A big corporation may be able to escape punitive damages in a court case. Find out why that may be the case.

What if some large corporation did something really bad, even evil toward you; something that would seem to be ripe to justify punitive damages? While that might be something we’d all love to see happen, call it the desire for vengeance, this doesn’t always happen.

Yes, unfortunately, there are instances when corporations may sometimes escape punitive damages when the wrongful act they have been charged with and sued over, was committed by an employee. This raises an interesting question: to wit who else would perpetrate a bad act if not an employee; after all, companies are only able to act via the human beings that work for them.

How could something like that be? A company not being assessed punitive damages for an outrageous act? The bottom line is that judges don’t particularly like punitive damages claims. Thus, one of the ways they weed them out of lawsuits against big companies/corporations is to misread the California Civil Code section 3294.

Section 3294 provides that corporations aren’t liable for the bad acts of their employees, unless either the corporation should have known they were employing some crazy rogue nut bar who might be capable of misconduct, or if someone very high up in the corporation directed or ratified the conduct. To put that in simpler terms, that means that the corporation isn’t liable for punitive damages unless it can be traced to “an officer, director or managing agent.”

The obvious intention of the legislature in enacting that statute was to avoid corporate liability for the intentional torts of low-level employees, like when a security guard beats up a visitor for no good reason. The idea is that “No purpose would be served by punishing the employer for an employee’s conduct that is wholly unrelated to its business or to the employee’s duties therein.” Fine, we get that.

However, judges too often use the law to allow companies to avoid punitive damages and use a low level employee as a scapegoat for the company’s misconduct, or where it’s truly hard to figure out who made the ultimate decision. Judges may even weed out punitive damage claims at the pleading stage, simply because a plaintiff doesn’t know who made the decision.

The lesson for plaintiffs here is to allege as much as they can in the Complaint, which might be only that the conduct in question was made by an officer or managing agent acting in their corporate capacity. That done, then quickly propound discovery aimed at identifying the real decision maker in order to fend off an early motion to strike. The dance of law can be such fun at times.

To learn more about David Alden Erikson, Attorney at Law, visit Daviderikson.com. Mr. Erikson specializes in Los Angeles fashion law, internet law, business litigation, trademark and copyright law.