Judge Rex Heeseman of the Los Angeles Superior Court has an essay entitled “The Supremes and Punitive Damages” in today’s Daily Journal (subscription required). The essay gives a brief overview of the recent punitive damages decisions from the U.S. Supreme Court and the California Supreme Court, particularly last month’s decision in Roby v. McKesson, which we summarized here.

I will go out on a limb and predict that this award won’t hold up. As reported by the Associated Press, a jury in federal district court in Texas has awarded $100 million in punitive damages to 10 workers at a BP plant who claimed they were exposed to toxic fumes.

Why do I say the award won’t hold up? Because the jury awarded $10 million in punitive damages to each plaintiff, but awarded only $5,000 to $10,000 in compensatory damages to nine of the ten plaintiffs, and $240,000 or so to the remaining plaintiff. That means the ratio of punitive damages to compensatory damages is somewhere between 10,000 to 1 and 20,000 to 1 for nine of the plaintiffs, and 42 to 1 for the other plaintiff.

The North Carolina Supreme Court’s decision last week in Scarborough v. Dillard’s addresses an issue that has divided California appellate courts for quite some time.

The issue is whether the “clear and convincing evidence” standard has any role in appellate review of punitive damages awards. In most jurisdictions, plaintiffs are not entitled to punitive damages unless they can prove by clear and convincing evidence that the defendant acted with malice. But what happens when a defendant challenges a jury’s award of punitive damages, arguing that the award is not supported by substantial evidence? Should the reviewing court (either an appellate court or a trial court ruling on a JNOV motion) apply the usual “substantial evidence” rules without regard to the heightened standard of proof, and uphold the award if there is any slight amount of evidence supporting a finding of malice? Or should the reviewing court take the heightened standard of proof into account?

As we have reported in prior posts, California courts are all over the map on this issue. There is published case authority expressly holding that reviewing courts should take the “clear and convincing” standard into account. (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’”].) But there are other cases outside the punitive damages context holding that the clear and convincing evidence standard does not apply on appellate review. We occasionally see unpublished opinions (like this one and this one) applying this analysis to punitive damages decisions without even mentioning Shade Foods.

California Supreme Court opinions spanning a century or more leave the question up in the air, as we noted here. Last year the California Supreme Court granted review on this issue, but later dismissed review because the parties settled the case. Sooner or later, the court is likely to take this issue up again, but for now California law is in limbo.

In North Carolina, however, it is now clear that reviewing courts should take the clear and convincing standard into account:

[W]e hold that in reviewing a trial court’s ruling on a motion for judgment
notwithstanding the verdict on punitive damages, our appellate courts must
determine whether the nonmovant produced clear and convincing evidence from
which a jury could reasonably find one or more of the statutory aggravating
factors required by N.C.G.S. § 1D-15(a) and that that aggravating factor was
related to the injury for which compensatory damages were awarded. Reviewing the trial court’s ruling under the “more than a scintilla of evidence” standard does
not give proper deference to the statutory mandate that the aggravating factor
be proved by clear and convincing evidence. Evidence that is only more than a
scintilla cannot as a matter of law satisfy the nonmoving party’s threshold
statutory burden of clear and convincing evidence.

Hat tip: North Carolina Business Litigation Report

Related post:

Interesting North Carolina Punitive Damages Decision on the Standard of Review

The jury in this malicious prosecution case awarded $74,000 in compensatory damages and $5 million in punitive damages, for a ratio of 67.5 to one. Not surprisingly, the trial court reduced the punitive damages award (to $296,000, for a ratio of four to one). And not surprisingly, the Court of Appeal (Fourth Appellate District, Division One) affirmed that reduction in this unpublished opinion.

Both sides had appealed from the trial court’s posttrial ruling. The defendant appealed, arguing that the plaintiff failed to provide evidence of his net worth. As we have seen, California punitive damages awards are often reversed on that basis. But not this time. The Court of Appeal concluded that the defendant waived his right to assert that argument, because he failed to comply with a court order requiring him to turn over various financial documents. The defendant prepared a “statement of total assets,” in which he claimed that his total assets were approximately $50,000 and his total debts were approximately $1 million. The Court of Appeal agreed with the trial court that the defendant’s claims lacked credibility, because his own trial testimony referred to various substantial assets, such as a $4 million home, an expensive car, and beneficiary interests in trusts, none of which were disclosed on the defendant’s statement. By failing to comply with a court order to produce documents relating to these assets, the defendant waived his right to complain about the absence of evidence of his net worth.

The plaintiff filed a cross-appeal, arguing that the trial court should have ordered a new trial instead of reducing the punitive damages award outright in a ruling on the defendant’s JNOV motion. The Court of Appeal rejected that argument, citing its earlier opinion in Gober v. Ralph’s Grocery, which held that a trial court has authority to grant a JNOV on the grounds that a punitive damages award is constitutionally excessive. Under Gober, a trial court can reduce the award to the constitutional maximum without ordering a new trial. The plaintiff tried to distinguish Gober on the ground that the defendant in Gober had waived its own right to a new trial. The Court of Appeal rejected that argument, saying that a defendant need not expressly waive its right to a new trial to take advantage of the Gober rule.

On the latter point, this opinion is in direct conflict with a decision earlier this year from the same court in Leeper-Johnson v. Prudential, which held that the Gober rule could only be applied if the defendant expressly waived its right to a new trial due excessive punitive damages. Apparently, Justice McIntyre (who wrote Leeper-Johnson) and Justice O’Rourke (who wrote this opinion) are not quite on the same page regarding this issue.

From my perspective, Justice O’Rourke’s view makes a lot more sense. If a punitive damages award is unconstitutionally excessive, and the defendant asks the court to reduce the award to its constitutional maximum, the defendant is entitled to that relief, regardless of whether the defendant expressly waives its to a new trial.

In some cases involving excessive punitive damages, the defendant might have a right to a new trial if the defendant can prove a trial error, like an evidentiary or instructional error, that may have caused the jury to award a higher amount of punitive damages. But I see no reason why the plaintiff would ever have any right to a new trial as a result of an excessive punitive damages award, because the plaintiff could not possibly obtain any greater relief than the constitutional maximum. And I don’t understand why a plaintiff would obtain a right to a new trial that would not otherwise exist, simply because the defendant did not expressly waive its own rights to a new trial.

The California Court of Appeal (Fourth District, Division Three) issued this unpublished opinion last week, reversing a $255,000 punitive damages award against an attorney who was found liable for slander of title based on his improper filing of a lis pendens.

The plaintiff cited 13 different items of evidence which, he contended, supported punitive damages. One of the items was a note written by the attorney, which the Court of Appeal descibes as reading “almost like a haiku.” Here’s the note/haiku as it appears in the opinion:

Straight note
2nd Trust deed-we have
rights to do Lis Pendens
Bank accounts? what can we
tie up?
No payments against note.
Sold by-
on sale of prop or term of lease
Geoff will pay $100,000
She’s entitled to fees
under
[verified it
[removing.

The court found nothing in this “poem” (as the court described it) or any of the other items of evidence cited by the plaintiff, to support a finding of malice, oppression, or fraud within the meaning of Civil Code section 3294.

You don’t see this every day; a court concludes that a supervisor engaged in improper conduct towards an employee, and permits an award of punitive damages to both the employee and the supervisor.

In this published opinion, the Kentucky Court of Appeals affirmed an award of $1.1 million in compensatory damages and $5 million in punitive damages to a McDonald’s employee who was subjected to an improper strip search and a sexual assault. While those numbers may seem high, it isn’t completely surprising that McDonald’s ends up being liable for a sexual assault authorized by a supervisor.

But here’s where it gets weird. The supervisor also recovered $100,000 in compensatory damages and $400,000 in punitive damages (reduced from the $1 million awarded by the trial court). The supervisor claimed she was tricked by a prank caller into ordering the strip search. According to the supervisor, the prank caller said he was a police officer and asked the supervisor to call her boyfriend (who did not work for McDonald’s), and bring him into the store to conduct a body cavity search of the employee. Apparently, that seemed like a reasonable request to her, so she complied. The supervisor’s boyfriend then came to the store and sexually assaulted the employee. When McDonald’s corporate management learned of the incident, they fired the supervisor. She then sued McDonald’s for intentional infliction of emotional distress.

The Court of Appeals ruled that McDonald’s was liable to both the employee and the supervisor because McDonald’s corporate management knew that a prank caller was contacting its stores, pretending to be a police officer and convincing the store managers to conduct strip searches, but McDonald’s made a conscious decision not to train or warn their store managers or employees about the calls. Accordingly, McDonald’s must pay half a million dollars to the supervisor who was “duped” into asking her boyfriend to perform a body cavity search on an employee.

Hat tip: ABA Journal

As reported by Bloomberg, Pfizer has been hit with another big punitive damages award – – $28 million – – in litigation over its hormone replacement drug Prempro.

At the same time, a judge in a separate case involving the same drug formally unsealed a $75 million punitive damages verdict. That verdict, which a jury rendered earlier this month in the same courthouse, was supposed to be confidential but was quickly leaked to the press.

In a third Prempro case, the Eighth Circuit determined earlier this month that the plaintiffs had presented sufficient evidence to support a claim for punitive damages (but the court ordered a new trial to redetermine the amount of the award).

According to plaintiffs’ lawyers, Pfizer faces lawsuits from 10,000 more women who claim injuries from Pfizer’s hormone replacement drugs. Pretty soon this is going to add up to some real money.

Related posts:

A Mixed Bag For Pfizer On Prempro Punitive Damages

Jury Awards Undisclosed Amount of Punitive Damages Against Pfizer in Prempro Litigation

Arkansas District Court Vacates $27 Million Punitive Damages Award Against Wyeth and UpJohn

In this AmLaw Litigation Daily story, the plaintiff’s attorney who recently won a $244 million punitive damages verdict against Philip Morris says the award was so high because “this was the first trial in which the jury heard about the ‘real financial resources’ of Philip Morris.”

It sounds like future proceedings will involve a fight over the U.S. Supreme Court’s statement in State Farm v. Campbell that “[t]he wealth of a defendant cannot justify an otherwise unconstitutional punitive damages award.”

As reported by Reuters, a Florida jury has awarded $56.6 million in compensatory damages and $244 million in punitive damages to a smoker with emphysema. This is by far the largest verdict in the 8,000 or so individual trials that are proceeding in Florida as a result of the Florida Supreme Court’s 2006 Engle decision, which tossed out a $145 billion class action punitive damages award.

Related posts:

Florida Jury Awards $25 Million in Punitive Damages to Smoker’s Widow

“Smokers, tobacco, both winners in early Engle cases”

Jury Rules For Plaintiff in First Phase of Retrial After Reversal of $145 Billion Punitive Damages Award

After Reversal of $145 Billion Class Action Punitive Damages Award, Florida Smokers Seek Punitive Damages in Individual Suits

Plaintiffs’ Attorneys Win $218 Million Fee Award for Helping Obtain a Punitive Damages Verdict that Was Reversed on Appeal

SCOTUSblog has identified the cert. petition in Buell-Wilson as one of the “petitions to watch” for the Supreme Court’s upcoming conference on November 24. The SCOTUSblog post includes links to the opinion and the petition-stage briefing.

• Opinion below (California Court of Appeal)
• Petition for certiorari
• Brief in opposition
• Petitioner’s reply
• Amicus brief of the Alliance of Automobile Manufacturers
• Amicus brief of Product Liability Advisory Council, Inc.
• Amicus brief of the U.S. Chamber of Commerce
• Amicus brief of DRI — The Voice of the Defense Bar

Related posts:

Ford Files Cert. Petition in Buell-Wilson

California Supreme Court Denies Request to Re-Publish Buell-Wilson

The Largest Punitive Damages Award to Survive Appeal in California?

Cal. Supreme Court Dismisses Review in Buell-Wilson v. Ford

Plaintiff Asks California Supreme Court to Dismiss Review in Buell-Wilson v. Ford

Buell-Wilson v. Ford: Two of the Three Issues Raised in the Petition are Not Dependent on the United States Supreme Court’s Opinion in Williams III

California Supreme Court Grants Review in Buell-Wilson v. Ford

Court of Appeal May Have Been Too Quick on the Trigger in Buell-Wilson Post-Opinion Order

Court of Appeal Denies Petition for Rehearing in Buell-Wilson v. Ford

Buell-Wilson v. Ford—Court of Appeal Says Ford Waived Due Process Protections Against Excessive Punitive Damages