Case Name: Jitendra Pandit, et al. v. Lyndon Harris, et al.

Case No.: 1-14-CV-260448

Motion to Strike Punitive Damages by Defendants Lyndon Harris and AAA Northern California, Nevada & Utah to the Complaint of Jitendra Pandit, Falguni Patel & Rajesh Patel, dba Cottle Mail Center

On February 13, 2014, Plaintiffs filed a Complaint against Defendants alleging the following causes of action: (1) Breach of Fiduciary Duty; (2) Negligence; (3) Fraud; (4) Negligent Misrepresentation; and (5) Violation of Insurance Code section 780.

On April 3, 2014, Defendants filed the motion presently before the Court, a motion to strike Plaintiffs’ prayer for punitive damages. Defendants argue that Plaintiffs fail to allege specific facts demonstrating that Defendants’ conduct rises to the level of malice, oppression, or fraud to support punitive damages.

“In order to state a prima facie claim for punitive damages, a complaint must set forth the elements as stated in the general punitive damage statute, Civil Code section 3294. These statutory elements include allegations that the defendant has been guilty of oppression, fraud, or malice. ‘Malice’ is defined in the statute as conduct ‘intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.’ ‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights. ‘Fraud’ is ‘an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.’” (Turman v. Turning Point of Central California, Inc. (2010) 191 Cal.App.4th 53, 63 [internal citations omitted].)

With respect to defendant Lyndon Harris (“Harris”), Plaintiffs have alleged a well-pleaded fraud claim against him to support an award for punitive damages. (See Complaint at ¶¶ 36-41; see also Stevens v. Sup. Ct. (1986) 180 Cal.App.3d 605, 610 [a fraud cause seeking punitive damages need not include an allegation that the fraud was motivated by the malicious desire to inflict injury upon the victim; the pleading of fraud is sufficient].) To the extent that Defendants challenge the adequacy of the fraud cause of action, the proper vehicle is by demurrer, not motion to strike. (See Quiroz v. Seventh Ave. Center (2006) 140 Cal.App.4th 1256, 1281 [where a whole cause of action is the proper subject of a pleading challenge, the court should sustain a demurrer to the cause of action rather than grant a motion to strike].)

However, with respect to defendant AAA Northern California, Nevada, and Utah (“AAA”), an employer shall not be liable for punitive damages, based upon the acts of an employee of the employer, unless 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. (See Civ. Code § 3294, subd. (b).) “With 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.) Thus, the Legislature intended section 3294, subdivision (b) “to limit corporate punitive damage liability to those employees who exercise substantial independent authority and judgment over decisions that ultimately determine corporate policy.” (White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 573.)

Here, Plaintiffs allege that AAA was a corporation which employed Harris as an insurance agent. (See Complaint at ¶¶ 4-5.) Therefore, in order to state facts to support a claim for punitive damages, the Complaint must allege acts by a managing agent of AAA. In this case, Plaintiffs fail to allege sufficient facts to hold AAA, as the employer, liable for punitive damages.

Accordingly, Defendants’ motion to strike punitive damages with respect to defendant AAA is GRANTED WITH 10 DAYS’ LEAVE TO AMEND. (See Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 971 [leave to amend is liberally allowed as a matter of fairness, unless the complaint shows on its face that it is incapable of amendment].) The motion to strike punitive damages with respect to defendant Harris is DENIED.