California Punitives by Horvitz & Levy

  • Court of Appeal rejects plaintiffs’ bid for retrial on punitive damages, finds waiver of objections to financial disclosures (Lanning v. Kramer)

    This case involves a species of waiver we haven’t seen before.

    A jury found that several defendants acted with malice in committing various torts, including trespass and intentional infliction of emotional distress.  But the jury declined to award any punitive damages.

    On appeal, the plaintiffs sought a new trial on the amount of punitive damages.  They argued that one of the defendants failed to disclose sufficient information about his financial condition, and thereby prevented plaintiffs’ financial expert from offering evidence of his net worth.

    The Court of Appeal (Second Appellate District, Division Seven) held in an unpublished opinion that plaintiffs waived their right to seek a new trial because they failed to make a timely objection to the adequacy of the defendant’s disclosures.  The court noted that the plaintiffs’ expert opined about the defendant’s net worth, gave a specific dollar amount, and never mentioned that the information provided to him was insufficient to allow him to render an opinion.

    We’ve seen a lot of cases finding waiver because plaintiffs failed to present meaningful evidence of the defendant’s financial condition, or because the defendant failed to comply with a court order compelling disclosure of financial information, but this is the first time we have seen a case imposing a waiver because plaintiffs failed to object to the defendant’s disclosure.

  • Court of Appeal rejects defendant’s claim of inability to pay punitive damages, citing evidence that defendant failed to improve her financial condition (Morton v. Spotts)

    This unpublished opinion contains a rather unusual twist on an issue that frequently arises in punitive damages cases in California, namely, whether a punitive damages award is disproportionate to the defendant’s ability to pay.

    In an appeal from a $15,000 punitive damages award, the defendant argued the award was excessive in light of her negative net worth.  The plaintiff disagreed with the defendant’s interpretation of the evidence, and argued that the defendant’s net worth was worth at least $350,000.  The Court of Appeal (Fourth Appellate District, Division One) affirmed the award.  The court could have just adopted the plaintiff’s view of the evidence and left it at that.  But instead, the court cited the defendant’s failure to fully utilize her financial assets, and said the jury could have concluded defendant was “failing to maximize her net worth or improve her financial condition.”

    That’s a new one on me.  I don’t recall ever seeing any other opinion suggesting that an award could be upheld on the theory that the defendant’s inability to pay was the result of the defendant’s failure to maximize his or her own net worth.    

  • Court of Appeal approves pattern jury instruction on “clear and convincing” evidence (Nevarrez v. San Marino Skilled Nursing)

    This is not a punitive damages case. But it merits discussion here because it addresses the adequacy of the official California jury instruction on the clear and convincing evidence standard of proof, which applies in all punitive damages cases.

    This is not the first time the California Court of Appeal has considered how courts should explain the clear and convincing evidence standard to jurors. Far from it. Back in the early 1990’s, the Second Appellate District, Division Three, criticized the definition of clear and convincing evidence set forth in BAJI No. 2.62, the pattern instruction in use at the time. That instruction defined clear and convincing evidence as “evidence of such convincing force that it demonstrates, in contrast to opposing evidence, a high probability of the truth of the fact[s] for which it is offered as proof.”

    In a case called Mock v. Michigan Millers Mutual, Division Three said the BAJI No. 2.62 definition was too weak, because it did not reflect the stringent standard established by the California Supreme Court in In re Angelia P.: “so clear as to leave no substantial doubt”; “sufficiently strong to command the unhesitating assent of every reasonable mind.”

    A few years later, however, Division Three backed away from that criticism in a 2-1 decision. In that case, Mattco Forge v. Arthur Young & Co., the court said that the In re Angelia P. formula was too close to the “reasonable doubt” standard used in criminal cases.

    In 2003, the Judicial Council approved the CACI instructions as the official preferred jury instructions for use in California. The CACI instructions contained a definition of clear and convincing evidence that was even weaker than the BAJI formulation that Division Three criticized in Mock.  CACI No. 201 says that clear and convincing evidence means “that the party must persuade you that it is highly probable that the fact is true.” By watering down the definition of clear and convincing evidence, the CACI instructions arguably opened the door to revisiting the Mock/Mattco Forge debate. Indeed, we are aware of several cases in which trial courts agreed to give special instructions on this issue because they concluded that the standard set forth in CACI No. 201 is inadequate.

    Today, however, the Court of Appeal (Second Appellate District, Division Four) gave CACI No. 201 its blessing in this published opinion. The opinion acknowledges the history on this issue, but declines to embrace the Mock rationale. Instead, the opinion follows the reasoning of Mattco Forge and holds that the trial court properly rejected the defendants’ proposed special instruction, which incorporated the In re Angelia P. definition of clear and convincing evidence.

    We decline to hold that CACI No. 201 should be augmented to require that “the evidence must be ‘so clear as to leave no substantial doubt‘ and ‘sufficiently strong as to command the unhesitating assent of every reasonable mind.’ ” Neither In re Angelia P., supra, 28 Cal.3d 908, nor any more recent authority mandates that augmentation, and the proposed additional language is dangerously similar to that describing the burden of proof in criminal cases. (Mattco Forge, supra, 52 Cal.App.4th at p. 849.) The trial court did not err in rejecting it.

    We wouldn’t be surprised to see this case end up in the California Supreme Court.

  • Court of Appeal affirms $40,000 in punitive damages after reversing $3.8 million in compensatory damages (Corenbaum v. Lampkin)

    Our report on this case is a bit tardy, because I was traveling abroad when the decision was issued.  The main issue in this case has nothing to do with punitive damages, but it merits a brief mention here because the court’s treatment of the punitive damages award is somewhat unusual.

    The primary question in this appeal was whether, in light of the California Supreme Court’s opinion in Howell v. Hamilton Meats, personal injury plaintiffs can present evidence of the amounts their medical providers billed for services, even though the providers agreed to accept lesser amounts as payment in full for their services.  Howell held that a plaintiff’s damages are properly measured by the amount paid, not the amount billed.  The question here was whether the amount billed was nonetheless admissible as relevant on the issues of future medical expenses and noneconomic damages.

    The trial court allowed the plaintiffs to introduce evidence of the amount billed, but the California Court of Appeal (Second Appellate District, Division Three) held, in a published opinion, that the evidence was inadmissible.  Accordingly, the Court of Appeal reversed the jury’s $3.8 million compensatory damages award for a new trial.  Interestingly, the court chose not to reverse the jury’s award of $40,000 in punitive damages.  Ordinarily, when an appellate court reverses a compensatory damages award for a new trial, reversal of the punitive damages is virtually automatic.  But perhaps the court in this case thought that the small amount of punitive damages awarded here dictated a different result.

    Full disclosure: Horvitz & Levy represented the defendant in this appeal, although we did not brief or argue the punitive damages issues.  We associated into the case after the initial briefing, submitting a supplemental brief and presenting oral argument for the defendant.   The Court of Appeal inadvertently omitted our firm’s name from the slip opinion (presumably because we were not the initial counsel of record).

  • $4.8M punitive damages award reversed for lack of evidence that corporate management participated in wrongdoing (Martinez v. Rite Aid)

    In October 2010 we reported about this $4.8 million punitive damages award against Rite Aid in a disability discrimination case.  Yesterday, the California Court of Appeal (Second Appellate District, Division Seven) vacated that award in an unpublished opinion. 

    The Court of Appeal based its decision on Civil Code section 3294, subdivision (b), which provides that a corporation cannot be liable for punitive damages based on the acts of an employee unless a corporate officer, director, or managing agent committed, authorized, or ratified those acts.  The Supreme Court has defined a managing agent as a person who has the authority to determine corporate policy, meaning formal policies that affect a substantial portion of the company and are likely to come to the attention of corporate leadership.

    The Court of Appeal held that none of the three different corporate employees who allegedly discriminated against the plaintiff qualified as managing agents within the meaning of section 3294.  One was a “human resources manager,” one was a “store district manager,” and the third was a “pharmacy district manager.”  The court found that, although all of them had “manager” in their title, none of them had any real authority to establish formal company policies for a substantial portion of the company.  As a result, the court reversed the punitive damages award, entitling Rite Aid to judgment in its favor on that issue.  (For unrelated reasons, the court also reversed the jury’s $3.4 million compensatory damages award and ordered a new trial on that issue.)

  • Court of Appeal directs trial court to dismiss punitive damages claim against hospital

    A California plaintiff who sues a healthcare provider for professional negligence cannot request punitive damages in the complaint until the trial court determines, based on competent evidence, that the plaintiff has a “substantial probability” of obtaining punitive damages.  See Code of Civil Procedure section 425.13.  California’s appellate courts take this requirement very seriously, as this published opinion indicates (Pomona Valley Hospital Medical Center v. Superior Court).

    The plaintiff sued Pomona Valley Hospital, claiming she was injured by a medical putty (Striker Biotech’s OP-1 Putty) used during her back surgery.  To support her claim for punitive damages, she relied on letters showing that the hospital was conducting a study on OP-1 putty.  She said the letters showed the hospital acted with malice by including her in the study without her consent.  The trial court agreed, and allowed the plaintiff to amend her complaint to request punitive damages.

    The defendant petitioned the Court of Appeal (Second Appellate District, Division Five) for writ relief.  The Court of Appeal called for further briefing and scheduled an oral argument.  The oral argument apparently did not go well for the plaintiff, who sent a letter to the court withdrawing her punitive damages claim. Despite that letter, the Court of Appeal apparently concluded that the California legal community would benefit from further guidance on this issue, so it issued a published opinion reversing the trial court’s order.  The Court of Appeal held that the plaintiff failed to submit any evidence that she was included in the OP-1 study, or that anyone was included in the study without their informed consent.  Her evidence established nothing more than the existence of a study, which was not enough to carry her burden of demonstrating a probability of success on her claim for punitive damages.

  • Unpublished opinion: an agent of a public entity can be liable for punitive damages

    Public entities are immune from punitive damages in California under Government Code section 818. What about agents performing a public entity’s functions?  This unpublished opinion says the statutory immunity doesn’t extend to them.

    Plaintiff Thomas Madeiros filed a tort claim with the City of Palo Alto.  Defendant George Hills Co. (GHC) was a third party-contractor responsible for administering claims against the city.  After GHC told Madeiros his claim was untimely, he sued GHC for false representation, seeking punitive damages.  The trial court granted GHC’s motion to strike the punitive damages claim under section 818, under the theory that GHC was entitled to immunity as an agent performing the duties of a public entity.

    The California Court of Appeal (Third Appellate District) reversed and reinstated the punitive damages claim. It held that a contractor for a public entity is not immune from punitive damages for its own tortious conduct. The case will go back to the trial court, and Medeiros will have the chance to prove that GHC acted with malice, oppression, or fraud in its processing of his claim.

  • Unpublished opinion finds that defendant waived challenge to punitive damages award

    As a general rule, when a California defendant wants to challenge a jury’s damages award as excessive, the defendant must raise that issue in a new trial motion to preserve it for appeal.  This unpublished opinion (Silas v. Arden) from the Second Appellate District, Division One, applies that rule and finds that a defendant waived his right to challenge a punitive damages award by not raising excessive damages in a motion for new trial.

    In Silas, the defendant argued that the award was excessive because the plaintiff’s counsel inflamed the passions and prejudices of the jury with improper arguments.  That seems like the sort of argument that is a trial court should probably decide in the first instance.  In other situations, however, a defendant might be able to challenge a punitive damages award on appeal even without moving for a new trial.  A defendant who argues that an award is excessive as a matter of law under the Due Process Clause should be able to raise that argument for the first time on appeal, because it is a pure legal issue that does not require the appellate court to resolve evidentiary conflicts.  See, for example, Storage Services v. Ooosterbaan (1989) 214 Cal.App.3d 498, 515, fn. 9 [no waiver where excessive damages argument does not involve conflicting testimony or issues of credibility].    

  • Trial court properly dismissed punitive damages claim because plaintiff introduced no evidence of corporate ratification (Betson v. Rite Aid)

    This unpublished opinion (Betson v. Rite Aid) allows a plaintiff to proceed with her claims for disability discrimination and retaliation, but prohibits her from seeking punitive damages.  Although she accused her manager of numerous malicious acts, she presented no evidence that the manager’s misconduct was authorized or ratified by the defendant’s upper management.

    The plaintiff worked as a shift supervisor at a Rite Aid drug store in Beverly Hills.  She sued Rite Aid for various theories of discrimination, retaliation and harassment.  She claimed that the store manager routinely mocked her because she had a limp, refused to accommodate her disability, and fired her based on false accusations of stealing money from a cash register.  The trial court granted summary adjudication on many of plaintiff’s claims, including her claim for punitive damages.  The case went to trial on the remaining claims and the jury awarded the plaintiff $500,000.  The trial court, however, granted Rite Aid’s motion for judgment notwithstanding the verdict and entered judgment for Rite Aid.

    Plaintiff appealed and the California Court of Appeal (Second Appellate District, Division Four), held that the trial court erred in granting JNOV and erred in granting summary adjudication on plaintiff’s claims for disability discrimination and retaliation.  Nevertheless, the court affirmed the trial court’s decision to toss out the plaintiff’s claim for punitive damages, because plaintiff presented no evidence that the store manager’s misconduct was ratified by any officer, director, or managing agent of Rite Aid.  The plaintiff argued that Rite Aid’s continued employment of the store manager was sufficient evidence of ratification, but the Court of Appeal rejected that contention as a matter of law.

    This case is a reminder that a corporate employee with the title of “manager” may not qualify as a “managing agent” within the meaning of Civil Code section 3294. As the California Supreme Court has explained, managing agents include only those corporate employees who have sufficient authority in the corporation such that their decisions ultimately determine corporate policy.  (See White v. Ultramar.)

  • Court of Appeal affirms $25 million punitive damages award against co-founder of Guess, Inc. (Gottlieb v. Fahs)

    In 2009 we reported on a Los Angeles jury verdict awarding $370 million, including $25 million in punitive damages, against Georges Marciano, the co-founder of Guess, Inc.  This unpublished opinion (Gottlieb v. Fahs) from the California Court of Appeal (Second Appellate District, Division Two) affirms the punitive damages, rejecting the defendant’s claim that the record contained insufficient evidence of his financial condition.  But the Court of Appeal did grant him some relief.  It reduced the compensatory damages to a total of $25 million.

    The end result is a much higher punitive-to-compensatory ratio than the jury originally awarded.  The defendant could have sought a new trial on that basis, although there is a split of authority on this issue as we have noted.  As far as the opinion reveals, the defendant did not raise that as a ground for a new trial.