Opinion
No. G006654
4-2-1992
Previously published at 12 Cal.App.4th 244, 5 Cal.App.4th 92 12 Cal.App.4th 244, 5 Cal.App.4th 92 MGW, INC., Plaintiff and Appellant, v. FREDRICKS DEVELOPMENT CORPORATION, et al., Defendants and Appellants.
Perez, McNabb & Cook, Perez & McNabb, Richard L. Perez, Sandra J. McNabb and Jeffrey Alan Miller, Orinda, for plaintiff and appellant. Irell & Manella, Scott D. Baskin, Andra Barmash Greene, Harry P. Weitzel, Newport Beach, Gibson, Dunn & Crutcher, John A. Arguelles, John J. Swenson, Robert F. Serio, Theodore J. Boutrous, Kimberly D. Reed, Los Angeles, Higgs, Fletcher & Mack, John M. Morris, Merville Thompson, San Diego, Woodrow D. Smith, Melvin King, Los Angeles, Drummy, Garrett, King & Harrison, Howard F. Harrison and Kathleen Carothers Paone, Costa Mesa, for defendants and appellants.
MGW, INC., Plaintiff and Appellant,
v.
FREDRICKS DEVELOPMENT CORPORATION, et al., Defendants and Appellants.
April 2, 1992.
Review Dismissed and Cause Remanded July 15, 1993.
Review Granted July 9, 1992.
Certified for Partial Publication
Perez, McNabb & Cook, Perez & McNabb, Richard L. Perez, Sandra J. McNabb and Jeffrey Alan Miller, Orinda, for plaintiff and appellant.
Irell & Manella, Scott D. Baskin, Andra Barmash Greene, Harry P. Weitzel, Newport Beach, Gibson, Dunn & Crutcher, John A. Arguelles, John J. Swenson, Robert F. Serio, Theodore J. Boutrous, Kimberly D. Reed, Los Angeles, Higgs, Fletcher & Mack, John M. Morris, Merville Thompson, San Diego, Woodrow D. Smith, Melvin King, Los Angeles, Drummy, Garrett, King & Harrison, Howard F. Harrison and Kathleen Carothers Paone, Costa Mesa, for defendants and appellants.
OPINION
WALLIN, Associate Justice.
Fredricks Development Corporation, Dunn Properties Corporation and Pacific Real Estate Projects, Inc. (PREP) appealed from a judgment awarding real estate broker MGW, Inc. general and punitive damages for interference with prospective economic advantage and conspiracy based upon Fredricks' refusal to pay MGW a commission pursuant to an oral broker's agreement. MGW appealed from orders of nonsuit in favor of defendants Home Capital Corporation and Humboldt Financial Services Corporation, and an order granting judgment notwithstanding the verdict and a new trial in favor of defendant Pacific Lighting Corporation. We reversed the orders granting judgment notwithstanding the verdict and a new trial as to Pacific Lighting and affirmed in all other respects. (MGW, Inc. v. Fredricks Development Corporation, 1990 WL 272149 (Apr. 30, 1990) G006654 [nonpub. opn.] ) The California Supreme Court denied review, but the United States Supreme Court granted certiorari and ordered this court's judgment vacated and remanded "for further consideration in light of Pacific Mutual Life Insurance Company v. Haslip, 499 U.S. 1 [111 S.Ct. 1032, 113 L.Ed.2d 1] (1991)." We affirm in part and reverse in part. * * *
Plaintiff MGW is a commercial real estate brokerage and investment firm owned and operated by Malcolm Waitt, Jr., a licensed real estate broker. Waitt is MGW's only employee.
Defendant Fredricks Development Corporation is a real estate developer involved in the construction of large-scale residential tracts. Fredricks is a wholly-owned subsidiary of Pacific Lighting Corporation.
In 1982 Fredricks made known to Waitt and other local brokers that it was interested in acquiring a large residential project along the I-15 corridor in the southern Orange County or northern San Diego County area. Waitt was told that if he brought in an opportunity Fredricks undertook and was not paid a broker's fee by the seller, Fredricks would see he was fairly compensated. This was Fredricks' standard arrangement, and on at least one previous occasion Waitt was paid for his efforts under this arrangement. Waitt had no written broker's contract with Fredricks.
On February 14, 1983, Waitt read a newspaper article saying Home Capital, which was in the business of financing developments, had bought out its partner and was looking for an experienced developer and joint venturer to help build out a 1500-acre mixed residential/commercial project known as Rancho Carmel. The project was located along the I-15 corridor in northern San Diego County. Waitt, believing this was just the opportunity Fredricks was looking for, called Home Capital and told them Fredricks might be interested in the project. Home Capital told Waitt that if they struck a deal with Fredricks they would not pay a broker's fee and he would have to look to Fredricks for any commission.
Waitt showed the article to Fredricks. Fredricks told him that neither it nor Pacific Lighting was aware of the Rancho Carmel opportunity, and on being advised Home Capital would not pay a broker's commission, Fredricks assured Waitt that if it went ahead with the deal he would be fairly compensated. Dunn Properties Corporation, another wholly-owned subsidiary of Pacific Lighting which builds out commercial tracts, became involved because Fredricks could not handle the commercial end of the project.
On March 21, 1983, Fredricks, Home Capital and Dunn signed a letter of intent to enter into a joint venture to build the Rancho Carmel project. The purpose of the letter was to tie up the property for a period of time in order to allow Fredricks and Dunn to determine the project's feasibility. One of its provisions was: "[Dunn and Fredricks] and Home [Capital] each hereby represent to one another that no broker or finders fee will be payable as a result of D & F and Home entering into the proposed venture and each indemnifies the other against any such broker or finders fee."
Waitt frequently asked about the project and was led to believe the deal was progressing smoothly and that Fredricks intended to compensate him. He was never told he would not be paid a commission.
The joint venture interest was ultimately purchased on behalf of Fredricks and Dunn in the name of PREP, which was a wholly-owned subsidiary of Pacific Lighting. Fredricks, however, refused to pay Waitt a broker's commission, claiming the Pacific Lighting corporations knew of the opportunity before Waitt brought the newspaper clipping to them. Waitt was told that in late 1982 there had been rumors the Rancho Carmel project might soon become available, that Dunn had inquired (through a different broker) whether Home Capital would sell off just the commercial use, that Home Capital said it was unwilling to discuss sale of the project until it bought out its joint venturer, and that Home Capital was unwilling to sell off just the commercial part of the project since it viewed the entire development as an integrated plan. Dunn, however, did not pursue the commercial part of the project at any time after it became available and before Waitt brought Fredricks the article.
Waitt filed an action for breach of oral agreement, quantum meruit, tortious breach of the covenant of good faith and fair dealing, conspiracy and tortious interference with prospective economic advantage. The complaint named Fredricks, Dunn, Pacific Lighting, PREP, Home Capital and Humboldt as defendants.
At trial the court dismissed all of MGW's contractual claims on the ground they were unenforceable under the statute of frauds. A nonsuit was granted in favor of Home Capital and Humboldt, and a nonsuit was granted to PREP on the interference with prospective advantage claim. The jury returned a verdict of $558,000 in damages against Fredricks, Pacific Lighting, Dunn and PREP, and $2 million in punitive damages against all defendants but PREP. Pacific Lighting's motions for judgment notwithstanding the verdict and a new trial were granted. Fredricks, Dunn and PREP appeal from the judgment. MGW appeals from the orders of nonsuit, new trial, and judgment notwithstanding the verdict. I-III
IV
Pacific Mut. Life Ins. Co. v. Haslip, supra, 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1 held, although the common-law method of assessing punitive damages is not so "inherently unfair as to deny due process ... per se," their imposition in a particular case can violate the due process clause. (Id. at pp. ---- - ----, 111 S.Ct. at pp. 1042-1043, 113 L.Ed.2d at pp. 19-20.) In concluding the punitive damages in Haslip were constitutionally permissible, the United States Supreme Court concentrated on three facets of the Alabama procedures involved: (1) instructions pointed the jury to the purposes of deterrence and retribution and directed it to consider the character and degree of the wrong and need to prevent similar wrongs; (2) there were established trial court post-trial review procedures, requiring the court to state reasons for affirming or setting aside an award after considering the defendant's culpability, the deterrent effect on others, and impact on innocent third parties; and (3) the state Supreme Court reviewed the award, making a comparative analysis of other awards and applying a detailed substantive analysis. (Id. at pp. ---- - ----, 111 S.Ct. at pp. 1043-1045, 113 L.Ed.2d at pp. 20-22.)
The Supreme Court did not say these factors were sine qua nons of a constitutionally adequate system of punitive damages awards. The court first noted a history of nearly 150 years of affirming the propriety of punitive damages, concluding that "[i]n view of this consistent history, we cannot say that the common-law method for assessing punitive damages is so inherently unfair as to deny due process and be per se unconstitutional. ' "If a thing has been practised [sic] for two hundred years by common consent, it will need a strong case for the Fourteenth Amendment to affect it." ' [Citation.]" (Id. at p. ----, 111 S.Ct. at p. 1043, 113 L.Ed.2d at pp. 19-20.)
But the court acknowledged that there was a constitutional issue to be resolved: "It would be ... inappropriate to say that, because punitive damages have been recognized for so long, their imposition is never unconstitutional.... [p] One must concede that unlimited jury discretion--or unlimited judicial discretion for that matter--in the fixing of punitive damages may invite extreme results that jar one's constitutional sensibilities. [Citation.] We need not, and indeed we cannot, draw a mathematical bright line between the constitutionally acceptable and the constitutionally unacceptable that would fit every case. We can say, however, that general concerns of reasonableness and adequate guidance from the court when the case is tried to a jury properly enter into the constitutional calculus." (Id. at p. ----, 111 S.Ct. at p. 1043, 113 L.Ed.2d at p. 20.)
From these statements we discern that the Supreme Court was attempting to strike a balance between the historical American reliance on the wisdom of the jury and the need to protect parties when the functioning of that process goes awry in rare instances. The Supreme Court's solution was to determine whether the Alabama system "impose[d] sufficiently definite and meaningful constraint on the discretion of Alabama fact finders in awarding punitive damages." (Id. at p. ----, 111 S.Ct. at p. 1045, 113 L.Ed.2d at p. 22.)
Our task is to determine whether California's system does the same. Las Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal.App.3d 1220, 1256-1259, 1 Cal.Rptr.2d 301 held that it does, and we agree. (See also Wollersheim v. Church of Scientology of California (1992) --- Cal.App.4th ----, ----, 6 Cal.Rptr.2d 532; Liberty Transport, Inc. v. Harry W. Gorst Co. (1991) 229 Cal.App.3d 417, 441, 280 Cal.Rptr. 159.) The jury's discretion is guided by objective factors designed to effect the policies behind such awards (BAJI No. 14.71), the trial court independently determines the propriety of the award (Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d at p. 933, 148 Cal.Rptr. 389, 582 P.2d 980; Ferraro v. Pacific Fin. Corp. (1970) 8 Cal.App.3d 339, 351, 87 Cal.Rptr. 226), and the appellate courts use objective factors in their review (Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d at p. 928, 148 Cal.Rptr. 389, 582 P.2d 980).
The California Supreme Court recently commented briefly upon the potential impact of the Haslip decision on the adequacy of California's system of appellate review, pointing out that the Mississippi and Vermont standards of review criticized in Haslip "appear[ ] to be similar to" California's. (Adams v. Murakami, supra, 54 Cal.3d at p. 118, fn. 9, 284 Cal.Rptr. 318, 813 P.2d 1348.) To make this observation the Adams court referred to language in Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d at page 928, 148 Cal.Rptr. 389, 582 P.2d 980 that in California "a punitive damages award will be set aside only when it 'is so grossly disproportionate as to raise a presumption that it is the result of passion or prejudice.' " (Adams v. Murakami, supra, 54 Cal.3d at p. 118, fn. 9, 284 Cal.Rptr. 318, 813 P.2d 1348.) However, because resolution of that issue was unnecessary, the Supreme Court did not decide it and refused to express an opinion on it. (Id. at pp. 118-119, fn. 9, 284 Cal.Rptr. 318, 813 P.2d 1348.)
Upon careful study we conclude the California standard of review is much more objective than is suggested by the language quoted above. After stating the standard of review in terms of "passion or prejudice," the Neal court immediately pointed out that "[i]n making the indicated assessment we are afforded guidance by certain established principles, all of which are grounded in the purpose and function of punitive damages." (Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d at p. 928, 148 Cal.Rptr. 389, 582 P.2d 980, fn. omitted.) The court listed three factors to be considered: (1) whether the amount of the award reasonably reflects the reprehensibility of the defendant's conduct; (2) whether the punitive damages bear a reasonable relationship to the actual damages; and (3) whether the award will have a deterrent effect without crippling the financial existence of the defendant. (Ibid.) Although not as numerous as the factors applied by Alabama appellate courts (see Pacific Mut. Life Ins. Co. v. Haslip, supra, 499 U.S. at p. ----, 111 S.Ct. at p. 1045, 113 L.Ed.2d at p. 22), they do encompass the same basic concepts. (See George v. International Society for Krishna Consciousness of California (1992) 3 Cal.App.4th 52, 123, fn. 54, 4 Cal.Rptr.2d 473.) The California standard is the objective type mandated by Haslip. (See Glasscock v. Armstrong Cork Co. (5th Cir.1991) 946 F.2d 1085, 1098-1099 ["passion and prejudice" standard of review in Texas is constitutional because meaningful review factors are applied]; Robertson Oil Company v. Phillips Petroleum Company (W.D.Ark.1991) 779 F.Supp. 994, 996 ["shocks the conscience" standard is constitutional because objective criteria are applied]; see also Hospital Authority v. Jones (1991) 261 Ga. 613, 409 S.E.2d 501, 503 [Georgia punitive damages procedures are constitutional although providing less structured post-trial and appellate review than the Alabama system].)
Pacific Lighting, Fredricks and Dunn assert several defects in the procedures used here. They argue it was improper for the jury to consider the defendants' wealth in determining the amount that would adequately deter similar conduct, citing a comment in Haslip that Alabama law excluded such evidence. (Pacific Mut. Life Ins. Co. v. Haslip, supra, 499 U.S. at p. ----, 111 S.Ct. at p. 1044, 113 L.Ed.2d at p. 21.) But the Alabama system only prohibited evidence of wealth at the liability stage, allowing it to be presented to the trial court at the post-trial review of punitive damages. (See Green Oil Co. v. Hornsby (Ala.1989) 539 So.2d 218, 222-224.) Presumably, the purpose is to avoid prejudicing the jury with evidence of the defendant's wealth before liability is determined. In California that goal is accomplished by delaying the determination of the amount of damages until after malice, oppression, or fraud is found. (Civ.Code, § 3295, subd. (d).)
The California Supreme Court held in Adams v. Murakami, supra, 54 Cal.3d 105, 284 Cal.Rptr. 318, 813 P.2d 1348 that proof of the defendant's financial condition is a prerequisite to a valid punitive damages award. (Id. at pp. 115-116, 284 Cal.Rptr. 318, 813 P.2d 1348.) And the Supreme Court in Pacific Mut. Life Ins. Co. v. Haslip, supra, 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1 merely required that the jury "be guided by more than the defendant's net worth." (Id. at p. ----, 111 S.Ct. at p. 1045, 113 L.Ed.2d at p. 22.) It did not prohibit such evidence. Here, evidence of wealth was admitted only to allow the jury to determine whether the award would have a deterrent but non-crippling effect on the defendants. (Adams v. Murakami, supra, 54 Cal.3d at pp. 115-116, 284 Cal.Rptr. 318, 813 P.2d 1348; Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d at p. 928, 148 Cal.Rptr. 389, 582 P.2d 980.)
Pacific Lighting, Fredricks, and Dunn raise several claims directed at the trial court's review of the punitive damages award at the motion for new trial. To put the assertions in proper context, we look to the United States Supreme Court's observations about the Alabama system of trial court review in Haslip.
The high court observed, "[T]he Supreme Court of Alabama ... established post-trial procedures for scrutinizing punitive awards ... [stating] that trial courts are 'to reflect in the record the reasons for interfering with a jury verdict, or refusing to do so, on grounds of excessiveness of the damages.' [Citation.] Among the factors deemed 'appropriate for the trial court's consideration' are the 'culpability of the defendant's conduct,' the 'desirability of discouraging others from similar conduct,' the 'impact upon the parties,' and 'other factors, such as the impact on innocent third parties.' [Citation.] The ... test ensures meaningful and adequate review by the trial court whenever a jury has fixed the punitive damages." (Pacific Mut. Life Ins. Co. v. Haslip, supra, 499 U.S. at p. ----, 111 S.Ct. at p. 1044, 113 L.Ed.2d at p. 21.)
The Supreme Court did not say trial court review was a prerequisite to a valid award of punitive damages. In fact it said that "[t]he Alabama Supreme Court's post-verdict review ensures that punitive damage awards are not grossly out of proportion to the severity of the offense and have some understandable relationship to compensatory damages." (Id. at p. ----, 111 S.Ct. at p. 1045, 113 L.Ed.2d at p. 22, emphasis added.) Thus, appellate review serves virtually the same purpose as trial court review, lessening the importance of trial court review.
Against this backdrop Pacific Lighting, Fredricks, and Dunn suggest the California trial court review system is inadequate. They point out that in Alabama the trial court is required to hold a hearing after trial where additional evidence may be introduced. (See, e.g., Wilson v. Dukona Corp. (1989) 547 So.2d 70, 73-74.) They contrast the California system where a new trial motion is heard only upon request and, unlike Alabama, the trial court need not state on the record its reasons for denying the motion.
The answer to the first complaint is simple. A defendant who is upset by a punitive damages award may have it reviewed in the trial court simply by moving for a new trial pursuant to Code of Civil Procedure section 657, hardly a constitutionally onerous task. Here, all of the defendants asked the trial court to review whether any punitive damages were merited. The court performed that review and denied the motion as to Fredricks and Dunn, but granted it as to Pacific Lighting on other grounds. We presume that had Fredricks and Dunn asked the trial court to review whether the damages were excessive, the court would have done so.
The defendants' second observation is correct; California only requires the trial court to set forth reasons for granting the motion. (Code Civ.Proc., § 657; Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d at p. 931, 148 Cal.Rptr. 389, 582 P.2d 980.) But this fact does not reveal a constitutional defect in the procedure. The purposes of requiring the court to specify its reasons for granting the motion are to "encourage careful deliberation by the trial court before ruling on the new trial motion and to make a sufficiently precise record to permit meaningful appellate review." (Stevens v. Parke, Davis & Co. (1973) 9 Cal.3d 51, 61, 107 Cal.Rptr. 45, 507 P.2d 653.) The former purpose is met even if the trial court ultimately denies the motion, and it is the only purpose relevant to the goal of "meaningful and adequate" trial court review noted by Pacific Mut. Life Ins. Co. v. Haslip, supra, 499 U.S. at page ----, 111 S.Ct. at page 1044, 113 L.Ed.2d at page 21.
The defendants claim California trial courts have no duty to independently review the punitive damages at the motion for new trial and the system is thus constitutionally suspect. They seem to assume Haslip mandates such an independent review, but the Haslip opinion does not say that. And the Alabama system does not provide for a completely independent trial court review. There is a presumption the jury verdict was proper. (Green Oil Co. v. Hornsby, supra, 539 So.2d at pp. 222, 224.)
Even so, in California the trial court's determination is virtually independent. "In considering a motion for new trial, the trial judge is entitled to reweigh the evidence, consider the credibility of the witnesses and draw reasonable inferences contrary to those accepted by the jury. [Citation.] The question is not whether there is substantial evidence to support the jury's verdict but whether the record supports the trial court's determination, after weighing the evidence, the jury should have reached a different verdict. [Citation.]" (Galindo v. Partenreederei M.S. Parma (1974) 43 Cal.App.3d 294, 302, 117 Cal.Rptr. 638; see also Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d at p. 933, 148 Cal.Rptr. 389, 582 P.2d 980.) This procedure provides a constitutionally adequate trial court review.
As we have noted, Fredricks and Dunn received as much review as they requested: whether any punitive damages were merited. Because the trial court granted Pacific Lighting's motion for a new trial as to liability, we cannot say from the record that the trial judge evaluated the propriety or amount of the punitive damages awarded against it. However, the trial judge is now deceased and upon a remand, another judge would be required to hear the matter, out of necessity and by statutory authority. (Code Civ.Proc., § 661; Telefilm, Inc. v. Superior Court (1949) 33 Cal.2d 289, 201 P.2d 811.) Any insight gained from the trial judge's presence at the trial has been lost.
This court is in as good a position as any newly assigned trial judge to evaluate the propriety of the punitive damages awarded. If there had been a court trial, we would have the power to make findings in addition to any made in the trial court. (Code Civ.Proc., § 909.) Although this was a jury trial, the same power exists as it relates to a trial court's independent review of a punitive damages award. An appellate court's "power '... to affirm, modify or direct the entry of a final judgment ... [is] to be liberally construed to the end that a cause may be disposed of on a single appeal.' [Citations.] Where the result, were we to remand, is foreordained from the record, we should exercise this power to dispose of the case without further proceedings." (Harlow v. Carleson (1976) 16 Cal.3d 731, 738-739, 129 Cal.Rptr. 298, 548 P.2d 698 [appellate court reviewed trial issue as if trial court had applied proper standard]; see also Estate of Friedman (1979) 100 Cal.App.3d 810, 819, 161 Cal.Rptr. 311 [appellate court made finding omitted by trial court]; compare In re Marriage of Davis (1983) 141 Cal.App.3d 71, 75-76, 190 Cal.Rptr. 104 [court declined to make omitted finding where evidence was in conflict].) We opt to exercise that power here, and apply the same standard as the trial court in reviewing the award against Pacific Lighting.
Pacific Lighting, Fredricks and Dunn complain that California appellate review is not sufficiently independent and thorough. First, as we have noted, Haslip does not mandate an independent determination by the appellate court; it merely requires an objective and meaningful review of the jury's determination. (Pacific Mut. Life Ins. Co. v. Haslip, supra, 499 U.S. at pp. ---- - ----, 111 S.Ct. at pp. 1044-1045, 113 L.Ed.2d at pp. 21-22.) Second, we have opted to use the trial court standard of review as to Pacific Lighting.
Fredricks and Dunn suggest California's appellate review system is constitutionally inadequate because the Alabama scheme provides for a comparison with other verdicts in determining the reasonableness of a punitive damages award, and California does not. (See Bertero v. National General Corp. (1974) 13 Cal.3d 43, 65, fn. 12, 118 Cal.Rptr. 184, 529 P.2d 608; Bigboy v. County of San Diego (1984) 154 Cal.App.3d 397, 406, 201 Cal.Rptr. 226; Grimshaw v. Ford Motor Co. (1981) 119 Cal.App.3d 757, 818-819, 174 Cal.Rptr. 348.) Of those three cases, only Grimshaw dealt with punitive damages. It cited Bertero and Leming v. Oilfields Trucking Co. (1955) 44 Cal.2d 343, 355-356, 282 P.2d 23, another case involving compensatory damages. (Grimshaw v. Ford Motor Co., supra, 119 Cal.App.3d at p. 819, 174 Cal.Rptr. 348.)
While the rule may have great merit when dealing with compensatory damages, we disagree with the Grimshaw court that it should be applied to appellate review of punitive damages. Although not necessarily constitutionally mandated, a comparison of punitive to compensatory damages ratios and percentages of net worth helps ensure an award is reasonable within the context of all awards. As the Supreme Court noted in Adams v. Murakami, supra, 54 Cal.3d 105, 284 Cal.Rptr. 318, 813 P.2d 1348, "Deciding in the abstract whether an award is 'excessive' is like deciding whether it is 'bigger,' without asking 'Bigger than what?' " (Id. at p. 110, 284 Cal.Rptr. 318, 813 P.2d 1348.) The court engaged in an extensive and enlightening comparative review of prior awards in Devlin v. Kearny Mesa AMC/Jeep/Renault, Inc. (1984) 155 Cal.App.3d 381, 393-396, 202 Cal.Rptr. 204. California law permits such a review and we shall make use of it.
The first factor to be considered is whether the amount of the award reasonably reflects the reprehensibility of the defendants' conduct. (Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d at p. 928, 148 Cal.Rptr. 389, 582 P.2d 980.) The gist of MGW's causes of action was that the defendants conspired to defraud it out of a $500,000 commission. Despite the defendants' attempts to reargue the case, the jury agreed with MGW's theory of the case and found that this was more than a simple misunderstanding or breach of contract. Before reaching this conclusion the jury was instructed that: (1) there was no cause of action for breach of contract or related claims, only for intentional interference with a prospective economic advantage, and conspiracy; (2) to find the former cause of action, the defendants must have acted with a design to disrupt MGW's prospective economic advantage; (3) the jury could not find conspiracy unless it found interference with a prospective economic advantage; and (4) to find conspiracy, the defendants must have agreed to interfere with MGW's prospective economic advantage. Substantial evidence supports the jury's findings on these issues, and we would reach the same result independently.
Given the defendants' conduct, the award reasonably reflects its reprehensibility. Interference with prospective economic advantage is so repugnant to the public interest that the Supreme Court has seen fit to recognize the existence of the cause of action even in the absence of a written agreement. (Buckaloo v. Johnson (1975) 14 Cal.3d 815, 829-830, 122 Cal.Rptr. 745, 537 P.2d 865.) The wrong is compounded when it is perpetrated by fraud. MGW's theory was that the defendants decided to falsely claim that Dunn had previously known about the Rancho Carmel property so that MGW would not be entitled to its finder's fee.
The fraud was all the worse because it was the product of a conspiracy. Although the cause of action for civil conspiracy exists primarily to determine joint liability and is not actionable absent commission of the underlying tort (Doctors' Co. v. Superior Court (1989) 49 Cal.3d 39, 44, 260 Cal.Rptr. 183, 775 P.2d 508), the existence of a conspiracy to perpetrate a civil wrong signals significantly more reprehensible behavior, just as it does in criminal cases. (Callanan v. United States (1961) 364 U.S. 587, 593-594, 81 S.Ct. 321, 325, 5 L.Ed.2d 312.) In terms of reprehensibility, this is not a close case.
The next inquiry is whether the punitive damages bear a reasonable relationship to the actual damages. (Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d at p. 928, 148 Cal.Rptr. 389, 582 P.2d 980.) Here, the ratio was 3.4 to 1 ($2 million to $588,000), below the 4 to 1 ratio the Haslip court found might be "close to the line." (Pacific Mut. Life Ins. Co. v. Haslip, supra, 499 U.S. at p. ----, 111 S.Ct. at p. 1046, 113 L.Ed.2d at p. 23.) By equally dividing the compensatory damages award among the four defendants against whom they were assessed, the defendants calculate the following ratios: 5.44 to 1 as to Pacific Lighting and Dunn ($800,000 to $147,000), and 2.72 to 1 ($400,000 to $147,000) as to Fredricks. This approach ignores the fact that each defendant is jointly and severally liable for the entire compensatory damages award. However, because it does not affect the outcome, we will indulge the defendants' assumption.
Relying on the "close to the line" comment in Haslip, Pacific Lighting and Dunn argue that the 5.44 to 1 ratio violates due process as a matter of law. This argument ignores the Supreme Court's refusal in Haslip to "draw a mathematical bright line." (Id. at p. ----, 111 S.Ct. at p. 1043, 113 L.Ed.2d at p. 20.) It also ignores several salient facts. The Supreme Court pointed out that the actual compensatory damages in Haslip were unknown; the court assumed the plaintiff got all she asked for. The punitive damages were over 200 times the plaintiff's out-of-pocket expenses. (Id. at p. ----, fn. 2, 111 S.Ct. at p. 1037 fn. 2, 113 L.Ed.2d at p. 12, fn. 2.) The Supreme Court has refused to review one post-Haslip case involving a ratio of 750 to 1. (Principal Financial Group v. Thomas (Ala.1991) 585 So.2d 816, cert. den. 502 U.S. 1009, 112 S.Ct. 649, 116 L.Ed.2d 666.)
The punitive damages ratio here falls well within that approved in numerous other California cases. (See Devlin v. Kearny Mesa AMC/Jeep/Renault, Inc., supra, 155 Cal.App.3d at pp. 393-396, 202 Cal.Rptr. 204.) Given the conduct involved, even a ratio of 5.44 to 1 was eminently reasonable, not to mention the 2.72 ratio as to Dunn.
The final factor to be considered is whether the award will have a deterrent effect without crippling the financial existence of the defendant. (Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d at p. 928, 148 Cal.Rptr. 389, 582 P.2d 980.) Logic suggests this issue cannot be reviewed without some evidence of a defendant's financial condition and Adams v. Murakami, supra, 54 Cal.3d 105, 284 Cal.Rptr. 318, 813 P.2d 1348 mandated the evidence be placed before the trier of fact. There was adequate evidence for that purpose here. The jury was given Pacific Lighting financial documents, which stated they were for "Pacific Lighting Corporation and subsidiary companies." It also had information that Fredricks and Dunn had recently guaranteed a $27 million payment and assumed additional debt of $13 million.
The court found the award reasonable, expressly noting, "I think that if Dunn and Fredricks were in such strong financial position to guarantee a single cash payment of $27,000,000, and at the same time and in the same transaction assumed an additional debt of $13,000,000, ... the jury was justified in concluding that an award of $800,000 in one case and $400,000 in the other as punitive damages was justified and reasonable.... [p] Had ... that financial statement not come into evidence I would have no trouble whatsoever in upholding the award of punitive damages against Dunn and Fredricks."
Although the court's statements were made in response to the argument that Pacific Lighting's financial records prejudiced Fredricks and Dunn, they were clear, concise, and directed specifically to the issue of the propriety of the punitive damages award. Likewise, the evidence was sufficient to show the award will have a deterrent but not crippling effect. Particularly compelling is the evidence that Dunn and Fredricks were guarantors for a $27 million loan. Only multi-million dollar entities would be accepted to act as such by any responsible lender.
Although individual financial statements would have been ideal they were not required. The Supreme Court in Adams v. Murakami, supra, 54 Cal.3d 105, 284 Cal.Rptr. 318, 813 P.2d 1348 expressly declined to specify what type of evidence was appropriate to show "defendant's ability to pay." (Id. at p. 116, fn. 7, 284 Cal.Rptr. 318, 813 P.2d 1348.) And, in Douglas v. Ostermeier (1991) 1 Cal.App.4th 729, 2 Cal.Rptr.2d 594 the court upheld a punitive damages award where the evidence of the defendant's financial condition consisted of the value of the property involved in the action and the values of some of the defendant's other property. (Id. at p. 749, 2 Cal.Rptr.2d 594.)
All that is necessary in cases where punitive damages are awarded is some evidence from which a reasonable jury and reviewing courts can conclude the award will deter but not cripple the defendant financially. That standard was met here.
Even if the evidence here were insufficient, Fredricks and Dunn would not be entitled to a reversal. They waived this particular aspect of the punitive damages issue, not because they failed to raise the point below (see Adams v. Murakami, supra, 54 Cal.3d at p. 115, fn. 5, 284 Cal.Rptr. 318, 813 P.2d 1348), but because they affirmatively objected to further evidence of their financial condition. (Kessler v. Gray (1978) 77 Cal.App.3d 284, 290, 143 Cal.Rptr. 496 [appellant may not object to sufficiency of evidence when it arises from exclusion of evidence at appellant's instance].)
There was much more precise evidence of Pacific Lighting's financial condition. Its financial statement showed it was a huge multi-billion dollar corporation. Its net income for 1983 was over $157 million. Its net worth (subtracting long term debt from total assets) was $2.46 billion. Given those figures, the punitive damages award was about one-half of one percent of Pacific Lighting's net income for 1983, and three one-hundredths percent of its net worth. Put in perspective, it was the equivalent of a $250 award against a person with net annual income of $50,000, or a $195 award against someone with a net worth of $600,000.
As we have noted, the trial court granted Pacific Lighting a new trial on the issue of liability. Therefore, it did not determine whether the award would deter Pacific Lighting without crippling it. However, based on the figures presented, we independently determine that the standard was met.
The judgment is reversed as it relates to the granting of Pacific Lighting's motions for new trial and for judgment notwithstanding the verdict, and remanded to the trial court for the purpose of entering judgment for MGW. In all other respects the judgment is affirmed. MGW is entitled to recover costs from Fredricks, Dunn, PREP, and Pacific; Home and Humboldt are entitled to recover costs from MGW.
SILLS, P.J., and SONENSHINE, J., concur. --------------- 1 Pursuant to California Rules of Court, rules 976(b) and 976.1, this opinion is certified for publication with the exception of parts I, II and III. 2 Because the order on writ of certiorari only refers to Pacific Mut. Life Ins. Co. v. Haslip (1991) 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1, dealing with the constitutionality of punitive damages, our "resolution of the other issues stands as between the parties.' (Advisory Com. com. to Cal.Rules of Court, rule 29.2.)" (People v. Alfaro (1986) 42 Cal.3d 627, 637, fn. 9, 230 Cal.Rptr. 129, 724 P.2d 1154; see also Agricultural Labor Relations Bd. v. Tex-Cal Land Management, Inc. (1987) 43 Cal.3d 696, 709, fn. 12, 238 Cal.Rptr. 780, 739 P.2d 140.) Those other issues had been fully briefed and argued by the parties. Because the order vacated the prior judgment of this court, we reiterate our prior resolution of those issues (with minor textual changes) in parts I, II, and III of this opinion. The constitutional issue is discussed in part IV. 3 Humboldt Financial Services Corporation also owned a small part of the project. * See footnote 1, ante. 5 Liberty Transport was disapproved in Adams v. Murakami (1991) 54 Cal.3d 105, 115-116, 284 Cal.Rptr. 318, 813 P.2d 1348 insofar as it held that proof of the defendant's financial condition was not a prerequisite to a valid award of punitive damages. However, the Adams court expressly declined to decide the constitutionality of California's punitive damages standard. (Id. at pp. 118-119, fn. 9, 284 Cal.Rptr. 318, 813 P.2d 1348.) And, although Liberty Transport was tried after the effective date of the 1987 amendments to Civil Code section 3294, the differences in the criteria applied are not sufficiently different to eschew Liberty Transport as persuasive authority. 6 As read to the jury here, the instruction provided in relevant part: "In arriving at any award of punitive damages, you are to consider the following: [p] 1. The reprehensibility of the conduct of the defendant; [p] 2. The amount of punitive damages which will have a deterrent effect on the defendant in the light of defendant's financial condition; [p] 3. That the punitive damages must bear a reasonable relation to the actual damages." The jury was also told punitive damages were for the purpose of punishment and could be awarded only by finding upon clear and convincing evidence that the defendants were guilty of fraud or malice, as specifically defined. These constraints parallel those found to be adequate in Pacific Mut. Life Ins. Co. v. Haslip, supra, 499 U.S. at pp. ---- - ----, 111 S.Ct. at pp. 1043-1044, 113 L.Ed.2d at pp. 20-21 and the objective factors used by California courts to review the propriety of punitive damages awards. (Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 928, 148 Cal.Rptr. 389, 582 P.2d 980.) 7 Those factors are: "(a) whether there is a reasonable relationship between the punitive damages award and the harm likely to result from the defendant's conduct as well as the harm that actually has occurred; (b) the degree of reprehensibility of the defendant's conduct, the duration of that conduct, the defendant's awareness, any concealment, and the existence and frequency of similar past conduct; (c) the profitability to the defendant of the wrongful conduct and the desirability of removing that profit and of having the defendant also sustain a loss; (d) the 'financial position' of the defendant; (e) all the costs of litigation; (f) the imposition of criminal sanctions on the defendant for its conduct, these to be taken in mitigation; and (g) the existence of other civil awards against the defendant for the same conduct, these also to be taken in mitigation." (Ibid.) 8 This conclusion is bolstered by the California requirement of clear and convincing evidence to support an award of punitive damages, a higher standard than the preponderance level approved in Haslip. (Liberty Transport, Inc. v. Harry W. Gorst Co., supra, 229 Cal.App.3d at p. 436, 280 Cal.Rptr. 159; Pacific Mut. Life Ins. Co. v. Haslip, supra, 499 U.S. at p. ----, fn. 11, 111 S.Ct. at p. 1046, fn. 11, 113 L.Ed.2d at p. 23, fn. 11; see Dunn v. Owens-Corning Fiberglass (D.Virgin Islands 1991) 774 F.Supp. 929, 947 ["clear and convincing" standard provides safeguard not present in system approved in Haslip ].) 9 Although we might fairly read the United States Supreme Court's mandate in this case as requiring a consideration only in the abstract of the California punitive damages system ("this cause is remanded to the Court of Appeal ... for further consideration in light of [Haslip ]"), we choose to consider the defendants' arguments that the proceedings here were constitutionally defective. Fredricks and Dunn argue that the Supreme Court's action precludes us from finding they waived the constitutional issue by failing to raise it before this court in the initial proceedings here. We are not so constrained. (See, e.g., Colorado v. Connelly (1986) 479 U.S. 157, 171, fn. 4, 107 S.Ct. 515, 524, fn. 4, 93 L.Ed.2d 473 [on remand state court was free to consider any issue not inconsistent with Supreme Court opinion].) However, because it does not alter the result, and because the issue was raised at least perfunctorily in the trial court, we opt to give Dunn and Fredricks the full due process they seek and address the issues on the merits. (See Hale v. Morgan (1978) 22 Cal.3d 388, 394, 149 Cal.Rptr. 375, 584 P.2d 512 [appellate court has discretion to address fundamental constitutional error raised for the first time on appeal].) 10 Compare the practice in Alabama, approved by the Supreme Court in Haslip, of not permitting evidence of net worth before the jury at any stage. It may only be considered during the post-trial review of the amount awarded. (Pacific Mut. Life Ins. Co. v. Haslip, supra, 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1.) However, our Supreme Court's decision in Adams to require evidence of net worth before the jury as a prerequisite to the award of punitive damages compels us to conclude this difference is of no constitutional significance. 11 We do not make these observations to suggest no trial court review is ever necessary, but to put it in its proper perspective in the scheme of post-verdict review. 12 We have not found that the failure to require reasons for denying the motion hampers meaningful appellate review. However, it would be the better practice to state such reasons when denying the motion as to the amount of punitive damages. Because the trial court here was not asked to do so, we have no record, but for reasons to be stated, we do not find it to be an impediment to our review in this case. 13 Pacific Lighting goes so far as to attempt to relitigate whether Jim Hunter was one of its managing agents, a fact necessary to the imposition of punitive damages. That issue was adversely determined by the jury and we uphold it in the unpublished portion of this opinion. Were we to redetermine the issue sitting as a trial court on a motion for new trial, we would reach the same result. 14 The jury found in a special verdict that Pacific Lighting and Dunn intentionally interfered with MGW's prospective economic relationship and all defendants conspired with each other to do so. 15 The varying awards of punitive damages against the defendants ($800,000 against Pacific Lighting and Dunn, $400,000 against Fredricks, and zero against PREP) demonstrate that the jury made a sincere attempt to apportion fault. 16 The ratio drops to 2.6 to 1 if pretrial interest is included in the compensatory damages amount ($2 million to $773,200). 17 We would reach the same result, whether sitting as an appellate court or a trial court on a motion for new trial. 18 Interestingly, Fredricks and Dunn initially suggested that the California system was constitutionally inadequate because it allows juries to consider the defendant's wealth, as was the case here. Since the decision in Adams, they argue the case should be reversed because no evidence of wealth was presented. 19 George v. International Society for Krishna Consciousness of California, supra, 3 Cal.App.4th 52, 4 Cal.Rptr.2d 473 is distinguishable. There, the defendants apparently first objected but then complied with attempts to obtain information about their finances. The plaintiffs opted not to submit evidence of the defendants' worth. The court concluded, "[R]esponsibility for the lack of financial evidence cannot fairly be attributed solely or even principally to defendants." (Id. at p. 123, 4 Cal.Rptr.2d 473.) Here, MGW sought financial evidence but the defendants resisted. However, they eventually agreed that MGW could use the Pacific Lighting financial records. The only comment voiced about those records was defense counsel's continuing contention that the evidence was insufficient to allow the question of punitive damages to go to the jury as to Pacific Lighting. Based on that conduct, Dunn and Fredricks are estopped to claim the financial condition evidence was insufficient as to them. 20 Fredricks and Dunn argue in a footnote that the award of prejudgment interest was invalid, citing Gourley v. State Farm Mut. Auto. Ins. Co. (1991) 53 Cal.3d 121, 3 Cal.Rptr.2d 666, 822 P.2d 374. They waived the issue by failing to object in the trial court. (Wiley v. Southern Pacific Transportation Co. (1990) 220 Cal.App.3d 177, 188, 269 Cal.Rptr. 240.) In any event, interest was awarded pursuant to Civil Code section 3288 (providing for an interest award at the jury's discretion in cases of oppression, fraud, or malice), not pursuant to Civil Code section 3291 which was the subject in Gourley v. State Farm Mut. Auto. Ins. Co., supra, 53 Cal.3d 121, 3 Cal.Rptr.2d 666, 822 P.2d 374.