California Punitives by Horvitz & Levy

  • Court of Appeal reverses $7.5 million in punitive damages (Bigler-Engler v. Breg)

    The $7.5 million punitive damages verdict in this case was #10 on our list of the biggest punitive damages verdicts in California in 2012.  Four years later, only $150,000 of that award survived appeal.

    The plaintiff brought a personal injury action against a medical device manufacturer (Breg) and the doctor (Chao) who recommended and sold the device.  The jury awarded roughly $5.8 million in compensatory damages, plus $7 million in punitive damages against Breg and $500,000 against Chao. Both defendants appealed.

    In a partially published opinion, the California Court of Appeal (Fourth Appellate District, Division One) reversed.

    It tossed the entire punitive damages award against Breg, because the plaintiff’s intentional concealment against Breg was not supported by substantial evidence. The jury’s malice finding against Breg was based solely on that claim, so without it there could be no punitive damages as to Breg.

    As for Chao, the court found that both the compensatory damages and the punitive damages were excessive.  California courts rarely reverse non-economic damages as excessive, but the court concluded that $5.1 million awarded by the jury for plaintiff’s pain and suffering was simply too much.  Although plaintiff sustained an injury that required multiple surgeries, by the time of trial she was suffering only “minimal physical discomfort, intermittent curtailment of daily activities, and some anxiety over the condition of her scar.”  The court ordered a new trial, subject to the plaintiff’s agreement to accept a reduction of the compensatory damages to $1.3 million.

    We have previously observed that California courts are divided on whether an appellate court should automatically reverse a punitive damages award after making a substantial reduction to the compensatory damages award.  In our view, the better reasoned answer is “yes.”  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.

    This court, however, took the alternative approach, and held that the Chao was not entitled to have a jury decide the reasonable relationship question in the first instance.  In other words, no automatic reversal of the punitive damages.  Instead, the court held Chao would be entitled to a reversal only if the court determined that the punitive damages were excessive, taking into account the reduced compensatory award.  Fortunately for him, the court answered that question in the affirmative.  The court held that the $500,000 punitive damages award against Chao was excessive as a matter of state law.  The court noted that the award exceeded 14% of Chao’s net worth, and that California courts have held that anything over 10% is presumptively excessive.  The court ordered a new trial, subject to plaintiff’s acceptance of a reduction of the punitive damages to $150,000, which is roughly 5 percent of Chao’s net worth.

    Having found the punitive damages excessive under state law, the court did not consider Chao’s alternative argument that the award was also excessive as a matter of federal due process.

  • Missouri appellate court affirms $23 million punitive damages award against Abbott

    The Missouri Court of Appeals, Eastern District, has affirmed a judgment awarding $15 million in compensatory damages and $23 million in punitive damages against drug maker Abbott Laboratories.  The plaintiffs consisted of 29 individuals who claimed they suffered birth defects because their mothers took Abbott’s antiepileptic drug Depakote.  The appellate court rejected Abbott’s argument that plaintiffs failed to prove Abbott deliberately disregarded the safety of others when marketing the drug.   

    Johnson & Johnson will soon be challenging some very large Missouri punitive damages awards, so they can’t be too happy to see this opinion.  But the court in this case applied Minnesota law to the punitive damages claim, so the decision should not have any direct impact on J&J’s talc appeals.

  • Court of Appeal issues slightly modified opinion in long-running insurance bad faith case (Nickerson v. Stonebridge)

    A few days ago the California Court of Appeal published what may be the final chapter in the lengthy saga involving a $19 million punitive damages award in an insurance bad faith case.

    We have discussed this case at length in prior posts (see the links below).  I don’t want to rehash all of that, but here’s a brief recap:

    • A jury awarded $19 million in punitive damages and $35,000 in compensatory damages against an insurer.  After the verdict, the trial court tacked on an additional $12,500 in damages to compensate the insured for the legal fees he incurred to obtain his wrongfully withheld policy benefits (Brandt fees).
    • The trial court decided the punitive damages were excessive and ordered a new trial unless the plaintiff accepted a reduction of the punitive damages to $350,000, ten times the compensatory damages awarded by the jury.
    • The Court of Appeal (Second Appellate District, Division Three) affirmed.  In the process, it said the trial court properly excluded the $12,500 in Brandt fees from the ratio calculations.  The Court of Appeal reasoned that punitive damages award could not be based on a multiplier of the Brandt fees because the jury did not know about the Brandt fees when it made the initial punitive damages award.
    • The Supreme Court disagreed, and held that the Brandt fees should have been included as part of the compensatory damages for ratio purposes.  Instead of modifying the judgment itself, the Supreme Court sent the case back to the Court of Appeal for further proceedings.

    That brings us to this week.  The Court of Appeal’s new published opinion is nearly identical to its prior decision.  The court simply deleted the prior discussion of the Brandt fee issue, and inserted a summary of the Supreme Court’s decision.  The court then added the Brandt fees onto the jury’s compensatory damages award, for a total of $47,500 in compensatory damages.  Keeping the same 10-to-1 ratio as in the previous decision, the Court of Appeal concluded that the final punitive damages award should be $475,000.

    That’s a lot of litigation over $175,000.

    P.S.  Two of the justices involved in the original decision were not part of the panel for new opinion.  Justice Croskey died while the case was pending before the Supreme Court, and Justice Klein retired.  Justice Croskey had dissented from the original opinion, taking the view that punitive damages should never have been awarded in this case.  But there is no dissent this time around.  The new decision is unanimous.

    Related posts:

    California Supreme Court rules for plaintiff in dispute over ratio calculations in insurance bad faith cases (Nickerson v. Stonebridge)

    California Supreme Court limits issues for review in Nickerson v. Stonebridge

    California Supreme Court grants review in Nickerson v. Stonebridge

    Court of Appeal orders reduction of $19M punitive damages award to $350,000 (Nickerson v. Stonebridge) – PART II

    Court of Appeal orders reduction of $19M punitive damages award to $350,000 (Nickerson v. Stonebridge) – PART I

    L.A. trial court reduces punitive damages award against Stonebridge insurance from $19 million to $350,000

    L.A. jury awards $19 million in punitive damages and $35,000 in compensatory damages in insurance bad faith case

     

  • Johnson & Johnson hit for $65 million in punitive damages in third big talc verdict

    Fortune reports that a jury in Missouri has awarded $65 million in punitive damages and $2.5 in compensatory damages against Johnson & Johnson, in favor of a woman who claims J&J’s baby powder caused her to develop ovarian cancer.

    This is the third time a Missouri jury has returned a huge verdict against Johnson & Johnson based on claims that its talc-based powders caused ovarian cancer.  The company has appealed the other two verdicts and plans to appeal this one too. It seems unlikely that the 26-to-1 ratio of punitive damages to compensatory damages in this case could survive post-trial motions and appeal.

  • Two big punitive damages awards in Florida this week

    It’s a good week to be a Florida plaintiff seeking punitive damages.

    CVN news reports that a Fort Lauderdale jury has awarded a smoker’s family $20 million in punitive damages (on top of $9 million in compensatory damages) against R.J. Reynolds.

    And The Real Deal reports that a bankruptcy judge in Miami has awarded $12.5 million in punitive damages against developer D.R. Horton for allegedly improper lending practices that contributed to the bankruptcy of a homeowners association.

  • Ninth Circuit reduces $1.16 million punitive damages award to $352,000 (Mitri v. Walgreen)

    Law 360 reported yesterday on the Ninth Circuit’s memorandum disposition in this wrongful termination case in which the plaintiff claimed he was fired for reporting potential Medicare fraud.  It’s only five pages long, so there isn’t much analysis.  In a nutshell, the jury awarded $88,000 in economic damages and $1.155 million in punitive damages, a ratio of 13 to 1.  The Ninth Circuit determined the punitive damages award was constitutionally excessive and reduced it to $352,000, a ratio of 4 to 1.

    Interestingly, the Ninth Circuit noted that a lower ratio was appropriate in light of the “substantial” compensatory damages.  Contrast that approach to the California Court of Appeal’s decision in Bullock v. Philip Morris, which held that a compensatory damages award of $850,000 (nearly ten times larger than the award in this case) was not substantial.  The Bullock court reached that conclusion by comparing the amount of the award to the defendant’s wealth.  We are not aware of any other decisions following that approach, and the Ninth Circuit certainly didn’t follow it here.

    The Ninth Circuit also observed that the jury’s punitive damages award was excessive in relation to the $10,000 fine that the California Labor Code authorizes for unlawful retaliation against whistleblowers.  California courts have gotten into the habit of saying that such comparisons are “not useful” (see Bullock again), even though the third guidepost of BMW v. Gore calls for courts to “accord substantial deference to legislative judgments concerning appropriate sanctions for the conduct at issue.”

  • Jury awards $1.7 million in punitive damages against Long Beach hospital

    The Long-Beach Press Telegram reported earlier this week on a $1.7 million punitive damages verdict against the Community Hospital of Long Beach and a co-defendant, Memorial Psychiatric Health Services.

    According to the article, the case involved three former hospital employees who claimed they were subjected to harassment and discrimination by an openly gay male nurse who worked for the defendants.  The jury awarded one of the plaintiffs $1.5 million in punitive damages and $165,175 in compensatory damages (a 9-to-1 ratio), and awarded the other two each $100,000 in punitive damages and $1.4 million in compensatory damages (a .07 to 1 ratio).

    According to the article, both defendants presented evidence that they could not afford to pay even the compensatory damages, much less a sizable punitive damages award.  That suggests the defendants will argue in post-trial motions that the award is excessive in relation to their financial condition.

  • Court of Appeal orders new trial in case that generated $55 million punitive damages award (Grow Land & Water v. McCarthy Family Farms)

    The Hanford Sentinel reported over the weekend on a decision from the Fifth Appellate District in Fresno that reversed a judgment awarding $73.4 million in compensatory damages and $3 million in punitive damages.  A jury had originally awarded $55.2 million in punitive damages, one of the largest punitive damages awards in California in recent years.  But the trial court reduced that to $3 million.

    The case arises from a failed development project.  The plaintiff, Grow Land & Water, alleged that it was in the process of acquiring land and water rights when the defendant interfered with his deal and acquired the rights for himself.

    The unpublished opinion doesn’t say much about the punitive damages.  The reversal was based entirely on problems with the compensatory damages, namely, that the plaintiff failed to prove some elements of its damages claims and the compensatory award was tainted by irrelevant and prejudicial evidence.  The Court of Appeal concluded that a new trial was therefore required on all the damages, including the punitives:

    Punitive damages must bear a reasonable relationship to the actual damages.  Thus, the reversal of the compensatory damages requires that the punitive damages be redetermined as well.

    While that may seem like an intuitive result, other divisions of the California Court of Appeal have issued opinions that dramatically reduced a compensatory damages award without ordering a new trial on punitive damages.  (See, for example, here and here.)  Under the reasoning of this case, those cases should have come out differently.  The defendants in those cases were entitled to have a jury decide in the first instance what amount of punitive damages would be reasonable in relation to the actual damages.  I’m still hoping the California Supreme Court will examine this issue, although it has passed up several opportunities to do so.

  • California Court of Appeal finds $5.5M in punitive damages unconstitutional, gives plaintiffs the option of a new trial or $900k (Vaughn v. Darwish)


    In this lawsuit by six tenants against their landlord, a Los Angeles jury awarded punitive damages totaling roughly $5.5 million.  That award was ultimately deemed constitutionally excessive in this unpublished opinion, but the path to that result was a rocky one, and I have doubts about whether the Court of Appeal’s disposition is procedurally correct.

    The procedural weirdness began in the trial court, where the court issued a rolling series of rulings on the defendants’ post-trial motions.

    After the jury’s verdict, the trial court entered judgment and the plaintiffs served notice of entry of that judgment on August 30, 2013.  The defendants then filed post-trial motions arguing, among other things, that the punitive damages were excessive.  The trial court’s deadline for ruling on those motions was October 29 (60 days after the service of notice of entry of judgment).

    On October 25 the trial court issued a minute order stating that the post-trial motions were denied, except that a new trial would be granted unless the plaintiffs consented to a remittitur of the total punitive damages to $900,000.  The minute order referenced a separate formal order dated October 25, but the trial court never signed or entered any other order on that date.

    Three days later, on October 28, the trial court issued another order stating that its October 25 ruling was only tentative and not final.

    On November 12, roughly two weeks after deadline, the trial court issued an “amended” order, again stating that the post-trial motions were denied, except that a new trial would be granted on punitive damages unless the plaintiffs accepted a remittitur of the amount to $900,000.

    On November 20, the trial court issued yet another purported amendment to its ruling on the post-trial motions, changing the amount of the remittitur.

    Both sides appealed.  The Second Appellate District, Division Two, determined that the trial court’s order purporting to grant a conditional new trial was ineffective because the trial court failed to issue a signed statement of its reasons when it initially granted a conditional new trial, and because the trial court later vacated its initial ruling by deeming it to be “tentative.”  The November 12 and November 20 rulings were ineffective because the deadline had already passed.

    Having reversed the trial court’s grant of a conditional new trial, the Court of Appeal then proceeded to grant a conditional new trial on its own, finding that the jury’s punitive damages award was constitutionally excessive under Simon v. San Paolo U.S. Holding Co., and ordering a remittitur in exactly the same amount as in the trial court’s original order.

    That disposition is questionable, because the Supreme Court of California said in Simon that, when a court determines that a punitive damages award is constitutionally excessive, the appropriate remedy is to modify the judgment by reducing the award to the constitutional maximum.  Simon explains that courts should not give plaintiffs the option of choosing a new trial as an alternative to the reduction:

    Giving a plaintiff the option of a new trial rather than accepting the constitutional maximum for this case would be of no value. If, on a new trial, the plaintiff was awarded punitive damages less than the constitutional maximum, he would have lost. If the plaintiff obtained more than the constitutional maximum, the award could not be sustained. Thus, a new trial provides only a ‘heads the defendant wins; tails the plaintiff loses’ option.

    The Court of Appeal here cited Simon but ordered precisely the sort of disposition that Simon cautions against. In so doing, the court cited a Court of Appeal opinion that pre-dates Simon.  This is probably just an oversight, which the court may correct before the opinion becomes final.

  • $360 million punitive damages award reduced under Texas cap

    Reuters is reporting that U.S. District Judge Ed Kinkeade of the Northern District of Texas has reduced a $360 million punitive damages award against Johnson & Johnson.  A jury had awarded that amount, on top of $140 million in compensatory damages, in a case involving allegedly defective hip implants.  Per the story, the judge has reduced the total award to $151 million, pursuant to a Texas statute limiting punitive damages. That total suggests the punitive damages were reduced to $11 million, but the story does not elaborate.