• Corporate Liability for Punitive Damages: Who are Your Managing Agents?
  • October 18, 2013
  • Law Firm: Vandeventer Black LLP - Office
  • A recent decision in the California Court of Appeal addressed whether a triable issue of material fact was presented as to whether a company's construction project manager and its equal employment opportunity officer were managing agents who engaged in or ratified wrongful conduct against an employee.

    The Lawsuit

    In Lisa Davis v. Kiewit Pacific Co., 2013 DJDAR  13494 (October 9, 2013), Lisa Davis (“Davis”) was employed by Kiewit Pacific Co. (“Kiewit”) as a box grader operator on its contract to excavate a 12-mile segment of the All American Canal (ACC) in Imperial County and line it with concrete (“Project”).  Davis was one of two female employees on an excavation crew of over 100 employees.  Davis, while working on the excavation crew had complained to her foreman, superintendents, and safety officer regarding the insufficient number of portable toilets and their location away from the job site and lack of cleanliness.  After her complaints were ignored, she also complained to Kiewit’s project manager for the Project.  According to Davis, she was again ignored.  Following her complaints, there was an incident where she discovered feces and a pornographic magazine placed in the women’s portable toilet.  Thereafter, she complained to Kiewit’s equal employment opportunity (EEO) officer regarding Kiewit not providing access to sanitary portable toilets or investigating to determine who was responsible for the incident. 

    Less than a month later, Davis was laid off along with the rest of the crew.  Kiewit rehired crew members a week later, and Davis was not among them.

    Davis filed a complaint against Kiewit, alleging causes of action for discrimination, harassment, retaliation, and failure to prevent discrimination, harassment and retaliation in violation of the Fair Employment and Housing Act (FEHA) and for non-payment of wages in violation of the Labor Code.  Davis alleged that Kiewit’s conduct was malicious and oppressive and committed and/or ratified by its managing agents to support a request for punitive damages.

    Kiewit moved for summary adjudication on Davis’s request for punitive damages.   In his declaration in support of the motion, Kiewit’s project manager stated in part:

    “I am not an officer or director of Kiewit.  As a Kiewit employee, I have never drafted corporate policy or had substantial discretionary authority over decisions that ultimately determine Kiewit’s corporate policy.  The only role that I play with respect to Kiewit’s anti-harassment policy and EEO policies is to ensure they are followed on the job.”

    Also, in his declaration in support of the motion, Kiewit’s EEO officer stated in part:

    “As a Kiewit employee, I have never had substantial discretionary authority over decisions that ultimately determine Kiewit’s corporate policy.  I do not write or recommend implementation of any human resources policies and procedures.”

    The trial court granted Kiewit’s motion on Davis’s request for punitive damages, ruling that Davis cannot recover punitive damages as a matter of law because no officer, director or managing agent of Kiewit engaged in or ratified any oppressive, malicious and/or fraudulent conduct against her.

    The California Court of Appeal Ruling

    Davis appealed the decision to the Court of Appeal.  There the Court ruled that based on the evidence presented there is a triable issue of material fact regarding whether Kiewit’s employees - project manager and EEO officer - were managing agents of Kiewit.

    Punitive damages are awarded only if “the defendant has been guilty of oppression, fraud, or malice.” California Civil Code § 3294 (a).  An employer may be liable for punitive damages based on the conduct of an
    employee if 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 bad conduct; or
    • commits an act of oppression, fraud, or malice. 

    Corporations may be held liable for the oppressive, fraudulent or malicious acts of its employees, but only for the acts or omissions of an officer, director, or managing agent of the corporation. Civil Code § 3294 (b).

    The terms “officer” and “director” are titles of corporate employees which have a clear meaning.  The status of someone as an “officer” or “director” of a corporation is not typically in dispute, and was not an issue in this case. 

    The Court cited the well-known California Supreme Court case of White v. Ultramar, Inc. (1999) 21 Cal.4th 563 in defining “managing agents” as employees who “exercise substantial discretionary authority over decisions that ultimately determine corporate policy.”  Id., at 573.  Employees are “managing agents” if they are in policymaking positions as opposed to simply implementing company policies.

    The Court found that Kiewit did not meet its initial burden to produce sufficient evidence to make a showing that there were no triable issues regarding whether Kiewit’s project manager and EEO officer were managing agents of Kiewit.  The Court reasoned that Kiewit, by simply restating the applicable legal standard in White, and in turn asserting a legal conclusion for the determination of whether Kiewit’s project manager and EEO officer were managing agents, did not satisfy its initial burden of production.

    The Court went on the reason that the evidence presented by Kiewit, particularly the declarations in support of the motion, did not contain sufficient description of the project manager and EEO officer’s job duties and responsibilities and the nature and extent of their authority and discretion, as well as their exercise of that authority and discretion, to support a reasonable inference that they did not “exercise substantial discretionary authority over significant aspects of Kiewit’s business.”

    Even if Kiewit had carried its burden, Davis had produced sufficient evidence to show a triable issue of fact. According to Davis, the project manager was the top manager in charge of the $170 million Project and all other managers reported to him. His duties included interfacing with stakeholders on the Project, contract administration, operations and personnel oversight, and making sure the Project was completed according to the contract.  According to the Court, a trier of fact could reasonably infer that the project manager exercised substantial discretionary authority over a broad range of issues involving the Project. 

    As to the EEO officer, testimony and other evidence, including the Kiewit’s EEO policy manual, showed that he was responsible for administering corporate policies on preventing discrimination, retaliation, and harassment.

    The Court found that a trier of fact could reasonably infer that the EEO officer had authority and discretion in making, interpreting, and applying Kiewit’s EEO policies on a corporate wide basis and therefore had authority and discretion to make decisions that ultimately determine corporate policy.

    The Impact of the Decision

    Whether a company will be liable for punitive damages depends on whether the employee belongs to the leadership group of officers, directors, or managing agents.  The recent decision reinforces California case law regarding what factors are determinative in establishing whether an employee is a managing agent.

    Although an employee’s hierarchy in a company is not determinative of his or her status as a managing agent of that company, an employee’s hierarchy along with management duties and responsibilities, the level and nature of authority such as the number and level of employees supervised, the amount of discretion provided and the ability to set company policy are determinative factors in whether an employee is a managing agent.

    The important take away from this decision is that in moving for summary judgment/adjudication on the issue of punitive damages sought against a company, factual evidence regarding the employee’s lack of broad discretion and policy-making authority rather than conclusory statements of law is essential.