California Punitives by Horvitz & Levy

  • Plaintiff opposes cert. petition raising “overkill” issue (Crane Co. v. Poage)

    Last month we blogged about this pending cert. petition, which asks the Supreme Court to address (among other things) how the lower courts should deal with multiple lawsuits seeking punitive damages for the same tortious conduct. 

    This week, the plaintiff filed her opposition brief.  It argues (among other things) that Missouri law protects defendants against multiple punishment, by allowing the defendant to request a credit against any punitive damages award for its potential liability in other cases.  The plaintiff contends that the petitioner forfeited its right to raise this issue because it did not file a post-trial motion seeking such a credit, and did not raise the issue in the Missouri Court of Appeals.

    We will continue to track the petition and report on the ruling.

  • Proposed bill would authorize tripling of civil penalties in cases involving minors (AB 2015)

    California assembly member Brian Maienschein (R-San Diego) has introduced a bill entitled “Punitive damages: minors,” which would authorize tripling of civil fines and penalties in cases involving minors.  

    The law would apply to any civil penalty or remedy if (a) the purpose is to punish and deter and (b) the amount is subject to the trier of fact’s discretion.  In such cases, the trier of fact could decide to increase the amount by a factor of three, if any of these factors are present:

    (1) The defendant knew or should have known that his or her conduct was directed to one or more minors.

    (2) Minors are substantially more vulnerable than other members of the public to the defendant’s conduct and actually suffered harm from the defendant’s conduct.
    (3) The conduct involved the crimes of prostitution, pimping, and pandering.
    It is not entirely clear how this bill, if enacted, would interact with current punitive damages law.  Punitive damages fall into the category of civil remedies that are designed to punish and deter.  And the amounts of such awards are within the discretion of the trier of fact, at least to an extent (subject to state and federal limitations on excessive awards).  Therefore, it appears that this bill would apply to punitive damages, but of course the state legislature cannot override the federal constitutional limitations on punitive damages.  So to the extent this bill would authorize an award in excess of those limitations, federal law would take precedence. 
    The status of the bill can be tracked here.

  • Ninth Circuit creates circuit split on availability of punitive damages in unseaworthiness cases (Batterton v. Dutra Group)

    The Ninth Circuit issued a published opinion today that expressly disagrees with a decision of the Fifth Circuit.

    The issue is whether punitive damages are available in unseaworthiness cases under general maritime law.   The Ninth Circuit answered this question in the affirmative in 1987, in a case called Evich v. Morris.  But the Fifth Circuit ruled a few years ago that a subsequent Supreme Court case impliedly overruled Evich.

    Not so, says the Ninth Circuit:

    The Fifth Circuit’s leading opinions . . . are scholarly and carefully reasoned, but so are the dissenting opinions, which to us are more persuasive.

    This case has the makings of a good cert. petition, with an express circuit split on an issue of federal common law.  Stay tuned to see whether the Ninth Circuit agrees to take this one en banc.

  • SCOTUS asked to address punitive damages “overkill” in mass tort cases (Crane Co. v. Poage)

    In a few months, the Supreme Court will decide whether to wade back into the subject of punitive damages, a topic it hasn’t addressed in a few years.  A pending cert. petition asks the Court to address the following two issues:

    1. Whether the Due Process Clause requires appellate review that considers factors undermining the reasonableness of a punitive damages award? 

    2. Whether the Due Process Clause prohibits a punitive damages award that is more than ten times a substantial compensatory damages award against a defendant who faces multiple suits arising from a single course of conduct?

    The petition arises from a decision of the Missouri Court of Appeals that affirmed $822,250 in compensatory damages and $10 million in punitive damages.

    The second issue in the petition is particularly interesting to me.  For decades courts have struggled to find a way to address the problem of duplicative punishment that arises when multiple plaintiffs seek punitive damages for the same conduct.  (In this case, the conduct was the defendant’s use of asbestos-containing materials in equipment supplied to the Navy shortly after World War II).  Many courts have voiced concerns about punitive damages overkill, but they have not yet devised a workable solution. 

    In California, defendants are permitted to raise this concern only if they present the jury with evidence or prior punitive damages awards.  (See Stevens v. Owens-Corning Fiberglas.)  In my view, that rule conflicts with the Supreme Court’s subsequent due process decisions.  Those decisions require courts to evaluate punitive damages based on various matters not presented to the jury.  For example, the California Supreme Court held in 2016 that, when courts compare punitive damages awards to the amount of actual harm for excessiveness purposes, they can take into account attorney fees awarded as compensatory damages (Brandt fees), even if the fee award occurred after the jury’s punitive damages verdict.  (See Nickerson v. Stonebridge.)  If courts can consider other matters not presented to the jury, they should also be allowed to consider the fact that the defendant has already been punished for the same conduct in other cases.

    The Court will likely hold its conference on this petition in March. I believe this will be the first punitive damages petition to come before the Court since Justice Gorsuch replaced Justice Scalia, who consistently dissented from all of the Court’s due process decisions on punitive damages. 

  • Oakland jury awards punitive damages against Oakland councilwoman in assault case

    An Oakland jury awarded either $4 million or $550,000 in punitive damages yesterday, depending on which of these stories is correct:

    Ex-Black Panther Elaine Brown awarded $4 million in punitive damages (AP/Philadelphia Tribune)

    Jury: Oakland councilwoman must pay $550,000 in punitive damages to former Black Panther leader (East Bay Times)

    The AP’s description of the verdict seems a bit jumbled, so I’m guessing the East Bay Times got it right.

  • Court of Appeal vacates punitive damages in case where jury awarded $75 million (City of Modesto v. Dow)

    This partially published opinion issued yesterday contains an interesting discussion of California’s “managing agent” requirement.  As we have discussed in prior posts, California law does not permit punishment of corporations for the acts of non-managerial employees.  Civil Code section 3294 requires plaintiffs seeking punitive damages to prove that the misconduct at issue was committed (or authorized or ratified) by an officer, director, or managing agent of the corporation.

    The California Supreme Court has set a fairly high bar for proving that a corporate employee qualifies as a managing agent within the meaning of section 3294.  The employee must have authority to create “formal policies that affect a substantial portion of the company and that are the type likely to come to the attention of corporate leadership.”  (See Roby v. McKesson.)

    Recent cases have applied this standard inconsistently.  One decision last summer found that an employee who merely applied company policy qualified as a managing agent. Another decision a few months ago ruled that employees who applied corporate policy were not managing agents because they did not have the discretion to create company policy.

    Yesterday’s decision arises from a long and complex procedural history, most of which is not relevant to the subject of this blog.  What’s important for our purposes is that a jury in a groundwater contamination case, the City of Modesto won a jury award of $3.1 million in compensatory damages against various defendants, and $75 million in punitive damages against one defendant (Dow).

    The City’s punitive damages claim against Dow rested on the premise that Dow sold dry cleaning chemicals and knowingly provided inadequate instructions regarding the proper use and disposal of the chemicals, which ultimately led to the contamination of groundwater supplies in Modesto.

    The trial court reduced the punitive damages awards during the posttrial proceedings, ruling that any amount in excess of $5,444, 221 (four times compensatory damages) would violate due process.

    The City and Dow both appealed.  The City sought reinstatement of the jury’s $75 million punitive damages award, and Dow argued that it was entitled to judgment in its favor on the issue of punitive damages because the City failed to satisfy the managing agent requirement.

    The Court of Appeal (First Appellate District, Division Four) agreed with Dow and vacated the punitive damages award in its entirety.  The court rejected the City’s argument that Dow’s “product stewards” qualified as managing agents. Product stewards were responsible for knowing and understanding the health, safety, and environmental effects of Dow’s chemical products. They were involved in the preparation of Dow’s communications with its customers, including instructions on how users could properly dispose of chemicals.  But the Court of Appeal found no evidence that the product stewards had “broad discretion” or “ultimate authority” regarding Dow’s communications, as the City contended.

    Having concluded that the product stewards did not qualify as managing agents, and finding no other evidence of any culpable officer, director, or managing agent, the Court of Appeal vacated the jury’s award of punitive damages against Dow.

    Notably, the Court of Appeal took the clear and convincing standard of proof into account when evaluating the sufficiency of the evidence on the managing agent issue.  That approach is well grounded in California case law, but not every Court of Appeal has adhered to it, as we have noted.

    Unfortunately, the entire punitive damages discussion in this opinion has been designated “not for publication.”

    Disclosure: Horvitz & Levy LLP represented Dow as consulting counsel on appeal.

  • $150 million punitive damages award against AbbVie vacated

    The National Law Journal reports that an Illinois trial court has vacated a $150 million punitive damages award rendered against drug maker Abbvie last summer.  The court ruled that the jury’s award findings were “logically incompatible” because the jury found AbbVie liable for fraudulent misrepresentation–a claim that includes damages as an element–and yet the jury awarded $0 in compensatory damages.  The court ordered a new trial.

  • Court of Appeal conditionally affirms $500,000 punitive damages award despite vacating all compensatory damages (Jensen v. Charon Solutions)

    This unpublished opinion continues an unfortunate trend in the California Court of Appeal.

    Readers of this blog have heard me complain before that an appellate court should not affirm a punitive damages award after ordering a significant reduction in compensatory damages.  Punitive damages are supposed to bear a reasonable relationship to the plaintiff’s actual harm. Juries are instructed to make that determination in every case, and the defendant is entitled to have the jury decide that issue in the first instance.

    In this malicious prosecution case, a jury awarded $1 million in compensatory damages and $500,000 in punitive damages.  On appeal, the Court of Appeal (Second Appellate District, Division Two) concluded that the trial court erred by allowing the plaintiff’s counsel to seek over $400,000 in damages in the form of attorneys fees, based on bills which were so heavily redacted that almost no content was left.  Accordingly, the court sent the case back for a new trial on compensatory damages.

    The court should have ordered a new trial on the punitive damages as well.  That’s what some other  Courts of Appeal have done in this situation.  (See e.g., SEIU v. Colcord (2008) 160 Cal.App.4th362.)

    Instead, the Court of Appeal here affirms the punitive damages award, on the theory that, as long as the compensatory damages on remand total at least $50,000, the jury’s award of $500,000 in punitive damages will be below the “10-to-1 cap” for punitive damages.

    That’s wrong for at least two reasons.  First, as noted, the defendant has a right to have a jury decide what amount of punitive damages is appropriate based on the harm caused.  Second, our Supreme Court has explained that punitive damages are not presumptively valid whenever they are less than ten times the amount of compensatory damages.   (See Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159, 1182 [“Multipliers less than nine or 10 to one are not, however, presumptively valid“].)  A lesser ratio may still be excessive, depending on the other circumstances of the case.

    The Supreme Court will have to sort this out someday, but this case may not be the right vehicle.  The opinion is not only unpublished, but the Court of Appeal observes that “both parties’ briefs on appeal mispresent the facts and the law.”  That isn’t going to encourage the Supreme Court to solicit further briefing in this case.

  • N.J. district court vacates $50 million punitive damages award against Lockheed

    We previously reported that a jury in federal jury in New Jersey awarded $50 million in punitive damages against Lockheed Martin in an age discrimination case. That award has been vacated, according to this story published today in the Courier Post.  The district court concluded that the plaintiff failed to present clear and convincing evidence of wrongdoing by Lockheed’s senior management.

  • “CT Supreme Court Issues Punitive Damages Ruling Favorable to Policyholders”

    This article appears today in the National Law Review, discussing a Connecticut Supreme Court opinion scheduled for official release on December 19.  The article reports that the Connecticut Supreme Court has rejected the argument that insurance coverage for punitive damages would violate that state’s public policy.  Instead, “where an insurance policy expressly provides coverage for an intentional act, common-law punitive damages are properly included in such coverage.”

    The Supreme Court of California has reached the opposite conclusion.  Because Insurance Code section 533 prohibits insurers from covering losses caused by an insured’s willful act, the Supreme Court has concluded that “our public policy prohibits indemnification of punitive damages.”  (PPG Industries v. Transamerica Ins. Co. (1999) 20 Cal.4th 310, 317.)