California Punitives by Horvitz & Levy

  • Court of Appeal affirms $1.95 million punitive damages award in wrongful termination case (Albarracin v. Fidelity National Financial)

    I’m catching up on some unpublished opinions from the past few weeks. In this one, the plaintiff alleged she was fired after complaining that her supervisor sexually harassed her.  A jury found defendant Fidelity National liable for intentional infliction of emotional distress, retaliation, and wrongful termination.  The jury awarded $250,000 in emotional distress damages and $1,950,000 in punitive damages.

    Fidelity appealed, challenging only the punitive damages award.  Fidelity argued that the plaintiff failed to present clear and convincing evidence of malice or oppression within the meaning of Civil Code section 3294.  Fidelity argued that the evidence showed at most that Fidelity’s investigation of the plaintiff’s sexual harassment complaint was negligent, but not malicious.  

    The Court of Appeal (Second District, Division Three) rejected that argument because Fidelity had not challenged the jury’s finding that Fidelity intentionally inflicted emotional distress.  The court said that finding was inconsistent with Fidelity’s appellate argument that its conduct was merely negligent, and because Fidelity had not challenged that finding on appeal, it could not characterize its conduct as mere negligence.

    Next, Fidelity argued that the punitive damages award was excessive and should be reduced to no more than $250,000, the amount of the jury’s emotional distress award. The court rejected that argument too, finding that Fidelity’s conduct was reprehensible enough to justify a nearly eight-to-one ratio.  Fidelity relied on caselaw holding that the maximum ratio may be one-to-one in cases where the compensatory damages are substantial.  But the Court of Appeal rejected that argument on the grounds that the $250,000 award was not all that large. Your mileage may vary; other courts have found that lesser amounts qualified as “substantial.”

  • In the first opinion after the Supreme Court’s decision in Conservatorship of O.B., Court of Appeal rejects substantial evidence argument and partially reinstates $15.6 million punitive damages award (King v. U.S. Bank)

    In this published opinion, the Third Appellate District restores millions of dollars in both compensatory and punitive damages that the trial court had stricken from a jury’s verdict in an employment dispute.

    Plaintiff King was a senior vice president at a bank. He gave bad performance reviews to two of his subordinates, who then turn accused him of gender discrimination, harassment, and falsification of records. The bank’s human resources director investigated and recommended that King be fired. When the bank fired him, he sued it for defamation, based on statements made by bank employees during the HR investigation. He also sued for wrongful termination, alleging that the bank’s human resources director conducted an inadequate investigation.
    A jury awarded King $8.5 million in compensatory damages and $15.6 million in punitive damages. The trial court partially granted the bank’s post-trial motions, refusing to vacate the award but chopping the compensatory damages down to $2.7 million and then limiting the punitive damages to the same amount. Both sides appealed.
    The bank argued that King failed to prove by clear and convincing evidence that any officer, director, or managing agent of the bank acted with malice. The Court of Appeal acknowledged that, under the Supreme Court’s decision earlier this week in Conservatorship of O.B., appellate courts must take the “clear and convincing” evidence standard into account when reviewing the sufficiency of the evidence supporting a punitive damages award. Although the Court of Appeal acknowledged that standard, it also stated that it did not matter that the conduct at issue could just as easily have been mere negligence, rather than malice. That statement seems incongruous with O.B. and with prior caselaw holding that evidence of malice cannot be clear and convincing if the evidence merely supports an inference of malice, but is also consistent with the possibility of mere negligence.
    Although the court affirmed the jury’s malice finding, the court also agreed with the trial court that the jury’s punitive damages award was excessive, and that a one-to-one ratio is the constitutional maximum under the circumstances of this case. However, because the court reversed the trial court’s rulings with respect to the compensatory damages and reinstated the jury’s $8.5 million compensatory damages award, application of the one-to-one ratio on appeal resulted in an $8.5 million punitive damages award, much higher than the $2.7 million maximum that the trial court had imposed.
    This opinion, if viewed as a test for how appellate courts will apply the new O.B. standard, suggests that O.B. may not move needle much in some courts. This opinion was clearly written well before O.B. was decided. When the Supreme Court issued its opinion in O.B. on Monday, the Court of Appeal proceeded to publish this opinion the very next day, adding a few citations to O.B. but otherwise not apparently seeing a need to take any additional time to revisit its analysis. Of course this is just one data point. It will take several more decisions before we can really measure the impact of O.B.

  • Court of Appeal concludes that $2.1 million punitive damages award is excessive, limits maximum amount to $371,000 (Orozco v. Conrad)

    I’m a bit tardy in reporting on this unpublished decision, which was issued last week. 

    The opinion arises out of a rather unusual dispute between a restaurant owner and her commercial landlord.  The dispute culminated with the landlord sending a crew of workers to forcibly remove equipment and supplies from the restaurant.  The tenant sued on various theories and a jury awarded her $50,000 in emotional distress damages, $3,000 for trespass to chattels, and $2.1 million in punitive damages.  The trial court determined that the punitive damages were excessive, and ordered a new trial unless the plaintiff consented to accept a reduce amount of $250,000 in punitive damages.

    Both sides appealed.  The Third Appellate District largely affirmed the judgment, agreeing with the trial court that the jury’s award of punitive damages was excessive.  But the court concluded that the maximum permissible amount is $371,000, rather than the $250,000 figure selected by the trial court. 

    The court cited its prior opinion in Bardis v. Oates for the proposition that a four-to-one ratio of punitive damages to compensatory damages is usually the limit in a case in which the compensatory damages are neither exceptionally high nor low, and the defendant’s conduct is neither exceptionally extreme nor trivial.  But the court concluded that the defendant’s conduct in this case registered “high on the reprehensibility meter,” and therefore warranted a ratio of seven to one, rather than the usual four to one. 

  • Court of Appeal reduces Roundup punitive damages from $39.3 million to $10.3 million (Johnson v. Monsanto)

    In 2018, a San Francisco jury awarded $39.3 million in compensatory damages and $250 million in punitive damages to a man who claimed he developed cancer as a result of using Monsanto’s weedkillers Roundup and Ranger Pro.  The trial court reduced the punitive damages to $39.3 million in response to Monsanto’s post-trial motions, resulting in a 1-to-1 ratio between the punitive and compensatory damages.

    The Court of Appeal (First District, Division One), affirmed the judgment in a partially published opinion, but reduced the compensatory damages to $10.3 million and then reduced the punitive damages to $10.3 to preserve the trial court’s 1-to-1 ratio.

    I won’t comment on the court’s analysis, because Horvitz & Levy represents Monsanto in this case.

  • Court of Appeal reverses $750,000 punitive damages award due to the absence of current evidence of the defendant’s finances (Saxton v. Hip Hop Beverage Corp.)

    Here is another installment in the long line of unpublished California opinions reversing a punitive damages award on the grounds that the plaintiff failed to present evidence of the defendant’s financial condition.  This opinion addresses a recurring sub-issue in this area: if the defendant has no current balance sheets or other financial documents, does that excuse the plaintiff from presenting evidence of the defendant’s current finances?  The answer is no.

    The plaintiff sued his former employer for discrimination and harassment.  Shortly before trial, he served the defendant with a notice to produce documents at trial, including the defendant’s financial records.  The defendant objected and the plaintiff filed a motion to compel production of the documents.  The trial court granted the motion and ordered the defendant to produce its tax returns, income statements, and balance sheets. 

    On the first day of trial, the defendant provided the plaintiff with its documents through 2015, but did not produce any documents for 2016 or 2017.  (The trial took place in 2018.)  The company had apparently stopped operating in 2017.  When the plaintiff asked the defendant to produce records for 2016 and 2017, the defendant argued that it had “produced what existed” and was not required to “go create things.”  The trial court agreed, and informed the plaintiff that he still needed to carry his burden of proof on the financial condition issue.

    The case proceeded to trial and the plaintiff won a jury verdict for $72,000 in compensatory damages and $750,000 in punitive damages.  The defendant appealed, arguing that the plaintiff had failed to present evidence of the defendant’s financial condition at the time of trial.

    The Court of Appeal (Second District, Division Four) agreed and reversed the punitive damages award. The court held that the record contained evidence of the defendant’s finances in 2016, but absolutely no evidence of the defendant’s finances in 2018.  The record showed that the defendant ceased operations in 2017, and there was no evidence that it maintained the same assets or equity in 2017 or 2018 that it had in 2016. 

    The plaintiff argued that the defendant should be estopped from complaining about the lack of  evidence of its current finances because the defendant failed to produce financial records for 2017 or 2018.  The Court of Appeal rejected that argument, citing the trial court’s finding that the defendant produced all the information in its possession, and was not required to create non-existent documents in order to comply with the court’s discovery order.  The court also rejected the plaintiff’s request to consider new evidence that the plaintiff obtained while the appeal was pending.  The plaintiff bore the burden of presenting financial condition evidence at trial, and that failure could not be cured by supplementing the record after the fact.

  • California Court of Appeal overturns three large punitive damages awards (Curry v. Academy Pointe, Colucci v. T-Mobile, and Tilkey v. Allstate)

    The pandemic-related shutdown has brought civil litigation in California to a screeching halt in the trial courts.  But the California Court of Appeal has continued processing cases and issuing opinions, and has overturned three large punitive damages awards since the shutdown began.

    1.  In Curry v. Academy Pointe, Inc., a landlord-tenant dispute over disability accommodations, a jury awarded $750,000 in compensatory damages and $4.5 million in punitive damages.  The landlord appealed and the Court of Appeal (Second Appellate District, Division One) reversed the punitive damages award in an unpublished opinion.

    The court found the punitive damages award was excessive because it bore no reasonable relation to  the low reprehensibility of defendants’ conduct, the severity of the plaintiff’s harm (which was completely compensated by the substantial compensatory damages award), and the possible civil penalties authorized by the Legislature for similar conduct. The court therefore reduced the punitive damages award to $750,000, resulting in a 1 to 1 ratio between punitive and compensatory damages.

    [Disclosure: Horvitz & Levy represented the landlord on appeal in Curry.]

    2.  In Colucci v. T-Mobile, a workplace retaliation case, a jury awarded $1 million in compensatory damages and $4 million in punitive damages.  T-Mobile appealed and the Court of Appeal (Fourth Appellate District, Division One), in a published opinion, ordered a reduction of the punitive damages award to $1.5 million.

    The court concluded that the reprehensibility of T-Mobile’s retaliatory conduct was “in the low or moderate range of wrongdoing that can support an award of punitive damages.”  And the court acknowledged that the California Supreme Court in Roby v. McKesson set a maximum ratio of 1 to 1 in another case involving a significant compensatory damages award and a low level of reprehensibility.  But the court did not explain why it chose a 1.5 to 1 ratio instead of following Roby‘s guidance and setting the maximum at 1 to 1.

    3. In Tilkey v. Allstate, a jury awarded $2.7 million in compensatory damages and $16 million in punitive damages to a plaintiff asserting a claim of “compelled self-published defamation.”  Allstate appealed, arguing that compelled self-published defamation is not a viable tort theory and, even if it were, it could not support an award of punitive damages.  The same court that issued the Colucci opinion, the Fourth Appellate District, Division One, issued a published opinion rejecting those arguments, but reversing the punitive damages award as excessive.  The court noted that the ratio of punitive damages to compensatory damages was more than 9 to 1, comparing the punitive damages only to the portion of the compensatory damages award attributable to defamation ($1.7 million).  Rather than reducing the punitive damages award to a specific number, the Court of Appeal sent the case back to the trial court to determine the constitutional maximum.

      

  • Court of Appeal reduces $13.8 million punitive damages award to $5.7 million in discrimination case (Moland v. McWane)

    In this employment case involving claims of racial discrimination and wrongful termination, a jury awarded $13.8 million in punitive damages and $2.87 million in compensatory damages, a ratio of 4.8 to 1.  On appeal, the defendant argued that the punitive damages should be vacated entirely or at least reduced as excessive.

    The California Court of Appeal (Second District, Division Seven) held in an unpublished opinion that an award of punitive damages was justified because the evidence, viewed in the light most favorable to the plaintiff, could support an inference that the defendant acted with extreme indifference to the plaintiff’s right to be free of racial discrimination in the workplace.

    Turning to the question of excessiveness, the court analyzed the three BMW/State Farm guideposts: (1) the reprehensibility of the conduct, (2) the ratio of punitive to compensatory damages, and (3) the difference between the punitive damages award and civil penalties authorized by the Legislature for similar misconduct.

    1.  The court found several indicators of a higher level of reprehensibility: the defendant’s acts affected the plaintiff’s emotional and mental health (i.e., did not inflict purely economic harm), the defendant should have known the plaintiff would suffer emotional harm, and the plaintiff was financially vulnerable.  But the court rejected the plaintiff’s argument that the level of reprehensibility was enhanced by the fact that the defendant made multiple decisions that harmed the plaintiff.  The court explained that discrimination against the plaintiff was a single instance of wrongdoing, and in the absence of further instances against the plaintiff or others, the defendant could not be treated as a repeat offender.

    2.  When analyzing the ratio of punitive damages to compensatory damages, the court rejected the defendant’s argument that a 1 to 1 ratio should be the constitutional maximum in light of the substantial noneconomic damages (about $2.5 million of the total compensatory damages award).  The court held that the ratio can exceed 1 to 1 when the noneconomic damages and the reprehensibility of the defendant’s conduct are both high.  Relying heavily on a Second Circuit decision, the court concluded that a limit of 2 to 1 is the constitutional maximum in a case of this nature.

    3.  Finally, the court compared the punitive damages award to a now-repealed $150,000 cap on administrative fines for claims before the California Fair Employment and Housing Commission.  The court found that the cap weighed in favor of an award less that the jury’s verdict, but did not mandate an award below a 2 to 1 ratio.

    Accordingly, the court ordered the trial court to modify the judgment to reduce the punitive damages award to $5.8 million, roughly double the amount of compensatory damages.  Appropriately, the court did not give the plaintiff the option of rejecting the lower amount in favor of a new trial.

  • Court of Appeal reverses $2 million punitive damages award due to lack of financial condition evidence (Chen v. Bam Brokerage)

    In this unpublished opinion, the California Court of Appeal (Second District, Division Seven) once again reversed a punitive damages award because the plaintiff failed to present evidence of the defendant’s financial condition.

    The plaintiff presented evidence that the defendant owned four pieces of real property, but presented no evidence of the defendant’s liabilities, including the encumbrances on those properties.  That was insufficient to support a punitive damages award, under the well-established rule that “evidence of liabilities should accompany evidence of assets.”  Accordingly, the court directed the trial court to enter judgment for the defendant on the issue of punitive damages.

  • Court of Appeal vacates punitive damages in default judgment due to lack of evidence of defendant’s finances (Dong v. Ryu)

    This case is a reminder that California law requires plaintiffs to present evidence of the defendant’s financial condition as a prerequisite to obtaining punitive damages, even in default judgments.

    In this case, the plaintiffs argued on appeal that their default judgment should be affirmed, including $57,000 in punitive damages, even though they presented no evidence of the defendant’s finances.  They argued that the defendant’s failure to respond to their complaint deprived them of the opportunity to obtain information about the defendant’s finances. 

    The Court of Appeal (Second District, Division Two) rejected that argument in an unpublished opinion.  The court noted that plaintiffs failed to show that they even tried to meet their burden: “our review of the record reveals no showing of what efforts, if any, were undertaken by plaintiffs to obtain information regarding defendant’s financial condition.”  The Court of Appeal reversed the punitive damages portion of the judgment and directed the trial court to enter judgment for the defendant on that issue.

  • Anti-whistleblower retaliation act for school employees does not authorize punitive damages against school districts (Visalia Unified School District v. Superior Court)

    This published opinion addresses an issue of first impression: whether the Reporting by School Employees of Improper Activities Act (the Act) authorizes recovery of punitive damages against school districts.

    The plaintiff, a former employee of the Visalia Unified School District, sued the District for retaliation in violation of the Act, seeking compensatory and punitive damages.  The Act authorizes recovery of punitive damages against a “person” who intentionally and maliciously engages in an act of retaliation.  For purposes of the Act, a “person” includes any state or local government.

    The District moved to strike the punitive damages claim under Government Code section 818, which prohibits punitive damages against public entities.  The superior court denied the motion, finding that the Act impliedly supersedes section 818 because the Legislature adopted the Act in 2000, long after it adopted section 818 (in 1983). 

    The Fifth Appellate District granted the District’s petition for writ relief and reversed the trial court’s ruling.  The Court of Appeal concluded that the trial court had overlooked key language in section 818, which bars punitive damages against public entities “notwithstanding any other provision of law.”  The Court of Appeal also held that section 818 is a fundamental part of California public entity law, supported by strong public policy.  The court concluded that, if the Legislature had intended to overturn such an important rule, it would have done so expressly.