California Punitives by Horvitz & Levy

  • $760,000 in punitive damages reversed as excessive in relation to defendant’s financial condition (Strohbach v. United General Title Insurance)

    In a fraud action involving a real estate loan, a jury awarded $2.7 million in compensatory damages and $762,000 in punitive damages (two separate awards of $381,000 each against two defendants).  The defendants appealed and the California Court of Appeal (Fourth Appellate District, Division Three) issued an unpublished opinion rejecting all of their arguments except one: that the punitive damages were excessive in relation to the defendants’ ability to pay.

    The court began its discussion by observing that, while some courts have held that a defendant’s net worth should not be the sole measure of a its financial condition because net worth is too easily subject to manipulation, “it is also true that California courts have ‘disfavored’ awards tending to exceed 10 percent of net worth.”  One of the awards in this case approached 100 percent of that defendant’s net assets, without even considering his substantial liabilities.  To distinguish this record from cases involving “manipulated” net worth, the court observed that the that the defendant’s liabilities were real, and did not represent money transferred to “some surreptitious investment or secret stash.”  The other defendant had even more limited assets, and had never earned as much as $10,000 in a single year.  Based on that record, the court concluded that the plaintiffs had not carried their burden of proving the defendants’ ability to pay the punitive damages awards.

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

    Yesterday we reported about the approval of Assembly Bill 458 by the California State Assembly’s appropriations committee.  We should have noted that the bill has been approved not only by the committee, but by the full Assembly.  The Sacramento Business Journal predicts that the Senate will not act on the bill before August, when the senators return from their summer recess.

  • Committee on Appropriations approves bill to prohibit deductions of punitive damages

    The Committee on Appropriations of the California State Assembly has approved a bill that would prevent California taxpayers from deducting payments of punitive damages.  Assembly Bill 458, which we previously discussed here, will now head to the state senate.  Despite the committee approval, the bill still seems unlikely to pass.  It would require a two-thirds majority approval.

  • Don’t fear the Reader: how to follow this blog’s RSS feed now that Google Reader is dead

    If you have been using Google Reader to follow this blog and have just discovered that Google Reader is no more, you may be interested in this piece from Slate: How to Survive the Google Reader Apocalypse.

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

    Does federal law preempt punitive damages claims against drug manufacturers who have satisfied FDA approval and labeling requirements?  That is the first question raised in this cert. petition filed by Novartis Pharmaceuticals in Novartis Pharmaceuticals Corp. v. Fussman. 

    The plaintiff brought suit in federal district court, asserting a failure-to-warn claim under North Carolina law.  The plaintiff claimed Novartis failed to adequately warn of risks associated with the cancer drugs Aredia and Zometa.  A jury awarded $287,000 in compensatory damages and $12.6 million in punitive damages.  The district court reduced the punitive damages award to $1.3 million under a North Carolina statute that caps punitive damages at three times compensatory damages.

    Novartis appealed to the Fourth Circuit, arguing that federal law bars punitive damages in state law failure to warn cases against drug manufacturers who have complied with all FDA requirements.  The Fourth Circuit disagreed and affirmed the punitive damages award in an unpublished opinion.

    Novartis filed a petition for certiorari and the plaintiff waived his right to file a response.  But the Supreme Court, after considering the petition, requested a response from the plaintiff.  Yesterday, the Washington Legal Foundation filed an amicus brief in support of the petition.  See their press release here.

    To track the status of this petition, you can view the Supreme Court’s online docket here.

  • Iowa Supreme Court reaffirms that punitive damages are not available in civil rights cases

    Last Friday, the Iowa Supreme Court issued this opinion (Ackelson v. Manley Toy Direct), reaffirming the court’s earlier ruling that punitive damages are not available in sexual harassment and gender discrimination cases brought under the Iowa Civil Rights Act: 

    We have clearly and repeatedly stated our conclusion that the ICRA does not implicitly permit an award of punitive damages. This message has been a reoccurring pronouncement over the last twenty-seven years. No significant legislative changes have been made since our first pronouncement in 1986 that would even hint at a shift in legislative intent since that time.

    During this same period, the issue of punitive damages in civil rights claims has received broad national attention, making it very likely that our legislature would have taken action to alter our interpretation if it disapproved.  . . . Overall, we think our legislature would be quite surprised to learn if we decided to reverse course and take a different position under the guise of statutory interpretation. We did our job twenty-seven years ago and will leave it for the legislature to take any different approach.

    That excerpt certainly creates the impression that this issue has been settled in Iowa for quite some time (twenty-seven years, to be precise).  Apparently, however, Iowa’s trial courts had not gotten that message.  This Associated Press story in the Globe Gazette reports that “trial judges had been allowing punitive damages in civil rights cases,” according to a local plaintiffs’ attorney.  Presumably that will change now.

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

    Today’s Recorder has a story on an interesting punitive damages case pending before the Ninth Circuit.

    In a sexual harassment case (Aguilar v. ASARCO), the jury awarded $0 in compensatory damages, $1 in nominal damages, and $868,750 in punitive damages.  The district court reduced the punitive damages to $300,000 and the defendant appealed, challenging that amount as excessive.  Oral argument was held on Wednesday.  As Scott Graham of the Recorder reports, Judges O’Scannlain and Hurwitz jousted with counsel over how to apply the single-digit-ratio rubric of BMW and State Farm to the facts of this case.  Stay tuned.  This is the sort of case in which the losing side might seek certiorari.

  • Court of Appeal affirms order vacating $1.75 million punitive damages award and ordering new trial (Radford v. BAE Systems)

    This unpublished opinion contains a very interesting discussion about the validity of some unusual posttrial procedures involving a punitive damages award.  Or at least it’s very interesting if you are into the arcana of California posttrial and appellate procedure.  If that’s not your thing, you might want to stop reading now.

    The jury in this case awarded $420,000 in compensatory damages and $1.75 million in punitive damages.  Before judgment was entered, the defendant asked the trial court to rule that the punitive damages were constitutionally excessive.  The plaintiff objected, arguing that the court should enter judgment and the defendant should then raise the excessive damages through posttrial motions.

    The trial court overruled the plaintiff’s objections and decided the excessiveness issue before entering judgment.  The court ruled that the maximum constitutionally permissible punitive damages award is $420,000 on the facts of this case.

    The court then entered judgment and the defendant filed a new trial motion and a JNOV motion.  The plaintiff argued that the trial court had no jurisdiction to grant either motion because the court had already considered the plaintiff’s prejudgment motion, which was effectively a new trial motion.

    The trial court overruled the plaintiff’s objections again, and granted the defendant’s new trial motion.  The court ruled that plaintiff’s counsel committed misconduct, depriving the defendant of a fair trial.  The court granted a new trial conditioned on the plaintiff’s acceptance of a remittitur of the amount of the compensatory and punitive damages to a total of less than $500,000.  The plaintiff accepted the remittitur.

    After the trial court’s jurisdiction to grant a new trial expired, the court issued its specification of reasons for granting a new trial.  In the specification of reasons, the court amended its earlier new trial order to eliminate the conditional part of the order and to eliminate the plaintiff’s right to avoid a new trial by accepting a remittitur.

    The plaintiff appealed and the Court of Appeal (First Appellate District, Division Five) affirmed. It found nothing wrong with the judge deciding the issue of excessive punitive damages before entering judgment.  The Court of Appeal said the trial court’s prejudgment ruling was effectively a de facto JNOV motion, not a de facto new trial motion, because the issue of constitutional excessiveness is a JNOV issue, not a new trial issue.

    The plaintiff argued that even a de facto JNOV motion before judgment would be improper because by statute the trial court is supposed to hear and decide the JNOV motion at the same time as a new trial motion.  The Court of Appeal said that argument might have been valid if the plaintiff had raised it below, but since he didn’t, the argument was waived.

    The Court of Appeal also found nothing nothing wrong with the court “amending” the new trial order in the specification of reasons and taking away the plaintiff’s right to accept a remittitur.  The Court of Appeal said that the remittitur part of the original new trial order was void all along because trial courts are not permitted to order a remittitur when granting a new trial on grounds other than excessive damages.  Therefore, because the remittitur was never legally valid in the first place, the trial court did not err by revoking the remittitur in its specification of reasons.

  • Massachusetts Supreme Court reverses smoker’s $81M punitive damages award

    The Boston Herald reports that the Massachusetts Supreme Judicial Court has reversed an $81 million punitive damages award given to the family of a smoker in a lawsuit against Lorillard Tobacco Co. 

    In a unanimous opinion, the court ruled that the trial court improperly instructed the jury on the issues of negligent design and marketing, and that those erroneous instructions may have tainted the punitive damages award.  The court ordered a new trial on punitive damages, but affirmed the jury’s $35 million compensatory damages award, which was supported by alternate theories of liability not impacted by the erroneous instructions.

  • Oakland jury awards $11M in punitive damages against Owens-Illinois

    Law 360 reports (subscription required) that a jury in Alameda County has awarded $16.3 million in compensatory damages and $11 million in punitive damages against Owens-Illinois Inc. 

    The plaintiff claims she developed mesothelioma as a result of her exposure to asbestos fibers while shaking out and washing her husband’s clothes.  It is not clear to what extent such “take home” claims are viable in California.  Last year the Second Appellate District, Division Seven, ruled that Ford could not be liable to a plaintiff who claimed she developed mesothelioma as a result of her exposure to asbestos fibers from laundering her father’s and brother’s clothes after they worked as independent contractors installing asbestos at a Ford manufacturing plant. (Campbell v. Ford Motor Co.)  Related issues are pending before the First Appellate District, Division Three, in Kesner v. Pneumo Abex and before the Second Appellate District, Division Three, in Petitpas v. Borgwarner.