California Punitives by Horvitz & Levy

  • California Supreme Court adopts broad interpretation of statute that shields public entities from punitive damages (Los Angeles Unified v. Superior Court)

    Last week the California Supreme Court issued this opinion adopting a broad interpretation of a California statute that exempts public entities from punitive damages.

    Government Code section 818 provides that public entities cannot be held liable for damages imposed “primarily for the same of example and by way of punishing the defendant.”  That statute clearly applies to punitive damages, but what about other statutory provisions that provide double or treble damages for certain types of misconduct?

    Previous Supreme Court decisions had suggested that section 818 applies only to damages that are “simply and solely punitive.” Under that view, public entities could be liable for double or treble damages under a statute that is designed to punish but also to serve some other purpose, e.g., incentivize lawsuits, provide redress for otherwise uncompensated harms or expenditures, or advance some other policy goal.  But the Supreme Court overruled that line of authority, concluding that section 818 bars any form of damages that is imposed primarily for punishment, even if the statute also has some other secondary purposes.

  • Supreme Court of California denies review in McNeal v. Whittaker, Clark & Daniels (with one vote to grant review)

    In July we reported on the reversal of a $3 million punitive damages award in McNeal v. Whittaker, Clark & Daniels, and commented on the significance of the decision for products liability litigation in California.  The Supreme Court this week denied the plaintiffs’ petition for review.  But as noted on At the Lectern, Horvitz & Levy’s blog on all things related to the Supreme Court of California, Justice Goodwin Liu voted to grant the petition.

  • Supreme Court denies review in Albarracin v. Fidelity National

    The Supreme Court of California has denied Fidelity National’s petition for review in the Albarracin case, discussed here and here.

  • California Supreme Court to rule soon on Fidelity National’s petition for review (Albarracin v. Fidelity National)

    We previously reported on the Court of Appeals’ affirmance of a $2 million punitive damages award in this employment case.  As we noted, the court concluded that a $250,000 compensatory damages award was not “substantial” for purposes of the rule that lower punitive-to-compensatory ratios are warranted in cases with substantial compensatory damages.

    Fidelity National has petitioned for review, raising the following issues (quoted directly from the petition):

    1.    Under Auto Equity Sales, Inc. v. Superior Court
    (1962) 57 Cal.2d 450, 455 (Auto Equity Sales), this Court’s
    decisions “are binding upon and must be followed by all the state
    courts of California.”
         Does this stare decisis doctrine require the intermediate
    appellate courts, in unpublished decisions, to either follow or
    meaningfully distinguish this Court’s relevant holdings? 

    2.        This Court and the U.S. Supreme Court require
    reviewing courts to independently determine the constitutionality
    of punitive damages awards, including whether such an award
    bears a reasonable relationship to compensatory damages.
        Does the fact that a compensatory award is moderate—that
    is, neither large enough to suggest an inherent punitive element
    nor small and purely economic—itself justify “a much higher
    ratio” of punitive damages (here, nearly 8-to-1)?

    The Supreme Court has granted itself a 30-day extension of time to rule on the petition, moving the due date from November 21 to December 21.  Expect a ruling soon.

  • Supreme Court denies review in King v. US Bank

     The Supreme Court has denied US Bank’s petition for review in the case discussed here.

  • California Supreme Court to rule soon on US Bank’s petition for review (King v. U.S. Bank)

    We reported in August about this decision in which the Court of Appeal partially reinstated a big punitive damages award against U.S. Bank.  As you may recall, the case involved a U.S. Bank supervisor who was accused of harassment by his subordinates. The company investigated and fired him.  He then sued the bank for wrongful termination and defamation and won a jury verdict for $24.3 million including $15.6 million in punitive damages.  The trial court reduced the amount to $2.7 million but the Court of Appeal bumped it back up to $8.5 million.

    U.S. Bank has filed a petition for review with the California Supreme Court raising the following issues (these are quoted directly from the petition):

    1. Whether evidence of errors of judgment by human resources (“HR”) employees who repeat allegedly false statements during an internal investigation of alleged workplace misconduct is sufficient to defeat the common-interest privilege and sustain a defamation claim. 

    2. Whether an employer that terminates an employee for misconduct may be held liable for wrongful termination and breach of the covenant of good faith and fair dealing based on an inference that the employer rushed the termination so that the employee would not qualify for a bonus.

    3. Whether evidence that an entry-level HR employee exercised discretion when investigating alleged workplace misconduct is sufficient to support a determination that she was a “managing agent” whose conduct can subject her employer to punitive damages.

    4. Whether the decision below misapplied this Court’s decision—issued the day before—requiring courts to view the evidence supporting a finding of punitive liability through the lens of the clear-and-convincing-evidence standard.

    5. Whether the Court of Appeal accorded legally insufficient deference to the trial court’s order granting a new trial or remittitur. 

    6. Whether the $8,469,696 punitive award approved by the Court of Appeal—six times the maximum permissible punitive award for the more severe conduct and injuries in Roby v. McKesson Corp. (2009) 47 Cal.4th 686—is unconstitutionally excessive, given the punitive and deterrent effects of the $5,000,000 in non-economic damages and USBNA’s minimal to non-existent ill-gotten gain.

    Horvitz & Levy filed a letter on behalf of the Association of Southern California Defense Counsel, asking the Supreme Court to grant the petition. The CELC and the US Chamber of Commerce also submitted letters (see here and here).

    The Supreme Court’s original deadline to rule on the petition was November 3, but the court issued an order extending its time until December 3.  Expect a ruling soon. 

  • California Supreme Court confirms that clear and convincing evidence standard applies on appeal (Conservatorship of O.B.)

    Today the California Supreme Court settled a long-running split of authority that we have blogged about often.  In Conservatorship of O.B., the Supreme Court clarified that the clear and convincing evidence standard applies on appeal, and does not “disappear” during appellate review, as some opinions had mistakenly held.

    To recap the issue, most facts in civil cases must be proved by a preponderance of the evidence, which means that the fact is more likely than not to be true.  But for certain facts, California law requires proof by clear and convincing evidence, which is a higher burden, and requires evidence that is “so clear as to leave no substantial doubt” and “sufficiently strong to command the unhesitating assent of every reasonable mind.”  (See In re Angelia P.)

    The clear and convincing evidence standard applies to the facts necessary for an award of punitive damages.  (See Civil Code section 3294, subdivision (a).)  It also applies to the facts necessary for establishing a conservatorship, which was the issue in the O.B. case.  The trial court in O.B. concluded that a conversatorship was warranted for a woman with autism.  She appealed, challenging the sufficiency of the evidence.  The Court of Appeal, in reviewing the evidence, ignored the clear and convincing evidence standard, reasoning that the standard applies only in the trial court but not on appeal.  As we have reported here, several other Court of Appeal opinions have taken that same approach (usually in unpublished opinions), often without acknowledging contrary authority holding that appellate courts must consider the higher standard of proof when evaluating the sufficiency of the evidence.

    The Supreme Court granted review to resolve the split of authority.  The conservators tried to rely on legislative history to defend the Court of Appeal’s approach.  They argued that when the Legislature adopted the clear and convincing standard for conservatorship cases, it did so against a backdrop of “150 years of consistent precedent” from the Supreme Court of California squarely holding that the clear and convincing evidence standard applies only to the trial court, and disappears on appeal.

    The problem with that argument was that it rested on a false premise about “150 years of consistent precedent.” As the O.B. opinion explains (and as our firm pointed out in an amicus brief), the Supreme Court had issued conflicting statements on the issue over the years, so there is no basis to infer that the Legislature adopted the conservators’ view, which is actually a minority view in the case law in California and elsewhere.

    After examining the issue thoroughly, the Supreme Court concluded that “logic, sound policy, and precedent all point toward the same conclusion: When reviewing a finding made pursuant to the clear and convincing standard of proof, an appellate court must attune its review for substantial evidence to the heightened degree of certainty required by this standard.”  Accordingly, the Supreme Court reversed the Court of Appeal and disapproved the line of cases holding that the clear and convincing evidence standard disappears on appeal.

    So how will this actually work in practice?  Does this mean that an appellate court can now reweigh the evidence and reevaluate the credibility of the witnesses when deciding whether the evidence was sufficient to meet the higher standard of proof?  No.  The Supreme Court explains (my emphasis in bold):

    When reviewing a finding that a fact has been proved by clear and convincing evidence, the question before the appellate court is whether the record as a whole contains substantial evidence from which a reasonable factfinder could have found it highly probable that the fact was true. In conducting its review, the court must view the record in the light most favorable to the prevailing party below and give appropriate deference to how the trier of fact may have evaluated the credibility of witnesses, resolved conflicts in the evidence, and drawn reasonable inferences from the evidence. 

    The Supreme Court’s opinion makes clear that Courts of Appeal should take this approach in any case where the clear and convincing evidence standard applies, including punitive damages cases.

  • Supreme Court of California seems to preview its holding on clear-and-convincing evidence issue

    Last week we reported on the oral argument in Conservatorship of O.B., and we noted that the Supreme Court of California seems inclined to hold that the clear-and-convincing evidence standard applies on appeal.

    Further evidence of the Supreme Court’s inclination can be found in the Court’s May 21 opinion in In re White.  As At the Lectern points out, the Court’s framing of the substantial evidence issue in that case might presage the outcome in O.B.: the Supreme Court said it needed to determine “whether any court could have found clear and convincing evidence that the person’s release on bail posed a substantial likelihood of great bodily harm to others.”  By baking the concept of clear and convincing evidence into that question, the Supreme Court seems to be disagreeing with the idea that the clear and convincing evidence standard disappears during appellate review.  We will find out soon enough.

  • Supreme Court of California hears arguments in case with punitive damages implications (Conservatorship of O.B.)

    The California Supreme Court held oral argument yesterday in Conservatorship of O.B.  That case is not a punitive damages case, but the issue it presents has significant implications for punitive damages litigation in California.

    As previously reported here, the issue presented is whether California appellate courts should take the “clear and convincing” evidence standard into account when deciding whether substantial evidence supports a factual finding that must be proven by clear and convincing evidence.  As readers of this blog are aware, that issue has come up often in punitive damages litigation, including a 2008 case in which the Supreme Court granted review but never reached the issue because the parties settled.

    The Supreme Court received amicus briefing in O.B. discussing the implications of this issue in punitive damages cases.  (Horvitz & Levy submitted one of those briefs, on behalf of the U.S. Chamber of Commerce.)  However, the oral argument yesterday focused exclusively on the application of the clear and convincing standard in the context of conservatorship cases.  Neither the parties nor the justices touched on the application of the heightened standard of proof outside of that context.

    Based on the questions asked by the justices, I am cautiously optimistic that the California Supreme Court will ultimately take the same position as the U.S. Supreme Court and hold that the clear and convincing evidence standard applies on appeal, and does not “disappear” during appellate review as some Court of Appeal decisions have held.  But it is also possible that the Supreme Court may issue a very narrow opinion, leading to further litigation over this issue outside the conservatorship context.

  • Supreme Court of California grants review to resolve split over application of “clear and convincing” evidence standard

    As reported on our sister blog, At the Lectern, the Supreme Court has finally agreed to settle a long-running split of authority about how the clear and convincing evidence standard applies, if at all, on appeal.

    The issue has great importance for punitive damages cases because, as readers of this blog are
    aware, California plaintiffs must prove all the prerequisites for a punitive damages award by clear and convincing evidence.   (See Civil Code section 3294.)

    As we have discussed in the past, our appellate courts do not agree about whether they should take the heightened standard of proof into account when reviewing the sufficiency of the plaintiffs’ evidence.  Many courts say yes, but others have said no.

    The Supreme Court has furthered the confusion by seeming to take both sides of the debate.  (Compare Crail v. Blakely [holding that clear and convincing standard was adopted only “for the edification and guidance of the trial court”] with In re Angelia P. [holding that the clear and convincing evidence standard is incorporated into the substantial evidence standard on appeal].)

    The Supreme Court actually granted review to address this issue over a decade ago. But the parties settled that case and the issue became moot.  In the years since, many other petitions raised the issue, but the Supreme Court consistently denied them.  Now, finally, in Conservatorship of O.B., the Supreme Court has agreed to take the issue up again.  With any luck, the parties to that case will not reach a settlement.