California Punitives by Horvitz & Levy

  • Court of Appeal holds that Probate Code double damages may be punitive in nature, but are not punitive damages (Hill v. Superior Court)

    Last week the California Court of Appeal (First Appellate District, Division Two) issued this published opinion holding that double damages under the Probate Code may be “punitive in nature” and may have a “punitive effect,” but they are not technically “punitive damages.”

    The issue arises at the intersection of Probate Law and punitive damages law.  The plaintiffs in this case sued their stepfather under a Probate Code provision that permits double damages against someone who in bad faith takes property from the estate of a decedent.  Things got complicated, however, when the defendant died and his son was substituted into the case as his successor in interest. The Code of Civil Procedure states that, when a defendant dies, the plaintiffs can recover from the successor in interest all the damages that they could have recovered from the decedent, except for punitive damages.

    The trial court in this case ruled that the plaintiffs could not recover double damages under the Probate Code, because double damages are akin to punitive damages and therefore were no longer available when the decedent was replaced by his successor in interest.

    The plaintiffs petitioned the Court of Appeal for writ relief.  The Court of Appeal granted the petition and reversed the trial court, ruling that double damages, even if similar to punitive damages, are not  punitive damages.  As the court explained: (1) punitive damages require a showing of malice, fraud, or oppression, which is not true for Probate Code double damages; (2) punitive damages are subject to the clear-and-convincing-evidence standard of proof, which Probate Code double damages are not; and (3) punitive damages require proof of the defendant’s financial condition, with Probate Code double damages do not.

    On its way to that conclusion, the Court of Appeal included an interesting aside on the relationship between punitive damages and statutory penalties.  It said that plaintiffs can recover both statutory penalties and punitive damages in the same case.  Many other cases have held, however, that plaintiffs cannot recover both statutory penalties and punitive damages, and must elect one or the other.  The opinion cites one of these cases, Hassoldt v. Patrick Media Group, but the only thing the opinion says about Hassoldt is that “Hassoldt is not a First District case.”

    Ultimately, this case is not really about whether plaintiffs can recover both statutory penalties and punitive damages for the same wrong, so the statements on that issue are dicta.  But this opinion may end up causing some confusion on that point if cited out of context.

  • Interplay Between Punitive Damages and Statutory Penalties/Remedies?

    Our recent posts about the “new right/exclusive remedy” issue pending in Savaglio v. Walmart and about the inapplicability of the Adams v. Murakami financial condition rule in statutory penalty cases prompt this observation: I wonder if courts and litigants are broadly aware of the election of remedies rule discussed in Fassberg Const. Co. v. Housing Authority of City of Los Angeles (2007) 151 Cal.App.4th. 267. Here’s an excerpt with part of that discussion:
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    The Housing Authority contends it is entitled to recover the compensatory damages for breach of contract, treble damages for false claims, civil penalty, and punitive damages. We conclude that the trial court correctly required an election of remedies. (FN 27)
    California courts have held that if a defendant is liable for a statutory penalty or multiple damages under a statute, the award is punitive in nature, and the award penalizes essentially the same conduct as an award of punitive damages, the plaintiff cannot recover punitive damages in addition to that recovery but must elect its remedy. (Troensegaard v. Silvercrest Industries, Inc. (1985) 175 Cal.App.3d 218, 226-228, 220 Cal.Rptr. 712 [civil penalty under Civ.Code, § 1794]; Marshall v. Brown (1983) 141 Cal.App.3d 408, 419, 190 Cal.Rptr. 392 [treble damages under Lab.Code, § 1054]; see Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1256, 79 Cal.Rptr.2d 747 [stating that the plaintiffs must elect between statutory penalties or treble damages under Pen.Code, § 637.2, subd. (a) and punitive damages]; Turnbull & Turnbull v. ARA Transportation, Inc. (1990) 219 Cal.App.3d 811, 826, 268 Cal.Rptr. 856 [treble damages under Bus. & Prof.Code, § 17082].) To impose both a statutory penalty or multiple damages award and punitive damages in those circumstances would be duplicative. (Troensegaard, supra, at pp. 227-228, 220 Cal.Rptr. 712; Marshall, supra, at p. 419, 190 Cal.Rptr. 392.) We presume that the Legislature did not intend to allow such a double recovery absent a specific indication to the contrary. (Troensegaard, supra, at p. 228, 220 Cal.Rptr. 712; see Hale v. Morgan (1978) 22 Cal.3d 388, 405, 149 Cal.Rptr. 375, 584 P.2d 512 [narrowly construing Civ.Code, § 789.3 with regard to the amount of a civil penalty]; People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 294, 313-314, 58 Cal.Rptr.2d 855, 926 P.2d 1042 [discussing Hale].)
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    The court went on to discuss and reject the plaintiff’s contention that the penalties were really compensatory in nature, and thus did not preclude an additional award of punitive damages:

    We need not decide categorically whether the recovery of treble damages and a civil penalty under the California False Claims Act precludes the recovery of punitive damages on a common law cause of action arising from the same conduct in all cases. Instead, we focus on the nature of the awards in this case (see Cook County, supra, 538 U.S. at p. 130, 123 S.Ct. 1239) to determine whether the treble damages award and civil penalty included sufficient amounts serving a punitive objective so as to render an additional award of punitive damages a prohibited double recovery under California law. Because there was no qui tam relator entitled to a significant portion of the treble damages award, we conclude that most of the treble damages award here served a punitive rather than a compensatory purpose. Moreover, particularly in light of the treble damages award, we conclude that the additional civil penalty served primarily a punitive purpose. Considering the amount of the civil penalty ($1,491,500) relative to the amount of the Housing Authority’s purported actual damages resulting from false claims ($455,000), together with our conclusion that the majority of the treble damages award served a punitive purpose, we are compelled to conclude that the aggregate punitive portion of the treble damages award and civil penalty is sufficiently large that any additional award of punitive damages would be duplicative and unwarranted.

  • In re Estate of Sheen: California Court of Appeal Holds Statutory Penalty is Not Subject to Rule Requiring Proof of Net Worth for Punitive Damages

    npublished opinion (2008 WL 2059133), the Second District court of appeal reviewed a trial court’s decision not to award statutory penalties under Probate Code section 859 where the plaintiff failed to produce evidence of net worth. Section 859 allows a court to award twice the amount of damages against a person who, in bad faith, wrongfully takes estate or trust property. The court of appeal reversed, holding that the California Supreme Court’s Adams v. Murakami rule (plaintiffs must present evidence of the defendant’s financial condition to preserve a claim for punitive damages) does not apply to statutory penalties:

    “In cases of statutory penalties, with amounts or ranges legislatively fixed, the precondition of showing the defendant’s financial condition (Adams v. Murakami (1991) 54 Cal.3d 105) does not apply – although the defendant may raise financial condition as a fact in mitigation of the penalty or its amount. (E.g., Rich v. Schwab (1998) 63 Cal.App.4th 803, 814-817.) The trial court here overlooked this distinction, or misconstrued petitioners’ prayer for a penalty as one for conventional punitive damages.”