California Punitives by Horvitz & Levy

  • Pending Petition for Review Challenges Appellate Decision Affirming Punitive Damages Against County Officials Mired in Bribery Scandal

    On February 6, defendants in a case raising punitive damages issues filed a petition asking the California Supreme Court to grant review of an appellate court decision affirming a punitive award that the defendants claimed was unconstitutionally excessive. (Here’s the Supreme Court docket info.)
    The case is County of San Bernardino v. Walsh, and arises out of a bribery and corruption scandal. I haven’t seen the petition but, under the facts as outlined in the Court of Appeal opinion, I’m assuming there’s no traditional “ratio” challenge to the award given the relatively high compensatory damages: the trial court awarded damages of $4,242,626, comprised of various bribes, kickbacks, and fees accepted by the defendants, and further assessed $1 million in punitive damages against one defendant, plus $500,000 in punitive damages against another on breach of fiduciary duty and fraud causes of action.

    It appears the individual defendants’ focus has been on a comparison of the awards to the individuals’ net worth and claimed inability to pay. The Court of Appeal, however, held the trial court had discretion to infer that the defendants were well able to pay the judgment, concluding that they “intentionally concealed their assets, testified falsely regarding many factual issues, and were, at best, evasive and nonresponsive in answering questions as to their financial condition. This conduct gave the court wide latitude to make inferences from the evidence unfavorable to [defendants] Mays and Walsh.”

    The California Supreme Court is currently due to rule on the petition by early April (within 60 days after February 6).

  • Are Federal Credit Unions Immune from Punitive Damages Claims?

    A few months ago, in McGee v. Tucoemas Federal Credit Union, the California Court of Appeal held federal credit unions were not entitled to sovereign immunity from punitive damages claims.

    As counsel of record for the defendant, we (Horvitz & Levy LLP) are filing today a cert petition to the US Supreme Court challenging this holding. Here’s a summary from the petition outlining the question presented:

    “Federal credit unions are federal instrumentalities chartered under the Federal Credit Union Act, 12 U.S.C. §§ 1751 to 1795k. Does their authority under that Act to ‘sue and be sued,’ 12 U.S.C. § 1757(2), waive their immunity as federal instrumentalities from punitive damage claims? The decision of the Court of Appeal of the State of California, which allowed the punitive damage claims here, declined to follow decisions of the Sixth, Eighth, Ninth, and Eleventh Circuits of the United States Court of Appeals.”

    Stay tuned!

  • Punitive Damages in Mordor?

    The estate of author J.R.R. Tolkien has sued New Line Cinema for more than $150 million in compensatory damages for the alleged failure to pay the estate contractual royalties from the three Lord of the Rings movies. The lawsuit apparently also seeks punitive damages. However, whether the Tolkien estate can claim punitive damages for New Line’s alleged breach of the contract may well be determined by the City of Hope case recently argued in the California Supreme Court.

  • William Lerach Sentenced to Maximum Term

    Although not directly relevant to punitive damages, since William Lerach has been responsible for seeking major punitive damage awards in the past, his recent sentence and conviction (as well as the information on how he found certain clients) is noteworthy. As reported in the Recorder:

    “After criticizing a plea deal, Los Angeles federal Judge John Walter accepted it, but sentenced star plaintiff attorney William Lerach to the highest term under the agreement — 24 months in federal prison.

    Walter hammered prosecutors in court Monday about why they cut the deal with Lerach, who pleaded guilty in connection with kickbacks to lead plaintiffs of his former law firm, now known as Milberg Weiss. Lerach pleaded guilty to a single count of giving an improper payment to a plaintiff.

    Checking his famous bravado at the courtroom door, the former securities class action king expressed humble regret as Walter reluctantly accepted the deal hashed out between Lerach and federal prosecutors.

    Lerach’s lawyer, John Keker of San Francisco’s Keker & Van Nest, had asked that Lerach serve six months in prison and six months’ home confinement, while the government wanted 24 months behind bars.”

  • Punitive Damages Op-Ed by the California Chamber of Commerce Now Available Online

    This op-ed by Kyla Christofferson at the California Chamber of Commerce was published in the Daily Journal on January 7, but is now available on-line without a subscription on the Chamber’s website. The op-ed supported a bill that would have capped punitive damages at no more than three times compensatory damages. (See our posts about that bill here and here.)

    Don Ernst, president of the Consumer Attorneys of California, submitted a letter to the editor in response to the Chamber’s op-ed. Here’s what I said previously about Ernst’s letter:

    The letter . . . describes the Chamber of Commerce as a dishonest “front group for corporations seeking to avoid accountability for wrongdoing and negligence.” Aside from attacking the Chamber’s credibility, Ernst’s main argument is that reform is unnecessary because disproportionate punitive damage awards are rare.

    I am puzzled by the argument about the rarity of excessive punitive awards. Why should our justice system tolerate any excessive awards, even if they are rare? I doubt that the defendants who get hit with excessive punitive awards find much solace in the notion that such awards are uncommon. And if excessive punitive damages are so rare, why are the Consumer Attorneys so opposed to limiting such awards? What difference would it make, except to the defendants who are unlucky enough to be on the wrong end of those rare awards?

    Ernst supports his argument by listing cases in which punitive damages motivated manufacturers to remove dangerous products from the market. Interestingly, he doesn’t mention whether the awards in those cases would have been subject to the cap proposed by the Chamber. Out of curiousity, I looked up one of the awards he mentions – -the $125 million punitive damage award in Grimshaw v. Ford Motor Co., the infamous Ford Pinto case. Ernst cites Grimshaw as an example of an award that changed corporate behavior, but he doesn’t mention that the punitive damages award in Grimshaw was reduced to $3.5 million (by the trial court), compared to compensatory damages of $2 million. If a ratio of 1.75-to-one was sufficient to change Ford’s conduct in Grimshaw, that case hardly supports Ernst’s argument against the three-to-one cap proposed by the Chamber.

  • “Should There Be a Limit on Punitive Damages?”

    Helium is featuring a series of short essays debating the merits of unlimited punitive damage awards. Currently, the site contains four essays in favor of unlimited awards and four essays opposing unlimited awards. Visitors to the site can cast their vote.

    What is Helium, you ask? The site bills itself as “a community of writers who are revolutionizing publishing.” It is not “a blog or a collection of edited encyclopedic listings.”

  • New Mexico Jury Awards $33 Million in Punitive Damages

    The Albuquerque Journal reports that a jury has awarded $33 million in punitive damages in an abuse-of-process lawsuit by one attorney against another. The jury awarded $165,000 in compensatory damages, which makes for a ratio of exactly 200 to 1. The losing party says he plans to appeal. I hope the winner isn’t making plans to spend the $33 million quite yet.

    Hat tip to Howard Bashman.

    UPDATE (By Jeremy Rosen on 2/7/08 at 3:45 pm): On the other hand, the plaintiff may take comfort in the fact that the New Mexico appellate courts have been named as “dishonorable mention judicial hellholes” by ATRA.

  • Illegal Aliens and Punitive Damages

    In this political year, illegal immigration has been a hot topic. In some cases debates over the immigration issue have intersected with punitive damages issues. In Arizona, voters passed an initiative in 2006 that prohibits illegal aliens from being able to receive punitive damages in any lawsuit they bring. In Iowa, a proposed new law would call for employers who continue to hire illegal aliens as employees to be subject to punitive damages in addition to other civil fines.

  • AMA Study Shows that Caps on Punitive Damages Improve Access to Health Care, or Do They?

    This article discusses a new American Medical Association study, which “proves that capping punitive damages in medical malpractice cases both reduces doctors’ malpractice insurance premiums and increases the number of physicians available to care for patients.” According to the article, the AMA claims that placing a $250,000 cap on punitive damages in states that don’t have effective reforms in place could reduce medical malpractice premiums by $1.4 billion nationwide.

    The author of the article may have misinterpreted this AMA press release, issued yesterday. The press release discusses a study about the impact of caps on noneconomic damages, not punitive damages. (As most readers of this blog probably know, California has a cap of $250,000 on noneconomic damages in medical malpractice cases, but no statutory cap on punitive damages.)

  • More on Bullock v. Philip Morris: Curing Legal Error with a Remittitur?

    Another interesting aspect of yesterday’s opinion in Bullock (discussed in earlier posts here and here) is the court’s analysis of the conditional new trial/remittitur procedure, under which a court orders that a new trial will take place unless the plaintiff consents to a reduction of the damages award. The Bullock court outlines the usual use of a remittitur to cure an award that is flawed simply because it is just too high in light of the evidence. But the court goes on to say a remittitur can also be used in some cases to cure a defect in an award that is the result of a legal error that affected the jury’s deliberations. Specifically, “remittitur may be appropriate where instructional error resulted in an excessive award and the amount of the excess is ascertainable.” Ultimately, on the particular facts of Bullock, the court concluded, “we cannot determine how the instructional error that we have found affected the amount of the punitive damages award and we cannot substitute our own assessment of the appropriate amount of punitive damages for that of a jury (or a judge on a new trial motion). We therefore conclude that a remittitur by this court would be inappropriate.”

    This result – an unconditional new trial order – makes sense to me, but what’s a little harder to fathom is the court’s reference, without further elaboration, to Stevens v. Snow (1923) 191 Cal. 58, 68, in which the Supreme Court used a remittitur to, in the words of the Bullock court, “reduc[e] by one-half the amount of a judgment based on instructional error and error in the admission of evidence despite the Supreme Court’s express acknowledgment that it could not determine how the errors affected the amount of the judgment.” What’s a little odd here is that no subsequent court seems to have followed Stevens on this matter of using a remittitur to cure an award that is potentially inflated due to legal error, and the Supreme Court 60 years later – in Schelbauer v. Butler Manufacturing Co. (1984) 35 Cal.3d 442, 454 – exhaustively analyzed and expressly disapproved the use of a remittitur as a means to cure legal error, holding that use of remittitur is “confined to cases in which an excessive damage award [is] the only error in the jury’s verdict.” Several other courts have reached the same conclusion, but the Bullock court didn’t cite Schelbauer or any of the other decisions limiting remittitur to cases involving only pure excessiveness challenges to a damages award.

    It would appear that, if a court follows the Stevens approach in any future case, a clear conflict will be set up between Stevens and Schelbauer.