California Punitives by Horvitz & Levy

  • 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  The opinion is only partially published, and the punitive damages analysis appears in the unpublished portion.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?

  • Court of Appeal reverses order granting summary adjudication of punitive damages in harassment case (Davis v. Kiewit)

    This unpublished opinion provides some useful guidance about what exactly a corporate defendant must do to obtain summary adjudication on the ground that misbehaving employees were not “managing agents” within the meaning of Civil Code section 3294.

    The plaintiff sued her employer for gender discrimination and harassment, seeking punitive damages.  The trial court granted the defendant’s motion for summary adjudication on the issue of punitive damages, finding there were no triable issues of fact as to whether the employees who committeed the alleged misconduct were managing agents.  At trial, the jury awarded $270,000 in compensatory damages.  The plaintiff appealed from the order granting summary adjudication on her request for punitive damages.

    The Fourth Appellate District, Division One, reversed.   According to the court, the defendant had not met its burden of producing sufficient evidence to negate all triable issues of fact on the managing agent issue. The defendant had submitted declarations from the two employees involved, stating that “I have never drafted corporate policy or had substantial discretionary authority over decisions that ultimately determine . . . corporate policy.”  The Court of Appeal said the declarations simply parroted the legal standard set forth in White v. Ultramar, and did not contain a sufficient description of the employees’ job duties and responsibilities, and the nature and extent of their authority and discretion.  Accordingly, the court ordered the trial court to reinstate plaintiff’s claim for punitive damages.

  • Court of Appeal hears oral arguments in case with $14.5M punitive damages award

    Law 360 (subscription required) is reporting on yesterday’s oral argument in Pfeifer v. John Crane, a case in which a jury awarded $14.5 million in punitive damages against a manufacturer of asbestos-containing gaskets.  According to the story, John Crane is seeking to vacate the award due to the absence of any evidence of malice, oppression, or fraud.  The story reports that one member of the appellate panel, Justice Manella, was skeptical of Crane’s arguments.  The opinion should be released by the end of the year.

  • Massachusetts Supreme Court upholds $18 million punitive damages award (Aleo v. Toys R Us)

    The Massachusetts Supreme Judicial Court issued this opinion today, affirming a $2.6 million compensatory damages award and a $18 million punitive damages award in a products liability case against Toys R Us. The plaintiff claimed that Toys R Us sold a defective inflatable pool slide that collapsed and severely injured the 29-year-old plaintiff. 

    The Supreme Court rejected the defendant’s argument that the punitive damages were grossly excessive.  The court said that although the defendant’s conduct was “only grossly negligent, rather than malicious or willful,” it was still sufficiently reprehensible to support an $18 million punitive damages award.  In California, by contrast, gross negligence alone is not sufficient to support any award of punitive damages. (See, e.g., Flyer’s Body Shop v. Ticor Title Ins.)

  • Los Angeles jury awards $32.5 million in punitive damages in asbestos case

    This verdict happened last month but we neglected to report it at the time.  HarrisMartin reported (subscription required) that an L.A. jury awarded $6.5 million in compensatory damages and $32.5 million in punitive damages.  The plaintiffs are the family of a former General Motors employee who died from mesothelioma.  The defendant, BorgWarner, manufactured asbestos-containing clutches.  We’ll keep an eye on this one as it proceeds to posttrial motions and appeal.    

  • Bill to eliminate tax deductions for punitive damages appears to be dead

    It appears that the proposed bill to prevent California taxpayers from deducting punitive damages as business expenses (AB 458), which passed in the California Assembly in July, will not see a floor vote in the Senate.  The Daily Journal (subscription required) is reporting that Sen. Ron Calderon, who had been backing the bill in the Senate, has withdrawn his support.  Calderon’s move comes just days before the legislative session ends on September 13.  His decision to abandon the bill may have something to do with the fact that the California Chamber of Commerce and the Civil Justice Association of California both announced their opposition to the bill late last week.

    A similar bill, AB 1276, failed on the Assembly floor in 2011.

    Related posts:

    Assembly approves bill to prevent tax deduction of punitive damages; Senate not expected to act until August

    Committee on Appropriations approves bill to prohibit deductions of punitive damages

    Another proposal to prohibit California taxpayers from deducting punitive damages

    Assembly rejects proposal to eliminate tax deductions for punitive damages

    Proposed California bill would prevent tax deductions for punitive damages 

  • 1,000 posts and counting

    Believe it or not, yesterday’s post on Nickerson was our 1,000th post! 

    When we started up in 2008, we wondered whether we could find enough material to maintain a blog on such a narrowly focused topic.  That hasn’t been a problem, as it turns out. 

    Even more surprisingly, about 400 of you have subscribed to this blog by email, Twitter, or RSS feed.  That’s a drop in the bucket compared to the big boys of legal blogging (no one will mistake us for Above the Law), but it’s good enough to place us well within the top 100 most popular legal blogs, according to Avvo. 

    So thanks to all of you for coming along for the ride  Maybe in another five years we’ll be blogging about post #2000.

  • Court of Appeal orders reduction of $19M punitive damages award to $350,000 (Nickerson v. Stonebridge) – PART II

    Last week we blogged about this published opinion and its curious disposition.

    In this post, we discuss some interesting aspects of the majority opinion, which held that any punitive damages award over $350,000 would be unconstitutional.

    First, I am confused by this statement at the outset of the legal discussion, indicating that excessiveness is the only issue on appeal:”[t]he contentions on appeal raise only the question of whether the remitted punitive damage award passes constitutional muster under the due process clause.”  That’s confusing because the dissenting opinion says that the appellant challenged not only the amount of the award, but also the sufficiency of the evidence supporting the jury’s finding of fraud: “Stonebridge contends there is no substantial evidence that it intentionally misrepresented or concealed a material fact and therefore there is no substantial evidence to support the fraud finding.”

    So which is it?  Did Stonebridge challenge the sufficiency of the evidence or not?  If so, the majority opinion should have addressed that issue before embarking upon an excessiveness analysis.  Stonebridge’s argument seems to warrant serious consideration, given that the dissenting justice actually agrees with Stonebridge on that point.  The mysterious omission of this argument from the majority opinion makes me suspect that the majority opinion was originally written to be a dissent, but that’s pure speculation.

    Turning to the merits of the majority’s excessiveness analysis, here are some notable aspects:

    1. The court concluded, for purposes of measuring the reprehensibility of Stonebridge’s conduct, that Stonebridge caused no physical harm, despite the jury’s award of emotional distress damages.  The court distinguished Roby, in which the Supreme Court found that the plaintiff’s emotional distress was a form of physical harm.  The Court of Appeal said emotional distress can be treated as physical harm only if the plaintiff suffers some physical symptoms.

    2.  The court concluded, for purposes of computing the ratio of punitive to compensatory damages, that it could not consider the jury’s award of policy benefits or Brandt fees.  The court distinguished Major v. Western Home, a case in which the court included Brandt fees in the ratio analysis.  The court pointed out that in Major the jury awarded Brandt fees before it awarded punitive damages.  Where, as here, the trial court awards Brandt fees after the conclusion of the jury trial, those fees cannot be used to uphold the jury’s punitive damages award.  (This aspect of the majority opinion follows the reasoning of Amerigraphics.)

    3.  The court concluded that any ratio in excess of 10 to 1 would be unconstitutional, even though the court thought Stonebridge’s conduct was particularly bad, implicating four of the five reprehensibility subfactors identified in BMW.  The court described the $35,000 compensatory damages award as “small,” but did not invoke the statement in BMW that “low awards of compensatory damages may properly support a higher ratio . . . if, for example, a particularly egregious act has resulted in only a small amount of economic damages.”

    4.  The court rejected the notion that a higher ratio could be justified by the defendant’s sizable wealth. While that analysis is consistent with the Supreme Court’s admonition that wealth cannot be used to uphold an otherwise unconstitutional award, it seems in tension with this panel’s prior decision in Bullock v. Philip Morris (Bullock II), which cited the defendant’s wealth to justify a 16 to 1 ratio.

    Related post:

    Court of Appeal orders reduction of $19M punitive damages award to $350,000 (Nickerson v. Stonebridge) – PART I

  • Court of Appeal orders reduction of $19M punitive damages award to $350,000 (Nickerson v. Stonebridge) – PART I

    Today, the California Court of Appeal published one of the most interesting punitive damages opinions that court has issued in quite some time.  The opinion has so many interesting aspects, our discussion of the case will be split up into several posts.  In this first post, we’re going to talk about the puzzling disposition of the case.

    This is an insurance bad faith case in which a jury awarded $31,500 in contract damages, $35,000 in tort damages, and $19 million in punitive damages. The defendant, Stonebridge Life Insurance, filed a motion for JNOV and a new trial motion arguing excessive punitive damages, among other things.  The trial court denied the JNOV motion but granted a conditional new trial, giving the plaintiff the option to avoid the new trial by accepting a remittitur of the punitive damages to $350,000.  The plaintiff declined the remittitur and both parties appealed.

    On appeal, the court concludes that the jury’s $19 million award was excessive as a matter of federal due process, and that the maximum constitutionally permissible award is $350,000.  (We’ll have more discussion of the court’s excessiveness analysis in later posts).

    Based on the court’s conclusion that $350,000 is the constitutional maximum, we would have expected the following disposition: the trial court’s order denying JNOV is reversed, and the trial court is directed to grant a partial JNOV reducing the punitive damages to the constitutional maximum of $350,000 (see, e.g., Gober and Simon).  The court’s conditional new trial order would then be moot.

    Instead, the Court of Appeal did exactly the opposite.  It affirmed the order denying the motion for JNOV and reversed the order granting a new trial.  But it nevertheless directed the trial court to reduce the amount of punitive damages to $350,000.  Huh?

    If the constitutional maximum is $350,000, the trial court did exactly the right thing by granting a new trial based on excessive damages.  The trial court’s only error was that it should also have granted partial JNOV to reduce the award to the constitutional maximum, and the new trial should have been merely an alternative ruling.  So why does the Court of Appeal affirm the JNOV ruling and reverse the new trial ruling?  It should be the other way around. The end result is the same in this case either way, but this disposition may cause undue confusion in future litigation. 

    Related posts:

    L.A. trial court reduces punitive damages award against Stonebridge insurance from $19 million to $350,000

    L.A. jury awards $19 million in punitive damages and $35,000 in compensatory damages in insurance bad faith case

  • Novartis cert. petition distributed for Sept. 30 conference

    We previously reported on this pending cert. petition, which asks the Supreme Court to address the preemption of punitive damages claims against drug makers.  The Supreme Court asked the plaintiff to respond to the petition, which certainly doesn’t mean it will be granted, but does make it worth watching.  The online docket indicates that the Supreme Court will consider the petition at its September 30 conference.

    Related posts:

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