HASSOLDT v. PATRICK MEDIA GROUP INC

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Court of Appeal, Second District, Division 3, California.

Judy HASSOLDT et al., Plaintiffs and Appellants, v. PATRICK MEDIA GROUP, INC., Defendant and Appellants.

No. B113905.

Decided: May 30, 2000

Law offices of Michael N. Stafford, Michael N. Stafford, Glendale, Benedon & Serlin, Douglas G. Benedon, Woodland Hills, and Gerald M. Serlin, Westbury, NY, for Defendant and Appellant. Law offices of Harold J. Light and Harold J. Light, Santa Monica, for Plaintiffs and Appellants.

I

FACTUAL BACKGROUND

Plaintiffs and appellants Judy and William Hassoldt (the Hassoldts) own a piece of property in Redondo Beach, on which they operate a preschool called Der Kindergarden.   The Hassoldts established a trust (the Yankee Trust) which owns the land and leases it to Der Kindergarden, Inc., a corporation.   Neither Der Kindergarden, Inc. nor the Yankee Trust is a party to this litigation.

Defendant and appellant Patrick Media Group, Inc. (Patrick), is an outdoor advertising company.   In September of 1986, it purchased the assets and some of the liabilities of another outdoor advertising company, Foster & Kleiser (F & K).

In October 1992, a tree located on the Hassoldts' property was severely trimmed.   When William Hassoldt discovered the tree had been trimmed, he contacted Daniel Voorhees, the employee of Patrick in charge of Patrick's tree cutting activities.   Ultimately, Patrick denied it was responsible for cutting the tree.   The Hassoldts suspected Patrick had trimmed the tree on their property to better expose their outdoor billboard.

The Hassoldts filed a complaint against Patrick which contained multiple causes of action.   The gravamen of the Hassoldts' complaint was that Patrick had tortiously trimmed their tree.   Following a trial by jury, the Hassoldts were awarded $130,000 in compensatory damages and $150,000 in punitive damages.  (The jury's award will be discussed in greater detail, infra.)   Both the Hassoldts and Patrick have appealed timely from the judgment.

II

The Hassoldts' Spoliation of Evidence Causes of ActionProcedural Background

The original complaint filed by the Hassoldts contained five causes of action:  trespass, nuisance, conversion, intentional infliction of emotional distress and negligent infliction of emotional distress.   In a third amended complaint the Hassoldts added causes of action for intentional and negligent spoliation of evidence.   The gravamen of these new causes of action was that Patrick destroyed records and photographs relating to their tree cutting activities.1

The jury was given instructions relating to the Hassoldts' causes of action for trespass;  negligence;  nuisance;  conversion;  negligent spoliation of evidence;  intentional spoliation of evidence;  including spoliation damage instructions.   The jury was also instructed on the Hassoldts' intentional infliction of emotional distress cause of action.2

Four Special Findings were submitted to the jury.   Specifically, the jury was asked whether it found “by a preponderance of the evidence defendant Patrick Media Group, Inc. responsible for damag[ing] Plaintiffs' tree”;  whether it found “by a preponderance of the evidence that defendant Patrick Media Group, Inc. is liable for spoliation of evidence”;  whether it found “by clear and convincing evidence that defendant acted with oppression or malice in damaging the tree”;  and whether it found “by clear and convincing evidence that defendant acted with fraud, oppression or malice in spoliating evidence.”   The jury answered all four of these questions in the affirmative.   In addition to the Special Findings, the jury returned a general verdict awarding $130,000 in damages to the Hassoldts.   This verdict form did not indicate the cause or causes of action which formed the basis of the damage award.

The jury also returned a second verdict form which stated:  “We, the jury in the above entitled action, having previously found Defendant Patrick Media Group, Inc. acted with fraud, oppression or malice in spoliating evidence now award punitive damages in the amount of $150,000.”   The jury was apparently presented with no verdict form that gave it the option of awarding punitive damages on any of the Hassoldts' other causes of action.

Discussion

 As stated, the jury was specifically requested to determine whether Patrick had spoliated evidence.3  Moreover, the jury's award of punitive damages related only to the Hassoldts' spoliation claim.   Based on Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1, 74 Cal.Rptr.2d 248, 954 P.2d 511 4 , Patrick contends the judgment cannot stand.   Patrick also contends Cedars-Sinai should be retroactively applied to this case.   We agree with both of Patrick's contentions.

In Cedars-Sinai, the court specifically held “that there is no tort remedy for the intentional spoliation of evidence by a party to the cause of action to which the spoliated evidence is relevant, in cases in which, as here, the spoliation victim knows or should have known of the alleged spoliation before the trial or other decision on the merits of the underlying action.”   (Cedars-Sinai Medical Center v. Superior Court, supra, 18 Cal.4th at pp. 17-18, 74 Cal.Rptr.2d 248, 954 P.2d 511, fn. omitted.) 5  While the court acknowledged “that the intentional destruction of evidence should be condemned” (id. at p. 8, 74 Cal.Rptr.2d 248, 954 P.2d 511), it refused to create a tort remedy for such destruction.

The court's decision was based on its conclusion that non-tort remedies existed to rectify the intentional destruction of evidence by a party.   These remedies included permitting the trier of fact to draw an unfavorable evidentiary inference against the party who destroyed the evidence (Evid.Code, § 413;  BAJI No. 2.03);  issue, evidentiary, terminating and monetary sanctions for destroying evidence that should have been produced during discovery (Code of Civ.Proc. § 2023);  state bar disciplinary proceedings against any lawyer participating in the spoliation of evidence;  and criminal penalties (Pen.Code, § 135).   The court's disinclination to create a tort remedy for spoliating evidence was also based, in part, on the “uncertainty of the fact of harm in spoliation cases.”  (Cedars-Sinai Medical Center v. Superior Court (Bowyer), supra, 18 Cal.4th at p. 13, 74 Cal.Rptr.2d 248, 954 P.2d 511.)

The Hassoldts do not, nor could they, dispute the holding in Cedars-Sinai.   Rather, they argue that Cedars-Sinai should not be applied retroactively because “the parties have already gone through a trial when the tort of spoliation was recognized by California courts․”   As a fall back position, the Hassoldts argue that “even if an exception to retroactivity were deemed not to apply in this case, the Court should treat the jury's award (to the extent, if at all it applies to the destruction of evidence) as a de facto sanction for Patrick's outrageous behavior.   Otherwise, the innocent parties in this proceeding, plaintiffs (not to mention the trial court), face the burden of yet another trial, while the clear wrongdoer, Patrick, has yet another opportunity to ratchet up the costs to plaintiffs and perhaps, with the passage of time, escape some of the punishment it so richly deserves.”   We find neither these nor the Hassoldts' other arguments relating to retroactivity to be persuasive.6

“The general rule is that judicial decisions are given retroactive effect.”  (Camper v. Workers' Comp. Appeals Bd. (1992) 3 Cal.4th 679, 688, 12 Cal.Rptr.2d 101, 836 P.2d 888.)  “Several factors are relevant in determining whether an exception to the general rule of retroactivity is warranted, including:  ‘the reasonableness of the parties' reliance on the former rule, the nature of the change as substantive or procedural, retroactivity's effect on the administration of justice, and the purposes to be served by the new rule.  [Citations.]’  (Woods [v. Young (19991) ] 53 Cal.3d [315] at p. 330 [279 Cal.Rptr. 613, 807 P.2d 455].)  ․” (Camper v. Workers' Comp. Appeals Bd., supra, 3 Cal.4th at p. 688, 12 Cal.Rptr.2d 101, 836 P.2d 888.)

With respect to the parties' reasonable reliance on the existence of the tort of spoliation of evidence, we observe that, before Cedars-Sinai, the Supreme Court had never issued a definitive decision on the subject.   In that regard, this case is much like the decision in Newman v. Emerson Radio Corp. (1989) 48 Cal.3d 973, 258 Cal.Rptr. 592, 772 P.2d 1059, in which the Supreme Court held that its decision in Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 254 Cal.Rptr. 211, 765 P.2d 373 was to be given full retroactive effect.7  In Newman the court stated:  “Because the relevant portion of Foley did not address an area in which this court had previously issued a definitive decision, from the outset any reliance on the previous state of the law could not and should not have been viewed as firmly fixed as would have been the case had we previously spoken.  (Compare Moradi-Shalal [v. Fireman's Fund Ins. Companies (1988) ] 46 Cal.3d 287 [250 Cal.Rptr. 116, 758 P.2d 58].)   Even if one views Foley as breaking new and unexpected ground, a point we do not concede, it did so in an indisputably unsettled area․   The cases were not in agreement as to the appropriate standards permitting recovery of tort damages, leading to uncertainty which was reflected in the variety of Court of Appeal analyses as well as in confusing pleadings in the trial courts.”  (Newman v. Emerson Radio Corp., supra, 48 Cal.3d at pp. 986-987, 258 Cal.Rptr. 592, 772 P.2d 1059.)

The fact that the Supreme Court had granted review in Cedars-Sinai almost a year before this case went to trial also argues against any reasonable belief in the continued existence of spoliation of evidence as a tort remedy.   As the court in Newman stated:  “Although we did not decide Foley until December 1988, our decision to grant review in January 1986 put litigants on clear notice of the possibility that we might decline to accept Cleary's [Cleary v. American Airlines, Inc. (1980) 111 Cal.App.3d 443, 168 Cal.Rptr. 722] substantial extension of traditional common law principles in the employment law area and that the state's highest court intended to decide the issue rather than leave it to the decisions of the intermediate appellate courts․”  (Newman v. Emerson Radio Corp., supra, 48 Cal.3d at p. 987, fn. 7, 258 Cal.Rptr. 592, 772 P.2d 1059.)

Additionally, as was the case with Foley, retroactive application of the Cedars-Sinai decision will not divest the Hassoldts of any property or contract right, nor, as we will explain below, will it leave them without any remedy.

Finally, applying Cedars-Sinai retroactively will not unduly burden the administration of justice.   The cause of action can be stricken from any complaint in a case that has not yet gone to trial and damages based on spoliation of evidence can be overturned in any case now pending on appeal, where it is clear from the judgment or special verdict that such damages were based on a spoliation cause of action.

The Impact of a Retroactive Application of Cedars-Sinai on the Present Case

 Our conclusion that Cedars-Sinai must be given full retroactive effect leads to the inescapable conclusion that, to the extent the Hassoldts were awarded damages - both compensatory and punitive - based on their causes of action for spoliation of evidence, that award must be set aside.   The difficulty presented by this case is that the jury's $130,000 compensatory damage award was based on a general verdict, i.e., the jury was not asked to specify on which cause or causes of action the award was based.

Patrick contends that the $130,000 compensatory damage award was exclusively for attorney's fees and costs incurred by the Hassoldts by reason of Patrick's spoliation of evidence.   Patrick bases this contention on the following facts:

1. “$130,000 was precisely the amount requested by Plaintiffs' counsel in his closing argument as attorney's fees and costs for the spoliation cause of action.”

2. The court informed the jury that attorney's fees could be recovered as damages in a spoliation cause of action;

3. The jury then asked for a re-reading of plaintiff William Hassoldt's testimony concerning the amount of attorney's fees and costs incurred;

4. That within an hour or two after receiving a transcript of [William] Hassoldt's testimony, the jury returned its $130,000 verdict;

5. That there was no evidence the Hassoldts suffered any other kind of damage.  (The Hassoldts strenuously disagree with the latter contention.)

While it may be Patrick's claim that the $130,000 awarded as compensatory damages represented the attorney's fees and costs incurred in connection with the Hassoldts' spoliation causes of action, we do not know that for a fact and we will not speculate in order to reach that result.   Our refusal to speculate is buttressed by the fact that the jury found by a preponderance of the evidence that Patrick was “responsible for damaging plaintiffs' tree” and by clear and convincing evidence that Patrick “acted with oppression or malice in damaging the tree.”   It is clear, therefore, that the judgment must be reversed and the case remanded for a new trial.   The question is what issue or issues should be retried.

Although the Hassoldts may not recover any damages - compensatory or punitive 8 -on their now abolished spoliation causes of action, we reiterate the fact that their complaint contained other causes of action, namely, trespass, conversion, and negligence.   We also reiterate the fact that the jury found by a preponderance of the evidence that Patrick was responsible for damaging the Hassoldts' tree and did so with oppression or malice.   If, therefore, no error existed with respect to the liability phase of the trial, we would reverse for a new trial on the issue of damages only.   The fact is, however, that the liability phase of the trial was infected with error.   Specifically, as discussed in more detail in the unpublished portion of the opinion, we have concluded the trial court erroneously admitted into evidence the testimony of Fred Johnson.   Accordingly, the case must be remanded for a new trial on both the issues of liability and damages.9

III-VI***

VII

Considerations on Remand

We have already stated the judgment in this case must be reversed and the case remanded for a new trial on the issues of liability and damages.   It is our view, however, that we must provide some guidance to the trial court on retrial.

As we have stated several times, the jury found by a preponderance of the evidence that Patrick spoliated evidence and by clear and evidencing that such spoliation was done oppressively or maliciously.   We do not take these findings of the jury lightly.14  Indeed, even though the Supreme Court in Cedars-Sinai abolished the tort of intentional spoliation of evidence, it recognized that “[d]estroying evidence can destroy fairness and justice, for it increases the risk of an erroneous decision on the merits of the underlying cause of action.   Destroying evidence can also increase the costs of litigation as parties attempt to reconstruct the destroyed evidence or to develop other evidence, which may be less accessible, less persuasive, or both.”  (Cedars-Sinai Medical Center v. Superior Court, supra, 18 Cal.4th at p. 8, 74 Cal.Rptr.2d 248, 954 P.2d 511.)

To summarize the foregoing, the jury found that Patrick spoliated evidence and did so oppressively and maliciously.   Additionally, Patrick failed to produce records relating to its tree trimming activities, which resulted in sanctions being imposed on it or its counsel on no less than three separate occasions.   Although the Hassoldts may no longer recover damages for spoliation of evidence in light of Cedars-Sinai, it does not, nor should it, follow that they are without remedy.   Indeed, the availability of these remedies 15 was one of the reasons the Supreme Court in Cedars-Sinai abolished the tort of intentional spoliation of evidence.

 If we were simply to return this case to the trial court for retrial, without considering the above referred to conduct on the part of Patrick, the Hassoldts effectively would be denied a remedy despite Patrick's egregious conduct in spoliating evidence and abusing the discovery process.   Accordingly, when this case is returned to the trial court for retrial, the Hassoldts are free to apply to the court for issue or evidentiary sanctions.   In determining which, if any, of these sanctions to impose the trial court will accept as fact (based on the jury's findings) that Patrick spoliated evidence, i.e., the records and pictures of its tree cutting activities.   In deciding whether to impose such sanctions, the trial court should bear in mind that since damages are no longer recoverable for Patrick's intentional spoliation of evidence, its pernicious conduct will go unpunished unless some form of evidentiary or issue sanction is levied.

VIII

Disposition

The judgment is reversed.   Each party is to bear its own costs on appeal.

FOOTNOTES

FOOTNOTE.  

1.   Before 1993, Patrick's tree cutting records consisted of a one or two-page compilation of the locations at which trees were cut and before and after pictures of each tree cut.   Before 1993, neither the tree trimming lists nor the before and after photographs were destroyed.   After Patrick was contacted by the Hassoldts' attorney concerning the cutting of trees, Patrick's representative (Voorhees) looked at these records.   In June 1993, after receiving several letters from the Hassoldts' counsel, Patrick changed his record keeping procedure.   Specifically, in June of 1993, Patrick made the decision to begin throwing away the before and after photographs and the tree trim lists.   Additionally, under Patrick's new procedure, it retained the monthly summaries and before and after pictures for tree cuttings for only a twelve-month period.   Voorhees testified that the destruction of the October 1992 records (the records that would be germane to the present case) occurred in or about the second week of November 1993, which was weeks after Patrick was served with a summons and complaint in this action.

2.   A non-suit was granted on the Hassoldts' cause of action for negligent infliction of emotional distress.

3.   The jury was not asked to determine whether the spoliation of evidence was intentional or negligent.

4.   Cedars-Sinai was decided after the trial in this case and while the appeal was pending.

5.   There is no question in the present case that the Hassoldts knew about Patrick's alleged spoliation of evidence before the trial of this case commenced.   Indeed, as stated, the Hassoldts moved to amend their complaint to add spoliation causes of action approximately one year before the trial of this case commenced.

6.   The Hassoldts also advanced the novel proposition that “Even If the Court Finds That Cedars-Sinai Must Be Applied Retroactively, This Court Should Allow the Judgment to Stand as a De Facto Sanction.”   We reject this argument as well.

7.   In Foley the court held, inter alia, that “an employee may not obtain tort relief for breach of the implied covenant of good faith and fair dealing in an employment contract;  the covenant is a contract term and relief for its violation accordingly is limited to contract damages.”   (Newman v. Emerson Radio Corp., supra, 48 Cal.3d at p. 976, 258 Cal.Rptr. 592, 772 P.2d 1059.)

8.   The punitive damage award of $150,000 must be reversed because it is clear that that award was based on Patrick's spoliation of evidence.   Indeed, the punitive damage verdict form submitted to the jury permitted an award of punitive damages on only the spoliation causes of action.

9.   At the conclusion of this opinion we will discuss issues that may arise on retrial, as well as the options open to the trial court on remand.

FOOTNOTE.   See footnote *, ante.

14.   In addition, as the Hassoldts point out, the history of this case reveals substantial discovery abuses by Patrick.   Thus, on June 22, 1994, the Hassoldts' motion to compel Patrick to produce documents relating to their tree trimming activities was granted and Patrick's counsel was ordered to pay $1,064.00 in sanctions.   On August 30, 1995, Patrick was sanctioned $750.00 for again failing to reveal certain information relating to its tree trimming activities.   On October 20, 1995, Patrick was again sanctioned (evidentiary sanction) for failing to turn over documents relating to its tree trimming activities.

15.   We identified these other remedies on page 310 of this opinion.

SCHNEIDER, J.** FN** Judge of the Los Angeles Supreme Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

KLEIN, P.J., and CROSKEY, J., concur.