California Punitives by Horvitz & Levy

  • 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.

  • Unpublished opinion affirms punitive damages award against defendant with negative net worth (Liu v. Wong)

    As readers of this blog are aware, California law requires courts to reduce punitive damages awards that are disproportionate to the defendant’s financial condition.  Consistent with this principle, California courts have vacated punitive damages awards entirely when the defendant had a negative net worth.  (See the cases discussed here, here, and here.)  But there has been some inconsistency on this point.  Some courts have affirmed punitive damages awards even when the defendant had a negative net worth.  (See the cases discussed here and here.)

    This unpublished opinion from the California Court of Appeal (First District, Division Two) falls into the latter category, affirming a $410,000 punitive damages award despite evidence that the defendant had a negative net worth.  The court concluded that the award was not excessive because the defendant had borrowed substantial sums of money secured by loans on property he owned.  I don’t see how the defendant’s heavy borrowing shows that he can afford to pay punitive damages without suffering financial ruin (which is the whole point of requiring taking the defendant’s financial condition into account).  Perhaps the court just didn’t believe that he really had a negative net worth.

  • Unpublished opinion affirms trial court’s reduction of $1 million punitive damages award to $450,000 (Sunkist v. Mahmood)

    In this defamation case, a jury awarded $60,000 in compensatory damages and $1 million in punitive damages.  The trial court ruled that both the compensatory and punitive damages were excessive, but denied the defendant’s motion for a new trial after the plaintiff consented to a reduction of the damages to $45,000 in compensatory damages and $450,000 in punitive damages.  The defendant appealed, arguing that the reduced amounts were still excessive.  The plaintiff cross-appealed seeking reinstatement of the $1 million punitive award.

    The California Court of Appeal (First Appellate District, Division Three) issued this unpublished opinion rejecting both appeals and affirming the damages awards as reduced.  The opinion doesn’t contain much analysis on the excessiveness issue; it simply concludes that, “[g]iven the nature and circumstances” of the case, the jury’s $1 million award was excessive but the trial court’s reduced award of $450,000 was not.

    Although the excessiveness analysis isn’t particularly noteworthy, the opinion reveals an interesting procedural irregularity in the lower court proceedings.  In the second phase of this bifurcated trial, one of the jurors became seriously ill, forcing the trial court to declare a mistrial.  The court then empaneled a second jury to decide the issue of punitive damages, instead of ordering a complete new trial.  That would seem to violate the “same jury” requirement of Civil Code 3295(d), which requires a single jury must decide both liability and punitive damages.  Case law has carved out some limited exceptions under which a limited retrial may be held on the issue of punitive damages.  (See our prior blog post about limited retrials.)  But this case wouldn’t seem to fit those exceptions.  Nevertheless, the Court of Appeal affirms the judgment without even mentioning that problem.  Perhaps the defendant didn’t raise this issue on appeal.

  • Rex Heeseman op-ed about Bullock in today’s Daily Journal

    Los Angeles superior court judge Rex Heeseman, who frequently writes opinion pieces on insurance law and punitive damages, has written an op-ed that appears in today’s Daily Journal (subscription required to access article).  Judge Heeseman’s piece examines the likely impact of the recent Bullock opinion, which upheld a 16 to 1 ratio of punitive to compensatory damages.  Interestingly, he writes that the majority opinion’s analysis is “arguably contrary to Campbell,” to the extent that the majority folded the defendant’s financial condition into the BMW guidepost analysis.   (We struck the same note in our amicus filing on behalf of the U.S. Chamber of Commerce.) 

    Ultimately, Judge Heeseman predicts that plaintiffs will cite Bullock to show that ratios can exceed 9 to 1 in cases of “extreme” reprehensibility, and defendants will argue that Bullock should be limited to its particular facts.  That sounds about right with respect to trial court litigation. I would add that, when those cases go up on appeal, defendants will argue that the majority opinion in Bullock should not be followed by other appellate courts because it is out of step with federal and state law, as pointed out in Justice Kitching’s dissenting opinion.

  • L.A. jury awards $15.4 million in punitive damages against Pentel

    Last month we had two eight-figure punitive damages in California (see our posts here and here).  Now we have another one.   According to this story in Rafu Shimpo, a jury in Los Angeles has awarded $32.8 million in damages – – including $17.5 million in punitive damages – – in a dispute over the development of a $2 pen.  The plaintiff alleged that Pentel of America and its Tokyo-based parent company maliciously stole the concept of the HyperG, a smooth-writing gel pen.      

  • WLF paper on class action certification of punitive damages claims

    I should have posted this three weeks ago, but better late than never.  My colleague Felix Shafir, occasional contributor to this blog, has written a short paper for the Washington Legal Foundation article entitled Class Action Certification of Punitive Damages Claims After Wal-Mart v. Dukes.

  • Arkansas Supreme Court declares cap on punitive damages unconstitutional, reinstates $42 million punitive damages award

    Yesterday the Arkansas Supreme Court issued an opinion holding that the Arkansas legislature violated that state’s constitution by imposing a cap on punitive damages.

    The cap, which was enacted in 2003, limits punitive damages to the greater of $250,000 or three times compensatory damages (not to exceed $1 million).  Yesterday’s opinion (Bayer CropScience v. Schafer), says the cap violates a provision of the Arkansas constitution that provides: “no law shall be enacted limiting the amount to be recovered for injuries resulting in death or for injuries to persons or property.”  The defendant argued that the language in question only applies to compensatory damages.  The court disagreed, finding that punitive damages are part of the “amount to be recovered” within the meaning of the constitutional provision.

    The court went on to hold that Bayer waived its right to challenge the excessiveness of the $42 million punitive damages award, because it failed to file a separate notice of appeal from the trial court’s post-trial order ruling on the excessiveness issue.  Ouch.  In light of the substantial compensatory damages award  – – $5.9 million – – the defendant would have had a strong argument that the punitive damages couldn’t exceed the compensatory damages by more than a one-to-one ratio.

    By our count there are 31 states with caps on punitive damages.  I guess this makes it 30.

    Related posts:

    Arkansas Supreme Court considers constitutionality of caps on punitive damages

    Arkansas Jury Awards $42 Million in Punitive Damages in Litigation Over Genetically Modified Rice