Wollersheim v. Church of Scientology of California

Page 532

6 Cal.Rptr.2d 532

Previously published at 10 Cal.App.4th 370, 15 Cal.App.4th 1426, 4 Cal.App.4th 1074

10 Cal.App.4th 370, 15 Cal.App.4th 1426, 4 Cal.App.4th 1074

Larry WOLLERSHEIM, Plaintiff and Respondent, v. CHURCH OF SCIENTOLOGY OF CALIFORNIA, Defendant and Appellant.

No. B023193.

Court of Appeal, Second District, Division 7, California.

March 20, 1992.

As Modified on Denial of Rehearing April 20, 1992.

Review Granted July 23, 1992.

Review Dismissed and Cause Remanded July 15, 1993.

Rabinowitz, Boudin, Standard, Krinsky & Lieberman, and Eric M. Lieberman and Terry Gross, New York City, Lenske, Lenske & Heller, and Lawrence E. Heller, Woodland Hills, and Michael Lee Hertzberg, New York City, for defendant and appellant.

Cummins and White, Barry Van Sickle, Robert S. Horwitz, and Tina B. Fisher, Los Angeles, for plaintiff and respondent.

JOHNSON, Associate Justice.

This case is on remand from the United States Supreme Court to reconsider the punitive damage award modified and approved in our earlier opinion (Wollersheim v. Church of Scientology (1989) 212 Cal.App.3d 872, 260 Cal.Rptr. 331, rev. den. Oct. 26, 1989, cert. grtd., vac. and remd. (1991) 499 U.S. 914, 111 S.Ct. 1298, 113 L.Ed.2d 234,) in the light of the high court's decision in Pacific Mut. Life Ins. Co. v. Haslip (1991) 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1. To facilitate review of this question, we ordered supplemental briefing and heard oral argument from the parties. Upon reconsideration, we conclude the California procedures for determining punitive damage awards pass constitutional muster under Haslip. We further conclude, as we did in our prior opinion, the jury acted appropriately in imposing a punitive damage award in this case but the amount it awarded is excessive under the standards established by California law. Consequently, we affirm the judgment, subject to a remittitur. ¹

I. THE PROCEEDINGS THUS FAR.

The original appeal followed a jury award of $30 million in compensatory and punitive damages to Larry Wollersheim (Wollersheim), a former member of the Church of Scientology (Scientology). The complaint alleged Scientology intentionally and negligently inflicted severe emotional injury on Wollersheim through certain practices, including "auditing," "disconnect," and "fair game." Since the trial court granted summary adjudication that Scientology is a religion and "auditing" is a religious practice, the trial proceeded under the assumption they were. In our original opinion we concluded there was substantial evidence to support a finding Scientology had committed the tort of intentional infliction of emotional injury against Wollersheim. We also found sufficient evidence the "auditing" and other practices in this case were conducted in a coercive environment. Thus, none of them qualified as "voluntary religious practices" entitled to constitutional protection under the First Amendment religious freedom guarantees. At the same time, we concluded both the compensatory and punitive damages the jury awarded in this case were excessive. Consequently, we reduced the compensatory damages to $500,000 and the punitive damage award to $2 million.

The California Supreme Court denied the petitions for review unanimously. (Oct. 26, 1989.) The United States Supreme Court, however, granted certiorari on the punitive damages issue and held this case along with ten others (see fn. 4, infra ) awaiting its disposition of the lead case on the constitutionality of punitive damages--Pacific Mut. Life Ins. Co. v. Haslip, supra, 499 U.S. 1, 111 S.Ct. 1032. After deciding Haslip, the Supreme Court remanded all 11 punitive damage cases it was holding for the lower courts to review in light of Haslip.

Since the Haslip opinion was limited solely to the issue of the constitutionality of punitive damage awards, our reconsideration of our prior decision likewise is confined to that issue. ² We first review the procedures and standards California courts apply in deciding the appropriateness and amount of punitive damage awards and determine whether that process is constitutional under Haslip. We then examine the specific punitive damage award in this case, as reduced by this court, and determine whether it passes constitutional muster.

II. THE PROCESS CALIFORNIA USES FOR DETERMINING AND REVIEWING PUNITIVE DAMAGES AWARDS IS CONSTITUTIONAL UNDER THE RECENT UNITED STATES SUPREME COURT DECISION IN PACIFIC MUTUAL INSURANCE CO. v. HASLIP.

This court and other California appellate courts already have ruled this state's procedures for determining punitive damages comply with the "due process" standards enunciated in Haslip. (Liberty Transport, Inc. v. Harry W. Gorst Co. (1991) 229 Cal.App.3d 417, 280 Cal.Rptr. 159; Las Palmas Associates v. Las Palmas Center (1991) 235 Cal.App.3d 1220, 1 Cal.Rptr.2d 301.) None of these opinions, however, had occasion to consider this question in depth. Consequently, we examine the Haslip opinion in some detail and the Alabama punitive damages procedures approved in that decision as background for reviewing the punitive damage award the jury levied on Scientology. As further background for our review, we also have included an appendix containing a table of appellate opinions in which California courts evaluated punitive damage awards. This table updates a similar table which appears in Devlin v. Kearney Mesa AMC/Jeep/Renault, Inc. (1984) 155 Cal.App.3d 381, 393-396, 202 Cal.Rptr. 204.

In Haslip an insurance agent was accredited by at least one other insurance carrier as well as the defendant, Pacific Mutual. The plaintiffs were employees of a company this agent signed up for a group combined health and life insurance policy. Pacific only supplied the life insurance portion of this policy and another of this agent's companies provided the health insurance component. Later the agent embezzled premiums plaintiffs' employer had forwarded to him instead of paying them over to the insurance companies. The policies were cancelled. So when these plaintiffs became sick they suddenly and unhappily found out they had no health coverage. (111 S.Ct. at p. 1036.)

The plaintiffs sued the agent and Pacific for fraud. The other three plaintiffs only received compensatory damages, but Haslip won "general damages" in the amount of $1,040,000. (111 S.Ct. at p. 1037.) The Supreme Court concluded at least $840,000 of this represented punitive damages. (Id. at fn. 2.) Pacific appealed and the Alabama Supreme Court affirmed, including the punitive damages portion of the award, by a divided vote. After granting certiorari the United States Supreme Court also affirmed in a majority opinion signed by five Justices. Two Justices separately concurred and one dissented. (The ninth Justice did not participate in the decision.)

In assessing the constitutionality of the punitive damages award in Haslip, the United States Supreme Court traced the long history and important role of punitive damages in Anglo-American law. On the basis of this historical review, the high court ruled, "So far as we have been able to determine, every state and federal court that has considered the question has ruled that the common-law method for assessing punitive damages does not in itself violate due process. [Citation omitted.] In 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." (Id. 499 U.S. at p. ----, 111 S.Ct. at p. 1043, 113 L.Ed.2d at p. 19.)

Having ruled punitive damages awards are constitutional in concept, the Supreme Court considered whether the specific award in the Haslip case was constitutionally acceptable. The justices set forth the general considerations that are to guide the decision of whether a specific award is constitutional. "[U]nlimited 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.... [G]eneral concerns of reasonableness and adequate guidance from the court when the case is tried to a jury properly enter into the constitutional calculus." (Id. 499 U.S. at p. ----, 111 S.Ct. at p. 1043, 113 L.Ed.2d at p. 20.)

The Supreme Court described several attributes of the Alabama process for determining punitive damage awards and, on that basis, concluded "the award here did not lack objective criteria.... [I]n this case it does not cross the line into the area of constitutional impropriety." (Id. 499 U.S. at p. ----, 111 S.Ct. at p. 1046, 113 L.Ed.2d at p. 23.) The high court did not, however, hold nor imply the Alabama process was the one and only system which accords due process. Nor did it suggest any particular attribute of the Alabama process was absolutely essential to constitutionality. ³ All the Supreme Court held was that the Alabama process achieved the constitutional requirement of "reasonableness" and "adequate guidance to the jury." ⁴

The Supreme Court found several features of the Alabama process worthy of mention. We consider each and consider how the Supreme Court's observations about Alabama criteria and procedures relate to the constitutionality of California's punitive damages process.

A. The Adequacy of Jury Instructions.

The Supreme Court observed the Alabama jury instructions adequately described the purposes of punitive damages as punishing the defendant and deterring "the defendant and others from doing such wrong in the future," rather than compensating the plaintiff. The instructions gave the jury "significant discretion" in determining punitive damages, but that discretion was limited to the amount needed to advance the "state policy concerns" of "deterrence and retribution." Moreover, the degree of discretion allowed "is no greater than that pursued in many familiar areas of the law." (The Supreme Court listed several examples including "reasonable...