This published California Court of Appeal opinion is a rarity.  It’s a state appellate decision analyzing punitive damages awarded under federal maritime law.

Federal maritime law differs dramatically from California law on the issue of punitive damages.  For instance, the burden of proof is much lower in maritime cases; California law requires proof by clear and convincing evidence, but maritime law requires only proof by a preponderance of the evidence. California law requires proof that the defendant acted with malice, oppression, or fraud, whereas maritime law permits punitive damages based on showing of recklessness or gross negligence.  And the Supreme Court in Exxon Shipping set forth an excessive analysis for maritime cases that differs from the due process standards that apply to punitive damages awards arising under state law.

For all of these reasons, this opinion isn’t likely to have much impact on punitive damages cases involving California law.  Nevertheless, the opinion is an interesting read.

The plaintiffs in this case suffered serious injuries when they fell off the back of a personal watercraft and the jet thrust from the watercraft ripped their flesh.  (The injuries were pretty gruesome; skip that part of the opinion if you are squeamish).

The defendant manufacturer had placed a warning on the watercraft, specifically addressing the risk that injured the plaintiffs.  The warning advised users of the watercraft to wear a wetsuit bottom or other protective clothing.  But the plaintiffs alleged that the defendant acted with callous disregard for safety by placing the warning in a place where only the driver of the vehicle could see it.  Plaintiffs claimed that a second warning should have been placed on the back of the vehicle.  They presented evidence that another watercraft manufacturer placed multiple warnings in different places on its vehicles.

The defendant’s safety manager testified that the defendant deliberately chose not to use multiple warnings to avoid the “dilution effect” that occurs when a product bears too many warnings, including multiple warnings about the same hazard.  (See, e.g., Broussard v. Continental Oil (La.App. 1983) 433 So.2d 354, 358 [placing too many warnings on a product would “decrease the effectiveness of all the warnings”]; see also Restatement (Third) of the Law of Torts: Product Liability, Section 2, comment i [“excessive detail may detract from the ability of typical users to focus on the important aspects of the warnings”].)

Although the defendant sought to present this issue as a balancing of competing safety interests, the Court of Appeal (Fourth Appellate District, Division One) said a jury could reasonably conclude under the preponderance of the evidence standard that the defendant’s conduct was reckless.

The opinion also held that the amount of the punitive damages ($1.5 million to each plaintiff) was not excessive.  The ratio of punitive damages to compensatory damages was 1-to-1 for one plaintiff and 3.78-to-1 for the other.  The defendant argued that, under Exxon Shipping, the maximum ratio under federal maritime law is 1-to-1. The court disagreed, holding that the 1-to-1 limit adopted by the majority in Exxon Shipping only applies to cases where the defendant’s conduct is low on the scale of blameworthiness.  The court concluded that the defendant’s conduct in this case (failing to add a duplicate warning in a different place on the product)  was “on the higher end of the scale of blameworthiness” and therefore could support the ratios awarded by the jury.

This published opinion from the California Court of Appeal (Second District, Division Three) could be headed to the California Supreme Court.

In this asbestos personal injury action, the jury awarded $30 million in compensatory damages and $18 million in punitive damages.  The trial court ruled that the compensatory damages were excessive and reduced them to $6 million. (Technically, the court ordered a conditional new trial subject to the plaintiffs’ acceptance of a remittitur.)

The defendant argued on appeal that it was entitled to a new trial on punitive damages in light of the dramatic reduction of the compensatory damages.  As noted in prior posts, California case law supports the notion that the punitive damages award should be reversed in these circumstances. The Court of Appeal in this case, however, ruled that reversal was not necessary because the punitive damages award was not constitutionally excessive when compared to the reduced compensatory damages.

The Court of Appeal’s opinion overlooked a problem that has nothing to do with whether the award is constitutionally excessive.  In the punitive damages phase of this trial, the jury was instructed to select an amount of punitive damages that bears a reasonable relationship to the actual harm to the plaintiff.  So the jury came up with a number—$18 million—that the jurors thought was reasonable in relationship to $30 million in actual harm.  In other words, they thought a punitive damages award that was 60% of the compensatory damages award was reasonable.

But it turns out that the actual harm was only $6 million.  There’s at least a fair chance that the jury would have come up with a different number if they had known that.  Perhaps they would have awarded $3.6 million (60% of $6 million).  Maybe they would have gone higher.  Or lower.  No one can know.  Because no jury ever decided what amount of punitive damages is appropriate in relation to the $6 million of actual harm that occurred here, the defendant should be entitled to a new trial on that issue.

I think there’s a decent chance the California Supreme Court will review this issue, for several reasons.  First, the opinion is published.  Second, Justice Kitching wrote a dissenting opinion that points out the error of the majority opinion on exactly this point.  Third, there is a conflict in California law on this issue, with multiple published opinions on point.

The last time I predicted that that the Supreme Court would grant review on this issue, I was wrong.  But there was no dissenting opinion in that case. So I’m going out on a limb and predicting that the dissent will be enough to get the Supreme Court’s attention this time.

Full disclosure: our firm represents the defendant in this cases, Union Carbide, in other matters.  We were not involved in this appeal.

In 2010 we reported on the unpublished opinion in Boothby v. Parker, which affirmed a $350,000 punitive damages award.  Four years later, the same litigation has now generated a published opinion.

The new opinion reveals that defendant Parker never paid the punitive damages award against him in the prior proceedings, because a conservatorship was established for him during that litigation.  The conservators took the position that, under the Probate Code, the decision to pay the punitive damages award against their conservatee was entirely discretionary, and that they should not be forced to pay a debt that would deprive Parker of funds needed for the necessities of life.  The trial court disagreed and ordered the conservators to pay the award.

The conservators appealed and the California Court of Appeal (Second Appellate District, Division Two) affirmed the trial court’s order.  The court rejected the conservators’ reliance on a provision of Probate Code section 2430, which provides that debts occurring during a conservatorship need not be paid if doing so would impair the ability to provide for the necessaries of life.  The court concluded that provision was inapplicable because Parker’s liability for punitive damages “occurred” when he committed the underlying tort, not when the punitive damages were awarded or affirmed on appeal.  Thus, the payment of the debt was mandatory and not discretionary, regardless of whether paying the debt means that the conservators will no longer be able to provide for Parker’s basic needs.

It’s a harsh result, one that hardly seems consistent with the California cases stating that punitive damages should only punish a defendant, not destroy him financially.  The lesson appears to be that attorneys defending a conservatee against a punitive damages claim must demonstrate during the underlying tort litigation the punitive damages award will be financially ruinous to the defendant.  Otherwise, the conservators will be bound to pay the award in the future regardless of whatever financial impact it may have.