California Punitives by Horvitz & Levy

  • Daily Journal reports on punitive damages strategy in Toyota litigation

    An article in today’s Los Angeles & San Francisco Daily Journal describes an interesting punitive damages strategy by the plaintiffs’ counsel in a lawsuit alleging that a woman (Marie Edwards) was killed when her Lexus suddenly accelerated.  The article, “Toyota Fends off Punitive Damages Claims” (subscription required), describes correspondence in which plaintiffs’ counsel argues that he will be able to obtain punitive damages based on the pain and suffering experienced by the decedent in the moments before her death. 

    I’m not sure that strategy is going to work.  Under California law, plaintiffs in a wrongful death action are not entitled to recover punitive damages.  (See, e.g., Nelson v. County of Los Angeles (2003) 113 Cal.App.4th 783, 794 [“‘[I]t has long been established in California that punitive damages may not be recovered in a wrongful death action’”].)  The estate of the decedent can recover punitive damages in a survivorship action, but the estate cannot recover damages for the decedent’s pain and suffering, because those damages are, by statute, extinguished if the decedent dies before entry of a verdict. 

    Perhaps the plaintiffs here intend to argue that Ms. Edwards’ momentary distress or pain and suffering represents “actual harm,” which even though it is legally noncompensable, could nonetheless be considered as the basis for imposing punitive damages in the survivor action.  There would seem to be a good argument on the defense side, however, that it would be improper to base punitive damages on an element of compensatory damages that has been expressly rejected by the Legislature.  Such an approach would effectively be an end-run around the Legislature’s policy decision.  Moreover, using a disapproved measure of compensatory damages as the hook for punitives would introduce an element of unpredictability and arbitrariness, something the U.S. Supreme Court has consistently railed against.

  • Article analyzes punitive damages decisions after Exxon Shipping v. Baker

    When the Supreme Court decided Exxon Shipping v. Baker in 2008, observers wondered whether about the impact of the opinion beyond the maritime context.  This article attempts to answer that question.  The authors (Barbara A. Lukeman and Raymond Mariani at Nixon Peabody) conclude that “Exxon did not drive the lower courts to impose a 1:1 ratio more than had been occurring beforehand.” 

    As far as California punitive damages litigation is concerned, that statement is accurate.  The Exxon Shipping opinion itself did not launch a wave of cases imposing 1-to-1 ratios; that wave actually began a few years before Exxon Shipping. 

    A few years ago, the idea of a court reducing an award to a 1-to-1 ratio was unheard of in California.  But in 2006 our courts, taking their cue from State Farm v. Campbell, began reducing awards to a 1-to-1 ratio, even when those awards were already in the single digits.  (See, e.g., Jet Source Charter, Inc. v. Doherty (2007) 148 Cal.App.4th 1 [ratio reduced from 4-to-1 down to 1-to-1]; Walker v. Farmers Ins. Group (2007) 153 Cal.App.4th 965 [ratio reduced from 5.6-to-1 down to 1-to-1]; Grassilli v. Barr (2006) 142 Cal.App.4th 1260 [ratios reduced from 8.4-to-1 and 7.5-to-1 down well below 1-to-1]; see also Roby v. McKesson HBOC (2006) 146 Cal.App.4th 63, review granted [ratio reduced from 10.7-to-1 down to 1.4-to-1].)

    That trend continued after Exxon, with courts citing Exxon in support of reduced 1-to-1 ratios.  (See Stevens v. Vons (2009) [unpublished] [ratio reduced from 10-to-1 down to 1-to-1]; Essex Ins. v. Prof. Building Contractors [unpublished] [ratio reduced from 3.7-to-1 down to 1-to-1]; see also Roby v. McKesson (2009) 47 Cal.4th 686 [ratio reduced from 10.7-to-1 down to 1.4-to-1, further reduced to 1-to-1 by California Supreme Court].)

    This wave of cases isn’t exactly a flood, but compared to the state of the law a few years ago, the number of 1-to-1 ratio cases in recent years is remarkable.

  • Uzyel v. Kadisha: An increase in compensatory damages does not entitle plaintiffs to a new trial on punitive damages

    This published opinion holds that a plaintiff cannot take advantage of a procedural rule adopted for the benefit of defendants.
    We have previously blogged about California’s rule that, when a defendant gets hit with both compensatory damages and punitive damages, and a court later reduces the compensatory damages, the defendant is entitled to a reduction of the punitive damages (or possibly a retrial on punitive damages, depending on the reason why the compensatory damages were reduced).  That’s the general rule, although we have seen some inconsistent decisions in this area.  The rationale behind the rule is to ensure that the punitive damages bear a reasonable relationship to the reduced compensatory damages award.
    In this opinion from the Second Appellate District, Division Five Three, the court holds that when a trial court or appellate court increases the compensatory damages, the plaintiff is not entitled to a proportionate increase in punitive damages, nor to a retrial on punitive damages to try for a larger amount.
    Full disclosure: Horvitz & Levy represents the defendant on appeal in this case.

  • Proposal to Eliminate Tax Deduction for Punitive Damages Still Alive

    Business Insurance reports that the newest version of the proposed federal tax bill, the American Jobs and Closing Tax Loopholes Act, still includes a provision to eliminate the deductibility of punitive damages.

    Related posts:

    More from Prof. Markel on Tax Policy and Punitive Damages

    “Taxing Punitive Damages”

    Proposed Legislation Would Eliminate Tax Deduction for Punitive Damages

    Obama Administration Proposes To Eliminate Tax Deduction for Payment of Punitive Damages

  • More from Prof. Markel on Tax Policy and Punitive Damages

    Professor Dan Markel co-authored a NY Times op-ed in June, arguing that plaintiffs’ lawyers should be permitted to tell juries that punitive damages are tax deductible, which would encourage juries to award larger amounts to offset the effect of the deduction. I questioned the proposal on the ground that it would require a complicated inquiry into the defendant’s tax situation, and would invite speculation by the jury about future events. Drug & Device Law didn’t like the proposal much either.

    Prof. Markel has now written a new article in which he acknowledges that there is a “dark side” to tax-aware juries, namely, that windfall awards to plaintiffs would be magnified. His new article (Overcoming Tradeoffs in the Taxation of Punitive Damages) advocates reforms that, he says, “stake out a more nuanced middle path between those scholars and policymakers touting nondeductibility for all punitive damages and those endorsing the current rule allowing a deduction for all punitive damages paid by business defendants.” Prof. Markel’s proposal is a bit complex, but as far as I can tell, he proposes to adopt a new name for punitive damages (“extracompensatory damages”), which would consist of three different components: retributive damages, aggravated damages, and deterrence punitive damages, each of which would serve a purpose that is currently served by punitive damages. The latter two components would remain tax deductible, and the tax treatment of the first component is less clear. The complexity of this whole scheme makes it highly unlikely that any state would ever adopt it.

    Related post:

    “Taxing Punitive Damages”

  • Law Review Article Focuses on a French Court’s Refusal to Enforce a California Punitive Damages Award

    Here’s a new law review article reminding us that foreign courts don’t care much for American-style punitive damages. The article, posted to SSRN by French law professor Francois-Xavier Licari, describes a case in which a French appellate court refused to recognize a California judgment because it included an award of punitive damages. The French court concluded that punitive damages are contrary to that nation’s public policy because they represent a windfall to the plaintiff. Other foreign courts have taken a similar approach.

    Apparently, the author of this article disagrees with that approach and thinks the judgment should have been enforced, but I can’t say for sure because I can’t read the article. It’s written in French. Perhaps an enterprising (and French-speaking) reader will offer a translation.

    UPDATE (9/13/10): Professor Licari has been kind enough to provide this English-language version of the abstract of his article:

    Recently, a French Court of Appeal (cour d’appel) refused to recognize a California judgment (to grant an “exequatur”) that awarded punitive damages to American citizens in a breach of contract case involving the sale of a ship from French sellers. The French Court gave several reasons in refusing to grant the exequatur, particularly: French law only allows for compensatory damages and considers the principle of full compensation as fundamental; punitive damages create an unjust enrichment (a windfall) for the plaintiff. In effect, the punitive damages given by the California court were disproportionate to the actual damages. In sum, punitive damages hurt French public policy (l’ordre public international français). The author contends that none of these arguments stand up to an objective examination. For example, a close look at French case law shows the principle of full compensation has never been considered as belonging to the ordre public in the international sense of the notion. Furthermore, French private law knows “private penalties” (pienes privées), and some of them resemble American punitive damages. Last but not least, two recent law reform proposals militate in favor of the introduction of punitive damages to the French Civil Code. This essay advocates for a better understanding of the notion of punitive damages and their role in American law, and urges French courts to give effect to reasonable punitive damage awards.

    Professor Licari has also pointed out that a snippet of an English translation of the French appellate opinion appears in a footnote in this U.S. Supreme Court amicus brief. See this citation in footnote 17: Court of Appeal of Poitiers, No. 0702404 (Feb. 26, 2009) (“a foreign decision which . . . awards punitive damages far in excess from the price of the vessel, object of the contract . . . infringes upon the principle of proportionality between the damages and the breach guaranteed by Article 8 of the French Declaration of the Rights of Man and the Citizen.”)

  • Oregon Agrees to Accept Less Than Its 60 Percent Share of Punitive Damages Award Against Boy Scouts

    In our previous report about an $18.5 million punitive damages award against Boy Scouts of America, we predicted that the case would be difficult to settle because of (1) an Oregon statute providing that 60 percent of punitive damages go to the state, and (2) Oregon’s past practice of insisting on getting its cut, regardless of any settlement agreement between the parties.

    The case wasn’t so difficult to settle after all. Oregon Public Broadcasting reports that the case has settled. The amount of the settlement is confidential, except for the fact that Oregon agreed to accept $2.2 million in punitive damages, much less than its statutory share of the verdict amount.

  • McCall v. Safety Consultant Services: Wording of Verdict Form Precludes Punitive Damages

    This unpublished opinion illustrates the importance of a carefully worded verdict form.

    The plaintiff alleged she was sexually assaulted by Alfred Escobar, a group counselor. The plaintiff sought punitive damages from Escobar and his employer, Safety Consultant Services (SCS). The jury awarded no punitive damages against Escobar, but awarded $90,000 in punitive damages against SCS. The trial court, however, vacated the jury’s punitive damages award and granted judgment in favor of SCS on that issue.

    The plaintiff appealed and the California Court of Appeal (Second Appellate District, Division One) affirmed. The plaintiff argued that SCS could be held liable for punitive damages based on its own conduct, even if Escobar’s conduct did not support punitive damages. But the Court of Appeal rejected this argument based on the wording of the verdict form that was submitted to the jury. The verdict form stated: “If you decide that defendant Alfred Escobar’s conduct caused plaintiff Cheryl McCall harm, you must decide whether that conduct justifies an award of punitive damages against defendant Alfred Escobar and, if so, against defendant Safety Consultant Services, Inc.” Thus, the only theory presented to the jury was that SCS could be liable for punitive damages only if Escobar was liable for punitive damages. Because the jury awarded no punitive damages against Escobar, plaintiff could get no punitive damages from SCS.

  • District Court Awards $10 Million in Punitive Damages Against Blog Publisher

    Legal Blog Watch reports that the proprietors of a gossip blog called TheDirty.com have been hit with an $11 million default judgment, including $10 million in punitive damages.

    I get a little uneasy whenever I hear about a punitive damages award for something published on a blog. We bloggers shouldn’t have to live in fear of a big punitive damages award every time we sit down at the keyboard, right? Well, in this particular instance, it wouldn’t have been too difficult to predict that the material in question would cause trouble.

    The plaintiff, a cheerleader for the Cincinnati Bengals, alleges she was defamed when the blog reported accusations that she had sex with Bengal football players and had two venereal diseases. Did I mention that the plaintiff is not only a cheerleader but also a school teacher, and that the blog accused her of having sex in her classroom?

    Anyway, Politico reports that the entire judgment may unravel because the plaintiff’s lawyers inadvertenly named the wrong defendant in the lawsuit.

  • Mack Film Development v. Johnson: Defendant Waived Right to Challenge $1.75 Million Punitive Damages Award By Failing to Comply With Court Order

    The defendants in this unpublished opinion asked the California Court of Appeal to reverse a $1.75 million punitive damages award on the ground that the plaintiff had failed to introduce meaningful evidence of the defendants’ financial condition. The Second Appellate District, Division Five, wasn’t buying it.

    The court put the blame on the defendant for failing to respond to a valid court order to produce its financial information after the jury found that the defendant had acted with malice. Citing Mike Davidov Co. v. Issod (2000) 78 Cal.App.4th 597, the Court of Appeal concluded that the defendant waived its right to complain that the award was not supported by financial condition evidence:

    Johnson was not entitled to escape punitive damages by the simple expedient of refusing to produce financial information needed to fix such an award, as doing so would have allowed him to flout a court order with impunity and undermine the legal process. In view of Johnson’s failure to produce evidence of his financial condition, he may not complain the amount of punitive damages is excessive.