When a defendant doesn’t bother to defend himself against a lawsuit, the plaintiff can get a default judgment for punitive damages only if the plaintiff serves the defendant with a statement of the amount of punitive damages sought. (See Code of Civil Procedure section 425.115.) In this case, the plaintiff got a default judgment for $25,000 in punitive damages, but never served a statement of damages. An easy reversal, right? Not so fast. The default judgment in this case was entered way back in 1990, well before the Legislature enacted the statute requiring a statement of damages (which happened in 1992). Accordingly, the California Court of Appeal (Second Appellate District, Division Two) affirms in an unpublished opinion.
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Unpublished opinion reverses $500,000 punitive damages award against law school (Rose v. Whittier College)
Over the years, we’ve reported on quite a few unpublished opinions in which the California Court of Appeal has reversed a punitive damages award because the plaintiff failed to introduce meaningful evidence of the defendant’s financial condition. This unpublished opinion from the California Court of Appeal (Second Appellate District, Division Two) is just the latest example.
The plaintiff in this case was a law professor at Whittier Law School. He claimed the school fraudulently induced him to accept an early retirement package. His lawyers persuaded a jury to award $350,000 in compensatory damages and $500,000 in punitive damages, but they neglected to present any evidence regarding the law school’s financial condition. On appeal, they tried to save the award by arguing that financial condition evidence is unnecessary when the record contains evidence that the defendant profited from its tortious conduct.
The Court of Appeal held that there is a conflict in authority on this issue, but concluded that under the better reasoned authority, evidence of the profits from the wrongful conduct is not an adequate substitute for evidence of financial condition. As a result, the court reversed the punitive damages award in its entirety. I have no quibbles with the court’s analysis, but I’m a little surprised the court didn’t publish the opinion. Ordinarily I would expect the court to publish an opinion that takes sides on an issue that has divided published opinions.
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Another unpublished opinion that reduces compensatory damages and leaves punitive damages untouched (Hardie v. Wizard Gaming)
Here’s another unpublished opinion that reduces a jury’s award of compensatory damages but affirms the jury’s award of punitive damages. As a result, the California Court of Appeal (Fifth Appellate District) affirms a ratio higher than the ratio awarded by the jury; the jury’s ratio was 2.4 to 1, but the ratio after appeal is 3.4 to 1. The opinion makes no effort to explain how this is permissible, and does not cite any of the conflicting authority on point. Instead, the court reviews the punitive damages award to determine whether it is disproportionate to the compensatory damages as reduced on appeal, even though the trial court instructed the jury to make its punitive damages award proportionate to a completely different number – – the original compensatory damages award.
I continue to believe that this issue will make its way to the California Supreme Court, but that may not happen until another published Court of Appeal opinion tackles the issue head on.
Related posts:
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Unpublished opinion affirms $7 million in punitive damages while misstating the standard of review (Trealoff v. Forest River)
In this unpublished opinion issued last week, the California Court of Appeal (Fourth District, Division Two) seems to have misstated the applicable standard of review.
The jury in this case awarded a total of $2.55 million in compensatory damages and $15 million in punitive damages against two defendants. The trial court ruled that the punitive damages were unconstitutionally excessive and reduced them to $7 million. Both sides appealed. The defendants argued that $7 million was still excessive, and the plaintiff argued that the trial court was wrong in finding the original $15 million excessive.
The Court of Appeal’s opinion leaves the $7 million award in place. The court’s analysis of the amount isn’t particularly noteworthy except for the court’s statements about the appropriate standard of review, which seem incorrect to me.
When analyzing the defendants’ appeal, the Court of Appeal states that the de novo standard of review governs the issue of whether the $7 million is unconstitutionallly excessive. Nothing wrong with that. But when analyzing the plaintiff’s appeal, the court applies the more deferential abuse-of-discretion standard of review to the trial court’s determination that the $15 million was excessive. Now we have a problem. The court cites Boeken v. Philip Morris, but Boeken clearly holds that the abuse-of-discretion standard applies only to the extent a trial court finds a punitive award excessive under state law. Boeken makes clear that the de novo standard of review applies to a trial court’s ruling on excessiveness as a matter of federal constitutional law. In this case, the trial court found the award excessive as a matter of federal constitutional law, so the court should have reviewed that ruling de novo, both under Boeken and the U.S. Supreme Court’s opinion in Cooper v. Leatherman. Perhaps the court will correct itself before the opinion becomes final, though the change in standard of review might not affect the outcome.
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Unpublished opinion affirms $500,000 punitive award (Plikaytis v. Roth)
The defendant in this case challenged a $500,000 punitive damages award as excessive in relation to his net worth. Documentary evidence showed the defendant had a net worth of $8 million in 2008. But this case was tried in 2009, and it’s net worth at the time of trial that counts. (See, e.g., Washington v. Farlice (1991) 1 Cal.App.4th 766, 777.) The defendant argued at trial that his net worth dropped to $500,000 in 2009, mostly due to a decline in the value of his real estate holdings. But he provided no evidence to substantiate his statements about his reduced property value.
The California Court of Appeal (Fourth Appellate District, Division One) didn’t buy it. In this unpublished opinion, the court said the jury could have properly rejected the defendant’s self-appraisal of his real estate assets, and concluded that his net worth was at least $5 million, even considering the evidence of the defendant’s increased liabilities as of 2009. Accordingly, the court concluded the $500,000 was not excessive in relation to the defendant’s net worth.
Related posts:
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Two recent unpublished opinions adress the sufficiency of financial condition evidence (Sylester Flowers v. Hillyer and Madriz v. Ochoa)
On Sept. 23 the California Court of Appeal issued two unpublished opinions addressing whether a plaintiff had presented sufficient evidence of the defendant’s financial condition to sustain an award of punitive damages.
In Sylester Flowers v. Hillyer, the First Appellate District, Division Five, reversed a $4.8 million punitive damages award because the plaintiff’s presentation on the defendant’s financial condition was insufficient. Interestingly, the defendant in that case had repeatedly refused the plaintiff’s requests for financial documents, and failed to comply with an initial court order requiring disclosure of financial information. Other cases have found that a defendant who fails to comply with such an order cannot later complain about the absence of financial condition evidence. (See, e.g., Mike Davidov v. Issod.) But the court here found no waiver, in part because it was not clear whether the defendant ultimately complied with the trial court’s final order compelling discovery of financial records, and also because the plaintiff failed to request the financial condition evidence for the purpose of obtaining punitive damages. The court noted, “There is no indication that plaintiffs sought — or that the trial court ordered — pretrial discovery of [defendant’s] financial condition pursuant to Civil Code section 3295, subdivision (c),” and there was no indication that plaintiffs served a trial subpoena to bring financial records to court, or sought a court order for discovery regarding finances after the liability finding. In other words, just asking for the info is not enough; the plaintiff has to explain that the info is needed in connection with punitive damages.
In Madriz v. Ochoa, the Sixth Appellate District affirms $30,000 in punitive damages, finding that the plaintiff’s evidence on financial condition, although not perfect, was good enough. The evidence established that the defendant earned at least $100,000 per year, owned some real property, had at least $26,000 in cash, and had a history of making large cash deposits to various accounts. Although the evidence didn’t establish the defendant’s liabilities, the court said the evidence of income and assets was sufficient to sustain the jury’s relatively modest punitive award.
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Kelemen v. John Crane, Inc.: new trial ordered in case where jury awarded $18.3 million in punitive damages
There’s a lot of interesting stuff in this unpublished opinion.
Its a personal injury action for asbestos exposure, with a fairly typical fact pattern: Plaintiff is massively exposed to asbestos-containing insulation in the Navy and develops mesothelioma years later, but the manufacturers of the insulation aren’t around anymore, so the case goes to trial against a company that made asbestos-containing gaskets and packing, which were used inside some of the ship-board equipment. The jury finds for the plaintiff, assigns 70 percent fault to the defendant, and awards $900,000 in economic damages, $2 million in past noneconomic damages, $14 million in future noneconomic damages, and $18.3 million in punitive damages. After posttrial motions, the trial court orders a reduction of the punitive damages to $4.5 million. Both sides appeal.
The California Court of Appeal (Second Appellate District, Division Two), addresses several punitive damages issues in its opinion:
- First, the opinion holds that substantial evidence supports the jury’s determination that the defendant acted with malice, fraud or oppression within the meaning of Civil Code section 3294. The court follows the Shade Foods line of authority which holds that the reviewing court must review the evidence through the prism of the “clear and convincing evidence” burden of proof. The court does not discuss the conflicting line of authority which holds that the clear and convincing evidence standard has no impact on appellate review. (As readers of this blog may recall, that conflict was taken up by California Supreme Court in 2008, but the case was later dismissed after the parties settled). In the end, however, the court concludes that the evidence is sufficient to support a finding even under the heightened burden of proof.
- Next, the opinion holds that a new trial is required due to irregularities in the presentation of evidence of the defendant’s financial condition. This analysis is pretty interesting. As we have discussed many times on this blog (e.g., here), when a California appellate court concludes that a plaintiff has failed to meet its burden of presenting meaningful evidence of the defendant’s financial condition, the court will send the case back to the trial court with directions to enter judgment in favor the defendant on the issue of punitive damages. On the other hand, if the court concludes that the defendant failed to comply with a court order to produce financial condition evidence, the court will find a waiver by the defendant and affirm the award. (As we reported here.) In this case, the court finds that the defendant failed to comply with a court order, but also concludes that the order itself was defective. So instead of ordering judgment for the defendant or finding a waiver, the court orders a new trial on the issue of punitive damages. That’s an approach I haven’t seen before.
The opinion also holds that the jury’s award of $14 million in non-economic damages is excessive in relation to the plaintiff’s life expectancy. That issue is beyond the scope of this blog, but those with a general interest in California tort damages might want to check it out.
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Bullock v. Philip Morris Court of Appeal opinion affirms 16:1 punitive damages
We’ve blogged many times about the saga of the Bullock v. Philip Morris case, which has bounced up and down through the California trial and appellate court system for a while now. Most recently, we reported on the second jury verdict (on remand after the judgment on the first jury verdict was reversed). That 2009 verdict reflected the finding that $13.8 million was the appropriate amount of punitive damages to award on account of harm to a plaintiff who, a prior jury had found, suffered $850,000 in actual damages. As we noted, the resulting judgment allows for a greater than 16:1 ratio between punitive and compensatory damages.
The Court of Appeal (Second District, Division Three) yesterday affirmed the judgment in a divided opinion. Justice Croskey, writing for the majority, acknowledged that, when “substantial” compensatory damages are awarded, there is a presumption of unconstitutionality as to punitive awards exceeding a single-digit ratio (in comparison to the compensatory damages) to a significant degree. (See opn., fn. 18.) However, he concluded that a departure from a single-digit ratio was acceptable because, in his view, an $850,000 compensatory award is not “substantial” within the meaning of United States Supreme Court jurisprudence, when the award is viewed in light of the defendant’s financial condition.
Justice Kitching, dissenting, pointed out that those two concepts have not previously been linked. In fact, in many cases around the country, considerably smaller compensatory awards against very well-heeled companies have been deemed “substantial” within the meaning of the due process principles set out by the United States Supreme Court, and have triggered reversal or reduction of punitive awards that exceed single-digit ratios. It will be interesting to see what happens with the Bullock opinion, and whether other courts will similarly veer off in this new direction for punitive damages jurisprudence.
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Jim & Ray Telecom v. Kim: unpublished appellate decision shows the Supreme Court really should clarify the status of punitive damages awards after compensatories are cut
As we’ve discussed a number of times before (see related posts linked below), there’s a lot of uncertainty out there about what’s supposed to happen when a jury does its job of weighing the amount of punitive damages in light of a reasonable relationship to compensatory damages, but then the compensatory damages are cut on posttrial motions or on appeal. The Supreme Court recently declined to take up that question, denying review in Behr v. Redmond, despite the split of authority on the recurring issue.
An unpublished decision handed down last week from the California Court of Appeal is yet another case in point confirming that some guidance is needed here. In that matter involving a commercial dispute, the jury awarded $374,646.01 in compensatory damages and a matching $375,000 in punitive damages, for a 1:1 ratio. The trial court then found the compensatory damages were subject to an offset for amounts owed by the plaintiff to the defendant, and thus reduced those damages to $202,533.75. The court did not, however, adjust the punitive damages accordingly. So much for a 1:1 ratio.
Now, it may be that a postverdict reduction of compensatory damages due to a counterclaim by the defendant is treated differently from a reduction on excessiveness or legal error grounds. But this case won’t provide a vehicle for the Supreme Court to analyze that issue because, while the court of appeal noted that the defendant (acting in pro per) raised six arguments on appeal, a challenge to the amount of punitive damages was not among them. Nonetheless, the case highlights another example of the interconnected complex questions arising when compensatory damages are reduced in a punitive damages case.
Related posts:
Rex Heeseman op-ed discusses Behr v. Redmond
Two out of three ain’t bad: Supreme Court denies review in Behr v. Richmond, despite my prediction that they’d take the case
Petition for review asks Cal. Supreme Court to resolve split in authority regarding the proper treatment of a punitive damages award after reduction of compensatoriesBehr v. Redmond: Court of Appeal publishes previously unpublished opinion, creates split of authority
Behr v. Redmond: $2.8M punitive award affirmed, despite reduction of compensatory damages from $4M to $1.6M -
State Fish Co., Inc. v. Deluca: California Court of Appeal explains interplay between nominal and punitive damages
In this unpublished opinion handed down last week, the California Court of Appeal (Second District, Division Three), rejected a plaintiff’s appeal challenging the trial court’s denial of nominal damages under Cal. Civil Code section 3360 and denial of punitive damages. The appellate opinion explains that, even if the trial court erred in denying statutory nominal damages for a breach of fiduciary duty that did not apparently cause actual damages, reversal is not warranted unless some further consequence would result—such as triggering the possibility that the plaintiff might obtain a punitive damages award. The court noted,
An award of “nominal damages” can mean two different things: “a trifling or token allowance for mere technical invasion of a right, without actual damages; and the very different allowance made when actual damages are substantial, but their extent and amount are difficult of precise proof.” (Kluge v. O’Gara (1964) 227 Cal.App.2d 207, 209–210.) Only the second can provide a basis for an award of punitive damages. (Id. at p. 210.) Punitive damages cannot be awarded in the absence of actual damages. (Id. at p. 209.) The type of nominal damages to which State Fish would conceivably be entitled is the type of nominal damages which do not imply the existence of actual damages and therefore do not justify an award of punitive damages.
As the nominal damages sought by State Fish would not permit an award of punitive damages, the failure to award nominal damages is not a sufficient basis for reversal. We therefore need not consider whether a breach of fiduciary duty which did not cause actual damages justifies an award of nominal damages.
Side note: if you’re interested in the fate of punitive damages where no compensatory damages were awarded, you might follow the continuing progress of a Missouri wrongful death case against Alberta Comstock, whose daughter sued her mother, claiming the mother shot and killed her ex-husband (the plaintiff’s adoptive father). According to news accounts (e.g., “Comstock lawyers appeal judgment“), the civil jury found no compensatory damages were owed, but awarded $125,000 in punitive damages—half the amount suggested by the plaintiff’s attorney. Ms. Comstock is reportedly challenging the award.
UPDATE (8/4/11): In a decision decided this week, the Missouri Court of Appeal ruling in Lindahl v. State that a jury verdict awarding no compensatory damages but awarding punitive damages is inconsistent, and that a defendant who obtained judgment notwithstanding the verdict (on the ground that no punitives can stand where no compensatory damages are awarded) had invited an error by the trial court by affirmatively suggesting the matter need not be returned to the jury while it was still empaneled, to resolve the inconsistency. Therefore, the appellate court reversed the defense judgment and granted a complete new trial.
Related posts discussing punitive damages in the context of nonexistent or nominal compensatory damages:
Pending cert. petitions raise punitive damages issues
A Curious Punitive Damages Opinion from Florida
California DOI Loses Out on Collecting $700 Million Punitive Damages Award—For Now