Defendant insurance companies appealed the judgment of the Superior Court of San Diego County (California) that rendered a verdict in favor of plaintiffs, denied defendants' motions for judgment notwithstanding the verdict, and granted a new trial on the issue of punitive damages in a suit based on breach of the implied duty of good faith and fair dealing. Plaintiffs cross-appealed the order granting a new trial.

Plaintiff wife was injured when she was involved in an automobile accident caused by an uninsured motorist. Her automobile insurance policy included proper coverage for this type of accident, but defendant insurance companies failed to compensate plaintiffs. Plaintiffs filed suit based on a breach of the implied duty of good faith and fair dealing, constructive and actual fraud, and violation of Cal. Ins. Code § 790.03. The business dispute lawyer jury rendered a verdict in favor of plaintiffs and against defendants for compensatory damages and punitive damages. One defendant moved for a new trial; the other defendant moved for judgment notwithstanding the verdict and/or for a new trial. All the motions were denied except the second defendant's motion for a new trial on the issue of punitive damages only, unless plaintiffs consented to a reduction of the punitive damages. Defendants appealed the judgment entered pursuant to the jury verdict. One defendant also appealed the denial of its motion for judgment notwithstanding the verdict. Plaintiffs cross-appealed the order granting a new trial. The judgments were affirmed and the order granting the new trial was affirmed, because the trial court did not err.

The judgment against defendants was affirmed, and the order granting the new trial was affirmed, subject to plaintiffs filing their written consent to the reduced sum, because the trial court did not err.

The trial court held that appellee residential tenant association had a contractual right to distribute newsletters in a residential apartment complex owned and managed by appellant partnership. The Court of Appeal of California, First Appellate District, Division Three, held that the association had no such right under the federal or California constitutions and reversed. The association sought further review.

For 11 years association members distributed newsletters in the complex where they lived without objection from management. When the association continued to distribute newsletters after the building's standards had been revised to forbid leafleting, the partnership filed a complaint to enjoin the distribution, and the association filed a cross complaint for injunctive and declaratory relief under the federal and state free speech clauses. The supreme court seized the opportunity to clarify the Pruneyard decision which held that the California constitution protected speech and petitioning in privately owned shopping centers. The court held that based on historical antecedents, the text of the free speech clause, and case law, California's Constitution only protected against state action. Although Pruneyard did not mention state action, it relied heavily on the functional equivalence of the shopping center to a traditional public forum. However, the apartment complex was not functionally equivalent to a traditional public forum. Thus, management's decision to forbid leafleting was not state action which impinged on the association's free speech rights.

The court affirmed the decision of the court of appeals.