California Punitives by Horvitz & Levy

  • En banc Ninth Circuit: due process limits on punitive damages have “limited applicability” in Title VII cases (Arizona v. Asarco)

    Yesterday, the Ninth Circuit issued its en banc opinion in Arizona v. Asarco.  As our readers may recall, that’s the sexual harassment case in which a jury awarded the plaintiff no compensatory damages, $1 in nominal damages, and nearly $900,000 in punitive damages.

    The district court reduced the punitive damages to $300,000 under Title VII’s statutory cap on punitive and non-economic damages.  A three-judge panel of the Ninth Circuit then ruled, in a 2-1 decision, that the punitive damages were still excessive and should be further reduced to $125,000.

    Both parties sought en banc review.  The plaintiffs argued that they are entitled to the full $300,000 permitted by the cap, because an award within the cap cannot be unconstitutional.  The defendant argued that the 125,000 ratio permitted by the three-judge panel was still excessive.  Both parties got what they wanted—the court agreed to rehear the case en banc.  But the result isn’t quite what the defendant envisioned.  It’s a unanimous 11-0 win for the plaintiffs.

    The en banc opinion starts by discussing the due process test for evaluating the excessiveness of a punitive damages award, as laid out in BMW v. Gore and State Farm v. Campbell.  The opinion then states that the due process standards are “of some relevance”in Title VII cases.  In other words, it is theoretically possible that punitive damages awarded under a carefully crafted statutory scheme could nonetheless violate due process.

    But the opinion goes on to say that, when punitive damages are awarded under a “robust” statutory scheme, a “rigid application of the Gore guideposts is less necessary or appropriate.” Following that logic, the court concludes that a punitive damages award under Title VII can never really violate due process, because the statute clearly states the state of mind necessary for imposition of punitive damages, and provides fair notice of the possible amount of the punitive damages (i.e., up to $300,000).

    While it’s clear that the en banc court has no problem with 300,000 to 1 ratios in Title VII cases, it’s not at all clear how the court’s analysis would translate to other statutory schemes.  How is a district court supposed to determine which statutes are sufficiently robust and carefully crafted, such that a vigorous due process analysis becomes unnecessary?  And when a statute qualifies as robust and carefully crafted, how exactly does a district court perform the relaxed and non-rigid version of the BMW and Campbell analysis that this opinion seems to require?

    Given the murkiness of the court’s analysis, it is a bit surprising to see that this was a unanimous opinion.  The Ninth Circuit is known as a court whose members have a wide diversity of viewpoints and aren’t afraid to share them.  And this 11-member panel includes some judges whom we’d ordinarily expect to have some discomfort with an opinion holding that lower courts can, under circumstances that are not clearly defined, choose to disregard a due process analysis mandated by the U.S. Supreme Court.

    So long as the analysis of this opinion is limited to Title VII cases, it’s impact will be limited.  Because the $300,000 cap is a modest one, the Ninth Circuit wouldn’t be striking down many punitive damages awards as excessive under the BMW standards anyway, even if the court had not excepted Title VII cases from the usual BMW analysis.  But this opinion could end up being quite significant if its analysis spreads to other areas, or if the Title VII cap ever gets raised.

    As a side note, nowhere in this opinion does the court ever suggest that it might have a common-law duty to analyze the punitive damages award for excessiveness, apart from whatever the constitution requires.  As our friends over at Guideposts have pointed out, other circuits have held that in cases involving claims under federal law, federal courts have supervisory authority to ensure that those awards are not excessive, and should scrutinize them more closely under that common law authority than they would under the Due Process Clause.  Most likely, the parties did not make that argument here.

     Related posts:

    New punitive damages blog analyzes case pending before en banc Ninth Circuit (Arizona v. ASARCO)

    Ninth Circuit reduces $300,000 punitive damages award to $125,000 in Title VII harassment case (Arizona v. ASARCO)

    Ninth Circuit grants en banc rehearing to decide excessiveness of punitive damages in Title VII case (Arizona v. ASARCO)

    9th Circuit hears oral arguments in punitive damages case where jury awarded no compensatory damages

  • Press release by Consumer Attorneys of California defends jury’s $185 million verdict—by saying it is obviously excessive

    A week ago we reported on a jury award of $185 million in punitive damages in a single-plaintiff employment case against AutoZone.  Not surprisingly, that colossal award got a lot of media attention.  Some even called it a “preposterous” verdict by a runaway jury.

    In response to this criticism, the Consumer Attorneys of California issued a remarkable press release.  The press release says that criticism of the verdict is unwarranted, which isn’t a surprising position for CAC to take.  But CAC’s reasoning is quite surprising.  According to CAC, it makes no sense to talk about runaway juries or preposterous damage awards until the post-verdict proceedings are resolved, because “such big punitive damages awards are inevitably scaled back to a fraction of what was ordered by the jury.”  The press release goes on to say that “nobody at AutoZone is expecting to write a check for $185 million” because U.S. Supreme Court precedent limits punitive damages to no more than nine times the amount of compensatory damages.

    CAC has a point.  Many of the big punitive damages awards that generate media attention are later reduced during post-trial proceedings or on appeal.  And those rulings rarely get the same kind of press as the original verdict. 

    Nevertheless, CAC’s position is a startling one.  CAC’s members fight vigorously to obtain awards like this. And they fight to hold on to them during post-verdict review.

    Consider, for example, Bullock v. Philip Morris, in which a California jury awarded $28 billion in punitive damages to a single plaintiff.  The plaintiff’s lawyer fought hard to hold on to that award.  When the trial court reduced it to $28 million, plaintiff’s counsel filed a cross-appeal asking the Court of Appeal court to reinstate the full amount of the jury’s award.  (See 2005 WL 4656293.)  That lawyer—Michael J. Piuze—is a past recipient of CAC’s “Trial Lawyer of the Year Award.” One of the attorneys at his firm is currently on CAC’s board. 

    It isn’t just CAC’s individual members who defend punitive damages awards in the nine-figure range and above.  CAC itself files amicus curiae briefs to defend such awards.  For example, in Romo v. Ford Motor Co., CAC filed an amicus brief to defend a $290 million punitive damages award. (See 2003 WL 22455474.)

    Given this history, the CAC press release on the Auto Zone case comes as a great surprise, because it  seemingly acknowledges that an award much smaller than the Bullock and Romo awards is obviously excessive and will inevitably be reduced or vacated.  Having taken that position, it would now be difficult for CAC to file another amicus brief like the one it filed in Romo if the AutoZone case ends up on appeal.

  • Another punitive damages award reversed due to insufficient financial condition evidence (Wilson v. Autler)

    This unpublished opinion is the latest example of the California Court of Appeal vacating a punitive damages award because the plaintiff failed to present meaningful evidence of the defendant’s financial condition.

    The defendant testified that she owned a home and paid cash for it.  But the Court of Appeal (Fourth District, Division Two) said that evidence was not nearly sufficient to support a punitive damages award; the plaintiff presented no evidence of the value of the house, the defendant’s other assets or liabilities, or her income and expenses.  As a result, the court vacated $50,000 in punitive damages.

     

  • Court of Appeal re-issues Izell opinion without changing punitive damages analysis

    Last week we noted that the Court of Appeal granted rehearing in Izell v. Union Carbide, the case in which the court had issued a published 2-1 decision upholding an $18 million punitive damages award.  On Friday afternoon the court re-issued its opinion, without making any changes to the punitive damages analysis.

    The court modified its causation analysis and depublished the part of the opinion addressing allocation of fault, but none of that had any impact on the punitive damages award.  The majority stuck to their view that the defendant has no right to a new trial on punitive damages, to allow a jury re-assess the appropriate amount of punitive damages in relation to the dramatically reduced award of compensatory damages.  And Justice Kitching re-issued her dissent on that issue.  So the case is still teed up for review by the Supreme Court of California on that point.

    Related posts:

    Court of Appeal grants rehearing in Izell v. Union Carbide

    Court of Appeal affirms $18 million in punitive damages; reduction of compensatory damages from $30 million to $6 million does not require retrial of punitive damages (Izell v. Union Carbide)

  • Court of Appeal grants rehearing in Izell v. Union Carbide

    Last month we blogged about this opinion, which affirmed an $18 million punitive damages award.  Earlier this week, the Court of Appeal granted rehearing in that case and ordered the case resubmitted.  (Click here to view the court’s online docket.)   The resubmission restarts the court’s 90-day clock for issuing an opinion.

    Strangely enough, the Court of Appeal denied the defendant’s petition for rehearing, and then simultaneously granted rehearing on “[o]n the court’s own motion.”  Does that mean that the court granted rehearing to address an issue that was not raised in the defendant’s rehearing petition?  That would be surprising, given the comprehensive nature of the defendant’s 30-page petition. Stay tuned for further developments.

  • California federal jury awards $185 million in punitive damages in pregnancy discrimination case (Juarez v. AutoZone)

    ABC10 News in San Diego is reporting that a federal court jury has awarded a staggering $185 million in punitive damages in a pregnancy and gender discrimination case against AutoZone.  The compensatory damages award was $900,000.

    There’s no chance that punitive damages award survives post-trial and appellate review.  It is more than three times higher than the largest punitive damages award ever affirmed in California.

    The ABC10 story reports that the punitive damages award is $25 million more than the plaintiff’s attorneys requested.  That means they asked for $160 million in punitive damages in a case with a $900,000 compensatory damages award.  They would have been better off asking for a more modest amount, which might have stood a chance of surviving judicial review.   

  • Court of Appeal affirms $3 million punitive damages under federal maritime law (Colombo v. BRP US Inc.)

    This published California Court of Appeal opinion is a rarity.  It’s a state appellate decision analyzing punitive damages awarded under federal maritime law.

    Federal maritime law differs dramatically from California law on the issue of punitive damages.  For instance, the burden of proof is much lower in maritime cases; California law requires proof by clear and convincing evidence, but maritime law requires only proof by a preponderance of the evidence. California law requires proof that the defendant acted with malice, oppression, or fraud, whereas maritime law permits punitive damages based on showing of recklessness or gross negligence.  And the Supreme Court in Exxon Shipping set forth an excessive analysis for maritime cases that differs from the due process standards that apply to punitive damages awards arising under state law.

    For all of these reasons, this opinion isn’t likely to have much impact on punitive damages cases involving California law.  Nevertheless, the opinion is an interesting read.

    The plaintiffs in this case suffered serious injuries when they fell off the back of a personal watercraft and the jet thrust from the watercraft ripped their flesh.  (The injuries were pretty gruesome; skip that part of the opinion if you are squeamish).

    The defendant manufacturer had placed a warning on the watercraft, specifically addressing the risk that injured the plaintiffs.  The warning advised users of the watercraft to wear a wetsuit bottom or other protective clothing.  But the plaintiffs alleged that the defendant acted with callous disregard for safety by placing the warning in a place where only the driver of the vehicle could see it.  Plaintiffs claimed that a second warning should have been placed on the back of the vehicle.  They presented evidence that another watercraft manufacturer placed multiple warnings in different places on its vehicles.

    The defendant’s safety manager testified that the defendant deliberately chose not to use multiple warnings to avoid the “dilution effect” that occurs when a product bears too many warnings, including multiple warnings about the same hazard.  (See, e.g., Broussard v. Continental Oil (La.App. 1983) 433 So.2d 354, 358 [placing too many warnings on a product would “decrease the effectiveness of all the warnings”]; see also Restatement (Third) of the Law of Torts: Product Liability, Section 2, comment i [“excessive detail may detract from the ability of typical users to focus on the important aspects of the warnings”].)

    Although the defendant sought to present this issue as a balancing of competing safety interests, the Court of Appeal (Fourth Appellate District, Division One) said a jury could reasonably conclude under the preponderance of the evidence standard that the defendant’s conduct was reckless.

    The opinion also held that the amount of the punitive damages ($1.5 million to each plaintiff) was not excessive.  The ratio of punitive damages to compensatory damages was 1-to-1 for one plaintiff and 3.78-to-1 for the other.  The defendant argued that, under Exxon Shipping, the maximum ratio under federal maritime law is 1-to-1. The court disagreed, holding that the 1-to-1 limit adopted by the majority in Exxon Shipping only applies to cases where the defendant’s conduct is low on the scale of blameworthiness.  The court concluded that the defendant’s conduct in this case (failing to add a duplicate warning in a different place on the product)  was “on the higher end of the scale of blameworthiness” and therefore could support the ratios awarded by the jury.

  • Court of Appeal vacates $500,000 punitive damages award because plaintiff failed to serve statement of damages (Chen v. Institute of Medical Education)

    We have reported before on cases in which a court reversed a default-judgment punitive damages award because the plaintiff failed to serve the defendant with a statement of damages.

    The plaintiffs in this case tried to avoid that fate by arguing that the record contained no evidence to support a finding that they did not serve a statement of damages.  According to the plaintiffs, the defendant could not prove that point simply by pointing out that no such statement appeared in the record.

    It’s a somewhat clever argument, because a statement of damages wouldn’t necessarily appear in the trial court record.  It could be served but not filed with the court.  Thus, the absence of a statement of damages in the record doesn’t necessarily mean that statement of damages was filed.

    But the Sixth Appellate District didn’t buy it.  In this unpublished opinion, the court observed that the  plaintiffs had never actually claimed, in the trial court or on appeal, that they did serve a statement of damages.  Accordingly, the court was comfortable presuming that the plaintiffs never served a statement of damages, despite the void in the record on that point.  As a result, the court vacated the punitive damages portion of the default judgment ($500,000).

  • Yuba County judge vacates $15.7 million punitive damages award against mortgage loan servicing company

    The Sacramento Bee reports that Judge Stephen Berrier of the Yuba County Superior Court has vacated nearly all of a jury’s $16.2 million damages award against a New Jersey company that provides mortgage loan servicing.

    The article reports that the plaintiff bought a home and was unable to afford his monthly mortgage, so he obtained a loan modification from the defendant (PHH Mortgage Services).  He thought the modification would reduce his monthly payments from $2,100 to $1,543 but, for reasons not explained in the story, things didn’t work out that way and the plaintiff ended up over $7000 in arrears.

    PHH initiated foreclosure proceedings and the plaintiff sued PHH to fend off foreclosure.  It worked.  PHH halted foreclosure and a jury awarded the plaintiff $16.2 million in damages, including $15.7 million in punitive damages.

    Judge Berrier, however, ruled that plaintiff was entitled to only $159,000.  Presumably that ruling was in response to posttrial motions filed by PHH, but the article doesn’t say.  And the article doesn’t say whether the $159,000 represents compensatory damages or punitive damages.  It does mention, however, that Judge Berrier found that PHH did not act with malice or reckless disregard.  That suggests he tossed out the entirety of the punitive damages award.

    Thanks to Evan Tager of Guideposts for calling the story to our attention.

  • Judge cuts Actos punitive damages award from $9 billion to $36.8 million

    The absurd $9 billion dollar punitive damages award that made headlines earlier this year is no more.  The National Law Journal reports that U.S. District Judge Rebecca Doherty of the Western District of Louisiana has reduced the award to $36.8 million.

    According to the story, Judge Doherty concluded that the 6000 to 1 ratio between the punitive damages and compensatory damages was unconstitutionally excessive.  No surprise there.  She reduced the award to $27.6 million against one defendant (Takeda Pharmaceuticals) and $9.2 million against the other (Eli Lilly & Co.).  She also reduced the total compensatory damages to $1.27 million.

    Even as reduced, the punitive damages are roughly 29-to-1, which is awfully hard to square with State Farm v. Campbell and its admonition that substantial compensatory damages of $1 million or more call for a low ratio.  Eli Lilly says it plans to appeal.