In Re Pacific Fertility Center Litigation

Filing 868

ORDER RE: PUNITIVE DAMAGES INSTRUCTION. Signed by Magistrate Judge Jacqueline Scott Corley on 6/17/2021. (ahm, COURT STAFF) (Filed on 6/17/2021)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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IN RE: PACIFIC FERTILITY CENTER
LITIGATION

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Case No. 18-cv-01586-JSC
ORDER RE: PUNITIVE DAMAGES
INSTRUCTION

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Re: Dkt. No. 846

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United States District Court
Northern District of California

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At the charging conference on June 7, 2021, Chart objected to the proposed jury

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instruction regarding punitive damages. In particular, Chart argued that “there’s been no evidence

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that an officer, director, or managing agent has been involved in anything having to do with the

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controller.” (Tr. at 1747-48.) The Court requested briefing regarding this matter. The Court

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reviewed Plaintiffs’ trial brief and the relevant legal authority, and prior to instructing the jury,

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orally ruled that no reasonable trier of fact could find by clear and convincing evidence that the

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alleged conduct constituting malice, oppression, or fraud was authorized by, known by, or

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committed by one or more Chart officers, directors, or managing agents, and therefore declined to

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give a punitive damages instruction. (Tr. 1787-1790.) This Order elaborates on the Court’s oral

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ruling.

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DISCUSSION

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Plaintiffs’ punitive damages request arises out of their claim that Chart was negligent

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because it failed to recall or retrofit the TEC 3000 electronic controller installed on Tank 4.

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To hold Chart liable for punitive damages on this claim, the jury must be able to find by clear and

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convincing evidence that at least one of Chart’s officers or managing agents authorized, approved,

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or ratified the company’s offending conduct. Cal. Civ. Code § 3294(b); Barton v. Alexander

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Hamilton Life Ins. Co. of America, 110 Cal.App.4th 1640, 1644 (2003) (holding that the clear and

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convincing standard applies to all of section 3294); see also White v. Ultramar, Inc., 21 Cal. 4th

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563, 572 (1999) (stating that managing agents are “those employees who exercise substantial

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independent authority and judgment over decisions that ultimately determine corporate policy”).
Plaintiffs’ trial brief identifies three trial exhibits which they contend support such a

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finding: Trial Exhibits 200, 223, and 284. They contend that “[t]hese exhibits show in the years

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leading up to the Tank 4 incident, Chart’s upper management had been kept informed about

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the SN=0 issue, the company’s development of a retrofit capable of fixing the issue, and the

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ultimate decision to release that retrofit to market without informing customers that it was
necessary to address a known defect in Chart’s TEC-3000 controllers.” (Dkt. No. 846 at 2.)

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United States District Court
Northern District of California

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While these exhibits indeed reference the “Chart hierarchy” and “upper management,” they do not

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identify to whom they are referring. (Trial Ex. 284 at 290; Trial. Ex. 200 at 4552-53.) Nor did

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Plaintiffs identify trial testimony which supports their theory that an officer or managing agent

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was actually aware of the alleged controller issues or, at least, any testimony as to what the officer

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or managing agent was aware of. In particular, although Plaintiffs maintain that Frank Bies, the

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Vice President and General Manager of Chart’s cryobiological business, was a Chart officer who

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was aware of the controller issue, they do not cite to portions of his deposition testimony which

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would support such knowledge and he was not copied on the emails at Trial Exhibits 200, 223, or

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284.

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Plaintiffs’ argument that knowledge can be inferred from Chart’s release of a retrofit kit for

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the TEC-3000 controllers is likewise unavailing. While Plaintiffs need not “produce a smoking

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memorandum signed by the CEO and Board of Directors,” Pizarro v. Nat'l Steel & Shipbuilding

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Co., No. 19-cv-08425-WHA, 2021 WL 1197467, at *4 (N.D. Cal. Mar. 30, 2021), the evidence

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must permit “a clear and convincing inference that within the corporate hierarchy authorized

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persons acted despicably in ‘willful and conscious disregard of the rights or safety of others’”

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Romo, 99 Cal.App. 4th at 1141 (citing Civ. Code, § 3294). As Plaintiffs have not identified

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evidence that discusses what Chart’s unidentified hierarchy was told about the controller issue and

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the need for a retrofit, no reasonable trier of fact could find by clear and convincing evidence that
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the hierarchy acted in willful and conscious disregard of the rights and safety of others. The trial

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exhibits highlighted by Plaintiffs reference potential future discussions with management, but the

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record is silent as to whether those discussions happened and thus is silent as to what information

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was conveyed to the hierarchy. At best the retrofit and the emails support a finding by a

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preponderance of the evidence that some communications occurred; absent evidence as to the

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substance of the communications they do not satisfy the clear and convincing evidence required

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for the imposition of punitive damages.

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Finally, Plaintiffs argue that Josep Fernandez and Ramon Gonzalez are managing agents.
Mr. Fernandez was a managing director at Chart and Mr. Gonzalez was a Cryobio product
manager. There is no evidence, however, to support Mr. Fernandez’s knowledge of the issue—let

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United States District Court
Northern District of California

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alone his authorization, approval, or ratification of Chart’s allegedly offending conduct. Plaintiffs

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point to no trial testimony to that effect and the only reference to Mr. Fernandez in the identified

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exhibits is Brendon Wade’s statement in an email to Jim Gibson that “[m]aybe you can mention

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this to Josep/Ramon/Buzz” in reference to the controller issue. (Tr. Ex. 223.) Plaintiffs have

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pointed to no evidence that it was actually raised with Mr. Fernandez.

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With respect to Mr. Gonzalez, Plaintiffs contend that because he was above Mr. Wade and

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Justin Junnier in the Chart hierarchy, and he participated in the email chains at Trial Exhibits 200

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and 284, he is a managing agent. A plaintiff

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may satisfy the “managing agent” requirement . . . through evidence
showing the information in the possession of the corporation and the
structure of management decisionmaking that permits an inference
that the information in fact moved upward to a point where corporate
policy was formulated. These inferences cannot be based merely on
speculation, but they may be established by circumstantial evidence,
in accordance with ordinary standards of proof.

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Romo v. Ford Motor Co., 99 Cal.App. 4th 1115, 1141 (2002), voided and remanded on other

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grounds, 538 U.S. 1028 (2003). “The key inquiry [for purposes of the managing agent question]

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concerns the employee’s authority to change or establish corporate policy.” CRST, Inc. v. Superior

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Ct., 11 Cal. App. 5th 1255, 1273 (2017), as modified (June 19, 2017) (emphasis added).

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That Mr. Gonzalez was above Mr. Wade and Mr. Junnier in the company hierarchy does
not demonstrate that he is a managing agent with the authority to change or establish corporate
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policy, and in fact, the emails themselves suggest otherwise. In Trial Exhibit 200, Daphne

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Maddox, a quality analyst with Chart’s BioMedical Division, is seeking additional information

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from Mr. Gonzalez so that she can pass it on to “upper management.” (Tr. Ex. 200 at

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CHART004553.) Similarly, in Trial Exhibit 284 Mr. Gonzalez seeks additional information so

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that he can pass it on to “Chart hierarchy.” (Tr. Ex. 284 at EXTRON-000290.) Neither of these

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emails support an inference that he formulated corporate policy; indeed, Plaintiffs do not identify

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any evidence that suggests Mr. Gonzalez had any input or even influence on whether there would

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or should be a retrofit or recall of the controller. See Coll. Hosp. Inc. v. Superior Ct., 8 Cal. 4th

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704, 723 (1994), as modified (Nov. 23, 1994) (“The obvious point is that in performing, ratifying,

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or approving the malicious conduct, the agent must be acting as the organization’s representative,

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United States District Court
Northern District of California

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not in some other capacity.”) At best, these emails support an inference that Mr. Gonzalez’s role

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was to provide information to those formulating company policy.

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For the reasons stated above, the Court concludes that Plaintiffs have failed to demonstrate

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that substantial evidence supports an inference that a Chart officer or managing agent authorized,

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ratified, or approved of the Chart’s offending conduct with respect to the controller. As a result,

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the Court declined to give an instruction regarding punitive damages to the jury.

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IT IS SO ORDERED.
Dated: June 17, 2021

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JACQUELINE SCOTT CORLEY
United States Magistrate Judge

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