California Court Of Appeals Says Public Entities May Seek Punitive Damages From Private Parties

In City of Glendale v. Superior Court of Los Angeles County (2002) 95 Cal.App.4th 1266, the California Court of Appeal, held that public entities may pursue claims for punitive damages from private parties.

City of Glendale and Glendale Redevelopment Agency (collectively, City) sued Robert Fenton and Gregory Pentoney for fraud and asked for damages, including punitive damages. Fenton and Pentoney argued that City, as a public entity, could not recover punitive damages. Division Seven of the Second District of the California Court of Appeal disagreed.

In making its decision, the Court faced conflicting Court of Appeal precedent. In City of Los Angeles v. Shpegel-Dimsey, Inc. (1988) 198 Cal. App. 3d 1009, Division One of the Second Appellate District held that a municipality could not recover punitive damages. In City of Sanger v. Superior Court (1992) 8 Cal. App. 4th 444, however, the Fourth Appellate District held that a municipality may pursue such damages.

The Court of Appeal in this case (City of Glendale) followed City of Sanger. Firstly, the Court noted, Civil Code section 3294 states only that “the plaintiff,” where appropriate, may recover punitive damages. To the extent the term “plaintiff” refers to the “person” who files a complaint or cross-complaint, the court reasoned, the term “person” includes a “public entity.” (Code Civ. Proc. §§ 481.180, 481.170.) Therefore, the plain language of section 3294 permits all plaintiffs, both public and private, to recover punitive damages in appropriate cases.

The Court next addressed Fenton and Pentoney’s argument that allowing public entities to recover punitive damages from private persons violates the constitutionally protected right to equal protection, since private persons, under Gov. Code § 818, may not recover punitive damages from public entities. Here, the Court found no equal protection violation because, it said, there is a rational basis for the rule. More specifically, treating public and private parties differently when they are defendants is rationally related to a legitimate government goal, “because requiring a public entity to pay punitive damages would ultimately serve to punish the group intended to benefit from the punishment.” Conversely, the Court found a rational basis exists for treating public and private parties the same when either is the plaintiff and seeks to recover punitive damages (so long as the defendant is not a public agency). Regardless of whether the plaintiff is a public or private party, requiring a private defendant to pay punitive damages furthers the goal of punitive damages of punishing and deterring wrongdoing.

Therefore, the Court concluded that City could pursue its claim for punitive damages against Fenton and Pentoney.