California Punitives by Horvitz & Levy

  • California Jury Awards $50 Million in Punitive Damages Against Shell Subsidiary

    This case has already gone up on appeal once, and is likely headed that way again.

    In 2008 we blogged about this case, which involves a plaintiff who purchased a gas station from Shell subsidiary Equilon Enterprises and claims Equilon defrauded him by withholding material information. He claims that Equilon failed to tell him that the site of the gas station was about to become the target of state regulatory agencies, a fact that ultimately prevented him from being able to operate a gas station on the site.

    When the case went to trial in 2006, the jury awarded the plaintiff $1.65 million in compensatory damages and found that Equilon acted with malice, oppression, or fraud. But the trial court dismissed the plaintiff’s punitive damages claim because he failed to present meaningful evidence of the defendant’s financial condition. The California Court of Appeal (Second Appellate District, Division Eight) reversed, concluding that the trial court should have given the plaintiff more time to marshal his financial condition evidence.

    According to the plaintiff’s attorney’s press release, a new jury has awarded $50 million in punitive damages. That makes for a ratio in excess of 30 to 1, a ratio that should not withstand posttrial and appellate scrutiny. Even assuming the defendant’s conduct was extremely egregious, the defendant seems to have a strong argument that the maximum ratio cannot exceed one to one, given the size of the compensatory damages award and the purely economic nature of the plaintiff’s injuries.

    The appeal may also raise some interesting issues about the proper procedures for a trial like this, in which one jury decided the issues of liability and malice, and another jury awarded punitive damages. In such situations, it is difficult if not impossible to ensure that the second jury bases its punitive damages award solely on the same conduct that the first jury found to be tortious and malicious. If the plaintiff made multiple arguments in the first trial, the first jury may have accepted some of those arguments and rejected others. Unless the jury made very specific findings, however, there would be no way for anyone to know the precise basis for the first jury’s findings, and therefore no way to comply with the requirement of California law that punitive damages must be based on malice, oppression or fraud in the conduct that gave rise to liability.

  • Boothby v. Parker: $350,000 in Punitive Damages Affirmed, Despite Reduction of Compensatory Damages

    There seems to be a growing split in the California Court of Appeals on the question of what should happen to a punitive damages award when a court slashes the compensatory damages award. In SEIU v. Colcord, the First Appellate District, Division One, ordered a reduction in the compensatory damages and then sent the case back to the trial court to reconsider the amount of the punitive damages in light of the reduction. But in McGee v. Tucoemas, both the trial court and the Court of Appeal refused to reevaluate the amount of punitive damages after a reduction of the punitive damages award.

    In this unpublished opinion, the Second Appellate District, Division Two, affirms a $350,000 punitive damages award, even though the court reduced the compensatory damages from $725,000 to $325,000. The court relies on McGee but does not discuss SEIU or any other similar authority. (E.g., Las Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal.App.3d 1220, 1254 [reducing compensatory damages and reducing punitive damages to preserve the ratio awarded by the jury].)

    This is an issue that could eventually end up before the California Supreme Court.

  • Brunskill Associates v. Rapid Payroll: $11 Million in Punitive Damages Affirmed

    I mention this unpublished opinion only because we report on all California appellate decisions on punitive damages. There doesn’t appear to be anything particularly interesting here.

    The California Court of Appeal (Second District, Division Two) concludes that the defendants’ conduct warranted punitive damages because they made intentional misrepresentations with the goal of destroying the plaintiff’s business. And the court affirms the amount of the award (in excess of $11 million), which was less than the amount of compensatory damages ($15 million). If there’s an interesting legal angle in there somewhere, I’m not seeing it, even though it’s a pretty big award.

  • Montoya v. Shaw: Another Punitive Damages Award Reversed Because the Plaintiff Failed to Prove the Defendant’s Financial Condition

    This unpublished opinion illustrates yet again the consequences of failing to comply with California’s unique rule that a plaintiff cannot obtain punitive damages unless the plaintiff presents meaningful evidence of the defendant’s ability to pay.

    The plaintiff here won a $20,000 punitive damages award at trial. But the only evidence he presented regarding the defendant’s financial condition was the fact that the defendant owned several businesses. The plaintiff did not establish the value of those businesses, the income the defendant derived from them, or the liabilities associated with them. Accordingly, the California Court of Appeal (Fourth Appellate District, Division One) vacated the punitive damages award. And because the plaintiff had a full an fair opportunity to present his evidence the first time around, he doesn’t get to go back to the trial court and try again.

  • Barnes v. Morales: Punitive Damages Can Be Awarded for Purely Economic Harm

    This unpublished opinion isn’t exactly earth-shattering, but we mention it as part of our ongoing effort to catalog all of the California appellate opinions on punitive damages.

    The defendant in this fraud case challenged a $56,000 punitive damages award, arguing that punitive damages could not be awarded in this case because the plaintiff’s $295,000 compensatory damages award was purely economic. The Court of Appeal easily disposed of that argument, noting that Civil Code section 3294 expressly authorizes punitive damages for fraud and does not require an award of non-economic damages.

  • Suh v. Superior Court: Arbitration Agreement that Precludes Punitive Damages is Unenforceable

    In this published opinion, the Second Appellate District, Division Five, invalidates an arbitration agreement which, among other things, eliminated the right to recover punitive damages:

    To the extent the damage limitation clause applies to statutorily imposed remedies, such as punitive damages, it is “contrary to public policy and unlawful.” (Amendariz [v. Foundation Health Pscyhcare Services, Inc. (2000) 24 Cal.4th 83,] 104.)

    So California plaintiffs have a right to seek punitive damages through arbitration, but questions remain about the application of federal due process standards to any such awards.

  • Kunysz v. Sadler: Punitive Damages Reversed by Stipulation

    Here’s one you don’t see everyday: a stipulated reversal of a punitive damages award.

    The parties reached a settlement through a court-sponsored appellate mediation program and they agreed, as part of the settlement, to file a stipulation requesting that the underlying be vacated. Stipulated reversals used to be more common in California, but the Legislature enacted a statute limiting the circumstances in which an appellate court can grant stipulated reversals (Code of Civil Procedure section 128(a)(8)), and the courts have construed those requirements strictly. In this unpublished opinion, however, the Fourth Appellate District, Division Three, accepted the parties’ stipulation and reversed a judgment that awarded $100,000 in punitive damages.

    One of the factors that weighs in favor of granting a stipulated reversal is a likelihood of reversal on the merits. The court found a likelihood of reversal here because the punitive damages award was not accompanied by any award of actual damages.

  • Geragos v. Borer: $9 Million in Punitive Damages Reduced to $600,000

    We haven’t blogged about a celebrity punitive damages case in a while. But here’s an unpublished opinion from the California Court of Appeal (Second District, Division Three) involving one of the biggest celebrities ever: Michael Jackson.

    In 2003, Jackson hired prominent attorney Mark Geragos to defend him against criminal charges in Santa Barbara County. Geragos chartered a private plane from XtraJet, Inc. to fly with Jackson from Las Vegas to Santa Barbara, so that Jackson could surrender for his arrest.

    According to the opinion, Jeffrey Borer, the owner of XtraJet, decided to make a few extra bucks on the transaction by installing hidden video recorders on the plane, with the intent of selling the recordings to the media. Predictably, Borer got busted when he tried to sell the tapes. Greta Van Susteren of Fox News called Geragos and told him that Borer was shopping the tapes to various media outlets. Geragos sued Borer, alleging a variety of claims including invasion of privacy, misappropriation of name and likeness, and unfair business practices.

    After a bench trial before Judge Soussan Bruguera in Los Angeles County, judgment was entered for $2.25 million in compensatory damages and $9 million in punitive damages. Borer was also convicted of illegal wiretapping in federal criminal proceedings.

    Borer appealed the civil judgment, challenging both the compensatory damages and the punitive damages. The Court of Appeal agreed with his arguments on both counts and ordered a remittitur of the compensatory damages to $150,000 and a remittitur of the punitive damages to $600,000.

    First, the Court of Appeal concluded that no substantial evidence supported Judge Bruguera’s determination that Borer was liable for misappropriation and misuse of the Geragos’s name and likeness, because Borer never actually sold or profited from the videotape. Next, the Court of Appeal concluded that Judge Bruguera’s compensatory damages award was excessive as a matter of law because there was no evidence of any out-of-pocket damages by Geragos, and no evidence that Gergagos sought any treatment or counseling for the emotional distress that he claimed to suffer.

    Finally, the Court of Appeal concluded that the punitive damages were excessive in violation of the Due Process Clause of the federal constitution. The court concluded that Borer’s conduct was not as reprehensible as other forms of punishable conduct because he did not endanger anyone’s health or safety, he did not target a financially vulnerable victim, and he had never engaged in similar misconduct in the past. Accordingly, the court determined that 4 to 1 is the maximum permissible ratio of punitive damages to compensatory damages on the facts of this case.

    Ordinarily, it is nonsensical for a court to give the plaintiff the option of new trial instead of accepting the constitutional maximum punitive damages award. By definition, the constitutional maximum represents the plaintiff’s best possible outcome, so a new trial would be pointless. (Unfortunately, that doesn’t stop some courts from offering the plaintiff a new trial under such circumstances, as discussed here, here, and here.)

    This case, however, illustrates a rare instance in which it is entirely proper for the court to offer the plaintiff a choice between the maximum award or a new trial. That’s because the remittitur here applies to both the compensatory damages and the punitive damages. If Geragos chooses a new trial, he might be able to recover more than the remittitur offered by the court. The court said the award of $2.25 million in compensatory damages was excessive but it didn’t say that number represented the maximum recovery. So Geragos might be able to do better on retrial, in which case he might be able to recover a larger amount of punitive damages, even assuming that the maximum ratio is four to one.

    Related posts:

    New Trial Motion Denied in Mark Geragos/Michael Jackson Punitive Damages Case

    Mark Geragos, Michael Jackson, and Punitive Damages

  • Everest Properties II v. Diller: Punitive Damages Claim Barred by Collateral Estoppel

    We don’t see many opinions involving the intersection of punitive damages and collateral estoppel. But in this unpublished opinion, the California Court of Appeal (First Appellate District, Division One), holds that the collateral estoppel doctrine bars a plaintiff from seeking punitive damages.

    The plaintiffs, investors in a partnership, sued the corporate general partner for breach of fiduciary duty. They won $23 million in compensatory damages, but the trial court ruled that the plaintiffs could not recover punitive damages because they failed to prove by clear and convincing evidence that the corporation acted with malice, oppression, or fraud.

    The plaintiffs then pursued a separate action against the individual who controlled the corporation, trying to get punitive damages for the same misconduct at issue in the first action. The trial court dismissed the action and the Court of Appeal affirmed, ruling that the plaintiffs were collaterally estopped from seeking punitive damages. The court determined that the two actions involved identical allegations of misconduct. Because the trial court in the first action determined that the conduct did not support punitive damages against the corporation, the plaintiffs could not use the same conduct to support a punitive damages claim against the individual.

  • Goldstein v. Beck: Unpublished Opinion Affirms $4 Million in Punitive Damages

    The California Court of Appeal (Second Appellate District, Division Seven) issued this unpublished opinion last week, affirming a $2 million compensatory damages award and a $4 million punitive damages award. The court rejected the appellant’s argument that the record contained no substantial evidence of malice, oppression, or fraud. I won’t comment further about this one, since my firm represents the appellant and the litigation is ongoing.