California Punitives by Horvitz & Levy

  • Martin v. Harpaz: $6.6 Million in Punitive Damages Reversed Because of Insufficient Financial Condition Evidence

    The California Court of Appeal (Second Appellate District, Division One) issued this unpublished opinion yesterday, reversing a punitive damages award because the plaintiff failed to introduce sufficient evidence of the defendants’ financial condition. The punitive damages awards, against 5 different defendants, totaled $6.6 million.

    The plaintiff, apparently aware of California’s rule requiring plaintiffs to present meaningful evidence of the defendant’s financial condition, introduced some evidence of the defendants’ finances. The evidence showed the defendants had some large cash receipts for their business operations, but it also showed that the defendants’ had massive debts, and that some of the defendants had declared bankruptcy. Apparently, the plaintiffs offered no forensic accountant or other expert to estimate the defendants’ net worth.

    After a bench trial, the trial court awarded punitive damages awards based on its conclusion that none of the defendants’ testimony regarding their net worth was worthy of belief. Thus, the trial court seemed to mistakenly believe that the defendants, rather than the plaintiffs, had the burden of proof on this issue.

    The Court of Appeal reversed. It ordered all the punitive damages awards stricken from the judgment because the plaintiffs had failed to present evidence of the defendants’ net worth. By my quick count, this is the seventh unpublished California opinion this year reversing a punitive damages award because of the plaintiffs’ failure to present meaningful financial condition evidence.

  • Leonin v. Salapare: $25,000 Punitive Damages Award Reversed

    Here’s yet another unpublished opinion from the California Court of Appeal (Fourth Appellate District, Division Two) reversing a punitive damages award because the plaintiff failed to meet its burden of introducing sufficient evidence of the defendant’s financial condition. This seems to happen about once a month.

  • Yanes v. Orea: Punitive Damages Portion of Default Judgment Reversed

    The California Court of Appeal (Fourth Appellate District, Division Two) issued an unpublished opinion reversing the portion of a default judgment that awarded $411,688.79 in punitive damages. The plaintiff failed to serve a statement requesting a specific amount of punitive damages, which is a prerequisite to obtaining punitive damages by default. We have seen this before. (See our prior posts here and here.)

  • Griffin Dewatering v. Northern Ins.: $10 Million Punitive Damages Award Reversed

    The California Court of Appeal (Fourth District, Division Three) issued a published opinion on Friday, reversing an $11.1 million judgment, including $10 million in punitive damages.

    The court didn’t reach any punitive damages because it reversed the liability finding and directed entry of judgment for the defendant on all issues. I mention it here only because it was one of the largest punitive damages verdicts in California in 2005. (And because my firm represented the defendant).

  • Berry v. Taggart: Trial Court Properly Denied Motion to Strike

    The California Court of Appeal (First District, Division 1) issued this unpublished opinion, affirming a trial court order denying a defendant’s special motion to strike the plaintiff’s complaint under Code of Civil Procedure section 425.16 (the “anti-SLAPP” statute).

    I won’t delve into the anti-SLAPP aspects of this opinion, which are beyond the scope of this blog. For our purposes, its important to note only that an appellate court reviewing the denial of an anti-SLAPP motion must consider whether the plaintiff established a probability of prevailing on the complaint. With respect to the punitive damages allegation in the complaint, the defendant argued that the plaintiff could not prevail on its fifth cause of action for punitive damages because California law does not recognize a “cause of action” for punitive damages.

    The Court of Appeal agreed that there is no separate cause of action or tort for punitive damages under California law. But the court nevertheless concluded that the fifth cause of action in plaintiff’s complaint, although styled as a cause of action for punitive damages, actually stated facts sufficient to support a cause of action for malicious prosecution. The court went on to say that, because punitive damages are unquestionably recoverable in a malicious prosecution action, plaintiff had established a likelihood of obtaining punitive damages sufficient to defeat the defendant’s special motion to strike.

  • Superior Dispatch, Inc. v. Insurance Corp of New York: Trial Court Erred in Striking Punitive Damages Claim in Insurance Bad Faith Case

    The California Court of Appeal (Second District, Division 3) issued this published opinion yesterday, reversing a trial court’s grant of summary judgment to an insurer in an insurance bad faith suit.

    Among other things, the opinion states that the trial court erred in striking the plaintiff’s punitive damages claim because the facts alleged in the complaint would be sufficient to support a finding of “oppression,” one of the predicates to awarding punitive damages under Civil Code 3294.

    The punitive damages portion of the opinion is not particularly noteworthy. We mention it only in connection with our ongoing efforts to develop a complete picture of all the punitive damages decisions coming out of the California Court of Appeal.

  • Some Stats On Punitive Damages in the California Court of Appeal

    Since we began this blog in January 2008, we’ve tracked every California Court of Appeal opinion on the topic of punitive damages, published and unpublished. As a result, we’ve collected a fair amount of data. I’m starting to sift through some of that data to see what it might tell us about how our appellate courts deal with punitive damages. I’ve started by looking just at the 2009 California punitive damages decisions. When I have time, I’ll update these figures with the cases from 2008.

    Total decisions, published and unpublished

    There have been 26 California Court of Appeal decisions in 2009 addressing punitive damages, not counting cases where punitive damages were awarded but the court of appeal’s opinion did not address punitive damages issues (e.g., not including Blanks v. Seyfarth Shaw, in which the Court of Appeal ordered a new trial on all issues, resulting in the reversal of a $15 million punitive damages award). Only 2 of the punitive damages opinions in 2009 have been published. (Scott and Major).

    Defendants’ success rates in challenging punitive damages

    To date, there have been 18 appeals in 2009 involving a defendant’s challenge to an award of punitive damages. (As explained below, the other cases involve defense verdicts or punitive damages claims that were dismissed before trial.)

    In 13 of those 18 cases, the defendant was successful in getting a punitive damages award vacated or reduced, either by the trial court or the court of appeal. That’s an overall success rate of 72 percent for defendants.

    In 6 of those 18 cases (33 percent), the punitive damages were vacated entirely.

    Looking exclusively at cases in which the trial court rejected the defendants’ posttrial challenges, the defendants succeeded in getting some relief from the Court of Appeal (either a reduction or a completely reversal) in 8 out of 13 cases (62 percent).

    Plaintiffs’ success rates in appealing from trial court rulings for the defense

    There have been 4 cases so far in 2009 in which a plaintiff appealed from a trial court decision dismissing a punitive damages claim (by nonsuit, directed verdict, or a motion to strike). Only one of those plaintiffs were successful (25 percent).

    There have been 3 cases in which plaintiffs appealed from a decision not to award punitive damages (two jury trials and one bench trial). All 3 of those appeals were unsuccessful.

    Conclusions

    These sample sizes are too small to support any conclusions. And even when we have more data, it is important to keep in mind that these stats are based exclusively on appellate decisions, and do not include cases in which a trial court made a posttrial ruling that was never appealed. So you have to take all these numbers with a grain of salt.

    Nevertheless, the one thing that jumps out at me from these stats is the high success rates for defendants. It will be interesting to see whether that is just a 2009 anomaly, or whether those percentages hold true when we add in the stats from the 2008 cases.

  • Essex Ins. v. Professional Building Contractors: Punitive Damages Reduced to 1-to-1 Ratio in Insurance Bad Faith Case

    The California Court of Appeal (Second Appellate District, Division Two) has issued an opinion which, although unpublished, is a must read for anyone handling an insurance bad faith case involving punitive damages.

    The jury awarded $682,000 in compensatory damages and $2.5 million in punitive damages (a ratio of 3.7-to-1) against an insurance company for unreasonably denying coverage. The trial court granted a conditional new trial unless the plaintiff agreed to accept a remittitur of the punitive damages to $682,000. The plaintiff refused to accept the remittitur and appealed from the order granting a new trial.

    The Court of Appeal affirmed. First, it noted the “abuse of discretion” standard of review governs appellate review of a trial court order granting a conditional new trial based on excessive punitive damages, not the “de novo” standard of review that applies to a defendant’s appeal from a judgment awarding punitive damages.

    Next, the court evaluated the defendant’s conduct and determined that it was relatively low on the reprehensibility scale because the plaintiff’s losses were purely economic, there was no indifference to public health or safety, the plaintiff was not financially vulnerable, and the defendant was not a repeat offender.

    Turning to the ratio between punitive and compensatory damages, the court cited several recent California opinions that have imposed a 1-to-1 limit in cases with relatively low levels of reprehensibility. The court rejected the plaintiff’s argument that the ratio calculation should include prejudgment interest or speculative “potential harm” claimed by the plaintiff. The court also cited Justice Souter’s majority opinion in Exxon Shipping, which noted that the median ratio is less than 1-to-1 across the entire gamut of circumstances that can support punitive damages.

    Finally, when considering the third guidepost for evaluating punitive damages – – legislative or regulatory penalties for comparable misconduct – – the court rejected the plaintiff’s argument that the defendant insurer could have been fined $10,000 under Insurance Code section 790.035 for each “will, unfair or deceptive act” in its dealing with the plaintiff. The court said that even assuming the insurer’s acts were punishable under that statute, the insurer’s liability in this case was based on its handling of a single claim for a single insured, and therefore was not comparable to conduct that would trigger multiple penalties under the statute.

    By our count, this is the sixth California appellate decision in the past 3 years in which a punitive damages award was reduced from a single digit ratio down to a 1-to-1 ratio, either by the trial court or by the court of appeal. The others are:

    Stevens v. Vons (2009) [unpublished] [ratio reduced from 10-to-1 down to 1-to-1]

    Walker v. Farmers Ins. Group (2007) 153 Cal.App.4th 965 [ratio reduced from 5.6-to-1 down to 1-to-1]

    Jet Source Charter, Inc. v. Doherty (2007) 148 Cal.App.4th 1 [ratio reduced from 4-to-1 down to 1-to-1]

    Grassilli v. Barr (2006) 142 Cal.App.4th 1260 [ratios reduced from 8.4-to-1 and 7.5-to-1 down well below 1-to-1]

    Roby v. McKesson HBOC (2006) 146 Cal.App.4th 63, review granted [ratio reduced from 10.7-to-1 down to 1.4-to-1]

  • Pagarigan v. Libby Care: Conclusory Allegations of Corporate Ratification Cannot Support Punitive Damages Claim

    The California Court of Appeal (Second Appellate District, Division Seven) issued this unpublished opinion yesterday, affirming a trial court’s order striking a claim for punitive damages.

    The plaintiffs were seeking punitive damages against a corporation that operates a nursing home. The plaintiffs alleged that the nursing home was understaffed and underfunded, which ultimately led to the death of their mother, a resident at the facility.

    Under California law, punitive damages cannot be awarded against a corporation unless an officer, director, or managing agent of the corporation committed, authorized, or ratified the punishable conduct. (Civil Code section 3294.) To satisfy this requirement, the plaintiffs alleged in their complaint that the decision to underfund and understaff the facility was “committed by, or authorized and ratified by officers, directors and/or managing agents.” In other words, the complaint alleged a legal conclusion but did not allege any specific facts to support that conclusion.

    The Court of Appeal affirmed the trial court’s order striking the punitive damages claim, holding that:

    absent any allegations that employees at [the nursing home] have any responsibility for or authority over . . . corporate-wide policies and procedures, rather than day-to-day management duties at one facility, or allegations that individuals . . . within [the corporation’s] leadership group were aware of and ratified the corporate funding and staffing policies that allegedly led to the abuse suffered by [plaintiffs’ mother], the trial court properly granted the motion to strike the claims for punitive damages

    In the year and half since we launched this blog and began tracking all California appellate opinions on punitive damages, this is only the second case involving a punitive damages claim that was rejected because the allegations of the complaint were insufficiently specific. (Here’s our post about the other case.)

  • Clark v. Clark: $2.5 Million Net Worth Sufficient to Support $100,000 Punitive Damages Award

    We’ve been blogging recently about the slew of cases reversing punitive damages awards because the plaintiff failed to present meaningful evidence of the defendant’s financial condition.

    Here’s a change: in an unpublished opinion, the California Court of Appeal (First Appellate District, Division Three), reverses a trial court’s determination that the plaintiff’s evidence of the defendant’s financial condition was insufficient. The Court of Appeal concluded the evidence established a net worth of $2.5 million, more than enough to support a $100,000 award. The Court of Appeal faulted the trial court improperly weighing evidence and considering evidence not before the jury.