California Punitives by Horvitz & Levy

  • 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 In this unpublished opinion, however, the Fourth Appellate District, Division Three, accepted the parties’ stipulation and reversed a judgment that awarded $100,000 in punitive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 But here’s an unpublished opinion from the California Court of Appeal (Second District, Division Three) involving one of the biggest celebrities ever: Michael Jackson.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.

  • Nelson v. Exxon Mobil: Punitive Damages Claims Can Be Assigned

    This published opinion could be headed for the California Supreme Court.

    The opinion addresses whether the right to recover punitive damages is assignable under California law. The Court of Appeal (Third Appellate District) held that the right to recover punitive damages is assignable if that right arises from a cause of action that is assignable. The court observed that causes of action arising from an injury of a personal nature (e.g., slander, assault, malicious prosecution) are not assignable. But the injury in this case was groundwater contamination, an injury to real property. The court observed that claims for injury to real property are transferred with the property when title passes from one owner to another. Accordingly, the court concluded that a property owner could assign its right to seek punitive damages in connection with injury to the property.

    The court acknowledged that several other cases, including California Supreme Court cases, contain language suggesting that the right to seek punitive damages is never assignable. But the Court of Appeal said the results in those cases could be harmonized with the new rule announced in this opinion. Nevertheless, the result in this case is inconsistent with the plain language of other published opinions, which makes a strong case for Supreme Court review.

  • Gunderson v. Wall: Inconsistencies in Defendant’sTestimony Are Not Alone Sufficient to Support Punitive Damages

    This unpublished opinion shoots down an argument that arises fairly often in punitive damages appeals. When the issue on appeal is whether the plaintiff failed to prove malice by clear and convincing evidence, plaintiffs sometimes argue that the defendant’s testimony contained inconsistencies, which shows the defendant was lying, which in turn proves that the defendant was acting with an evil motive, i.e., malice.

    The Second Appellate District, Division Seven, rejected that sort of argument here. It ruled that inconsistencies in the defendant’s testimony were not a substitute for clear and convincing proof of malice:

    In this case, the issue is whether there was substantial evidence to support a finding by clear and convincing evidence that Wall knew or should have known that Welded was receiving stolen funds. As previously discussed, the inconsistencies in Wall’s trial testimony reasonably could support a finding by the jury that Wall was not a credible witness and that he thus had failed to prove his affirmative defense of good faith. But none of the inconsistencies supported the inference that, at the time Welded received the two transfers from Gruys, Wall knew or had reason to know that Gruys had stolen those funds from someone else. Unlike the good faith defense for which Wall and Welded had the burden of proof, the burden rested on Gunderson to establish by clear and convincing evidence that Wall and Welded (as opposed to Gruys) were guilty of malice, oppression, or fraud. However, absent any evidence that Wall and Welded had actual or constructive knowledge that the transferred funds did not belong to Gruys, Gunderson could not satisfy his burden of proving that Wall and Welded acted with an intent to cause Gunderson injury or engaged in despicable conduct in a conscious disregard of his rights.

    Accordingly, the court reversed an $800,000 punitive damages award. (The court also reversed a $2.4 million punitive damages award against another defendant, after concluding that the award resulted from an improper discovery sanction.)

    There may be some situations in which inconsistencies in the defendant’s testimony do in fact support an inference of malice, because the inconsistencies rule out any possible explanation for the defendant’s conduct other than malice. But that will not always be the case, as this opinion illustrates.

  • Jackson v. Yarbray: Defendants Can Be Jointly and Severally Liable for Punitive Damages

    To my knowledge, this opinion is the first published opinion in California to uphold joint and several liability for punitive damages. If anyone knows about another one, I would love to hear about it.

    The trial court entered a judgment holding five different defendants jointly liable for $700,000 in compensatory damages and $2.41 million punitive damages. Only one of the defendants challenged the punitive damages award on appeal. He argued, among other things, that the trial court lacked authority to impose joint and several liability against all defendants for the total punitive damages award, and should have assessed punitive damages separately against each defendant.

    The Court of Appeal (Second Appellate District, Division Seven) rejected that argument: “[W]hen the theory of liability is that the defendants acted jointly in tortiously pursuing a course of conduct, imposing joint and several liability for punitive damages is not prohibitied.” The court acknowledged that in most cases, punitive damages are assessed separately, even against joint tortfeasors. Indeed, the California Supreme Court expressly stated in Thomson v. Catalina (1928) 205 Cal. 402 that it was proper for a trial court to instruct a jury to award punitive damages in different amounts against different defendants.

    The Court of Appeal here did not cite a single case in California (or anywhere else) allowing punitive damages to be assessed jointly and severally. Nevertheless, the court concluded that “punitive damages do not have to be apportioned when the finder of fact determines that the defendants acted jointly to commit a single wrong and each acted with essentially the same degree of culpability.”

    This case appears to be inconsistent not only with California practice, but with the approach taken by other jurisdictions nationwide. (See McFadden v. Sanchez (2d Cir. 1983) 710 F.2d 907, 913 [“In modern times American jurisdictions have come to the conclusion that punitive damages should be assessed on an individual basis’”].) That practice makes sense to me; a defendant should be required to pay punitive damages only for its own acts of malice, and should not be jointly liable for the malice of others.

    UPDATE: Although this opinion is certified for publication, the punitive damages analysis appears in an unpublished portion of the opinion. Thanks to Kevin Underhill for pointing that out. (For those who don’t know, Kevin writes Lowering the Bar. I used to think legal humor was an oxymoron, until I started reading Kevin’s blog. This post is one of my all-time favorites.)

    FURTHER UPDATE: This post at Cal Biz Lit discuses this case and the concept of joint and several liability for punitive damages.

  • Kausch v. Wimsatt: Attorney Not Liable for Punitive Damages in Dispute with Client

    Things have been quiet lately in the California punitive damages arena. The California Court of Appeal (Second Appellate District, Division Three), issued this unpublished opinion yesterday, but it’s not particularly noteworthy. The plaintiff was involved in a personal injury lawsuit and he sued his lawyer, claiming (among other things) the lawyer improperly deducted certain expenses from a settlement check. The trial court granted summary adjudication on punitive damages, finding no triable issue of fact on the question of malice. The Court of Appeal affirmed.

  • Fariba v. Dealer Services: No Punitive Damages Where Liability Depends on Issue of First Impression

    Here’s a case defendants can cite whenever a plaintiff seeks punitive damages in a case involving a novel legal theory.

    In this published opinion, the California Court of Appeal (Fourth Appellate District, Division One) affirmed a judgment that raised a liability issue of first impression in California.

    (It has nothing to do with the topic of this blog, but in case you’re curious, the issue of first impression was: Where a secured creditor of a business has actual knowledge that the business is substantially engaged in consignment sales, are the rights of the consignor superior to the secured creditor? Answer: yes.)

    Although the Court of Appeal affirmed the award of compensatory damages based on this previously unresolved issue, the court also affirmed an order granting a directed verdict on the plaintiff’s claim for punitive damages. Among other things, the court concluded that the plaintiff could not prove by clear and convincing evidence that the defendant acted with conscious disregard of the plaintiff’s rights when the scope of the plaintiff’s rights turned on an unsettled legal issue.

  • Hodge v. Guarantee Real Estate: Defendant Entitled to Fees for Defending Meritless Punitive Damages Claim

    Can a plaintiff who pursues a meritless punitive damages claim be forced to pay the defendant’s attorney fees for defending that claim? Yes, according to this unpublished opinion from the California Court of Appeal (Fifth Appellate District).

    Under California Code of Civil Procedure section 2033.420, if a party serves a proper request for admission (RFA) and the opposing party fails to admit the truth of a matter contained in the RFA, the party that served the request can recover its attorney fees for proving the truth of that matter at trial.

    In this case, the plaintiffs’ complaint included a claim for punitive damages. The defendants served RFAs on the plaintiffs, asking them to admit that the defendants did not act with malice, oppression, or fraud (the prerequisites for recovering punitive damages under Civil Code section 3294). The plaintiffs denied the RFAs. At trial, the plaintiffs were unable to present any evidence of malice, oppression, or fraud, so the trial court granted a nonsuit on punitive damages.

    The defendants then moved for attorney fees under section 2033.420. The trial court agreed that the conditions for awarding fees under section 2033.420 were met, but the court denied the defendants’ motion on the ground that the plaintiffs’ punitive damages allegations did not increase the overall fees incurred by the defense.

    The Court of Appeal reversed. It held that the trial court erred by refusing to award any attorneys’ fees. At the least, the defendants should have been awarded the fees they incurred in bringing their nonsuit motion on punitive damages.

    UPDATE: The California Attorney’s Fees blog has a post about this opinion here.