In this published opinion, the California Court of Appeal (Second Appellate District, Division Eight), affirms a punitive damages award of $1.2 million. There was only one appellate issue regarding the punitive damages award: whether the plaintiff met her burden of presenting meaningful evidence of the defendant’s financial condition. The plaintiff presented evidence that the defendant earned a profit of $670,000 in the most recent 12-month period, and was “in the black” (although the actual amount of net worth was unspecified). The court said this evidence was sufficient to sustain the award, considering that the defendant had delayed in responding to discovery requests for financial information, and the defendant’s CEO was unable to personally calculate the defendant’s actual net worth.

Full disclosure: Horvitz & Levy represents the defendant in this appeal, and we will not comment on the opinion because the litigation is ongoing.

In this unpublished opinion, the California Court of Appeal (Third Appellate District) affirms $300,000 in punitive damages against three defendants.

The court rejects the defendants’ argument that the evidence was insufficient to support a finding of malice, fraud or oppression.  The court also rejects one defendant’s argument that the record contained insufficient evidence of his financial condition.  As we have observed, California defendants often get punitive damages reversed on this basis.  But not this time.  Here, the defendant in question did not appear for trial.  Plaintiff served him with a notice to appear, and he moved to quash the subpoena on the ground that he was not subject to the court’s jurisdiction because he now resides in Germany.  The trial court disagreed and upheld the validity of the subpoena.  But the defendant still refused to appear for trial.

The Court of Appeal concluded that the defendant’s failure to appear deprived the plaintiff of a meaningful opportunity to meet her burden of proof on the issue of the defendant’s financial condition.  And because the defendant’s failure to appear was a violation of a court order, the defendant forfeited his right to complain about the lack of such evidence on appeal.  (See Mike Davidov v. Issod (2000) 78 Cal.App.4th 597, 608-609 [defendant who disobeys a valid court order to produce information on his financial condition waives the right to object to a punitive damages award for lack of such evidence].)

The defendants in this unpublished opinion asked the California Court of Appeal to reverse a $1.75 million punitive damages award on the ground that the plaintiff had failed to introduce meaningful evidence of the defendants’ financial condition. The Second Appellate District, Division Five, wasn’t buying it.

The court put the blame on the defendant for failing to respond to a valid court order to produce its financial information after the jury found that the defendant had acted with malice. Citing Mike Davidov Co. v. Issod (2000) 78 Cal.App.4th 597, the Court of Appeal concluded that the defendant waived its right to complain that the award was not supported by financial condition evidence:

Johnson was not entitled to escape punitive damages by the simple expedient of refusing to produce financial information needed to fix such an award, as doing so would have allowed him to flout a court order with impunity and undermine the legal process. In view of Johnson’s failure to produce evidence of his financial condition, he may not complain the amount of punitive damages is excessive.

We have blogged quite a bit about the frequency with which California Court of Appeal reverses punitive damages awards on the ground that the plaintiff failed to introduce meaningful evidence of the defendant’s financial condition. But here’s an unpublished opinion from the Second Appellate District, Division Five, rejecting a challenge to a punitive damages award on that basis.

The plaintiff here presented audited financial statements showing that the two defendants had net worths of $3.6 million and $246,000 shortly before trial. The Court of Appeal said that evidence was more than enough to support punitive damages awards of $2,500 and $5,000 against the two defendants, nothwithstanding the “self-serving” testimony by the defendants’ CEO that the defendants had a negative net worth at the time of trial.

In this unpublished opinion, the Court of Appeal (Fourth Appellate District, Division Three) vacated a $100,000 punitive damages award because the defendant had a negative net worth.

The opinion recites the evidence regarding the defendant’s financial condition in some detail and concludes that, although the defendant owned multiple properties, he had a negative net worth at the time of trial because of his significant debt. Quoting the Supreme Court’s statement that the purpose of punitive damages “is to deter, not to destroy” (Adams v. Murakami (1991) 54 Cal.3d 105, 112), the court ordered the punitive damages award stricken from the judgment.

Contrast this opinion with Zaxis Wireless Communications, Inc. v. Motor Sound Corp. (2001) 89 Cal.App.4th 577, 582-583, which upheld a $300,000 punitive damages award against a defendant with a negative net worth.

Here’s another unpublished opinion that reverses a punitive damages award because a plaintiff failed to present meaningful evidence of the defendant’s financial condition.

The plaintiff argued that he met his burden because he introduced evidence about the profitability of the defendant’s misconduct. The California Court of Appeal (Second District, Division Four) said that’s not good enough; a plaintiff must provide evidence of the defendant’s overall financial condition, including assets and liabilities. Because the plaintiff here didn’t do that, he gets no punitive damages. He doesn’t get a new trial because he failed to prove his case the first time around, and is not entitled to a second bite at the apple.

I’ve lost track of how many times we seen punitive damages get reversed for this reason since we started this blog. Without a doubt, this is most frequent basis for reversal of punitive damages in California.

Here’s another case in which a plaintiff forfeited his right to punitive damages because he failed to present meaningful evidence of the defendant’s financial condition.

The plaintiff won a verdict for $288,000 in compensatory damages and $160,000 in punitive damages. The trial court granted the defendant’s motion for partial JNOV and eliminated the punitive damages award, on the ground that the plaintiff had failed to introduce meaningful evidence of the defendant’s financial condition.

The California Court of Appeal (Fourth District, Division One) affirmed. The plaintiff apparently conceded on appeal that he presented no direct evidence of the defendant’s financial condition, but he tried to prop up the punitive damages award by pointing to expert testimony regarding the value of a business partly owned by the defendant. The Court of Appeal determined that the expert never directly opined about the value of the business, and was not even qualified to do so.

The plaintiff also tried to rely on Cummings Medical Corp. v. Occupational Medical Corp. (1992) 10 Cal.App.4th 1292 for the proposition that a plaintiff need not introduce evidence of the defendant’s financial condition, and can rely instead on the amount of profit the defendant gained from the misconduct at issue. The Court of Appeal noted that it had previously rejected that reasoning in Kenly v. Ukegawa (1993) 16 Cal.App.4th 49, which held that an award cannot be based solely on the alleged “profit” gained by the defendant, “without examining the liabilities side of the balance sheet.”

Regular readers of this blog are well aware that California appellate courts frequently reverse punitive damages awards if the plaintiff failed to introduce meaningful evidence of the defendant’s financial condition. In this unpublished opinion, the Sixth Appellate District reverses another judgment on that basis, with a bit of a twist.

The trial court made a highly unorthodox damages award after a bench trial; the court awarded a lump sum amount of damages, without differentiating between compensatory damages and punitive damages. The Court of Appeal criticizes that practice, and then goes on to point out flaws in both the compensatory and punitive elements of the undifferentiated award.

First, the court concludes that the trial court used the wrong measure of compensatory damages. Then the court concludes that the trial court should have decided whether the plaintiff presented sufficient evidence of the defendant’s financial condition to permit an award of punitive damages. The trial court had expressed doubt about the sufficiency of the plaintiff’s evidence, but never actually decided the issue. The plaintiff tried to argue on appeal that California law does not require plaintiffs to introduce financial condition evidence, but the Court of Appeal summarily rejected that contention as a misreading of the law. So the case goes back to the trial court to make evaluate the sufficiency of the plaintiff’s evidence. (And consistent with California law, the plaintiff should not be permitted to introduce new financial condidtion evidence on remand – – see Kelly v. Haag (2006) 145 Cal.App.4th 910, 914.)

This case has already gone up on appeal once, and is likely headed that way again.

In 2008 we blogged about this case, which involves a plaintiff who purchased a gas station from Shell subsidiary Equilon Enterprises and claims Equilon defrauded him by withholding material information. He claims that Equilon failed to tell him that the site of the gas station was about to become the target of state regulatory agencies, a fact that ultimately prevented him from being able to operate a gas station on the site.

When the case went to trial in 2006, the jury awarded the plaintiff $1.65 million in compensatory damages and found that Equilon acted with malice, oppression, or fraud. But the trial court dismissed the plaintiff’s punitive damages claim because he failed to present meaningful evidence of the defendant’s financial condition. The California Court of Appeal (Second Appellate District, Division Eight) reversed, concluding that the trial court should have given the plaintiff more time to marshal his financial condition evidence.

According to the plaintiff’s attorney’s press release, a new jury has awarded $50 million in punitive damages. That makes for a ratio in excess of 30 to 1, a ratio that should not withstand posttrial and appellate scrutiny. Even assuming the defendant’s conduct was extremely egregious, the defendant seems to have a strong argument that the maximum ratio cannot exceed one to one, given the size of the compensatory damages award and the purely economic nature of the plaintiff’s injuries.

The appeal may also raise some interesting issues about the proper procedures for a trial like this, in which one jury decided the issues of liability and malice, and another jury awarded punitive damages. In such situations, it is difficult if not impossible to ensure that the second jury bases its punitive damages award solely on the same conduct that the first jury found to be tortious and malicious. If the plaintiff made multiple arguments in the first trial, the first jury may have accepted some of those arguments and rejected others. Unless the jury made very specific findings, however, there would be no way for anyone to know the precise basis for the first jury’s findings, and therefore no way to comply with the requirement of California law that punitive damages must be based on malice, oppression or fraud in the conduct that gave rise to liability.

This unpublished opinion illustrates yet again the consequences of failing to comply with California’s unique rule that a plaintiff cannot obtain punitive damages unless the plaintiff presents meaningful evidence of the defendant’s ability to pay.

The plaintiff here won a $20,000 punitive damages award at trial. But the only evidence he presented regarding the defendant’s financial condition was the fact that the defendant owned several businesses. The plaintiff did not establish the value of those businesses, the income the defendant derived from them, or the liabilities associated with them. Accordingly, the California Court of Appeal (Fourth Appellate District, Division One) vacated the punitive damages award. And because the plaintiff had a full an fair opportunity to present his evidence the first time around, he doesn’t get to go back to the trial court and try again.