California Punitives by Horvitz & Levy

  • LeFlore v. MTA: $150,000 in punitive damages vacated due to lack of meaningful financial condition evidence

    Here’s yet another California appellate opinion reversing a punitive damages award because the plaintiff failed to introduce meaningful evidence of the defendant’s financial condition.

    The trial proceedings in this case began as an employment discrimination lawsuit against the Los Angeles County Metropolitan Transit Agency by a former employee.  The trial ended with a damages award against the ex-employee, as a result of the MTA’s cross-complaint for misappropriation and fraudulent inducement.  The MTA’s cross-complaint alleged that the ex-exmployee misrepresented his employment history in his employment application and retained confidential documents belonging to MTA after he was fired.  A jury agreed and awarded the MTA $600,000 in compensatory damages and $150,000 in punitive damages.

    On appeal, the California Court of Appeal (Second Appellate District, Division Three) issued an unpublished opinion affirming the liability findings but reversing the punitive damages because the record contained no meaningful evidence of the ex-employee’s financial condition.  The record contained evidence of his income after he was fired, but no evidence of his assets or liabilities.

    The MTA tried to get around that problem by arguing that the ex-employee provided evasive and inadequate responses to questions regarding his financial condition in discovery and at trial, and thereby waived his right to complain that the record lacked information about his finances.  The Court of Appeal rejected this argument on two grounds.  First, it observed that unlike other cases where a waiver was found (e.g., Mike Davidov v. Issod), this case did not involve a defendant’s failure to comply with a court order; the MTA did not request any such order and the trial court never issued one.  Second, the MTA had only requested information about income and tax returns, which even if produced would not have sufficent to establish the ex-employee’s financial condition and ability to pay.

  • Law professors’ $5 million punitive damages award cut to $220,000

    Last December we reported on a $5 million punitive damages award in favor of two law professors against West Publishing.  The professors, as you may recall, were the authors of a West treatise on criminal procedure.  They won the big punitive award (along with $180,000 in compensatory damages) based on allegations that West wrongly identified them as the authors of shoddy updates to the treatise.

    Predictably, that punitive award did not survive post-trial review.  The trial court has issued an order (link via Courthouse news) finding that the award is excessive and that the professors must choose between a new trial or a remittitur of the total punitive damages to $220,000.

    UPDATE:  The original post erroneously reported that the trial court ordered a remittitur of the punitive damages to $400,000.  The correct figure is $220,000 (for a total award of $400,000 including the compensatory damages).  The text of the post has been corrected.

  • U.S. Supreme Court hears oral argument in Wal-Mart v. Dukes

    Yesterday, the U.S. Supreme Court heard oral argument in Wal-Mart v. Dukes, which we’ve been tracking for its possible impact on the availability of punitive damages in class actions.

    Based on a reading of the oral argument transcript, at least five justices appeared ready to overturn the district court’s decision to certify what is reportedly the largest class action in history. Justices Alito, Kennedy, Roberts, and Scalia seemed to signal that they agree the class does not satisfy the threshold requirements set by Federal Rule of Civil Procedure 23(a) for all federal class actions. Even several of the other justices who one might expect would be sympathetic to the plaintiffs’ argument appeared troubled by aspects of the class certification decision, although they did not necessarily agree the plaintiffs failed to satisfy Rule 23(a)’s threshold requirements.

    For example, the questions Justice Ginsburg asked suggested she may yet conclude at least some portion of plaintiffs’ lawsuit cannot be certified solely under Rule 23(b)(2) even if the plaintiffs satisfied Rule 23(a). Justice Ginsburg indicated that, under the advisory committee’s note for Rule 23(b)(2), a class action cannot be certified under that rule if the monetary relief sought predominates over injunctive relief. She questioned how plaintiffs could say injunctive rather than monetary relief predominates here given that nearly half of the class members are not interested in injunctive relief but all of the members are interested in money.

    Interestingly, Justice Sotomayor seemed to suggest that, where a class seeks both injunctive and monetary relief, it may be appropriate for courts to decide whether the class should be certified under Rule 23(b)(2) based on a test developed by the Fifth Circuit in Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5th Cir. 1998). If the Allison test were applied to the plaintiffs’ lawsuit, the plaintiffs in Wal-Mart—and plaintiffs in future class actions—may face an uphill struggle persuading a court to certify requests for back pay and punitive damages for class treatment under Rule 23(b)(2). See Allison, 151 F.3d at 416-418 (affirming determination that class certification for claims seeking compensatory and punitive damages was inappropriate under Rule 23(b)(2) because these claims for monetary relief were not sufficiently incidental to the injunctive and declaratory relief sought).

    Given the questions posed by Justices Ginsburg and Sotomayor, it will be interesting to see whether the Supreme Court reverses class certification in a close (perhaps 5 to 4) decision holding the plaintiffs failed to satisfy Rule 23(a)’s threshold requirements or whether, either in lieu of or in addition to this determination, a broader coalition of justices agrees the class fails to satisfy Rule 23(b)(2).

    Related posts:

    Wal-Mart v Dukes argument set for March 29

    Cert. granted in Dukes v. Wal-Mart; review limited to first question plus new issue added by the Court

    Wal-Mart v. Dukes cert. petition redistributed for Dec. 3 conference

    Wal-Mart v. Dukes cert. petition up for consideration next week

    Cert. Petition in Wal-Mart v. Dukes raises class certification issues that may impact whether punitive damages are subject to class treatment

    Ninth Circuit’s Dukes v. Wal-Mart decision addresses class certification of punitive damages claims

  • Holmes v. Burke: punitive damages affirmed against defendant with negative net worth

    This blog has reported on many decisions in which the California Court of Appeal reversed a punitive damages award because the plaintiff failed to introduce meaningful evidence of the defendant’s financial condition.  The appellant in this unpublished opinion from the Fourth Appellate District, Division Three, was hoping to add another decision to that list, but the court concluded that the plaintiff’s evidence, although imperfect, was enough to constitute “meaningful” evidence.   

    The interesting twist here is that the defendant had a negative net worth, but the court affirmed anyway.  The record showed that the defendant had $120,000 in net annual income, but had no significant assets (his home is underwater and proceeding to foreclosure) and a tax liability approaching $2 million.  Nevertheless, the court affirmed the punitive damages award because the defendant waived any argument that the punitive damages were excessive.  It seems that the defendant argued only that the record lacked meaningful financial condition evidence, but did not argue that the award was excessive in relation to the defendant’s financial condition evidence. 

    UPDATE:  Odds are good that, if the defendant had raised an excessiveness argument, the court would have reversed the punitive damages, based on what the same court did in another case last year.

  • Martinucci v. So. Cal. Permanente: Trial court properly vacated a $7.5 million punitive damages award

    This unpublished opinion from the California Court of Appeal (Second Appellate District, Division Two) affirms a trial court order tossing out a $7.5 million punitive damages award in an employment case. 

    The plaintiff, a doctor of radiology, claimed he was fired from a Kaiser medical facility because he insisted on the highest standards of patient care, causing resentment among other personnel and staff.  He sued for retaliatory termination in violation of public policy and various other claims.  After a three-week trial, a jury awarded $3.9 million in compensatory damages and $7.5 million in punitive damages.

    The defendant moved for a new trial and for judgment notwithstanding the verdict (JNOV).  The trial court granted a complete new trial on various grounds, including instructional error.  The court also took the issue of punitive damages off the table for the retrial by granting a JNOV on that issue.  The court found that the plaintiff failed to meet his burden of proving malice, oppression, or fraud, the prerequisites to punitive damages under Civil Code section 3294.

    The Court of Appeal affirmed both the new trial order and the JNOV on punitive damages, agreeing that the plaintiff presented no evidence of malice.  The court also rejected the plaintiff’s argument that his allegations of retaliatory discharge amounted to “per se malice and/or oppression.” The court said he waived that argument by not raising it when the trial court asked him to identify all evidence of malice, fraud or oppression.  Instead of finding waiver, the court could have just said that “per se malice and/or oppression” does not exist under California law.

  • Wyeth v. Scofield cert. petition raises punitive damages issues

    Drug maker Wyeth has filed a petition for certiorari in Wyeth v. Scofield, asking the U.S. Supreme Court to decide two questions:

    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).

    California courts have already grappled with the first question as a matter of state law.  The California Supreme Court held in Schelbauer v. Butler Manufacturing Co. (1984) 35 Cal.3d 442, 454 that the proper use of a remittitur, as opposed to ordering a new trial, is “confined to cases in which an excessive damage award [is] the only error in the jury’s verdict.”   And the Court of Appeal held in Fidler v. Hollywood Park Operating Co. (1990) 223 Cal.App.3d 483, 489 that courts should order a new trial rather than a remittitur in cases where it appears the jury was influenced by passion and prejudice: “[t]he fairest result is to remand the matter for a new trial.”  (See also Tan Jay Internat., Ltd. v. Canadian Indemnity Co. (1988) 198 Cal.App.3d 695, 705 [trial court properly ordered a new trial where it appeared that “the jury was impermissibly swayed by passion and prejudice”].)  Although California is fairly well settled on the issue, it couldn’t hurt to have a definitive opinion on this issue from the U.S. Supreme Court.      

    The second issue is one where courts nationwide have been all over the map.  The cert. petition does an excellent job of listing all the cases in which courts have, or have not, adhered to the U.S. Supreme Court’s admonition that a one-to-one ratio is appropriate in cases involving “substantial” compensatory damages award.  For the most part, California courts have followed the Supreme Court’s guidance, in cases like Jet Source Charter v. Doherty, Walker v. Farmers, and most recently, the California Supreme Court’s decision in Roby v. McKesson.  But we have observed a few instances in which, in unpublished opinions, our courts have affirmed punitive damages awards that exceeded an already substantial compensatory award.  (See our prior posts here and here.)

    The Supreme Court recently denied another petition asking for further guidance on State Farm‘s one-to-one ratio.  We’ll see if this one fares any better.

    Hat tip: Drug & Device Law

  • Johnson & Johnson asks California Supreme Court to review case allowing punitive damages for ibuprofen warnings

    Johnson & Johnson has filed a petition for review with the California Supreme Court in Johnson & Johnson v. Superior Court, the case in which the California Court of Appeal (Second Appellate District, Division Four) held that punitive damages could be imposed on Johnson & Johnson for failing to include enough details in its warning labels for ibuprofen.  The labels warned about the possibility of severe allergic reactions, but didn’t specifically warn about skin reddening, blisters, or rash.  You can view the Supreme Court’s on-line docket to track the status of the petition.  As I said in earlier posts, the Court of Appeal’s opinion allowing plaintiffs to proceed with a punitive damages claim, in a case that seems marginal at best on the issue of liability, is inconsistent with California’s stringent requirements for the proof necessary to recover punitive damages.

    Related posts:

    Court of Appeal publishes opinion on punitive damages against Johnson & Johnson for ibuprofen warnings

    Johnson & Johnson v. Superior Court; plaintiffs can seek punitive damages for incomplete ibuprofen warnings

  • Assembly Judiciary Committee rejects bill that would prevent juries from deciding the amount of punitive damages

    The Judiciary Committee of the California Assembly has rejected AB 556, which would have given California’s trial judges the exclusive authority to decide the appropriate amount of punitive damages, even in cases that are otherwise decided by a jury.

    Related post:

    Proposed bill would require that judges, not juries, determine the amount of punitive damages in California

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

    Bloomberg Businessweek is reporting that a jury in Los Angeles has awarded a former Marine $19 million in punitive damages and $35,000 in compensatory damages, in an insurance bad faith case against Stonebridge Life Insurance.  The plaintiff 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.

    Stonebridge says it intends to appeal.  An appeal may not be necessary, however, if Stonebridge files post-trial motions asking the trial court to reduce or vacate the punitive damages.  Although there is some case law stating that a low compensatory damages award can support a higher punitive-to-compensatory ratio, nothing would support the extreme ratio here.  The trial court may conclude that the punitive is so high and so disproportionate to the actual harm that it raises a presumption that the jury acted out of passion and prejudice.

  • Bill on punitive damages in products cases fails to pass Senate Judiciary Committee

    The Judiciary Committee of the California Senate held a hearing yesterday on Assembly Bill 158, which would eliminate punitive damages in products liability cases in which the defendant complied with applicable regulations.  The committee did not approve the bill, but will consider it again at a future hearing.

    Related posts:

    Proposed cap on punitive damages in California is deleted from amended version of bill

    Another year, another proposal to cap punitive damages in California