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  The Court of Appeal (First Appellate District, Division Four) in this unpublished opinion says “no,” because there was insufficient evidence that both parties agreed to submit the issue of punitive damages to the judge handling the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.

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This unpublished opinion from the California Court of Appeal (First District, Division Two) falls into the latter category, affirming a $410,000 punitive damages award despite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.

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.