California Punitives by Horvitz & Levy

  • $200 Million Punitive Damages Award Vacated

    A Los Angeles superior court judge has vacated the $200 million punitive damages award that a jury awarded against Certainteed back in April.

    The judge’s ruling on posttrial motions states that a complete new trial on all issues is required because no substantial evidence supports the jury’s determination that a nonparty tortfeasor was 0% at fault for the plaintiff’s injuries. According to the judge, undisputed evidence established that some fault should have been assigned to that nonparty.

    Although the ruling orders a complete new trial, it also addresses some punitive damages issues, in recognition of the fact that the new trial order could be reversed on appeal. The order states that substantial evidence supports the jury’s finding that the defendant acted with malice, oppression, or fraud within the meaning of Civil Code section 3294. But the order also states that the amount of the award was grossly excessive, and that the maximum permissible punitive damages award on the facts of this case is $5.9 million (equal to the amount of the compensatory damages award, after reducing the compensatory damages to account for allocation of fault).

  • Belk v. Electra Cruises: Court of Appeal Affirms Trial Court’s Reduction of Punitive Damages to 1 to 1 Ratio

    Both the defendant and the plaintiff lose in this unpublished opinion.

    The plaintiff prevailed at trial on a wrongful termination claim and won $80,000 in compensatory damages and $225,000 in punitive damages. The trial court reduced the punitive damages to $80,000 (a 1 to 1 ratio). Both sides appealed. The plaintiff sought reinstatement of the jury’s award, and the defendant argued that the $80,000 was still excessive.

    The Court of Appeal (Fourth Appellate District, Division Three) rejected both appeals and affirmed the $80,000 punitive damages award. Even though both parties lost their respective appeals, the court apparently viewed the plaintiff as the prevailing party on appeal, because the court awarded the plaintiff her costs on appeal.

  • Rambeau v. Barker: Punitive Damages Vacated Due to Defendant’s Negative Net Worth

    In this unpublished opinion, the Court of Appeal (Fourth Appellate District, Division Three) vacated a $100,000 punitive damages award because the defendant had a negative net worth.

    The opinion recites the evidence regarding the defendant’s financial condition in some detail and concludes that, although the defendant owned multiple properties, he had a negative net worth at the time of trial because of his significant debt. Quoting the Supreme Court’s statement that the purpose of punitive damages “is to deter, not to destroy” (Adams v. Murakami (1991) 54 Cal.3d 105, 112), the court ordered the punitive damages award stricken from the judgment.

    Contrast this opinion with Zaxis Wireless Communications, Inc. v. Motor Sound Corp. (2001) 89 Cal.App.4th 577, 582-583, which upheld a $300,000 punitive damages award against a defendant with a negative net worth.

  • Sacramento Trial Court Upholds $28 Million Punitive Damages Award

    In May we reported on a case in which a Sacramento jury awarded $1.1 million in compensatory damages and $28 million in punitive damages against a nursing home company. As reported by the Sacramento Bee, the trial judge in that case has denied the defendant’s posttrial motions, declining to vacate or reduce the punitive damages award.

    We won’t comment any further on the case because our firm has been retained to represent the defendant on appeal.

  • Dole Judgment Vacated Due to Fraud

    Times are tough for the lawyers representing a group of Nicaraguan banana workers who claimed they were harmed by pesticides that Dole used in the 1970’s. Law.com is reporting that a Los Angeles judge has dismissed the last remnants of a verdict in which a jury awarded those workers over $5 million in damages, including $2.5 million in punitive damages.

    In November 2007, the jury in Tellez v. Dole awarded $3.2 million in compensatory damages and $2.5 million in punitive damages. The punitive damages award was vacated during posttrial proceedings, but Dole appealed the remaining portion of the award. Dole argued that the case should be thrown out in light of evidence that plaintiffs’ counsel falsified medical records and work certificates and intimidated Dole’s investigators in Nicaragua. The Court of Appeal refused to vacate the judgment, but ruled that a prima facie case of fraud existed and returned the case to the trial court for further proceedings. Court of Appeal Justice Victoria Chaney, who presided over the trial court proceedings on remand because she had been involved in the case before she was elevated to the Court of Appeal, found evidence of fraud, and vacated the entire verdict.

    In related news, the Ninth Circuit recently sanctioned prominent plaintiffs’ attorneys Walter Lack and Tommy Girardi for their own fraudulent attempts to enforce a Nicaraguan judgment that was based on the same allegations.

    The plaintiffs’ lawyers came very close to collecting millions of dollars from these cases, but they ultimately ended up with nothing.

  • Novartis Settles Case with $250 Million Punitive Damages Award for $152.5 Million

    In May we blogged about a $250 million punitive damages award against drug maker Novartis in an employment discrimination class action. The jury awarded $3.3 million in compensatory damages to 12 plaintiffs, but compensatory damages for the remaining 5,588 plaintiffs remained to be determined. At that rate, the compensatory damages could easily have eclipsed the punitives.

    The Washington Post reports that Novartis has settled that case for $152.5 million. So it looks like that case will not be the vehicle for an appellate opinion on the availability of punitive damages in class actions.

  • Unzipped Apparel v. Sweet Sportswear: $5M Punitive Damages Award Affirmed

    This is a very long unpublished opinion, only a small portion of which relates to punitive damages.

    In a nutshell, the jury awarded $30 million in compensatory damages against one of the defendants, Guez, who succeeded in knocking out $3.8 million of that award on appeal. Despite the reduction of the compensatory damages, the Court of Appeal (Second Appellate District, Division Seven) declined to order a reduction of the punitive damages. Instead, the court examined the amount of the punitive damages award under state law (because the defendant did not challenge the amount of the award on federal due process grounds) and concluded that the award was not excessive.

    It’s not all that surprising that the court affirmed the amount of this punitive damages award, since the compensatory damages, even as reduced, were still much larger than the punitive damages. But it’s interesting that the court did not discuss the case law stating that a reduction in compensatory damages necessarily requires a reduction of the punitive damages award, or at least a new trial on punitive damages. As we have noted before, California courts have taken conflicting positions on this issue. Neither line of authorities is discussed in this opinion.

  • Nigerian Court Hits Shell With Punitive Damages for 1970 Oil Spill

    The on-line Nigerian news outlet Vanguard is reporting that a court in Nigeria has ordered Shell Petroleum Development Company of Nigeria to pay 15.4 billion in Nigerian Nairas for an oil spill that occurred in 1970. That’s equivalent to about $102.7 million in U.S. dollars, if I’ve done the currency conversion correctly.

    The Vanguard story says 10 billion of the award is for “punitive damages . . . for general inconveniences, acid rain, pollution of underground water and hardship to the population . . .” That doesn’t really sound like “punitive damages” as we know them in the U.S.; it sounds more like compensation for actual injuries.

    I have no idea whether Shell has any avenue for challenging the award on appeal, whether it might succeed in such a challenge, or whether the plaintiffs will be able to enforce the award if it sticks. I’ll try to keep an eye out for more details on this story.

  • NYT Op-Ed on Taxing Punitive Damages

    We previously blogged about the Senate’s recent approval of a measure to prevent corporations from taking tax deductions for punitive damages awards.

    Law Professors Gregg Polsky and Dan Markel criticize that proposal in a New York Times op-ed entitled “Damages Control.” Profs. Polsky and Markel argue that the proposal won’t work because parties will still be able to settle punitive damages cases, and the defendants can characterize the settlements as payments of compensatory damages, which will remain deductible.

    Polsky and Markel contend that, instead of eliminating the tax deduction, we should allow plaintiffs’ lawyers to explain to juries that punitive damages awards are tax deductible, which would then encourage juries to award higher amounts to offset the fact that the award will be deductible. Polsky and Markel concede, however, that “tax-aware” juries would have to know the defendant’s marginal tax rate in order to figure out the appropriate amount to offset the deduction.

    It seems to me that the jury would have to know more than that; the jury would have to understand the defendant’s overall tax situation to calculate any such offset. If the defendant were not expected to report any income for the year in question, would any offset be appropriate? Would the jury be asked to consider the effect of carry-overs from one tax year to the next? Would the jury be asked to determine the defendant’s expected tax liability, based on speculation about what was likely to occur during the remainder of the tax year?

    California courts decided long ago that juries should not be asked to consider the tax consequences of any damages awards, because juries would have to engage in “intense speculation about the future” in order to accurately adjust their awards. (See Rodriguez v. McDonnell Douglas Corp. (1978) 87 Cal.App.3d 626, 667-668.) Any proposal that increases speculation by the jury is probably not a good idea.

  • Singh v. Southland Stone: $350,000 Punitive Damages Award Reversed

    In this published opinion, the California Court of Appeal (Second Appellate District, Division Three) reversed a $350,000 punitive damages award because the jury’s factual findings were fundamentally inconsistent.

    The plaintiff alleged that the defendant, his former employer, made intentional misrepresentations in order to lure him to to the U.S. to work. In a confusing a contradictory verdict, the jury found that the defendant did not make the alleged misrepresentations, but also found that the defendant acted with malice, oppression, or fraud (the prerequisites for punitive damages under Civil Code section 3294). The Court of Appeal concluded that those findings were fundamentally inconsistent, requiring a new trial.