California Punitives by Horvitz & Levy

  • Trial judge in AutoZone case hears arguments on post-trial motions

    Last year we blogged about the $185 million punitive damages verdict that a San Diego federal jury awarded to a single plaintiff in an employment case (Juarez v. AutoZone).  We predicted, along with pretty much everyone else, that the award would not survive judicial review.  Even the Consumer Attorneys of California, who ordinarily advocate for big punitive damage awards, went on record saying that this award is obviously excessive.

    ABC10News in San Diego reported this morning that the trial judge in that case was set to hear arguments on AutoZone’s post-trial motions.

    For those interested in digging into this a little further, here are links to the parties’ primary briefs on the post-trial motions:

    AutoZone’s new trial motion
    AutoZone’s motion for judgment as a matter of law
    Plaintiff’s opposition to new trial motion
    Plaintiff’s opposition to motion for judgment as a matter of law
    AutoZone’s reply in support of new trial motion
    AutoZone’s reply in support of motion for judgment as a matter of law

  • Supreme Court declines to resolve split in authority on recurring issue (Izell v. Union Carbide)

    I thought Izell v. Union Carbide was going to be the case in which the Supreme Court of California finally resolved a longstanding split in authority in California.

    The case was perfectly teed up for the Supreme Court to decide what an appellate court should do with a punitive damages award when the court sharply reduces the amount of compensatory damages on appeal.  Some courts have held that a retrial of punitive damages is necessary.  Other courts have said that the punitive damages should be reduced to preserve the same ratio as the jury’s original award.  But the Izell court held that no action was required, because the punitive damages in that case were not constitutionally excessive when compared to the reduced amount of compensatory damages.

    Izell had all the hallmarks of a great vehicle for Supreme Court review: a published opinion with a dissent, a recurring issue that has generated a split of authority, hundreds of millions of dollars riding on the outcome of the issue, and lots of parties writing the Supreme Court to support review.  Despite the long odds against review, I said here that the chances of review in Izell were high.

    The Supreme Court denied review yesterday.  The docket doesn’t indicate a single vote in favor of the petition.  Go figure.

  • West Virginia senate passes bill capping punitive damages

    The Register-Herald of Beckley West Virginia is reporting this morning that the West Virginia state senate has passed a bill that would cap punitive damages at four times compensatory damages or $500,000, whichever is greater.

    The bill enjoyed broad bipartisan support, with all but a handful of Democrats voting in favor of the proposal.  An earlier proposal that would have placed the cap a little lower, at three times compensatory damages, failed by a narrow vote yesterday.

    If this bill becomes law, it would be a major change to the civil litigation climate in West Virginia.  That state has dished out some colossal punitive damages awards in recent years, reaching into the hundreds of millions of dollars.

  • California Court of Appeal affirms dismissal of punitive damages claims, clarifies rules for discovery of financial condition information (I-CA Enterprises v. Palram Americas)

    This unpublished opinion has a lot of interesting stuff and is worth discussing at some length.

    The plaintiff, a California business, contracted with the defendants, two unrelated Israeli manufacturers.  The contracts permitted the plaintiff to distribute the defendants’ products in the U.S.  For a time, the plaintiff sold the products of one company to the other.  Eventually, the two companies started doing business directly with each other, cutting the plaintiff out of the loop.  The plaintiff sued both of them, claiming that each one intentionally interfered with the other’s contract with the plaintiff.

    The trial was bifurcated.  In the first phase, the jury decided that the two defendants were both liable for $225,000 in damages for intentional interference with contractual relations. 

    The plaintiff wanted to proceed to a second phase of trial to seek punitive damages against both defendants.  But the plaintiff had no evidence regarding the financial condition of Defendant 1.  The plaintiff had asked Defendant 1 to turn over its financial condition before trial, but Defendant 1 had refused.  The plaintiff renewed its request after the conclusion of the first phase of trial, and Defendant 1 refused again.

    When the plaintiff moved to compel Defendant 1 to turn over all documents relating to its finances, the trial court denied the motion on three grounds: (1) Defendant 1 was a foreign corporation and the court lacked the power to compel nonresidents to attend trial or produce documents; (2) the plaintiff’s request failed to specify exactly what documents the plaintiff was seeking; and (3) the plaintiff had forfeited its right to conduct financial condition discovery by bringing its motion on the eve of the second phase of trial. The trial court then granted nonsuit in favor of Defendant 1 on the issue of punitive damages, because the plaintiff could not possibly satisfy its burden or presenting meaningful evidence of Defendant 1’s financial condition.

    The plaintiff proceeded with its punitive damages claim against Defendant 2 and the jury awarded $3 million.  The trial court, however, granted Defendant 2’s motion for judgment notwithstanding the verdict (JNOV), finding that the plaintiff had presented no substantial evidence of malice, oppression, or fraud.

    The plaintiff appealed, challenging the trial court’s rulings as to both defendants. The Court of Appeal (Second Appellate District, Division Two) rejected the plaintiff’s arguments.

    Discovery of financial condition evidence

    The Court of Appeal found no error in any of the trial court’s reasons for denying the plaintiff’s motion to compel Defendant 1 to produce its financial condition evidence.  The Court of Appeal held that the trial court had no power to compel a foreign defendant to produce its financial records.  More importantly, the court held that the trial court was within its discretion to deny the plaintiff’s motion as untimely.  The court noted that Civil Code section 3295, subdivision (c), permits a plaintiff to bring a motion to obtain pretrial discovery of the defendant’s financial condition evidence.  Because the plaintiff failed to exercise that right, the trial court was within its discretion to rule that the plaintiff’s discovery request on the eve of the second phase of trial was too late.

    This is a significant holding.  In our experience, plaintiffs often seek discovery of financial condition evidence after the first phase of trial, just as the plaintiff did here.  This is the first opinion we’ve seen holding that a trial court can properly deny such requests as untimely.

    The Court of Appeal also ruled that the trial court did not err in excluding a Dun & Bradstreet report that the plaintiff had offered up as evidence of Defendant 1’s financial condition evidence.  The report was hearsay. Although experts are ordinarily allowed to rely on inadmissible evidence in forming their opinions, the trial court did not abuse its discretion in holding that the plaintiff’s expert could not testify about the Dun & Bradstreet report, because the jury would be likely to place too much emphasis on that hearsay document, in the absence of any admissible evidence regarding the defendant’s finances.

    Sufficiency of the evidence

    The Court of Appeal also found no error in the trial court’s granting of JNOV to Defendant 2.  Notably, the court agreed with the plaintiff that Defendant 2 had made intentional misrepresentation (viewing the record in the light most favorable to the plaintiff).  But the court held that those misrepresentations could not support a punitive damages award because the plaintiff failed to show that it relied on them, or that they otherwise harmed the plaintiff:  “While there is a level of deceit that is evidence form [Defendant 2]’s actions . . . this pretense did no harm to [plaintiff], as required by Civil Code section 3294.”

  • California Court of Appeal vacates punitive damages awards of $3 million and $275,000 due to insufficient evidence (Wilson v. So. Cal. Edison; Union Central Cold Storage v. RDM)

    The California Court of Appeal issued two opinions this week vacating punitive damages awards based on insufficient evidence.

    In the first case, the Court of Appeal (Second District, Division Seven) issued an unpublished opinion vacating a $275,000 punitive damages award because the plaintiff failed to present meaningful evidence of the defendant’s financial condition. We have noted before that a surprising number of punitive damages awards are vacated on that basis every year.  Often a plaintiff will present evidence of the defendant’s assets or income, but fail to present any evidence of liabilities or expenses.  Amazingly, the plaintiff in this case “presented no relevant evidence” whatsoever, according to the court.

    In the second case, the Court of Appeal (Second District, Division Four) issued a published opinion vacating a $3 million punitive damages award because the plaintiff failed to prove that the defendant engaged in punishable conduct. The plaintiff claimed that Southern California Edison failed to maintain an electrical substation, causing stray electrical currents to enter her home.  Plaintiff presented evidence that Edison’s management was aware of the problem of stray electricity at the plaintiff’s property.  But their awareness arose only in the context of the company’s efforts to mitigate the problem to ensure that there was no danger to anyone on the property.  Thus, plaintiff failed to prove that the corporate management acted with malice, oppression, or fraud as Civil Code section 3294 requires.

  • Georgia judge reduces $47.9 million punitive damages award to $250,000 under statutory cap, plaintiff vows to challenge constitutionality of cap

    Last month we reported on a huge $47.9 million punitive damages award out of Georgia, in a case involving a plaintiff who was severely burned in a gas explosion in an apartment he leased from the defendants.  As noted in our earlier report, Georgia law caps punitive damages at $250,000 in most cases.  It therefore comes as no surprise to see this story in the Daily Report, saying that the judge has reduced the punitive damages award to $250,000.

    According to the story, the trial judge rejected an attack on the constitutionality of the statute.  The plaintiff is planning to appeal that ruling and has already lined up appellate counsel, who says he will  take the case to the Georgia Supreme Court.  Plaintiffs haven’t had much luck with those arguments in most states, but they succeeded in the Missouri Supreme Court just last year.  This case will be worth watching if it goes up on appeal.

  • Federal judge in Connecticut awards $27.5 million in punitive damages in trade secrets case

    Law360 reported on January 21 (and it escaped my notice until now) that U.S. District Judge Michael P. Shea of the District of Connecticut awarded $27.5 million in punitive damages in an antitrust and trade secrets case.

    According to the Law 360 article, a jury awarded $35 million in compensatory damages, which Judge Shea founded to be excessive.  He ordered a conditional new trial on the issue of compensatory damages, subject to an agreement by the plaintiff (MacDermid Printing Solutions) to reduce the award to $20 million.  But the defendant (Cortron Corp.) probably didn’t spend much time celebrating when they learned that Judge Shea also granted the plaintiff’s motion for punitive damages and awarded $27.5 million.

  • Missouri state senator seeks to amend state constitution to restore cap on punitive damages

    Last year the Missouri Supreme Court struck down Missouri’s statutory cap on punitive damages as unconstitutional. Today the Missouri Chamber of Commerce reports that state senator Ron Richard has introduced a bill to amend the Missouri constitution to reinstate the cap.  Not surprisingly, the chamber of commerce supports the proposal.

    Related post:

    Missouri Supreme Court strikes down punitive damages cap as unconstitutional

  • California Court of Appeal reinstates $1.2 million punitive damages award in sexual harassment case (Shank v. CRST Van Expedited)

    The plaintiff in this case, a former employee of a trucking company, claimed that her supervisor repeatedly subjected her to unwanted sexual advances.  She obtained a jury verdict for $391,000 in compensatory damages, $1.17 million in punitive damages against her former employer, and $3,500 in punitive damages against her individual supervisor.

    The employer filed post-trial motions to challenge the verdict.  The trial court agreed that the plaintiff failed to prove that the employer acted with malice, oppression, or fraud.  As a result, the court granted judgment notwithstanding the verdict (JNOV) on the issue of punitive damages against the employer, wiping out the jury’s $1.17 million award.

    The plaintiff appealed, arguing that the trial court erred in granting the JNOV motion.  The California Court of Appeal (Fourth Appellate District, Division Three) agreed with the plaintiff in this unpublished opinion.

    The court began its analysis by noting that the supervisor unquestionably engaged in malice and oppression; throughout a 28-day training period, he made numerous unwanted sexual advances towards the plaintiff.

    The question then became whether the employer could be punished for ratifying the supervisor’s misconduct.  The Court of Appeal concluded that the company’s human resources a director was a managing agent within the meaning of Civil Code section 3294, and that the human resources director ratified the supervisor’s conduct by failing to investigate the plaintiff’s complaints.  That failure to investigate was directly contrary to the company’s written policies for responding to and preventing sexual harassment.

    The employer argued on appeal that the company did not need to investigate in this particular instance because because the plaintiff did not complain about the harassment until after she left the company.  The Court of Appeal rejected that argument, holding that “there is no applicable law or evidence that once an employee leaves an investigation is unnecessary.”

    The Court of Appeal then reversed the trial court’s JNOV, reinstating the full amount of the jury’s punitive damages award.  That will be a bitter pill for the corporation’s board of directors, who probably thought they had protected the company from this type of award by adopting a policy that required a thorough investigation of any harassment claims.

     

  • Georgia jury awards $47.9 million in punitive damages

    The Daily Report of Fulton County, Georgia is reporting that a jury there has awarded $72.8 million to a school teacher who was burned after a gas line in his apartment exploded. He sued his landlord, claiming that the explosion was caused by the landlord’s violation of building codes.  The verdict consists of $17.9 million in compensatory damages, $47.9 million in punitive damages, and $7 million in attorney fees. 

    A Georgia statute limits punitive damages to $250,000 except in products liability cases, cases involving a specific intent to harm, and cases where the defendant was under the influence of drugs or alcohol.  None of those exceptions would seem to apply here.