California Punitives by Horvitz & Levy

  • 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.

  • Meadowbrook Estates HOA v. Equity Lifestyle Properties: Trial Court Properly Granted Motion to Strike Punitive Damages Claim

    We report on every California punitive damages decision, published or unpublished, but sometimes there isn’t much to say. In this unpublished opinion, the California Court of Appeal (Fourth Appellate District, Division One) affirms a trial court’s decision to strike a plaintiff’s claim for punitive damages on the ground that the facts alleged in the complaint, even if true, could not support a finding of malice, fraud, or oppression. Yawn.

  • Oregon Supreme Court Reverses $100 Million Punitive Damages Award Against Philip Morris

    Here’s a case that proves the adage, “If at first you don’t succeed, try, try again.”

    As readers of this blog will recall, Philip Morris was unable to persuade the Oregon Supreme Court to overturn a $79.5 million punitive damages award in the Williams case, even after the U.S. Supreme Court had seemingly ruled in Philip Morris’ favor.

    In Schwarz v. Philip Morris, the Oregon Supreme Court has ordered a new trial for nearly the same error at issue in Williams: a defect in the jury instructions on the question of imposing punitive damages for harm to nonparties. In Schwarz, as in Williams, the Oregon Supreme Court ruled that the trial court properly rejected Philip Morris’ proposed instruction because it was not “accurate in all respects” as required by Oregon law. But the Schwarz court agreed with Philip Morris that the trial court erred by giving the jury an standard pattern instruction that improperly allowed the jury to use evidence of harm to others in arriving at its punitive damages verdict.

    The ruling is a big win for Philip Morris. The jury in Schwarz had awarded $169,000 in compensatory damages and $150 million in punitive damages, reduced to a mere $100 million by the trial court. As a result of the Supreme Court’s decision, the compensatory damages award will stand, but the issue of punitive damages will be retried.

  • Florida Appellate Court Reverses $351 Million Punitive Damages Award

    This Florida appellate opinion reverses a judgment that awarded $159 million in compensatory damages and $351 million punitive damages award against accounting firm BDO Seitman for an allegedly botched audit. The court ordered a new trial because it concluded that the trial court unfairly “trifurcated” the original trial, allowing the jury to make a key finding relevant to the issue of punitive damages before the jury had even considered liability issues such as causation and reliance.

    Related post:

    Foreign Corporation Not Liable for Punitive Damages Against U.S. Affiliate

  • San Diego Jury Awards Over $10 Million in Punitive Damages Against Title Companies

    The New York Times reports that a San Diego jury has awarded the $1.1 million in compensatory damages and $5.7 million in punitive damages against the Chicago Title Company and the Chicago Title Insurance Company for their role in an allegedly fraudulent real estate transaction. The story reports that the same jury also awarded $2.1 million in compensatory damages and $5.2 million in punitive damages against Rollo Richard Norton II, the alleged mastermind of the fraudulent scheme.

  • Trattman v. Key: Punitive Damages Claim Reinstated Because Trial Court Fumbled Bifurcation Procedure

    In this unpublished opinion, the California Court of Appeal (Second Appellate District, Division 8) corrects an obvious error by the trial court.

    The case involves Civil Code section 3295, which gives defendants the right to request a bifurcated trial on punitive damages. If a defendant invokes its rights under section 3295, the trial court must bifurcate the trial so that the jury does not hear any evidence of the defendant’s financial condition (or any other evidence relating to the amount of punitive damages), until the trier of fact has already ruled in the plaintiff’s favor on liability and ruled that the defendant acted with malice, oppression, or fraud, the prerequisites for awarding punitive damages under Civil Code section 3294.

    The defendant in this case requested bifurcation under section 3295. The first phase went forward and the trial court, acting as the trier of fact, ruled in favor of the plaintiff on liability and found that the defendant had acted with malice, oppression, or fraud. But the court concluded that the plaintiff waived his right to punitive damages by failing to introduce evidence of the defendant’s financial condition during the first phase.

    I can’t figure out what the trial court could have been thinking. Under section 3295, the plaintiff was prohibited from presenting any evidence of the defendant’s financial condition during the first phase of trial. Clearly the plaintiff did not waive any rights by complying with the plain language of the statute. That’s exactly what the Court of Appeal said, and reversed the case for a limited retrial on the punitive damages. (See our prior discussion of problems associated with limited retrials on punitive damages.)

  • Cert. Denied in Wyeth v. Scroggin (Constitutionality of Partial Retrials)

    A few months ago we blogged about the cert. petition in Wyeth v. Scroggin. Today, the Supreme Court denied that petition (see the order list). We’ll have to wait a while for the Supreme Court (or some other court) to tackle the problems that can arise when a new trial is limited to the issue of punitive damages.

  • Texas Jury Hits JDA Software with Big Punitive Damages, But How Big?

    Various media outlets are reporting that a jury in Dallas has awarded $246 million in damages against DJA Software Group in a software-licensing dispute with Dillard’s Inc. Exactly how much of that award is punitive damages, I can’t tell.

    The Wall Street Journal reports that the jury awarded $238 million in punitive damages. The Associated Press, however, says the jury awarded $238 million in “indirect or punitive damages.” Reuters reports that the jury awarded $238 million in “consequential, special or punitive damages.”

    To the non-legal press, those might not seem like significant differences. But for purposes of analyzing whether the award is excessive, it obviously makes a big difference whether the $238 million was entirely punitive damages, or whether it included some compensatory damages. If the jury really awarded $8 million in compensatory damages and $238 million in punitive damages, JDA could virtually guarantee that the punitive damages would be overturned as excessive. Under that scenario, the punitive damages award would quite possibly be reduced to $8 million, resulting in a 1-to-1 ratio.

    But if a big chunk of the $238 million includes compensatory damages, the analysis changes dramatically. The award might not be reduced at all, if the total compensatory damages already exceed the punitive damages.

    Bradenton.com, the website for the Bradenton Herald, contains a press release from Susman Godfrey, counsel for Dillard’s, indicating that the jury actually awarded $96 million in various types of compensatory damages and $150 million in punitive damages. Assuming that’s accurate, the punitive damages may be excessive, but Dillard’s may still end up with a total award in excess of $100 million (assuming there are no other defects in the award besides the excessiveness of the punitive damages).