Last month we reported on the California Court of Appeal’s latest decision in the ongoing saga of Bullock v. Philip Morris. Yesterday, Philip Morris filed its petition for review. You can track the status of the petition on the court’s online docket.
-
Two recent unpublished opinions adress the sufficiency of financial condition evidence (Sylester Flowers v. Hillyer and Madriz v. Ochoa)
On Sept. 23 the California Court of Appeal issued two unpublished opinions addressing whether a plaintiff had presented sufficient evidence of the defendant’s financial condition to sustain an award of punitive damages.
In Sylester Flowers v. Hillyer, the First Appellate District, Division Five, reversed a $4.8 million punitive damages award because the plaintiff’s presentation on the defendant’s financial condition was insufficient. Interestingly, the defendant in that case had repeatedly refused the plaintiff’s requests for financial documents, and failed to comply with an initial court order requiring disclosure of financial information. Other cases have found that a defendant who fails to comply with such an order cannot later complain about the absence of financial condition evidence. (See, e.g., Mike Davidov v. Issod.) But the court here found no waiver, in part because it was not clear whether the defendant ultimately complied with the trial court’s final order compelling discovery of financial records, and also because the plaintiff failed to request the financial condition evidence for the purpose of obtaining punitive damages. The court noted, “There is no indication that plaintiffs sought — or that the trial court ordered — pretrial discovery of [defendant’s] financial condition pursuant to Civil Code section 3295, subdivision (c),” and there was no indication that plaintiffs served a trial subpoena to bring financial records to court, or sought a court order for discovery regarding finances after the liability finding. In other words, just asking for the info is not enough; the plaintiff has to explain that the info is needed in connection with punitive damages.
In Madriz v. Ochoa, the Sixth Appellate District affirms $30,000 in punitive damages, finding that the plaintiff’s evidence on financial condition, although not perfect, was good enough. The evidence established that the defendant earned at least $100,000 per year, owned some real property, had at least $26,000 in cash, and had a history of making large cash deposits to various accounts. Although the evidence didn’t establish the defendant’s liabilities, the court said the evidence of income and assets was sufficient to sustain the jury’s relatively modest punitive award.
-
Ninth Circuit calls on district court to consider whether punitive damages claims can be certified for class treatment in light of Wal-Mart v. Dukes
When the U.S. Supreme Court decided Wal-Mart v. Dukes back in June, we observed that the Court’s interpretation of Federal Rule of Civil Procedure 23(b)(2) might lead federal courts to conclude that claims for punitive damages cannot be certified for class treatment under this rule. Late last week, the Ninth Circuit instructed a federal district court to consider this very question in Ellis v. Costco Wholesale Corp.
Rule 23(b)(2) allows for class treatment only when “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” In Wal-Mart, the Supreme Court assessed whether this rule justified class certification where the class sought not only declaratory and injunctive relief but backpay as well. The Court held that Rule 23(b)(2) does not authorize class certification where, as with claims for backpay, each class member would be entitled to an individualized award of monetary damages.
As we explained at that time, the Supreme Court has previously held that any punitive damages award must be tied to the harm suffered by a plaintiff. (See, e.g., State Farm Mutual Auto. Ins. Co. v. Campbell (2003) 538 U.S. 408, 422-423.) We therefore noted that, in the future, courts may well conclude that claims for punitive damages, like claims for backpay, are claims for an individualized award of monetary damages that cannot be certified for class treatment under Rule 23(b)(2). Since then, several federal district courts have reached precisely that conclusion. (See, e.g., Morrow v. Washington (E.D. Tex. Aug. 29, 2011) 2011 WL 3847985, at *30 [claims for punitive damages “are not appropriate for Rule 23(b)(2) certification” because they “would require an individualized, factual determination for each claim”]; Altier v. Worley Catastrophe Response, LLC (E.D. La. July 26, 2011) 2011 WL 3205229, at *13 [denying class certification under Rule 23(b)(2) with respect to punitive damages claim because such a claim “requires a focus on individualized issues to comply with constitutional protections”].)
This issue also came up in Ellis. There, the Ninth Circuit vacated a district court’s order granting class certification and remanded to the district court to consider whether class certification should be granted pursuant to the legal standards established in Wal-Mart. In doing so, the Ninth Circuit “highlight[ed] several factors for the district court to consider” on remand. Among those factors, the Ninth Circuit—rather than deciding the issue itself—said the district court may consider on remand whether plaintiffs’ claim for punitive damages could be certified in accordance with Wal-Mart‘s interpretation of Rule 23(b)(2).
Of course, it’s possible the district court may sidestep this Rule 23(b)(2) issue since the Ninth Circuit also indicated the district court could consider whether to certify the punitive damages claim pursuant to Rule 23(b)(3). But there is no guarantee the district court would do so. As we’ve previously pointed out, although some courts have certified punitive damages claims for class treatment, several federal courts have declined to do so because the necessity of assessing an award of punitive damages in light of the defendant’s conduct toward a particular plaintiff requires individualized inquiries that prevent a plaintiff from satisfying Rule 23(b)(3)’s predominance requirement.
-
Kahaner v. Salamon: unpublished opinion further illustrates split on how to handle punitive damages after reduction of compensatory damages
We’ve noted in prior posts that California appellate courts have split on the question of what to do about a punitive damages award when the court determines that the compensatory damages must be reduced. Traditionally, courts would order a reduction of the punitive damages, or at least a new trial, to account for the change in the compensatories. But more recently we’ve seen some courts simply affirming the punitive damages without regard to the change in the compensatories (and therefore without regard to the change in the punitive-to-compensatory ratio). This unpublished opinion from the Second Appellate District, Division Seven, falls into that category. The court orders the trial court to reevaluate the amount of compensatory damages, but affirms an award of $50,000 in punitive damages without even knowing what the final compensatory amount will be.
This case isn’t as extreme as Behr v. Redmond, where the Court of Appeal reduced the compensatory damages from $4 million to $1.6 but left a $2.8 million punitive damages award undisturbed. Unfortunately, when the defendant in Behr petitioned for review to the California Supreme Court, he didn’t get a single vote. Perhaps the Supreme Court didn’t think that case was the right vehicle to settle this issue, but will take up the issue in a future case. I hope so, because the lower courts are all over the map on this issue and could use some guidance.
-
U.S. punitive damages in German courts
The Federal Supreme Court of Germany held in 1992 that U.S. punitive damages awards are unenforceable in Germany because they violate the “ordre public” – – the fundamental values of Germany’s justice system. The Federal Supreme Court got it wrong, according to this article by Madeleine Tolani (U.S. Damages Before German Courts: A Comparative Analysis with Respect to the Ordre Public).
-
Plaintiffs’ group issues white paper purporting to dispel “myths” about punitive damages
The Center for Justice & Democracy, an advocacy group founded by plaintiffs’ lawyers, has released a white paper which, according to the press release, debunks common myths about punitive damages. The paper argues that punitive damages serve a vitally important role in deterring unsafe practices, and it takes aim at critics of punitive damages by reciting Department of Justice statistics showing that punitive damages are rarely awarded, and are usually awarded only in modest amounts. (We reported on the same stats in 2009.)
The article fails to explain, however, how the cited statistics dispel any actual “myths” about punitive damages. The unstated premise of the paper is that critics of punitive damages are claiming that punitive damages are awarded in a high-percentage of cases, and that most of those awards are excessive. But that’s not really what critics are saying. The real criticism is that punitive damages are awarded arbitrarily and irrationally. The CJ&D response seems to be, “Yeah, but not very often.” That doesn’t seem like much of a myth-buster.
If the CJ&D really wants to prove that punitive damages are necessary to deter unsafe practices, they should study whether such practices are more common in countries and jurisdictions that don’t allow punitive damages. Or they could prove the value of unlimited punitive damages by showing a greater incidence of unsafe practices in jurisdictions that have imposed statutory caps. That kind of study could take the debate beyond mere rhetoric and into the realm of actual substance. But as far as I know, no advocacy group on either side has attempted to perform that type of study.
-
Kelemen v. John Crane, Inc.: new trial ordered in case where jury awarded $18.3 million in punitive damages
There’s a lot of interesting stuff in this unpublished opinion.
Its a personal injury action for asbestos exposure, with a fairly typical fact pattern: Plaintiff is massively exposed to asbestos-containing insulation in the Navy and develops mesothelioma years later, but the manufacturers of the insulation aren’t around anymore, so the case goes to trial against a company that made asbestos-containing gaskets and packing, which were used inside some of the ship-board equipment. The jury finds for the plaintiff, assigns 70 percent fault to the defendant, and awards $900,000 in economic damages, $2 million in past noneconomic damages, $14 million in future noneconomic damages, and $18.3 million in punitive damages. After posttrial motions, the trial court orders a reduction of the punitive damages to $4.5 million. Both sides appeal.
The California Court of Appeal (Second Appellate District, Division Two), addresses several punitive damages issues in its opinion:
- First, the opinion holds that substantial evidence supports the jury’s determination that the defendant acted with malice, fraud or oppression within the meaning of Civil Code section 3294. The court follows the Shade Foods line of authority which holds that the reviewing court must review the evidence through the prism of the “clear and convincing evidence” burden of proof. The court does not discuss the conflicting line of authority which holds that the clear and convincing evidence standard has no impact on appellate review. (As readers of this blog may recall, that conflict was taken up by California Supreme Court in 2008, but the case was later dismissed after the parties settled). In the end, however, the court concludes that the evidence is sufficient to support a finding even under the heightened burden of proof.
- Next, the opinion holds that a new trial is required due to irregularities in the presentation of evidence of the defendant’s financial condition. This analysis is pretty interesting. As we have discussed many times on this blog (e.g., here), when a California appellate court concludes that a plaintiff has failed to meet its burden of presenting meaningful evidence of the defendant’s financial condition, the court will send the case back to the trial court with directions to enter judgment in favor the defendant on the issue of punitive damages. On the other hand, if the court concludes that the defendant failed to comply with a court order to produce financial condition evidence, the court will find a waiver by the defendant and affirm the award. (As we reported here.) In this case, the court finds that the defendant failed to comply with a court order, but also concludes that the order itself was defective. So instead of ordering judgment for the defendant or finding a waiver, the court orders a new trial on the issue of punitive damages. That’s an approach I haven’t seen before.
The opinion also holds that the jury’s award of $14 million in non-economic damages is excessive in relation to the plaintiff’s life expectancy. That issue is beyond the scope of this blog, but those with a general interest in California tort damages might want to check it out.
-
Oil spill plaintiffs allowed to pursue punitive damages claims against BP
I’m jumping back into blogging after 6 weeks away from the office. Thanks to my colleagues Lisa Perrochet and Jeremy Rosen for keeping the blog rolling in my absence.
Here’s a bit of news from earlier in the week: AP reports that U.S. district judge Carl Barbier of the Eastern District of Louisiana will allow thousands of fisherman and businesses affected by the Gulf of Mexico oil spill to seek punitive damages from BP, Halliburton, Transocean Ltd., and a host of other defendants. You can find Judge Barbier’s order and other materials from the litigation on this special page on the court’s website.
The order permits the plaintiffs to seek punitive damages under general maritime law, which allows punitive damages based on a showing of “gross negligence.” The order concludes that such claims are not preempted by the Oil Pollution Act of 1990 (“OPA”), a comprehensive statute that addresses responsibility for oil spills, but is silent as to the availability of punitive damages. The order declines to follow a First
DistrictCircuit decision (South Port Marine v. Gulf Oil Limited Partnership), which held that punitive damages were not available under the OPA. You can bet BP and the other defendants will take that up on appeal. -
L.A. verdict against film producer Jon Peters awards $2.5 million in punitive damages for sexual harrassment
Reuters reports that film producer Jon Peters has been hit with a verdict for $822,000 in compensatory damages and $2.5 million in punitive damages (about a 3:1 ratio) in a case involving claims of sexual harrassment and hostile work environment.
Given that the compensatory damages are “substantial” by most courts’ definition (but see the recent Bullock appellate court decision, discussed here), and given that this case does not appear to involve physical injury, it will be interesting to see whether the punitive damages (if found to be supported by clear and convincing evidence of malice) will be cut on postrial motions or on appeal to a 1:1 ratio, on excessiveness grounds.
Related posts:
$1.16 punitive damages verdict returned against Walgreens: will 13:1 ratio stick? [describing recent Calfornia punitive damages verdict in an employment tort case]
Thomas v. iStar Financial, Inc.: $1.6 million punitive damages award in retaliatory discharge case is excessive [discussing appellate opinion that affirmed a trial court order reducing the $1.6 million punitive award to $190,000 (less than a 1:1 ratio)];
Sex and punitive damages [referencing recent New Jersey appellate court ruling on punitive damages in a sexual harrassment case]
-
A potpourri of recent eight-figure punitive awards against medical care providers
$18 million punitive damages award (on top of $18.7 million compensatory award): A Florida jury was not pleased with the behavior of a suspended doctor (James Scott Pendergraft IV), whose clinic reportedly mishandled the medical services provided to patient who sought an abortion, but who ended up giving birth to a severely disabled child. The Orlando Sentinel reports that the trial judge last week denied posttrial motions challenging the July 2011 verdict.
$80 million punitive award (on top of $11.5 million compensatory award): According to a plaintiffs’ firm press release, a West Virginia jury found that the defendant nursing home was responsible for the dehydration death of one of its patients. An appeal is apparently in the works. The case is Douglas v. Manor Care Inc.
Honorable mention — punitive damages anticipated after jury awarded $2.287 compensatory damages: the Pennsylvania Record says that, after a three week trial in a case titled Williams vs. Willow Terrace et al., a jury found nursing home defendants were responsible for the poor care of a patient who developed pressure ulcers and ultimately died from them.