California Punitives by Horvitz & Levy

  • Kunysz v. Sadler: Punitive Damages Reversed by Stipulation

    Here’s one you don’t see everyday: a stipulated reversal of a punitive damages award.

    The parties reached a settlement through a court-sponsored appellate mediation program and they agreed, as part of the settlement, to file a stipulation requesting that the underlying be vacated. Stipulated reversals used to be more common in California, but the Legislature enacted a statute limiting the circumstances in which an appellate court can grant stipulated reversals (Code of Civil Procedure section 128(a)(8)), and the courts have construed those requirements strictly. In this unpublished opinion, however, the Fourth Appellate District, Division Three, accepted the parties’ stipulation and reversed a judgment that awarded $100,000 in punitive damages.

    One of the factors that weighs in favor of granting a stipulated reversal is a likelihood of reversal on the merits. The court found a likelihood of reversal here because the punitive damages award was not accompanied by any award of actual damages.

  • Year In Review: 2009 California Punitive Damages Decisions by the Numbers

    I had hoped to get to this sooner, but better late than never. Here’s a recap of last year’s California appellate decisions involving punitive damages.

    Total decisions, published and unpublished

    By my count, the California appellate courts decided 42 cases in 2009 addressing punitive damages. That doesn’t include cases in which a defendant appealed a punitive damages award but the court of appeal did not reach any punitive damages issues because the court reversed on other grounds. (E.g., it doesn’t include cases like Griffin Dewatering.)

    Five of those 42 cases were published. (Roby, Fariba, Superior Dispatch, Scott and Major)

    Defendants’ success rates in challenging punitive damages

    There were 32 appeals in 2009 involving a defendant’s challenge to an award of punitive damages. (As explained below, the other 10 cases involved plaintiffs’ appeals.)

    In 23 of those 32 cases, the defendant was successful in getting a punitive damages award vacated or reduced. That’s an overall success rate of 72 percent for defendants. That includes not only cases in which the Court of Appeal vacated or reduced a punitive damages award, but also cases in which the trial court vacated or reduced a punitive damages award and the Court of Appeal affirmed the trial court’s ruling.

    In 11 of those 23 cases, the punitive damages were vacated entirely.

    Looking exclusively at cases in which the trial court rejected the defendants’ posttrial challenges but the defendants succeeded in getting some relief from the Court of Appeal, the defendants prevailed on appeal in 15 out of 24 cases (63 percent).

    Plaintiffs’ success rates in appealing from trial court rulings for the defense

    There were 7 cases in 2009 in which a plaintiff appealed from a trial court decision dismissing a punitive damages claim (by nonsuit, directed verdict, or a motion to strike). Two of those plaintiffs were successful in getting their punitive damages claim reinstated (34 percent).

    There were 3 cases in which plaintiffs appealed from a decision not to award punitive damages (two jury trials and one bench trial). All 3 of those appeals were unsuccessful.

    Conclusions

    This is the first year for which we have compiled statistics like this, so it’s hard to know how these numbers compare to previous years. But looking just at this year’s numbers, the high rate of success for defendants challenging punitive damages awards is striking. The average civil appeal has about a 22 percent chance of success based on the Judicial Council’s stats report (see page 28), but civil appeals challenging punitive damages awards seem to fare much better. We plan to expand these statistics in the future, so we will see if this level of success remains constant or was simply a one-year anomaly based on a small sample size.

  • Ventura County Jury Awards $5 Million in Punitive Damages

    This appears to be the first significant California punitive damages award of 2010. According to Los Angeles Lawyer Talk, a jury in Ventura county has awarded $5 million in punitive damages (and $2.7 million in compensatory damages) in an elder abuse case against the Fillmore Convalescent Center.

  • More on Choice of Law in Punitive Damages Cases

    Last month we linked to a post on Drug and Device Law about choice of law in punitive damages cases. In that post, Jim Beck at Dechert argued that the law of the defendant’s home state should govern punitive damages issues, even if the law of a different forum applies to to the award of compensatory damages.

    For a contrary view, see this piece by John D. Rowell. He argues that, at least in California, punitive damages issues should be governed by California law, not by the law of an out-of-state defendant’s home state.

  • Geragos v. Borer: $9 Million in Punitive Damages Reduced to $600,000

    We haven’t blogged about a celebrity punitive damages case in a while. But here’s an unpublished opinion from the California Court of Appeal (Second District, Division Three) involving one of the biggest celebrities ever: Michael Jackson.

    In 2003, Jackson hired prominent attorney Mark Geragos to defend him against criminal charges in Santa Barbara County. Geragos chartered a private plane from XtraJet, Inc. to fly with Jackson from Las Vegas to Santa Barbara, so that Jackson could surrender for his arrest.

    According to the opinion, Jeffrey Borer, the owner of XtraJet, decided to make a few extra bucks on the transaction by installing hidden video recorders on the plane, with the intent of selling the recordings to the media. Predictably, Borer got busted when he tried to sell the tapes. Greta Van Susteren of Fox News called Geragos and told him that Borer was shopping the tapes to various media outlets. Geragos sued Borer, alleging a variety of claims including invasion of privacy, misappropriation of name and likeness, and unfair business practices.

    After a bench trial before Judge Soussan Bruguera in Los Angeles County, judgment was entered for $2.25 million in compensatory damages and $9 million in punitive damages. Borer was also convicted of illegal wiretapping in federal criminal proceedings.

    Borer appealed the civil judgment, challenging both the compensatory damages and the punitive damages. The Court of Appeal agreed with his arguments on both counts and ordered a remittitur of the compensatory damages to $150,000 and a remittitur of the punitive damages to $600,000.

    First, the Court of Appeal concluded that no substantial evidence supported Judge Bruguera’s determination that Borer was liable for misappropriation and misuse of the Geragos’s name and likeness, because Borer never actually sold or profited from the videotape. Next, the Court of Appeal concluded that Judge Bruguera’s compensatory damages award was excessive as a matter of law because there was no evidence of any out-of-pocket damages by Geragos, and no evidence that Gergagos sought any treatment or counseling for the emotional distress that he claimed to suffer.

    Finally, the Court of Appeal concluded that the punitive damages were excessive in violation of the Due Process Clause of the federal constitution. The court concluded that Borer’s conduct was not as reprehensible as other forms of punishable conduct because he did not endanger anyone’s health or safety, he did not target a financially vulnerable victim, and he had never engaged in similar misconduct in the past. Accordingly, the court determined that 4 to 1 is the maximum permissible ratio of punitive damages to compensatory damages on the facts of this case.

    Ordinarily, it is nonsensical for a court to give the plaintiff the option of new trial instead of accepting the constitutional maximum punitive damages award. By definition, the constitutional maximum represents the plaintiff’s best possible outcome, so a new trial would be pointless. (Unfortunately, that doesn’t stop some courts from offering the plaintiff a new trial under such circumstances, as discussed here, here, and here.)

    This case, however, illustrates a rare instance in which it is entirely proper for the court to offer the plaintiff a choice between the maximum award or a new trial. That’s because the remittitur here applies to both the compensatory damages and the punitive damages. If Geragos chooses a new trial, he might be able to recover more than the remittitur offered by the court. The court said the award of $2.25 million in compensatory damages was excessive but it didn’t say that number represented the maximum recovery. So Geragos might be able to do better on retrial, in which case he might be able to recover a larger amount of punitive damages, even assuming that the maximum ratio is four to one.

    Related posts:

    New Trial Motion Denied in Mark Geragos/Michael Jackson Punitive Damages Case

    Mark Geragos, Michael Jackson, and Punitive Damages

  • Punitive Damages in China

    For the first time, the People’s Republic of China has passed a law authorizing punitive damages, according to this “Alert” issued by Greenberg Traurig. The law apparently applies only to products liability lawsuits. One of the stated purposes of the law is to promote “social harmony and stability.”

  • Product Liability Verdicts Up, Punitive Damages Verdicts Down

    This Bloomberg article reports that the biggest products liability verdicts got even bigger in 2009, with the top 5 verdicts totalling 52 percent more than the previous year. The article reports, however, that the incidence of huge punitive damages verdicts actually declined:

    Last year did reveal some bright spots for corporate defendants with a continued decline in the size of punitive damage awards. Punitives, assessed in addition to compensatory damages, are meant to punish the company for bad conduct and serve as a warning to others. The 10 biggest punitive damages verdicts against corporations totaled less than $1 billion for the second straight year.

    That’s consistent with the trend in California, which also saw a decline in the largest punitive damages awards.

  • Schwarzenegger Proposes Cap on Punitive Damages

    Governor Schwarzenegger has issued a press release listing his proposals for getting California’s economy back on track. One of those proposals is a cap on punitive damages. The press release doesn’t explain exactly where the cap would be set, but it hardly matters. As I mentioned in my previous post, the California Legislature shot down a proposed cap last year and they’re not likely to change course in the near future. The consumer attorneys won’t let that happen.

  • Another Case Involving the Validity of Statutory Caps on Punitive Damages

    The California Legislature has never imposed a cap on the amount of punitive damages awards a jury can award, and that’s not likely to change any time soon. (See our post about the failed effort to enact a cap in California last year). In the rest of the country, however, roughly half of the states have adopted a statutory cap of some kind. According to this Daily Journal column, caps have been enacted in 22 of the 45 states that allow punitive damages.

    One state with a cap is Nevada, which has a statute limiting punitive damages to three times the amount of compensatory damages, up to a maximum of $300,000. According to this article in the Las Vegas Review-Journal, a Las Vegas plaintiffs’ lawyer is mounting a challenge to the constitutionality of that statute.

    Similar issues have been raised in other states, with the result that caps have usually been upheld. For example, caps have been upheld in Alaska, North Carolina, Ohio, Texas, and Virginia, but overturned in Georgia, Illinois, and Indiana. The validity of the Georgia cap is currently pending before the Georgia Supreme Court.

    The most common argument against statutory caps on punitive damages is that they violate the right to a jury trial. But creative plaintiffs’ lawyers have also argued that the caps violate: (1) state constitutional provisions guaranteeing open courts, (2) separation of powers principles, (3) specific statutes governing punitive damages, and (4) state laws prohibiting special legislation.

    Given the enormous sums of money at stake, we can expect to see a lot more litigation on this issue around the country (but not in California).

  • Everest Properties II v. Diller: Punitive Damages Claim Barred by Collateral Estoppel

    We don’t see many opinions involving the intersection of punitive damages and collateral estoppel. But in this unpublished opinion, the California Court of Appeal (First Appellate District, Division One), holds that the collateral estoppel doctrine bars a plaintiff from seeking punitive damages.

    The plaintiffs, investors in a partnership, sued the corporate general partner for breach of fiduciary duty. They won $23 million in compensatory damages, but the trial court ruled that the plaintiffs could not recover punitive damages because they failed to prove by clear and convincing evidence that the corporation acted with malice, oppression, or fraud.

    The plaintiffs then pursued a separate action against the individual who controlled the corporation, trying to get punitive damages for the same misconduct at issue in the first action. The trial court dismissed the action and the Court of Appeal affirmed, ruling that the plaintiffs were collaterally estopped from seeking punitive damages. The court determined that the two actions involved identical allegations of misconduct. Because the trial court in the first action determined that the conduct did not support punitive damages against the corporation, the plaintiffs could not use the same conduct to support a punitive damages claim against the individual.