California Punitives by Horvitz & Levy

  • Court of Appeal rejects defendant’s claim of inability to pay punitive damages, citing evidence that defendant failed to improve her financial condition (Morton v. Spotts)

    This unpublished opinion contains a rather unusual twist on an issue that frequently arises in punitive damages cases in California, namely, whether a punitive damages award is disproportionate to the defendant’s ability to pay.

    In an appeal from a $15,000 punitive damages award, the defendant argued the award was excessive in light of her negative net worth.  The plaintiff disagreed with the defendant’s interpretation of the evidence, and argued that the defendant’s net worth was worth at least $350,000.  The Court of Appeal (Fourth Appellate District, Division One) affirmed the award.  The court could have just adopted the plaintiff’s view of the evidence and left it at that.  But instead, the court cited the defendant’s failure to fully utilize her financial assets, and said the jury could have concluded defendant was “failing to maximize her net worth or improve her financial condition.”

    That’s a new one on me.  I don’t recall ever seeing any other opinion suggesting that an award could be upheld on the theory that the defendant’s inability to pay was the result of the defendant’s failure to maximize his or her own net worth.    

  • Court of Appeal approves pattern jury instruction on “clear and convincing” evidence (Nevarrez v. San Marino Skilled Nursing)

    This is not a punitive damages case. But it merits discussion here because it addresses the adequacy of the official California jury instruction on the clear and convincing evidence standard of proof, which applies in all punitive damages cases.

    This is not the first time the California Court of Appeal has considered how courts should explain the clear and convincing evidence standard to jurors. Far from it. Back in the early 1990’s, the Second Appellate District, Division Three, criticized the definition of clear and convincing evidence set forth in BAJI No. 2.62, the pattern instruction in use at the time. That instruction defined clear and convincing evidence as “evidence of such convincing force that it demonstrates, in contrast to opposing evidence, a high probability of the truth of the fact[s] for which it is offered as proof.”

    In a case called Mock v. Michigan Millers Mutual, Division Three said the BAJI No. 2.62 definition was too weak, because it did not reflect the stringent standard established by the California Supreme Court in In re Angelia P.: “so clear as to leave no substantial doubt”; “sufficiently strong to command the unhesitating assent of every reasonable mind.”

    A few years later, however, Division Three backed away from that criticism in a 2-1 decision. In that case, Mattco Forge v. Arthur Young & Co., the court said that the In re Angelia P. formula was too close to the “reasonable doubt” standard used in criminal cases.

    In 2003, the Judicial Council approved the CACI instructions as the official preferred jury instructions for use in California. The CACI instructions contained a definition of clear and convincing evidence that was even weaker than the BAJI formulation that Division Three criticized in Mock.  CACI No. 201 says that clear and convincing evidence means “that the party must persuade you that it is highly probable that the fact is true.” By watering down the definition of clear and convincing evidence, the CACI instructions arguably opened the door to revisiting the Mock/Mattco Forge debate. Indeed, we are aware of several cases in which trial courts agreed to give special instructions on this issue because they concluded that the standard set forth in CACI No. 201 is inadequate.

    Today, however, the Court of Appeal (Second Appellate District, Division Four) gave CACI No. 201 its blessing in this published opinion. The opinion acknowledges the history on this issue, but declines to embrace the Mock rationale. Instead, the opinion follows the reasoning of Mattco Forge and holds that the trial court properly rejected the defendants’ proposed special instruction, which incorporated the In re Angelia P. definition of clear and convincing evidence.

    We decline to hold that CACI No. 201 should be augmented to require that “the evidence must be ‘so clear as to leave no substantial doubt‘ and ‘sufficiently strong as to command the unhesitating assent of every reasonable mind.’ ” Neither In re Angelia P., supra, 28 Cal.3d 908, nor any more recent authority mandates that augmentation, and the proposed additional language is dangerously similar to that describing the burden of proof in criminal cases. (Mattco Forge, supra, 52 Cal.App.4th at p. 849.) The trial court did not err in rejecting it.

    We wouldn’t be surprised to see this case end up in the California Supreme Court.

  • Indiana Supreme Court declares punitive damages cap constitutional

    A few years ago we reported on an order by an Indiana trial judge invalidating that state’s cap on punitive damages.  Under Indiana’s rules of appellate procedure, when a trial court declares a statute unconstitutional, the appeal goes directly to the Indiana Supreme Court.  The Supreme Court has now reversed the trial court’s ruling and upheld the constitutionality of the cap.  The concise 9-page opinion holds that the statute (which limits punitive damages to the greater of $50,000 or three times compensatory damages) neither infringes on the right to a jury trial nor violates the separation of powers doctrine. 

    This decision brings Indiana law into line with what appears to be a growing majority of state supreme courts to address this issue, although some states have gone the other way.  (See, e.g., this post about a contrary ruling from the Arkansas Supreme Court.) 

    For further discussion of the opinion and Indiana punitive damages law in general, see the Hoosier Litigation Blog.

  • Court of Appeal affirms $40,000 in punitive damages after reversing $3.8 million in compensatory damages (Corenbaum v. Lampkin)

    Our report on this case is a bit tardy, because I was traveling abroad when the decision was issued.  The main issue in this case has nothing to do with punitive damages, but it merits a brief mention here because the court’s treatment of the punitive damages award is somewhat unusual.

    The primary question in this appeal was whether, in light of the California Supreme Court’s opinion in Howell v. Hamilton Meats, personal injury plaintiffs can present evidence of the amounts their medical providers billed for services, even though the providers agreed to accept lesser amounts as payment in full for their services.  Howell held that a plaintiff’s damages are properly measured by the amount paid, not the amount billed.  The question here was whether the amount billed was nonetheless admissible as relevant on the issues of future medical expenses and noneconomic damages.

    The trial court allowed the plaintiffs to introduce evidence of the amount billed, but the California Court of Appeal (Second Appellate District, Division Three) held, in a published opinion, that the evidence was inadmissible.  Accordingly, the Court of Appeal reversed the jury’s $3.8 million compensatory damages award for a new trial.  Interestingly, the court chose not to reverse the jury’s award of $40,000 in punitive damages.  Ordinarily, when an appellate court reverses a compensatory damages award for a new trial, reversal of the punitive damages is virtually automatic.  But perhaps the court in this case thought that the small amount of punitive damages awarded here dictated a different result.

    Full disclosure: Horvitz & Levy represented the defendant in this appeal, although we did not brief or argue the punitive damages issues.  We associated into the case after the initial briefing, submitting a supplemental brief and presenting oral argument for the defendant.   The Court of Appeal inadvertently omitted our firm’s name from the slip opinion (presumably because we were not the initial counsel of record).

  • $4.8M punitive damages award reversed for lack of evidence that corporate management participated in wrongdoing (Martinez v. Rite Aid)

    In October 2010 we reported about this $4.8 million punitive damages award against Rite Aid in a disability discrimination case.  Yesterday, the California Court of Appeal (Second Appellate District, Division Seven) vacated that award in an unpublished opinion. 

    The Court of Appeal based its decision on Civil Code section 3294, subdivision (b), which provides that a corporation cannot be liable for punitive damages based on the acts of an employee unless a corporate officer, director, or managing agent committed, authorized, or ratified those acts.  The Supreme Court has defined a managing agent as a person who has the authority to determine corporate policy, meaning formal policies that affect a substantial portion of the company and are likely to come to the attention of corporate leadership.

    The Court of Appeal held that none of the three different corporate employees who allegedly discriminated against the plaintiff qualified as managing agents within the meaning of section 3294.  One was a “human resources manager,” one was a “store district manager,” and the third was a “pharmacy district manager.”  The court found that, although all of them had “manager” in their title, none of them had any real authority to establish formal company policies for a substantial portion of the company.  As a result, the court reversed the punitive damages award, entitling Rite Aid to judgment in its favor on that issue.  (For unrelated reasons, the court also reversed the jury’s $3.4 million compensatory damages award and ordered a new trial on that issue.)

  • Supreme Court of India affirms $18.4 million punitive damages award

    An editorial in Business Standard reports on a case in which the Supreme Court of India has affirmed a punitive damages award of “Rs 100 crone” in a contamination case against the operator of a copper smelting plant. That works out to $18.4 million, according to an on-line currency converter.

    The editorial says India’s Supreme Court has traditionally been hostile to punitive damages.  The author, who is apparently a student at Stanford law school, worries that the decision does not clearly explain the basis for the punitive damages award, possibly opening the door to expansion of punitive damages claims in future environmental litigation in India. 

  • Canadian judge awards a record $4.5 million in punitive damages

    OHS News reports that a judge in Saskatchewan has awarded punitive damages totaling $4.5 million against two insurers (Zurich Life Insurance and AIG) for wrongfully withholding workers’ compensation benefits.  According to OHS News, the award in this case represents “the largest ever punitive damages penalty in Canada.”  In California, an award like that would not have made the top 10 list last year (though it would have come in at #10 in 2011).

  • Billionaire wins $12M in punitive damages from New York jury

    Bloomberg News is reporting (via the San Francisco Chronicle) that a federal jury in Manhattan has awarded $12 million in punitive damages to Florida billionaire William Koch, who claimed he was duped into buying collectible wine that turned out to be fake.  The defendant, California internet entrepreneur Eric Greenberg, said he had no idea the wines from his private collection were not authentic.  Obviously the jury didn’t believe him.  Nevertheless, it seems unlikely that the punitive damages award will survive through posttrial motions and an appeal. The award is 31.5 times the compensatory damages of $380,000.   

  • Las Vegas jury awards $500 million in punitive damages in hepatitis case

    Earlier today we reported on the plaintiff’s request for $2.5 billion in punitive damages in this case.  The jury has just returned a verdict for $500 million in punitive damages, according to KLAS-TV. That’s $270 million against one defendant and $230 million against another.  While that isn’t nearly as much as the plaintiffs requested, the combined punitive damages are still about 21 times the compensatory damages, which seems to present a serious constitutional excessiveness problem.

  • Frog-phobic plaintiff is not entitled to punitive damages

    This is one of the strangest punitive damages stories we have seen in a while.  The Associated Press reports (via Long Island Newsday) that the New York Court of Appeals has reversed an award of $250,000 in punitive damages to a plaintiff who claimed he was terrorized by the presence of frogs in his yard.

    According to the story, the plaintiff claimed he developed a fear of frogs as a child, when he was chased by a man holding bullfrogs.  Decades later, his ranidaphobia resurfaced when some nearby construction allegedly turned his 40-acre property near Buffalo into a wetland, attracting hordes of frogs that blocked his driveway and his front door.  It’s almost like they knew he was afraid of them!

    Based on this tale of woe, the plaintiff and his attorney managed to persuade a jury to award $1.6 million in compensatory damages plus and additional $250,000 in punitive damages.  The Court of Appeals, however reversed the punitive damages, finding no evidence that the defendant acted with a conscious disregard for plaintiff’s well-being.