This published opinion issued today addresses a recurring issue in California punitive damages litigation: when an appellate court significantly reduces a compensatory damages award, what should the court do with a punitive damages award?

The best way to handle this situation is to order a re-evaluation of the punitive damages in the trial court. That means a new trial is necessary if the punitive damages were awarded by a jury.  If the punitive damages were awarded by the trial court, the Court of Appeal should send the case back to the trial judge for reconsideration.  That approach preserves the defendant’s right to have the trier-of-fact assess punitive damages based on actual harm caused to the plaintiff.  Some California appellate decisions, like this one, have followed that approach.

The second-best approach is to direct the trial court to reduce the punitive damages to match the original ratio of compensatory to punitive damages.  That’s the approach taken by the Court of Appeal (Fourth Appellate District, Division One) in today’s Pulte Home case.  It determined that the trial court erred in calculating the compensatory damages, so it sent the case back to the trial court to recalculate the compensatory damages and then reduce the punitive damages to preserve the 1-to-1 ratio of the original award.  Although that approach maintains the original ratio, it deprives the defendant of the right to have the jury (or judge) determine whether a lesser ratio is more appropriate, in light of the fact that the harm was not as severe as originally thought.

By far the worst approach is for the Court of Appeal to simply affirm the punitive damages, without respecting the original ratio or giving the trier of fact the opportunity to determine whether a different punishment is appropriate. Unfortunately, our courts have sometimes adopted that approach, both in published and unpublished opinions.

Some day the California Supreme Court will sort this out.  We hope.

The case involves an odd set of facts.  The plaintiff claimed that his landlords invaded his privacy by posting a notice in his apartment complex informing all the tenants that the police had placed him under a psychiatric hold.  A jury awarded him $200,000 in compensatory damages and $650,000 in punitive damages.

The defendants moved for judgment notwithstanding the verdict (JNOV), arguing that the evidence did not support the jury’s finding that they acted with malice. The trial court agreed, finding that “the weight of the evidence did not support a finding of malice by clear and convincing evidence.”

The Court of Appeal (Second Appellate District, Division Three) reversed in an unpublished opinion, finding that the trial court applied the wrong standard when reviewing the evidence.  When a trial court rules on a JNOV motion, the court is not permitted to re-weigh the evidence.  The court must draw every reasonable inference in favor of the party who won at trial, and can grant JNOV only if there is no substantial evidence to support the verdict.

Here, because the trial court’s JNOV order referred to the “weight” of the evidence, the Court of Appeal concluded that the trial court must have impermissibly re-weighed the evidence.  That alone might not have been enough to justify reversal, if there were no substantial evidence of malice.  But the Court of Appeal, reviewing the entire record, concluded that a jury could infer that the defendants acted with malice, and that they posted the notice about the plaintiff with intent to force him out so  they could rent his unit at a higher price.  Accordingly, the court reversed the trial court’s JNOV ruling and reinstated the jury’s award of punitive damages.

We haven’t had many occasions to blog about the intersection between punitive damages and California’s anti-SLAPP statute (Code of Civil Procedure section 425.16).  That statute authorizes a special motion to strike a complaint that arises form activity exercising the rights of free speech.

In this unpublished opinion, the Court of Appeal (First Appellate District, Division Five) holds that an anti-SLAPP motion cannot be used to strike a punitive damages allegation.  The court explains that anti-SLAPP motions must be directed at an entire cause of action, not a prayer for a specific type of relief.

Disclosure: Horvitz & Levy LLP represents Washington Hospital in this case.