California Punitives by Horvitz & Levy

  • SCOTUS denies cert. in Johnson & Johnson talc case involving $1.62 billion punitive damages award

    The Supreme Court has denied Johnson & Johnson’s cert. petition discussed in this prior post.  

    The petition drew widespread support from defense organizations, including the Atlantic Legal Foundation,  DRI, the Federal of Defense and Corporate Counsel, the International Association of Defense Counsel, the Missouri Organization of Defense Lawyers, the Product Liability Advisory Council, the U.S. Chamber of Commerce, and Washington Legal Foundation.  (You can view all those briefs through links on the Supreme Court’s docket page.)

    None of the attention managed to draw the Supreme Court’s interest.  The Court denied the petition this week, with Justices Alito and Kavanaugh recusing themselves (no reason was given for the recusal but the likely explanation is that they own stock in Johnson & Johnson).  

    Bloomberg Law posted this story on the ruling today: Justices Sticking to Punitive Damages Limits after J&J Case

  • Court of Appeal affirms $500,000 in punitive damages where plaintiff recovered only $15,000 in compensatory damages but defendant caused over $100,000 in actual harm (Rubio v. CIA Wheel Group)

    At first glance, this published opinion appears to affirm a punitive damages award that is 33 times greater than the plaintiff’s actual harm.

    The appeal arose from a bench trial on a claim for wrongful termination.  The trial judge awarded the plaintiffs $15,000 in economic damages and $500,000 in punitive damages.  In the process, the trial court made a finding that the wrongfully terminated employee, who died while the litigation was pending, suffered non-economic damages between $100,000 and $150,000.  That amount was not included in the judgment because Code of Civil Procedure section 377.34 precludes recovery for a decedent’s pain and suffering.

    The defendant appealed, arguing that the 33-to-1 ratio of punitive damages was excessive.  The Court of Appeal (Second District, Division Eight) disagreed.  Citing the California Supreme Court’s opinion in Simon v. San Paolo U.S. Holding Co., the court held that the decedent’s nonrecoverable emotional distress damages should be treated as part of the actual harm caused by the defendant, when calculating the ratio between the punitive damages and the actual harm.  With those damages included, the ratio was only 3.5 to 1.

    The court went on to conclude that the 3.5-to-1 ratio was not excessive because the defendant acted with a “medium high” degree of reprehensibility when it fired an employee who was seriously ill with cancer, under the false pretense of poor job performance.  The court also found that the defendant had forfeited various other challenges to the punitive damages award by failing to procure an adequate record on appeal.

  • “Trizetto’s $570M Punitive Damages Award Excessive, Judge Says”

    Law360 reports here on a ruling by a federal district judge in New York, ordering a conditional new trial on the grounds of excessive punitive damages in a trade secrets and copyright case.  The plaintiff must decide between a new trial or a reduction of the punitive damages from $570 million to $285 million (the amount of the jury’s compensatory damages award).

  • Court of Appeal orders new trial on punitive damages in conjunction with reallocation of fault (Putt v. Ford Motor Co.)

    In this asbestos-injury case, a jury awarded approximately $8.5 million in compensatory damages and $25.5 million in punitive damages against Ford Motor Co. The trial court ruled the punitive damages were excessive and reduced the amount to $8.7 million.

    Ford appealed and the Court of Appeal (Second District, Division Two) reversed in an unpublished opinion, finding that the jury’s allocation of fault could not be squared with the evidence. The jury allocated 100% of the fault to the one defendant remaining at trial (Ford), even though the evidence showed that the plaintiff used identical asbestos-containing products made by others. Accordingly, the Court of Appeal ordered a new trial on the allocation of fault.

    The Court of Appeal then concluded it should also order a new trial on the amount of punitive damages. The court reasoned that the jury in the first trial based its award of punitive damages on the assumption that Ford was 100 percent responsible for the plaintiff’s injury, but if the jury had apportioned fault based on the plaintiff’s proportional exposure to Ford products as compared to other defendants’ products, the jury would have assigned only 8 percent fault to Ford, possibly less. The court concluded that the possibility of a much smaller allocation to Ford weighed in favor of retrying the amount of punitive damages: “the potential for a jury to find that Ford’s violation is of a substantially smaller magnitude counsels in favor of letting the jury on retrial evaluate the opprobrium of Ford’s conduct in light of Ford’s proportionate fault for plaintiff’s injury rather than simply using the constitutional maximum as a back-end safety valve.”

    Disclosure: Horvitz & Levy represents Ford in this case

  • Court of Appeal confirms that trier of fact can decline to award punitive damages even if malice is proven (Lei v. Yan)

    The plaintiffs in this malicious prosecution won a judgment in their favor after a bench trial, but they were disappointed that the trial judge did not award punitive damages.  They appealed, arguing they were entitled to punitive damages as a matter of law.

    The Court of Appeal (First District, Division Three) agreed that the plaintiffs presented “abundant evidence” to support a finding that the defendant acted with malice.  The unpublished opinion went on to explain, however, that even when the evidence could support a finding of malice, a jury (or a court in a bench trial) is never required to award punitive damages.  As prior courts have explained, a plaintiff is never entitled to punitive damages as a matter of right.  Accordingly, the court here found no basis for overturning the trial court’s decision not to award punitive damages.

  • Johnson & Johnson seeks SCOTUS review of Missouri punitive damages award

    We previously reported on this talc case in which the Missouri Court of Appeal affirmed a $1.62 billion punitive damages award against Johnson & Johnson.  

    Johnson & Johnson has filed a petition for certiorari in that case, raising the following issues:

    (1) Whether a court must assess if consolidating multiple plaintiffs for a single trial violates due process, or whether it can presume that jury instructions always cure both jury confusion and prejudice to the defendant; (2) whether a punitive-damages award violates due process when it far exceeds a substantial compensatory-damages award, and whether the ratio of punitive to compensatory damages for jointly and severally liable defendants is calculated by assuming that each defendant will pay the entire compensatory award; and (3) whether the “arise out of or relate to” requirement for specific personal jurisdiction can be met by merely showing a “link” in the chain of causation, as the Court of Appeals of Missouri held, or whether a heightened showing of relatedness is required, as the Ford Motor Company in Ford Motor Co. v. Montana Eighth Judicial District Court has argued.

    The first issue falls into a category that the Supreme Court has avoided thus far—the special concerns that arise when courts award punitive damages in mass tort situations.  The Supreme Court has repeatedly denied petitions raising these sorts of issues, but perhaps the eye-popping award here will make this the case that finally draws the court’s attention.

    The Court may feel that it has already answered “yes” to the first part of the second question, because the BMW and State Farm cases both held that a punitive damages award usually violates due process when it far exceeds a substantial compensatory damages award.  But the Court has not yet addressed the second part of that question, namely, whether in cases involving multiple defendants, courts can double-count the compensatory damages when calculating the punitive-to-compensatory ratio.  When this issue has come up in California, most courts have recognized that double-counting would result in an artificially low ratio, so our courts will generally calculate the ratio by comparing the punitive damages award against each defendant to that defendant’s proportionate share of the compensatory damages award, taking into account the jury’s allocation of fault.  It would be helpful to have a Supreme Court opinion validating that approach.

    The third question seems to be DOA, now that the Supreme Court has ruled against Ford in the Montana case referenced in the question.

    Law 360 has coverage of Johnson & Johnson’s opinion here.

  • Ninth Circuit affirms district court’s bifurcation of punitive damages trial (Phanpradith v. Griego)

    In California state court, defendants have a statutory right to request bifurcation in punitive damages trials.  (See Civil Code section 3295, subsection (d).)  The statute provides that the plaintiff cannot present evidence of the defendant’s financial condition until after the jury finds that the defendant acted with malice, oppression, or fraud.  

    Federal law does not require such bifurcation, but leaves it to the discretion of the district court. In this prisoner’s civil rights case in federal court, the district court exercised its discretion to bifurcate a punitive damages trial after the plaintiff attempted to introduce evidence about a prison official’s income before the plaintiff had established liability for punitive damages. 

    When the prisoner challenged that bifurcation order on appeal, the Ninth Circuit affirmed in an unpublished memorandum disposition, finding that the district court did not abuse its discretion in ordering because such financial evidence could have been confusing to the jury when the plaintiff had not yet established entitlement to punitive damages.  

  • “All-Women Hogan Lovells Team Secures $152M Award From Texas Jury Over Claims of Pirated Software”

    Law.com reports here on a Texas verdict awarding $32 million in compensatory damages and $120 million in punitive damages to a company that makes software for apartment management companies, against a client who allegedly allowed a third-party to pirate the software.

  • Court of Appeal vacates $15 million punitive damages award in asbestos-injury case (Morgan v. J-M Manufacturing, Inc.)

    This unpublished opinion addresses a significant recurring issue in California punitive damages litigation, and should be published. 

    A jury awarded $15 million in compensatory damages and $15 million in punitive damages against J-M Manufacturing, a company that sold asbestos-containing pipes in the early 1980s.  The jury found that the plaintiff was exposed to dust from the pipes while he was overseeing construction sites and watching other workers cut those pipes.  

    The plaintiffs’ claim for punitive damages was not based on the conduct of any particular corporate officer, director, or managing agent.  Instead, they treated the defendant as a monolithic entity.  They argued that  “they” engaged in despicable conduct, without specifying exactly who “they” were.

    On appeal, when the defendant pointed out the absence of evidence of wrongdoing by an officer, director, or managing agent, as required by Civil Code section 3294, the plaintiffs argued that they did not need to present such evidence under the circumstances of this case.  Citing Romo v. Ford Motor, they argued they could obtain punitive damages by proving that the entire organization acted with malice, without identifying any particular individual who did so.  

    We have seen this argument repeatedly from plaintiffs in California products liability cases. The Court of Appeal here (Second District Division One) rejected it, correctly recognized that what Romo actually held is that a plaintiff can satisfy the managing agent requirement “through evidence showing the information in possession of the corporation and the structure of management decisionmaking that permits an inference that the information in fact moved upward to a point where corporate policy was formulated.  These inferences cannot be based merely on speculation, but they may be established by circumstantial evidence, in accordance with ordinary standards of proof.”

    Because the plaintiffs here had presented no evidence about the “structure of management decisionmaking” they could not take advantage of this aspect of Romo.  Accordingly, due to a total lack of evidence to satisfy the managing agent requirement, the Court of Appeal vacated the punitive damages award.

    UPDATE (2/19/21):  This opinion has now been certified for publication.  

  • Court of Appeal affirms trial court order that vacated $7.5 million punitive damages award due to insufficient managing agent evidence (Verotel Merchant Services v. Rizal Commercial Bank)

    This unpublished opinion is worth a read for anyone litigating a California punitive damages case involving a “managing agent” issue under Civil Code section 3294.

    The facts are complicated but here’s a simplified recap:  Plaintiff was an online merchant who accepted credit card payments. Plaintiff sent its credit card transactions to the defendant, a bank.  The transactions were processed by an intermediary, who was secretly pocketing a percentage of the transactions.  The plaintiff caught on and sued the bank for fraud, claiming the intermediary was the bank’s agent.  The bank argued that the intermediary was actually the plaintiff‘s agent.  A jury sided with the plaintiff, awarding $1.5 million in compensatory damages and $7.5 million in punitive damages.

    The trial judge, Michael J. Raphael (who is now a Court of Appeal justice), granted the defendant’s JNOV motion and vacated the punitive damages.  He ruled that the bank could not be liable for punitive damages because the intermediary was not a managing agent of the bank. In so doing, he correctly anticipated the Supreme Court’s holding in Conservatorship of O.B., and took the clear-and-convincing evidence standard into account when evaluating the sufficiency of the evidence.

    The plaintiff appealed, arguing that the trial court applied the wrong standard in its JNOV order because it focused too much on the small number of accounts that the intermediary handled, in comparison to the bank’s overall business.  The Court of Appeal (Second District, Division Four) rejected that argument because the trial court’s analysis was squarely in line with the Supreme Court’s decision in White v. Ultramar, which held that a managing agent must have the ability to affect a “substantial portion” of the defendant’s business.    

    The plaintiff also argued that the trial court, when it ruled on the JNOV, should not have applied the holding in Roby v. McKesson that a managing agent must be in a position to create “formal policies that affect a substantial portion of the company.”  The plaintiff argued that standard was inapplicable because the jury was not instructed on it.  That argument was actually adopted by a different Court of Appeal last year in a published opinion. (See Colucci v. T-Mobile [refusing to follow the Roby standard because it was not set forth in jury instructions].)  In this case, however, the Court of Appeal didn’t buy it.  The court held that nothing about the holding of Roby is inconsistent with the standard CACI jury instruction that tells jurors to consider whether a managing agent has the power to determine corporate policy.  Therefore, the court was correct to consider Roby‘s guidance when evaluating the sufficiency of the evidence under that standard.