This case arises from a dispute between a buyer and seller of undeveloped land located in the City of Malibu (the “Property”).  Plaintiff Civic Center Way, LLC (“CCW”) bought the Property from Defendant Third Point Land Company LLC (“Third Point”) for an initial purchase price of $6 million with a residual purchase price of up to $4 million.  CCW intended to convert the vacant parcel into a medical building.  CCW now seeks to rescind the sale.  CCW alleges that Third Point actively concealed a Notice of Violation (“NOV”) it had received from the City of Malibu which found violations of city environmental regulations resulting from prior brush clearing activities on the Property.  CCW contends this NOV was a material fact affecting the value of the land as it made developing the Property more difficult, expensive and potentially impossible.     

This hearing is on Defendants Third Point, Kelemen Company LLC and Tibor Kelemen’s  motion to bifurcate trial to exclude any evidence of their wealth and financial condition during the liability phase of the trial.  Defendants argue that bifurcation is mandatory pursuant to Civ. Code §3295(d) which provides that the court “shall” on application of any defendant preclude the admission of defendant’s profits or financial condition until the jury makes a finding of malice, oppression or fraud.  In the alternative, Defendants argue that bifurcation is warranted to avoid prejudice pursuant to Code Civ. Proc. §1048(b) and to promote the ends of justice pursuant to Code Civ. Proc. §598.  No opposition was filed as of the posting of this tentative ruling.             

LEGAL STANDARD 

In trials where punitive damages are claimed, bifurcation is mandatory on defendant’s motion: No evidence of defendant’s wealth (e.g., assets, income, financial condition, etc.) is admissible “until after the trier of fact returns a verdict for plaintiff awarding actual damages and finding the defendant guilty of malice, oppression or fraud in accordance with Section 3294”.  (Civ. Code §3295(d).)  This avoids the risk that defendant’s financial condition might taint the jury’s determination of the underlying liability case and the issues of oppression, fraud or malice.  (Medo v. Sup.Ct. (1988) 205 Cal.App.3d 64, 67–68.)  Bifurcation minimizes potential prejudice by preventing jurors from learning of a defendant's¿"deep¿pockets" before they determine these threshold issues.  (Torres v. Automobile Club of Southern California (1997) 15 Cal.4th 771, 778.) 

Assuming a timely motion by defendant, there are two phases in a trial where punitive damages are sought: In the first phase of the bifurcated trial, the jury considers the underlying liability case (whether plaintiff suffered actual injury, harm or damage as a proximate result of defendant’s conduct) and whether punitive damages are warranted (whether there is clear and convincing evidence that defendant is guilty of malice, oppression or fraud).  But it does not consider evidence on the amount of a punitive damages award.  (Civ. Code § 3295(d); CACI 3941, 3944, 3946, 3948; Westrec Marina Mgt., Inc. v. Jardine Ins. Brokers Orange County, Inc. (2000) 85 Cal.App.4th 1042, 1050.)  

If the jury returns a verdict in plaintiff’s favor and determines that punitive damages are warranted under the law, the second phase of the trial occurs: The jury considers what amount of punitive damages to award in light of established guidelines. (CACI 3942.)  Because the jury must determine the amount of punitive damages that will have a deterrent effect on defendant, “wealth” evidence is admissible against any defendant who was found guilty of “malice, oppression or fraud.”  (Civ. Code § 3295(d); CACI 3942.)  

“A request under Section 3295, subdivision (d) is essentially a motion in limine, and ordinarily should be made before trial.”  (Las Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal.App.3d 1220, 1241.)  Delay may waive defendant’s right to a bifurcated trial on punitive damages or to exclusion of evidence on defendant's wealth.  (Id. at 1242.) 

DISCUSSION   

Pursuant to Civil Code §3295(d), this Court must bifurcate trial upon Defendants’ application to preclude the admission of evidence of Defendants’ profits or financial condition.¿ (Torres, 15 Cal.4th at 777-778 (“section 3295(d) requires a court upon application of any defendant to bifurcate a trial so that the trier of fact is not presented with evidence of the defendant’s wealth and profits until after the issues of liability, compensatory damages, and malice, oppression or fraud have been resolved against the defendant”) (emphasis added).)  Further, bifurcating the trial would avoid juror confusion and error in evaluating Defendants’ liability for compensatory damages under the “preponderance of the evidence” standard and Defendants’ liability for punitive damages under the “clear and convincing” standard.  Bifurcation will also avoid prejudice to Defendants as evidence of their financial condition and wealth may improperly sway the juror’s deliberations.   

CONCLUSION 

Based on the foregoing, the Court GRANTS Defendants’ motion to bifurcate.    

IT IS SO ORDERED. 

DATED:  December 12, 2023