Opinion
This appeal arises out of one of a series of suits between defendant Equilon Enterprises, LLC (Equilon), and plaintiff Keith Fullington (Fullington), a former Equilon franchisee. Fullington appeals the summary adjudication for Equilon of causes of action for fraud and violation of Business and Professions Code section 21148. We reverse.
FACTUAL BACKGROUND
I. Prior Litigation Between the Parties
Equilon is the successor in interest to Shell Oil Company (Shell) and Texaco, Inc. (Texaco). Fullington is a former Shell lessee-dealer who operated a Shell-branded retail gas station in Rowland Heights, California (the Nogales station).
Equilon was formed in 1998, when Shell and Texaco merged their retail marketing and refining activities. Shell and Texaco contributed to Equilon all of their western refining and marketing assets, and assigned to Equilon all of their gas station leases and dealer agreements. In exchange, Shell and Texaco received 100 percent of the ownership interests in Equilon. Individual Shell and Texaco gas stations continued to sell company products under existing leases and agreements. (Abrahim & Sons Enterprises v. Equilon Enterprises, LLC (9th Cir. 2002)
After its formation, Equilon terminated a “variable rent program” (sometimes referred to as a VRP) formerly offered to Shell’s lessee-dealers. The termination of the variable rent program, as well as the transfer to Equilon of gas station leases and dealer agreements, generated a variety of lawsuits between Equilon and its lessee-dealers. Three such suits are relevant to the present appeal.
A. The HRN Litigation
In 1999, Fullington and other independent Shell lessee-dealers who operated Shell-branded service stations in the United States sued Shell, Equilon,
The Texas court granted summary judgment for the defendants on December 14, 2000. The Texas Supreme Court affirmed the grant of summary judgment.
B. The Abrahim Litigation
After Shell and Texaco transferred their assets to Equilon, 43 independent dealers who operated Shell or Texaco gasoline stations in Southern California filed suit in Abrahim.
The defendants moved for summary judgment, contending that Shell’s and Texaco’s contributions of gas stations to Equilon was not a sale, transfer, or assignment of the stations to “another person” within the meaning of section 20999.25, subdivision (a). The Ninth Circuit disagreed and reversed the district court’s grant of summary judgment for the defendants. It held that Equilon was “another person,” and Texaco’s and Shell’s contributions of assets to Equilon were “transfers,” within the meaning of the statute. Thus, “the transaction at issue here was a transfer to another person, Equilon, which triggered the duty to offer the gas stations to the franchisees first.” (Abrahim, supra, 292 F.3d at p. 963.)
C. The Marquez Litigation
On June 24, 2002, 21 Shell and Texaco dealers, including Fullington, filed suit in Marquez v. Shell Oil Company (Super. Ct. L.A. County, 2003,
II. The Present Action
On May 29, 2003, Fullington and other lessee-dealers filed the present action against Equilon and four individuals (collectively, Equilon). As relevant to the present appeal, the operative third amended complaint, filed June 16, 2004, alleges as follows:
(1) Violation of Business and Professions Code section 21148. Business and Professions Code section 21148 (section 21148) prohibits a franchisor from withholding consent to the sale, transfer, or assignment of a franchise under certain circumstances. As discussed more fully below, Fullington alleged that Equilon violated section 21148 by intentionally interfering with Fullington’s attempts to sell his franchise to two separate buyers with whom Fullington had entered escrow. As a direct result of Equilon’s conduct, Fullington was not able to sell his franchise and lost his station and business.
(2) Fraud. Fullington alleged that before Equilon was formed, Shell routinely allowed its lessee-dealers to reduce their rent through the variable rent program. In 1998, Equilon eliminated the variable rent program and reverted to higher “contract rent.” Thereafter, Equilon created the “interim rent challenge” (sometimes referred to as the IRC), by which a lessee-dealer could challenge the contract rent by obtaining an appraisal of the dealer’s land, equipment, and improvements, and then using the appraisal to calculate a new fair market value rent. The interim rent challenge was supposed to be made available to all lessee-dealers who complained about their contract rents, but instead was arbitrarily made available to only some lessee-dealers.
III. Equilon’s Motions for Summary Judgment
A. Section 21148 Claim (Res Judicata)
Equilon moved for summary adjudication of Fullington’s section 21148 claim, asserting that the claim was barred by res judicata because it arose from the same “transaction” as the claims litigated in HRN. Equilon urged that in both HRN and the present action, Fullington alleged that Equilon acted with the intent “to force the lessee-dealers to ‘ “walk away” from their stations for nothing’ or to ‘substantially reduc[e] the franchisees’ goodwill value in order to achieve “dealer buy outs” ’ at reduced prices. [Internal record reference omitted.]” Equilon therefore urged that Fullington’s section 21148 claim was “related in ‘time, space, origin, and motivation’ ” to the claims and allegations in HRN, and thus should have been litigated in a single action.
The court granted summary judgment for Equilon. It explained: “As in HRN, plaintiff Fullington alleges here that Equilon’s interference with the sale of his station is demonstrative of Equilon’s intent to force its lessee-dealers to ‘ “walk away” from their stations for nothing’ or to ‘substantially reduc[e] the franchisees’ goodwill value in order to achieve “dealer buy outs” ’ at reduced prices. [Internal record reference omitted.] As such, plaintiff Fullington’s section 21148 claim is related in ‘time, space, origin, and motivation’ to the claims and allegations in HRN, and the claims therefore arise from the same ‘transaction.’ [Citation.]
“In support of his claim, Fullington alleges that the first incident of Equilon’s interference occurred in 1999, followed by interference in ‘the winter of 1999, early 2000.’ [Internal record reference omitted.] Accordingly, plaintiff Fullington’s section 21148 claim had accrued before December 2000, when judgment was rendered in HRN, such that he could have raised that cause of action there. [Citation.] Fullington’s failure to raise his section 21148 claim in HRN bars him from raising it now.”
Equilon also moved for summary adjudication of Fullington’s fraud claim. Equilon asserted that even if it had misrepresented the existence of the interim rent challenge, as Fullington alleged, the only damage Fullington could have suffered was the difference between the rent he actually paid and the lower fair market rent he allegedly would have paid had he known about the IRC. However, as part of the Marquez settlement, all of the rent Fullington paid after the IRC was implemented was refunded to him. Therefore, “[Fullington] cannot support an essential element of [his] case— that [he was] damaged by Equilon’s failure to inform [him] of the existence of the IRC—and [his] fraud claims fail as a matter of law.”
Fullington opposed the summary adjudication motion, contending that his fraud damages included not only rent overcharges, but also lost goodwill value and punitive damages. Thus, while he conceded that Equilon was entitled to an offset for the rent overcharges for which he had been compensated, he urged that Equilon was not entitled to summary adjudication of the fraud claim.
The court granted the summary adjudication motion. It said that while Fullington argued that he was seeking to recover more than overpaid rent, including loss of goodwill value, he “offer[ed] absolutely no evidence that [he has] suffered a compensable loss of goodwill value.” Further, “it is settled in California that punitive damages cannot be awarded unless actual damages were suffered, the theory being that they are in addition to compensatory damages. See Kizer v. County of San Mateo,
IV. Judgment and Appeal
The court entered judgment for defendants and against Fullington on January 19, 2011. Fullington timely appealed.
STANDARD OF REVIEW
A motion for summary judgment is properly granted only when “all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” (Code Civ. Proc., § 437c, subd. (c).) “We review a grant of summary judgment de novo [and] decide independently whether the facts not subject to triable
DISCUSSION
I. The Trial Court Erred in Granting Summary Adjudication of Fullington’s Section 21148 Claim
Fullington contends that his section 21148 claim was not precluded by the final judgment in HRN, and thus the trial court erred in granting Equilon’s motion for summary adjudication. For the following reasons, we agree.
A. Fullington’s Prior and Current Claims Do Not Arise Out of the Same Facts
Because the HRN judgment was entered by a Texas court, its res judicata effect is determined by Texas law. (Code Civ. Proc., § 1913 [“the effect of a judicial record of a sister state is the same in this state as in the state where it was made . . .”].) Under Texas law, “[r]es judicata bars the relitigation of claims that have been finally adjudicated or that could have been litigated in the prior action. [Citation.] For res judicata to apply, the following elements must be present: (1) a prior final judgment on the merits by a court of competent jurisdiction; (2) the same parties or those in privity with them; and (3) a second action based on the same claims as were raised or could have been raised in the first action. [Citation.] Thus, a party may not pursue a claim determined by the final judgment of a court of competent jurisdiction in a prior suit as a ground of recovery in a later suit against the same parties. [Citation.] In short, res judicata precludes parties from relitigating claims that have been finally adjudicated by a competent tribunal. [Citation.]” (Igal v. Brightstar Info. Tech. Group, Inc. (Tex. 2007)
To determine what claims are precluded by an earlier judgment, “we must compare ‘the factual matters that make up the gist of the complaint’ in each claim. [Barr v. Resolution Trust Corp. ex rel. Sunbelt Fed. Sav. (Tex. 1992)
“The decisive issue is whether [the present] litigation involves the same subject matter as the litigation between these parties that resulted in the previous judgment. If it [does], this action is barred; otherwise, it is not. ‘A determination of what constitutes the subject matter of a suit necessarily requires an examination of the factual basis of the claim or claims in the prior litigation.’ [Citation.]” (Cherokee Water Co. v. Freeman (Tex.App. 2004)
1. The HRN Litigation
The operative 10th amended original petition in HRN (filed Oct. 1, 2000) alleged five causes of action, each of which arose out of Equilon’s elimination of the variable rent program and increase in wholesale gasoline prices:
(a) Fraudulent Inducement: Plaintiffs alleged that when they contracted with defendants, defendants made false representations and/or failed to disclose material facts, including that plaintiffs would never have to pay “contract” rent. This was untrue; specifically, defendants intended to eliminate the variable rent program and other rent reduction programs.
(b) Fraud—Variable Rent Program: Plaintiffs alleged that during the course and development of the variable rent program, Shell made numerous misrepresentations and omissions, including that plaintiffs would pay Shell a maximum rent as set forth in the dealer agreements and that Shell’s variable rent program would result in lower rents. Shell “failed to disclose to Plaintiffs the true nature of its rental charges incorporated in the VRP, including the fact that Shell intended to collect, through manipulation of its pricing of Shell gasoline to Plaintiffs, amounts for the rental, use, and occupancy of its service stations in excess of the amounts set forth in the dealer agreements and VRP, and that it was Shell’s intention through implementation of the VRP to use it as a scheme to collect amounts from Plaintiffs in excess of the rental amounts Shell represented that it had agreed to accept.”
(c) Negligent Misrepresentation—Variable Rent Program: Plaintiffs alleged that between 1982 and 1999, Shell offered its lessee-dealers the variable rent program, through which it encouraged lessee-dealers to buy their gasoline at the higher “dealer tank wagon” price, rather than at the lower “rack” price,and to purchase greater volumes of gasoline. Shell represented that lessee-dealers could reduce their monthly rent by participating in the variable rent program, but did not tell its lessee-dealers that the variable rent program was a vehicle by which Shell intended to, and did, collect additional rent from its dealers. Shell also represented that the variable rent program would always be in place. Shell made these misrepresentations and omissions and did not exercise reasonable care in obtaining or communicating this information.
(d) Breach of Contract—Variable Rent Program: Plaintiffs alleged that Shell breached its contractual obligations to plaintiffs by collecting from them amounts in excess of those Shell had agreed to accept from each plaintiff under the dealer agreement, as reduced by the variable rent program.
(e) Breach of Contract—Open Price Term: Plaintiffs alleged that Shell breached its contractual obligations to plaintiffs by failing to set the dealer tank wagon prices in good faith, instead charging plaintiffs unreasonably high prices for gasoline, instituting “pad pricing,” and including a hidden rent component in dealer tank wagon prices. Further, Shell charged Texaco lessee-dealers a lower dealer tank wagon price. “Thus, even if the lessee-dealers sold gasoline to the public at their cost, the retail price at the jobber stations is still lower than the price at the lessee-dealer stations. Therefore, the lessee-dealers are prevented from competing against the other stations. The lessee-dealers must either lower prices to increase customers and lose money, or keep prices high enough to make a profit, lose customers, and lose money. Again either way, Defendants make money and the lessee-dealers are effectively forced out of business, [f] ... As a result of Defendants’ marketing plan and practices, and its preferential gasoline pricing for jobbers and company-owned stations, Defendants [are] forcing lessee dealers, such as Plaintiffs, out of business.”
2. Section 21148 Claim
Fullington’s fifth cause of action, for violation of section 21148, arises out of Equilon’s alleged interference with Fullington’s several attempts to sell his Shell franchise. Fullington alleges that in spring 1999, he agreed to terms of sales with a first prospective buyer, who had sufficient capital and assets to run a Shell-branded franchise. Fullington and the first buyer agreed on a purchase price and opened escrow in 1999. The first buyer attended Shell “Dealer School,” a training program for new prospective franchisees. While at Dealer School, Joseph Hoffman, an Equilon sales consultant, asked to review the first buyer’s business plan. Hoffman told the first buyer that she could never make any money at Fullington’s location and should not purchase his station. After returning from Dealer School, the first buyer
Fullington found a second prospective buyer in late 1999 or early 2000. Fullington and the second prospective buyer agreed to terms in early 2000 and opened escrow. Fullington’s second buyer made several attempts to arrange a meeting with sales consultant Gary Kimer and his boss to discuss plans for the station and get Equilon’s consent to assignment of Fullington’s franchise. Neither Kimer nor his boss returned any of the second buyer’s calls for several weeks. When Kimer and the second buyer finally met, Kimer told the second buyer he should not purchase the station because Equilon had no plans to keep Fullington’s station in its network and the station could not be run profitably. Based on Kimer’s statements, the second buyer cancelled escrow. Fullington was not able to sell his franchise, and he subsequently lost his station and business.
3. Analysis
As the above discussion makes clear, the factual matters that make up the “gist” of the two actions are not the same. HRN alleged the elimination of the variable rent program and the increase in the wholesale price of gasoline on a company wide basis. In contrast, the present suit concerns actions taken by two Equilon employees (Hoffman and Kimer) to discourage potential buyers from purchasing Fullington’s franchise. Indeed, there is virtually no factual overlap between the relevant causes of action in the two actions.
Further, the events relevant to the two suits are separated in time. The HRN complaint alleged that Shell implemented the variable rent program in 1982 to “entice the lessee-dealers to enter into contracts with Defendants” and to “collect additional rent from its dealers.” It also alleged that “[beginning in at least 1995 and continuing to the present,” defendants sold Shell-branded gasoline to “jobbers” at lower prices than it sold the same gasoline to lessee-dealers. In contrast, the present complaint alleges that Equilon agents discouraged prospective buyers from purchasing Fullington’s franchise in 1999 and 2000.
It also does not appear that the claims alleged in HRN and the present case would form a convenient trial unit. HRN involved hundreds of plaintiffs and corporate conduct undertaken by unidentified Equilon agents. The section 21148 claim involves a single plaintiff—Fullington—and actions undertaken by two identified Equilon agents, Hoffman and Kimer. Equilon has not identified any efficiencies in combining these groups of claims at trial, nor any basis for concluding that doing so “conform[s] to the parties’ expectations, business understanding, or usage.” (Daniels, supra,
In the present case, Fullington alleges that he agreed to terms of sale with a first prospective buyer in spring 1999, and with a second prospective buyer in late 1999 or early 2000, but that neither sale was consummated because of Equilon’s interference. Fullington alleges that as a result, he was not able to sell his franchise and lost his station and business. However, the complaint does not allege, and defendants do not assert in their statement of undisputed facts, the dates on which Equilon employees allegedly interfered with Fullington’s prospective sales, the date on which the prospective buyers allegedly withdrew, or the date on which Fullington lost his station. Accordingly, the record does not conclusively establish that Fullington’s section 21148 claim was ripe when the Texas court entered judgment in HRN in December 2000.
Equilon asserts that Fullington’s section 21148 claim necessarily accrued before final judgment in HRN because “[i]t is undisputed that the first incident of Equilon’s alleged interference with the sale of Fullington’s station occurred in 1999. . . . Thus, even if Fullington had not suffered the full extent of his injury until later, his claim for violation of section 21148 accrued and was mature in 1999.” We do not agree. A section 21148 violation is not actionable unless a franchisee “is injured in his business or property by reason of a violation of this chapter” (Bus. & Prof. Code, § 21140.4, italics added); the date of injury thus is critical to evaluating when Fullington’s cause of action accrued. The date of the injury is not alleged in the complaint, however, and Equilon did not submit any evidence relevant to this issue in support of its summary adjudication motion. That is, while the complaint alleges that Fullington agreed to terms of sale with a first prospective buyer in 1999 and that Hoffman interfered with that sale, it does not specify the date of Hoffman’s alleged interference. Moreover, although Hoffman’s interference presumably occurred before Fullington agreed to terms of sale with a second prospective buyer, allegedly in late 1999 or early 2000, it does not
B. Fullington’s Prior and Current Claims Are Not Barred by Res Judicata Merely Because They Are Based on Actions Taken “For the Same Reason”
Equilon asserts that even if two claims are based on distinct actions by defendants, the claims arise out of the same nucleus of operative facts—and therefore constitute a single transaction for res judicata purposes—“if the actions were taken for the same reason.” Equilon urges that principle applies here because in both HRN and the present case, Fullington alleged that Equilon engaged in actionable conduct to “eliminate franchisee lessee-dealers from its business model by ‘forcing many Plaintiffs out of business.’ ”
For the proposition that claims based on actions taken “for the same reason” must be joined in a single suit, Equilon cites just one case, Motient Corp. v. Dondero (Tex.App. 2008)
Motient filed two suits against Dondero. The first action, filed in federal court, alleged that Dondero made false and misleading statements to persuade shareholders to cede control of Motient, and made improper filings in connection with the preferred stock transaction “ ‘to improperly influence the vote by Motient shareholders on critical corporate transactions and therefore constitute disguised proxy solicitations.’ ” (Motient, supra,
After the federal suit was dismissed, the trial court granted summary judgment for Dondero on his state fiduciary duty claim and the Texas Court of Appeals affirmed. The court explained that under the “transactional” test, “a prior judgment’s preclusive effect extends to all rights of the plaintiff with respect to all or any part of the transaction, or series of connected transactions, out of which the original action arose. [Citation.] What grouping of facts constitutes a transaction or series of transactions must be determined pragmatically, giving weight to such considerations as whether the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether their treatment as a unit conf[o]rms to the parties’ expectations or business understanding or usage. [Citations.] Under the transactional test, ‘the critical issue is not the relief granted or the theory asserted but whether the plaintiff bases the two actions on the same nucleus of operative facts.’ [Citation.]” (Motient, supra,
In so concluding, the court rejected Motient’s contention that the facts common to the two actions were “background,” not “operative,” facts. (Motient, supra,
Equilon emphasizes the last sentence quoted above, suggesting that under Motient, “two different types of actions, which allegedly violate different laws and different obligations, may still arise from the same nucleus of operative facts if the alleged wrongdoer had the same alleged reason for taking the actions.” We do not agree: While Motient says that “motivation” is a relevant factor, it nowhere suggests, as Equilon does, that causes of action necessarily arise from the same nucleus of operative facts if the actions were taken “for the same reason.” To the contrary, Motient emphasized that what
Finally, nothing in Motient’s analysis suggests that Fullington’s section 21148 claim arose from the same nucleus of operative facts as the claims asserted in HRN. All of the relevant events in Motient took place during the seven months between April 2005 and February 2006, while the events relevant to the claims between Fullington and Equilon spanned 18 years, from 1982 to 2000. Further, while all of the events alleged in Motient were part of a proxy fight “by which Dondero tried to take control of Motient and engaged in certain conduct directed to that end” (Motient, supra, 269 S.W.3d at pp. 80-81, 83-84), the events relevant to HRN and the present suit are alleged to be part of two separate transactions with disparate motivations: The VRP allegedly was implemented to persuade prospective franchisees to enter franchise agreements and leases with the company, and then was eliminated to increase the company’s revenue, while defendants’ conduct alleged in the present case allegedly was intended to discourage prospective buyers from purchasing Fullington’s franchise. And, there is no indication that the decisions to implement the policies alleged in the two cases were made by the same people in the same periods of time. For all of these reasons, the present case is not governed by Motient.
C. Fullington’s Current Claims Are Not Barred by Res Judicata Simply Because They Arise Out of the Same Legal Relationship
Equilon also asserts that even if two claims are based on distinct actions by an alleged wrongdoer, the claims necessarily arise out of the same nucleus of operative facts if they arise from the same “ ‘legal relationship, such as under a lease, a contract, or a marriage.’ ” Thus, Equilon asserts, because Fullington’s claims in HRN and his section 21148 claim here all arise “out of the franchise relationship between Fullington and Equilon,” the present claims are precluded by res judicata.
Equilon is correct that several Texas appellate cases state that “[wjhere there is a legal relationship, such as under a lease, a contract, or a marriage, all claims arising from that relationship will arise from the same subject matter and be subject to res judicata.” (Pinebrook Props., Ltd. v. Brookhaven Lake Prop. Owners Ass’n (Tex.App. 2002)
The Texas Court of Appeals reached a similar result in Brown v. Dr. Michael D. Hoffman & Assocs. (Tex.App. 2003)
In view of Daniels and Brown—as well as our conclusion that the rule articulated in Pinebrook is in conflict with the transactional approach to res judicata adopted by the Texas courts—we decline to find that under Texas law all claims arising from a legal relationship necessarily arise from the same subject matter and thus are subject to res judicata. We therefore find that the franchisor-franchisee relationship between Equilon and Fullington does not support the trial court’s grant of summary judgment.
Fullington’s cause of action for fraud asserts that but for Equilon’s intentional misrepresentations, Fullington would have reduced his monthly rent by taking advantage of the “interim rent challenge” that Equilon offered some of its lessee-dealers. Because he was not advised of the interim rent challenge, he paid “commercially unreasonable and excessively high contract rent” for two years.
Equilon’s motion for summary adjudication asserted that Fullington’s fraud cause of action failed as a matter of law because Fullington could not establish that he suffered any damage as a result of the alleged fraud. Equilon argued that even if Fullington could prove that it made fraudulent misrepresentations, Fullington’s measure of damages would be the difference between the rent he actually paid and the lower fair market rent he allegedly would have paid had he known about the interim rent challenge. However, as part of the Marquez settlement, Equilon had already refunded all of the rent Fullington paid after the interim rent challenge was implemented. Equilon asserted that Fullington therefore could not establish the damages element of his fraud claim.
There is no dispute that if Fullington prevails on his fraud claim, Equilon will be entitled to an offset for the rent overcharges for which it already has compensated Fullington. There also is no dispute that the offset to which Equilon will be entitled under these circumstances exceeds the actual damages for fraud that Fullington can recover in this action. What is disputed is whether the damages for which Fullington already has been compensated can satisfy the “actual damages” element of a fraud cause of action, and thus support a punitive damages award.
Equilon says no, urging that “[b]ecause there are no compensable damages now, Fullington cannot obtain an award of punitive damages.” In other words, Equilon urges that when it settled the Marquez action, it did not merely obtain an offset against any future damages award Fullington might win in connection with his alleged overpayment of rent—it fatally undermined Fullington’s ability to pursue any cause of action in connection with that alleged overpayment. Fullington contends to the contrary, urging that what matters is whether he suffered a compensable injury, not whether he has been compensated for that injury by another party or through another lawsuit. Thus, he says that notwithstanding the Marquez settlement, he can state a cause of action for fraud (and recover punitive damages) because Equilon’s fraudulent conduct caused him actual injury. For the following reasons, Fullington is correct.
We are not aware of any California case that has addressed the precise issue raised here—whether a plaintiff’s recovery of compensatory damages in a first suit eliminates his tort causes of action in a second suit. However, both a California court and a federal district court applying California law have addressed closely related punitive damages issues, and their decisions inform our analysis here.
California law permits an award of punitive damages only if a plaintiff suffers “actual injury.” (Gagnon v. Continental Casualty Co. (1989)
The Court of Appeal reversed. It said although it is “well settled” that punitive damages cannot be awarded unless actual damages are suffered, the requirement of actual damages “is simply the requirement that a tortious act be proven if punitive damages are to be assessed (Brewer v. Second Baptist Church [(1948)]
In the case before it, it was undisputed that the defendant “was a victim of [a] fraudulent representation to the extent of $307.40.” (Esparza, supra,
A federal district court applied Esparza to a case very like the present one in Yates v. Nimeh (N.D.Cal. 2007)
The district court denied the motion to dismiss. (Yates, supra,
B. Cases from Other States Holding That a Plaintiff May Pursue a Second Suit After Receiving Full Satisfaction of Judgment in a First Suit
The supreme courts of several states also have addressed the question before us, holding that a plaintiff may pursue a second suit even after receiving full satisfaction of judgment in a first suit. Sanchez v. Clayton (1994)
A federal jury found the university violated the plaintiffs’ First and Fifth Amendment rights, and the court entered judgment for the plaintiffs for $750,000. The university appealed from the judgment, and the plaintiffs cross-appealed from the denial of prejudgment interest. (Sanchez, supra,
Following the settlement of the federal case, Servicemaster moved for and was granted summary judgment in the state case on the grounds that the plaintiffs had been fully compensated for their damages. The New Mexico Supreme Court reversed, explaining; “The determinative issue in this case is
The South Carolina Supreme Court adopted the reasoning of the Sanchez court in McGee v. Bruce Hospital System (2001)
The South Carolina Supreme Court reversed. After quoting the Sanchez decision at length, the court concluded that the courts below had “incorrectly stated that since the issue of actual damages could not be submitted to the jury, there was no legal liability upon which to predicate a verdict for punitive damages. To the contrary, under the reasoning of our law and Sanchez v. Clayton, supra, the issue of [the hospital’s liability] can be submitted to the jury and if the jury determines [the hospital] is liable, the jury can then decide whether punitive damages against [the hospital] are warranted, [f] ...[][].. . [The plaintiff] should not be denied the opportunity to have a jury determine whether [the hospital] is liable for punitive damages.” (McGee, supra, 545 S.E.2d at pp. 288-289; see Taylor v. Compere (Mo.Ct.App. 2007)
C. Analysis
We believe that the rule adopted in Yates, Sanchez, and McGee is consistent with California law, and we adopt it here. California law has a variety of doctrines—none of which Equilon invoked here—that prohibit the filing of multiple suits arising out of the same wrongful conduct. If none of those doctrines applies—and thus the filing of two separate actions does not offend California law—we perceive no reason why the maintenance of one action should become impermissible because a judgment or settlement is entered in the other. Nor do we see why a party should be permitted to avoid an award of punitive damages in one action—intended to “punish the wrongdoer and to make an example of him” (Bankhead v. ArvinMeritor, Inc. (2012)
Equilon contends that the present case is fundamentally different than Esparza, where the defendant “proved actual, compensable damages at the time of trial,” because “Fullington cannot prove actual, compensable damages at the time of trial.” We do not agree. Although it is true that Esparza differs from the present case procedurally—here, Fullington was compensated for his compensatory damages before trial, while the Esparza defendant was compensated by an offset awarded at trial—Equilon suggests no reason (and we can conceive of none) why the procedural difference should be material to the outcome.
Equilon also contends that it is a “fundamental principle of punitive damages” that “compensable actual damages are an absolute prerequisite to an award of punitive damages.” Not so. As our Supreme Court explained long ago, “The rule that exemplary damages cannot be imposed unless the plaintiff has suffered actual damages (Clark v. McClurg [(1932)]
Equilon contends finally that the present case is governed by Berkley v. Dowds (2007)
Equilon emphasizes the Berkley court’s use of the phrase “recovery of actual damages” to suggest that “in California, there must be a concurrent award of compensatory damages ... to support an award of punitive damages.” The only issue before the Berkley court, however, was whether damages to which the plaintiff was not entitled as a matter of law could support an award of punitive damages. The court did not consider the issue relevant to the present case: Whether damages that already had been recovered in a separate action could support a punitive damages award. As cases “are not authority for propositions not considered,” we “decline to read [Berkley] for more than it expressly holds.” (People v. Brown (2012)
We reverse the summary adjudication of Fullington’s second and fifth causes of action (for fraud and violation of § 21148). Fullington shall recover his costs on appeal.
Willhite, Acting P. J., and Manella, J., concurred.
Notes
Fullington was not a party to the Abrahim litigation.