California Punitives by Horvitz & Levy

  • Unpublished opinion affirms $750,000 punitive damages award against two doctors (Taheri v. Khadavi)

    This unpublished opinion from the California Court of Appeal (Second Appellate District, Division Seven) affirms a judgment awarding $8 million in compensatory damages and $750,000 in punitive damages in a case involving claims of fraud and breach of fiduciary duty by two doctors.

    The defendants did not challenge the amount of the punitive damages award as excessive, but they argued that the Court of Appeal should vacate the award because the plaintiff failed to prove that the defendants acted with malice, oppression, or fraud within the meaning of Civil Code section 3294.  The court rejected that argument, reasoning that the defendants are subject to punitive damages because the jury found them guilty of fraud:

    The jury found the defendants committed fraud.  As discussed above, that finding was supported by substantial evidence . . . Accordingly the punitive damages must be upheld.

    The court’s analysis seems to assume that, if a plaintiff proves a cause of action for fraud, then punitive damages are automatically available under the fraud prong of section 3294.  But California law defines the tort of fraud differently from the sort of fraud needed to obtain punitive damages.  The difference is the sort of “intent” required.  To prove the tort of fraud, the plaintiff must prove that the defendant acted with an intent to induce reliance.  But to obtain punitive damages for fraud, the plaintiff must prove that the defendant actually intended to cause harm.  Thus, a defendant who commits fraud with intent to induce reliance, but no intent to cause harm, is not liable for punitive damages.  It’s not possible to tell from this opinion whether it would have made any difference if the Court of Appeal had considered this distinction.

  • New law review article on enforcement of U.S. punitive damages awards in France

    Professor François-Xavier Licari, of the University of Metz law school, has written another interesting article on the enforcement of American punitive damages awards in France.  The article, co-authored by Benjamin West Janke, is entitled Enforcing Punitive Damages Awards in France after Fountaine Pajot.  Here’s the abstract:

    In a landmark ruling, the Cour de cassation held that “an award of punitive damages is not, per se, contrary to public policy,” but that “it is otherwise when the amount awarded is disproportionate with regard to the damage sustained and the debtor’s breach of his contractual obligation.” Schlenzka & Langhorne v. Fountaine Pajot, S.A. involved the failed attempt by American judgment creditors to enforce their California judgment against a French defendant in France. At the same time that the judgment creditors were taking their case through the French legal system, the Cour de cassation, in a different line of cases, liberalized the conditions under which a foreign judgment could be enforced in France. But when the Court opened one door for the American plaintiffs, it closed another by refusing to enforce the judgment because it included disproportionate punitive damages. The Court’s reasons were inconsistent with prior interpretations of proportionality and disingenuous to the court’s modern approach to the enforcement of foreign judgments. In just a few words, the Court echoed prevailing French and European sentiments about American punitive damage awards. Unfortunately, the prevailing attitudes are dominated more by prejudice than by fact and reason.

    The article will appear in the American Journal of Comparative Law.

  • A big year for big verdicts: the top punitive damages awards of 2011

    A majority of states have adopted statutory caps on punitive damages, but the verdicts of 2011 showed us that colossal punitive damages awards are still alive and well in the rest of the U.S., especially in California.

    Top 10 California punitive damages verdicts of 2011

    By my count, these were the top 10 punitive damages awards of the year in California:

    1.  $85 million against Mattel.
    2.  $65 million against Encino-Tarzana Regional Medical Center.
    3.  $50 million against Ford.
    4.  $30 million against Actelion.  
    5.  $20 million against Kaiser-Gypsum (reduced to $4 million after post-trial motions).
    6.  $19 million against Stonebridge Life Insurance (reduced to $350k after post-trial motions).
    7.  $15.6 million against Johnson & Johnson.
    8.  $15.4 million against Pentel.
    9.  $13.5 million against ArvinMeritor and Pneumo Abex.
    10. $2.5 million against Jon Peters.

    That’s a total of $306 million in punitive damages just for these 10 cases.

    Top 5 U.S. punitive damages verdicts of 2011

    The California numbers are impressive, but our top verdict of the year, the $85 million verdict against Mattell, doesn’t even make the top five on the list of the biggest punitive damages awards in the U.S. in 2011:

    1.  $150 billion (Texas)
    2.  $1 billion (Maryland)
    3.  $300 million (vacated on post-trial motions) (Mississippi)
    4.  $200 million (Virginia)
    5.  $162.5 million  (Nevada)

    As the notations above indicate, some of these mega-awards have already been tossed out.  Most of the others will probably meet the same fate.  But 2011 showed that the reversal of such awards on appeal is no sure thing, even in California.  In the few years prior to 2011, our courts were regularly chopping these awards down to size, following the U.S. Supreme Court’s statement in State Farm that the ratio of punitive damages to compensatory damages should not exeed one to one, in cases where the compensatory damages themselves are “substantial.”  But in 2011 we saw some backsliding on that issue, with several courts upholding some very large awards, with ratios in excess of 1 to 1, despite the presence of substantial compensatory damages:

    $13.8 million (ratio of 16 to 1)
    $7 million (ratio of 2.75 to 1)
    $4.7 million (ratio of 2.35 to 1)
    $2.8 million (ratio of 1.75 to 1)
    $1 million (ratio of 2 to 1)

    The California Supreme Court declined review in all of these cases, so this list, unlike the others above, represents final payable judgments.

    All the numbers in this post are based on a review of our blog posts from 2011.  Perhaps there are some other verdicts and decisions that should be listed, but somehow escaped our attention during the year.  If anyone sees something we missed that should have made these lists, let us know, and we will update the lists accordingly.

  • California Supreme Court denies review in Trealoff v. Forest River

    A few months ago we blogged about the unpublished opinion in Trealoff v. Forest River, which upheld a trial court’s determination that a $15 million punitive damages award should be reduced to $7 million.  Today the California Supreme Court denied the defendants’ petition for review.

    Here are the issues that the Supreme Court declined to review:

    1. Whether emotional distress standing alone constitutes “physical harm” for purposes of determining the constitutionality of punitive damages when the distress is not severe and consists entirely of the plaintiffs undiagnosed, untreated, and self-proclaimed emotional injury?

     2. Whether the reprehensibility of a defendant’s conduct for purposes of determining the constitutionality of punitive damages may be assessed with reference to unrelated acts that underlie multiple claims alleged by the plaintiff?
     3. Whether exclusion of evidence tending to negate the existence of malice by a defendant violates its due-process rights and is contrary to long-standing precedents holding such evidence to be presumptively admissible?
     

  • Mississippi judge vacates $300 million punitive damages award after disqualification of original trial judge

    Earlier this year, a Mississippi jury awarded $300 million in punitive damages and $22 million in compensatory damages to a man who claimed he developed asbestosis as a result of working with drilling mud additives.  That award was reportedly the largest verdict in U.S. history for an individual asbestos plaintiff.  But it didn’t last very long.  A new trial judge has vacated that award and ordered a new trial, according to this Associated Press report (via the Witchita Eagle).  It seems that the original judge failed to disclose that his parents had been involved in asbestos litigation against the same defendants.  The Mississippi Supreme Court removed that judge from the case and appointed a new judge, who ordered a retrial.

  • Pennsylvania appellate court rules on two punitive damages awards arising from the same conduct; reinstates a $28 million award in one case (resulting in a 4.4 to 1 ratio) and reduces a $75 million award in the other (resulting in a 2 to 1 ratio)

    We’ve previously reported on the series of punitive damages awards against Wyeth for injuries allegedly caused by its hormone replacement drug Prempro.

    The appeals in two of those cases were decided today by the Pennsylvania Superior Court.  In one of the cases, Kendall v. Wyeth, a Philadelphia jury awarded $28 million in punitive damages, which the trial court reduced to $1 million.  In today’s opinion, the Pennsylvania Superior Court reinstated the original award, concluding that a 4.44 to 1 ratio was not excessive in light of evidence that the defendants “elevated profits above public health.”

    Wyeth argued that a 1 to 1 ratio was the constitutional maximum, citing State Farm‘s statement that “When compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory –
    damages, can reach the outermost limit of the due process guarantee.”  The court rejected that argument, observing that in State Farm, when the U.S. Supreme Court sent the case back to the Utah Supreme Court, the Utah Supreme Court disregarded the suggestion of a 1 to 1 ratio and permitted a 9 to 1 ratio.  (Note that, in California, at least one division of our Court of Appeal has refused to give any weight to the Utah Supreme Court’s opinion on remand in State Farm; see Walker v. Farmer Ins. Exchange.)

    In a companion case involving another Prempro punitive damages award against Wyeth, Barton v. Wyeth, the same appellate court ordered a reduction of a $75 million punitive damages award to $7.4 million, for a ratio of 2 to 1.  That result is actually a victory for the plaintiff, because the trial court had remitted the award to $5.6 million, for a ratio of only 1.5 to 1.  In a footnote at the end of the opinion, the court reconciles the seeming inconsistency in its two opinions.  The footnote says that the award in Kendall warranted a higher ratio because the plaintiff in that case suffered devastating physical and emotional injuries.

    Hat tip: How Appealing‘s Howard Bashman (who argued the Kendall case for the successful plaintiffs).

    Related posts:

    Trial Judge Reduces $75M Punitive Damages Award to $5.6M in Pfizer Litigation

    More Punitive Damages Against Pfizer in Prempro Litigation: Philadelphia Jury Awards $28 million

    A Mixed Bag For Pfizer On Prempro Punitive Damages

    Jury Awards Undisclosed Amount of Punitive Damages Against Pfizer in Prempro Litigation

    Arkansas District Court Vacates $27 Million Punitive Damages Award Against Wyeth and UpJohn

    Nevada Judge Cuts $99 Million Punitive Damages Award Against Wyeth

  • New study shows jurors can’t distinguish between intentional and reckless misconduct

    This article in the National Law Journal discusses a new study released by the John D. and Catherine T. MacArthur Foundation Research Network of Law and Neuroscience, housed at Vanderbilt University.  The participants in the study were asked to determine the appropriate punishment for different types of misconduct, and were unable to draw distinctions between knowing and reckless misconduct.  Sometimes they punished reckless conduct more harshly than knowing conduct. 

    The study involved criminal conduct, but the there’s no reason to believe that jurors are any better at making this sort of determination in civil cases involving punitive damages.  As appellate lawyers we see plenty of cases where the punishment doesn’t seem to fit the crime.  We see jurors awarding punitive damages at the high-end of the single-digit ratio spectrum, even though the conduct at issue can’t be characterized as highly reprehensible in relation to other types of punishable conduct.  (See, for example, this recent case in which a jury awarded $1,000,000 in punitive damages to a plaintiff who was allegedly slandered by a family member, but according to the jury’s findings suffered no out-of-pocket loss.)  Fortunately, our experience has been that judges are more attuned to these types of distinctions, and are often able to bring these awards into line.

  • Yale Law Journal student note: Reconciling Punitive Damages with Tort Law’s Normative Framework

    If you’re interested in the theoretical underpinnings of punitive damages, you might want to read Yale law student Amir Nezar’s note in the Yale Law Journal: Reconciling Punitive Damages with Tort Law’s Normative Framework.  The theme of the note is that courts and commentators have missed the boat in coming up with a theoretical justification of punitive damages that’s consistent with tort law.  Economic theorists haven’t gotten it right when they attempt to explain punitive damages as a method for deterring inefficient behavior, and “retributive justice” theorists haven’t gotten it right when try to explain punitive damages as retribution for wrongs to society.  In the author’s view, punitive damages are better explained by corrective justice theory, which views punitive damages as the defendant’s payment of a moral debt owed to the plaintiff.  Or at least I think that’s what he’s trying to say.  Check it out for yourself. 

    Hat tip: Prof. François-Xavier Licari.

  • Texas jury awards $150 billion in punitive damages

    No, that heading isn’t a typo.  That’s $150 billion in punitive damages.  According to this story in the Salt Lake Tribune, a Texas jury awarded $370 million in compensatory damages and $150 billion in punitive damages (a ratio in excess of 400 to one) against a man who allegedly sexually assaulted the plaintiffs’ son and set him on fire.  The defendant did not even bother to show up for trial. 

    The verdict is reportedly the largest in U.S. history, topping the $145 billion award in the Engle class action against the tobacco industry (which was later reversed by the Florida Supreme Court).

    This award won’t have any practical significance, since it’s obviously uncollectible.  It’s not likely to have much legal significance either; the defendant who didn’t show up for trial probably won’t bother to challenge the award through post-trial motions or an appeal, so we’re not going to end up with any judicial opinion evaluating the propriety of the award.  Thus, the impact of the award is largely symbolic, as a reflection of the jury’s outrage at the defendant’s extraordinarily reprehensible conduct. 

    There may also be a more subtle effect as well.  As I have noted before, I think these  massive awards, even if they are uncollectible and uncontested, have a tendency to seep into the public perception of our judicial system, contributing to the impression that awards like this are within the range of acceptable outcomes in civil litigation. 
    If you are a plaintiff or a plaintiff’s lawyer, you may view that as a good thing.  If you’re a defendant or a defense lawyer, not so much.

  • Unpublished opinion prevents spouse from seeking punitive damages in family law proceeding (In re Marriage of Noghrestchi and Williams)

    Ordinarily, a party to a California divorce proceeding cannot seek punitive damages from their future ex-spouse, because the California Family Code permits the parties to seek only certain specifically authorized remedies (which do not include punitive damages).  But this rule has an exception. It does not apply to disputes about transactions that occurred before the marriage.  Thus, if the parties agree to have a dispute about a pre-marital transaction resolved by the same judge who is handling the dissolution, that judge is empowered to award the full range of tort remedies, including punitive damages.

    The question in this divorce case is whether the wife could take advantage of that exception.  The Court of Appeal (First Appellate District, Division Four) in this unpublished opinion says “no,” because there was insufficient evidence that both parties agreed to submit the issue of punitive damages to the judge handling the dissolution.  The wife presented only weak evidence that she intended to submit that issue to the judge, and she presented no evidence that her husband agreed to put that issue on that table.