Civil Remedies For Financial Abuse

            The civil remedies available for elder financial abuse are set forth in W & I § 15657.5, which provides that where a plaintiff proves financial abuse by a preponderance of the evidence, he may recover all "remedies otherwise provided by law.” (W & I § 15657.5(a).) The principle that where there is a right there is a remedy (Ubi jus ibi remedium; Blumberg v. Birch (1893) 99 Cal. 416, 418) is codified in CC § 3281. (“Every person who suffers detriment from the unlawful act or omission of another, may recover from the person in fault a compensation therefore in money, which is called damages.”) Accordingly, an elder who is harmed as a result of financial abuse is entitled to recover compensatory damages. However, in addition to compensatory damages, an elder is also entitled to recover, as a matter of right, "reasonable attorney’s fees and costs." (W & I § 15657.5(a).) Thus, both the recovery of compensatory damages and the recovery of attorney’s fees and costs result from the elder proving financial abuse by a preponderance of the evidence. The awarding of attorney’s fees promotes one of the primary objectives of EADACPA -- to enable interested persons to engage attorneys to take up the cause of abused elder persons. ( W & I § 15600(j).)

            A plaintiff who proves financial abuse by a preponderance of the evidence may recover damages from any "defendant." (W & I § 15657.5(a).) And the definition of financial abuse applies to "persons or entities." (W & I § 15610.30(a), emphasis added.) Thus the definition of financial abuse contemplates that non-natural persons may be directly liable for financial abuse. However, a non-natural person must normally act through a natural person. Therefore, including non-natural persons in the definition of financial abuse suggests that wrongful conduct might sometimes be imputed from a natural person to a non-natural person. Accordingly, it would seem that a plaintiff could recover the damages provided by W & I § 15657.5(a) directly from a non-natural person where the wrongful conduct of a natural person is imputed to the entity.

            Financial abuse may result from conduct which also constitutes fraud. In an action for fraud, a plaintiff must prove each element of the cause of action by a preponderance of the evidence (Liodas v. Sahadi (1977) 19 Cal.3d 278, 291), and a claim of fraud is often accompanied by a claim for punitive damages pursuant to CC § 3294. To recover punitive damages (in addition to compensatory damages), a plaintiff must prove by “clear and convincing evidence” that the defendant is "guilty of oppression, fraud, or malice.” (CC § 3294(a).) Thus, two different standards of proof may be applied to a plaintiff’s fraud case: (1) a preponderance of the evidence to recover compensatory damages for fraud; and (2) clear and convincing evidence to recover punitive damages for fraud. Similarly, an action for financial abuse may seek, in addition to compensatory damages, punitive damages pursuant to CC § 3294. The availability of punitive damages in financial abuse claims is recognized in the remedies section. (W & I § 15657.5(c).) Accordingly, two different standards of proof may be applied to a plaintiff’s elder financial abuse case: (1) a preponderance of the evidence to recover compensatory damages, attorney's fees, and costs for financial abuse; and (2) clear and convincing evidence of "oppression, fraud, or malice" to recover punitive damages. Could a plaintiff prove by a preponderance of the evidence that a defendant took property "with the intent to defraud" pursuant to W & I § 15610.30(a)(1) such that financial abuse occurs but not prove by clear and convincing evidence that the defendant is "guilty of . . . fraud" pursuant to CC § 3294? This question arose in an unpublished decision (Ciolino v. Ryan (1st Dist. 2005) 2005 WL 2065302), and the court decided that this could occur. Presumably this is correct both because of the different standards of proof, as well as because financial abuse requires only the "intent to defraud" while several additional elements are required for a defendant to be "guilty of . . . fraud."

             The punitive damages statute presents additional conditions for any plaintiff wishing to recover punitive damages from a defendant who is an employer of the active wrongdoer. (CC §  3294(b).)

“An employer shall not be liable for damages pursuant to subdivision (a), based upon the acts of the employee of the employer, unless the employer had advance knowledge of the unfitness of the employee and employed him or her with a conscious disregard of the rights or safety of others or authorized or ratified the wrongful conduct for which the damages are awarded or was personally guilty of oppression, fraud, or malice.”

Accordingly, a plaintiff, be he an elder or younger, can not recover punitive damages from a wrongdoer’s employer without first satisfying these additional conditions. However, the availability of punitive damages (and perhaps any damages) from an employer in financial abuse cases is complicated by some very unusual language in W & I § 15657.5(b).

 "Where it is proven by a preponderance of the evidence that a defendant is liable for financial abuse, as defined in Section 15610.30, and where it is proven by clear and convincing evidence that the defendant has been guilty of recklessness, oppression, fraud, or malice in the commission of the abuse, in addition to reasonable attorney's fees and costs set forth in subdivision (a), and all other remedies otherwise provided by law, the following shall apply:

            (1) The limitations imposed by Section 377.34 of the Code of Civil Procedure on the damages recoverable shall not apply.

(2) The standards set forth in subdivision (a) of Section 3294 of the Civil Code regarding the imposition of punitive damages on an employer based upon the acts of an employee shall be     satisfied before any damages or attorney's fees permitted under this section may be imposed against an employer."

A plaintiff who proves financial abuse by a preponderance of the evidence is entitled to recover compensatory damages, attorney's fees, and costs pursuant to subdivision (a); however, a plaintiff who goes on to prove "recklessness, oppression, fraud, or malice" by clear and convincing evidence triggers two additional consequences pursuant to subdivision (b). One would imagine that a plaintiff who successfully proves greater culpability by a higher standard of proof would be entitled to some extra measure of recovery, and this is supported by the phrase: "in addition to reasonable attorney's fees and costs . . . and all other remedies otherwise provided by law . . . ." (Emphasis added.) The first consequence (subsection (b)(1)) does enhance a plaintiff's remedies by providing that financial abuse damages survive the death of the victim. However, the second consequence (subsection (b)(2)) appears to be a limitation and not an enhancement and seemingly takes away a portion of the remedy given to a plaintiff in subsection (a), at least with regard to employers.

                Subdivisions (b) and (b)(2) provide that if the plaintiff proves "recklessness, oppression, fraud, or malice" then the higher standard of CC § 3294(a) must be met before "any damages or attorney's fees under this section may be imposed against an employer." Thus, while an elder may recover compensatory damages and attorney’s fees from any defendant by proving financial abuse by a preponderance of the evidence, he may not recover any damages from a defendant who is an employer based upon the conduct of the defendant’s employee without first satisfying the conditions of CC § 3294(b). The organization of § 15657.5 suggests that this limitation does not apply unless the elder proves that the defendant has been guilty of recklessness, oppression, fraud, or malice. However, this would have the potential for producing absurd results. For example, an elder who proves financial abuse by a preponderance of the evidence but fails to present any additional evidence and thereby fails to prove recklessness, oppression, fraud, or malice should recover compensatory damages from all defendants, including non-natural persons acting through others. However, the elder who proves recklessness by clear and convincing evidence may not recover any damages from an employer without first satisfying the additional conditions of CC § 3294(b). This obviously would make little sense. It is much more likely that the Legislature intended that damages never be imposed on an employer for the acts of an employee unless the elder proved by clear and convincing evidence that the employee’s conduct was reckless, oppressive, fraudulent, or malicious and the conditions of CC § 3294(b) are satisfied. This would also justify adding recklessness to the list of conditions under which an employer might ultimately be held responsible. The phrase “oppression, fraud, or malice” is obviously the identical language used in CC § 3294; however, within the financial abuse statute, a fourth element of “recklessness” is added. While oppression, fraud, and malice all require some form of specific intent by the wrongdoer, recklessness lowers this standard to include conduct in which the wrongdoer should appreciate that the harm is likely to result but does not necessarily intend it. The definition of elder financial abuse provided by W & I § 15610.30 appears to include conduct which occurs with a culpable state-of-mind, yet which does not rise to the level of specific intent. Thus, § 15657.5 appears to make damages unavailable against an employer unless additional and more demanding proof is provided, but also lowers the bar somewhat by including reckless as well as intentional conduct.

            There are at least two problems with this interpretation: (1) the definition of financial abuse seemingly imposes liability on both natural and non-natural persons, that is, on "any person or entity" (W & I § 15610.30(a); and (2) the higher standard of CC § 3294(b) is contingent on the plaintiff proving "recklessness, oppression, fraud, or malice." If a non-natural person may be guilty of and directly liable for financial abuse, but an employer may not be liable for any damages unless the higher standards are met, then only non-natural persons who are not employers may be so liable pursuant to W & I § 15657.5(a). But a non-natural person can only act through a natural person, and by far the most common relationship would be that of employer/employee. Thus, the scope of financial abuse as defined in W & I § 15610.30(a) and the availability of the resulting remedies provided by W & I § 15657.5 appear inconsistent. An alternate solution to this problem may exist depending upon the meaning given to the phrase "this section" in subsection (b)(2). To which section does "this section" refer? At least two possibilities exist: (1) CC § 3294; or (2) W & I § 15657.5. If "this section" means CC § 3294, then subsection (b)(2) merely confirms that an employer may not be liable for punitive damages unless the higher standard of CC § 3294(b) is met, and therefore an employer may be liable for compensatory damages, attorney's fees, and costs based upon proof of financial abuse by a preponderance of the evidence. If "this section" means W & I § 15657.5, then an employer may not be liable for "any damages" unless this higher standard is met. The problem with the first interpretation is that subsection (b)(2) refers to "any damages or attorney's fees," and attorney's fees are normally not recoverable pursuant to CC § 3294. The problem with the second interpretation is that its application is contingent on the plaintiff proving recklessness, oppression, fraud, or malice by clear and convincing evidence. While this statutory language is quite confusing, it would seem more likely than not that a court would resolve this conundrum by deciding that an employer is not subject to liability for financial abuse unless both the higher standards of W & I § 15657.5(b) and CC § 3294(b) are met.

            As previously noted, subsection (b)(1) provides that if the higher standard of subsection (b) is met, then the damages survive the death of the victim. Specifically, subsection (b)(1) provides:

“The limitations imposed by Section 377.34 of the Code of Civil Procedure on the damages recoverable shall not apply.”

CCP § 377.34 provides:

“In an action or proceeding by a decedent's personal representative or successor in interest on the decedent's cause of action, the damages recoverable are limited to the loss or damage that the decedent sustained or incurred before death, including any penalties or punitive or exemplary damages that the decedent would have been entitled to recover had the decedent lived, and do not include damages for pain, suffering, or disfigurement.”

Thus, where an elder dies before judgment and recklessness, oppression, fraud, or malice are proven by clear and convincing evidence, damages for pain, suffering, or disfigurement may be recovered. The significance of this language may extend beyond merely creating survivorship rights in certain elder financial abuse cases. Many elder financial abuse schemes involve transactions that are at least facially contractual in nature. The law of contracts generally does not permit the recovery of general damages such as pain, suffering, or disfigurement. By expressly acknowledging that general damages may survive the death of the elder where recklessness is proven, subsection (b)(1) strongly suggests that general damages are recoverable in any financial abuse action. It is certainly not uncommon for elderly victims of financial abuse to experience pain, suffering, and emotional distress as a result of their victimization. It is also common for elders to receive frequent medical care. Whether the courts will permit emotional distress damages to be recovered in the absence of any physical injury remains to be seen. However, even if such damages would not be recoverable, an elder might very well recover a portion of medical expenses, pain, and suffering where such consequences are caused by the victimization.