California Punitives by Horvitz & Levy

  • Court of Appeal holds that defendant’s wealth justifies $4 million in punitive damages (Brewer v. Impact Biomedicines)

    This unpublished opinion analyzes whether a $4 million punitive damages award is excessive when compared to a $1 million compensatory damages award, and concludes that the award is not excessive because of the defendant’s wealth.

    The plaintiff in this case is a doctor who is an expert in neurology. He claimed that the defendant, Impact Biomedicines, used his preliminary consulting work in submissions to the FDA without his knowledge or consent.

    A jury awarded him $1 million in compensatory damages and $4 million in punitive damages on his claim for fraudulent concealment. On appeal, the Fourth Appellate District, Division One, considered whether the 4 to 1 ratio of punitive damages was constitutionally excessive, in light of statements by the U.S. Supreme Court that awards exceeding a 1 to 1 ratio may be excessive in cases where the compensatory damages are substantial.

    Many cases have held that compensatory damages of $1 million or more are substantial for purposes of applying the Supreme Court’s test. But the Court of Appeal here concluded that the award was not substantial when compared to the defendant’s net worth of $325 million.

    Nothing in the U.S. Supreme Court caselaw indicates that the defendant’s wealth should have a bearing on whether a compensatory damages award is considered substantial. To the contrary, the Supreme Court held in State Farm that courts cannot use a defendant’s wealth as a justification to uphold an otherwise unconstitutional award.

    But that’s exactly what the Court of Appeal did here. It upheld an award that would have been considered excessive if the defendant were not wealthy.

    We have seen this before. Back in 2011 in Bullock v. Philip Morris, the Second Appellate District upheld a punitive damages award against a tobacco company using the same reasoning—that a compensatory damages award is not substantial if the defendant is very wealthy.

    A major difference between this case and Bullock is that the Court of Appeal in Bullock found the defendant’s conduct to be highly reprehensible, and cited that high degree of reprehensibility as an additional basis for upholding the award. But here, the Court of Appeal found that the defendant’s conduct was not highly reprehensible. Thus, the defendant’s wealth was the only justification for departing from the usual 1 to 1 ratio limit. That’s something we haven’t seen before.

  • District court cuts punitive damages to $1 in OMG Girlz case

    Law360 reports (subscription required) that U.S. District Judge James Selna reduced a jury’s punitive damages award from $53.6 million to $1 in the long-running infringement case involving MGA Entertainment’s L.O.L. Surprise! OMG dolls.

    Rapper T.I. and his wife singer Tameka “Tiny” Harris sued MGA, claiming the toys infringe on the trade dress of the now-defunct pop group they founded, OMG Girlz. The case has been tried three times. One trial ended in a mistrial, another ended in a defense verdict that was reversed on appeal, and the third ended with a giant verdict: $17.8 million in compensatory damages and $53.6 million in punitive damages.

    MGA filed posttrial motions challenging that verdict. Judge Selna agreed that the plaintiffs failed to prove by clear and convincing evidence that MGA engaged in punishable conduct. “There was no reliable evidence that MGA had any knowledge of the group’s trade dress or desire to use their likeness to create the infringing dolls.”

    Ordinarily, when a plaintiff fails to present sufficient evidence to support an award of punitive damages, the appropriate remedy is to enter judgment in favor of the defendant on that issue. But in this case Judge Selna decided to grant a new trial unless the plaintiffs agreed to accept a reduction of the punitive damages to $1. Of course, they’ll never accept that.

    The granting of a new trial on punitive damages is a huge break for the plaintiffs. Even though they failed to prove their case, they get a second chance. Or in this case, a fourth chance.

  • Another award reversed because plaintiff failed to present complete evidence of defendant’s financial condition (Trellis v. Thaler)

    This unpublished opinion is the latest in a long string of California appellate decisions reversing a punitive damages award because the plaintiff failed to present complete evidence of the defendant’s financial condition.

    The plaintiff presented evidence of the defendant’s income, but no evidence of the defendant’s liabilities or expenses. Many trial lawyers seem to think that’s good enough. It isn’t. As the Court of Appeal explained: ” ‘Normally, evidence of liabilities should accompany evidence of assets, and evidence of expenses should accompany evidence of income.’ ” Because plaintiff failed to carry its burden of proof on this issue, the Court of Appeal directed the trial court to enter judgment for the defendant on the claim for punitive damages.

  • Court of Appeal reaffirms rule that insurance bad faith, without more, does not warrant punitive damages (Bartel v. Chicago Title)

    This published opinion from the Sixth Appellate District reverses a trial court’s determination that an insurer did not act in bad faith, but it affirms the trial court’s determination that the insurer’s conduct, although tortious, did not warrant punitive damages.

    The decision reaffirms a 1990s opinion (Tomaselli v. Transamerica), which held that a plaintiff in an insurance bad faith case must do more than prove that the insurer’s conduct was unreasonable, in order to obtain punitive damages. The plaintiff must present clear and convincing evidence that the defendant acted ” ‘with the intent to vex, injure, or annoy.’ “

    Not every jurisdiction follows this rule. In New Mexico, for example, a plaintiff who proves insurance bad faith need not show that the insurer acted with an additional culpable mental state. (See Sloan v. State Farm).

  • Ventura County jury awards $1 million in punitive damages for bed bug bites

    LA Post reports that a Ventura County jury has awarded $1 million in compensatory damages and $1 million in punitive damages to two men who alleged they were bitten by bed bugs while staying at a hotel in Ventura.

    Awards of punitive damages in bed bug cases are not new, but the amount amount of the award in this case raises the bar. Back in 2003, Judge Posner penned a Seventh Circuit opinion that affirmed an award of $186,000 in punitive damages in a bed bugs case. That opinion made a splash at the time because the punitive damages were so much higher than the jury’s $5,000 compensatory damages award.

    It will be interesting to see whether the much larger punitive award in this case survives posttrial and appellate review.

  • Employer’s failure to terminate alleged harasser is not sufficient evidence of ratification (Montes v. SPS Technologies LLC)

    This unpublished opinion reinstates a plaintiff’s claim for punitive damages against his former supervisor, but rejects the plaintiff’s claim for punitive damages against his former employer.

    A California employer generally cannot be liable for punitive damages based on the acts of an employee, unless those acts were authorized or ratified by corporate management. (See Civil Code section 3294(b).)

    In this case, a plaintiff alleged that he was harassed by his former supervisor, and he sought punitive damages against his former employer on the theory that the employer ratified the harasser’s conduct after the fact. To prove ratification, he pointed to the fact after he filed an action for harassment, the employer did not terminate the alleged harasser or send him to training.

    The California Court of Appeal (Second District, Division Seven) rejected that argument as unsupported by any authority. The court noted that an employer cannot ratify an employee’s misconduct unless they employer actually knew of the misconduct. The mere fact that someone alleged misconduct is not enough. There must be some evidence that the employer knew those allegations were actually true.

  • Delaware jury awards $271.2 million in punitive damages against Amgen

    A federal jury in Delaware has awarded $135.6 million in compensatory damages and $271.2 million in punitive damages against California-based Amgen Inc., according to this press release issued by the plaintiff.

    The plaintiff, Regeneron Pharmaceuticals, Inc., accused Amgen of anticompetitive practices in pricing its drug Repatha, which competes with Regeneron’s Praluent.

    The large punitive damages award in this case and in the Walmart case (see below) are a reminder that punitive damages are regularly awarded in corporation-versus-corporation lawsuits. Policy discussions about punitive damages often mistakenly assume that punitive damages are awarded only in cases involving “little guy” consumers suing big corporations.

  • Arkansas jury awards $150 million in punitive damages against Walmart

    Reuters reports that a jury in federal court in Arkansas has awarded $72.7 million in compensatory damages and $150 million in punitive damages against Walmart in a trade secrets case.

    The plaintiff is a startup company, Zest Labs, who claims that Walmart stole its trade secrets for reducing food waste.

  • Texas jury awards $480 million in punitive damages against crane company

    A jury in Texas has awarded $159 million in compensatory damages and $480 million in punitive damages against a crane company, TNT Crane & Rigging, according to this press release from the plaintiff’s law firm. The plaintiffs are the heirs of a man who was killed during a construction accident.

    Texas law caps punitive damages at a maximum of $750,000, except in cases where the defendant committed a felony. It seems likely that the defendant will file posttrial motions that seek to apply the cap to this case.

  • Georgia jury awards $2 billion against Monsanto in the latest Roundup lawsuit

    ABC news reports on a Georgia jury verdict against Monsanto, awarding $65 million in compensatory damages and $2 billion in punitive damages to a man who claims that exposure to the weedkiller Roundup caused his cancer.

    By my count, this is at least the third time that a jury has awarded $2 billion in a Roundup lawsuit. See prior reports here and here. Those awards were both reduced by the trial judge, although the reduced awards were still enormous: $87 million and and $400 million.

    There have also been a number of defense verdicts, but those don’t typically generate front-page headlines. Bayer, which acquired Monsanto, maintains a website that includes a list of all the trial results going in both directions.

    This is an aspect of our legal system that’s hard to explain or justify. If you bring a lawsuit alleging that you developed cancer after using Roundup, and you present the same type of scientific and medical evidence that other plaintiffs have presented, you might get a jury award for billions of dollars or you might get absolutely nothing.