California Punitives by Horvitz & Levy

  • New York appellate court addresses punitive damages in asbestos litigation

    In California, a number of punitive damages cases in recent years have involved asbestos exposure.  See, for example, Bankhead v. Arvinmeritor, Pfeifer v. John Crane, and Izell v. Union Carbide. 

    New York has its share of asbestos litigation as well, but a long-standing case management order prevented plaintiffs from seeking punitive damages in those cases, at least in New York City.  Recently, a new presiding judge modified that order and allowed punitive damages claims to proceed in asbestos cases.  In fact, she ruled that plaintiffs could wait until the close of evidence to indicate whether they will seek punitives.

    A slew of defendants challenged that modification, leading to this appellate opinion.  The appellate court ruled that the trial court had the authority to modify the case management order, but she exceeded her authority when she allowed plaintiffs to wait until the close of evidence.  That was improper, according to the Appellate Division, First Department, because due process requires that a defendant be provided with an opportunity to conduct discovery and establish a defense to a claim for punitive damages.  The order deprived defendants of their due process rights by leaving them guessing, until the close of trial, whether the plaintiffs would seek punitive damages.

    The National Law Review reports that the decision puts the long-term viability of punitive damages in New York City asbestos cases back in question.

  • Canadian appellate court reduces record-setting $4.5 million punitive damages award

    The StarPhoenix of Saskatoon reports that an appellate court in Saskatchewan has reduced an “unprecedented” $5 million damages award in an insurance bad faith case.

    The plaintiff claimed that two insurance companies unreasonably denied his claims for workers’ compensation benefits. The trial court (Justice Murray Acton of the Saskatoon Court of Queen’s Bench) awarded him $450,000 for emotional distress and $4.5 million in punitive damages.  At the time, Justice Acton said he hoped the large award would gain the attention of the insurance industry.

    Instead, the award attracted the attention of the Court of Appeal, which issued a 94-page opinion that dramatically reduced the “extravagant” damages.  The three-judge panel reduced the emotional distress damages to $45,000 and reduced the punitive damages to $675,000.

    The opinion is an illustration of the stark contrast between Canadian courts and American courts when it comes to damages.  We are long past the time in this country when anyone would call a $5 million damages award in a bad faith case “unprecedented” or “record-setting.”

    Will American-style damages awards gain a foothold in Canada?  Perhaps, if this story is any indication.  But for now at least, the Saskatchewan Court of Appeal is holding the line.

  • New York jury awards $16 million in punitive damages in sexual harassment case

    This story in the New York Daily News reports that a federal jury in Manhattan has awarded $2 million in compensatory damages and $16 million in punitive damages to a plaintiff who claimed that her employer sexually harassed her and then defamed her.  The plaintiff was seeking $850 million, so perhaps the jury thought they were showing restraint by awarding “only” $16 million in punitives.

  • San Bernardino jury awards $2 million in punitive damages in murder-for-hire case

    The Associated Press reported over the weekend that a San Bernardino jury awarded $2 million in punitive damages, on top of $4.5 million in compensatory damages, to a man who claimed that the defendants plotted to murder him.  According to a press release by the plaintiff’s attorneys, the two defendants conspired with members of the Mexican Mafia to kill the plaintiff as a result of some sort of confrontation that occurred at a bar. 

    When a jury awards such a large amount of punitive damages against individual defendants, it usually raises questions about whether the award is disproportionate to the defendants’ ability to pay.  Several California decisions have referenced a 10 percent rule of thumb, i.e., awards that exceed 10 percent of a defendant’s net worth are presumed to be excessive.  In this case, the AP story reports that the defendants are members of an Indian tribe and receive in excess of $1 million per year in proceeds from a casino.  If the plaintiff can use that evidence to demonstrate that the defendants each have a net worth in excess of $10 million, the plaintiff may be able to fend off the argument that the award exceeds the defendants’ ability to pay.

  • Canadian smokers win $15 billion in punitive damages

    CBC News reports that a judge in Montreal has ordered three tobacco companies to pay $15 billion in a class action brought by one million Canadian smokers.  The plaintiffs alleged that the defendants failed to warn about the dangers of smoking and engaged in unscrupulous marketing.  The defendants are Imperial Tobacco, Rothmans Benson & Hedges, and JTI-MacDonald.

    Canadian courts are not known for dishing out large punitive damages awards.  A few years ago we reported on a case before the Supreme Court of Canada involving a $500,000 punitive damages award, which was reportedly the largest amount ever awarded in an employment case in Canada.  So this $15 billion award is somewhat of a shock.

    Not surprisingly, the tobacco defendants say they intend to appeal.  But the story also says that the judge will permit the plaintiffs to enforce the judgment up to $1 billion while the appeal is pending.  So even if the defendants win on appeal, they’ll be left with the prospect of trying to claw back $1 billion from a million individual smokers throughout Canada. 

  • Supreme Court calls for response to cert. petition raising punitive damages issues (Quicken Loans v. Brown)

    The Supreme Court has asked the plaintiffs to respond to the cert. petition filed by Quicken Loans in Quicken Loans v. Brown.  As we noted a few weeks ago, the cert. petition raises the following issues:

    1.  Whether a state court may evade its obligation to apply the United States Constitution and this Court’s cases by asserting that expressly and pervasively raised federal constitutional claims were purported waived.

    2.  Whether, in applying the punitive to compensatory damages ratio of State Farm v. Campbell [citation], court awarded attorney’s fees are properly included as compensatory damages?

    Despite the request for a response, this petition still seems like a longshot, given that the Supreme Court has denied other petitions raising similar issues in recent years.  Nevertheless, the request for a response should be welcome news for Quicken Loans.  At least it keeps alive the possibility of a grant.

  • Supreme Court declines to review Fifth Circuit decision that disallowed punitive damages in unseaworthiness cases (McBride v. Estis Well Service)

    Last year we reported on this en banc Fifth Circuit opinion, which held that punitive damages are not available under the Jones Act or general maritime law for a defendant’s failure to maintain a seaworthy vessel.

    Yesterday, the Supreme Court denied the cert. petition filed on behalf of the injured seamen in that case.  You can view the Court’s online docket here.

    Bloomberg BNA has full coverage.

  • Ninth Circuit wipes out $75 million punitive damages award against defense contractor

    A few years ago we reported on this $75 million punitive damages award against defense contractor Kellog Brown & Root for conduct that took place in Iraq.  Today, the Ninth Circuit vacated that award in its entirety.
     
    Members of the Oregon National Guard sued KBR in federal district court in Oregon, seeking recovery under Oregon law.  The plaintiffs blamed KBR for causing them to be exposed to hexavalent chromium in Iraq.  A jury awarded over $80 million in damages, including $75 million in punitive damages.  KBR appealed to the Ninth Circuit and our firm filed an amicus brief, arguing that the Constitution prohibits imposition of punitive damages under state law for conduct that occurred solely in a foreign country.

    Today the Ninth Circuit issued a memorandum disposition reversing the judgment.  The Ninth Circuit didn’t reach the question of extraterritorial punishment.  Instead, it reversed the judgment on the ground that KBR is not subject to personal jurisdiction in Oregon because KBR did not engage in any acts expressly aimed at Oregon.  The fact that KBR engaged in conduct towards members of the Oregon National Guard was not sufficient to create jurisdiction in Oregon.

  • Amicus briefs support SCOTUS review of West Virginia punitive damages award (Quicken Loans v. Brown)

    Last week the U.S. Chamber of Commerce and the Washington Legal Foundation filed amicus briefs asking the Supreme Court to once again provide guidance on issues that arise when a court reviews (or in this case, declines to review) a punitive damages award for excessiveness.
     
    In the case of Quicken Loans v. Brown, the plaintiff sued Quicken Loans for fraud, claiming it lent her more money than her house was worth.  A jury awarded $2.17 million in punitive damages and $17,500 in compensatory damages, a ratio of 124 to 1.  The plaintiff also recovered over $596,000 in fees and costs, which the trial court cited during post-trial proceedings as a basis for upholding the punitive damages award.  

    Quicken Loans appealed to the West Virginia Supreme Court, raising a constitutional challenge to the size of the punitive damages award.  The court never reached that issue because it reversed the judgment on other grounds.  The case went back to the trial court, which entered a new judgment that increased both the compensatory and punitive damages. 

    Quicken Loans appealed again, and the West Virginia Supreme Court invalidated the part of the trial court’s order that increased the damages.  The Supreme Court ordered the original amounts reinstated, but declined (by a 3-2 vote) to review the amount of the punitive damages.  The majority said Quicken Loans had waived the issue by not raising it in the first appeal.  The dissenting opinion pointed out, however, that the “one of the petitioner’s most significant assignments of error [in the first appeal] was that the punitive damages award was ‘grossly excessive.’”  For whatever reason, the justices in the majority did not see it that way.

    Quicken Loans has now petitioned for certiorari, raising these two issues:

    1.  Whether a state court may evade its obligation to apply the United States Constitution and this Court’s cases by asserting that expressly and pervasively raised federal constitutional claims were purported waived.

    2.  Whether, in applying the punitive to compensatory damages ratio of State Farm v. Campbell [citation], court awarded attorney’s fees are properly included as compensatory damages?

    The Supreme Court has had many opportunities to delve back into this area in recent years, including other cases raising the second issue presented here (treatment of attorney’s fees as compensatory damages for ratio purposes), but the justices haven’t seemed interested.  Perhaps the unusual procedural history of this case will grab their attention.

    WLF’s amicus brief is available at this link.

      

  • Ninth Circuit affirms punitive damages award against UPS; verdict was the fifth largest in California in 2012 (Marlo v. UPS)

    By our count, the $15.9 million punitive damages award in Marlo v. UPS was the fifth largest punitive damages verdict in California in 2012.  The district court reduced that award to $6.6 million, which was still three times the amount of compensatory damages.

    The Ninth Circuit has affirmed the reduced award in this memorandum disposition, by a vote of two to one.  The memorandum is short on analysis, as such dispositions typically are.  It doesn’t explain what sort of conduct warranted such a large award.  It does explain, however, that the UPS vice president who committed the misconduct had sufficient policymaking authority that he qualified as a “managing agent” under Civil Code section 3294.

    The memorandum ends with the conclusory statement that the amount of the award, as reduced, is not constitutionally excessive.  It contains no explanation of why a one-to-one ratio is not the maximum permissible ratio in this case given the substantial punitive compensatory damages award. (See State Farm v. Campbell and Roby v. McKesson.)

    The dissenting opinion by James G. Carr, a senior district judge sitting with the Ninth Circuit by designation, is even more terse.  It says, in its entirety:

    Respectfully, and aware of my lesser familiarity with California law relating to managing agents, I dissent.

    Yes, that’s the same Judge Carr who wrote the order we blogged about yesterday, vacating a $20 million punitive damages award against Philip Morris.