California Punitives by Horvitz & Levy

  • Florida Court of Appeal orders new trial on punitive damages claim against Philip Morris

    We’ve mentioned this case (Naugle v. Philip Morris) a few times before.  Back in November 2009, a jury awarded $300 million, including $244 in punitive damages.  During the posttrial phase, the trial court reduced the total damages to less than 40 million.  And now the Florida Court of Appeal has ruled that the trial judge should have granted a new trial on damages instead of ordering a remittitur.  The appellate court reasoned that Philip Morris was entitled to a new trial based on the trial court’s finding that the jury was motivated by passions, anger, and sympathy.

    The California Supreme Court made a similar holding in Schelbauer v. Butler Manufacturing Co. (1984) 35 Cal.3d 442, 454, when it expressly disapproved the use of a remittitur as a means to cure legal error, holding that use of remittitur is “confined to cases in which an excessive damage award [is] the only error in the jury’s verdict.”

    Last year Wyeth asked the U.S. Supreme Court to decide whether a remittitur can be used to cure a verdict tainted by passion and prejudice, but Wyeth’s petition was denied.

    This case is part of the continuing fallout from the Florida Supreme Court’s Engle decision reversing a $145 billion verdict in a class action against five tobacco defendants. Point of Law has a post summarizing the saga.

  • Trial court properly dismissed punitive damages claim because plaintiff introduced no evidence of corporate ratification (Betson v. Rite Aid)

    This unpublished opinion (Betson v. Rite Aid) allows a plaintiff to proceed with her claims for disability discrimination and retaliation, but prohibits her from seeking punitive damages.  Although she accused her manager of numerous malicious acts, she presented no evidence that the manager’s misconduct was authorized or ratified by the defendant’s upper management.

    The plaintiff worked as a shift supervisor at a Rite Aid drug store in Beverly Hills.  She sued Rite Aid for various theories of discrimination, retaliation and harassment.  She claimed that the store manager routinely mocked her because she had a limp, refused to accommodate her disability, and fired her based on false accusations of stealing money from a cash register.  The trial court granted summary adjudication on many of plaintiff’s claims, including her claim for punitive damages.  The case went to trial on the remaining claims and the jury awarded the plaintiff $500,000.  The trial court, however, granted Rite Aid’s motion for judgment notwithstanding the verdict and entered judgment for Rite Aid.

    Plaintiff appealed and the California Court of Appeal (Second Appellate District, Division Four), held that the trial court erred in granting JNOV and erred in granting summary adjudication on plaintiff’s claims for disability discrimination and retaliation.  Nevertheless, the court affirmed the trial court’s decision to toss out the plaintiff’s claim for punitive damages, because plaintiff presented no evidence that the store manager’s misconduct was ratified by any officer, director, or managing agent of Rite Aid.  The plaintiff argued that Rite Aid’s continued employment of the store manager was sufficient evidence of ratification, but the Court of Appeal rejected that contention as a matter of law.

    This case is a reminder that a corporate employee with the title of “manager” may not qualify as a “managing agent” within the meaning of Civil Code section 3294. As the California Supreme Court has explained, managing agents include only those corporate employees who have sufficient authority in the corporation such that their decisions ultimately determine corporate policy.  (See White v. Ultramar.)

  • Los Angeles jury awards $7.7M in punitive damages to former “The Price is Right” model; try to guess the final award without going over

    The Associated Press reports that a Los Angeles jury has awarded $777,000 in compensatory damages and $7.7 million in punitive damages in an employment discrimination suit brought by a former model on “The Price is Right.”  The plaintiff, Brandi Cochran, claims she was not permitted to return to work on the show after she took maternity leave.  The defendant, Freemantle Media, contends the trial judge erroneously excluded evidence that over 40 percent of the models on the show have been pregnant.

    Given the size of the compensatory damages and the high punitive-to-compensatory ratio, this award is not likely to survive through posttrial motions and an appeal.  Our readers are invited to guess the final amount of the punitive damages award, without going over. 

  • Supreme Court of Mississippi adopts an unusual procedural rule

    Our readers are well aware that California has a unique procedural rule that puts the burden on plaintiffs to introduce meaningful evidence of the defendant’s financial condition in order to obtain punitive damages.  A plaintiff who fails to introduce such evidence forfeits any claim for punitive damages. 

    As far as I know, no other state has such a rule. In 1992, the Mississippi Supreme Court expressly rejected our rule and held that neither party is required to introduce financial condition evidence, but if no such evidence is presented, neither party can challenge the amount of the punitive damages award on appeal.  (See C & C Trucking Co. v. Smith (Miss. 1992) 612 So. 2d 1092, 1105.) 
     
    This recent opinion (Coleman & Coleman v. Waller Funeral Home) from the same court puts a surprising twist on that rule.  In Coleman & Coleman, a jury awarded $25,000 in punitive damages against the defendant.  The defendant challenged the award in a posttrial motion by submitting evidence of its negative net worth.  Based on that evidence, the trial court vacated the punitive damages award.  The plaintiff appealed, citing C & C Trucking and arguing that the defendant waived its right to challenge the amount of the punitive damages by failing to present its financial condition evidence at trial.  The Supreme Court agreed that C & C Trucking is the controlling authority, but it found a waiver by the plaintiff rather than the defendant.  The Supreme Court said that the plaintiff, by failing to introduce the defendant’s financial condition at trial, waived its right to challenge the trial court’s posttrial ruling.

    Even from my perspective as a defense lawyer, that seems unfair to the plaintiff.  I could understand a court saying that a party has to present financial condition evidence to the jury in the first instance before that party can raise the issue on appeal.  But I don’t understand how a court can allow one party to present such evidence after the verdict and then preclude the other party from challenging the post-verdict ruling based on that evidence. 

    Absent a waiver, the court in this case might have reached the opposite result, based on a decision it issued just three months ago holding that a defendant with a negative net worth is not immune from punitive damages.  (See Canadian Nat’l Ry. Co. v. Waltman (Miss 2012) 94 So.3d 1111.)

  • Judge vacates $20 million punitive damages award against Joe Francis

    A few months ago we reported about Steve Wynn’s $20 million punitive damages award against Girls Gone Wild founder Joe Francis.  According to the Hollywood Reporter, the trial judge has vacated that award in its entirety because Wynn failed to produce any evidence of Francis’ financial condition at the time of trial. We have seen a lot of appellate reversals of punitive damages awards on that basis, but not many instances of a trial court granting posttrial relief under that rationale.  Typically, if the trial court believes the plaintiff has not provided sufficient evidence of the defendant’s financial condition, the court will grant a nonsuit or a directed verdict before the case goes to the jury.

    In addition to vacating the punitive damages award, the trial court also trimmed the compensatory damages by $1 million.  Francis says his legal team is predicting a “100 percent chance of success of appealling the remaining part of the case.”

  • L.A. jury awards $3.6 million in punitive damages aginst game maker for trademark infringement

    Today’s Daily Journal (subscription required) reports that a federal court jury here in Los Angeles has awarded $5 million in compensatory damages and $3.6 million in punitive damages against a board game maker who allegedly infringed upon the plaintiff’s trademarked phrase “Would You Rather . . .?”  This litigation has been going on for seven years and has already been up to the Ninth Circuit once.  It’s going up again, according to the statements of defense counsel quoted in the article.

  • Oregon jury awards $75 million in punitive damages against defense contractor

    Last month we reported on a defense contractor’s failed attempt to have Iraqi law applied to a lawsuit in federal court alleging that the contractor knowingly exposed members of the Oregon National Guard to hexavalent chromium while they were serving in Iraq.  The Seattle Times reports that a jury in that case has awarded a total of $75 million in punitive damages.  The verdict requires Halliburton spin-off Kellogg Brown & Root (KBR) to pay $850,000 in compensatory damages and $6.25 million in punitive damages to each of the 12 plaintiffs. This one is almost certainly headed to the Ninth Circuit.

  • UC Irvine professor seeks punitive damages from Johnny Depp

    We rarely report on pretrial proceedings in punitive damages cases.  Most cases end up settling, so we don’t usually cover them until they reach a final verdict or decision by the court.  But this story is so odd it’s worth a quick mention.  The Daily Pilot reports that a professor at UC Irvine’s medical school is suing actor Johnny Depp for punitive damages.  The plaintiff claims that Depp’s bodyguards roughed her up in the VIP area of an Iggy & the Stooges concert.  The story says the trial judge permitted plaintiff to proceed with her punitive damages claim, but the story doesn’t explain whether the court made that ruling in connection with a motion to strike, a summary adjudication motion, or some other procedure.  In any event, I found it amusing that Iggy Pop’s fan base has matured to the point that, when a fight breaks out at a show, it involves a medical professor and a celebrity entourage.

  • Second Circuit punitive damages decision draws criticism

    Yesterday, the New York Law Journal published an op-ed (subscription required) criticizing a recent decision on punitive damages from the Second Circuit.

    The decision in question is Payne v. Jones. A jury awarded $60,000 in compensatory damages and $300,000 in punitive damages against a police officer who assaulted the plaintiff.  The defendant appealed to the Second Circuit, which concluded that any punitive damages award over $100,000 would be excessive in light of the reprehensibility of the defendant’s conduct. 

    The op-ed criticizes the opinion for, among other things, creating confusion about the appropriate standard of review.  The op-ed suggests the Second Circuit gave insufficient deference to the district court.

    I agree with the op-ed that the opinion contains an unnecessarily complicated discussion of the standard of review, but I do not agree that the court gave insufficient deference to the district court.  The Second Circuit cited a 1978 case for the proposition that the traditional standard of review is whether the amount of the award “shock[s] the judicial conscience.”  The court then stated that the traditional standard is “informed” by the due process principles contained in the Supreme Court’s BMW v. Gore opinion. The Second Circuit noted, however, that BMW involved a federal court reviewing a state court punitive damages award, and that a federal court can overturn a state court punitive damages award only if it violates the Due Process Clause, whereas a federal court has broader supervisory powers over a district court.  In other words, a federal appellate court can second-guess a district court’s ruling on the amount of punitive damages even when there is no due process violation.  The court then went on to explain why the award was excessive under the BMW standards.  

    Curiously, the Second Circuit did not cite the governing Supreme Court precedent on the standard of review issue: Cooper v. Leatherman.  In that case, the Supreme Court held that appellate courts must apply a de novo standard of review to a lower court’s ruling on the excessiveness of a punitive damages award under BMW v. Gore.  Lower courts have held that Cooper v. Leatherman applies regardless of whether the punitive damages award was rendered in state court or federal court.   Indeed, the Second Circuit itself has repeatedly held that de novo review applies to a district court’s ruling on excessiveness of punitive damages. One such case involved the same sort factual scenario as Payne – an assault and battery by a police officer, DiSorbo v. Hoy.  So there was no need for the Second Circuit to engage in a lengthy discussion of the standard of review.  It should have just followed Cooper (and its own prior decisions) and applied de novo review.  Undoubtedly, it would have reached the same ultimate conclusion and found the award excessive.

    Thanks to Richard Montes and Ben Shatz for calling the opinion and the op-ed to my attention.

  • Court of Appeal affirms $25 million punitive damages award against co-founder of Guess, Inc. (Gottlieb v. Fahs)

    In 2009 we reported on a Los Angeles jury verdict awarding $370 million, including $25 million in punitive damages, against Georges Marciano, the co-founder of Guess, Inc.  This unpublished opinion (Gottlieb v. Fahs) from the California Court of Appeal (Second Appellate District, Division Two) affirms the punitive damages, rejecting the defendant’s claim that the record contained insufficient evidence of his financial condition.  But the Court of Appeal did grant him some relief.  It reduced the compensatory damages to a total of $25 million.

    The end result is a much higher punitive-to-compensatory ratio than the jury originally awarded.  The defendant could have sought a new trial on that basis, although there is a split of authority on this issue as we have noted.  As far as the opinion reveals, the defendant did not raise that as a ground for a new trial.