White v. Ultramar, Inc.

• Citation: 981 P.2d 944,88 Cal.Rptr.2d 19,21 Cal.4th 563
• Decision Date: 23 August 1999
• Docket Number: No. S070177,S070177
• Court: United States State Supreme Court (California)
• Parties: , 981 P.2d 944, 15 IER Cases 775, 1999 Daily Journal D.A.R. 8693 Thomas M. WHITE, Plaintiff and Respondent, v. ULTRAMAR, INC., Defendant and Appellant

Page 19

88 Cal.Rptr.2d 19

21 Cal.4th 563, 981 P.2d 944, 15 IER Cases 775,

1999 Daily Journal D.A.R. 8693

Thomas M. WHITE, Plaintiff and Respondent, v. ULTRAMAR, INC., Defendant and Appellant.

No. S070177.

Supreme Court of California

Aug. 23, 1999.

Seyfarth, Shaw, Fairweather & Geraldson, William J. Dritsas, San Francisco, David D. Kadue, Los Angeles, and Michael J. Sears, San Francisco, for Defendant and Appellant.

Littler, Mendelson, David S. Durham, San Francisco, Henry D. Lederman, Walnut Creek, and Arthur M. Eidelhoch, San Francisco, for Beverly Enterprises-California, Inc., as Amicus Curiae on behalf of Defendant and Appellant.

Horvitz & Levy, Peter Abrahams, Mitchell C. Tilner and S. Thomas Todd, Encino, for the American International Companies and Fire Insurance Exchange as Amici Curiae on behalf of Defendant and Appellant.

Sidley & Austin, Jeffrey A. Berman, James M. Harris, Los Angeles, and Deborah J. Muns, for Employers Group as Amicus Curiae on behalf of Defendant and Appellant.

Paul, Hastings, Janofsky & Walker, Paul Grosssman, George W. Abele, Los Angeles, and Christina L. McEnerney, for California Employment Law Council as Amicus Curiae on behalf of Defendant and Appellant.

Larabee & Loadman and Dale R. Larabee, San Diego, for Plaintiff and Respondent.

Law Offices of Ian Herzog, Santa Monica, Evan D. Marshall, Ian Herzog, Santa Monica; Douglas Devries, Sacramento; Bruce Broilett; Christine Spagnoli, Santa Monica;, Roland Wrinkle, Woodland Hills; Wayne Mclean; James Sturdevant, San Francisco; Harvey R. Levine, San Diego; Leonard Sacks, Granada Hills; Daniel Smith; Robert Steinberg, Los Angeles; Tony Tanke, Redwood City; Deborah David, Los Angeles; Thomas G. Stolpman, Long Beach; Lea-Ann Tratten; Lawrence Drivon; William D. Turley, San Diego; Steven J. Keifield; Thor Emblem, Escondido; Mary E. Alexander, San Francisco; David Rosen; Rick Simons; Joseph Harbison III, Sacramento; Moses Lebovits, Los Angeles; and David Casey, Jr., San Diego, for Consumer Attorneys of California as Amicus Curiae on behalf of Plaintiff and Respondent.

William C. Quackenbush, San Mateo, as Amicus Curiae on behalf of Plaintiff and Respondent.

Joseph Posner; and Norman Pine, Encino, for California Employment Lawyers Association as Amicus Curiae on behalf of Plaintiff and Respondent.

CHIN, J.

We granted review to resolve a conflict in the Courts of Appeal over how to define the statutory term "managing agent" for determining corporate punitive damage liability under Civil Code section 3294, subdivision (b). ¹ Some courts, including the Court of Appeal in this case, broadly define the term to include supervisory employees who have limited decisionmaking authority, but possess the ability to hire and fire company employees. (See, e.g., Stephens v. Coldwell Banker Commercial Group, Inc. (1988) 199 Cal.App.3d 1394, 1404, 245 Cal.Rptr. 606 (Stephens ).) Others limit the term's application to those employees who exercise substantial discretion in their decisionmaking so that their decisions ultimately determine corporate policy. (See, e.g., Kelly-Zurian v. Wohl Shoe Co. (1994) 22 Cal.App.4th 397, 421-422, 27 Cal.Rptr.2d 457 (Kelly-Zurian ).)

We disagree with the Court of Appeal's conclusion that the mere ability to hire and fire employees renders a supervisory employee a managing agent under section 3294, subdivision (b). Instead, we conclude the Legislature intended the term "managing agent" to include only those corporate employees who exercise substantial independent authority and judgment in their corporate decisionmaking so that their decisions ultimately determine corporate policy. The scope of a corporate employee's discretion and authority under our test is therefore a question of fact for decision on a case-by-case basis.

As noted, we disagree with the Court of Appeal to the extent its decision conflicts with our construction of managing agent under section 3294, subdivision (b). Nonetheless, we affirm its judgment in plaintiff's favor after concluding that Lorraine Salla, defendant's zone manager and the employee who fired plaintiff, was a managing agent under the statute.

A. Facts

Plaintiff Thomas M. White (plaintiff) worked in a convenience store owned by Ultramar, Inc. (Ultramar). He was promoted to assistant manager in November 1992. The store manager, Russ Gossman, who hired plaintiff, told him employees could ignore the company's written drink policy that they could have free fountain sodas and coffee, but only if they used their own cups. The policy required employees to pay for their drinks if they used company cups. The store manager who replaced Gossman, Larry Asemka, also told plaintiff that he did not follow the store's written drink policy. Asemka was later fired. He asked plaintiff to testify at his unemployment benefits hearing, and plaintiff agreed to do so.

The hearing was in the morning; plaintiff's shift at the store did not begin until the afternoon. On the morning of the hearing, plaintiff went to the store to pick up another employee, Ernest Fimbres, who had also agreed to testify at the hearing. Plaintiff, who was not on duty at the time, entered the store and drew a soda from the soda fountain; Fimbres also took a drink from the fountain. Neither plaintiff nor Fimbres paid for the sodas even though they used company cups in violation of the company's written drink policy.

Plaintiff testified at trial that the new store manager, Thomas McKinney, saw him take the soda, that he asked plaintiff to begin his shift earlier in the day, that plaintiff agreed to do so, and that he said nothing else as plaintiff and Fimbres left the store without paying for their drinks. McKinney testified that he told plaintiff and Fimbres they were supposed to pay for the drinks. He called Salla and asked her permission to fire them when they did not. According to McKinney, Salla told him she would consult with the company's human resources department before taking any action against the employees.

Plaintiff, Salla, and Fimbres testified at Asemka's unemployment hearing. When plaintiff went to work after the hearing, McKinney told him he was suspended and ordered him to wait outside the store until Salla arrived.

According to plaintiff, when Salla arrived, she told him he "kn[e]w better than to do something like that against [her]." Plaintiff told her she could not fire him for testifying at Asemka's hearing; she replied she was firing him for stealing soda. Fimbres was also fired. Salla testified at trial that she fired plaintiff for refusing to pay for a drink. The store was equipped with a videotaping system designed to operate 24 hours a day. On the day Salla fired plaintiff, however, there was a gap of several minutes in the tape; the missing tape covered the time period when plaintiff and Fimbres got drinks in the store and McKinney, the manager, purportedly told them they had to pay.

Plaintiff sued Ultramar, claiming, inter alia, that he was wrongfully terminated in retaliation for testifying at the unemployment hearing, a violation of company policy ² and public policy under Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 164 Cal.Rptr. 839, 610 P.2d 1330 (Tameny ). The jury awarded him $42,000 in compensatory damages and $300,000 in punitive damages.

As to the punitive damages question, the jury was instructed under BAJI No. 14.74, which provides that "[a]n employee acts in a managerial capacity where the degree of discretion permitted the employee in making decisions is such that the employee's decisions will ultimately determine the business policy of the employer." The jury awarded plaintiff punitive damages after finding "by clear and convincing evidence that [Ultramar] was guilty of malice, oppression or fraud" for firing plaintiff. However, the jury was not asked to specify which Ultramar employee it found to be a managing agent. After trial, the judge granted plaintiff's motion for prevailing party attorney fees under Labor Code section 218.5 and awarded him approximately $70,000 in addition to the compensatory and punitive damages awards.

Ultramar appealed. The Court of Appeal reversed the attorney fee award, but otherwise affirmed the judgment in plaintiff's favor on his Tameny claim. The court also upheld the punitive damages award against Ultramar on the ground that Salla was a managing agent under section 3294, subdivision (b), because she was the supervisor who ultimately fired him. We granted Ultramar's petition for review, and limited our review to the punitive damages question and the construction of managing agent under section 3294, subdivision (b).

B. Background

Before its 1980 amendment, section 3294 provided: "In an action for the breach of an obligation not arising from contract, where the defendant has been guilty of oppression, fraud, or malice, express or implied, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant." (Stats.1905, ch. 463, § 1, p. 621.) The statute was originally enacted in 1872, with minor amendments in 1901 and 1905.

Courts interpreted section 3294 to mean that a California corporation was liable for punitive damages only if the corporation itself, acting through those who managed its general affairs, engaged in the requisite oppression, fraud, or malice. Although a corporation could be liable for compensatory damages for an employee's tort under the respondeat superior doctrine, the corporation was not responsible for punitive damages where it neither personally directed nor ratified the wrongful act.

As stated in an early case, "The entire basis of the doctrine of vindictive [punitive] damages is that the person, himself, who is sued has been guilty of recklessness or wickedness which amounts to a criminality that should be punished for the good of society, and as a warning to the individual; but to award such damages against the master for the...