A Mondaq.com article by law firm Norton Rose Fulbright reports a trend towards rising punitive damages awards in Canada. As evidence of the trend, the article discusses recent awards of $4.5 million, $200,000, and $500,000. Everything is relative; such awards would not provide any evidence of “rising” punitive damages in California.
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California Supreme Court leaves Pfeifer v. John Crane on the books
Last October we reported on the Court of Appeal’s published opinion in Pfeifer v. John Crane, which affirmed a $14.5 million punitive damages award. Yesterday, the Supreme Court denied two requests to depublish the opinion. The defendant, John Crane, had submitted one of those requests. The other was a combined submission on behalf of the Association of Southern California Defense Counsel and the Association of Defense Counsel of Northern California and Nevada.
In our prior post, we suggested the Supreme Court might grant John Crane’s petition for review and hold this case pending the disposition of Webb v. Special Electric, another case involving the “sophisticated purchaser” defense. John Crane, however, asked to withdraw its petition for review. The Supreme Court granted that request as part of its order yesterday, so Pfeifer remains good law. But the Supreme Court will have the last say on the sophisticated purchaser issue when it issues its opinion in Webb.
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Defendants seek California Supreme Court review in Asahi v. Actelion
The defendants in Asahi Kasei Pharma v. Actelion Ltd. have petitioned the Supreme Court of California for review. As we mentioned in a previous post, the Court of Appeal upheld a $30 million punitive damages award in that case, the third largest punitive damages award ever to survive appeal in California.
Aside from the enormity of the award, the case is notable because the plaintiff was a large corporation that obtained punitive damages against three individuals. The individuals were officers of a corporate defendant that itself was not hit for punitive damages. That scenario is highly unusual, if not unprecedented. Many corporate officers would no doubt be surprised to learn that, when their company gets sued by a corporate competitor, they can end up being individually liable for millions in punitive damages.
You can track the Supreme Court’s online docket here.
Related posts:
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Credit card late fees and over-limit fees are not punitive damages, according to the Ninth Circuit (Pinon v. Bank of America)
This published Ninth Circuit opinion is quite an entertaining read.
The plaintiffs in the case are a class of consumers who hold credit cards with major banks. They filed a complaint alleging that the defendants charged them fees ranging from $15 to $39 for missing payments and for exceeding their borrowing limits. The plaintiffs conceded that the penalties were authorized by their borrowing agreements, but they alleged that the amount of the fees are unconstitutionally excessive under the due process principles set forth BMW v. Gore and State Farm v. Campbell. The district court dismissed their complaint for failure to state an actionable claim.
The Ninth Circuit affirmed, agreeing that due process principles do not prevent enforcement of excessive penalty clauses in private contracts. But that’s not the entertaining part. The entertaining part is Judge Reinhardt’s concurring opinion. The concurrence, dripping with sarcasm, explains that the Supreme Court has “recently discovered” constitutional limitations on punitive damages, and should consider extending those limitations for the benefit of not just corporate evildoers, but ordinary consumers as well. Here’s the full introduction to Judge Reinhardt’s concurrence:
I concur, reluctantly. The Supreme Court has recently discovered that the Constitution prevents courts from imposing disproportionate punitive damages in tort cases. If the Court continues to adhere to its newfound view, it would be well advised to apply the same rule to prevent disproportionate penalties from being imposed on consumers when they breach contracts of adhesion. Consumers must frequently enter into such one-sided contracts if they are to obtain many of the practical necessities of modern life, such as credit cards, cellular phones, utilities, and other vital consumer goods. Applied to such contracts, the Court’s most recent substantive due process rule—which has to date served primarily to protect wealthy corporations from liability for repeated wrongdoing—would also protect ordinary consumers from paying excessive court-enforced damages for minimal breaches of contract. These excessive penalties are currently paid to large national business entities which, each year, collect billions of dollars in late fees alone. They reflect a compensatory to penalty damages ratio higher than 1 to 100, which far exceeds the ratio of non-punitive to punitive damages that the Court has held to be prohibited by the Constitution in tort cases. In sum, if due process is violated when courts award disproportionate punitive damages in the tort context, due process is equally violated when courts enforce the punitive and substantially more disproportionate penalty clauses in contracts of adhesion.
I ultimately agree with the opinion of the court, however, that the Constitution has not yet been so interpreted. Thus, I cannot disagree with the ultimate decision. I do believe, however, that the proposition I discuss deserves further exploration and analysis, and that, should the new Supreme Court doctrine continue in effect, the extension of that doctrine as requested by Cardholders should eventually become the law under the Due Process Clause.
The full concurring opinion is worth a read and is only about seven pages long.
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Court of Appeal affirms order vacating $200,000 in punitive damages against defendants with negative net worth (Gelhar v. Baldwin)
This unpublished opinion addresses a scenario that seems to be arising more frequently in California punitive damages litigation: the award of punitive damages against defendants with a negative net worth.
The jury in this fraud and elder abuse case ordered two defendants to pay a total of $200,000 in punitive damages. The trial court, however, granted the defendants’ motion for a new trial and vacated the punitive damages award as excessive in relation to the defendants’ financial condition. The court noted that at the time of trial the defendants had a combined net worth of negative $350,000 to $400,000. The court concluded that the jury’s $200,000 punitive damages award was so disproportionate to the defendant’s wealth “that it [wa]s presumptively based on passion and prejudice.”
The California Court of Appeal (Fourth Appellate District, Division Three) affirmed. It held that “[e]vidence of a negative net worth was a valid reason for the court to hold the punitive damages award was excessive.” That is not exactly a novel holding, but it is notable in light of several recent decisions that have affirmed punitive damages awards notwithstanding the defendant’s claimed negative net worth. (For example, Pfeifer v. John Crane, Miracle v. Mehrban, and Bankhead v. ArvinMeritor.)
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California Supreme Court limits issues for review in Nickerson v. Stonebridge
Last month we reported on the California Supreme Court’s grant of review in Nickerson v. Stonebridge Life Insurance. The plaintiff’s petition in that case raised three issues, and the Supreme Court granted review without limiting the issues, meaning that all three issues were in play.
This week, however, the court has issued an order taking two of the three issues off the table, and limiting review to the second issue raised in the petition:
Is an award of attorney fees under Brandt v. Superior Court (1985) 37 Cal.3d 813 properly included as compensatory damages where the fees are awarded by the jury, but excluded from compensatory damages when they are awarded by the trial court after the jury has rendered its verdict? (Cal. Rules of Court, rule 8.516(a)(1).)
That means the court will not be considering these two other issues raised by the petition:
1. In calculating the 10:1 ratio between punitive and compensatory damages, the Court of Appeal held that the policy proceeds must be excluded. Two other published California decisions follow this approach; and one published opinion rejects it. Does due process require that the policy proceeds be excluded from the compensatory damages used to compute the ratio between punitive and compensatory damages?
3. Both the trial court and the Court of Appeal stated that the $350,000 punitive-damage award in this case was too low to deter Stonebridge from engaging in the same misconduct. Yet both courts felt “constrained” by due process to award no more than 10 times the compensatory award. If the courts determine that punitive damages reduced on the basis of a 10:1 ratio to compensatory damages will not deter a defendant from repeating its misconduct, can they permit substantially higher ratios without offending due process?
By taking issue #3 off the table, the Supreme Court has narrowed the potential impact of this case considerably. The Supreme Court’s decision on that issue would have affected all punitive damages cases, but now the decision will be limited to an issue that arises only in the context of insurance bad faith.
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L.A. jury awards $3.6 million in punitive damages in asbestos case
This isn’t exactly breaking news. HarrisMartin (subscription required) reported this story on December 18, but we’ve been a little backlogged around here so we’re just getting around to blogging about it.
A jury in Los Angeles has awarded $5 million in compensatory damages and $3.6 million in punitive damages against Crown, Cork & Seal Company Inc., a manufacturer of asbestos-containing pipe insulation. This represents a significantly better result for the plaintiffs than the first trial in this case, which ended in a defense verdict. That first judgment was reversed in a published opinion, however, because the Court of Appeal determined that the trial court had wrongly excluded the “consumer expectations” theory of product defect from the case.
Disclaimer: Horvitz & Levy LLP is involved in this litigation, representing a different defendant in a related appeal arising out of the first trial. -
Court of Appeal affirms $30 million punitive damages award – the third largest to survive appeal in California (Asahi v. Actelion)
This published opinion by the California Court of Appeal (First Appellate District, Division Five) affirms a judgment consisting of $377 million in compensatory damages and $30 million in punitive damages. The punitive damages award, although small in comparison to the compensatory damages, appears to be the third largest punitive damages award to survive appeal in California. The punitive damages portion of the opinion, however, is unpublished.
Here’s our updated list of the largest awards that our appellate courts have ever affirmed:
1. Buell-Wilson v. Ford (2008) [depublished]: $55 million
2. Boeken v. Philip Morris (2005) 127 Cal.App.4th 1640: $50 million
3. Asahi Kasei Pharma Corporation v. Actelion Ltd. (2013) ___ Cal.App.4th ____: $30 million
4. Rufo v. Simpson (2001) 86 Cal.App.4th 573: $25 million
5. Vann v. Travelers (1998) [unpublished]: $25 million
I’m swamped with other work right now, but I hope to make time to write a further post analyzing the substance of this opinion. In the meantime, for further reading about this case, see this November 8 story in The Recorder: With Appeal Pending, Gloves Come Off in Pharmaceutical Feud (subscription required).
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California listed as the nation’s worst “judicial hellhole” (again)
The American Tort Reform Foundation has once again listed California at the top of its Judicial Hellhole rankings. The report mentions, among other things, the $11 million punitive damages award in the Grigg v. Owens-Illinois case, which we discussed here. That certainly wasn’t the largest award of the year, but it made the report because of some surprising rulings by the trial court. Among other things, the articles says that the trial judge determined in posttial proceedings that that the punitive damages claim never should have gone to the jury, but she nonetheless refused to vacate the award.
Related posts:
Oakland jury awards $11M in punitive damages against Owens-Illinois
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California Supreme Court grants review in Nickerson v. Stonebridge
Today the California Supreme Court granted review in Nickerson v. Stonebridge, according to the court’s online docket. The issues raised by the petition for review are:
1. In calculating the 10:1 ratio between punitive and compensatory damages, the Court of Appeal held that the policy proceeds must be excluded. Two other published California decisions follow this approach; and one published opinion rejects it. Does due process require that the policy proceeds be excluded from the compensatory damages used to compute the ratio between punitive and compensatory damages?
2. In Brandt v. Superior Court (1985) 37 Cal.3d 818, this Court held that a policyholder’s damages in an insurance bad-faith case included the attorney’s fees incurred to recover the policy proceeds. In calculating the 10:1 ratio between punitive and compensatory damages, the Court of Appeal excluded the Brandt fees because they were awarded by the trial court in post-trial proceedings, and not by the jury. The court followed another published opinion that took this approach. But there is also a published opinion that, without comment, included post-judgment Brandt fees in the ratio. Does due process require that Brandt fees must be awarded by the jury in order for them to be factored into the ratio between punitive and compensatory damages?
3. Both the trial court and the Court of Appeal stated that the $350,000 punitive-damage award in this case was too low to deter Stonebridge from engaging in the same misconduct. Yet both courts felt “constrained” by due process to award no more than 10 times the compensatory award. If the courts determine that punitive damages reduced on the basis of a 10:1 ratio to compensatory damages will not deter a defendant from repeating its misconduct, can they permit substantially higher ratios without offending due process?
Related posts: