California Punitives by Horvitz & Levy

  • Catching up on unpublished 2024 California Court of Appeal decisions

    I’ve been catching up on some unpublished punitive damages opinions that were issued earlier this year. Here’s a brief rundown:

    Matthes v. Rodgers (May 13, 2024, Second District, Division Four):

    Upholding $1.95 million in punitive damages; defendant failed to respond to subpoenas requesting financial information, and therefore waived its right to complain that trial court erred when it modified the standard CACI instructions to delete the language telling the jury to consider the defendant’s ability to pay

    Soria v. Compass Group (April 16, 2024, Second District, Division Two):

    Holding that trial court properly granted nonsuit on punitive damages because plaintiff failed to present evidence that two employees of defendant hospital were managing agents

    Medel v. Oceanic Companies (February 22, 2024, Fourth District, Division One):

    Holding that trial court properly reduced $2 million and $1 million punitive damages awards to $652,000 and $326,000 (ratios of two-to-one and one-to-one) for conduct that was “moderately to highly reprehensible”

    Rudnicki v. Farmers Insurance Exchange (January 2, 2024, Second District, Division Two)

    Declining to further reduce punitive damages that trial court cut from $150 million to $18.5 million (3.5-to-one ratio) in retaliation case involving “moderately reprehensible” conduct

  • Alvarado v. Cajun Operating Co.: Punitive Damages Are Unavailable for a Retaliation Claim Under the ADA

    The U.S. Court of Appeals for the Ninth Circuit issued a new opinion today holding that compensatory damages and punitive damages are not available for a retaliation claim brought under the Americans with Disabilities Act (ADA).

    According to the plaintiff in this case, the defendant retaliated against him for complaining that his manager had discriminated against him on the basis of his disability. Subsequently, the plaintiff sued his former employer for, among things, retaliation under the ADA. Prior to trial, the federal district court barred the plaintiff from seeking compensatory damages and punitive damages for his ADA retaliation claim on the grounds that only equitable relief was available for such claims.

    The Ninth Circuit agreed to hear an interlocutory appeal on this issue and affirmed the trial court’s determination. The appellate court noted that other federal courts had previously reached differing conclusions on the issue. On reviewing the case law and 42 U.S.C. section 1981a (the statute governing the availability of compensatory and punitive damages for certain types of ADA claims), the Ninth Circuit determined that the plain language of “section 1981a limits its remedial reach to ADA discrimination claims, and does not incorporate ADA retaliation claims . . . .” While the Ninth Circuit acknowledged that “a convoluted analytical path exists to concluding that punitive and compensatory damages are available for ADA retaliation claims,” the court rejected this convoluted approach because it was contrary to “the basic tenets of statutory construction” calling for a court to look to a statute’s plain language. Since the “plain and unambiguous provisions of 42 U.S.C [section] 1981a limit the availability of compensatory and punitive damages to” specific claims that did not include ADA retaliation claims, the Ninth Circuit held that “ADA retaliation claims are redressable only by equitable relief . . . .”

  • Roby v. McKesson: Cal. Supreme Court Embraces 1:1 Ratio

    Now that I’ve had a chance to review this morning’s opinion from the California Supreme Court, here’s a more detailed summary of the court’s ruling. The primary significance of the case, for purposes of this blog, is that the California Supreme Court has embraced the principle that the maximum permissible ratio of punitive damages to compensatory damages is one-to-one in cases where the compensatory damages award is substantial.

    The Lower Court Proceedings
    The plaintiff in this case, Charlene Roby, claimed she was fired because of a medical condition and a related disability. A jury found in her favor and awarded $3.5 million in compensatory damages and $15 million in compensatory punitive damages. (That was the award against her employer. She received a separate, smaller award against her supervisor.)

    The Court of Appeal reduced the compensatory damages award to $1.4 million, based on ambiguities in the jury’s verdict and a lack of evidence to support some of Roby’s claims. The court further concluded that the $15 million punitive damages award was excessive under the federal Due Process Clause. The court determined that the maximum permissible punitive damages award, based on the facts of the case and the size of the compensatory damages award, was $2 million (1.4 times the amount of compensatory damages).

    Roby’s Petition for Review and Briefing on the Merits

    Roby petitioned for California Supreme Court for review. She asked the court to decide two issues relating to the Court of Appeal’s reduction of the compensatory damages, and she asked the court to decide several punitive damages issues, including whether the Court of Appeal erred in reducing the punitive damages award.

    In the briefing on the merits, Roby and her amicus, the Consumer Attorneys of California (CAOC), argued that the Court of Appeal went too far in adhering to the U.S. Supreme Court’s statement in State Farm v. Campbell that “[w]hen compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process clause.” According to Roby and CAOC, that statement in Campbell was dicta but some lower courts have taken it as a license to substitute their view of the appropriate amount of punitive damages in place of the jury’s decision.

    The Supreme Court’s Opinion

    The Supreme Court ruled in Roby’s favor on one of her arguments regarding compensatory damages, and increased the amount of compensatory damages by $500,000 (for reasons that are outside the topic of this blog).

    Having decided to affirm $1.9 million in compensatory damages, the Supreme Court then addressed the amount of the punitive damages. It agreed with the Court of Appeal that the jury’s $15 million award was excessive, but it disagreed with the Court of Appeal’s adoption of a maximum ratio of 1.4 to one. The Supreme Court held that the ratio could not exceed one to one on the facts of this case.

    The Supreme Court first analyzed the reprehensibility of the defendant’s conduct in light of the five “reprehensibility factors” discussed in State Farm: (1) whether the harm was physical as opposed to economic, (2) whether the defendant’s conduct evinced an indifference to or reckless disregard of the health or safety of others, (3) whether the plaintiff was financially vulnerable, (4) whether the conduct involved repeated actions or was an isolated incident, and (5) whether the harm was the result of intentional malice. The Supreme Court concluded that the first three factors were all present in the case, but the latter two factors were not. Accordingly, the court concluded that the defendant’s conduct “was at the low end of the range of wrongdoing that can support an award of punitive damages under California law.”

    As part of its discussion of reprehensibility, the court considered which employees of the defendant could be considered “managing agents” within the meaning of Civil Code section 3294, such that their conduct could subject their employer to punitive damages. The court concluded that certain corporate managers had participated in some of the misconduct at issue, and therefore punitive damages could be awarded. But the court also held that Roby’s immediate supervisor, who had authority over four employees at a local distribution center, did not constitute a managing agent. The court emphasized that a managing agent must have authority to set company-wide policy, i.e., “formal policies that affect a substantial portion of the company and that are the type likely to come to the attention of corporate leadership. It is this sort of broad authority that justifies punishing an entire company for an otherwise isolated act of oppression, fraud, or malice.” This statement is inconsistent with some recent Court of Appeal decisions that have held that employees could qualify as managing agents even if they lacked such broad authority. (See our post on Major v. Western Home.)

    After discussing the reprehensibility issue, the court then turned to the question of ratio. The court noted that under State Farm, and under the California Supreme Court’s own opinion in Simon v. San Paolo, the maximum permissible ratio of punitive damages is low, perhaps only one to one, when the amount of compensatory damages is substantial. And the court noted that a low ratio is especially appropriate when the compensatory damages award includes a punitive component in the form of emotional distress damages.

    Finally, the court considered the difference between the jury’s punitive damages award and the applicable civil penalties authorized by the Legislature for similar misconduct. The court noted that if Roby had pursued a claim administratively before the California Fair Employment and Housing Commission, the commission could have assessed a maximum fine of $150,000. “Obviously, this guidepost weighs in favor of a lower constitutional limit in this case.”

    After considering all these factors, the court concluded that a one-to-one ratio is the federal constitutional limit in this case. The court then ordered a reduction of the punitive damages to a $1.9 million maximum, without affording the plaintiff the option of a new trial. Thus, the Supreme Court implicitly rejected Roby’s argument that a new trial was the only appropriate remedy. Curiously, while embracing the one-to-one ratio as the limit in this case, the Supreme Court did not mention the U.S. Supreme Court’s opinion in Exxon Shipping, which adopted a one-to-one ratio limit as a matter of federal common law.

    In a concurring and dissenting opinion, Justice Werdegar (joined by Justice Moreno), agreed with most of the majority’s analysis, but argued that a ratio of two to one should be the limit. Justice Werdegar reasoned that a higher award was warranted for two reasons: (1) she viewed the defendant’s conduct as being more reprehensible than described in the majority opinion, and (2) the defendant is a large corporation, ranked in the top 50 of the Fortune 500.

    The significance of this opinion lies partly in the fact that the California Supreme Court has issued so few opinions on punitive damages in recent years. The opinion is fairly lengthy, and various tidbits from this opinion will likely be relevant to a variety of sub-issues that arise in punitive damages litigation. But the primary significance seems to be that the court has put the final nail in the coffin of the argument that the portion of State Farm calling for a one-to-one ratio limit is mere dicta that should does not apply in California.

    UPDATE (12/01/2009): The Daily Journal has a story on Roby here (subscription required).

  • California Supreme Court Will Hear Oral Arguments in Roby v. McKesson on Sept. 2

    In prior posts, we have mentioned in Roby v. McKesson, a case pending before the California Supreme Court. The briefing in that case has focused primarily on employment law issues, but punitive damages are in the mix.

    For example, Roby argues that Court of Appeal went too far in reducing her punitive damages award from $15 million down to $2 million, for a punitive-to-compensatory ratio of 1.4 to 1. Roby’s petition for review suggested that the reduction was the result of a “knee-jerk adherence” to the “mere suggestion” in State Farm v. Campbell that the ratio of punitive damages to compensatory damages should be low, perhaps no more than 1 to 1, in cases involving substantial compensatory damages.

    In April of this year, the Supreme Court asked the parties to file supplemental briefs to address whether the jury’s damages awards are so ambiguous that a new trial is required. That question raises the distinct possibility that the Supreme Court won’t even reach the punitive damages issues in Roby, but we’re continuing to keep an eye on this one just in case. Oral argument has been set for Sept. 2. Click here to view the court’s online docket.

  • $25 Million Punitive Damages Award in Riverside Employment Case

    The Riverside Press-Enterprise is reporting that a jury has awarded $916,000 in compensatory damages and $25 million in punitive damages in an age discrimination case against Sears Holdings. The plaintiff, a former manager of a KMart store, claims he was fired as part of a company-wide policy of replacing older workers with “fresh blood.”

    The 27.3-to-1 ratio of punitive damages to compensatory damages is suspect, to say the least. Not surprisingly, Sears says it plans to file posttrial motions and, if necessary, an appeal.

  • $4.1 Billion Judgment Is Real

    When we posted last week about a judgment confirming a $4.1 billion arbitration award (including $3 billion in punitive damages), we received a few emails questioning whether that could possibly be true. People wondered whether an arbitrator could possibly award that much to an individual in an employment dispute.

    Oh yes, it’s true. Settle It Now has posted a .pdf copy of the judgment.

  • A $3 Billion Punitive Damages Award in Los Angeles?

    A Sacramento plaintiff’s lawyer has issued a press release reporting that he won a $4.1 billion dollar judgment in an employment dispute in Los Angeles. The press release says the judgment was entered after the superior court confirmed a private arbitration award. The press release does not specify the amount of punitive damages awarded, except to say that the arbitrator awarded punitive damages equal to three times the compensatory damages.

    UPDATE: I looked this case up on the L.A. Superior Court’s website. Assuming I have the right case number (BC353567), this appears to be a default judgment, a fact not mentioned in the press release.

    FURTHER UPDATE (6/5/09): Scot Bernstein, counsel for the plaintiff, contacted us to clarify that there were four defendants in this case, and only one of them defaulted. The other three moved to compel arbitration, which ultimately led to a $4.1 billion judgment confirming the arbitration award.

    YET ANOTHER UPDATE (6/5/09): Today’s edition of the The Daily Journal (subscription required) confirms the award: $4.1 billion, with $3 billion in punitive damages. Here’s an excerpt:

    A Los Angeles County judge has signed off on a $4.1 billion arbitration award
    to the former employee of a large voice communications company, marking what
    is believed to be the largest arbitration award ever for an employment
    dispute.

    The JAMS award could lead employers to reconsider arbitration
    agreements that have become standard in employee contracts, attorneys said.

    Arbitrator William F. McDonald, a retired Orange County Superior Court judge,
    found iFreedom Communications International Holdings Limited, and its founder, Timothy Ringgenberg, liable for more than $975 million in compensatory damages and awarded nearly $3 billion in punitive damages, as well as interest and penalties, to Paul Thomas Chester.

    Manpowerblogs has more.

  • Lopez v. Bimbo Bakeries: Court of Appeal Affirms $2 Milllion Punitive Damages Award

    The California Court of Appeal (First District, Division Four) issued this unpublished opinion last week, affirming a $2 million punitive damages award in an employment case involving compensatory damages of $340,700 (a ratio of 5.87 to 1).

    This punitive damages discussion goes into more detail than the typical unpublished opinion. From my perspective, these are the two most interesting aspects of the court’s analysis:

    1. The court stated that the clear and convincing evidence standard, which applies to punitive damages determinations, “does not alter our standard of review.” That holding is directly contrary to published opinions (See, e.g., Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847 [“since the jury’s findings were subject to a heightened burden of proof, [this court] must review the record . . . in light of that burden’”].) Admittedly, there are cases going both ways on this issue. But I’m a little disappointed to see the Court of Appeal deciding this issue in an unpublished opinion without even acknowledging the split of authority. The California Supreme Court granted review last year in Harvey v. Sybase to resolve the split on this issue, but the court later dismissed review after the parties settled. Presumably the Supreme Court still views this as a review-worthy issue and will take up another case on this subject, perhaps even this one.

    2. The court concluded that the amount of the punitive damages award, and the ratio of nearly six-to-one, was not excessive under the Due Process Clause. In reaching that holding, the court did not mention the U.S. Supreme Court’s statement in State Farm v. Campbell that the ratio should be low, perhaps only one-to-one, in cases involving substantial compensatory damages. Other California appellate panels (and courts in other jurisdictions) have followed the Supreme Court’s direction on that point and have reduced punitive damages awards down to a single-digit level. (See my Washington Legal Foundation paper discussing a possible nationwide trend on this issue.) The $340,700 compensatory damages award in this case is well in excess of the amount that other courts have found to be “substantial” within the meaning of Campbell. Perhaps the Court of Appeal in this case thought the defendant’s conduct was so reprehensible that it justified an award well above the 1-to-1 ratio, notwithstanding the Supreme Court’s reasoning in Campbell. If so, it would have been nice for the court to acknowledge this aspect of Campbell and explain why it decided not to follow the Supreme Court’s reasoning.

    The opinion also addresses other issues, such as the sufficiency of the evidence to satisfy California’s “managing agent” requirement, and the relevance of the defendant’s $826 million net worth. I’m not going to make this blog post any longer by summarizing the court’s holdings on those points, but the opinion is definitely worth a read, especially for anyone handling a punitive damages appeal before the First District, Division Four.

  • Cal. Supreme Court Requests Supplemental Briefing in Roby v. McKesson

    The California Supreme Court has asked the parties in Roby v. McKesson to address the following question:

    Are the jury’s compensatory damages verdicts so ambiguous as to
    whether there is overlapping recovery as to require a remand to the trial
    court for a new trial limited to determining the amount of compensatory and
    punitive damages?

    Roby has been pending before the California Supreme Court since April 2007. The issues before the court are primarily questions of employment law, but they also include a punitive damages issue. Specifically, the petitioner contends that the Court of Appeal erred when it determined that a $15 million punitive damages award was excessive and ordered the award reduced to $2 million, roughly 1.4 times the compensatory damages. The question that the Supreme Court is now posing suggests that the court may order a new trial in that case without deciding the punitive damages issue.

    A very similar issue is also before the California Supreme Court in Buell-Wilson v. Ford. In that case, the Court of Appeal took the opposite approach from Roby; the court refused to reduce a punitive damages award to a 1-to-1 ratio, notwithstanding the U.S. Supreme Court’s admonition in State Farm v. Campbell that a 1-to-1 ratio may be the outer limit in cases involving substantial compensatory damages. The defendant petitioned for review on that issue.

    There is a chance, however, the California Supreme Court won’t address this issue in Buell-Wilson either. As we have noted, the plaintiff in Buell-Wilson has moved to dismiss review based on the U.S. Supreme Court’s decision to dismiss certiorari in Williams III.

    Interestingly, the lawyer who represents the defendant in Roby also represents the plaintiff in Buell-Wilson. He may find himself on opposite sides of the same issue if the Supreme Court actually hears both cases on the merits. He will probably have to argue that, even though both cases involve substantial compensatory damages, the facts of Buell-Wilson permit a ratio in excess of 1-to-1 while the facts of Roby do not.

  • “The Failure of Punitive Damages in Employment Discrimination Cases: A Call for Change”

    This article on punitive damages in discrimination cases, which we blogged about last September when Prof. Seiner posted an advance copy on SSRN, has now been published in the latest edition of the William & Mary Law Review. The article is available on Westlaw and the citation is 50 Wm. & Mary L. Rev. 735.