The Enhanced Civil Remedy that Every Litigator Needs to Know About

Every litigator should be aware of an enhanced civil remedy under one of California’s theft statutes, Penal Code section 496(c), which entitles parties to treble damages and attorney’s fees for any violation under that section.  The Court of Appeal provided a detailed overview of this remedy in Switzer v. Wood, 35 Cal. App. 5th 116, 247 Cal. Rptr. 3d 114 (2019), after the trial court mistakenly determined that section 496(c) did not apply because it would lead to unreasonable results.

In Switzer, two individuals formed an LLC to sell medical devices, but one of the individuals converted large sums of money and other valuable property belonging to Switzer and the company.  The jury specifically found the respondents had violated Penal Code section 496(a), which prohibits individuals from knowingly receiving, withholding, or selling “property that has been stolen or that has been obtained in any manner constituting theft.”  Id. at 126.  However, the trial court declined to award treble damages or attorney’s fees to Switzer based on its belief that section 496(c) did not apply to ordinary conversion claims like Switzer’s.

The Court of Appeal reversed the trial court’s ruling on Switzer’s treble damages claim based on section 496’s “clear and unambiguous” language, which entitles parties to treble damages for any violation under the statute.  Id. at 121.  Thus, despite being a criminal statute, a criminal conviction is not required – a civil jury may determine whether a violation under the statute has actually occurred.  The Switzer court supported its rationale by citing a prior Court of Appeal decision, which similarly found that a party was entitled to treble damages after demonstrating a violation under subdivision (a).  See Bell v. Feibush, 212 Cal. App. 4th 1041, 1049 (2013).

Importantly, subdivision (c) also mandates an award of attorney’s fees for any violation under the statute.  Although the Switzer court’s discussion about awarding attorney’s fees is unpublished, the court’s use of the “plain meaning rule” can likewise be applied.  See Switzer, 247 Cal. Rptr. 3d at 126 (reversing the trial court’s denial of Switzer’s motion for attorney’s fees); see also ALLURE LABS, INC., Appellant, v. NELLI MARKUSHEVSKA, et al., Appellees, 2019 WL 3231012, at *9 (N.D. Cal. July 18, 2019) (finding that the Bankruptcy Court “committed legal error” by declining to award attorney’s fees under subdivision (c)).

Lastly, while Switzer involved the conversion of money and medical device equipment, section 496 is defined broadly to encompass “any property.”  Pen. Code § 496(a); see Bell, 212 Cal. App. 4th at 1049 (“Anything that could be the subject of a theft can also be property under section 496.”).  For example, a court’s finding that a party stole copies of trade secrets under section 496(a) would also entitle that person to treble damages and attorney’s fees under section 496(c).  See People v. Gopal, 171 Cal. App. 3d 524, 541 (1985) (“It therefore follows that receipt of a copy of stolen trade secrets is a crime in violation of section 496.”).

Based on Switzer, it would be a mistake not to plead a violation of section 496(a) with any other theft-related causes of action.  Failing to do so may cost your client treble damages, and may cost you an automatic award of attorney’s fees.