California Punitives by Horvitz & Levy

  • Breaking news: Court of Appeal reverses $21 million punitive damages award in published opinion (Doe v. The Watchtower Bible and Tract Society)

    A few years ago we reported on a $21 million punitive damages award in a sexual abuse case against a congregation of Jehovah’s Witnesses and that group’s nationwide organization.  The Court of Appeal’s online docket indicates that the court (First Appellate District, Division Three) has reversed the award in a published opinion.  The court hasn’t yet released its opinion.  Stay tuned.

    UPDATE (3:45 pm): the opinion is now available here.  More details to follow.

    APRIL 14 UPDATE:  The opinion reveals that the Court of Appeal vacated the punitive damages award because the award rested entirely on a failure-to-warn theory, and the court ruled that the defendants owed no duty to warn.  So the court never reached the question of whether the award was supported by evidence of malice, nor did the court have any occasion to address the size of the award (which had already been reduced from $21 million to $8.6 million as the result of the defendant’s post-trial motions in the trial court).

  • Court of Appeal affirms trial court order that vacated $15 million punitive damages award against Donald Sterling

    A few years ago we blogged about this case in which actress Robyn Cohen won a $17.3 million judgment against Donald Sterling, former owner of the Los Angeles Clippers.

    The plaintiff, who is best known for appearing with Bill Murray in The Life Aquatic with Steve Zissou, claimed that a fire in her Sterling-owned apartment building caused her emotional distress and derailed her acting career. As noted in our prior post, the trial court ruled that one of the plaintiff’s substantive claims was not supported by the evidence, and the court ordered a complete new trial on all the remaining claims because he could not determine the extent to which the unsupported claim influenced the jury.

    Yesterday the California Court of Appeal (Second Appellate District, Division Five) issued an unpublished opinion affirming the trial court’s order.  The opinion illustrates how difficult it is to overturn a new trial order.  The Court of Appeal explained that the plaintiff had to show that the record provided no possible basis for granting a new trial.  She could not meet that burden because the jury’s verdict did not reveal what conduct was the basis for the jury’s punitive damages award.  The trial court properly ordered a complete new trial on all issues, rather than a retrial limited to punitive damages, because a second jury could not properly assess punitive damages without knowing what specific conduct the first jury thought supported liability, or what specific conduct the first jury thought was punishable.

    Full disclosure: Horvitz & Levy represented Sterling in the post-trial motions and on appeal.

  • Court of Appeal publishes two previously unpublished opinions; topics include discovery of financial information and premature entry of judgment

    In the past two days the California Court of Appeal ordered publication of two punitive damages opinions that were previously designated as unpublished.

    We described the first case, I-CA v. Palram, in some detail here.  The opinion has a fairly lengthy discussion of the procedures that govern discovery of a defendant’s financial condition.

    We haven’t previously discussed the other case, Baker v. Castaldi.  There, the trial court purported to enter judgment after the first phase of a bifurcated trial.  The judgment awarded compensatory damages to the plaintiff but left the issue of punitive damages unresolved.  The trial court apparently intended to enter a second judgment after the second phase of trial.  The defendant appealed from the judgment but the Court of Appeal dismissed the appeal on the ground that there was no final judgment.  Under California’s “one final judgment” rule, a purported judgment that does not resolve all the issues in the case is not truly a judgment and is therefore not appealable.

    It may seem obvious that a trial court should not enter judgment until the case is over. But in our experience, the problem of premature judgments is a recurring one in California.  Some of our trial judges mistakenly believe that they should immediately enter judgment after a jury verdict, even if the final rights of the parties have not yet been decided.

    Premature entry of judgment is a big problem for defendants, because California judgments are immediately enforceable when entered.  For that reason, the defendant may be forced to file an appeal and post an appeal bond in order to stay enforcement of the so-called judgment (and incur substantial expense in the form of bond premiums and attorneys’ fees), even though the defendant fully expects the Court of Appeal to dismiss the appeal.

    Full disclosure: Horvitz & Levy LLP requested publication of both opinions.

  • California Court of Appeal affirms dismissal of punitive damages claims, clarifies rules for discovery of financial condition information (I-CA Enterprises v. Palram Americas)

    This unpublished opinion has a lot of interesting stuff and is worth discussing at some length.

    The plaintiff, a California business, contracted with the defendants, two unrelated Israeli manufacturers.  The contracts permitted the plaintiff to distribute the defendants’ products in the U.S.  For a time, the plaintiff sold the products of one company to the other.  Eventually, the two companies started doing business directly with each other, cutting the plaintiff out of the loop.  The plaintiff sued both of them, claiming that each one intentionally interfered with the other’s contract with the plaintiff.

    The trial was bifurcated.  In the first phase, the jury decided that the two defendants were both liable for $225,000 in damages for intentional interference with contractual relations. 

    The plaintiff wanted to proceed to a second phase of trial to seek punitive damages against both defendants.  But the plaintiff had no evidence regarding the financial condition of Defendant 1.  The plaintiff had asked Defendant 1 to turn over its financial condition before trial, but Defendant 1 had refused.  The plaintiff renewed its request after the conclusion of the first phase of trial, and Defendant 1 refused again.

    When the plaintiff moved to compel Defendant 1 to turn over all documents relating to its finances, the trial court denied the motion on three grounds: (1) Defendant 1 was a foreign corporation and the court lacked the power to compel nonresidents to attend trial or produce documents; (2) the plaintiff’s request failed to specify exactly what documents the plaintiff was seeking; and (3) the plaintiff had forfeited its right to conduct financial condition discovery by bringing its motion on the eve of the second phase of trial. The trial court then granted nonsuit in favor of Defendant 1 on the issue of punitive damages, because the plaintiff could not possibly satisfy its burden or presenting meaningful evidence of Defendant 1’s financial condition.

    The plaintiff proceeded with its punitive damages claim against Defendant 2 and the jury awarded $3 million.  The trial court, however, granted Defendant 2’s motion for judgment notwithstanding the verdict (JNOV), finding that the plaintiff had presented no substantial evidence of malice, oppression, or fraud.

    The plaintiff appealed, challenging the trial court’s rulings as to both defendants. The Court of Appeal (Second Appellate District, Division Two) rejected the plaintiff’s arguments.

    Discovery of financial condition evidence

    The Court of Appeal found no error in any of the trial court’s reasons for denying the plaintiff’s motion to compel Defendant 1 to produce its financial condition evidence.  The Court of Appeal held that the trial court had no power to compel a foreign defendant to produce its financial records.  More importantly, the court held that the trial court was within its discretion to deny the plaintiff’s motion as untimely.  The court noted that Civil Code section 3295, subdivision (c), permits a plaintiff to bring a motion to obtain pretrial discovery of the defendant’s financial condition evidence.  Because the plaintiff failed to exercise that right, the trial court was within its discretion to rule that the plaintiff’s discovery request on the eve of the second phase of trial was too late.

    This is a significant holding.  In our experience, plaintiffs often seek discovery of financial condition evidence after the first phase of trial, just as the plaintiff did here.  This is the first opinion we’ve seen holding that a trial court can properly deny such requests as untimely.

    The Court of Appeal also ruled that the trial court did not err in excluding a Dun & Bradstreet report that the plaintiff had offered up as evidence of Defendant 1’s financial condition evidence.  The report was hearsay. Although experts are ordinarily allowed to rely on inadmissible evidence in forming their opinions, the trial court did not abuse its discretion in holding that the plaintiff’s expert could not testify about the Dun & Bradstreet report, because the jury would be likely to place too much emphasis on that hearsay document, in the absence of any admissible evidence regarding the defendant’s finances.

    Sufficiency of the evidence

    The Court of Appeal also found no error in the trial court’s granting of JNOV to Defendant 2.  Notably, the court agreed with the plaintiff that Defendant 2 had made intentional misrepresentation (viewing the record in the light most favorable to the plaintiff).  But the court held that those misrepresentations could not support a punitive damages award because the plaintiff failed to show that it relied on them, or that they otherwise harmed the plaintiff:  “While there is a level of deceit that is evidence form [Defendant 2]’s actions . . . this pretense did no harm to [plaintiff], as required by Civil Code section 3294.”

  • California Court of Appeal vacates punitive damages awards of $3 million and $275,000 due to insufficient evidence (Wilson v. So. Cal. Edison; Union Central Cold Storage v. RDM)

    The California Court of Appeal issued two opinions this week vacating punitive damages awards based on insufficient evidence.

    In the first case, the Court of Appeal (Second District, Division Seven) issued an unpublished opinion vacating a $275,000 punitive damages award because the plaintiff failed to present meaningful evidence of the defendant’s financial condition. We have noted before that a surprising number of punitive damages awards are vacated on that basis every year.  Often a plaintiff will present evidence of the defendant’s assets or income, but fail to present any evidence of liabilities or expenses.  Amazingly, the plaintiff in this case “presented no relevant evidence” whatsoever, according to the court.

    In the second case, the Court of Appeal (Second District, Division Four) issued a published opinion vacating a $3 million punitive damages award because the plaintiff failed to prove that the defendant engaged in punishable conduct. The plaintiff claimed that Southern California Edison failed to maintain an electrical substation, causing stray electrical currents to enter her home.  Plaintiff presented evidence that Edison’s management was aware of the problem of stray electricity at the plaintiff’s property.  But their awareness arose only in the context of the company’s efforts to mitigate the problem to ensure that there was no danger to anyone on the property.  Thus, plaintiff failed to prove that the corporate management acted with malice, oppression, or fraud as Civil Code section 3294 requires.

  • California Court of Appeal reinstates $1.2 million punitive damages award in sexual harassment case (Shank v. CRST Van Expedited)

    The plaintiff in this case, a former employee of a trucking company, claimed that her supervisor repeatedly subjected her to unwanted sexual advances.  She obtained a jury verdict for $391,000 in compensatory damages, $1.17 million in punitive damages against her former employer, and $3,500 in punitive damages against her individual supervisor.

    The employer filed post-trial motions to challenge the verdict.  The trial court agreed that the plaintiff failed to prove that the employer acted with malice, oppression, or fraud.  As a result, the court granted judgment notwithstanding the verdict (JNOV) on the issue of punitive damages against the employer, wiping out the jury’s $1.17 million award.

    The plaintiff appealed, arguing that the trial court erred in granting the JNOV motion.  The California Court of Appeal (Fourth Appellate District, Division Three) agreed with the plaintiff in this unpublished opinion.

    The court began its analysis by noting that the supervisor unquestionably engaged in malice and oppression; throughout a 28-day training period, he made numerous unwanted sexual advances towards the plaintiff.

    The question then became whether the employer could be punished for ratifying the supervisor’s misconduct.  The Court of Appeal concluded that the company’s human resources a director was a managing agent within the meaning of Civil Code section 3294, and that the human resources director ratified the supervisor’s conduct by failing to investigate the plaintiff’s complaints.  That failure to investigate was directly contrary to the company’s written policies for responding to and preventing sexual harassment.

    The employer argued on appeal that the company did not need to investigate in this particular instance because because the plaintiff did not complain about the harassment until after she left the company.  The Court of Appeal rejected that argument, holding that “there is no applicable law or evidence that once an employee leaves an investigation is unnecessary.”

    The Court of Appeal then reversed the trial court’s JNOV, reinstating the full amount of the jury’s punitive damages award.  That will be a bitter pill for the corporation’s board of directors, who probably thought they had protected the company from this type of award by adopting a policy that required a thorough investigation of any harassment claims.

     

  • Court of Appeal vacates $405,000 punitive damages award in discrimination case, finding it duplictative of statutory penalty (Paletz v. Adaya)

    This unpublished opinion contains an unusually lengthy discussion of an issue that rarely arises in California punitive damages cases: whether punitive damages can be awarded in a case in which the plaintiff has already recovered a statutory penalty.

    The general rule on this issue is well established: if a defendant is liable for a statutory penalty (such as treble damages) for a particular act of misconduct, the defendant cannot be subjected to punitive damages for the same act.  Allowing both a statutory penalty and punitive damages would be duplicative, so the plaintiff must choose one or the other.

    Notwithstanding this general rule, courts sometimes permit both statutory penalties and punitive damages in the same case, either because (a) the particular statutory language in question shows that the Legislature intended to authorize duplicative penalties, or (2) the case involves separate acts of misconduct that merit separate punishment.

    In this case, the plaintiff alleged that the defendant hotel discriminated against her because she is Jewish.  She recovered compensatory damages and statutory penalties under California’s Unruh Civil Rights Act, and she also recovered $405,000 in punitive damages.

    The Court of Appeal (Second Appellate District, Division Three) vacated the punitive damages, finding that this case did not fit within either of the exceptions to the general rule against duplicative punishment.  The court first concluded that the provision of the Unruh Act that authorizes treble damages is punitive in nature, and that nothing in the statute indicates that the Legislature intended to permit duplicative damages.  The court also went on to say that the statutory penalty and the punitive damages were awarded for the same misconduct, and therefore the defendant could be subjected only to one punishment.  The plaintiff gets to keep the statutory penalties, but not the punitive damages.

  • Another punitive damages award reversed due to insufficient financial condition evidence (Wilson v. Autler)

    This unpublished opinion is the latest example of the California Court of Appeal vacating a punitive damages award because the plaintiff failed to present meaningful evidence of the defendant’s financial condition.

    The defendant testified that she owned a home and paid cash for it.  But the Court of Appeal (Fourth District, Division Two) said that evidence was not nearly sufficient to support a punitive damages award; the plaintiff presented no evidence of the value of the house, the defendant’s other assets or liabilities, or her income and expenses.  As a result, the court vacated $50,000 in punitive damages.

     

  • Court of Appeal re-issues Izell opinion without changing punitive damages analysis

    Last week we noted that the Court of Appeal granted rehearing in Izell v. Union Carbide, the case in which the court had issued a published 2-1 decision upholding an $18 million punitive damages award.  On Friday afternoon the court re-issued its opinion, without making any changes to the punitive damages analysis.

    The court modified its causation analysis and depublished the part of the opinion addressing allocation of fault, but none of that had any impact on the punitive damages award.  The majority stuck to their view that the defendant has no right to a new trial on punitive damages, to allow a jury re-assess the appropriate amount of punitive damages in relation to the dramatically reduced award of compensatory damages.  And Justice Kitching re-issued her dissent on that issue.  So the case is still teed up for review by the Supreme Court of California on that point.

    Related posts:

    Court of Appeal grants rehearing in Izell v. Union Carbide

    Court of Appeal affirms $18 million in punitive damages; reduction of compensatory damages from $30 million to $6 million does not require retrial of punitive damages (Izell v. Union Carbide)

  • Court of Appeal grants rehearing in Izell v. Union Carbide

    Last month we blogged about this opinion, which affirmed an $18 million punitive damages award.  Earlier this week, the Court of Appeal granted rehearing in that case and ordered the case resubmitted.  (Click here to view the court’s online docket.)   The resubmission restarts the court’s 90-day clock for issuing an opinion.

    Strangely enough, the Court of Appeal denied the defendant’s petition for rehearing, and then simultaneously granted rehearing on “[o]n the court’s own motion.”  Does that mean that the court granted rehearing to address an issue that was not raised in the defendant’s rehearing petition?  That would be surprising, given the comprehensive nature of the defendant’s 30-page petition. Stay tuned for further developments.