California Punitives by Horvitz & Levy

  • Supreme Court grants cert. to decide whether $4.3 billion punitive damages award should be reinstated (Opati v. Republic of Sudan)

    We have reported several times about huge punitive damages awards against foreign governments based on acts of state-sponsored terrorism.  (See here, here, and here.)  These awards are typically entered by default, because the defendant countries usually do not appear to defend themselves.  And to my knowledge the plaintiffs have not had any success collecting on these judgments.

    Once such award occurred in this case: a federal district court awarded $6 billion in compensatory damages and $4.3 billion in punitive damages against the government of Sudan for its complicity in the 1998 attacks on the U.S. embassies in Kenya and Tanzania that killed 224 people.  Sudan eventually appeared in the case and appealed the judgment.

    In 2017 the D.C. Circuit upheld Sudan’s liability but vacated the punitive damages.  The court ruled that the plaintiffs could not recover punitive damages under the 1976 Foreign Sovereign Immunities Act (FSIA), because when Congress amended the statute to permit claims against state sponsors of terrorism, it did not expressly authorize recovery of punitive damages in lawsuits over conduct that predated the amendment.

    The plaintiffs filed a cert. petition, which the Supreme Court granted today.  The Court’s order limits review to the second issue raised in the petition: whether the FSIA applies retroactively, permitting punitive damages against foreign states for terrorist activities occurring prior to the passage of the current version of the act.

    The decision in this case will obviously have an impact on the various other punitive damages cases involving state-sponsored terrorism, but it may not have much application outside that context.

  • Supreme Court grants cert. to decide whether $4.3 billion punitive damages award should be reinstated (Opati v. Republic of Sudan)

    We have reported several times about huge punitive damages awards against foreign governments based on acts of state-sponsored terrorism.  (See here, here, and here.)  These awards are typically entered by default, because the defendant countries usually do not appear to defend themselves.  And to my knowledge the plaintiffs have not had any success on collecting on these judgments.

    Once such award occurred in this case: a federal district court awarded $6 billion in compensatory damages and $4.3 billion in punitive damages against the government of Sudan for its complicity in the 1998 attacks on the U.S. embassies in Kenya and Tanzania that killed 224 people.  Sudan eventually appeared in the case and appealed the judgment.

    In 2017 the D.C. Circuit upheld Sudan’s liability but vacated the punitive damages.  The court ruled that the plaintiffs could not recover punitive damages under the 1976 Foreign Sovereign Immunities Act (FSIA), because when Congress amended the statute to permit claims against state sponsors of terrorism, it did not expressly authorize recovery of punitive damages in lawsuits over conduct that predated the amendment.

    The plaintiffs filed a cert. petition, which the Supreme Court granted today.  The Court’s order limits review to the second issue raised in the petition: whether the FSIA applies retroactively, permitting punitive damages against foreign states for terrorist activities occurring prior to the passage of the current version of the act.

    The decision in this case will obviously have an impact on the various other punitive damages cases involving state-sponsored terrorism, but it may not have much application outside that context.

  • Court of Appeal vacates $500,000 punitive damages award because plaintiff failed to serve statement of damages (Chen v. Institute of Medical Education)

    We have reported before on cases in which a court reversed a default-judgment punitive damages award because the plaintiff failed to serve the defendant with a statement of damages.

    The plaintiffs in this case tried to avoid that fate by arguing that the record contained no evidence to support a finding that they did not serve a statement of damages.  According to the plaintiffs, the defendant could not prove that point simply by pointing out that no such statement appeared in the record.

    It’s a somewhat clever argument, because a statement of damages wouldn’t necessarily appear in the trial court record.  It could be served but not filed with the court.  Thus, the absence of a statement of damages in the record doesn’t necessarily mean that statement of damages was filed.

    But the Sixth Appellate District didn’t buy it.  In this unpublished opinion, the court observed that the  plaintiffs had never actually claimed, in the trial court or on appeal, that they did serve a statement of damages.  Accordingly, the court was comfortable presuming that the plaintiffs never served a statement of damages, despite the void in the record on that point.  As a result, the court vacated the punitive damages portion of the default judgment ($500,000).

  • Court of Appeal vacates punitive damages portion of default judgment for lack of financial condition evidence (Stutz Artiano v. Larkins)

    This unpublished opinion is yet another reminder that in California, plaintiffs cannot obtain punitive damages without presenting meaningful evidence of the defendant’s financial condition, even in the case of a default judgment.   

    In this case, the plaintiff obtained a default judgment and, at a prove up hearing, presented evidence of its damages.  But it presented no evidence of the defendant’s financial condition.  Accordingly, the California Court of Appeal (Fourth Appellate District, Division One) ordered the trial court to strike the award of punitive damages from the judgment. 

  • $44 million punitive damages award reversed in unpublished opinion (VW Credit v. Keuylian)

    In California, two recurring scenarios appear in the unpublished opinions on punitive damages: (1) the court reverses a punitive damages award because the plaintiff obtained a default judgment but did not provide the defendant with adequate notice of the amount of punitive damages the plaintiff was seeking, or (2) the court reverses a punitive damages award because plaintiff failed to introduce meaningful evidence of the defendant’s financial condition.

    In this unpublished opinion from the Fourth Appellate District, Division Three, we have a twofer: the plaintiff provided insufficient notice of the amount it was seeking by default and failed to introduce meaningful evidence of the defendant’s financial condition.  The $44 million punitive damages award in this case never had a chance.

  • Vidrio v. Hernandez: No Special Scrutiny of Default Judgments That Include Punitive Damages

    I wonder why this opinion wasn’t published.

    In Vidrio v. Hernandez, the California Court of Appeal (First Appellate District, Division Five) expressly disagreed with Nicholson v. Rose (1980) 106 Cal.App.3d 457. Nicholson included some broad language stating that courts should give special scrutiny to default judgments in which punitive damages are awarded. But the unpublished opinion in Vidrio says: “We find no support for the broad statement in Nicholson that appellate review of default judgments is any more or less stringent where punitive damages are awarded.” That sort of disagreement is usually enough to warrant publication.

    Perhaps the court decided not to publish its opinion because the court found that it lacked jurisdiction to directly review the punitive damages award. Jurisdiction was lacking because the defendant appealed only from an order denying his motion to vacate the default judgment and did not appeal from the judgment itself. Thus, the criticism of Nicholson appears to be dictum. Still, publication of the opinion would have provided some guidance to future litigants.

  • Oliver v. Pacific Real Estate: Default Judgment Awarding $292,717 in Punitive Damages Affirmed

    In this unpublished opinion, the California Court of Appeal (Fifth District) affirmed a default judgment that includes a $50,000 punitive damages award.

    The appellant asked the court to strike the punitive damages award because the plaintiff did not comply with Code of Civil Procedure section 425.115. Under that statute, a plaintiff cannot obtain punitive damages in a default judgment unless the plaintiff serves the defendant with a statement requesting a specific amount of punitive damages. The idea is to notify the defendant of the amount at stake so the defendant can decide whether to put up a fight.

    In this case, the plaintiff did not serve a statement of damages as described in section 425.115. But he did attach a document to his complaint indicating that he sought $500,000 in punitive damages. The court said that was close enough to satisfy section 425.115.

  • Yanes v. Orea: Punitive Damages Portion of Default Judgment Reversed

    The California Court of Appeal (Fourth Appellate District, Division Two) issued an unpublished opinion reversing the portion of a default judgment that awarded $411,688.79 in punitive damages. The plaintiff failed to serve a statement requesting a specific amount of punitive damages, which is a prerequisite to obtaining punitive damages by default. We have seen this before. (See our prior posts here and here.)

  • Punitive Damages and Default Judgments

    In California, a plaintiff cannot obtain punitive damages as part of a default judgment in a personal injury or wrongful death case unless the plaintiff first serves a statement of damages, specifying the amount of punitive damages requested. (See California Code of Civil Procedure 425.11, subd. (c).)

    This rule came in to play in two unpublished decisions issued this week by the California Court of Appeal. In Anson v. St. Michael’s Episcopal Church, the plaintiff failed to serve a statement of damages, and the Fourth Appellate District, Division Three, held that he was not entitled to recover punitive damages by default. By contrast, in Cantu v. Thomas, the plaintiff did serve a statement of damages requesting a specific amount of punitive damages, and the Fourth Appellate District, Division Two, affirmed the $20,000 in punitive damages he obtained by default.

    UPDATE: On June 30, the Second Appellate District, Division Eight, issued another unpublished opinion on this issue. In Daniel v. Lathen, the court upheld the portion of a trial court’s order that vacated a $320,000 punitive damages award obtained by default. The plaintiff was not entitled to punitive damages because he failed to serve a statement of damages before obtaining the default.

  • Birts v. The Estate Plan: $10 Million Punitive Damages Award Entered on Default of Living Trust Seller

    A Texas law journal (The Southeast Texas Record) reported yesterday that a federal judge in Arkansas has entered a $16 million default judgment—including $10 million in punitive damages—against The Estate Plan, a company that sells living trusts. The plaintiffs brought a class action alleging that The Estate Plan was exploiting senior citizens and offering unsound financial and legal advice in a manner giving rise to claims of fraud, unauthorized practice of law, negligence, breach of fiduciary duty, and conspiracy. The March 16 default judgment in Birts, et al v. The Estate Plan (case 4:08-cv-04047-HFB) also reportedly requires the defendant to correct misrepresentations in the materials that it provides to consumers and to engage in a public information campaign.

    Public outrage over financial shenanigans like this will likely result in a continuing stream of big-ticket punitive damages awards.