In a recent unpublished opinion, California’s 2nd District Court of Appeal
handed down a potentially significant opinion on the application of
In Morgan v. J-M Manufacturing Co. (Case. No. B297393), the court
reversed an award of punitive damages because plaintiffs had failed to
identify any particular officer, director or managing agent responsible for
any of the alleged wrongs, sufficient to sustain a punitive damage award.
Although the Morgan decision does not change the state of the law per se, it is a win for corporate or organizational defendants in
that it highlights that plaintiffs must do more than simply show that it is
possible that pervasive conduct existed, giving rise to the punitive
The background of the litigation is straightforward: A married couple sued
a host of defendants for damages based on the husband’s alleged exposure to
asbestos. When the trial date arrived, only defendant J-M Manufacturing and
one other defendant remained. Before closing argument, plaintiffs settled
with the other defendant. The jury eventually awarded over $15 million in
compensatory damages, attributing 45 percent to J-M, and an additional $15
million in punitive damages, finding that J-M had acted with malice,
oppression or fraud. On appeal, the court upheld the liability findings,
but reversed the punitive damages award.
At issue was whether plaintiffs had put forward sufficient evidence to
demonstrate that an officer, director or managing agent of J-M acted with
the requisite mens rea to support a punitive damages award.
Plaintiffs contended that they need not identify particular actions by any
particular officer, director or managing agent to hold J-M liable for
punitive damages because the “entire organization was involved in the acts
giving rise to malice.” Instead, plaintiffs contended that they need only
show that the actions pervaded the entire company.
The Court of Appeal held that was not the case. Supporting its decision,
the court pointed to plaintiffs’ utter failure to address J-M’s corporate
and governance structure, lumping all J-M affiliates and employees
together, and referring to those affiliates and individuals only in the
plural — as “they” — throughout trial. The Court of Appeal clearly stated
that the decision was not that plaintiffs could never put forward
sufficient evidence supporting a punitive damages award, but rather that
plaintiffs had not done so in this case.
Despite being unpublished and (ostensibly) staying the course with relevant
legal standards, the opinion does offer a positive outlook for the
application of punitive damages awards in California. Plaintiffs must do
more than simply demonstrate that an entire organization was involved in
the actions giving rise to punitive damages, but also must somehow connect
those actions to specific individuals or structures demonstrating corporate
knowledge. This makes sense. The point of punitive damages is to punish the
wrongdoer. Absent specific evidence, a company or organization could be
punished for simply being a company or organization.