California Punitives by Horvitz & Levy

  • Court of Appeal affirms $14.5M punitive damages award in asbestos case (Pfeifer v. John Crane)

    The California Court of Appeal issued this 68-page published opinion today, affirming a $14.5 million punitive damages award.

    The opinion might not remain on the books for long, for reasons having nothing to do with the court’s punitive damages analysis.  The opinion addresses an issue that’s already before the California Supreme Court in another matter, Webb v. Special Electric.  Both cases raise the following question: when a supplier sells a product to a purchaser who is already aware of dangers of the product, can the supplier still be liable for failure to warn?  Because that issue is already before the court in Webb, there is a strong chance the court will grant John Crane’s petition for review (assuming it files one) and hold this case pending the disposition in Webb.

    Aside from that “sophisticated purchaser” issue, there is a lot of interesting stuff in this opinion. I won’t attempt to summarize all 68 pages, but here are some highlights of the punitive damages analysis:

    1.  The opinion states that reviewing courts should take the “clear and convincing” evidence standard into account when deciding whether a plaintiff presented substantial evidence of malice, oppression, or fraud.  As we have noted in prior posts, other recent published cases have said the same thing, but some recent unpublished opinions have disagreed.

    2.   The opinion concludes that the record in this case supports the jury’s finding of malice, because the plaintiffs presented evidence that John Crane knew its customers used its products in ways capable of generating dangerous levels of asbestos dust. 

    3.  The opinion rejects John Crane’s argument that the trial court erred by ordering John Crane to disclose information about its financial condition during trial, after the jury found that John Crane acted with malice.  John Crane argued that the plaintiffs were not entitled to that information because they failed to follow the procedure spelled out in Civil Code section 3295(c) for requesting pretrial discovery of financial condition information.  The opinion follows the holding of Mike Davidov Co. v. Issod, which said that a court can order the defendant to produce its financial condition evidence during trial, after a finding of malice, so long as the trial court allows the defendant sufficient time to gather its records.

    4.  The opinion rejects John Crane’s argument that its financial condition was insufficient to support the punitive damages award.  According to the plaintiffs’ expert, John Crane had $403 million in assets and nearly $16 million in cash on hand, but had a negative net worth of $125 million.  The opinion observes, however, that John Crane’s net worth would be a positive $98 million if not for its  asbestos-litigation liabilities.  And the opinion observes that the jury’s award of $14.5 million is only six percent of the funds John Crane set aside for payment of asbestos litigation.  Based on these observations, the opinion concludes that John Crane could afford to pay the award without being destroyed.  

    5.  The opinion rejects John Crane’s argument that California’s punitive damages statute, Civil Code section 3294, is unconstitutionally vague as applied to this case.

    6.  The opinion holds that the jury’s $14.5 million award was not excessive.  The opinion compares that amount to the $6.2 million compensatory damages owed by John Crane (after reduction to reflect the jury’s allocation of fault), and concludes that the resulting ratio of 2.3 to one is not excessive, considering the highly reprehensible nature of John Crane’s conduct.

    We will keep tabs on this one to see if the Supreme Court grants review.

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

    The Ninth Circuit rarely issues published opinions on punitive damages, but they issued an interesting one yesterday. 

    The jury in this sexual harassment case awarded the plaintiff no actual damages, $1 in nominal damages, and $868,750 in punitive damages against ASARCO, a copper mining outfit.  The trial court reduced the punitive damages award to $300,000, the statutory maximum under Title VII for an employee of ASARCO’s size.  ASARCO appealed the award as reduced.

    Judge O’Scannlain, writing for the majority, framed the issue as follows: 

    We must decide whether the Constitution permits a six-figure punitive damages award in a sexual harassment suit where the jury awarded no compensatory damages and only one dollar in nominal damages.

    To answer that question, the court began by evaluating the first BMW guidepost – the reprehensibility of the defendant’s conduct.  The court concluded that the defendant’s conduct was highly reprehensible, implicating all five of the State Farm reprehensibility factors.  I’m a little surprised the court thought the defendant’s conduct implicated the “physical harm” factor, since the plaintiff did not apparently suffer any physical harm.  But the court dealt with this issue by saying intentional discrimination is a “serious affront to personal liberty” and therefore more reprehensible than other conduct that causes only economic harm.

    The court turned next to the ratio between the punitive damages and the $1 nominal award.  The court concluded that a ratio of 300,000 to 1 is constitutionally excessive, even in the face of highly reprehensible conduct.  That left the court with a dilemma of choosing a smaller award that would not be excessive, but would still have some deterrent effect.  The court settled on $125,000, only because 125,000 to 1 was the highest ratio that had been affirmed in any other published discrimination case: Abner v. Kan City S. R.R. Co., 513 F.3d 154, 157 (5th Cir. 2008).

    Judge Hurwitz dissented, arguing that the award should be affirmed and that Abner, although correctly decided on its facts, should not operate as a ceiling for punitive damages awards in harassment cases.

  • Oklahoma jury hits Toyota with $3 million in compensatory damages and sets the stage for punitive damages

    The LA Times reports that yesterday a jury in Oklahoma awarded $3 million in compensatory damages against Toyota in a “sudden acceleration” case.  The jury also found that Toyota acted with “reckless disregard,” the prerequisite for awarding punitive damages under Oklahoma law. 

  • $500,000 punitive damages award reduced to $150,000 (Wallis v. PHL Associates)

    The California Court of Appeal (Third Appellate District) issued this published opinion today, reducing a jury’s $2 million compensatory damages award to $15,000, and reducing a $500,000 punitive damages award to $150,000.

    The case involves allegations of fraud in connection with the sale of an antigen used in a vaccine.  Although the jury awarded $2 million in compensatory damages for fraud, the Court of Appeal said the evidence could only support an award of $15,000.

    The court then had to decide what to do about the $500,000 punitive damages award, in light of the reduced compensatory damages award.  As we have seen, courts have taken differing approaches to that issue.  The court could have sent the case back to the trial court to reevaluate the punitive damages in light of the reduced compensatories.  Instead, the court decided to simply order a reduction of the award to $150,000, representing ten times the amount of the compensatory damages as reduced, because the defendant offered to accept that amount, and any higher amount “would surely violate [the defendant’s] due process rights.”

    The court noted that the reprehensibility of the defendant’s conduct was “moderate” because it implicated only three of the five reprehensibility factors identified in State Farm v. Campbell.  The plaintiff argued that the presence of three out of five factors supports a finding of heightened reprehensibility, but the court disagreed:

    Wallis argues that the reprehensibility is rather more extreme. Keeping in mind that reprehensible conduct is, by definition, reprehensible in all instances and that extreme reprehensibility is found only in exceptional cases, we conclude that this case does not rise to the level of extremely reprehensible cases.

    In particular, the court noted that the defendant caused no physical harm, and did not act with an indifference to health and safety.  Accordingly, the court concluded that the jury’s award of $500,000, more than 33 times the compensatory damages as reduced, could not withstand constitutional review.  The court did not have to decide the maximum permissible ratio in this case, because the defendant agreed to pay the award if reduced to a ratio of 10 to 1 ($150,000).  So the court simply ordered a reduction of the punitive damages award to that amount, without the need for any further proceedings.

    Related posts:

    Petition for review asks Cal. Supreme Court to resolve split in authority regarding the proper treatment of a punitive damages award after reduction of compensatories

  • Supreme Court denies Novartis cert. petition

    The U.S. Supreme Court has denied certiorari in Novartis v. Fussman.  Novartis’s petition asked the court to decide whether federal law preempts punitive damages claims against drug manufacturers who have satisfied FDA approval and labeling requirements. The court requested a response to the petition, but ultimately decided not to take up the case.

    The court’s order list is here.  Law 360 has coverage here (subscription required).

    Related posts:

    Novartis cert. petition distributed for Sept. 30 conference

    Cert. petition asks Supreme Court to address preemption of punitive damages claims against drug makers (Novartis v. Fussman)

  • Court of Appeal rules that trial court properly struck punitive claim against employer as a matter of law (Nadaf-Rahrov v. Neiman Marcus Group, Inc.)

    In an unpublished opinion last Friday, the Court of Appeal (First Appellate District, Division Five) affirmed a nonsuit on a plaintiff’s punitive damages claim in an employment case.  Reinforcing a point that is occasionally overlooked, the court elaborated on the statutory rule that there is no such thing as vicarious liability for punitive damages.  Rather, such damages can be imposed on a company only for conduct directly committed by the company (through its officers, directors or managing agents), and not for malicious conduct by non-managing employees.  In addition, the opinion demonstrates that some mistakes in the hiring and retention of workers, even if tortious, simply could not be found by a reasonable jury to be “malicious.”

    The plaintiff in this case argued that one company vice president was an “officer” whose actions contributed to the plaintiff’s inability to obtain a work reassignment within the company.  The court noted, however, that this person played no role in the employment decisions made with respect to this plaintiff.  Moreover, the court held that the officer’s alleged misconduct–failing to “assure that the company’s human resource managers followed a uniform written policy when dealing with disabled employees who wished to return to work”–did not come close to establishing malice, oppression, or fraud.

    With respect to another employee—a human resource manager—the court held she also was not, as a matter of law, a managing agent with respect to the dispute in this case.  The court applied the rule that the “mere ability to hire and fire employees” does not render a supervisory employee a managing agent, and that “even the highest-ranking employee in one office of a corporation may not qualify as a managing agent when business policies are made at corporate headquarters.”  The human resources manager did not shape corporate policy beyond her authority to hire and fire employees.  Moreover, the court held, even if she were a managing agent, “substantial evidence did not support a finding she was guilty of malice, oppression, or fraud as is necessary to support an award of punitive damages” because some facts relating to plaintiff’s ability to return to work were unclear.  “The evidence supports the jury’s finding (by a preponderance of the evidence) that [the manager] should have done more to try to locate a new position for [plaintiff], but it would not support a finding by clear and convincing evidence that [the manager’s] decision to adopt a “wait-and-see” approach was ‘despicable’ as required by [Civil Code] section 3294, subdivisions (a) and (b), i.e., ‘base,’ ‘vile’ or ‘contemptible.’”

  • “Changing Tides: the Introduction of Punitive Damages into the French Legal System”

    This is the second law review article we’ve seen discussing the Fountaine Pajot decision by France’s Cour de Cassation (the supreme court for civil matters).  In that case, the court surprised many observers by holding that punitive damages are not, per se, contrary to French public policy.

    This article, Changing Tides: the Introduction of Punitive Damages into the French Legal System,   appears in the Winter 2013 edition of the Georgia Journal of International & Comparative Law, which was just uploaded to Westlaw.  The author contends that the Fountaine Pajot case is one of several indications that European opposition to punitive damages is eroding.  I can’t find a copy online, so you’ll need to access Westlaw or head to a library to read the whole thing.

    Related posts:

    New law review article on enforcement of U.S. punitive damages awards in France

    The French dip deeper into punitive damages jurisprudence

    French Supreme Court rules that American punitive damages awards are enforceable, as long as they don’t exceed compensatory damages

    Law Review Article Focuses on a French Court’s Refusal to Enforce a California Punitive Damages Award

  • Court of Appeal reverses $225,000 punitive damages award due to insufficient evidence of the defendant’s financial condition (Kennedy v. Sadafi)

    Here is yet another unpublished opinion vacating a punitive damages award because the plaintiff failed to meet her burden of presenting meaningful evidence of the defendant’s financial condition. 

    The plaintiff here introduced evidence of the defendant’s income, and partial evidence of her assets, but no evidence of her liabilities.  Thus, the jury had no way to determine her net worth.  Accordingly, the Court of Appeal (Second District, Division Four) reverses the award with directions to enter judgment for the defendant on the issue of punitive damages.

  • New Jersey judge awards $37M in punitive damages against Vikings owners

    NJ.com reports that members of the Wilf family, who own the Minnesota Vikings, have been ordered to pay $84.5 million, including $36.8 million in punitive damages, for cheating their business partners out of revenue from an apartment complex.  A copy of the judge’s order appears at this link.

  • Court of Appeal affirms punitive damages award, rejects defendant’s complaint about modified jury instructions (Sacramento Singh Society v. Tatla)

    I have doubts about whether this opinion is correct.  The opinion is only partially published, and the punitive damages analysis appears in the unpublished portion.

     The plaintiff in this action, a nonprofit religious corporation, sued a group of defendants for slander of title and obtained a compensatory damages award of $359,021.22.  The jury also awarded punitive damages in various amounts against the different defendants, ranging from $60,000 to $167,500.  The opinion does not reveal the total amount of punitive damages.

     On appeal, the defendants complained about the trial court’s modifications to the standard CACI jury instructions.  Among other things, the trial court instructed the jury that the defendants could be liable for punitive damages if they acted with malice, or conspired to engage in malice.

    The California Court of Appeal (Third Appellate District) rejected the defendants’ challenge to those modifications.  First, the court said defendants waived their objections because, although they objected to the instruction in an unreported conference with the judge, they did not later specify the precise nature of their objection when they placed the objection on the record, beyond noting that they disagreed with the substance of the instruction.  The court found that was inadequate to preserve the issue:

    It was, of course, incumbent on defendants to place on the record their objection to the instruction in order to preserve it for appeal. Although it is clear defendants had some objection to the instruction, we are left to guess what that might have been.

    That aspect of the court’s opinion seems obviously wrong. The California Code of Civil Procedure provides that a party need not make any objection to a jury instruction in the trial court in order to challenge the validity of that instruction on appeal. All instructions are deemed objected to as a matter of law. (See CCP 647.) So there appears to be no basis for finding a waiver here.

    The court went on to say that, waiver aside, the defendants’ challenge to the instruction fails on the merits because there is nothing wrong with permitting punitive damages for conspiracy to commit malice.  That holding seems pretty shaky too, since the instruction did not require that the defendant be found to have acted with malice in performing any of the acts that effected a conspiracy. Permitting punitive damages against a defendant who merely may have non-maliciously conspired with others who acted with malice is akin to imposing vicarious liability for punitive damages. The Court of Appeal admits as much: “the fact that a given defendant conspired with the others to harm the Society but then left it to the others to do the dirty work and put the plan into action is hardly a reason to deny an award of punitive damages against that defendant.” What about the Supreme Court case law prohibiting vicarious liability for punitive damages? And what about Civil Code section 3294, which authorizes punitive damages only for a defendant who is actually guilty of malice, oppression, or fraud, and says nothing about allowing punitive damages for conspiring with someone else who is guilty of malice?