California Punitives by Horvitz & Levy

  • Brewer v. Premier Golf Properties: California Court of Appeal Reverses Punitive Damages Award in Wage & Hour Case

    When it rains, it pours. While the blogosphere was already buzzing about today’s oral argument in Williams III (see below), the California Court of Appeal (Fourth District, Division One) issued a significant punitive damages decision of its own, dealing with the availability of punitive damages for alleged violations of the California statutes and regulations governing meal and rest breaks, minimum wages, and pay stubs. My colleague Felix Shafir provides this summary:

    In Brewer v. Premier Golf Properties, a former waitress sued her employer for, among other things, denying her meal and rest breaks mandated by law, failing to pay her wages for the hours she worked, and not providing her with accurate itemized wage statements. A jury found in her favor on these allegations and awarded the plaintiff $195,000 in punitive damages (among other relief). The Court of Appeal reversed the punitive damages award based on two rationales. First, the court held that the “new right-exclusive remedy” rule (whose effect on punitive damages awards we blogged about several months ago – – here here and here) precluded an award of punitive damages. As the court explained, under that rule, “‘[w]here a statute creates new rights and obligations not previously existing in the common law, the express statutory remedy is deemed to be the exclusive remedy for statutory violations, unless it is deemed inadequate.’” The court determined that the Labor Code statutes regulating pay stubs and minimum wages, as well as the statute and regulations governing meal and rest breaks, created new rights that did not previously exist in the common law. The court then held that those statutes provided the express and exclusive remedy for violations of meal/rest break, minimum wage, and pay stub laws.

    The court also held punitive damages would be unavailable in the case even if the Labor Code statutory scheme did not provide the exclusive remedy. The court explained that punitive damages “are ordinarily recoverable only in ‘an action for the breach of an obligation not arising from contract.’” Applying this rule, the court decided that “the Labor Code provisions governing meal and rest breaks, minimum wages, and accurate pay stubs constitute statutory obligations imposed only when the parties have entered into an employment contract and are obligations arising from the employment contract,” and thus held that punitive damages could not be recovered for violations of these provisions.

    UPDATE: The Complex Litigator weighs in on Brewer. And Wage Law too.

  • SCOTUS Rejects FedEx Petition to Review Standard for Awarding Punitive Damages in ADA Cases

    Law.com reports that the US Supreme Court has rejected a cert petition by FedEx seeking review of a 4th Circuit decision (Federal Express Corp. v. Equal Employment Opportunity Commission, 513 F.2d 360 (2008)) affirming a jury award of $100,000 in punitive damages. In the suit brought by a deaf package handler pursuant to the Americans with Disabilities Act (ADA), the Baltimore jury found FedEx liable under the “reckless indifference” standard for punitive damages in ADA cases (see Kolstad v. American Dental Association, 527 U.S. 526 (1999)), and the 4th Circuit appellate court rejected FedEx’s argument on appeal that its internal compliance and grievance policies established a “good faith” defense to the claim as a matter of law.

    The 4th Circuit construed the “reckless indifference” standard as not requiring a subjective “bad motive” on the part of the employer, and further held that “the mere existence of an ADA compliance policy will not alone insulate an employer from punitive damages liability.” FedEx challenged that analysis in its petition for certiorari, arguing that the decision “will allow the issue [of punitive damages] to go automatically to the jury in every ADA case involving the interactive process, regardless of the employer’s state of mind in attempting to comply with its obligations.” The EEOC brief in opposition countered that the “reckless indifference” standard in Kolstad required only “consciousness of consequences or of wrongdoing,” and that “an employer can avoid the imposition of punitive damages by demonstrating that it engaged in good-faith efforts to comply with the law.” The EEOC’s press release announced the denial of FedEx’s petition for certiorari last week.

    Note that the compensatory award was only $8,000. As described by Sean Andrussier in the North Carolina Appellate Blog, FedEx challenged the $100,000 punitive award (12.5 times the compensatory award) as excessive on appeal. It does not appear, however, that FedEx renewed that argument in its cert petition. The punitive award was well within the applicable $300,000 statutory cap for damages under the ADA. But as the aforementioned blog post explains:

    The notion that an award is beyond due process review for excessiveness if it falls within a statutory range is misplaced. See, e.g., Kent v. A.O. White, Jr., Consulting Eng’r, P.C., 559 S.E.2d 731, 736-40 (Ga. Ct. App. 2002) (holding that punitive award that had been reduced by trial court to $250,000 statutory cap remained unconstitutionally excessive and ordering reduction to $85,964).

  • Robles v. Autozone Inc.: Unpublished Opinion Affirms Trial Court’s Reduction of Punitive Damages Award from 100-to-1 Ratio Down to 6-to-1

    In this unpublished opinion issued yesterday, the California Court of Appeal (Fourth Appellate District, Division One) affirmed a trial court’s decision to reduce a $7.5 million punitive damages award down to $438,900.

    The plaintiff was a former employee of AutoZone. He brought a claim against AutoZone for false imprisonment, claiming that he was wrongly accused of stealing money, questioned for three hours, and then coerced into signing a false confession. A jury awarded him $73,150 in compensatory damages and $7.5 million in punitive damages. In response to the defendant’s motion for JNOV, the trial court reduced the punitive damages to $438,900, six times the compensatory damages.

    The punitive damages discussion in this opinion is unusually long and I haven’t had time to read it carefully, but the court seems to reach these basic conclusions:

    1. The trial court did not err when it used a verdict form that did not require the jury to identify, by name, the corporate managing agent who authorized the misconduct at issue.

    2. Substantial evidence supported the jury’s conclusion that the defendant’s managing agents did in fact authorize the misconduct of lower level employees. Although the employees violated express company policies, the Court of Appeal said there was evidence to support a reasonable inference that AutoZone management had effectively authorized the employees’ conduct by structuring the company loss prevention department and procedures in such a way that effectively fostered abuses of power. (Without knowing all the details of the case, it’s a little hard to imagine how a jury could reasonably infer that corporate management authorized conduct which corporate management had expressly prohibited.)

    3. The trial court did not err in reducing the amount of punitive damages. The Court of Appeal found that the facts justified a significant punitive damages award because: (a) the defendant took advantage of a financially vulnerable plaintiff, (b) the conduct was not an isolated incident, and (c) the defendant engaged in intentional trickery and deceit. At the same time, however, the Court of Appeal found there were no extremely unusual circumstances that could support a double-digit ratio of punitive to compensatory damages. Accordingly, the Court of Appeal agreed with the trial court that 6-to-1 was the maximum ratio permitted by due process. Notably, the court observed that:

    [E]ven a six-to-one ratio of punitive damages represents a blot on a corporation’s reputation and has a punitive effect. The level of punitive damages imposed is not required to be so large as to impede the activities of the corporation.

    As I was reading through this opinion, a few peculiarities jumped out at me. First, the court cites its own prior opinion in Buell-Wilson v. Ford, without acknowledging that the California Supreme Court has granted review in that case, which therefore cannot be cited under California’s rules of court.

    Second, the court states that “It was appropriate for [plaintiff] to go forward and make out a case for punitives, to fully redress his injury.” That language seems contrary to the California rule that punitive damages can never be awarded to compensate for a plaintiff’s injuries, and are only available to serve the purposes of punishment and deterrence. See, e.g., Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379, 1387 (“‘punitive damages by definition are not intended to compensate the injured party’”).

    Presumably, these are things that the court would have cleaned up if it decided to publish this opinion.

    Hat tip to California Attorney’s Fees.

  • Honda Canada v. Keays: Supreme Court of Canada Vacates $500,000 Punitive Damages Award

    The Supreme Court of Canada issued an opinion today striking down a $500,000 punitive damages award in a wrongful-dismissal lawsuit. By a vote of 7-2, the court said Honda’s conduct “was not sufficiently egregious or outrageous to warrant an award of punitive damages.”

    As we noted in an earlier post about this case, the punitive damages award was considered large by Canadian standards, and was the largest punitive damages award ever in a Canadian employment-law case.

  • Pending Appeal Will Affect Punitive Damages Claims in Wage & Hour Class Actions

    The California Court of Appeal may soon resolve a punitive damages issue of critical importance to California employers: whether employees may seek punitive damages when they sue their employers for wage and hour violations.

    In 2003, a California trial court certified a class in Savaglio v. Wal-Mart, reportedly consisting of more than 115,000 hourly Wal-Mart employees, which sought to recover premium payments from Wal-Mart under Labor Code section 226.7 for missed or late meal periods. Subsequently, the class amended their allegations to seek punitive damages in addition to premium payments. In December 2005, following a rare class action trial, an Alameda jury awarded the class more than $66 million in premium payments and $115 million in punitive damages. Wal-Mart appealed and the case is currently pending before the First Appellate District, Division Four. (See the court’s online docket.)

    Among the issues that Wal-Mart has raised on appeal is whether California’s “new right-exclusive remedy” rule bars the punitive damages award in this wage and hour case. Under this rule, “where a statute creates a right that did not exist at common law and provides a comprehensive and detailed remedial scheme for its enforcement, the statutory remedy is exclusive.” (Rojo v. Kliger (1990) 52 Cal.3d 65, 79.) According to Wal-Mart’s opening appellate brief, no California appellate cases have upheld an award of punitive damages for any statutory wage and hour claims, and at least three federal district courts have applied the “new right-exclusive remedy” rule to dismiss claims seeking punitive damages predicated on alleged wage and hour violations.

    California has seen a boom in wage and hour class actions in the last decade and, according to some reports, claims seeking relief for meal period violations have been among the fastest growing areas of employment law over the past few years. Indeed, a recent report issued by Littler Mendelson (which specializes in labor and employment law) indicates that at least 311 wage and hour related class actions were filed in California state courts alone in the nearly six-month period between October 1, 2007, and March 28, 2008. (Hat tip to Wage Law Blog.) Given the dramatic rise in wage and hour class actions, the issue of whether punitive damages are available in wage and hour cases will likely have a significant impact on the potential liability California employers could face in the future.

  • Harvey v. Sybase: California Court of Appeal Reinstates Punitive Damages Award

    Last Friday, the California Court of Appeal (First District, Division Five) issued this partially published opinion reinstating a plaintiff’s claim for punitive damages in an employment discrimination case.

    The jury awarded $1.3 million in compensatory damages and $500,000 in punitive damages. The trial court granted JNOV in favor of the defendant on punitive damages, finding that no evidence supported a jury’s award. The Court of Appeal, in the unpublished part of its opinion, reversed the JNOV. For the most part, the court’s analysis is not particularly noteworthy. The court simply disagrees with the trial court’s conclusion that the plaintiff presented no substantial evidence that the defendant acted with “malice, oppression, or fraud,” the prerequisites for punitive damages under California law.

    But one small aspect of the court’s opinion caught my eye. The court acknowledges that plaintiffs must prove malice, oppression, or fraud by clear and convincing evidence, but the court then states, “Despite this more stringent burden of proof at the trial level, we nevertheless confine our review to determining whether the record contains evidence of circumstances warranting the imposition of punitive damages.” Maybe I’m misreading this, but it sounds as if the court believes that the clear and convincing evidence standard applies only at the trial court level and not on appeal. But a published California case expressly states that the clear and convincing evidence standard applies on appeal as well as in the trial court. (See 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. In other words, [this court] must inquire whether the record contains ‘substantial evidence to support a determination by clear and convincing evidence’”].) Of course, Division Five is free to disagree with this opinion by their colleagues in Division One, but if they were going to disagree with a published opinion, they probably should have published that part of their analysis.

    As an interesting side note, the plaintiff in this case was represented by our fellow blogger Bruce Nye at Cal Biz Lit. Congratulations Bruce, for getting that punitive damages award reinstated.

  • A $500,000 Punitive Damage Award in Canada is Considered to Be Extremely High and Newsworthy

    The Supreme Court of Canada is about to hear argument in an appeal from the lower appellate court’s reversal of a $500,000 punitive damage award in a wrongful termination case. That $500,000 award is apparently the highest punitive damage award ever awarded in an employment case in Canada. Perhaps we could learn something from our neighbor to the north.

    UPDATE (by Curt Cutting on 2/14/08 at 9:50 pm): A few years ago, that award would have amounted to less than $350,000 in U.S. dollars, but today the exchange rate is roughly even. God help us if the exchange rate ever gets bad enough to bring this award into the realm of the mega awards we see in California.