This published opinion from the Sixth Appellate District holds that Labor Code section 1102.5, which prohibits retaliation against whistleblowers, impliedly authorizes punitive damages as a remedy.
Disclosure: Horvitz & Levy represents the defendant in this action. Litigation is ongoing, so we will not comment on the court’s analysis.
This published opinion provides an overview of the proper remedies that a trial court can use to correct an an excessive award of punitive damages. The opinion doesn’t contain anything new or surprising, but it provides a good overview of existing law:
1. If a trial court finds that a punitive damages award is constitutionally excessive (i.e., the award exceeds the maximum amount permitted by due process), the trial court should grant judgment notwithstanding the verdict and reduce the award to the constitutional maximum.
2. If a trial court finds that a punitive damages award is excessive under state law (i.e., the award appears to be the product of passion and prejudice, or is disproportionate to the defendant’s financial condition), the trial court should grant a new trial. The new trial can be conditional, subject to the plaintiff’s acceptance of a remittitur of the award to a lesser amount.
The trial court in this case used the wrong procedure. The court found the award was excessive under state law, but instead of granting a new trial, the court granted judgment notwithstanding the verdict. The Court of Appeal (First District, Division Two) agreed that the award was excessive, but faulted the trial court for employing the wrong remedy. The Court of Appeal nevertheless affirmed the judgment, because the plaintiff’s counsel stipulated at oral argument that he would prefer to accept the reduced amount rather than undergoing a new trial. Thus, if the trial court had ordered a conditional new trial subject to a remittitur, the plaintiff would have accepted the remittitur. So in the end, the trial court’s procedural error was harmless.
In this unpublished opinion, the California Court of Appeal (Fourth District, Division One) affirms a punitive damages award that is roughly equal to the amount of compensatory damages. In theory, even a one-to-one ratio can be constitutionally excessive, if for example the reprehensibility of the defendant’s conduct is extremely low (which is what the defendant argued here). In practice, however, we rarely ever see a California appellate court reducing an award as excessive when the ratio is already one to one.
Often you can tell how a case is going to turn out when you read the summary of the facts. That’s certainly true in this case involving claims against a landlord for negligent failure to provide habitable premises. Here’s how the court describes the condition of the defendant’s apartment building in this published opinion:
Only two units in the [12-unit] Building had kitchens, and there were only two community rest rooms. There was evidence that human waste had been thrown out of the Building and had collected on the back. There were openings that permitted rodents and vermin to enter. Steps to the Building were infected with dry rot and were close to collapsing. The Building contained illegal electrical work. An inspection by Plaintiffs’ expert revealed dead and live cockroaches throughout the Building and dirty bathrooms.
As discussed further below, each of the Plaintiffs testified about his or her experiences in the building, which included cockroaches, bed bugs and other vermin; mold; and filthy conditions in common areas. Tenants were forced to wash their dishes outside the Building. There were several months when the Building had no power or water and residents had to purchase buckets of water from Myllyla’s daughter. One tenant had a cockroach removed from her ear.
After reading that summary, you’re probably not surprised to learn that the court affirmed the award of punitive damages against the landlord (the jury awarded $95,000 in punitive damages to each of the nine plaintiffs).
The defendant’s main argument on appeal was that the plaintiff failed to present any evidence of the defendant’s financial condition. As our readers know, that argument often succeeds because many California plaintiffs apparently don’t realize it is their burden to present such evidence. In this case, however, the plaintiffs attempted to obtain financial information from the defendant, who stonewalled their efforts.
The plaintiffs served two notices on the defendant pursuant to Code of Civil Procedure section 1987, which provides a procedure to compel a party to attend trial and produce documents at trial. Notices under section 1987 have the same effect as service of a subpoena. The notices in this case asked the defendant to appear at trial to testify about his financial condition, and to produce documents relating to his financial condition.
The defendant could have objected to the notices because they did not provide sufficient time to respond. If the defendant had objected, he would have been excused from complying with the notices unless the plaintiffs moved to compel his compliance. But instead of objecting, the defendant simply ignored the notices, refused to testify at trial, and refused to produce any financial documents. As a result, the Court of Appeal (Second District, Division Two) holds that the defendant forfeited the right to complain about the lack of evidence of his finances.
Two years ago a Los Angeles jury awarded $417 million, including $347 million in punitive damages, to a woman who claimed she developed ovarian cancer from talc in Johnson & Johnson’s Baby Powder. The trial court tossed out the punitive damages award, finding that the plaintiffs presented no clear and convincing evidence of malice, fraud, or oppression.
A few days ago, the Court of Appeal (Second District, Division Three) issued this published opinion affirming the trial court’s ruling on punitive damages. It’s an important decision because it deals with a factual scenario that arises frequently in California punitive damages litigation. The basic facts go something like this:
A manufacturer sells a product at a time when someone has posited that an ingredient in the product may increase the risk of cancer, but the issue is a question of scientific debate. The plaintiff uses the product and develops cancer, and seeks punitive damages from the manufacturer on theory that it consciously disregarded a possible risk to human health.
The Court of Appeal explains that such evidence cannot support punitive damages, which must be based on a showing that the defendant was aware of probable dangerous consequences of its conduct. For punitive damages purposes, it is not enough that someone somewhere identified a possible risk from the defendant’s product. If the scientific community had not reached agreement on whether there was an actual risk, then the defendant did not act with malice by selling the product.
So in this case, where the connection between talc and ovarian cancer remains under scientific investigation, the Court of Appeal said the jury could have reasonably concluded the defendant was negligent, but no reasonable jury could find by clear and convincing evidence that the defendant committed the sort of “despicable” conduct that warrants punitive damages.
Significantly, the court explained that scientific studies issued after the plaintiff’s injury could not be used to prove the defendant’s state of mind before the product was sold. “Scientific evidence developed post-injury did not create a reasonable inference that [the defendant] was acting with malice, pre-injury, in failing to warn of probable dangerous consequences of the product.”
While it may seem obvious that studies released in 2013 cannot shed light on a defendant’s state of mind in the 1960s, California case law on this issue has been somewhat unclear. This decision may help dispel some of that confusion.
Two years ago a Los Angeles jury awarded $417 million, including $347 million in punitive damages, to a woman who claimed she developed ovarian cancer from talc in Johnson & Johnson’s Baby Powder. The trial court tossed out the punitive damages award, finding that the plaintiffs presented no clear and convincing evidence of malice, fraud, or oppression.
A few days ago, the Court of Appeal (Second District, Division Three) issued this published opinion affirming the trial court’s ruling on punitive damages. It’s an important decision because it deals with a factual scenario that arises frequently in California punitive damages litigation. The basic facts go something like this:
A manufacturer sells a product at a time when someone has posited that an ingredient in the product may increase the risk of cancer, but the issue is a question of scientific debate. The plaintiff uses the product and develops cancer, and seeks punitive damages from the manufacturer on theory that it consciously disregarded a possible risk to human health.
The Court of Appeal explains that such evidence cannot support punitive damages, which must be based on a showing that the defendant was aware of probable dangerous consequences of its conduct. For punitive damages purposes, it is not enough that someone somewhere identified a possible risk from the defendant’s product. If the scientific community had not reached agreement on whether there was an actual risk, then the defendant did not act with malice by selling the product.
So in this case, where the connection between talc and ovarian cancer remains under scientific investigation, the Court of Appeal said the jury could have reasonably concluded the defendant was negligent, but no reasonable jury could find by clear and convincing evidence that the defendant committed the sort of “despicable” conduct that warrants punitive damages.
Significantly, the court explained that scientific studies issued after the plaintiff’s injury could not be used to prove the defendant’s state of mind before the product was sold. “Scientific evidence developed post-injury did not create a reasonable inference that [the defendant] was acting with malice, pre-injury, in failing to warn of probable dangerous consequences of the product.”
While it may seem obvious that studies released in 2013 cannot shed light on a defendant’s state of mind in the 1960s, California case law on this issue has been somewhat unclear. This decision may help dispel some of that confusion.
The California Court of Appeal commonly reverses punitive damages awards when a plaintiff fails to present meaningful evidence of the defendant’s ability to pay. This unpublished opinion falls into that category, but with an unusual wrinkle.
During trial, plaintiffs’ counsel made some effort tried to introduce evidence of the individual defendants’ finances, by asking them about their historic earnings. The trial court sustained relevance objections to those questions. Plaintiffs’ counsel thereafter made no further efforts to introduce evidence of the defendants’ finances.
After the jury ruled for the plaintiffs and awarded punitive damages, the defendants moved to vacate the punitive damage award on the ground that the plaintiffs had failed to introduce any evidence of the defendants’ finances. The trial court agreed the plaintiffs had presented no such evidence, but denied the defense motion because he blamed himself for the lack of evidence.
The judge explained that he had sustained the defendants’ objections on two grounds: (1) the defendants’ earnings from fifteen years earlier were too remote in time to be relevant, and (2) the court mistakenly thought that the trial had been bifurcated so that financial condition would be presented only in the second phase of trial.
The court was correct on the first ground. For punitive damages purposes, only the defendants’ finances at the time of trial are relevant. But the court was wrong on the second ground. The defendants had not asked for bifurcation.
The trial court concluded that, because of his own confusion regarding bifurcation, the plaintiffs had not received a full and fair opportunity to present their case regarding the defendants’ financial condition. So the court granted the plaintiffs a new trial on the issue of punitive damages
and denied the defendants’ motion for judgment notwithstanding the verdict.
The defendants appealed and the Fourth Appellate District, Division Three, reversed. It found that the trial court did nothing to prevent the plaintiffs from meeting their burden of presenting financial condition evidence. The court correctly sustained objections to questions that did not seek current financial condition, and the matter never came up again. Although the court may have believed that the trial was bifurcated, and based on that mistake the court would have sustained objections to other questions about financial condition, the court never explained that to plaintiffs’ counsel, who simply failed to ask any further questions on the issue.
So in the end, the Court of Appeal concluded that the lack of evidence was the plaintiffs’ own fault. The court reversed the order granting a new trial and directed the trial court to enter a new judgment in favor of the defendants on the issue of punitive damages.
The California Court of Appeal commonly reverses punitive damages awards when a plaintiff fails to present meaningful evidence of the defendant’s ability to pay. This unpublished opinion falls into that category, but with an unusual wrinkle.
During trial, plaintiffs’ counsel made some effort tried to introduce evidence of the individual defendants’ finances, by asking them about their historic earnings. The trial court sustained relevance objections to those questions. Plaintiffs’ counsel thereafter made no further efforts to introduce evidence of the defendants’ finances.
After the jury ruled for the plaintiffs and awarded punitive damages, the defendants moved to vacate the punitive damage award on the ground that the plaintiffs had failed to introduce any evidence of the defendants’ finances. The trial court agreed the plaintiffs had presented no such evidence, but denied the defense motion because he blamed himself for the lack of evidence.
The judge explained that he had sustained the defendants’ objections on two grounds: (1) the defendants’ earnings from fifteen years earlier were too remote in time to be relevant, and (2) the court mistakenly thought that the trial had been bifurcated so that financial condition would be presented only in the second phase of trial.
The court was correct on the first ground. For punitive damages purposes, only the defendants’ finances at the time of trial are relevant. But the court was wrong on the second ground. The defendants had not asked for bifurcation.
The trial court concluded that, because of his own confusion regarding bifurcation, the plaintiffs had not received a full and fair opportunity to present their case regarding the defendants’ financial condition. So the court granted the plaintiffs a new trial on the issue of punitive damages
and denied the defendants’ motion for judgment notwithstanding the verdict.
The defendants appealed and the Fourth Appellate District, Division Three, reversed. It found that the trial court did nothing to prevent the plaintiffs from meeting their burden of presenting financial condition evidence. The court correctly sustained objections to questions that did not seek current financial condition, and the matter never came up again. Although the court may have believed that the trial was bifurcated, and based on that mistake the court would have sustained objections to other questions about financial condition, the court never explained that to plaintiffs’ counsel, who simply failed to ask any further questions on the issue.
So in the end, the Court of Appeal concluded that the lack of evidence was the plaintiffs’ own fault. The court reversed the order granting a new trial and directed the trial court to enter a new judgment in favor of the defendants on the issue of punitive damages.
This published opinion is a likely candidate for California Supreme Court review.
This is an insurance bad faith case in which a jury awarded compensatory damages of $313,508 and punitive damages of $4 million against GEICO for unreasonably failing to pay its policyholder the policy limits of $50,000 under an underinsured motorist policy. The trial court reduced the punitive damages to $1 million. GEICO appealed only the punitive damages award.
GEICO argued that evidence was insufficient to to show that any managing agent of GEICO participated in or authorized an act of malice, fraud, or oppression, as required by Civil Code section 3294.
The Court of Appeal (Second District, Division Two) began its analysis by considering whether the clear-and-convincing standard of proof affects appellate review of the sufficiency of the evidence. As we have noted, California’s appellate courts have split on this issue and the California Supreme Court recently granted review to resolve the split.
The Court of Appeal here decided to disregard the clear-and-convincing standard for purposes of appellate review. In so doing, the court cited a 1973 Supreme Court opinion (Crail v. Blakely), but did not discuss some of the more recent cases or acknowledge that the issue is currently pending before the Supreme Court.
The court’s decision on the standard of review issue appears to be pivotal to its analysis of the merits. The court concluded that the plaintiff’s evidence was sufficient, based in large part on inferences that the jury might have drawn from equivocal evidence. For example, the court discussed evidence that claims adjusters at GEICO, who were not managing agents, cherry-picked evidence from the plaintiff’s medical files to justify their decision not to pay his claim. They prepared evaluations that minimized the plaintiff’s injuries, while ignoring evidence to the contrary. There was no direct evidence, however, that GEICO’s managing agent (a regional liability administrator) knew about the information that the adjusters omitted from their reports. The Court of Appeal concluded, however, that the jury could have inferred the managing agent’s knowledge of that information based on evidence that he had “more than a passing familiarity” with the claim.
Had the Court of Appeal taken the clear-and-convincing evidence requirement into account, it might have reached a different conclusion. Cases applying that standard have held that equivocal evidence is not sufficient to qualify as clear and convincing—when the evidence is equally consistent with ordinary negligence as with malice, the plaintiff has failed to show malice by clear and convincing evidence.
There’s a good chance that if GEICO petitions the California Supreme Court for review, the court will grant review and decide it along with the currently pending case on this issue (or hold this case pending the resolution of the other case).
This published opinion is a likely candidate for California Supreme Court review.
This is an insurance bad faith case in which a jury awarded compensatory damages of $313,508 and punitive damages of $4 million against GEICO for unreasonably failing to pay its policyholder the policy limits of $50,000 under an underinsured motorist policy. The trial court reduced the punitive damages to $1 million. GEICO appealed only the punitive damages award.
GEICO argued that evidence was insufficient to to show that any managing agent of GEICO participated in or authorized an act of malice, fraud, or oppression, as required by Civil Code section 3294.
The Court of Appeal (Second District, Division Two) began its analysis by considering whether the clear-and-convincing standard of proof affects appellate review of the sufficiency of the evidence. As we have noted, California’s appellate courts have split on this issue and the California Supreme Court recently granted review to resolve the split.
The Court of Appeal here decided to disregard the clear-and-convincing standard for purposes of appellate review. In so doing, the court cited a 1973 Supreme Court opinion (Crail v. Blakely), but did not discuss some of the more recent cases or acknowledge that the issue is currently pending before the Supreme Court.
The court’s decision on the standard of review issue appears to be pivotal to its analysis of the merits. The court concluded that the plaintiff’s evidence was sufficient, based in large part on inferences that the jury might have drawn from equivocal evidence. For example, the court discussed evidence that claims adjusters at GEICO, who were not managing agents, cherry-picked evidence from the plaintiff’s medical files to justify their decision not to pay his claim. They prepared evaluations that minimized the plaintiff’s injuries, while ignoring evidence to the contrary. There was no direct evidence, however, that GEICO’s managing agent (a regional liability administrator) knew about the information that the adjusters omitted from their reports. The Court of Appeal concluded, however, that the jury could have inferred the managing agent’s knowledge of that information based on evidence that he had “more than a passing familiarity” with the claim.
Had the Court of Appeal taken the clear-and-convincing evidence requirement into account, it might have reached a different conclusion. Cases applying that standard have held that equivocal evidence is not sufficient to qualify as clear and convincing—when the evidence is equally consistent with ordinary negligence as with malice, the plaintiff has failed to show malice by clear and convincing evidence.
There’s a good chance that if GEICO petitions the California Supreme Court for review, the court will grant review and decide it along with the currently pending case on this issue (or hold this case pending the resolution of the other case).