California Punitives by Horvitz & Levy

  • Ittella v. Pacific American Fish Co.: Court of Appeal Reverses $1.15 Million Punitive Damages Award

    The California Court of Appeal (Second District, Division Seven) issued this unpublished opinion today, reversing a $1.15 million punitive damages award and a $230,000 compensatory damages award.

    In the interests of full disclosure, our firm represented the defendant. We raised a few interesting punitive damages questions (e.g., whether a $230,000 compensatory damages award is “substantial” within the meaning of State Farm v. Campbell, such that the ratio of ratio of punitive to compensatory damages should not exceed 1-to-1). The court did not reach those issues; it reversed the entire judgment because the plaintiff failed to prove causation.

  • L.A. Jury Awards $50 Million In Punitive Damages Against CEO of iPayment

    The Los Angeles and San Francisco Daily Journal (subscription required) reports today that a jury in Los Angeles County Superior Court has awarded $50 million in punitive damages against Greg Daily, chairman and CEO of Nashville-based credit card processing company iPayment.

    According to the Daily Journal story, the trial judge granted the parties’ joint request to temporarily seal the amount of the punitive damages award. But the Daily Journal cites anonymous sources for the $50 million figure.

    Ordinarily, a punitive damages award of this size against an individual would be excessive under California’s “rule of thumb” that punitive damages cannot exceed more than 10 percent of a defendant’s net worth. In this case, however, the defendant is worth $1 billion, according to the plaintiff’s expert witness.

    The plaintiff is L.A.-based venture capitalist Douglas Shooker. Shooker claimed at trial that he spent months conducting research to develop a business plan for iPayment, and in exchange he received an option to purchase a 57 percent share of iPayment for $26 million. According to Shooker, Daily stole his business plan, installed himself as CEO, and blocked Shooker from exercising his option. Last week the jury awarded $300 million in compensatory damages. Daily promptly declared bankruptcy, so it remains to be seen whether any of the damages are collectible (assuming they survive post-trial motions and appeal).

  • Leeper-Johnson v. Prudential: Court of Appeal Affirms $4 Million Punitive Damages Award

    The California Court of Appeal (Fourth District, Division One) issued this unpublished opinion last week, affirming a trial court’s grant of a new trial on punitive damages.

    The jury awarded compensatory damages of nearly $2 million, plus $14 million in punitive damages. The trial court ruled that the punitive damages award was excessive, and granted a new trial on punitive damages unless the plaintiff agreed to accept a remittitur of the punitive award to $4 million. The plaintiff refused the remittitur so the trial court ordered a new trial on punitive damages. The defendant appealed.

    The Court of Appeal eliminated some elements of the compensatory damages award, reducing the total compensatory award to $1.7 million.

    The court then addressed the defendant’s argument that, on the facts of this case, 1-to-1 is the constitutional maximum ratio of punitive damages to compensatory damages. Presumably, the defendant cited the U.S. Supreme Court’s statement in Campbell that 1-to-1 may be the maximum ratio in cases involving “substantial” compensatory damages. The Court of Appeal opinion doesn’t discuss that aspect of Campbell, but it does indicate that the defendant relied on Gober v. Ralph’s Grocery, which held that trial and appellate courts both have the power to reduce a punitive damages award to the constitutional maximum without affording the plaintiff a new trial.

    Gober reasoned that it would be pointless to award a plaintiff a new trial when the defendant is willing to pay the constitutional maximum. The plaintiff could not possibly do any better on retrial.

    Curiously, the court in this case rejected the defendant’s reliance on Gober because the defendant had not agreed to forgo its right to a new trial. I don’t quite understand how the defendant could cite Gober and ask the Court of Appeal to reduce the punitive damages award to the constitutional maximum without forgoing its right to a new trial. Was the defendant asking the court to affirm the new trial order, while at the same time rendering an advisory opinion about the maximum amount of punitive damages that could be permitted upon retrial? If so, I can understand why the court would be unwilling to do that. But if the defendant didn’t expressly insist on its right to a new trial, and was urging the Court of Appeal to simply reduce the award to a 1-to-1 ratio, I think some courts might have interpreted the defendant’s reliance on Gober as an implied agreement to waive a new trial (assuming the punitive damages were capped at a 1-to-1 ratio).

  • “Souter favored limits on punitive damages”

    Fortune.com has an article online today entitled “What will Souter’s retirement mean for business? Justice favored limits on punitive damages.”

    I posted a few thoughts on this topic earlier this month, in response to a post on the Volokh Conspiracy.

  • Tort Reform, Appeal Bonds, and Punitive Damages

    The Journal Record reports here on the Oklahoma legislature’s approval of a civil justice reform bill which, among other things, will eliminate the requirement of posting an appeal bond in punitive damages cases. Other jurisdictions have adopted similar reforms, eliminating or relaxing the bonding requirements in punitive damages cases. Such reforms acknowledge the reality that a defendant’s right to appellate review of punitive damages is impaired if the punitive award is so large that the defendant cannot afford to post a bond. Although the defendant can appeal without a bond, it will be exposed to enforcement of the punitive damages throughout the appeals process, which could destroy the defendant’s business before the appeal is decided.

    No such reform has been adopted in California. Defendants here are required to post a bond equal to 1.5 times the amount of the judgment (including punitive damages) if they want to prevent the plaintiff from enforcing the judgment while the appeal is pending. A defendant who cannot afford to post a bond to cover a punitive damages award can petition the Court of Appeal for a writ of supersedeas, asking the court to exercise its discretionary authority to stay enforcement of the judgment without a bond. But in our experience, the Court of Appeal has little sympathy for defendants in this situation, and is generally unwilling to issue a stay on this basis, even when the defendant shows that its business will be destroyed by the enforcement of the punitive damages award while the appeal is pending.

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

    As reported in BusinessInsurance.com, the Obama administration made a proposal yesterday that would prevent taxpayers from deducting punitive damage payments as business expenses. The proposal is included in the administration’s 2010 budget. If approved by Congress, the new rule would apply to punitive damages paid after December 31, 2010. The administration said the “deductibility of punitive damage payments undermines the role of such damages in discouraging and penalizing certain undesirable actions or activities.”

  • Plaintiff Files Cert. Petition in Stevens v. Vons

    Back in January we had two posts about the California Court of Appeal’s unpublished opinion in Stevens v. Vons, in which the court affirmed a trial court ruling that reduced a $16.7 million punitive damages award down to $1.2 million. The plaintiff, after an unsuccessful petition for review to the California Supreme Court, has now filed a cert. petition with the U.S. Supreme Court.

    The petition contends that the Court of Appeal applied the wrong standard of review. The petition says the Court of Appeal mistakenly followed the California Supreme Court’s 1978 opinion in Neal v. Farmers, which held that a trial court’s decision to reduce a punitive damages award under California law is reviewed for abuse of discretion. The petition contends that the Court of Appeal should have followed the California Supreme Court’s more recent opinion in Simon v. San Paolo, which held that a trial court’s decision to reduce a punitive damages award on due process grounds is reviewed de novo. (Simon was merely restating the U.S. Supreme Court’s holding in Cooper v. Leatherman.) The petition contends that the Court of Appeal would have permitted a larger punitive damages award if it had analyzed the punitive damages award solely on due process grounds, and not under state law.

    I would be shocked if the Supreme Court grants this petition. The plaintiff is essentially arguing that state courts are no longer free to reduce punitive damages awards under state law if the awards are not excessive under the Due Process Clause. Nothing in the Supreme Court’s punitive damages jurisprudence suggests that the Court intended to prevent state courts from reducing punitive damages awards under state law.

  • Will Justice Souter’s Retirement Revolutionize Punitive Damages Litigation?

    Professor Jonathan Adler, in a post on the Volokh Conspiracy, speculates that Justice Souter’s replacement could join a liberal voting block to overturn the Supreme Court’s line of punitive damages cases going back to BMW v. Gore:

    Replacing Justice Souter could also have a significant effect is on the Court’s decisions on the due process limitations on punitive damages. Justice Souter joined the five justice majorities in BMW v. Gore and Philip Morris v. Williams limiting the award of punitives on due process grounds, and also wrote the Court’s majority in Exxon Shipping v. Baker, which limited punitive damages under the federal common law of maritime. Again, “liberal” justices are split on this question. Here, however, if Souter’s replacement were to align with Justices Stevens and Ginsburg, it is likely that the Court’s recent punitive damages cases could be overturned.

    While it’s certainly possible that Justice Souter’s replacement could shake things up in this area, I’m not sure I agree with Professor Adler. If the new justice aligns with Justice Stevens, the Court would not be likely to overturn BMW v. Gore. It was Justice Stevens, after all, who wrote the majority opinion in BMW v. Gore. Justice Breyer concurred in that opinion, and both justices Stevens and Breyer concurred in the Court’s subsequent opinion in State Farm v. Campbell. That leaves Justice Ginsburg as the only liberal justice opposing the Supreme Court’s application of the Due Process Clause to limit the size of punitive damages awards. It is true that Justice Souter was part of the 5-4 majorities in Williams and Exxon Shipping, so his replacement could potentially lead the Court to overturn those decisions, but the foundations of the Supreme Court’s punitive damages jurisprudence would still be intact so long as the Court does not overturn the BMW and Campbell decisions.

  • Georgia Jury Awards $30 Million in Punitive Damages Against Ford

    The Atlanta Journal-Constitution is reporting that a Georgia jury has awarded $30 million in punitive damages and $10 million in compensatory damages against Ford Motor Co. in a case involving an alleged defect in a 2004 Ford Explorer. The plaintiff claims she put the car in park and got out to mail a package when the vehicle suddenly shifted into reverse, backing into her and fracturing her spine.

    Ford is taking a beating in punitive damages litigation lately, between this award and the California Supreme Court’s decision to dismiss review in Buell-Wilson, which effectively affirmed a $55 million punitive damages award.

  • Santa Barbara Jury Awards $2.3 Million in Punitive Damages

    Noozhawk.com reports that a Santa Barbara jury has awarded $14 million in compensatory damages and $2.3 million in punitive damages to the parents of a 4-year-old boy who drowned in a swimming pool at a summer camp operated by the defendants. Counsel for one of the defendants, Cal-West, stated that the punitive damages award was improper because the drowning was accidental. Presumably, he intends to raise that argument in post-trial motions and on appeal.