California Punitives by Horvitz & Levy

  • Nguyen v. Do: $50,000 punitive damages award reversed for lack of meaningful financial condition evidence

    We haven’t seen one of these for a few months, but here’s the latest unpublished opinion in which the California Court of Appeal (Sixth District) reverses a punitive damages award because the plaintiff failed to introduce meaningful evidence of the defendant’s financial condition. Here’s the court’s description of the evidence that proved to be inadequate:

    The evidence . . .  showed only that Tam had a net income of $29,072 in 2008, no assets other than a 2004 Porsche Cayenne, and liabilities consisting of $34,000 owed to vendors and employees of SaigonUSA and a annual loss of $20,000 in operating SaigonUSA. No evidence was presented with regard to Tam’s income in years other than 2008, or as to the existence of any bank accounts, retirement accounts, or investments. Thus, the evidence showed only that Tam’s current liabilities exceeded his 2008 income and he has no assets other than a 2004 Porsche Cayenne of unknown value.

  • L.A. trial court reduces punitive damages award against Stonebridge insurance from $19 million to $350,000

    Earlier this year we reported on an insurance bad faith case against Stonebridge Life Insurance in which a Los Angeles jury verdict awarded $35,000 in compensatory damages and $19 million in punitive damages. The plaintiff, who purchased a hospital accidental indemnity policy from Stonebridge, claimed that Stonebridge unreasonably refused to pay for a lengthy hospital stay, agreeing to pay only for 19 days out of a 109-day stay.

    The defendant brought posttrial motions seeking a reduction of the punitive damages award. The trial court’s order (see discussion beginning on page 13) reluctantly concludes that any award in excess of $350,000 (10-to-1 ratio) would violate the federal Due Process Clause. Interestingly, the order written by Judge Mary Ann Murphy states that an award of $350,000 is unlikely to deter Stonebridge from engaging in similar misconduct in the future, but “the Court is constrained to reduce the punitive damages award to 10:1 based on recent California and federal authority.”

    The plaintiff will probably appeal, arguing that the 10-to-1 ratio is too low and relying on the statement in State Farm v. Campbell that higher ratios are appropriate when “a particularly egregious act has resulted in only a small amount of economic damages.” The defendant is likely to respond that the conduct at issue here is not so egregious as to warrant even a 10-to-1 ratio (if it warrants punitive damages at all).

    The Daily Journal has coverage of this story here. (Subscription required).

    Related post:

    L.A. jury awards $19 million in punitive damages and $35,000 in compensatory damages in insurance bad faith case

  • Ex-associate loses appeal on punitive damages claim against Orrick

    Reuters reports that a former Orrick, Herrington & Sutfliffe associate who sued the firm has lost an appeal seeking to reinstate his punitive damages claim against the firm. The associate claimed that Orrick failed to make him a partner despite assurances that his promotion would be guaranteed if he stayed at the firm.  As we reported in an earlier post, the trial court tossed his claim for punitive damages on the ground that he failed to allege that Orrick’s conduct was egregious enough to warrant punitives.  Not surprisingly, the court of appeal affirmed.

    Related posts:

    No punitive damages for former law firm associate who was passed over for partnership

  • Wyeth v. Scofield cert petition distributed for June 16 conference

    The U.S. Supreme Court is set to rule on the cert petition in Wyeth v. Scofield on June 16, according to the court’s online docket.  As noted in an earlier post, the issues presented in Wyeth’s cert petition are:

    1. Whether, when a verdict has been tainted by a jury’s passion or prejudice, due process requires a trial court to grant a new trial instead of a remittitur.

    2.Whether, and in what circumstances, a trial court violates due process when it awards a substantial amount in compensatory damages but nevertheless proceeds to award punitive damages in an amount exceeding the one-to-one ratio indicated in State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003) and Exxon Shipping v. Baker, 554 U.S. 471 (2008).

    Related post:

    Wyeth v. Scofield cert. petition raises punitive damages issues

  • L.A. Times supports bill to prevent deduction of punitive damages as business expenses

    Today’s L.A. Times has an editorial supporting AB 1276, which would prevent defendants from taking a tax deduction for payments of punitive damages.

    The bill has been approved by the Assembly’s appropriations committee by a vote of 12-5, but will not become law unless approved by a two-thirds majority in both houses of the legislature (it requires a 2/3 vote because it affects revenue).

    Related posts:

    Proposed California bill would prevent tax deductions for punitive damages

    Proposal to eliminate [federal] tax deduction for punitive damages still alive

    More from Prof. Markel on Tax Policy and Punitive Damages

    “Taxing Punitive Damages”

    Proposed [federal] legislation would eliminate tax deduction for punitive damages

    Obama administration proposes to eliminate tax deduction for payment of punitive damages

  • Kimes v. Grosser: court reinstates punitive damages claim for attack on Pumkin the cat

    Don’t mess with Pumkin the cat, or you may end up paying punitive damages.  That’s the message of this published opinion from the California Court of Appeal (First Appellate District, Division One).

    The plaintiff alleged that the defendants shot his beloved cat Pumkin with a pellet gun while Pumkin was perched on a fence between the plaintiff’s property and the defendants’ property.  Pumkin needed emergency surgery costing $6,000.  She survived but was left partially paralyzed.  Plaintiff sued to recover the cost of the surgery, increased costs of care due to Pumkin’s paralysis, and punitive damages.  The trial court ruled, however, that plaintiff could only recover Pumkin’s fair market value.  The plaintiff conceded that Pumkin had no market value, so the trial court dismissed his case.

    The Court of Appeal reversed the judgment of dismissal, ruling that the plaintiff was entitled to recover damages for the reasonable and necessary costs he incurred due to the wrongful injury of his cat.  More importantly for purposes of this blog, the court ruled that the plaintiff could recover punitive damages under California Civil Code section 3340(f), which provides that “exemplary damages may be given” in cases involving “wrongful injuries to animals . . committed willfully or by gross negligence, in disregard of humanity.”  The statutory language leaves me wondering whether there are any cases defining “disregard of humanity,” but I’ll leave that issue for another day.  

    UPDATE (6/2/11):  Bob Egelko of the San Francisco Chronicle reports: Brentwood man cleared to sue over cat’s shooting (the article contains a photo of Pumkin)

  • Gonzalez v. ATI Systems: trial court properly rejected punitive damages claim in disability discrimination case

    In this unpublished opinion, the California Court of Appeal (Second District, Division Five) reverses a trial court order that granted summary adjudication for the defense on the plaintiffs’ disability discrimination claims, but affirms the trial court’s grant of summary adjudication for the defense on the issue of punitive damages.  The Court of Appeal thought the plaintiff had enough evidence to proceed with his liability claims, but the court ruled that the plaintiff presented no clear and convincing evidence that his employer’s possibly tortious conduct was the result of malice, oppression, or fraud.

  • Oregon Supreme Court affirms $8 million punitive damages award

    A little while ago I posted about a Colorado Supreme Court opinion that affirmed an $18 million punitive damages award, and I observed that state supreme courts don’t often affirm blockbuster punitive damages awards.  One of our readers then alerted me to the Oregon Supreme Court’s opinion last week in Strawn v. Farmers Insurance Co. of Oregon, which affirmed an $8 million punitive damages award.  (Technically, the court reinstated an $8 million punitive damages award that had been reversed by the Court of Appeal.) 

    That doesn’t quite qualify as a “blockbuster,” but it is surprising that the court affirmed the award given that the compensatory damages were only $800,000.  A 10-to-1 ratio seems awfully high in a case that involves purely economic harm (underpayment of insurance policy benefits).  Then again, the Oregon Supreme Court has a history of marching to the beat of its own drum when it comes to punitive damages; this is the court that affirmed the $79.5 million punitive damages award in Philip Morris v. Williams even after the U.S. Supreme Court held that the jury instructions in that case violated Due Process.

    DISCLOSURE: Horvitz & Levy was not involved in the Strawn case, but we do represent Farmers in other matters.

  • Colorado Supreme Court affirms $18 million punitive damages award

    It’s not often that a state supreme court affirms a blockbuster punitive damages award, but yesterday the Colorado Supreme Court affirmed a $39.6 million judgment in a personal injury action, including $18 million in punitive damages, in the case of Qwest Services Corp. v. Blood.  The plaintiff, a lineman for an electric utility, was injured during a climb on a wooden utility pole.  The 46-year-old pole was rotten and collapsed under the plaintiff’s weight.  He sued the defendant, the company that owned of the pole, for failure to implement a routine pole inspection program.

    The Colorado Supreme Court’s opinion has three primary holdings:

    1.  Colorado’s punitive damages statute does not violate the Due Process Clause as interpreted by the U.S. Supreme Court in Philip Morris v. Williams; the statute does not suggest that a jury can or should award punitive damages to punish the defendant for harm to nonparties.

    2.  The evidence was sufficient to support a punitive damages award against the defendant, because a reasonable jury could conclude that the defendant’s failure to implement a pole inspection problem was “wilful and wanton” within the meaning of Colorado’s punitive damages statute. 

    3.  The amount of the award was not excessive under the three guideposts of BMW v. Gore because the reprehensibility of the defendant’s conduct was sufficient to support a punitive damages award that was less than the amount of compensatory damages.

    Related posts:

    Colorado Supreme Court to consider excessive punitive damages, despite statutory cap

  • Proposed California bill would prevent tax deductions for punitive damages

    Somehow I missed this when it happened, but I learned today that Assemblyman Mike Feuer introduced a bill in February – – Assembly Bill 1276 – – to prevent California taxpayers from deducting punitive damages payments as business expenses.  In general, taxpayers engaged in a business are permitted to deduct all expenses that are ordinary and necessary in conducting that business, unless specifically excluded by statute.  This proposal would eliminate the deduction for payments of punitive damages.  The bill has been approved by the Assembly Committee on Tax & Revenue and has been referred to the Appropriations committee. 

    As far as I’m aware, no U.S. jurisdiction has prohibited deduction of punitive damages.  But as noted in prior posts, the Obama administration has advocated for a change in federal law, a proposal that has drawn sharp criticism from law professors.

    Related posts:

    Proposal to eliminate [federal] tax deduction for punitive damages still alive

    More from Prof. Markel on Tax Policy and Punitive Damages

    “Taxing Punitive Damages”

    Proposed [federal] legislation would eliminate tax deduction for punitive damages

    Obama administration proposes to eliminate tax deduction for payment of punitive damages