California Supreme Court adopts broad interpretation of statute that shields public entities from punitive damages (Los Angeles Unified v. Superior Court)

Last week the California Supreme Court issued this opinion adopting a broad interpretation of a California statute that exempts public entities from punitive damages.

Government Code section 818 provides that public entities cannot be held liable for damages imposed “primarily for the same of example and by way of punishing the defendant.”  That statute clearly applies to punitive damages, but what about other statutory provisions that provide double or treble damages for certain types of misconduct?

Previous Supreme Court decisions had suggested that section 818 applies only to damages that are “simply and solely punitive.” Under that view, public entities could be liable for double or treble damages under a statute that is designed to punish but also to serve some other purpose, e.g., incentivize lawsuits, provide redress for otherwise uncompensated harms or expenditures, or advance some other policy goal.  But the Supreme Court overruled that line of authority, concluding that section 818 bars any form of damages that is imposed primarily for punishment, even if the statute also has some other secondary purposes.

Illinois legislature votes to expand availability of punitive damages

National Law Review reports that the Illinois legislature has passed a bill, House Bill 0219, that would make punitive damages available in wrongful death actions.  The articles states that under current Illinois law, punitive damages are available only to the victim and do not survive the victim’s death.  Illinois Governor J.B. Pritzker has not yet signed the bill into law but is expected to do so.

California law does not permit punitive damages in wrongful death actions brought by the heirs of a decedent, but they are recoverable in a survival action on behalf of the decedent’s estate.

New York judge awards $50 million in punitive damages to billionaire hedge fund founder Louis Bacon in defamation lawsuit

Financial Times reports on New York case in which a judge has awarded $50 million in compensatory damages and $50 million in punitive damages to billionaire hedge fund founder Louis Bacon.  The defendant is Canadian fashion mogul Peter Nygard.  Bacon claims Nygard defamed him in multiple ways—by falsely asserting that Bacon is a Ku Klux Klan member, that he was guilty of insider trading, that he was involved in the death of an employee, and that he was involved in arson.

The $100 million damages award in this case may be the least of Nygard’s legal problems.  He is in jail awaiting trial in Canada on charges of sexual assault, and has been charged in the US with racketeering and sex trafficking.  His businesses are already in bankruptcy, so he may not have the resources to pay the damages award in this case anyway.

Georgia jury awards $125 million in punitive damages

AP reports on a verdict in federal district court in Georgia awarding $10.5 million in compensatory damages and $125.5 million in punitive damages to a Georgia couple who alleged that their land was polluted by a neighboring solar panel facility.  Given the disparity between the punitive damages and the compensatory damages, the punitive awards seems unlikely to survive posttrial and appellate review.

Riverside County jury awards $1.44 billion in punitive damages against man for sexual abuse of his stepdaughter

The LA Times reports on a verdict in Riverside County Superior Court awarding $836 million in compensatory damages and $1.44 punitive damages.  The plaintiff is a 39-year-old woman who sued her stepfather for sexual abuse. Prior to trial, the plaintiff obtained a $200,000 settlement from her mother and a $1 million settlement from the Church of Jesus Christ of Latter-day Saints.  The plaintiff alleged that her mother and the church knew about the abuse and did nothing to protect her.  Those settlements are likely to be her only real recovery in the case—as the article notes, the verdict against her stepfather is “largely symbolic and unlikely ever to be fully paid.”

Court of Appeal holds that trial court cured wildly excessive punitive damages by reducing it, eliminating any need for a new trial (Exteres v. Connections Group)

When a jury awards an excessive amount of punitive damages, the trial court has the authority to order a new trial unless the plaintiff agrees to accept a reduced amount.  That’s a well-established principle of posttrial procedure.

But are there some situations where the jury’s award is so high that the trial court should simply order a new trial, without giving the plaintiff an option of accepting a remittitur to a more reasonable number?  Logic dictates that the answer should be yes.  If an award is so high that it creates a presumption that the jury was acting out of passion and prejudice, then the defendant should be able to get a new trial before a jury that will decide the case based solely on the facts.  In that situation, it is unfair to make the defendant pay the maximum amount that a jury could properly have awarded.  Perhaps a jury that wasn’t influenced by passion and prejudice would have awarded something less than the maximum amount.  This principle finds support in the California Supreme Court’s opinion in Sabella v. Southern Pacific, which assumed there are some situations in which excessive damages resulting from passion or prejudice “cannot be cured by a remittitur.”

The Court of Appeal in this unpublished opinion didn’t buy that argument, and rejected the defendant’s bid for a new trial.  According to the court (Fourth Appellate District, Division Two), the trial court cured any problem with the jury’s $117 million punitive damages award by reducing it to $1.43 million.  The court explained that ” ‘the relevant amount for purposes of our review is not the amount awarded by the jury, but the reduced amount ordered by the remittitur.’ ”  That analysis makes sense where the defendant’s argument on appeal challenges the amount of the punitive damages.  But the court’s analysis is not responsive to the defendant’s argument that the award was so high that it showed the jury was acting out of passion and prejudice, requiring a new trial.  Here, where the jury’s verdict was more than eight times the highest amount that a reasonable jury could have awarded, there seems to be a strong argument that the jury’s verdict was based on passion and prejudice, and that the only way to cure that is to start over with a new jury.

Court of Appeal reverses $1 million punitive damages award as not supported by the evidence (Kazminy v. Dignity Health)

I meant to report on this unpublished decision when it came down in late February, but it fell through the cracks.  Better late than never.

A former Dignity Health pharmacist sued the company for retaliation and wrongful discharge.  A jury awarded her $1 million in compensatory damages and $2.4 million in punitive damages, but the trial court reduced the punitive damages to $1 million. Dignity Health appealed.

On appeal, the Court of Appeal (Third Appellate District) reversed the punitive damages award for lack of substantial evidence.  The court found that, although there was evidence that a Dignity Health employee acted with malice towards the plaintiff, that employee was not a managing agent within the meaning of Civil Code section 3294 because he lacked authority to determine or change corporate policy.  Another Dignity Health employee who actually fired the plaintiff was a managing agent, but there was no evidence that he acted with malice.  Because plaintiff failed to present any evidence of malice on the part of a managing agent, the punitive damages award could not stand.

Court of Appeal affirms $1.5 million in punitive damages based on partial evidence of the defendants’ financial condition (Reliant Life Shares v. Michaels)

This published opinion departs from California’s usual rule that a plaintiff seeking punitive damages must present meaningful evidence of the defendant’s financial condition, including not just evidence of income and assets, but also evidence of liabilities and expenses.

A rather unique feature of California punitive damages law, discussed on this blog many times, is that a plaintiff seeking punitive damages bears the burden of presenting meaningful evidence of the defendant’s financial condition.  Our appellate courts have repeatedly held that evidence of financial condition is not meaningful if it is incomplete.  For example, Baxter v. Peterson explained that “[n]ormally, evidence of liabilities should accompany evidence of assets, and evidence of exposures should accompany evidence of income.” Similarly, Lara v. Cadag stated that where “the evidence is limited to proof of the defendant’s annual income, there is insufficient evidence to support an award of punitive damages.” And Farmers & Merchants Trust Co. v. Vanetik stated that “[w]e may not infer sufficient wealth to pay a punitive damages award from a narrow set of data points, such as ownership of valuable assets or a substantial annual income.”

The Court of Appeal in this case (Second District, Division Eight) cited all of these authorities but declined to follow them.  Instead, the court upheld punitive damages awards of $500,000 and $1 million against two individual defendants based on evidence of their income, without any evidence of their liabilities or expenses.  The court explained that because the defendants earned millions of dollars in revenues from their business, and because they made efforts to funnel these revenues through shell companies without accounting records, the evidence was sufficient to uphold the “relatively modest” awards of punitive damages.

In my opinion, this case is a prime candidate for depublication.  The result of the case is not particularly outrageous, but the court’s departure from well-settled law threatens to create confusion and uncertainty in future litigation.

Jury awards $3 million in punitive damages against Tesla in retrial of case that originally generated $137 million verdict

Courthouse News reports here on the retrial of Diaz v. Tesla, which resulted in a $3 million punitive damages award.

We previously wrote about this case here, here, here, and here. The plaintiff, who claims he was subject to racist epithets and harassment while working for Tesla, originally won a verdict in federal district court for $7 million in compensatory damages and $130 million in punitive damages.  The trial judge, District Court Judge William Orrick III, ordered a new trial unless the plaintiff would agree to a reduced verdict of $15 million.  Plaintiff chose a retrial instead of taking the $15 million.  That decision backfired, as the retrial resulted in a verdict of $175,000 in compensatory damages and $3 million in punitive damages.  While the lower amount of punitive damages is a “win” for Tesla compared to the $15 million (or the $130 million), Tesla may still challenge the award as excessive, noting that the reduced punitive damages are still more than 17 times higher than the reduced compensatory damages.

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