Judge: Christopher K. Lui, Case: 23STCV31391, Date: 2025-03-12 Tentative Ruling

Case Number: 23STCV31391    Hearing Date: March 12, 2025    Dept: 76

            Plaintiff alleges that he was threatened by a co-worker and he was subjected to supervisor’s sexual harassment of female employees and himself. Plaintiff reported this conduct to HR, but nothing was done, so Plaintiff resigned. Plaintiff also alleges wage and hour violations.

            Defendants Lithia Motors, Inc. and Sherman Oaks-B, Inc. move to strike portions of the Second Amended Complaint.

TENTATIVE RULING

Defendants Lithia Motors, Inc. and Sherman Oaks-B, Inc.’s motion to strike portions of the Second Amended Complaint is GRANTED as to all, with leave to amend as to Defendant Lithia Motors, Inc. but DENIED as to all as to Defendant Sherman Oaks-B, Inc. as to the following: 

Punitive Damage claims at Paragraph 58, page 9, lines 8 through 9; Paragraph 59, page 10, lines 10-18; Paragraph 60, page 10, lines 19-21; Paragraph 68, page 10, lines 15-20; Paragraph 72, page 11, lines 1-2; Paragraph 73, page 11, lines 3-11; Paragraph 74, page 11, lines 12-14; Paragraph 85, page 12, lines 13-14; Paragraph 85, page 12, lines 15-23; Paragraph 86, page 12, lines 24-26; Paragraph 100, page 15, lines 1-6; Paragraph 101, page 15, lines 7-10; Paragraph 115, page 17, lines 11-19; Paragraph 116, page 17, lines 20-23; Paragraph 127, page 18, line 26 through page 19, line 6; Paragraph 128, page 19, lines 7 through 11; Paragraph 140, page 20, line 25 through page 21, line 6; Paragraph 141, page 21, lines 7 through 11; Paragraph 151, page 22, lines 6 through 14; Paragraph 152, page 22, lines 15 through 19; Paragraph 194, page 28, lines 22 through 26; Paragraph 195, page 28, line 27 through page 29, line 2; Prayer for Damages, Paragraph 5, page 29, line 13:

Plaintiff is given 30 days’ leave to amend.

ANALYSIS:

Motion To Strike

Meet and Confer

            The Declaration of Matthew Noel indicates that Defendants’ counsel satisfied the meet and confer requirement set forth in Civ. Proc. Code, § 435.5.

Discussion

            Defendants move to strike the following portions of the 2AC:

¿        Punitive Damage claims at Paragraph 58, page 9, lines 8 through 9; Paragraph 59, page 10, lines 10-18; Paragraph 60, page 10, lines 19-21; Paragraph 68, page 10, lines 15-20; Paragraph 72, page 11, lines 1-2; Paragraph 73, page 11, lines 3-11; Paragraph 74, page 11, lines 12-14; Paragraph 85, page 12, lines 13-14; Paragraph 85, page 12, lines 15-23; Paragraph 86, page 12, lines 24-26; Paragraph 100, page 15, lines 1-6; Paragraph 101, page 15, lines 7-10; Paragraph 115, page 17, lines 11-19; Paragraph 116, page 17, lines 20-23; Paragraph 127, page 18, line 26 through page 19, line 6; Paragraph 128, page 19, lines 7 through 11; Paragraph 140, page 20, line 25 through page 21, line 6; Paragraph 141, page 21, lines 7 through 11; Paragraph 151, page 22, lines 6 through 14; Paragraph 152, page 22, lines 15 through 19; Paragraph 194, page 28, lines 22 through 26; Paragraph 195, page 28, line 27 through page 29, line 2; Prayer for Damages, Paragraph 5, page 29, line 13:

 GRANTED as to all, with leave to amend as to Defendant Lithia Motors, Inc. but DENIED as to all as to Defendant Sherman Oaks-B, Inc.

            Defendants argue that the punitive damage allegations are not sufficiently pled as against corporations, including identifying any officers, directors or managing agents who engaged in malice, oppression or fraud.

            Defendants also argue that there are no allegations that Chapman was employed by LMI.

Civil Code § 3294(c) defines malice, oppression and fraud:

(1) ‘Malice’ means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.

(2) ‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.

(3) ‘Fraud’ means an intentional misrepresentation, desceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

     (Civil Code, § 3294(c)(1)-(3) [bold emphasis added].)

            To withstand a motion to strike punitive damages allegations, the complaint must set forth facts supporting a claim for punitive damages:

The mere allegation an intentional tort was committed is not sufficient to warrant an award of punitive damages.  (Citation omitted.)  Not only must there be circumstances of oppression, fraud or malice, but facts must be alleged in the pleading to support such a claim. 

     (Grieves v. Superior Court (Fox) (1984) 157 Cal.App.3d 159, 166 [emphasis added].)

            Civil Code, § 3294(b) provides:

(b) 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.

     (Civ. Code § 3294(b)[bold emphasis added].)

In White v. Ultramar (1999) 21 Cal.4th 563, the Supreme Court clarified that the amount of actual authority over decisions affecting corporate policy is the key to determining whether a person is a “managing agent” for purposes of Civil Code § 3294:

We therefore conclude that in amending section 3294, subdivision (b), the Legislature intended that principal liability for punitive damages not depend  [*577]  on employees' managerial level, but on the extent to which they exercise substantial discretionary authority over decisions that ultimately determine corporate policy. Thus, supervisors who have broad discretionary powers and exercise substantial discretionary authority in the corporation could be managing agents. Conversely, supervisors who have no discretionary authority over decisions that ultimately determine corporate policy would not be considered managing agents even though they may have the ability to hire or fire other employees. 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. 

Id. at 576-77 (bold emphasis added).

            Here, the allegations at ¶¶ 59, 73, 85, 100, 115, 127, 140, 151, 194 that Chapman was General Manager of Sherman Oaks-B, Inc. who exercised substantial discretionary authority over decisions that determine corporate policy and was aware of the Plaintiff’s complaints about Achilles and Ethan’s harassment, but failed to discipline them, is sufficient to plead a basis for punitive damages as against Sherman Oaks-B under the standard set forth in Civ. Code, § 3294(b), based on a ratification theory.

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.

The issue commonly arises where the employer or its managing agent is charged with failing to intercede in a known pattern of workplace abuse, or failing to investigate or discipline the errant employee once such misconduct became known. (See, e.g., Roberts v. Ford Aerospace & Communications Corp. (1990) 224 Cal.App.3d 793, 800-801 [274 Cal. Rptr. 139] [management knows Black employee is racially abused by colleagues at work and fires him after he complains]; Hart v. National Mortgage & Land Co. (1987) 189 Cal.App.3d 1420, 1432-1433 [235 Cal.Rptr. 68] [management fails to stop known on-the-job sexual harassment of employee by coworkers]; Greenfield v. Spectrum Investment Corp. (1985) 174 Cal.App.3d 111, 118-121 [219 Cal.Rptr. 805], overruled on other grounds in Lakin v. Watkins Associated Industries (1993) 6 Cal.4th 644, 664 [25 Cal.Rptr.2d 109, 863 P.2d 179] [employee is retained even though management knows about his violent temper and assault upon a customer at work]; Hale v. Farmers Ins. Exch. (1974) 42 Cal.App.3d 681, 691-692 [117 Cal.Rptr. 146] , overruled on other grounds in Egan, supra, 24 Cal.3d 809, 822, fn. 5 [insurer directs, reviews, and approves malicious claims settlement practices]; Schanafelt v. Seaboard Finance Co. (1951) 108 Cal.App.2d 420, 423-424 [239 P.2d 42] [employee follows finance company's directions and falsely imprisons pregnant customer while collecting on delinquent loan].) Corporate ratification in the punitive damages context requires actual knowledge of the conduct and its outrageous nature.

(College Hospital Inc. v. Superior Court (1994) 8 Cal.4th 704, 726.)

            Plaintiff will be permitted to conduct discovery as to whether Chapman was in fact a managing agent of Sherman Oaks-B, Inc. for purposes of Civil Code, § 3294(b).

            However, there are no allegations that Chapman was employed by LMI, and no facts plead as to why punitive damages are warranted as against LMI. Plaintiff will be given one more opportunity to amend as to punitive damages against LMI.

            Plaintiff is given 30 days’ leave to amend.