California Punitives by Horvitz & Levy

  • Supreme Court authorizes recovery of punitive damages against Sudan for 1998 embassy bombings (Opati v. Republic of Sudan)

    The Supreme Court issued a unanimous 11-page opinion today, reversing the D.C. Circuit and allowing punitive damages against the government of Sudan for its role in the 1998 bombings of the U.S. embassies in Kenya and Tanzania.

    As described in our prior post about this case, the plaintiffs obtained a judgment for $6 billion in compensatory damages and $4.3 billion in punitive damages.  The D.C. Circuit vacated the punitive damages award, ruling that when Congress amended the Foreign Sovereign Immunities Act (FSIA) in 2008 to create a federal cause of action against foreign governments for acts of terror, Congress did not expressly authorize recovery of punitive damages for acts committed before 2008.

    The Supreme Court disagreed.  Justice Gorsuch, writing for the court, explained that the National Defense Authorization Act for Fiscal Year 2008 (NDAA) created a federal cause of action for acts of terror, and expressly provided that remedies “may include economic damages . . . . and punitive damages.”  Moreover, two other provisions of the act specifically authorized new claims for pre-2008 acts of terrorism.  Although the latter provisions did not expressly mention punitive damages, the Supreme Court found it implausible that Congress would have authorized retroactive application of all the other features of the new cause of action except for punitive damages.

    The Supreme Court also rejected Sudan’s argument that the 2008 act is equivocal because it says only that awards “may” include punitive damages.  Justice Gorsuch noted that all categories of damages authorized by act are provided on equal terms, i.e., damages “may” include economic, non-economic, and punitive damages.  Thus, the use of the word “may” simply indicates that district courts are given discretion to determine whether each category of damages is appropriate under the facts of the particular case.

    However, the Supreme Court stopped short of reinstating the entire $4.3 billion punitive damages award.  That’s because the case involved two categories of plaintiffs: (1) U. S. nationals, members of the U.S. Armed Forces, and U. S. government employees or contractors, and (2) foreign nationals who are family members of U.S government employees and contractors.  The NDAA created a direct cause of action for the first category of plaintiffs, but not for the second, who were left to pursue claims under pre-existing state laws.  The D.C. Circuit, after concluding that U.S. nationals could not recover punitive damages, concluded that it would be “puzzling” to allow such a remedy to foreign nationals.  The Supreme Court, having concluded that U.S. nationals can recover punitive damages, asked the D.C. Circuit to revisit the availability of punitive damages for foreign nationals.

  • California Court of Appeal overturns three large punitive damages awards (Curry v. Academy Pointe, Colucci v. T-Mobile, and Tilkey v. Allstate)

    The pandemic-related shutdown has brought civil litigation in California to a screeching halt in the trial courts.  But the California Court of Appeal has continued processing cases and issuing opinions, and has overturned three large punitive damages awards since the shutdown began.

    1.  In Curry v. Academy Pointe, Inc., a landlord-tenant dispute over disability accommodations, a jury awarded $750,000 in compensatory damages and $4.5 million in punitive damages.  The landlord appealed and the Court of Appeal (Second Appellate District, Division One) reversed the punitive damages award in an unpublished opinion.

    The court found the punitive damages award was excessive because it bore no reasonable relation to  the low reprehensibility of defendants’ conduct, the severity of the plaintiff’s harm (which was completely compensated by the substantial compensatory damages award), and the possible civil penalties authorized by the Legislature for similar conduct. The court therefore reduced the punitive damages award to $750,000, resulting in a 1 to 1 ratio between punitive and compensatory damages.

    [Disclosure: Horvitz & Levy represented the landlord on appeal in Curry.]

    2.  In Colucci v. T-Mobile, a workplace retaliation case, a jury awarded $1 million in compensatory damages and $4 million in punitive damages.  T-Mobile appealed and the Court of Appeal (Fourth Appellate District, Division One), in a published opinion, ordered a reduction of the punitive damages award to $1.5 million.

    The court concluded that the reprehensibility of T-Mobile’s retaliatory conduct was “in the low or moderate range of wrongdoing that can support an award of punitive damages.”  And the court acknowledged that the California Supreme Court in Roby v. McKesson set a maximum ratio of 1 to 1 in another case involving a significant compensatory damages award and a low level of reprehensibility.  But the court did not explain why it chose a 1.5 to 1 ratio instead of following Roby‘s guidance and setting the maximum at 1 to 1.

    3. In Tilkey v. Allstate, a jury awarded $2.7 million in compensatory damages and $16 million in punitive damages to a plaintiff asserting a claim of “compelled self-published defamation.”  Allstate appealed, arguing that compelled self-published defamation is not a viable tort theory and, even if it were, it could not support an award of punitive damages.  The same court that issued the Colucci opinion, the Fourth Appellate District, Division One, issued a published opinion rejecting those arguments, but reversing the punitive damages award as excessive.  The court noted that the ratio of punitive damages to compensatory damages was more than 9 to 1, comparing the punitive damages only to the portion of the compensatory damages award attributable to defamation ($1.7 million).  Rather than reducing the punitive damages award to a specific number, the Court of Appeal sent the case back to the trial court to determine the constitutional maximum.

      

  • Court of Appeal reduces $13.8 million punitive damages award to $5.7 million in discrimination case (Moland v. McWane)

    In this employment case involving claims of racial discrimination and wrongful termination, a jury awarded $13.8 million in punitive damages and $2.87 million in compensatory damages, a ratio of 4.8 to 1.  On appeal, the defendant argued that the punitive damages should be vacated entirely or at least reduced as excessive.

    The California Court of Appeal (Second District, Division Seven) held in an unpublished opinion that an award of punitive damages was justified because the evidence, viewed in the light most favorable to the plaintiff, could support an inference that the defendant acted with extreme indifference to the plaintiff’s right to be free of racial discrimination in the workplace.

    Turning to the question of excessiveness, the court analyzed the three BMW/State Farm guideposts: (1) the reprehensibility of the conduct, (2) the ratio of punitive to compensatory damages, and (3) the difference between the punitive damages award and civil penalties authorized by the Legislature for similar misconduct.

    1.  The court found several indicators of a higher level of reprehensibility: the defendant’s acts affected the plaintiff’s emotional and mental health (i.e., did not inflict purely economic harm), the defendant should have known the plaintiff would suffer emotional harm, and the plaintiff was financially vulnerable.  But the court rejected the plaintiff’s argument that the level of reprehensibility was enhanced by the fact that the defendant made multiple decisions that harmed the plaintiff.  The court explained that discrimination against the plaintiff was a single instance of wrongdoing, and in the absence of further instances against the plaintiff or others, the defendant could not be treated as a repeat offender.

    2.  When analyzing the ratio of punitive damages to compensatory damages, the court rejected the defendant’s argument that a 1 to 1 ratio should be the constitutional maximum in light of the substantial noneconomic damages (about $2.5 million of the total compensatory damages award).  The court held that the ratio can exceed 1 to 1 when the noneconomic damages and the reprehensibility of the defendant’s conduct are both high.  Relying heavily on a Second Circuit decision, the court concluded that a limit of 2 to 1 is the constitutional maximum in a case of this nature.

    3.  Finally, the court compared the punitive damages award to a now-repealed $150,000 cap on administrative fines for claims before the California Fair Employment and Housing Commission.  The court found that the cap weighed in favor of an award less that the jury’s verdict, but did not mandate an award below a 2 to 1 ratio.

    Accordingly, the court ordered the trial court to modify the judgment to reduce the punitive damages award to $5.8 million, roughly double the amount of compensatory damages.  Appropriately, the court did not give the plaintiff the option of rejecting the lower amount in favor of a new trial.

  • Ninth Circuit affirms $2.5 million punitive damages award in insurance bad faith case (McClure v. Country Life)

    The unpublished opinion affirms $2.5 million in punitive damages and $1.29 million in compensatory damages in an insurance bad faith case.  The analysis is sparse, as usual for a memorandum disposition.  The court affirms the punitive damages because the plaintiff presented sufficient evidence that the defendant acted with an “evil mind” under Arizona punitive damages law.  Apparently the defendant did not argue that the punitive damages were excessive.

  • Ninth Circuit reduces punitive damages from $52 million to $32 million (Ramirez v. TransUnion LLC)

    In this published opinion, the Ninth Circuit reduced a punitive damages award from roughly $52 million to roughly $32 million.  Even that reduced figure represents one of the largest sums of punitive damages that has ever survived a Ninth Circuit appeal. 

    In this class action against credit reporting agency TransUnion, the plaintiffs alleged that TransUnion incorrectly placed terrorist alerts on the front page of their credit reports and send confusing and incomplete information about the alerts and how to remove them.  A jury awarded punitive damages in the amount of $6,353.08 per class member, for a total of $52 million.  That resulted in a 6.45 to 1 ratio of punitive to compensatory damages.

    The Ninth Circuit rejected most of TransUnion’s arguments on appeal but concluded that the award of punitive damages is constitutionally excessive, primarily because the defendant’s conduct, although “egregious,” did not involve health or safety and was not the result of intentional malice, trickery, or deceit.  The court determined that the 4 to 1 is the maximum ratio permitted by due process on the facts of this case.  Accordingly, the court directed the district court to modify the judgment to reduce each class member’s award of punitive damages to $3,936.88.  Judge Murguia wrote the opinion, joined by Judge Fletcher.  Judge McKeown dissented.

  • “Recent cases highlight strategies to defeat punitive damages even when compensatory liability may be difficult to avoid”

    The JD Supra Blog features this post by attorneys at Butler Snow offering advice based on recent jury verdicts in punitive damages cases: “Recent cases highlight strategies to defeat punitive damages even when compensatory liability may be difficult to avoid.”

  • Court of Appeal reverses $2 million punitive damages award due to lack of financial condition evidence (Chen v. Bam Brokerage)

    In this unpublished opinion, the California Court of Appeal (Second District, Division Seven) once again reversed a punitive damages award because the plaintiff failed to present evidence of the defendant’s financial condition.

    The plaintiff presented evidence that the defendant owned four pieces of real property, but presented no evidence of the defendant’s liabilities, including the encumbrances on those properties.  That was insufficient to support a punitive damages award, under the well-established rule that “evidence of liabilities should accompany evidence of assets.”  Accordingly, the court directed the trial court to enter judgment for the defendant on the issue of punitive damages.

  • Bayer plans to challenge $250 million punitive damages award over Dicamba weedkiller

    Earlier this month a jury in federal court in Missouri awarded $15 million in compensatory damages and $250 million in punitive damages to a peach farm that alleged its orchards were damaged by Bayer’s weedkiller Dicamba. 

    Dicamba was made by Monsanto, which Bayer acquired in 2018.  This litigation is unrelated to litigation involving the weedkiller Roundup, also made by Monsanto. 

    Bayer plans to challenge this verdict on appeal, per Reuters.

  • $8 billion punitive damages award against J&J reduced to $6.8 million in Risperdal case

    FiercePharma reports that a Philadelphia trial court has reduced the $8 billion punitive damages award against Johnson & Johnson to $6.8 million.  The case involves J&J’s alleged failure to warn about the potential side effects of the anti-psychotic drug Risperdal.

    According to the story, the court found that the punitive damages award was grossly disproportionate to the compensatory damages award of $680,000.  Johnson & Johnson says it still plans to appeal the award as reduced.  No doubt the plaintiffs will also appeal from the reduction of the award.

  • Court of Appeal vacates punitive damages in default judgment due to lack of evidence of defendant’s finances (Dong v. Ryu)

    This case is a reminder that California law requires plaintiffs to present evidence of the defendant’s financial condition as a prerequisite to obtaining punitive damages, even in default judgments.

    In this case, the plaintiffs argued on appeal that their default judgment should be affirmed, including $57,000 in punitive damages, even though they presented no evidence of the defendant’s finances.  They argued that the defendant’s failure to respond to their complaint deprived them of the opportunity to obtain information about the defendant’s finances. 

    The Court of Appeal (Second District, Division Two) rejected that argument in an unpublished opinion.  The court noted that plaintiffs failed to show that they even tried to meet their burden: “our review of the record reveals no showing of what efforts, if any, were undertaken by plaintiffs to obtain information regarding defendant’s financial condition.”  The Court of Appeal reversed the punitive damages portion of the judgment and directed the trial court to enter judgment for the defendant on that issue.