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CRST, Inc. v. Superior Court (Matthew John Lennig)

California Court of Appeals, Second District, Fourth Division

May 26, 2017

CRST, INC., et al., Petitioners,
v.
THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent MATTHEW JOHN LENNIG et al., Real Parties in Interest.

         ORIGINAL PROCEEDINGS in mandate. Bryan C. Yep, Judge, Los Angeles County Super. Ct. No. MC025288 Petition granted.

          Bassl, Edlin, Huie & Blum, Fred M. Blum, Michael E. Gallagher and Lisa M. Stevenson; Greines, Martin, Stein & Richland, Robert A. Olson, Cynthia E. Tobisman and Alan Diamond; Yoka & Smith, Christopher E. Faenza and Benjamin A. Davis for Petitioners.

          Parris Law Firm, R. Rex Parris, Bruce L. Schechter and Khail A. Parris; Grignon Law Firm, Margaret M. Grignon and Anne M. Grignon for Real Parties In Interest.

          MANELLA, J.

         This case arises from a vehicular accident in which a freightliner driven by petitioners' employee struck a vehicle, causing serious injuries to the passengers, real parties in interest Matthew and Michael Lennig. The Lennigs brought negligence claims against the employee and petitioners and sought punitive damages. After admitting vicarious liability for any negligence by their employee, petitioners sought summary adjudication on claims against them for negligent hiring and entrustment, contending that under Diaz v. Carcamo (2011) 51 Cal.4th 1148 (Diaz), their acknowledgment of vicarious liability barred such claims. Additionally, both petitioners and the employee sought summary adjudication on the requests for punitive damages. The trial court granted summary adjudication in favor of the employee as to the request for punitive damages against him, but denied petitioners' motion for summary adjudication in its entirety.

         Petitioners sought writ relief, challenging the trial court's denial of summary adjudication only as to the Lennigs' requests for punitive damages. We conclude that petitioners' admission of vicarious liability does not bar recovery of punitive damages, but further conclude there are no triable issues of fact which, if resolved in the Lennigs' favor, could subject petitioners to punitive damages. Accordingly, we grant the petition for writ of mandate.

         FACTUAL AND PROCEDURAL BACKGROUND

         In 2014, Hector Contreras was employed as a truck driver by petitioners CRST, Inc., CRST Expedited, Inc., CRST Van Expedited, Inc., and CRST Lincoln Sales, Inc. (CRST). On July 7, 2014, he drove a CRST freightliner on the Interstate 14 freeway. As he passed through a construction area known as the Red Rock Canyon Bridge project, he collided with a car containing Matthew and Michael Lennig. Following the accident, CRST terminated Contreras.

         In March 2015, the Lennigs initiated the underlying personal action. Their third amended complaint (TAC), filed July 5, 2016, contained claims for negligence and loss of consortium against Contreras, CRST, and other defendants. Of those claims, only the following are pertinent here: the first cause of action against Contreras and CRST for negligent operation of a motor vehicle; the fourth cause of action against CRST for negligent hiring, supervision, and retention; the fifth cause of action against Contreras for negligent infliction of emotional distress; and the seventh cause of action against CRST for negligent entrustment.[1] Each claim included a request for punitive damages.

         Contreras sought summary adjudication on the request for punitive damages accompanying the first and fifth causes of action, and CRST separately sought summary adjudication on the fourth and seventh causes of action and the requests for punitive damages accompanying the first, fourth, and seventh causes of action. Contreras contended the requests for punitive damages against him failed for want of evidence to support the TAC's key allegation regarding those requests, namely, that he was intoxicated when the collision occurred. CRST maintained that under Diaz, the fourth and seventh causes of action should be dismissed because CRST admitted vicarious liability for any negligent driving by Contreras. CRST also challenged the requests for punitive damages, arguing that its conduct did not meet the standards for an award of punitive damages, as set forth in Civil Code section 3294.[2]

         The trial court granted summary adjudication in Contreras's favor, concluding that no triable issues existed whether he was under the influence of drugs or alcohol at the time of the collision, but denied CRST's motion for summary adjudication in its entirety. On January 23, 2017, CRST filed its petition for writ of mandate, prohibition, or other relief, challenging the trial court's denial of summary adjudication only as to the requests for punitive damages. We issued an alternative writ of mandate directing the court's and parties' attention to Diaz, and imposed a temporary stay.

         DISCUSSION

         CRST contends the trial court erred in denying summary adjudication on the requests for punitive damages against it accompanying the first, fourth, and seventh causes of action. CRST asserts (1) that Diaz bars the recovery of punitive damages in view of CRST's acceptance of vicarious liability, and (2) that there are no triable issues regarding the propriety of an award of punitive damages under section 3294. As explained below, we reject CRST's contention regarding Diaz, but agree with its second contention.

         A. Standard of Review

         “An order denying a motion for summary adjudication may be reviewed by way of a petition for writ of mandate. [Citation.] Where the trial court's denial of a motion for summary judgment will result in trial on non-actionable claims, a writ of mandate will issue. [Citations.] Likewise, a writ of mandate may issue to prevent trial of non-actionable claims after the erroneous denial of a motion for summary adjudication. [¶] Since a motion for summary judgment or summary adjudication ‘involves pure matters of law, ' we review a ruling on the motion de novo to determine whether the moving and opposing papers show a triable issue of material fact. [Citations.] Thus, the appellate court need not defer to the trial court's decision. ‘“We are not bound by the trial court's stated reasons, if any, supporting its ruling; we review the ruling, not its rationale.”'[3] [Citations.]” (Travelers Casualty & Surety Co. v. Superior Court (1998) 63 Cal.App.4th 1440, 1450.)

         B. Governing Principles

         Because the key issues before us concern the extent to which CRST's admission of vicarious liability shields it from an award of punitive damages, we examine the principles governing an employer's vicarious liability for damages. Under the doctrine of respondeat superior, “an employer is vicariously liable for the torts of its employees committed within the scope of the employment.” (Lisa M. v. Henry Mayo Newhall Memorial Hospital (1995) 12 Cal.4th 291, 296.) The employer is thus liable for the compensatory damages attributable to the employee's misconduct, even when the employer is “innocent” of fault. (Miller v. Stouffer (1992) 9 Cal.App.4th 70, 84, italics omitted.) The rationale for the doctrine closely parallels the justification for imposing strict products liability on nonnegligent product manufacturers. (Far West Financial Corp. v. D & S Co. (1988) 46 Cal.3d 796, 813, fn. 13.) As our Supreme Court has explained, “‘[t]he losses caused by the torts of employees, which as a practical matter are sure to occur in the conduct of the employer's enterprise, are placed upon that enterprise itself, as a required cost of doing business.'” (Ibid., quoting Prosser & Keeton on Torts (1984) § 69, p. 500 [fns. omitted].)

         The special features of vicarious liability determine the employer's share of liability for compensatory damages under the comparative fault system, which allocates liability for tort damages in direct proportion to fault.[4] (Diaz, supra, 51 Cal.4th at pp. 1152, 1156.) As noted above, the respondeat superior doctrine attributes liability for compensatory damages to an employer, independent of any fault on the employer's part. Accordingly, within the comparative fault system, when an employer is liable solely on a theory of respondeat superior, “the employer's share of liability for the plaintiff”s damages corresponds to the share of fault that the jury allocates to the employee.” (Id. at p. 1157.)

         In contrast, under the respondeat superior doctrine, the employer is not liable for punitive damages absent fault or misconduct on the employer's part. (College Hospital Inc. v. Superior Court (1994) 8 Cal.4th 704, 724, fn. 11 (College Hospital); Weeks v. Baker & Mckenzie (1998) 63 Cal.App.4th 1128, 1155 (Weeks); Merlo v. Standard Life & Acc. Ins. Co. (1976) 59 Cal.App.3d 8, 18 (Merlo).) Unlike compensatory damages, which seek to make the plaintiff whole, punitive damages are intended to deter general types of misconduct. (College Hospital, supra, 8 Cal.4th at p. 712.) California courts have long held that punitive damages may, under appropriate circumstances, be recoverable for nondeliberate or unintentional torts, including actions in which the theory of recovery for compensatory damages from the defendant is based on strict products liability (Grimshaw v. Ford Motor Co. (1981) 119 Cal.App.3d 757, 810 (Grimshaw)) or vicarious liability(see Merlo, supra, 59 Cal.App.3d at p. 18). Accordingly, upon a suitable demonstration of employer misconduct, a vicariously liable employer may be subject to an award of punitive damages when an employee was negligent. (Farvour v. Geltis (1949) 91 Cal.App.2d 603, 604-606; see Nolin v. National Convenience Stores, Inc. (1979) 95 Cal.App.3d 279, 284-289.)

         The standard of misconduct for the recovery of punitive damages from a vicariously liable employer has been refined and modified. (See Weeks, supra, 63 Cal.App.4th at pp. 1148-1149.) Prior to the enactment of the current version of section 3294, California courts followed the rule stated in the Restatement of Torts section 909, which permits the imposition of punitive damages on an employer in several circumstances, including when “‘“the [employee] was unfit and the [employer] was reckless in employing him....”'”[5] (Weeks, supra, 63 Cal.App.4th at pp. 1148-1149; Merlo, supra, 59 Cal.App.3d at p. 18; see College Hospital, supra, 8 Cal.4th at p. 723.)

         The requisite employer misconduct is now specified in subdivision (b) of section 3294, which states that an employer may be liable for punitive damages when “‘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....'” (Weeks, supra, 63 Cal.App.4th at p. 1148.) The statute further provides that “‘[w]ith 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.'” (Ibid.) An award of punitive damages under the statute must be supported by findings made on clear and convincing evidence. (Barton v. Alexander Hamilton Life Ins. Co. of America (2003) 110 Cal.App.4th 1640, 1644.)

         C. Diaz does not bar the recovery of punitive damages

         We begin with the issue to which we directed the parties' attention, viz., whether under Diaz, CRST's admission of vicarious liability precludes the recovery of punitive damages against it.[6] Because the material facts here are undisputed, the key issues before us concern the application of Diaz to section 3294, subdivision (b).

         In Diaz, the Supreme Court's focus was on a rule set forth in Armenta v. Churchill (1954) 42 Cal.2d 448 (Armenta), which was decided before the adoption of the comparative fault system. Armenta involved a wrongful death action in which the plaintiff sought compensatory damages from the driver of a dump truck and its owner, alleging that her husband died when the dump truck backed over him. (Id. at p. 451.) The plaintiff asserted a claim for negligence against the driver and a claim for negligent entrustment against the owner based on allegations that she knew the driver had a poor driving record. (Id. at p. 456.) After the defendants admitted that the driver was acting within the scope of his employment at the time of the accident, the trial court barred the plaintiff from introducing evidence at trial regarding the owner's knowledge of the driver's driving record. (Ibid.) Affirming that ruling, our Supreme Court explained that the complaint's allegations merely asserted two alternative theories -- namely, negligence and vicarious liability -- under which the plaintiff “sought to impose upon [the owner] the same liability as might be imposed upon [the driver].” (Id. at p. 457.) Because the owner's admission of vicarious liability established her liability for the driver's tort, “there was no material issue remaining to which the offered evidence could be legitimately directed.” (Id. at pp. 457-458.)

         Diaz examined whether the Armenta rule survived adoption of the comparative fault system. In Diaz, the plaintiff was injured when the car she was driving collided with another passenger vehicle and a commercial truck. (Diaz, supra, 51 Cal.4th at pp. 1152-1153.) In addition to asserting negligence claims against the drivers of the passenger vehicle and truck, she alleged that the truck's owner was vicariously liable for the driver's negligence and directly liable for its own negligence in hiring and retaining him. (Ibid.) Notwithstanding Armenta, the trial court permitted the plaintiff to introduce evidence of the driver's poor employment and driving record, even though the owner admitted vicarious liability for any negligence by the driver. (Id. at p. 1153.) A jury returned verdicts in the plaintiff's favor, including her claims against the owner for negligent hiring and retention, and allocated different shares of liability for compensatory damages among the three defendants. (Ibid.) The Court of Appeal affirmed the judgment, concluding that the adoption of the comparative fault system vitiated Armenta. (Id. at p. 1154.)

         Reversing the judgment of the Court of Appeal, our Supreme Court reaffirmed Armenta. (Diaz, supra, 51 Cal.4th at pp. 1154-1161.) The court determined that within the context of the comparative fault system, when the plaintiff alleges that an employee engaged in negligent driving, and seeks damages from the employer on the basis of vicarious liability and claims of negligent hiring, retention, or entrustment, the employer's share of liability is necessarily coextensive with that of the employee. (Ibid.) Accordingly, “[i]f... an employer offers to admit vicarious liability for its employee's negligent driving, then claims against the employer based on theories of negligent entrustment, hiring, or retention become superfluous. To allow such claims in that situation would subject the employer to a share of fault in addition to the share of fault assigned to the employee, for which the employer has already accepted liability.” (Id. at p. 1160.) The court thus restated and endorsed the Armenta rule, which it characterized as “bar[ring]” a claim for negligent entrustment when the employer admits vicarious liability for an employee's negligent conduct. (Id. at p. 1158.)

         As noted, petitioners have not challenged the trial court's denial of summary adjudication on the claims for negligent entrustment and retention. The issue before us is whether, under Diaz, petitioners' admission of vicarious liability bars the recovery of punitive damages. We conclude it does not. Diaz and Armenta establish that when an employer admits vicarious liability, the plaintiff may seek compensatory damages from the employer only on a theory of vicarious liability. Because neither Diaz nor Armenta addressed an action in which punitive damages were sought, in each case the employer's admission of vicarious liability necessarily rendered superfluous any allegations or evidence bearing on the employer's own misconduct.

         That is not the case, however, when the plaintiff seeks compensatory damages from the employer on a theory of vicarious liability, and also requests punitive damages from the employer. As explained above (see pt. B. of the Discussion, ante), under the theory of vicarious liability, the employer may be subject to punitive damages upon a proper showing of misconduct, the standards for which are specified in section 3294, subdivision (b). Allegations in the complaint relating to that misconduct do not constitute a separate cause of action, but attach to the claim for recovery against the employer under the theory of vicarious liability.[7] (See Coleman v. Gulf Ins. Group (1986) 41 Cal.3d 782, 789, fn. 2. [“[T]here is no separate or independent cause of action for punitive damages”]; McLaughlin v. National Union Fire Ins. Co. (1994) 23 Cal.App.4th 1132, 1163 [“In California there is no separate cause of action for punitive damages”].) Thus, when an employer such as CRST admits vicarious liability, neither the complaint's allegations of employer misconduct relating to the recovery of punitive damages nor the evidence supporting those allegations are superfluous. Nothing in Diaz or Armenta suggests otherwise.

         CRST directs our attention to Ferrer v. Okbamicael (Colo. 2017) 390 P.3d 836, 847-848, in which the Colorado Supreme Court adopted a rule similar to that stated in Diaz and Armenta, and further concluded that under Colorado law, the rule barred the recovery of punitive damages from the employer admitting vicarious liability. Ferrer is distinguishable, however, because the Colorado statute governing punitive damages, unlike section 3294, contains no provision authorizing an award of punitive damages against an employer responsible for compensatory damages on a theory of vicarious liability.[8]

         CRST also suggests that extending the Diaz-Armenta rule to bar the recovery of punitive damages from an employer admitting vicarious liability would promote beneficial public policies, arguing that such a rule would encourage employers to admit vicarious liability. We disagree. In Grimshaw, the court concluded that considerations of public policy support the recovery of punitive damages from manufacturers of defective products under a theory of strict products liability, which rests on a justification similar to that underlying the doctrine of respondeat superior. (Grimshaw, supra, 119 Cal.App.3d at p. 810.) Absent such a rule, the court stated, “in commerce-related torts, the manufacturer may find it more profitable to treat compensatory damages as part of the cost of doing business rather than to remedy the [product's] defect.” (Ibid.) That rationale applies here as well. If the Diaz-Armenta rule were extended in the manner CRST suggests, employers indifferent to public safety might find it more profitable to admit vicarious liability when sued, ...


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