California Punitives by Horvitz & Levy

  • Ford Files Cert. Petition in Buell-Wilson

    Ford has filed a petition for certiorari in Buell-Wilson v. Ford Motor Co., a case with a long procedural history that has already included one stop at the U.S. Supreme Court. (See the long list of related posts below.)

    Ford’s petition asks the court to clarify the standard for resolving a claim that a state punitive damages statute is unconstitutionally vague as applied to the facts of a particular case. Specifically, Ford argues that California’s punitive damages statute (Civil Code section 3294) is unconstitutionally vague as applied to cases involving manufacturers whose products comply with applicable regulatory standards and industry customs.

    Ford’s approach is a bold one. The Supreme Court has never addressed an as-applied vagueness challenge to a punitive damages statute, as far as I know. But there’s a first time for everything. If Ford can get cert. in this case, it could be the same kind of game-changing event as BMW v. Gore.

    Related posts:

    California Supreme Court Denies Request to Re-Publish Buell-Wilson

    The Largest Punitive Damages Award to Survive Appeal in California?

    Cal. Supreme Court Dismisses Review in Buell-Wilson v. Ford

    Plaintiff Asks California Supreme Court to Dismiss Review in Buell-Wilson v. Ford

    Buell-Wilson v. Ford: Two of the Three Issues Raised in the Petition are Not Dependent on the United States Supreme Court’s Opinion in Williams III

    California Supreme Court Grants Review in Buell-Wilson v. Ford

    Court of Appeal May Have Been Too Quick on the Trigger in Buell-Wilson Post-Opinion Order

    Court of Appeal Denies Petition for Rehearing in Buell-Wilson v. Ford

    Buell-Wilson v. Ford—Court of Appeal Says Ford Waived Due Process Protections Against Excessive Punitive Damages

  • U.S. Supreme Court Denies Cert. in Stevens v. Vons

    The U.S. Supreme Court’s on-line docket for Stevens v. Vons indicates that the court denied the petition for certiorari yesterday. As we noted in a prior post, the petitioner was essentially arguing that state courts are not permitted to reduce punitive damages awards under state law unless those awards are excessive under the Due Process Clause. Not surprisingly, the Supreme Court declined to take up that issue.

    Related posts:

    Stevens v. Vons: $16.7M in Punitive Damages Reduced to $1.2M, Ratio of 1-to-1

    Stevens v. Vons: Unpublished Opinion Addresses Controversial Issue Regarding Punitive Damages Standard of Review

  • Florida Jury Awards $275 Million in Punitive Damages

    According to the St. Petersberg Times, a jury has awarded $55 million in compensatory damages and $275 million in punitive damages against a drunk driver who killed a 13-year-old girl. The award seems largely symbolic, since the defendant could never possibly pay it. But if this award survives appeal, it would be the fourth largest punitive damages award ever affirmed in the U.S., as far as we are aware. (The current top five awards are listed in this post.)

  • “Predicting the Constitutionality of Punitive Damages”

    When a jury awards a large punitive damages awards, one of the first question for the lawyers on both sides is: Will this award survive posttrial and appellate review? A new paper posted on SSRN may help answer that question. Profesors Edward K. Cheng and Albert Yoon have written an essay entitled “Predicting the Constitutionality of Punitive Damages.” Here’s the abstract:

    The constitutional doctrine governing punitive damages captivates legal scholars and jurists in part because it is both complex and evolving. The unpredictability, however, presents difficulties for attorneys and their clients, who need greater certainty to make practical decisions about litigation and settlement. In this Essay, we offer a statistical approach for predicting court decisions on the constitutionality of punitives. As it turns out, basic logisitic regression methods with appropriate model selection can be quite effective, although we make further gains using a Bayesian hierarchical approach. Using a new dataset of cases challenging punitive damage constitutionality from 1989 to 2008, our hierarchical model can predict out-of-sample outcomes with 76-85 percent accuracy. These results suggest that while constitutionality may not be subject to a deterministic formula, it can be effectively modeled statistically. Beyond the punitive damages context, our work additionally offers a glimpse of the potential of statistical models for predicting a wide variety of legal questions.

    Hat tip: Torts Prof Blog.

  • $8.5 Million In Punitive Damages for Erectile Dysfunction

    I swear I’m not making this up. According to this story on Law.com, a Georgia jury has awarded $750,000 in compensatory damages and $8.5 million in punitive damages to a man who allegedly suffered permanent damage to his penis as a result of a botched treatment for erectile dysfunction.

    The plaintiff responded to an ad by the Boston Medical Group promising “sex for life.” The company’s clinic gave him its “secret formula” to inject into his penis. After he gave himself the first injection, he experienced “the best erection he’s ever had in his life.” Unfortunately, it proved to be a little too good. Two days later, he still had the erection. He went back to the clinic for treatment, but the clinic couldn’t help him and he ended up in a hospital emergency room. Ultimately, he suffered permanent damage to his penis and is now unable to have an erection without the use of Viagra or Cyalis.

    It certainly sounds like an unpleasant experience (especially the part about the plaintiff sticking a needle into his penis), but if the guy already had an erectile problem when he visited the clinic, isn’t he now in exactly the same position he was in before he went there? Does that really merit an $8.5 million punitive damages award, on top of $750,000 in compensatory damages? Something tells me this verdict is not going to withstand review.

    I can’t wait to hear what Lowering the Bar has to say about this one.

  • Hodge v. Guarantee Real Estate: Defendant Entitled to Fees for Defending Meritless Punitive Damages Claim

    Can a plaintiff who pursues a meritless punitive damages claim be forced to pay the defendant’s attorney fees for defending that claim? Yes, according to this unpublished opinion from the California Court of Appeal (Fifth Appellate District).

    Under California Code of Civil Procedure section 2033.420, if a party serves a proper request for admission (RFA) and the opposing party fails to admit the truth of a matter contained in the RFA, the party that served the request can recover its attorney fees for proving the truth of that matter at trial.

    In this case, the plaintiffs’ complaint included a claim for punitive damages. The defendants served RFAs on the plaintiffs, asking them to admit that the defendants did not act with malice, oppression, or fraud (the prerequisites for recovering punitive damages under Civil Code section 3294). The plaintiffs denied the RFAs. At trial, the plaintiffs were unable to present any evidence of malice, oppression, or fraud, so the trial court granted a nonsuit on punitive damages.

    The defendants then moved for attorney fees under section 2033.420. The trial court agreed that the conditions for awarding fees under section 2033.420 were met, but the court denied the defendants’ motion on the ground that the plaintiffs’ punitive damages allegations did not increase the overall fees incurred by the defense.

    The Court of Appeal reversed. It held that the trial court erred by refusing to award any attorneys’ fees. At the least, the defendants should have been awarded the fees they incurred in bringing their nonsuit motion on punitive damages.

    UPDATE: The California Attorney’s Fees blog has a post about this opinion here.

  • “Saving Lives Through Punitive Damages”

    Professors Joni Hersch and W. Kip Viscusi have posted a paper on SSRN entitled “Saving Lives Through Punitive Damages.” From the title, you might expect this paper to assert one of the traditional arguments in favor of punitive damages: that the threat of unpredictably large punitive damages awards is necessary to deter corporate misconduct and protect consumer safety. In fact, the article takes a different approach. Here’s an excerpt from the abstract:

    This article proposes that the value of statistical life be used to set the total damages amount needed for deterrence when punitive damages are warranted in wrongful death cases. The appropriate level of damages should be achieved by adjusting the value of punitive damages. . . . The U.S. Supreme Court’s focus on punitive damages ratios is misplaced, as it is the total damages amount, not the ratio, that is instrumental. The criteria for evaluating punitive damages in bodily injury cases should be different than for property damages cases.

    You may be wondering, as I was, exactly how “the value of statistical life” is calculated. In a nutshell, the value of statistical life is somewhere between $5 million and $9 million. Here’s an explanation from the article:

    To illustrate the VSL concept, consider the following example. Suppose a worker is willing to accept a fatality risk of 1/10,000 in return for annual wage compensation of $900. The value of statistical life, or the value per unit risk, is $900 divided by 1/10,000, or $9 million. Viewed somewhat differently, if 10,000 workers were each exposed to a 1/10,000 risk of death and each required $900 in compensation to face this risk, there would be a total of $9 million in compensation paid for the 1 expected, or statistical, death. By the same token, these workers would be willing to pay $900 for a fatality risk reduction of 1/10,000. Thus, the buying price and selling price for changes in risk are the same for very small changes in risk.

    The VSL approach is accepted methodology within the economics literature and government agencies. Dozens of peer reviewed studies that estimate the VSL have been published in major economics journals, and the methodology has been recommended for use by government agencies by the U.S. Office of Management and Budget. While the values used by government agencies differ and have changed over time, most agencies now use figures in the range of $5 million to $9 million. Here we will focus on the $9 million figure for concreteness.

    As the authors point out, this approach would sometimes yield ratios of punitive damages to compensatory damages exceeding 1-to-1, and possibly exceeding single digits. On the other hand, this approach would not allow 8 or 9-figure awards to a single plaintiff, like the $50 million punitive damages award affirmed by the California Court of Appeal in Boeken v. Philip v. Morris.

    This is an entirely academic exercise, because the states are not likely to abandon their traditional methods for awarding punitive damages. I can just hear the howls that would be generated by this approach. Critics would say it reduces the value of human life to a cold statistical computation. No state legislator is going to get behind that one. But this proposal is nonetheless a very thought-provoking and innovative solution to a problem (the lack of any concrete standards for imposing punitive damages in personal injury cases) that has long plagued American tort law.

    Hat tip: Torts Prof Blog.

  • New Look, Same Great Taste!

    Regular readers may notice that the look of this blog has changed. Don’t be alarmed.
    We will continue to provide the same scintillating content, covering all the drama and excitement in the world of California punitive damages litigation. (Yeah, perhaps that’s overstating things just a wee bit.) The new look simply echoes our newly redesigned law firm website: http://www.horvitzlevy.com/.

  • Montana Supreme Court Reverses Punitive Damages Award; Trial Court Excluded Evidence of Regulatory Compliance

    Although this blog is generally California-centric, last week we reported on an interesting out-of-state opinion, and here’s another one. In Malcolm v. Evenflo, a products liability action against a manufacturer of child seats, the Montana Supreme Court reversed a $3.7 million punitive damages award because the trial court wrongly excluded evidence that the defendant complied with federal safety standards.

    Some readers may think this is a no-brainer. After all, if a jury is being asked to decide whether a manufacturer acted with reckless disregard towards the safety of its consumers, the jury should at least be allowed to consider the fact that the defendant complied with all applicable safety regulations, right? Well, at least two Montana Supreme Court justices didn’t see it that way.

    Two justices dissented from this opinion, taking the position that a defendant’s compliance with safety regulations is not relevant to the issue of punitive damages, and would only confuse and mislead the jury. The dissent recites in detail all of the plaintiffs’ evidence in support of their claim for punitive damages. That evidence, as described by the dissent, certainly makes the defendant look bad. But even if the weight of the evidence favored the plaintiff, it seems to me that the defendant should have at least been allowed to present its evidence to the jury.

  • Gullwing Int’l v. Ostermeier: $1 Million in Punitive Damages Affirmed

    I have some doubts about the analysis in this unpublished opinion issued yesterday by the California Court of Appeal (Second Appellate District, Division Two).

    The jury in this fraud case awarded $17.1 million in punitive compensatory damages and $1 million in punitive damages. Obviously that’s not the sort of ratio that raises eyebrows. Nevertheless, the defendant argued that the Court of Appeal should reverse the punitive damages award because the plaintiff failed to present evidence of the defendant’s net worth. As readers of this blog are aware, California punitive damages awards are commonly reversed on that basis.

    The Court of Appeal’s opinion here acknowledges that “‘[n]et worth’ has become the guidepost of punitive damages” in California. The opinion then goes on to say that the plaintiff sufficiently proved the defendant’s net worth by presenting evidence that the defendant received several million dollars in cash from the plaintiff, owned several airplanes, and sold a piece of commercial property for $2.1 million.

    The opinion makes no mention of any evidence regarding the defendant’s liabilities or expenses. It is well established under California law that evidence of income and assets alone, without evidence of liabilities and expenses, is not sufficient to prove net worth. (See Kelly v. Haag (2006) 145 Cal.App.4th 910, 917 [reversing punitive damage award with directions when plaintiff introduced evidence of the defendant’s assets, but “there was no evidence of any encumbrances on the [defendant’s] properties at the time of trial, or of other liabilities [defendant] may have had”].)

    Since we launched this blog in 2008, three other opinions have reversed punitive damages awards because the plaintiff’s evidentiary presentation did not include evidence of the defendant’s liabilities and expenses. This opinion stands alone in affirming an award without such evidence. Perhaps the plaintiff presented such evidence and the court simply didn’t mention it in the opinion. But if the plaintiff presented no such evidence, the opinion’s analysis is inconsistent with existing law.

    Also, the opinion seems to overlook the effect of the $17.1 million compensatory damages award on the defendant’s financial condition. Other California courts have said that the effect of the jury’s verdict should be considered when evaluating the defendant’s ability to pay punitive damages. (See Washington v. Farlice (1991) 1 Cal.App.4th 766, 776.) The size of the compensatory verdict in this case dwarfs all the other evidence of the defendant’s assets discussed by the Court of Appeal, but the opinion does not seem to take that into account.

    Fortunately, this opinion is unpublished, so the aspects of the opinion that seem to depart from existing law will not have any precedential effect.