The case involves an odd set of facts.  The plaintiff claimed that his landlords invaded his privacy by posting a notice in his apartment complex informing all the tenants that the police had placed him under a psychiatric hold.  A jury awarded him $200,000 in compensatory damages and $650,000 in punitive damages.

The defendants moved for judgment notwithstanding the verdict (JNOV), arguing that the evidence did not support the jury’s finding that they acted with malice. The trial court agreed, finding that “the weight of the evidence did not support a finding of malice by clear and convincing evidence.”

The Court of Appeal (Second Appellate District, Division Three) reversed in an unpublished opinion, finding that the trial court applied the wrong standard when reviewing the evidence.  When a trial court rules on a JNOV motion, the court is not permitted to re-weigh the evidence.  The court must draw every reasonable inference in favor of the party who won at trial, and can grant JNOV only if there is no substantial evidence to support the verdict.

Here, because the trial court’s JNOV order referred to the “weight” of the evidence, the Court of Appeal concluded that the trial court must have impermissibly re-weighed the evidence.  That alone might not have been enough to justify reversal, if there were no substantial evidence of malice.  But the Court of Appeal, reviewing the entire record, concluded that a jury could infer that the defendants acted with malice, and that they posted the notice about the plaintiff with intent to force him out so  they could rent his unit at a higher price.  Accordingly, the court reversed the trial court’s JNOV ruling and reinstated the jury’s award of punitive damages.

We haven’t had many occasions to blog about the intersection between punitive damages and California’s anti-SLAPP statute (Code of Civil Procedure section 425.16).  That statute authorizes a special motion to strike a complaint that arises form activity exercising the rights of free speech.

In this unpublished opinion, the Court of Appeal (First Appellate District, Division Five) holds that an anti-SLAPP motion cannot be used to strike a punitive damages allegation.  The court explains that anti-SLAPP motions must be directed at an entire cause of action, not a prayer for a specific type of relief.

Disclosure: Horvitz & Levy LLP represents Washington Hospital in this case.

The California Court of Appeal issued a trio of unpublished opinions on punitive damages last month, with mixed results for plaintiffs and defendants.  Here’s a quick recap:

1.  In Haworth v. Adams the Second Appellate District, Division Two, affirmed a punitive damages award of $13.3 million in a case involving claims of fraud and elder abuse.

The opinion is unclear about what punitive damages issues the defendant raised on appeal.  At one point the opinion states that the defendant argued the punitive damages award was unsupported by the evidence and motivated by passion and prejudice. Those are classic state-law arguments governed by a well developed body of California cases.  But the opinion does not discuss any of those cases, and instead launches into a discussion of federal constitutional standards for excessiveness, without ever actually addressing the sufficiency of the evidence or the passion and prejudice issue.

Aside from that confusion about what issues the defendant raised, the opinion’s excessiveness analysis is itself problematic.  According to the opinion, the California Supreme Court has held that a ratio of “9 or 10 to 1 is the appropriate benchmark for determining whether a reasonable relationship exists between an exemplary and compensatory damages award.” The opinion then concludes that the award in this case is not excessive because the ratio of 10 to 1 falls within the Supreme Court’s “benchmark.”

That analysis suggests that any ratio of 10 to 1 or less is necessarily constitutional. But the California Supreme Court has expressly stated otherwise: “multipliers less than nine or 10 are not, however, presumptively valid.”  (See Simon v. San Paolo U.S. Holding Co..)  And both the U.S. Supreme Court and the California Supreme Court have indicated that a ratio of 1 to 1 may be the maximum in cases involving substantial compensatory damages awards.  (See Roby v. McKesson.) The $1.3 million compensatory damages award in this case certainly qualifies as substantial, but the Court of Appeal did not address whether the size of that award required a smaller ratio.  Perhaps the defendant did not raise those issues (if the defendant even raised a constitutional excessivness argument at all).

2.  In Saller v. Crown Cork & Seal the Second Appellate District, Division One, reversed a $3.6 million punitive damages award because the plaintiff failed to present evidence of the defendant’s financial condition.  Horvitz & Levy represented the defendant in that case so I won’t provide any commentary about it.

3.  In Frederick v. Pacwest Security Services the Second Appellate District, Division Seven, affirmed a $63,000 punitive damages award, rejecting the defendant’s argument that the plaintiff failed to present sufficient evidence of the defendant’s financial condition.  The court observed that the record contained evidence of the defendant’s gross receipts, net income, loan amounts, and line of credit. The court found that such evidence was enough to satisfy the plaintiff’s burden of proving the defendant’s ability to pay the award.  Moreover, the court found the award was not excessive in relation to the defendant’s finances, because although the award was equal to the defendant’s entire annual net income, it represented less than one percent of the company’s annual gross receipts.

A few days ago the California Court of Appeal published what may be the final chapter in the lengthy saga involving a $19 million punitive damages award in an insurance bad faith case.

We have discussed this case at length in prior posts (see the links below).  I don’t want to rehash all of that, but here’s a brief recap:

• A jury awarded $19 million in punitive damages and $35,000 in compensatory damages against an insurer.  After the verdict, the trial court tacked on an additional $12,500 in damages to compensate the insured for the legal fees he incurred to obtain his wrongfully withheld policy benefits (Brandt fees).
• The trial court decided the punitive damages were excessive and ordered a new trial unless the plaintiff accepted a reduction of the punitive damages to $350,000, ten times the compensatory damages awarded by the jury.
• The Court of Appeal (Second Appellate District, Division Three) affirmed.  In the process, it said the trial court properly excluded the $12,500 in Brandt fees from the ratio calculations.  The Court of Appeal reasoned that punitive damages award could not be based on a multiplier of the Brandt fees because the jury did not know about the Brandt fees when it made the initial punitive damages award.
• The Supreme Court disagreed, and held that the Brandt fees should have been included as part of the compensatory damages for ratio purposes.  Instead of modifying the judgment itself, the Supreme Court sent the case back to the Court of Appeal for further proceedings.

That brings us to this week.  The Court of Appeal’s new published opinion is nearly identical to its prior decision.  The court simply deleted the prior discussion of the Brandt fee issue, and inserted a summary of the Supreme Court’s decision.  The court then added the Brandt fees onto the jury’s compensatory damages award, for a total of $47,500 in compensatory damages.  Keeping the same 10-to-1 ratio as in the previous decision, the Court of Appeal concluded that the final punitive damages award should be $475,000.

That’s a lot of litigation over $175,000.

P.S.  Two of the justices involved in the original decision were not part of the panel for new opinion.  Justice Croskey died while the case was pending before the Supreme Court, and Justice Klein retired.  Justice Croskey had dissented from the original opinion, taking the view that punitive damages should never have been awarded in this case.  But there is no dissent this time around.  The new decision is unanimous.

Related posts:

California Supreme Court rules for plaintiff in dispute over ratio calculations in insurance bad faith cases (Nickerson v. Stonebridge)

California Supreme Court limits issues for review in Nickerson v. Stonebridge

California Supreme Court grants review in Nickerson v. Stonebridge

Court of Appeal orders reduction of $19M punitive damages award to $350,000 (Nickerson v. Stonebridge) – PART II

Court of Appeal orders reduction of $19M punitive damages award to $350,000 (Nickerson v. Stonebridge) – PART I

L.A. trial court reduces punitive damages award against Stonebridge insurance from $19 million to $350,000

L.A. jury awards $19 million in punitive damages and $35,000 in compensatory damages in insurance bad faith case

 

The Hanford Sentinel reported over the weekend on a decision from the Fifth Appellate District in Fresno that reversed a judgment awarding $73.4 million in compensatory damages and $3 million in punitive damages.  A jury had originally awarded $55.2 million in punitive damages, one of the largest punitive damages awards in California in recent years.  But the trial court reduced that to $3 million.

The case arises from a failed development project.  The plaintiff, Grow Land & Water, alleged that it was in the process of acquiring land and water rights when the defendant interfered with his deal and acquired the rights for himself.

The unpublished opinion doesn’t say much about the punitive damages.  The reversal was based entirely on problems with the compensatory damages, namely, that the plaintiff failed to prove some elements of its damages claims and the compensatory award was tainted by irrelevant and prejudicial evidence.  The Court of Appeal concluded that a new trial was therefore required on all the damages, including the punitives:

Punitive damages must bear a reasonable relationship to the actual damages.  Thus, the reversal of the compensatory damages requires that the punitive damages be redetermined as well.

While that may seem like an intuitive result, other divisions of the California Court of Appeal have issued opinions that dramatically reduced a compensatory damages award without ordering a new trial on punitive damages.  (See, for example, here and here.)  Under the reasoning of this case, those cases should have come out differently.  The defendants in those cases were entitled to have a jury decide in the first instance what amount of punitive damages would be reasonable in relation to the actual damages.  I’m still hoping the California Supreme Court will examine this issue, although it has passed up several opportunities to do so.

In this lawsuit by six tenants against their landlord, a Los Angeles jury awarded punitive damages totaling roughly $5.5 million.  That award was ultimately deemed constitutionally excessive in this unpublished opinion, but the path to that result was a rocky one, and I have doubts about whether the Court of Appeal’s disposition is procedurally correct.

The procedural weirdness began in the trial court, where the court issued a rolling series of rulings on the defendants’ post-trial motions.

After the jury’s verdict, the trial court entered judgment and the plaintiffs served notice of entry of that judgment on August 30, 2013.  The defendants then filed post-trial motions arguing, among other things, that the punitive damages were excessive.  The trial court’s deadline for ruling on those motions was October 29 (60 days after the service of notice of entry of judgment).

On October 25 the trial court issued a minute order stating that the post-trial motions were denied, except that a new trial would be granted unless the plaintiffs consented to a remittitur of the total punitive damages to $900,000.  The minute order referenced a separate formal order dated October 25, but the trial court never signed or entered any other order on that date.

Three days later, on October 28, the trial court issued another order stating that its October 25 ruling was only tentative and not final.

On November 12, roughly two weeks after deadline, the trial court issued an “amended” order, again stating that the post-trial motions were denied, except that a new trial would be granted on punitive damages unless the plaintiffs accepted a remittitur of the amount to $900,000.

On November 20, the trial court issued yet another purported amendment to its ruling on the post-trial motions, changing the amount of the remittitur.

Both sides appealed.  The Second Appellate District, Division Two, determined that the trial court’s order purporting to grant a conditional new trial was ineffective because the trial court failed to issue a signed statement of its reasons when it initially granted a conditional new trial, and because the trial court later vacated its initial ruling by deeming it to be “tentative.”  The November 12 and November 20 rulings were ineffective because the deadline had already passed.

Having reversed the trial court’s grant of a conditional new trial, the Court of Appeal then proceeded to grant a conditional new trial on its own, finding that the jury’s punitive damages award was constitutionally excessive under Simon v. San Paolo U.S. Holding Co., and ordering a remittitur in exactly the same amount as in the trial court’s original order.

That disposition is questionable, because the Supreme Court of California said in Simon that, when a court determines that a punitive damages award is constitutionally excessive, the appropriate remedy is to modify the judgment by reducing the award to the constitutional maximum.  Simon explains that courts should not give plaintiffs the option of choosing a new trial as an alternative to the reduction:

Giving a plaintiff the option of a new trial rather than accepting the constitutional maximum for this case would be of no value. If, on a new trial, the plaintiff was awarded punitive damages less than the constitutional maximum, he would have lost. If the plaintiff obtained more than the constitutional maximum, the award could not be sustained. Thus, a new trial provides only a ‘heads the defendant wins; tails the plaintiff loses’ option.

The Court of Appeal here cited Simon but ordered precisely the sort of disposition that Simon cautions against. In so doing, the court cited a Court of Appeal opinion that pre-dates Simon.  This is probably just an oversight, which the court may correct before the opinion becomes final.