d 194, 201; Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 964; Committee on Children’s Television v. General Foods (1983) 35 Cal.3d 197, 218-219.]
Likewise, punitive damages may be based upon fraudulent conduct, and upon a defendant’s knowing failure to warn of hazards. [Civ. Code § 3294; Hilliard v. A.H. Robins Co. (1983) 148 Cal.App.3d 374, 40091.]

Universal shows no lack of proof that it knowingly concealed asbestos-related hazards associated with its products. Indeed, none of the 26 purported facts in Universal’s separate statement address, involve, or discuss plaintiffs’ fraud, conspiracy-to-defraud and punitive damages claims.

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(Please note: the names and locations of all parties have been changed to protect the confidentiality of this personal injury case and its proceedings.)

3. Other cases
Holdgrafer is far from the only post-State Farm appellate decision vacating a punitive award after holding that other acts evidence was improperly admitted. Courts around the country have repeatedly done the same:
The Arkansas Supreme Court ordered a new trial on punitive damages in a case brought against a chemical manufacturer by farmers whose wheat crops were rendered unfit for sale when they were sprayed with an insecticide that was later determined to be unsafe for use on wheat. The plaintiffs had introduced evidence that the defendant had recommended the product for use not only on plaintiffs’ farms, but also on various other farms in Mississippi. The Court held that this evidence should not have been admitted, because it improperly invited the jury to impose punishment for conduct that harmed farmers other than the plaintiff. See FMC Corp. v. Helton, 360 Ark. 465 (2005).
The Indiana Court of Appeals vacated a punitive award in a negligence suit brought against a drunk driver because the trial court had allowed the jury to hear evidence of the defendant’s other DUI arrests. That court recognized that evidence of the defendant’s similar acts might, in rare situation[s], assist the jury in determining the level of punitive damages necessary to deter future transgressions. But, citing State Farm, the court held that any relevance which [the defendant’s] subsequent acts could have had upon the issue of punitive damages was substantially outweighed by the danger that the jury would use this evidence to punish [him] for his subsequent acts instead of the conduct that gave rise to [the plaintiffs] actual damages. Wohlwend v. Edwards, 796 N.E. 2d 781,785, 787 (Ind. Ct. App. 2003).

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(Please note: the names and locations of all parties have been changed to protect the confidentiality of this wrongful death case and its proceedings.)

G. Universal Fails to Negate Plaintiffs’ Premises Liability Claims

Universal fails to show any lack of proof that it: (1) required the use of any asbestos-containing products at the West Facility; (2) managed the operative details of David Plaza’s work such that the asbestos-containing dust on his person and clothes exposed Tina Gomez to asbestos; (3) negligently failed to warn or abate concealed hazards; or (4) negligently hired or managed other workers that negligently handled asbestos-containing materials.

Universal ignores that it owned and operated the West Facility when David Plaza performed brake work, which inevitably included the removal and installation of asbestos-containing brakes, at that store during 1981 through March 1982. As Universal’s PMK and counsel readily admit, Universal controlled the operative details of the work at the West Facility when that store was company owned. Thus, triable factual issues exist as to whether Universal is liable for negligently: (1) exercising the control it retained of the work at the West Facility that eventually exposed Tina Gomez to asbestos; and (2) failing to warn of or abate concealed asbestos-related defects. [Kinsman v. Unocal Corp. (2005) 37 Cal.4th 659; Grahn v. Tosco Corp. (1997) 58 Cal.App.4th 1373.]
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(Please note: the names and locations of all parties have been changed to protect the confidentiality of this wrongful death case and its proceedings.)

After hearing this evidence and argument, the jury returned a $10 million punitive award that the trial court reduced to $5 million. The Second District reversed, holding that it was error for the trial court to admit evidence of the two other spills. Even though that evidence also involved damage from oil spills and Unocal’s refusal to compensate landowners for their damages in a timely manner, the other cases were different from the Holdgrafers’: they involved different kinds of leaks, different kinds of contamination, different company personnel, different responses, and different methods of avoiding responsibility. The Court of Appeal therefore held that the evidence was too dissimilar to shed significant light on the reprehensibility of the conduct that had actually harmed the plaintiff, and that to the extent it was marginally relevant, its potential for prejudice far outweighed its probative value. (See Cal. Evid. Code § 352.) The court vacated the award and remanded for a new trial on punitive damages.

This reasoning tracks the California courts’ application of Evidence Code § 1101, which provides that character evidence is inadmissible to prove that the defendant engaged in misconduct consistent with that bad character on the occasion at issue in the trial. In Clark v. Optical Coating Lab., Inc., 165 Cal. App. 4th 150 (2008), the First District explained that Section 1101 applies to corporate defendants and precludes a plaintiff from offering evidence of a defendant’s other bad acts absent a showing of distinctive similarities or common features between the two instances of conduct. Id. at 175. Applying that rule, the court held that evidence of groundwater contamination at the defendant’s own facility was inadmissible in support of the plaintiffs’ claim that the defendant had disposed of chemicals improperly on the plaintiffs’ property. Id. at 174-75.

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(Please note: the names and locations of all parties have been changed to protect the confidentiality of this wrongful death case and its proceedings.)

F. Universal Exercised Complete or Substantial Control Over the Franchisee
Courts focus on the right to control in determining whether a true agency relationship exists between a franchisor and franchisee. [Wickham v. Southland Corp. (1985) 168 Cal.App.3d 49, 59; Nichols v. Arthur Murray, Inc. (1967) 248 Cal.App.2d 610, 613.] If the franchise agreement gives the franchisor the right of complete or substantial control over the franchisee, an agency relationship exists. [I]t is the right to control the means and manner in which the result is achieved that is significant in determining whether a principal-agency relationship exists. [Cislaw v. Southland Corp. (1992) 4 Cal.App.4th 1284, 1288 (emphasis in original).] The inquiry on this point is a factual one that rests on the extent to which the franchisor retained and exercised control of the operational details of the franchisee’s business. [Id. at 1292-1296.]

Universal fails to show with any admissible evidence that the West Facility was a Universal franchise during 1982 and 1983. California case law is clear that an agency relationship does not exist between a franchisor and a franchisee unless the franchise agreement gives the franchisor the right of complete or substantial control over the franchisee. [Cislaw, supra, 4 Cal.App.4th 1284, 1288.] Universal fails to provide a copy of any franchise agreement for the West Facility. This is no small matter because the terms of the agreement determine whether the franchisee acted as an agent of the franchisor. [Id. at 1288, 1294-1295.] Based on the testimony of Linda Snowball, Richard Leevers and Edwin Ferguson, it is questionable whether a West Facility Franchise Agreement even exists.

Instead of presenting a franchise agreement for the West Facility, Universal instead relies on the inadmissible declarations of Richard Stein and David Ferguson, an exemplar of a franchise agreement for the Baldwin Facility and a copy of the West Facility Sublease. Such evidence is insufficient. Without a franchise agreement for the West Facility, this Court is in no position to determine whether: (1) the West Facility was, in fact, a Universal franchise; or (2) the terms of a franchise agreement for the West Facility, if it exists, are substantially the same as the Baldwin Facility Franchise Agreement.

The discovery issues presented here are common to most personal injury cases.)

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