Summary
In Helmer, the court held an employee was entitled to recover future lost income damages on a promissory fraud claim because these damages "may properly be considered as part of the 'benefit of the bargain.' "
Summary of this case from Plata v. Darbun Enterprises, Inc.Opinion
No. F043471
May 27, 2005 CERTIFIED FOR PARTIAL PUBLICATION
Pursuant to California Rules of Court, rules 976(b) and 976.1, only the Introduction, Procedural and Factual Histories, part II A(1) and (2), and the Disposition are certified for publication.
Appeal from the Superior Court of Fresno County, No. 01 CE CG 00838, Mark Wood Snauffer, Judge.
Sedgwick, Detert, Moran Arnold, Christina J. Imre, Karen F. White; Law Offices of Poole Pereira and Paul A. Pereira for Defendants and Appellants.
Sagaser, Franson Jones, Sara Hedgpeth-Harris; Oren Paboojian, Warren R. Paboojian and Jason S. Bell for Plaintiff and Appellant.
OPINION
Plaintiff Kevin Helmer filed suit against defendants Bingham Toyota Isuzu and Bob Clark, his former employer and supervisor, for promissory fraud. He alleges that he was fraudulently induced to leave a prior job due to false promises made to him by Clark. A jury found in Helmer's favor, awarding him $450,913 in compensatory damages and $1.5 million in punitive damages. Later, the court reduced the punitive damage award to $675,000.
Bingham appeals the judgment, arguing that 1) Helmer did not prove the elements of a cause of action for promissory fraud; 2) the award of compensatory damages was excessive; and 3) the punitive damages award was excessive and not supported by the evidence. Helmer also appeals, contending that the trial court erred in reducing the amount of punitive damages.
In the published portion of this opinion, we uphold the jury's award of economic damages for the lost income Helmer suffered as a result of his leaving a secure job due to Clark's false promises regarding the monthly compensation he would earn at Bingham.
In doing so, we hold that future lost income is recoverable by an employee pursuing a claim of promissory fraud against an employer who induces him to leave secure employment by knowingly making false promises regarding the terms of his future employment.
In the unpublished portion of this opinion, we find that substantial evidence supported the jury's finding that Clark made a false promise to Helmer, that the jury properly awarded Helmer compensatory damages for his emotional distress, and that a managing agent engaged in conduct that permitted the award of punitive damages, the amount of which was correctly reduced by the trial court pursuant to federal and state law.
PROCEDURAL AND FACTUAL HISTORIES
On August 31, 2001, Helmer filed a first amended complaint in Fresno County Superior Court alleging the following causes of action: intentional misrepresentation, promissory fraud, and negligent misrepresentation. Bingham and Clark filed a motion for summary judgment, which was denied. A bifurcated jury trial began in April 2003.
Liability phase
In 1981, after being honorably discharged from the United States Marine Corps, Helmer began his career in automobile parts. In 1998, after working at various automobile dealerships in the Central Valley, Helmer began working for Lithia Automotive in the parts department as a parts person. In March 1999, Helmer was promoted to parts manager and in May 1999 was promoted to parts and service manager. Helmer's compensation was approximately $5,800 to $5,900 per month. As an employee at Lithia, there was a maximum amount of compensation that Helmer could earn each month — $6,500.
Helmer learned that Bingham Toyota Isuzu had a job opening in its parts department. In September 1999, Helmer completed an application for the position and talked with Clark, who was the director of parts and service at Bingham. Clark had the authority to hire and fire employees at Bingham. During this meeting, Clark asked Helmer how much he earned in compensation at Lithia. Helmer responded that he averaged "between 57 plus a month, that it was 5700 [5,700] and it could go up as high as 6,000." There is no dispute in Helmer's mind that he told Clark he needed to earn at least $5,700 per month in compensation.
According to Helmer, in response to this conversation, Clark then opened his desk drawer, pulled out a financial statement, made some calculations, and stated that "if [Helmer] had been employed by Bingham since January, [he] would have made $70,000 up to that point." Clark did not show Helmer the documents upon which he based this statement nor how he made the calculations.
Based on Clark's representation, Helmer decided to leave Lithia and join Bingham. Bingham's offer of employment was attractive to Helmer — it was a Toyota franchise and he was familiar with Toyota parts, he knew 90 percent of the parts employees, and, because the prior parts manager had been an employee for nearly 25 years, it was a place where Helmer believed he could "finish out [his] career." Helmer gave Lithia two weeks' notice. Helmer's supervisor at Lithia, Ron Kirby, was "sad" to see Helmer leave and believed that Helmer was a "good" and "reliable" employee.
Helmer's first day of work at Bingham was October 11, 1999. On his first day, Clark presented Helmer with a pay plan to sign. According to Helmer, Clark did not explain the pay plan and it simply was included in the packet of papers that he needed to sign.
The pay plan works as follows: Helmer had a base salary of $1,500 per month and received a "draw" of at least $4,000 per month off his commissions; however, if his commissions (calculated by taking 7 percent of a certain figure on the monthly financial statement) totaled more than $4,000, he would receive that commission amount in addition to the $1,500 base salary. Helmer understood the pay plan differently — he believed he would receive a $1,500 base salary, plus a $4,000 draw, plus 7 percent of commissions, which would total at least $70,000 (as Clark promised) in a nine-month period.
When Helmer received his first paycheck in November, he was concerned because it was $4,400 — which was less than the $5,700 per month that Helmer believed he and Clark had agreed he would earn. Helmer approached Clark, who told him that he did not understand why he had received that amount and that he would look into it. Clark, however, did not get back to Helmer regarding the amount.
In December, Helmer received his paycheck in the amount of $5,100, which again was less than $5,700. Helmer again questioned Clark about the amount, who suggested that if Helmer worked extra hours in the body shop, he could earn the additional money in his check.
In January 2000, Helmer received another paycheck in the amount of $4,800. In February, Helmer discussed with Clark again that his pay was less than $5,700 per month. According to Helmer, Clark asked for proof that Helmer had made $5,700 per month at Lithia and stated that Linda Gist, Bingham's controller, did not believe that Helmer earned that amount of money at Lithia. Helmer provided his pay stubs from Lithia. Helmer believed that, once he provided verification of his pay at Lithia, Clark would pay him according to what they had agreed prior to his accepting employment at Bingham.
In March, after no changes had been made to his compensation, Helmer spoke with Clark. After that, Helmer, Clark and Gist had a meeting, during which Helmer explained to Gist that Clark had promised Helmer he would earn over $70,000 and that he needed to receive the $5,700 per month in compensation that he had been promised. According to Helmer, Gist said that there was no way Bingham could guarantee to pay him $70,000 in a nine-month period. Helmer explained that he did not care about earning $70,000, but that he just wanted the $5,700 per month he and Clark had talked about. Approximately two days later, Clark notified Helmer that he was "letting" him go and that he was "terminated." Clark presented Helmer with his final check and Helmer was asked to return the "demo" car he was allowed to drive.
Unbeknown to Helmer, Gist had contacted Stan Ingersol, who had also applied for the position of parts manager back when it first became available in October 1999. Gist invited Ingersol to the dealership for an interview, during which Gist and Clark told Ingersol that Helmer was going to be fired. At the time of the interview, Helmer was still employed at Bingham.
After his termination, Helmer filed for and received unemployment benefits. Helmer contacted Kirby for a job, but they had already filled the position of parts manager. In addition, Lithia had a strict no-rehire policy, which prevented the dealership from rehiring Helmer. Helmer was offered and accepted a position in the parts department at Kitahara, during which he made approximately $3,200 per month. While at Kitahara, the other parts employees continually asked Helmer questions about his being fired from Bingham, which caused Helmer to relive the termination every day. Helmer subsequently was offered a position at Allstate Insurance as a field adjuster auto technician. Helmer has continued to look for a job in automobile parts because that is what he had done for 18 years and it is in his "blood." Although he has applied for several positions as a parts manager, he has found it difficult to obtain one because he was fired from Bingham, which he indicates on his application.
As a result of what occurred at Bingham, Helmer had a difficult time emotionally — he found it difficult to interact with his daughters because he felt he was unable to fulfill promises he made to them about college. Physically, Helmer had stomach cramps, lost his appetite, and began drinking. He did not seek medical or psychological counseling for these symptoms because he believed that he should "just get over it," and it was a "part of life." Helmer's fiancée, Terri, explained that Helmer was very upset and crying after he was terminated because he did not feel he was able to take care of his family.
Not surprisingly, Clark's version of what was said at his meeting with Helmer is much different from that of Helmer's. According to Clark, Helmer indicated that he needed to earn $57,000 per year. Clark denied that he ever told Helmer he could receive $70,000 in one year while working at Bingham. In addition, Clark denied that Helmer ever told him he needed to earn a minimum of $5,700 per month at Bingham before he would leave his job at Lithia. Clark admitted that he made some calculations using a financial statement in order to assure Helmer that earning $57,000 at Bingham was "doable." Clark also admitted that no one in the parts department had ever made more than $70,000 per year.
Clark agreed that Helmer expressed dissatisfaction about his pay and that he explained to Helmer, "`You're in the three or four slowest months in the car business. Profits are not like where we would want them to be in October, November, December, January, and things are going to pick up,' and just kind of roll with the flow." Clark expressly denied offering Helmer work in another department to earn extra money.
Clark acknowledged that he asked Helmer to prove the amount of money he earned at Lithia; specifically, that he bring in his W-2 forms. Clark wanted to find out if Helmer was being truthful about his pay at Lithia. Helmer, according to Clark, could not bring in the W-2, and brought in his pay stubs. Clark claimed that Helmer said, "`If I don't get X amount of dollars, then I can say I'm going to have to leave.'" Clark subsequently talked with Gist and informed her that he was going to accept Helmer's offer to quit. Clark admitted that Helmer was doing a "good job" and that he did not want to see Helmer leave Bingham, and that the sole reason for Helmer's termination was the disagreement they had over Helmer's pay.
Gist first became aware of Helmer's dissatisfaction with his pay one or two weeks before he was terminated. Clark told Gist that Helmer wanted more money because he had made more money at Lithia. Gist reviewed the documentation provided by Helmer to Clark regarding his pay at Lithia, but she did not believe it. Gist admitted that she interviewed Ingersol prior to Helmer's termination and that Ingersol earns approximately $67,500 per year.
Helmer's economic expert, Ted Vavoulis, explained that, using an annual salary of $70,000 (which Helmer would have earned per year at Bingham), and assuming that Helmer would have worked at Bingham until age 61, Helmer would have earned $896,262. Given his current annual salary of $47,000 at Allstate, his earnings until age 61 will likely total $599,000. The difference between these two salaries is approximately $297,200.
On May 5, 2003, the jury returned a verdict with regard to the liability of Bingham. The jury found that 1) Bingham made a false promise about a material matter; 2) at the time Bingham made the promise it did not intend to perform it; 3) Bingham made the promise with the intent to defraud; 4) Helmer was not aware of Bingham's intention not to perform the promise; 5) Helmer acted in reliance upon the promise; 6) Helmer justifiably relied upon the promise; and 7) Bingham's promise caused Helmer damage. The jury awarded Helmer economic damages in the amount of $490,913 and noneconomic damages in the amount of $50,000. The jury also found by clear and convincing evidence that both Clark and Bingham were guilty of the conduct constituting fraud.
Punitive damages phase
Vavoulis testified that in 2002, Bingham's assets were $14.1 million and its liabilities were $6.4 million, leaving a shareholder equity of $7.7 million. Vavoulis estimated that the value of Bingham's goodwill was $4.5 million, which, when added to the equity of $7.7 million, totaled $12.2 million in value.
On May 6, 2003, the jury returned a verdict awarding punitive damages in the amount of $1.5 million. Posttrial orders and events
On July 2, 2003, in response to Bingham's motions for judgment notwithstanding the verdict and for a new trial, the court reduced the punitive damages award against Bingham from $1.5 million to $675,000. The court conditionally denied a new trial if the plaintiff consented to remit the punitive damages award to $675,000, which plaintiff did. In addition, the court ordered the punitive damages award assessed against Bingham only. An amended judgment was filed.
Bingham and Clark filed a notice of appeal and Helmer filed a notice of cross-appeal.
DISCUSSION
I. Promissory fraud Bingham contends on appeal that the evidence presented to the jury was legally insufficient to establish that 1) a specific and definite promise was made to Helmer by Clark and Bingham; 2) Helmer justifiably relied on the alleged promise; and 3) Bingham did not intend to perform the alleged promise when it was made. "This argument calls for our determining whether substantial evidence supported the jury's verdict for respondent." ( Hardison v. Bushnell (1993) 18 Cal.App.4th 22, 25-26.) "Where findings of fact are challenged on a civil appeal, we are bound by the `elementary, but often overlooked principle of law, that . . . the power of an appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted,' to support the findings below. [Citation.] We must therefore view the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference and resolving all conflicts in its favor in accordance with the standard of review so long adhered to by this court." ( Jessup Farms v. Baldwin (1983) 33 Cal.3d 639, 660.) The testimony of a single witness, even that of the respondent, can provide substantial evidence, regardless of the number of witnesses or amount of evidence to the contrary. ( In re Marriage of Mix (1975) 14 Cal.3d 604, 614.) Under this standard, we do not reweigh the evidence on appeal and the appellant cannot re-argue those factual issues decided against it at the trial court level. ( Hasson v. Ford Motor Co. (1982) 32 Cal.3d 388, 398-399.) A. Applicable law "`Promissory fraud' is a subspecies of the action for fraud and deceit. A promise to do something necessarily implies the intention to perform; hence, where a promise is made without such intention, there is an implied misrepresentation of fact that may be actionable fraud. [Citations.]" ( Lazar v. Superior Court (1996) 12 Cal.4th 631, 638 ( Lazar).) The elements of promissory fraud are: "`(1) a promise made regarding a material fact without any intention of performing it; (2) the existence of the intent at the time of making the promise; (3) the promise was made with intent to deceive or with intent to induce the party to whom it was made to enter into the transaction; (4) the promise was relied on by the party to whom it was made; (5) the party making the promise did not perform; [and] (6) the party to whom the promise was made was injured.' [Citation.]" ( Muraoka v. Budget Rent-A-Car, Inc. (1984) 160 Cal.App.3d 107, 119.) " All of these elements must be present if actionable fraud is to be found; one element absent is fatal to recovery. [Citation.]" ( Okun v. Morton (1988) 203 Cal.App.3d 805, 828.) B. Promise Bingham and Clark first contend that the evidence was insufficient to establish promissory fraud because 1) Clark's statement that Helmer would have earned $70,000 if he had been employed by Bingham for the prior nine months does not constitute a promise that Helmer would earn $70,000 per year or $5,700 per month, and 2) Helmer testified about four possible promises that were made to him by Clark and thus has not identified a definite or specific promise that was not performed. Bingham is incorrect for the following reasons. First, we disagree with Bingham and Clark that there is no evidence of any specific promise being made to Helmer by Clark. The testimony sufficiently establishes that, in response to Helmer's statement that he earned an average of $5,700 per month (and that his monthly earnings could be as much as $6,500) and that he needed to earn at least that amount per month at Bingham, Clark said Helmer would have earned $70,000 in nine months had Helmer been employed by Bingham in the past nine months. This was the promise. Second, having found that there was substantial evidence to support the jury's finding that a promise was made to Helmer, we now determine whether this promise was sufficiently specific to constitute actionable fraud. California courts have routinely refused to enforce promises that are vague and indefinite. ( Rochlis v. Walt Disney Co. (1993) 19 Cal.App.4th 201, 213-214 [alleged promise to pay "appropriate" salary increases too vague and indefinite to be enforceable], overruled on other grounds in Turner v. Anheuser-Busch, Inc. (1994) 7 Cal.4th 1238, which in turn was criticized in Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479.) Further, "[p]romises too vague to be enforced will not support a fraud claim any more than they will one in contract." ( Rochlis v. Walt Disney Co., supra, 19 Cal.App.4th at p. 216.) In this case, the promise was not vague. Unlike the employer in Rochlis, Clark did not say that Bingham would pay Helmer an "appropriate" salary; rather he said that had Helmer been employed for nine months, he would have earned $70,000, which amounts to $7,777 per month for the nine-month period. This statement was made in direct response to Helmer's statement that he earned an average of $5,700 per month at Lithia and that he needed to earn the same salary at Bingham. This was a specific and definite statement about what Helmer's earnings would be at Bingham. Third, we disagree that Clark's statement could be interpreted as an opinion. He did not make this statement in the form of an opinion, but rather as a representation of fact. His assertion about the compensation that Helmer would earn was not a casual expression of belief, but a deliberate affirmation of the earnings Helmer would make at Bingham. Even if Clark's statement regarding Helmer's earnings at Bingham was an opinion, the statement is still actionable given Clark's superior position at Bingham. While expressions of opinion are not generally treated as representations of fact, and consequently are not grounds for a fraud cause of action (BAJI No. 12.32; 5 Witkin, Summary of Cal. Law (9th. ed. 1988 2004 supp.) Torts, § 678), there is an exception. When one party states an opinion as fact, or "`[w]hen one of the parties possesses, or assumes to possess, superior knowledge or special information regarding the subject matter of the representation, and the other party is so situated that he may reasonably rely upon such supposed superior knowledge or special information, a representation made by the party possessing or assuming to possess such knowledge or special information, though it might be regarded as but the expression of an opinion if made by any other person, is not excused if it be false.' [Citations.]" (5 Witkin, supra, § 680, at p. 781; see also BAJI No. 12.32; Cohen v. S S Construction Co. (1983) 151 Cal.App.3d 941, 946, quoting Borba v. Thomas (1977) 70 Cal.App.3d 144, 152.) Here, Clark held the position of Director of Parts and Service — he had the authority to hire and fire employees and negotiate salaries, he supervised the parts manager (the position held by Helmer), and he had access to sales records. In addition, Clark, along with Craig Tucker, ran the day-to-day operations of the dealership. In light of this, when he pulled out the sales records and informed Helmer he would have made $70,000, his "opinion" about Helmer's potential salary was stated as a fact, which, if proved to be false, is actionable. In sum, we view Clark's statement, as recounted by Helmer, "as implying facts which justify a belief in the truth of the opinion." ( Borba v. Thomas, supra, 70 Cal.App.3d at p. 152.) C. Justifiable reliance Before Helmer can recover for fraud, he must prove that he was justified in relying on Clark's statement regarding his salary. ( Seeger v. Odell (1941) 18 Cal.2d 409, 414-415 ( Seeger ); see also Blankenheim v. E.F. Hutton Co. (1990) 217 Cal.App.3d 1463, 1473-1474.) In Seeger, the California Supreme Court set forth the rules for establishing justifiable reliance:
See footnote, ante, page 1121.
"A fraudulent misrepresentation is one made with the knowledge that it is or may be untrue, and with the intention that the person to whom it is made act in reliance thereon. [Citations.] It must appear, however, not only that the plaintiff acted in reliance on the misrepresentation but that he was justified in his reliance. . . . If the conduct of the plaintiff in the light of his own intelligence and information was manifestly unreasonable, however, he will be denied a recovery. [Citations.] `He may not put faith in representations which are preposterous, or which are shown by facts within his observation to be so patently and obviously false that he must have closed his eyes to avoid discovery of the truth. . . .' [Citation.]" ( Seeger, supra, 18 Cal.2d at pp. 414-415.)Bingham alleges that Helmer was not justified in relying on Clark's statement because 1) Clark made no promise about his salary; 2) based on Helmer's testimony, there were conflicting promises made and therefore he could not rely on any of them; and 3) Helmer knew that his pay was based on commissions and that his monthly earnings would fluctuate. We disagree for the following reasons. First, as to Bingham's argument that no promise was made, we have already concluded that substantial evidence supported the jury's determination that Clark made a promise to Helmer regarding what his salary would be at Bingham. Second, concerning Bingham's argument about multiple promises being made to Helmer, we have already determined that substantial evidence supported the jury's finding that there was a specific and definite promise made by Clark to Helmer. Consequently, we need not address this contention any further. Third, the fact that Helmer knew his pay was based on commissions and would fluctuate does not prevent him from justifiably relying on Clark's representation. The jury likely concluded that Clark also knew Helmer's pay would be based on commissions, and that Clark took this into consideration when he made his statement that Helmer would have earned $70,000 in the nine-month period prior to his employment. It is likely because of these fluctuations that Clark gave Helmer a nine-month approximation of his earnings and did not base his statement on a single month of earnings. Having received a nine-month approximation of his earnings by Clark, the jury could easily find that Helmer was even more justified in relying on Clark's statement. Fourth, and finally, we conclude that Helmer's reliance on Clark's representation was justified given that Clark made the statement in direct response to Helmer's explanation that he needed to earn $5,700 per month, and Helmer saw that Clark relied on the dealership's financial information in providing his salary approximation. This is not a case where Helmer "`put faith in representations which are preposterous, or which are shown by facts within his observation to be so patently and obviously false that he must have closed his eyes to avoid discovery of the truth. . . .' [Citation.]" ( Seeger, supra, 18 Cal.2d at p. 415.) Rather, he trusted the salary approximation given to him by Bingham's Director of Parts and Service in response to his statement that he needed to earn $5,700 per month. Helmer's justifiable reliance is also established by the fact that he had satisfactory employment at Lithia. Helmer would have had no reason to accept a job at Bingham unless Bingham was offering him employment on the terms that were explained to him by Clark. In sum, there is substantial evidence to support the jury's finding that Helmer justifiably relied on Clark's statement. D. Intent to perform To establish the tort of promissory fraud, Helmer must also establish that Bingham and Clark did not intend to perform the promise at the time it was made. ( Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 30-31.) "`[S]omething more than nonperformance is required to prove the defendant's intent not to perform his promise.'" ( Id. at p. 30, citing People v. Ashley (1954) 42 Cal.2d 246, 263.) Bingham argues that Helmer cannot establish that Clark's statements were false when they were made or that Bingham did not intend to perform the promise that was made to Helmer regarding his salary. We disagree. The evidence establishes that Clark knew that no parts manager had ever earned more than $70,000 per year. At least one logical inference from this evidence is that Clark knew Helmer would not be able to earn such a salary at Bingham but made the promise anyway. Likewise, Bingham's attempt to establish that it could have performed the promise by noting that Helmer's replacement, Ingersol, earns "nearly $70,000" per year at a lesser commission rate also fails. First, Ingersol testified that his earnings were $60,000 for the year — not a nine-month period. This amount is far less than Clark's salary approximation to Helmer of $70,000 in a nine-month period. Second, even if we were to rely on Gist's testimony regarding Ingersol's earnings ($67,500), it too was based on Ingersol's yearly salary — not a nine-month period. There is more than sufficient evidence upon which a jury could conclude that Bingham and Clark never intended to perform as promised.
II. Compensatory damages fn_ Bingham next contends that the jury improperly awarded future lost income from his employment at Lithia as damages to Helmer because these damages cannot be considered "benefit of the bargain" damages as the two parties only "bargained" for at-will employment. In addition, Bingham argues there is no evidence that Helmer had a loss of earning capacity. Finally, Bingham takes the position that Helmer is not entitled to emotional distress damages because his distress flowed from his termination and not the false promise. The determination of whether Helmer is entitled to future lost income is a question of law subject to de novo review. (See Kajima/Ray Wilson v. Los Angeles County Metropolitan Transportation Authority (2000) 23 Cal.4th 305, 315; Hurtado v. Superior Court (1974) 11 Cal.3d 574, 579.) The amount of damages, however, is a fact question committed to the discretion of the trial judge on a motion for new trial; an award of damages will not be disturbed if it is supported by substantial evidence. ( Seffert v. Los Angeles Transit Lines (1961) 56 Cal.2d 498, 506-507; Westphal v. Wal-Mart Stores, Inc. (1998) 68 Cal.App.4th 1071, 1078; Miller v. San Diego Gas Elec. Co. (1963) 212 Cal.app.2d 555, 560.) The evidence is insufficient to support an award of damages only where no reasonable interpretation of the record supports the figure. ( Schroeder v. Auto Driveaway Co. (1974) 11 Cal.3d 908, 919; San Diego Metropolitan Transit Development Bd. v. Cushman (1997) 53 Cal.App.4th 918, 931.)
A. Economic damages
1. Future lost income and promissory fraud
The first issue we address is whether a plaintiff who pursues a promissory fraud (or false promise) claim against his employer is entitled to receive economic damages as a result of the income he lost when he left his former employment after being induced to leave by his current employer. This question has not been definitively answered by any California court.
In Lazar v. Superior Court (1996) 12 Cal.4th 631 [ 49 Cal.Rptr.2d 377, 909 P.2d 981], the California Supreme Court alluded to the possibility that a plaintiff could recover damages in a promissory fraud case based on the loss of income from his prior employment. In Lazar, the plaintiff asserted a claim for fraudulent inducement of employment contract, alleging that the defendant-employer had contacted him and tried to persuade him to leave his employment in New York and work for the defendant in Los Angeles. ( Id. at p. 635.) The plaintiff was concerned about relocating because "the move would entail relinquishing a secure job as president of the family company where he had worked all his adult life. . . ." ( Ibid.) Consequently, "[a]s a condition of agreeing to relocate, [the plaintiff] required [defendant-employer]'s assurance that his job would be secure and would involve significant [salary] increases." ( Ibid.) The defendant-employer represented to the plaintiff that he would continue to be employed as long as he performed his job and achieved goals, and that he would advance within the company and enjoy security and a strong future. ( Id. at pp. 635-636.) Unfortunately, after the plaintiff relocated and began working for the defendant-employer, he was fired. ( Id. at pp. 636-637.) The plaintiff sued for lost and future income and employment benefits. ( Id. at p. 637.) The Supreme Court held that the plaintiff could pursue a cause of action against the defendant-employer under the theory of promissory fraud. In its conclusion, the court noted that the plaintiff could "properly seek damages for the costs of uprooting his family, expenses incurred in relocation, and the loss of security and income associated with his former employment in New York." ( Id. at pp. 648-649, italics added.) No further explanation was given relating to the damages recoverable by a plaintiff in a promissory fraud case.
Some federal courts have interpreted this language as allowing recovery of future lost income in promissory fraud cases. (See e.g., City Solutions, Inc. v. Clear Channel Communications, Inc. (N.D.Cal. 2003) 242 F.Supp. 2d 720, 730 fn. 6, affd. in part and revd. in part by City Solutions, Inc. v. Clear Channel Communications (9th Cir. 2004) 365 F.3d 835; Lamke v. Sunstate Equipment Co., LLC (N.D.Cal., Sept. 22, 2004, Civ. No. C-03-4956 EMC **4-5) 2004 WL 2125869.)
In addition, there is one case that addresses whether future lost income is recoverable in an analogous situation. In Toscano v. Greene Music (2004) 124 Cal.App.4th 685 [ 21 Cal.Rptr.3d 732], the plaintiff sued a prospective employer for promissory estoppel stemming from the employer's unfulfilled promise of employment, which had caused the plaintiff to resign from an at-will employment position with his former employer. ( Id. at p. 689.) The trial court awarded the plaintiff damages that included his lost wages based on what he would have earned from his prior employer to the time of his retirement. ( Ibid.) The prospective employer appealed. ( Ibid.) The Court of Appeal recognized that "[n]o California case has squarely addressed the damages question presented: whether a plaintiff who resigns from at-will employment in reliance on an unfulfilled promise of other employment may recover, under a promissory estoppel theory, reliance damages based on wages lost from his or her prior employment." ( Id. at p. 691.) After reviewing the "equitable underpinnings of the promissory estoppel doctrine," and noting that "[b]ecause the doctrine is equitable in nature, the court should have broad judicial discretion to fashion remedies in the interests of justice," the Court of Appeal held that the plaintiff could recover future wages if they were not speculative or remote and were supported by substantial evidence. ( Id. at pp. 693, 694-695.) The Court of Appeal then concluded that the evidence of the plaintiff's lost future earnings was "too speculative," because the plaintiff "had [no] definite expectation of continued employment" with his prior employer for any particular time. ( Id. at p. 696, 21 Cal.Rptr.3d 732.) The court noted that neither the plaintiff nor the defendant had presented testimony from the plaintiff's former supervisor regarding whether the plaintiff would have enjoyed continued employment. ( Ibid.)
"The elements of promissory estoppel are (1) a clear promise, (2) reliance, (3) substantial detriment, and (4) damages `measured by the extent of the obligation assumed and not performed.' [Citation.]" ( Toscano v. Greene Music, supra, 124 Cal.App.4th at p. 692.)
CACI No. 1902 indicates that a plaintiff may recover past and future economic losses, including lost earnings and lost earning capacity, in an action for false promise. Although it is true that the council's verdict forms are only models, it is significant that the council believes these damages are recoverable in a false promise or promissory fraud case. We recognize that this verdict form differs from BAJI No. 16.50.2, which simply asks the jury to decide the "total amount of all damage that was suffered by the plaintiff and that was caused by plaintiff's reliance upon defendant's promise[.]"
In light of these reasons, we hold that future lost income is recoverable on a promissory fraud theory if the damages are not speculative or remote. We disagree with Bingham that Lazar holds that future lost income is only available in wrongful termination or breach-of-contract cases, given the court's statement that the plaintiff could recover "the loss of security and income associated with his former employment in New York." ( Lazar v. Superior Court, supra, 12 Cal.4th at p. 649.) Further, had Lazar held as Bingham contends, it would have prevented the Fourth District Court of Appeal in Toscano from allowing a plaintiff to recover future lost income in a promissory estoppel case.
Stepping back and looking at the situation, it does not make sense to allow a plaintiff to recover future lost income damages in a promissory estoppel case (i.e., Toscano) and to not allow the same plaintiff to recover these damages in a promissory fraud case. The elements of both causes of action are virtually identical with the exception of one element. In a promissory fraud case, a plaintiff must establish that the defendant did not intend to perform the promise when it was made. If we were to accept Bingham's position, a plaintiff would not be able to recover lost future income by virtue of having established more egregious behavior. This result is illogical and does not promote public policy.
We also believe that such damages may properly be considered as part of the "benefit of the bargain." Here, the employer made a false promise to induce an act by an employee who otherwise would have stayed in his former job. The employer "bargained" to obtain an employee who already had steady employment with another company. It is only fair to compensate the employee for the damages he suffered as a result of leaving that steady employment.
Finally, we conclude that the jury properly awarded Helmer future lost income damages pursuant to the jury instruction explaining that they were permitted to award Helmer reliance damages. "If you find that plaintiff is entitled to a verdict against defendant, you should then award plaintiff damages in an amount that will reasonably compensate plaintiff for all loss or harm provided that you find it was or will be suffered by plaintiff and was caused by defendant's conduct." Bingham did not object to this instruction. The jury could reasonably have concluded that the future lost income Helmer would have earned at Lithia (had it not been for Bingham's wrongful conduct) was permitted pursuant to this instruction.
2. Proof of Helmer's lost future income is not speculative or remote
We now consider whether the damages in this case are speculative or remote and conclude there is substantial evidence to support the jury's finding that Helmer was entitled to recover lost future income due to the fraudulent inducement by Bingham and Clark for Helmer to leave his employment at Lithia. Helmer's former supervisor, Ron Kirby, testified that he was "sad" to see Helmer leave and believed that Helmer was a "good" and "reliable" employee. The only reason he did not rehire Helmer after his termination from Bingham was due to a strict no-rehire policy. This testimony establishes that, had Helmer not been induced to leave his employment at Lithia due to the false promise made by Clark regarding his salary, Helmer would have remained employed at Lithia. In Kirby's words, Helmer was a "good" and "reliable" employee and the dealership was sad to see him go. Based on this evidence, the damages are neither speculative nor remote.
B. Emotional distress damages fn_ On appeal, Bingham argues that Helmer improperly was awarded emotional distress damages because 1) Helmer's emotional distress flowed from his termination and not the false promise; 2) these damages are preempted by the Workers' Compensation Act; and 3) there was no evidence presented of any egregious behavior engaged in by Bingham and Clark nor any physical injury to Helmer. Bingham is incorrect for the following reasons. First, Helmer testified that he suffered emotional distress as a result of the false promise by Clark. In his attempts to reconcile the monthly salary he was earning at Bingham with what he was promised by Clark, Helmer was repeatedly ignored by Clark, which frustrated him. In addition, Helmer testified that he was "irate" because he felt that he was being called a liar when required by Clark and Gist to bring his pay stubs from Lithia to prove that he was earning $5,700 per month. Also, Helmer was legitimately upset about his termination, which Clark testified was directly related to Helmer's insistence that he be paid the amount Clark had falsely promised him prior to his joining Bingham. In addition, Bingham hired Helmer's replacement (Ingersol) while Helmer was still employed at Bingham. Apparently, Ingersol knew that Helmer would be fired even before Helmer was told. As a result, the emotional distress that Helmer suffered as a result of his termination is directly related to Clark's false promise. Helmer indicated that he was shocked when he was terminated; he suffered from a loss of appetite and stomach cramps; and he had difficulty interacting with his daughters because he had made promises to them about college that he could not fulfill. He also testified that he began to drink "quite a bit," he wanted to be alone, and he believed his reputation in the automobile parts industry had been damaged. Helmer's fiancée confirmed the emotional distress suffered by Helmer, testifying that Helmer was "upset, . . . irritable, edgy, [and] snappy," and that he was upset about not being able to take care of his family. Thus, based on this testimony, a jury could conclude that Helmer suffered emotional distress as a result of the false promise. Second, Helmer's emotional distress damages are not prohibited by the Workers' Compensation Act. We recognize that in California, an employee's claim for emotional distress damages is generally preempted by the exclusivity provisions of the Workers' Compensation Act. (Lab. Code, § 3601.) In fact, the California Supreme Court has articulated the statutory bar to emotional distress claims arising out of the employment relationship as follows:
"In order to properly manage its business, every employer must on occasion review, criticize, demote, transfer and discipline employees. [¶] [W]hen the misconduct attributed to the employer is actions which are a normal part of the employment relationship, such as demotions, promotions, criticism of work practices . . . an employee suffering emotional distress . . . may not avoid the exclusive remedy provisions of the Labor Code by characterizing the employer's decisions as manifestly unfair, outrageous, harassment, or intended to cause emotional disturbance. . . ." ( Cole v. Fair Oaks Fire Protection Dist. (1987) 43 Cal.3d 148, 160.)However, false promises made to induce a person to leave his employment and join a new employer usually fall outside the "compensation bargain" and thus are not preempted by the Workers' Compensation Act. For example, in Lenk v. Total-Western, Inc. (2001) 89 Cal.App.4th 959, we held that the Workers' Compensation Act did not preempt a jury's award of damages to an employee for emotional distress arising from the employer's "misrepresentations related to the financial stability of a company, the company's future plans to relocate its operations, and the job applicant's promotion in the corporate ranks, all designed to induce employment. . . ." ( Id. at p. 973.) We stated that "misrepresentations made to induce [the plaintiff] to become an employee [were] not a normal part of the employment relationship or a risk reasonably encompassed within the compensation bargain." ( Id. at p. 972.) This was because fraudulently inducing a person to become an employee "simply does not reflect matters that can be expected to occur with substantial frequency in the working environment." ( Ibid.) Because Helmer, like the plaintiff in Lenk, was awarded emotional distress damages resulting from Bingham and Clark's false promises designed to induce him to leave Lithia and join Bingham, we conclude that Helmer's injury was not incurred as a normal part of the employment relationship. Third, and finally, we disagree with Bingham that Helmer was required to establish that it and Clark engaged in egregious behavior. Helmer is correct that there is "no requirement that the plaintiff prove physical injury, [citation], or that the plaintiff prove the elements of the tort of intentional infliction of emotional distress. [Citation]." (See e.g., Branch v. Homefed Bank (1992) 6 Cal.App.4th 793, 799; Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 580.) However, even if this type of evidence were required, it is present in this case. We have already determined that Clark 1) made the false promise to Helmer regarding his compensation should he accept employment at Bingham and 2) knew when he made such a promise that there was no intent by Bingham or Clark to fulfill that promise to Helmer, which induced Helmer to leave his stable employment at Lithia. A jury could reasonably conclude that Bingham and Clark's fraudulent intent is egregious and beyond the bounds of normal society.
III. Punitive damages fn_ On appeal, Bingham contends 1) there was insufficient evidence of malice, oppression, or fraud warranting punitive damages; 2) there was insufficient evidence to establish that a managing agent made or ratified the false promise; and 3) the reduced amount of punitive damages is excessive under California and federal law. Helmer appeals, arguing that the trial court erred in reducing the amount of punitive damages from $1.5 million to $675,000. We conclude that there was sufficient evidence to support the award of punitive damages and that the court correctly reduced the amount of punitive damages awarded to Helmer. Finally, the reduced amount is not constitutionally excessive under California or federal law. A. Evidence supporting award of punitive damages 1. Standard of review Bingham's arguments regarding the sufficiency of the evidence to warrant punitive damages "calls for our determining whether substantial evidence supported the jury's verdict. . . ." ( Hardison v. Bushnell, supra, 18 Cal.App.4th at pp. 25-26.) Thus, where the trier of fact has concluded "that the clear and convincing standard has been met, and there is substantial evidence to support it, then we must affirm." ( Mike Davidov Co. v. Issod (2000) 78 Cal.App.4th 597, 606.) 2. Malice, oppression, or fraud Civil Code section 3294(a) authorizes an award of punitive damages where there is oppression, fraud, or malice. "The words `oppression, fraud or malice' in Civil Code section 3294 being in the disjunctive, fraud alone is an adequate basis for awarding punitive damages." ( Glendale Fed. Sav. Loan Assn. v. Marina View Heights Dev. Co. (1977) 66 Cal.App.3d 101, 135 ( Glendale ).) "`Fraud'" is defined as "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." (Civ. Code, § 3294(c)(3).) After reviewing the whole record, we conclude that there was substantial evidence of fraud on the part of Bingham sufficient to warrant the award by the jury of punitive damages. As we have already discussed, Clark made a false promise to Helmer regarding the compensation he would earn at Bingham should he leave his employment at Lithia. Clark knew at the time he made the promise to Helmer that no parts manager had ever earned the amount of money Clark claimed Helmer would earn in nine months. Having found that Bingham committed a fraud upon Helmer in inducing him to leave his employment at Lithia by virtue of Clark's false promise to him regarding his compensation, the jury properly awarded punitive damages. (See Glendale, supra, 66 Cal.App.3d at p. 135.) 3. Managing agent When a plaintiff attempts to hold an employer liable for punitive damages based on the acts of an employee, liability will not be imposed unless the employer authorized or ratified the employee's bad act, personally committed the act, or wrongfully hired and retained an unfit employee. (Civ. Code, § 3294(b).) Additionally, where the employer is a corporation, a corporate officer, director, or managing agent must have performed, ratified, or approved of the offense. ( Ibid.) A managing agent is a person "who exercise[s] substantial independent authority and judgment over decisions that ultimately determine corporate policy." ( White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 573 ( White).) Also, this person must "exercise . . . substantial discretionary authority over significant aspects of a corporation's business." ( Id. at p. 577.) Clark held the position of "Director" of parts and services. He had the authority to hire and fire, negotiate salaries, and run his department without interference by Bingham. In fact, Mr. Bingham testified that he played no management role at the dealership and that the only two people who were in charge of the day-to-day operations of the dealership were Clark and Tucker. In sum, this evidence supports the jury's conclusion that Clark was Bingham's managing agent, thereby appropriately subjecting Bingham to punitive damages under Civil Code section 3294. ( White, supra, 21 Cal.4th at p. 577; Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 823.) B. Remittitur In ruling on Bingham's motion for a new trial, the trial court conditionally denied a new trial if Helmer consented to remit the punitive damages award to $675,000. While Helmer did consent, he retained the right to appeal the court's ruling should Bingham file an appeal, which it did. As a result, Helmer argues that the court erred in reducing the amount of punitive damages from $1.5 million to $675,000. Our review of this order is governed by the following authority:
"[W]hen a trial court grants a new trial on the issue of excessive damages, . . . the presumption of correctness normally accorded on appeal to the jury's verdict is replaced by a presumption in favor of the order. . . . `Whatever may be the rule which should govern the trial judge, it is certain that when his action in granting a new trial on the ground of excessive damages, or requiring a reduction of the amount as the condition of denying one, comes to be reviewed on appeal, his order will not be reversed unless it plainly appears that he abused his discretion; and the cases teach that when there is a material conflict of evidence regarding the extent of damage the imputation of such abuse is repelled, the same as if the ground of the order were insufficiency of the evidence to justify the verdict.' [Citations.] The reason for this is that the trial court, in ruling on the motion, sits not in an appellate capacity but as an independent trier of fact." ( Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 932-933.)Following this standard of review, we affirm the trial court's order. The record reflects that the court applied the criteria set forth by the United States Supreme Court in State Farm Mut. Automobile Ins. Co. v. Campbell (2003) 538 U.S. 408 ( State Farm) and BMW of North America, Inc. v. Gore (1996) 517 U.S. 559 ( Gore) for determining the amount of the punitive damages award in relation to the evidence presented during the trial. The court considered: 1) the degree of reprehensibility of defendant's conduct; 2) the ratio of punitive damages to the compensatory damages; and 3) compared the punitive damages award with the civil and criminal penalties that could be imposed for similar conduct. The court concluded that, based on this criteria, the "punitive damages award . . . was presumptively the product of passion or prejudice on the part of the jury." The court's specification of reasons — namely that the case involved a single incident "involving one plaintiff/employee, and not a systemic failure . . . involving injury to . . . the general public" and was out of line with the financial condition of Bingham — demonstrates that the court did independently review the evidence and felt that it was insufficient to justify the jury's award of punitive damages. We uphold the trial court's decision. C. Constitutionality of reduced punitive damages Bingham's final argument addresses the constitutionality of the reduced punitive damage award, specifically that 1) the conduct does not warrant $675,000 in punishment damages; 2) the ratio of the amount of compensatory damages to punitive damages establishes that the award is excessive as a matter of law; and 3) Bingham's net worth does not justify the award. We can overturn the award as "`excessive'" only if "`the verdict is so large that, at first blush, it shocks the conscience and suggests passion, prejudice or corruption on the part of the jury.'" ( Fagerquist v. Western Sun Aviation, Inc. (1987) 191 Cal.App.3d 709, 727, quoting Seffert v. Los Angeles Transit Lines, supra, 56 Cal.2d at p. 507; see also Fortman v. Hemco, Inc. (1989) 211 Cal.App.3d 241, 259 [finding that "damages are excessive only where the recovery is so grossly disproportionate to the injury that the award may be presumed to have been the result of passion or prejudice"].) Based on this standard of review, we disagree with Bingham and uphold the reduced punitive damages award for the following reasons. First, with regard to the reprehensibility of the conduct in this case, we agree with the trial court that Clark's intentional false promise to Helmer regarding his compensation was sufficiently reprehensible to warrant $675,000 in punitive damages. In State Farm, the United States Supreme Court enunciated several factors to guide the determination of the degree of reprehensibility: 1) whether "the harm caused was physical as opposed to economic"; 2) whether "the tortious conduct evinced an inference to or a reckless disregard of health or safety of others"; 3) whether "the target of the conduct had financial vulnerability"; 4) whether "the conduct involved repeated actions or was an isolated incident"; and 5) whether "the harm was the result of intentional malice, trickery, or deceit, or mere accident." ( State Farm, supra, 538 U.S. at p. 419; Gore, supra, 517 U.S. at pp. 576-577.) "The existence of any one of these factors weighing in favor of a plaintiff may not be sufficient to sustain a punitive damages award; and the absence of all of them renders any award suspect." ( State Farm, supra, at p. 419.) In this case, two of the factors are present — the financial vulnerability of Helmer (which was known to Clark) and that the conduct involved deceit. Trickery and deceit are reprehensible wrongs, especially when done intentionally through affirmative acts of misconduct. ( TXO Production Corp. v. Alliance Resources Corp. (1993) 509 U.S. 443, 462.) We reject Bingham's characterization of its wrong as a wrongful "`interpretation'" by Helmer of his salary, a single act of fraud and "careless." Here, Clark engaged in a pattern of deceit by repeatedly putting off Helmer's concerns regarding his pay and then questioning him about the pay Helmer had earned at Lithia. In addition, based on the testimony at trial, Clark knew that Helmer was in a financially vulnerable position — he was leaving secure employment at Lithia where he averaged $5,700 per month, which Helmer needed to earn to support his family — when he offered him the job and falsely promised him the same (and more) if he were to join Bingham. Second, we disagree with Bingham that the ratio of compensatory to punitive damages demonstrates "constitutional impropriety." "There is no mathematical bright line as to what is a constitutionally acceptable ratio between compensatory and punitive damages. Rather, a `general concern of reasonableness properly enters into the constitutional calculus.' [Citation.]" (Chin et al., Cal. Practice Guide: Employment Litigation (The Rutter Group 2004) ¶ 17:451.21, p. 17-64.) However, a one-to-one ratio is appropriate where there is a large compensatory damages award. ( State Farm, supra, 538 U.S. at p. 425.) In this case, Helmer was awarded a total of $450,000 ($400,000 in economic damages and $50,000 in non-economic damages), and the punitive damages award (as reduced by the trial court) was $645,000 — these numbers represent a ratio of 1:1.5. This ratio is constitutionally acceptable. Third, and finally, we conclude that the award is not constitutionally impermissible due to Bingham's net worth. Net worth is the most common measure of a defendant's wealth for the purposes of assessing punitive damages. ( Storage Services v. Oosterbaan (1989) 214 Cal.App.3d 498, 515.) In fact, California courts have consistently upheld punitive damage awards that amount to a percentage of the defendant's net worth, from .005 percent in Grimshaw v. Ford Motor Co. (1981) 119 Cal.App.3d 757, 820, to five percent in Weeks v. Baker McKenzie (1998) 63 Cal.App.4th 1128, 1166, and even 10 percent in Storage Services, supra, 214 Cal.App.3d at page 515. Since State Farm, the United States Supreme Court has not stated that a defendant's wealth cannot be considered in determining the amount of punitive damages; however, it does caution that the wealth of a defendant may not otherwise justify a constitutionally excessive award. ( State Farm, supra, 528 U.S. at p. 427.) Here, the punitive damage award was large, but Bingham points to no evidence that it will bankrupt the company or inflict an undue hardship. The amount of punitive damages amounts to eight percent of Bingham's net worth of $7.7 million. In addition, as noted by the trial court, Bingham spends approximately $2 million per year on advertising and, thus, an award of $675,000 could be paid by diverting some of the funds that are used on a yearly basis for advertising. We cannot say that the damages complained of exceed the level necessary to properly punish and deter any future conduct by Bingham.
DISPOSITION
The judgment is affirmed. Costs are awarded to Helmer.Harris, Acting P.J., and Dawson, J., concurred.
The petition of defendants and appellants for review by the Supreme Court was denied August 17, 2005. Werdegar, J., did not participate therein.