California Punitives by Horvitz & Levy

  • 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.

  • Plaintiff can pursue tort claim solely to obtain punitive damages (Fullington v. Equilon Enterprises LLC)

    This published opinion (Fullington v. Equilon Enterprises) addresses an issue of first impression in California law: whether a plaintiff can pursue a tort claim solely for the purpose of punitive damages, when the plaintiff has already been compensated for the alleged loss caused by the tort.

    The plaintiff, who leased and operated a Shell gas station, brought several lawsuits against Shell.  In one of those cases (the Marquez litigation), he claimed that Shell failed to offer him an opportunity to purchase his station before Shell transferred ownership of the station to another company.  He accepted a settlement with Shell in which Shell agreed to refund all the rent that plaintiff paid on his gas station from 1998 through 2001.

    In the instant case, he brought a fraud claim against Shell for overcharging him on rent from 1998 through 2000.  The trial court granted summary adjudication on the fraud claim, finding that plaintiff could not establish any damage because he had already received a complete refund of all rent in the Marquez action.  The plaintiff appealed, arguing that he should be allowed to pursue the fraud claim for the purpose of obtaining punitive damages.  While a plaintiff cannot ordinarily obtain punitive damages in the absence of compensatory damages, the plaintiff argued that what matters is whether he suffered a compensable injury, regardless of whether he was already compensated for that injury through another lawsuit.

    The California Court of Appeal (Second District, Division Four) agreed with the plaintiff and reversed the grant of summary adjudication on the fraud claim.  The court held on October 25 that a defendant cannot avoid an award of punitive damages by paying the plaintiff for his alleged injuries. The court noted that “California law has a variety of doctrines—none of which [defendant] invoked here—that prohibit the filing of multiple suits arising out of the same wrongful conduct. If none of those doctrines applies—and thus the filing of two separate actions does not offend California law—we perceive no reason why the maintenance of one action should become impermissible because a judgment or settlement is entered in the other.”

  • PG&E exposed to potential punitive damages for San Bruno explosion

    2012 has been a relatively quiet year for blockbuster punitive damages awards in California.  But that trend could change in January 2013 according to this report in the San Mateo County Times.  Judge Steven Dylina of the San Mateo County Superior Court has tentatively denied PG&E’s request to dismiss the plaintiff’s claim for punitive damages in a lawsuit arising out of the 2010 San Bruno explosion that killed eight people and destroyed 38 homes.  If Dylina sticks to his tentative ruling, a jury could be asked to award punitive damages in a case involving 350 plaintiffs and a very large amount of compensatory damages.

  • L.A. jury awards punitive damages against former Lakers coach Rudy T.

    PacificPalisadesPatch reports that a Los Angeles jury has ordered former Lakers coach (and longtime Houston Rockets coach) Rudy Tomjanovich and his wife to pay $250,000 in punitive damages and $2.7 million in compensatory damages to the buyer of their Pacific Palisades home.  The plaintiff, Strata Capital founder Steven Bardack, accused Tomjanovich of acting with malice when he sold the house without disclosing water intrusion and mold problems. 

    The house was previously owned by Girls Gone Wild founder Joe Francis, who was recently hit with a punitive damages award himself.  The PacificPalisadesPatch reports that a further stage of trial is set to begin against Francis and other defendants.  

  • Federal judge rejects application of Iraqi law to punitive damages claim

    The Oregonian reports that United States Magistrate Judge Paul Papak has denied a defendant’s request to apply Iraqi law to a claim for punitive damages based on conduct that occurred in Iraq. 

    The plaintiffs are Oregon National Guard soldiers who accuse defense contractor KBR, Inc. of knowingly exposing them to hexavelent chromium (which you may remember from such films as Erin Brockovich).  KPR argued that Iraqi law should apply because the alleged misconduct took place in Iraq, not Oregon where the case is pending. Iraqi law, like the law of most countries in the world, prohibits punitive damages.   

  • Federal judge awards $6B in punitive damages for 9/11attacks

    The Globe and Mail of Toronto reports that U.S. District Judge George B. Daniels of the Southern District of New York has awarded $6 billion in punitive damages against Iran, al-Qaeda, Hezbollah, and the Taliban, to punish the defendants for their involvement in the 9/11 attacks.

    According to the story, the court blamed Iran partly because the hijackers passed through Iran on their way to the U.S.  I’m not quite sure how that supports liability against Iran, but it hardly matters.  As the reporter observed, the award is largely symbolic and “unlikely to be recovered.” It’s no more collectible than any of the other gigantic punitive damages awards that the federal courts have issued against Iran in recent years.

    Related posts:

    Federal judge piles on punitive damages against Iran and Sudan: $1.67B and $236M

    Federal Judge Awards $300 Million In Punitive Damages Against Iran

    Federal judge awards $61.3 million in punitive damages against Iran

    $25 Million in Punitive Damages Against Cuba

    Miami Judge Awards $393 Million in Punitive Damages Against Cuba

  • Icicle Seafoods: cert. denied

    The U.S. Supreme Court has denied the petition for certiorari in Icicle Seafoods v. Clausen.  See page 16 of today’s order list.  Back in late June, there were some signs the Court might be interested in this petition, when Justice Kennedy issued a stay order and the Supreme Court requested a response to the petition.  But it turns out that we’ll all have to wait for the Supreme Court’s next foray into punitive damages.

    Related posts:

    No grant of certiorari in Icicle Seafoods today

    SCOTUS conferencing on Icicle Seafoods today

    SCOTUS scheduled to rule on Icicle Seafoods cert. petition on September 24

    Justice Kennedy issues stay in Icicle Seafoods v. Clausen

    Cert. petition raises punitive damages issues (Icicle Seafoods v. Clausen)

  • Unpublished opinion reduces $750,000 punitive damages award as excessive in relation to defendants’ financial condition (Stuckert v. Pyke)

    There are so many unpublished California opinions that reverse punitive damages awards because the plaintiff failed to introduce sufficient evidence of the defendant’s financial condition, we don’t bother to report them all.  But this unpublished opinion from the Fourth Appellate District, Division Two, merits a little discussion.

    In a dispute between former business partners, the jury awarded the plaintiff $2.15 million in compensatory damages and $750,000 in punitive damages.  As far as I can tell from the opinion, the punitive damages were awarded jointly against both defendants. That’s not how it usually works in California (or elsewhere), but at least one appellate court has endorsed the idea of joint and several liability for punitive damages, and the defendants didn’t make an issue of it in this appeal.

    Both defendants attacked the punitive damages as excessive in relation to their financial condition. Defendant #1 claimed at trial that he had a negative net worth and zero income.  On appeal, he took the position that, viewing the evidence in the light most favorable to the plaintiff, the record could support a finding that his net worth was $1.8 million.  The Court of Appeal concluded that the defendant gave the plaintiff’s evidence too much credit:

    We also believe that [Defendant #1] is too generous in accepting all of [Plaintiff’s] evidence. Although the substantial evidence standard is deferential to the factfinder, “this does not mean we must blindly seize any evidence in support of [Plaintiff] in order to affirm the judgment. . . . ‘[I]f the word “substantial” [is to mean] anything at all, it clearly implies that such evidence must be of ponderable legal significance. Obviously the word cannot be deemed synonymous with “any” evidence. It must be reasonable . . . , credible, and of solid value . . . .’ [Citation.]” (Kuhn v. Department of General Services (1994) 22 Cal.App.4th 1627, 1633.)

    Looking only at the “credible” evidence, the Court of Appeal concluded that Defendant #1’s net worth was $961,218, and that the $750,000 punitive damages award was therefore disproportionately excessive.  The court acknowledged that, according to published case law, courts generally do not allow punitive damages to exceed 10 percent of the defendant’s net worth.  That would suggest a maximum award of $96,000 in this case.  Instead the court adopted a maximum of $175,000, roughly 18 percent of the defendant’s net worth.  The court did not explain why it departed from the traditional 10 percent rule.  And the court did not simply order a reduction of the punitive damages to $175,000.   It gave the plaintiff the option between that reduced amount or a new trial on punitive damages.  It’s hard to imagine why the plaintiff would choose a new trial, unless he thinks Defendant #1’s financial condition will have improved by the time of a second trial.

    As for Defendant #2, the Court of Appeal agreed that the plaintiff had failed to establish that Defendant #2 had the ability to pay any punitive damages award.  The court said that Defendant #2 had a negative net worth, no income, and less than $5,000 in cash.  Accordingly, the court vacated Defendant #2’s liability for punitive damages altogether.

     

  • No grant of certiorari in Icicle Seafoods today

    Icicle Seafoods was not on the Supreme Court’s order list today.  That means the Supreme Court did not grant certiorari in that case today, but it doesn’t necessarily mean the petition for certiorari was denied.  The petition could be re-listed for another conference.  We should find out on Monday, when the Supreme Court issues its order listing all the petitions that were denied in today’s conference.

    Related posts:

    SCOTUS conferencing on Icicle Seafoods today

    SCOTUS scheduled to rule on Icicle Seafoods cert. petition on September 24

    Justice Kennedy issues stay in Icicle Seafoods v. Clausen

    Cert. petition raises punitive damages issues (Icicle Seafoods v. Clausen)