California Punitives by Horvitz & Levy

  • Court of Appeal reverses ruling in which trial court blamed himself for plaintiffs’ failure to introduce financial condition evidence (Tran v. Lam)

    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  This unpublished opinion falls into that category, but with an unusual wrinkle.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.

  • Court of Appeal reverses ruling in which trial court blamed himself for plaintiffs’ failure to introduce financial condition evidence (Tran v. Lam)

    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.

  • Court of Appeal affirms $1M in punitive damages and furthers split of authority on clear-and-convincing standard of proof (Mazik v. Geico)

    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).

  • Court of Appeal affirms $1M in punitive damages and furthers split of authority on clear-and-convincing standard of proof (Mazik v. Geico)

    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).

  • Court of Appeal reduces compensatory damages by $1.7M but affirms punitive damages (Cardoza v. Reed)

    This unpublished opinion addresses an unsettled question of California punitive damages law that we have written about a few times.  The question is what a reviewing court should do with a punitive damages award when the court significantly reduces the compensatory damages on appeal.  Should the reviewing court automatically order a retrial on the issue of punitive damages, so that a jury can determine what punishment is appropriate for the actual harm caused?

    In our view, the answer to that question should be yes.  Jurors are routinely instructed to award an amount of punitive damages that bears a reasonable relationship to the plaintiff’s actual harm.  And courts routinely presume that jurors follow their instructions.  So if a jury imposes punitive damages based on the understanding that the plaintiff suffered $5 million in compensatory damages, but that understanding turns out to be false, and the Court of Appeal determines that the plaintiff really suffered only $2 million in compensatory damages, then the defendant is entitled to have a jury decide what punishment is appropriate for causing that harm. 

    California courts used to follow that approach, but it recent years California appellate courts are increasingly reluctant to order a new trial under these circumstances.  Instead, they will order a new trial only if they determine that the jury’s punitive damages award is unconstitutionally excessive when compared to the now-reduced compensatory damages award. 

    That’s the approach that the Court of Appeal (First District, Division Four) took in this case.  It shaved $1.7 million off the jury’s compensatory damages award, but did not order a new trial on punitive damages.  Instead, the Court of Appeal affirmed the punitive damages award after concluding that the ratio between the punitive damages and the compensatory damages (as reduced) did not violate due process.  In the process, the Court of Appeal deprived the defendant of its right to have a jury decide the appropriate amount of punishment for the harm actually caused. 

    Perhaps someday the California Supreme Court will sort this out.  Until then, we will probably continued to see more unpublished opinions like this one.

  • Court of Appeal reduces compensatory damages by $1.7M but affirms punitive damages (Cardoza v. Reed)

    This unpublished opinion addresses an unsettled question of California punitive damages law that we have written about a few times.  The question is what a reviewing court should do with a punitive damages award when the court significantly reduces the compensatory damages on appeal.  Should the reviewing court automatically order a retrial on the issue of punitive damages, so that a jury can determine what punishment is appropriate for the actual harm caused?

    In our view, the answer to that question should be yes.  Jurors are routinely instructed to award an amount of punitive damages that bears a reasonable relationship to the plaintiff’s actual harm.  And courts routinely presume that jurors follow their instructions.  So if a jury imposes punitive damages based on the understanding that the plaintiff suffered $5 million in compensatory damages, but that understanding turns out to be false, and the Court of Appeal determines that the plaintiff really suffered only $2 million in compensatory damages, then the defendant is entitled to have a jury decide what punishment is appropriate for causing that harm.

    California courts used to follow that approach, but it recent years California appellate courts are increasingly reluctant to order a new trial under these circumstances.  Instead, they will order a new trial only if they determine that the jury’s punitive damages award is unconstitutionally excessive when compared to the now-reduced compensatory damages award.

    That’s the approach that the Court of Appeal (First District, Division Four) took in this case.  It shaved $1.7 million off the jury’s compensatory damages award, but did not order a new trial on punitive damages.  Instead, the Court of Appeal affirmed the punitive damages award after concluding that the ratio between the punitive damages and the compensatory damages (as reduced) did not violate due process.  In the process, the Court of Appeal deprived the defendant of its right to have a jury decide the appropriate amount of punishment for the harm actually caused.

    Perhaps someday the California Supreme Court will sort this out.  Until then, we will probably continued to see more unpublished opinions like this one.

  • Court of Appeal publishes opinion that vacated punitive damages due to lack of financial evidence (F&M Trust v. Vanetik)

    Back in February we reported on an unpublished decision that vacated $3.25 million in punitive damages because the plaintiff failed to present meaningful evidence of the defendants’ financial condition.

    The Court of Appeal has now ordered that discussion published in the official reports.  See the order at the bottom of the court’s online docket. Other parts of the opinion remain unpublished.

  • Court of Appeal publishes opinion that vacated punitive damages due to lack of financial evidence (F&M Trust v. Vanetik)

    Back in February we reported on an unpublished decision that vacated $3.25 million in punitive damages because the plaintiff failed to present meaningful evidence of the defendants’ financial condition.

    The Court of Appeal has now ordered that discussion published in the official reports.  See the order at the bottom of the court’s online docket. Other parts of the opinion remain unpublished.

  • Court of Appeal affirms punitive damages award, rejects defendant’s complaint about alternate juror participating in punitive damages phase (Nolasco v. Scantibodies)

    This unpublished opinion addresses an issue we haven’t seen in a while.

    A jury awarded a total of $932,000 in compensatory damages and $750,000 in punitive damages to two plaintiffs who claimed their employer retailed against them after they disclosed information to the FDA about the company’s practices.  (The defendant produces medical diagnostic tests and components.)

    The trial was bifurcated under Civil Code section 3295: in phase one the jury decided the issue of liability and whether the defendant acted with malice, oppression, or fraud; in phase two the jury decided the amount of punitive damages.

    On appeal, the defendant argued it was entitled to a new trial on punitive damages because the trial court seated an alternate juror during the second phase of trial.  The defendant argued that the use of the alternate juror violated section 3295’s requirement that both phases of trial be decided by the “same trier of fact.”

    The Court of Appeal (Fourth District, Division One) rejected that argument, citing an earlier decision in Rivera v. Sassoon.  Rivera held that the use of an alternative juror in phase two does not violate the “same trier of fact” rule because alternate jurors hear the same evidence and are subject to the same admonitions as the regular jurors.

    That reasoning is a little unsatisfying, because whatever instructions and evidence the alternate jurors may hear, they do not actually get to vote in phase one.  So when an alternative juror is seated for phase two, the two phases of trial are not literally being decided by the same trier of fact.  No other cases have followed Rivera‘s reasoning on this issue, but as the Court of Appeal pointed out, no cases have challenged that reasoning either.  So Rivera remains good law, at least for now.

  • Court of Appeal affirms punitive damages award, rejects defendant’s complaint about alternate juror participating in punitive damages phase (Nolasco v. Scantibodies)

    This unpublished opinion addresses an issue we haven’t seen in a while.

    A jury awarded a total of $932,000 in compensatory damages and $750,000 in punitive damages to two plaintiffs who claimed their employer retailed against them after they disclosed information to the FDA about the company’s practices.  (The defendant produces medical diagnostic tests and components.)

    The trial was bifurcated under Civil Code section 3295: in phase one the jury decided the issue of liability and whether the defendant acted with malice, oppression, or fraud; in phase two the jury decided the amount of punitive damages.

    On appeal, the defendant argued it was entitled to a new trial on punitive damages because the trial court seated an alternate juror during the second phase of trial.  The defendant argued that the use of the alternate juror violated section 3295’s requirement that both phases of trial be decided by the “same trier of fact.”

    The Court of Appeal (Fourth District, Division One) rejected that argument, citing an earlier decision in Rivera v. Sassoon.  Rivera held that the use of an alternative juror in phase two does not violate the “same trier of fact” rule because alternate jurors hear the same evidence and are subject to the same admonitions as the regular jurors.

    That reasoning is a little unsatisfying, because whatever instructions and evidence the alternate jurors may hear, they do not actually get to vote in phase one.  So when an alternative juror is seated for phase two, the two phases of trial are not literally being decided by the same trier of fact.  No other cases have followed Rivera‘s reasoning on this issue, but as the Court of Appeal pointed out, no cases have challenged that reasoning either.  So Rivera remains good law, at least for now.