53 Cal.App.5th 675
Cal. Ct. App.2020Background:
- King was a senior commercial-banking executive at U.S. Bank; two subordinates (Thakur, Flinn) complained to HR in Nov. 2012 alleging falsified initiative reports, padded expenses, improper remarks, and other misconduct; HR investigator McGovern led the probe.
- U.S. Bank terminated King on December 27, 2012; King claimed he had earned a 2012 bonus that termination deprived him of.
- King sued for defamation, wrongful termination in violation of public policy, and breach of the implied covenant of good faith and fair dealing; a jury awarded roughly $24.3 million (compensatory plus punitive).
- The trial court denied U.S. Bank’s JNOV, but conditionally granted a new trial on excessive damages unless King accepted remittitur; King accepted, and judgment was entered on a remitted award of roughly $5.4 million.
- On appeal the Court of Appeal: affirmed liability on all claims, reversed some new-trial rulings (reinstated $5 million of defamation damages), held punitive damages unconstitutional as awarded and remitted punitive damages to a one-to-one ratio with compensatory damages, resulting in an adjusted punitive award of $8,489,696 and combined awards described in the opinion.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Defamation — republication privilege / malice | King: HR republished subordinates’ false allegations with actual malice (deliberate failure to investigate, reliance on biased sources). | U.S. Bank: employer privilege under Civ. Code §47 protects HR republication; no malice shown; low-level employee statements not imputable as malicious. | Substantial evidence supported actual malice by HR investigator (deliberate avoidance of truth, reliance on biased sources); privilege defeated; defamation verdict upheld. |
| Wrongful termination — substantial motivating reason (deprive bonus) | King: timing, rush to terminate before year-end, HR’s weak investigation and management testimony support inference termination aimed to avoid paying earned bonus. | U.S. Bank: termination followed HR complaint; bonuses discretionary/pool fixed; timing does not show motive to deny bonus. | Jury reasonably could infer deprivation-of-bonus was a substantial motivating reason; verdict supported by substantial evidence. |
| Breach of implied covenant — termination to avoid bonus | King: termination was pretext to deprive him of an earned bonus; HR failed to obtain exculpatory evidence. | U.S. Bank: plan terms make him ineligible once terminated; implied covenant cannot negate express bonus terms. | Jury’s finding supported: if termination was in bad faith to deprive earned bonus, implied covenant claim is viable; verdict supported. |
| Punitive damages — sufficiency & constitutional excessiveness | King: punitive award justified by malice, managing-agent status of HR investigator, and U.S. Bank’s wealth (deterrence). | U.S. Bank: insufficient evidence of managing-agent misconduct and malice; punitive award excessive under State Farm guideposts. | Jury’s punitive finding on malice and managing-agent liability sustained as supported by evidence; but punitive award remitted on due-process review to a one-to-one ratio with compensatory damages (court applied State Farm guideposts and Roby). |
Key Cases Cited
- Roby v. McKesson Corp., 47 Cal.4th 686 (2009) (applied State Farm guideposts and held a one-to-one punitive/compensatory ratio was the federal constitutional limit under similar facts)
- State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003) (Supreme Court guideposts for reviewing punitive damages: reprehensibility, ratio to harm, comparable civil penalties)
- Khawar v. Globe Internat., Inc., 19 Cal.4th 254 (1998) (republication/adoption of defamatory statements and employer privilege analysis)
- Reader’s Digest Assn., Inc. v. Superior Court, 37 Cal.3d 244 (1984) (failure to investigate does not alone prove actual malice; purposeful avoidance can)
- Antonovich v. Superior Court, 234 Cal.App.3d 1041 (1991) (deliberate decision not to acquire knowledge may support actual malice)
- White v. Ultramar, Inc., 21 Cal.4th 563 (1999) (managing-agent standard for punitive liability depends on degree of discretionary authority)
- Simon v. San Paolo U.S. Holding Co., Inc., 35 Cal.4th 1159 (2005) (appellate review is de novo on constitutional excessiveness of punitive damages)