California Punitives by Horvitz & Levy

  • McCoy v. Progressive West: Court of Appeal Affirms $100,000 Punitive Damages Award for Insurance Bad Faith

    The California Court of Appeal (Second Appellate District, Division One) issued this published opinion affirming a $100,000 punitive damages award. The opinion was originally unpublished, but the court ordered publication yesterday, in reponse to a publication request submitted by the Consumer Attorneys of California.

    The defendant’s only challenge to the punitive damages award was that punitive damages are unavailable in breach of contract actions. The Court of Appeal rejecting that argument, citing previous cases that have allowed punitive damages for bad faith breach of an insurance contract.

    The court did not address Civil Code section 3294, which provides that punitive damages are available only for “the breach of an obligation not arising from contract.” That language suggests that punitive damages should not be available for tort claims (like insurance bad faith) that are based entirely on the breach of a contractual obligation. Although several Court of Appeal opinions have affirmed punitive damages awards in insurance bad faith actions, none of those opinions have reconciled that result with the language of the statute.

    UPDATE: I didn’t notice this the first time around, but the publication order only applies to certain portions of the opinion. The punitive damages discussion remains unpublished.

  • Pakravan v. Halajian: Unpublished Opinion Affirms Order Vacating $205,000 Punitive Damages Award

    The California Court of Appeal (Second District, Division Seven) issued this unpublished opinion affirming a trial court order that wiped out a $205,000 punitive damages award.

    The jury awarded no compensatory damages to the plaintiff, and then awarded $205,000 in punitive damages. The trial court granted judgment notwithstanding the verdict on the ground that a punitive damages award cannot stand without some award of compensatory damages.

    The Court of Appeal affirmed, relying on the California Supreme Court’s decision in Mother Cobb’s Chicken v. Fox (1937) 10 Cal.2d 203, which held that “actual damages must be found as a predicate for exemplary damages.” The court rejected the plaintiffs’ argument that Mother Cobb’s Chicken has been undermined by subsequent Court of Appeal decisions. The court noted that most of the plaintiffs’ authorities predate two recent Supreme Court decisions – – Kizer v. County of San Mateo and Potter v. Firestone Tire & Rubber Co. – – which reaffirmed the rule of Mother Cobb’s Chicken. The court also rejected the plaintiffs’ attempt to justify the punitive damages award based on “presumed” compensatory damages.

    The plaintiffs in this case are certainly not the first to attack the continuing validity of the rule in Mother Cobb’s Chicken. Because this is a recurring issue, the court probably should have published this opinion.

  • Bregante v. Steinberg: Unpublished Opinion Affirms Trial Court’s Decision Not to Award Punitive Damages

    The California Court of Appeal (Sixth District) issued this unpublished opinion affirming a trial court’s decision not to award punitive damages after a bench trial.

    In affirming the trial court’s decision, the Court of Appeal noted that, under California law, “even where the plaintiff prevails in a case where punitive damages are permissible, the plaintiff ‘is never entitled to them. The granting or withholding of the award of punitive damages is wholly within the control of the [the trier of fact]….’” (Citing Brewer v. Second Baptist Church of Los Angeles (1948) 32 Cal.2d 791, 801.)

  • Kozicki v. Craig: Unpublished Opinion Reduces $100,000 Punitive Damages Award to $3,600

    The California Court of Appeal (Fourth District, Division One) issued this unpublished opinion reducing a punitive damages award in an appeal from a default judgment. The court concluded that the record would not support a punitive damages award more than $3,600 – – six times the compensatory damages of $600. The court did not invoke the U. S. Supreme Court’s statement in State Farm v. Campbell that the ratio of punitive damages to compensatory damages can exceed single digits in cases involving “unusually small” compensatory damages.

  • USAA Settles Appeal From $3.5 Million Punitive Damages Award

    Last April we blogged about a $3.5 million punitive damages award against USAA in an insurance bad faith case in San Diego. The case generated a fair amount of publicity because the plaintiff was a Marine captain serving in Iraq. USAA appealed from the judgment, but the online docket reveals that a notice of settlement was filed on February 20.

  • Blanks v. Seyfarth Shaw: $15 Million Punitive Damages Award Reversed

    The California Court of Appeal (Second District, Division Three) issued this published opinion last week, reversing a $15 million punitive damages award in a legal malpractice action brought by Tae Bo creator Bill Blanks against the law firm Seyfarth Shaw and one if its partners, William Lancaster.

    The opinion doesn’t contain any analysis of punitive damages issues per se, because the court found that the entire judgment had to be reversed due to instructional errors committed by the trial court during the liability phase of the trial. Nevertheless, we thought the opinion merited a brief mention here because the $15 million punitive damages award was one of the largest punitive awards generated by the California courts in 2005, and the total verdict was the 7th largest that year.

  • La Baw v. Campbell: Court of Appeal Vacates $100,000 Punitive Damages Award Against Defendant With Negative Net Worth

    In this unpublished opinion, the California Court of Appeal (Fourth District, Division Two) vacated a punitive damages award of $100,000 because the defendant could not afford to pay.

    We have previously blogged about California’s rather unique rule that plaintiffs seeking punitive damages must present evidence of the defendant’s financial condition. As we observed, California plaintiffs routinely overlook this rule and end up losing their punitive damages awards on appeal.

    Even when plaintiffs do meet their burden, California courts will reduce punitive damages awards that are disproportionate to the defendant’s ability to pay. For individual defendants, the courts have adopted a rule of thumb that any award that exceeds 10 percent of the defendant’s net worth is excessive. (See Michelson v. Hamada (1994) 29 Cal.App.4th 1566, 1596.)

    This case is a little unusual because the evidence showed that the defendant had a negative net worth. He testified that his debts exceeded his assets, and the plaintiff presented no evidence to the contrary. The court therefore concluded that the defendant is unable to pay any punitive damages award. It vacated the award in its entirety and did not afford the plaintiff a new trial on this issue, because she had a full and fair opportunity to present her evidence in the first trial. (See Kelly v. Haag (2006) 145 Cal.App.4th 910, 914.) That aspect of the opinion conflicts with this recent unpublished decision, in which the Court of Appeal inexplicably gave the plaintiff a second chance to present evidence of the defendant’s financial condition after failing to do so the first time around.

  • Duffy v. Technicolor: Plaintiff Forfeited Punitive Damages By Not Seeking Them During First Phase of Trial

    The California Court of Appeal (Second District, Division Three) issued this unpublished opinion last week, affirming a trial court’s decision that prohibited a plaintiff from seeking punitive damages. In a nutshell, the plaintiff was barred from seeking punitive damages because he failed to make a timely request for punitive damages on any of the liability theories he presented to the jury.

    The plaintiff’s complaint asserted multiple theories of liability, but requested punitive damages only for intentional infliction of emotional distress. The trial court, however, granted a nonsuit on that claim prior to trial. The case went to trial, bifurcated into a liability phase and a damages phase. During the liability phase, the plaintiff did not ask to amend his complaint to seek punitive damages on the other claims, nor did he ask the jury to make a finding that the defendant acted with malice, oppression, or fraud. The jury found for the plaintiff on liability.

    During the damages phase, when the plaintiff began to assert a claim for punitive damages, the trial court asked the plaintiff how he could obtain punitive damages when the complaint did not seek punitive damages on any of the theories the jury had addressed in the liability phase. The plaintiff then sought leave to amend his complaint to request punitive damages on one of the claims the jury had addressed. The trial court denied the request as untimely.

    The Court of Appeal affirmed, finding that the trial court did not abuse its discretion. The court noted that a belated amendment of the complaint would have prejudiced the defendant, who might have adopted a different strategy during the liability phase, and might have presented different evidence, if the defendant had known the plaintiff was seeking punitive damages.

    The court’s reasoning makes sense, but it seems like the court could have affirmed on another more straightforward ground, without even going into a prejudice analysis. The plaintiff, by failing to obtain a finding of malice, oppression, or fraud during the liability phase, forfeited its claim to punitive damages as a matter of law. See Westrec Marina Management Inc. v. Jardine Ins. Brokers Orange County, Inc. (2000) 85 Cal.App.4th 1042, 1050. Under Westrec, it really wouldn’t matter whether the plaintiff had been allowed to amend his complaint or not. Without a finding of malice, oppression, or fraud, no punitive damages could be awarded.

  • Stevens v. Vons: Unpublished Opinion Addresses Controversial Issue Regarding Punitive Damages Standard of Review

    In our previous post we discussed this unpublished opinion from the California Court of Appeal, which affirmed the trial court’s adoption of a 1-to-1 ratio of punitive-to-compensatory damages. The same opinion is notable for another reason: it addresses a standard of review issue that has divided California’s intermediate appellate courts.

    As we mentioned in our prior post, the Court of Appeal rejected the defendant’s argument that the plaintiff failed to present sufficient evidence to support the imposition of punitive damages. In the process, the court ruled that the “clear and convincing evidence” standard, which governs punitive damages issues at the trial court, also applies on appeal, when a reviewing court examines the record to determine whether substantial evidence supports the imposition of punitive damages.

    As we have noted in prior posts, California appellate courts have been all over the map on this issue, with some courts taking the position that the clear and convincing evidence standard applies only in the trial court and has no relevance on appeal. Last year the California Supreme Court granted review to resolve the split among the lower courts on this precise issue, but the Supreme Court later dismissed review after the parties settled. This case presents another vehicle for the Supreme Court to address that issue, although the chances of review are diminished somewhat by the fact that this is an unpublished opinion.

  • Stevens v. Vons: $16.7M in Punitive Damages Reduced to $1.2M, Ratio of 1-to-1

    The California Court of Appeal (Second District, Division Six) issued this unpublished opinion yesterday, affirming a trial court’s decision to reduce a large punitive damages award.

    The plaintiff, a grocery store employee, sued for sexual harassment and retaliation. A jury ruled for the plaintiff and awarded $1,672,988 in compensatory damages and ten times that amount in punitive damages ($16,729,880). The trial court ordered a conditional new trial on excessive damages grounds, but offered the plaintiff a choice of accepting a remittutur, reducing the damages to $1.2 million in compensatory damages and an equal amount in punitive damages. The plaintiff accepted the remittitur. The defendant appealed from the judgment and the plaintiff cross-appealed from the reduction of the punitive damages.

    The defendant argued on appeal that the plaintiff failed to prove that a managing agent of the store had ratified the conduct of the employee who harassed the plaintiff. The Court of Appeal rejected that argument, finding that there was sufficient evidence to support the award of punitive damages.

    On the plaintiff’s cross-appeal, however, the Court of Appeal affirmed the trial court’s determination that the the 10-to-1 ratio of punitive damages to compensatory damages awarded by the jury was excessive, and that the proper ratio is 1-to-1. In affirming the reduced the award, the Court of Appeal noted that the reprehensibility of the defendant’s conduct was “low to moderate,” that the maximum statutory penalty for the defendant’s conduct is only $150,000, and that the compensatory damages were “substantial.” As we noted recently in another post, a small but growing number of appellate courts have finally begun to implement the Supreme Court’s statement in State Farm v. Campbell that the ratio of punitive damages should be low, perhaps only 1-to-1, when compensatory damages are substantial.

    This opinion also draws on the U.S. Supreme Court’s recent decision in Exxon Shipping as support for the 1-to-1 ratio:

    The reasonableness of the trial court’s selection of a 1:1 ratio is supported by Exxon Shipping Co. v. Baker (2008) __U.S. __ [128 S.Ct. 2605, 171 L.Ed.2d 570]. In that case the United States Supreme Court observed that there are “several studies . . . showing the median ratio of punitive to compensatory verdicts, reflecting what juries and judges have considered reasonable across many hundreds of punitive awards.” (Id., 128 S.Ct. at p. 2632.) The “studies cover cases of the most as well as the least blameworthy conduct triggering punitive liability, from malice and avarice, down to recklessness, and even gross negligence in some jurisdictions. The data put the median ratio for the entire gamut of circumstances at less than 1:1, . . . meaning that the compensatory award exceeds the punitive award in most cases. In a well functioning system, we would expect that awards at the median or lower would roughly express jurors’ sense of reasonable penalties in cases with no earmarks of exceptional blameworthiness within the punishable spectrum . . . .” (Id., at p. 2633.)

    The Supreme Court noted that it “has long held that ‘[p]unitive damages by definition are not intended to compensate the injured party, but rather to punish the tortfeasor . . . and to deter him and others from similar extreme conduct.’ [Citation.]” (Exxon Shipping Co. v. Baker, supra, 128 S.Ct. at p. 2633.) The trial court here could have reasonably concluded that punitive damages of $1.2 million, together with compensatory damages in the same amount, were sufficient to punish appellant and “‘deter [it] and others from similar extreme conduct.’ ” (Ibid.)

    This is exactly the sort of thing we had in mind when we predicted that the Exxon Shipping case, although not binding on state courts, will nonetheless be persuasive to some lower courts because the reasoning of Exxon Shipping applies to all types of punitive damages cases, not just maritime cases.
    The plaintiff in this case was represented on appeal by appellate specialist and blogger Donna Bader, who operates An Appeal to Reason.

    Hat tip: California Attorney’s Fees.