California Punitives by Horvitz & Levy

  • Birts v. The Estate Plan: $10 Million Punitive Damages Award Entered on Default of Living Trust Seller

    A Texas law journal (The Southeast Texas Record) reported yesterday that a federal judge in Arkansas has entered a $16 million default judgment—including $10 million in punitive damages—against The Estate Plan, a company that sells living trusts. The plaintiffs brought a class action alleging that The Estate Plan was exploiting senior citizens and offering unsound financial and legal advice in a manner giving rise to claims of fraud, unauthorized practice of law, negligence, breach of fiduciary duty, and conspiracy. The March 16 default judgment in Birts, et al v. The Estate Plan (case 4:08-cv-04047-HFB) also reportedly requires the defendant to correct misrepresentations in the materials that it provides to consumers and to engage in a public information campaign.

    Public outrage over financial shenanigans like this will likely result in a continuing stream of big-ticket punitive damages awards.

  • New Zealand High Court Mulls Punitive Damages Down Under

    According to a report on Voxy.co.nz, the high court of New Zealand recently heard arguments in a case involving the standards for imposing punitive damages under that country’s law. Plaintiff Susan Couch sued the New Zealand Department of Corrections on claims arising out of serious injuries sustained at the hands of a prison inmate who was granted parole and proceeded on a highly publicized rampage known as the Mt Wellington-Panmure RSA killings. Couch claims the department acted with “outrageous and flagrant” disregard for her safety. The court will address whether Couch’s claim for exemplary damages can go forward on that basis, without any allegation that the defendant made a conscious decision to act wrongfully.

    New Zealand has a no-fault accident compensation system, and the Deputy Solicitor-General John Pike reportedly argued to the court that allowing punitive damages could undermine the compensation system under the circumstances presented in Couch’s case.

    Signs of efforts to expand the availability of punitive damages around the globe could be viewed as an unwelcome American export. This blog has reported previously (e.g., here, here, here and here) on other foreign jurisdictions’ attempts to refine their punitive damages jurisprudence, and on attitudes toward U.S. punitive damages. As noted by Professor Helmut Koziol (the author of a Louisiana Law Review article we’ve described), the American system of punitive damages “cause[s] continential Europeans to shake their heads.”

  • Marsten v. Walgreens: Illinois Appellate Court Vacates $25 Million Punitive Damages Award

    The Daily Herald has a story about an Illinois appellate opinion vacating a $25 million punitive damages award because the plaintiff died. Apparently, Illinois law differs from California law on this point. In California, when a plaintiff dies, the plaintiff’s estate can recover punitive damages, although the plaintiff’s heirs cannot recover punitive damages in a wrongful death action. (See Code Civ. Proc., §§ 377.34 [authorizing in a survival action the recovery of damages “the decedent sustained or incurred before death, including any penalties or punitive or exemplary damages”], 377.61 [precluding in a wrongful death action “damages recoverable under Section 377.34”].) Last year we blogged about a case in which a federal district court vacated a $5 million punitive damages award that was improperly awarded on a wrongful death claim.

  • Defendants Win Latest Round of Florida Tobacco Litigation

    As we’ve noted in prior posts, a series of individual trials are taking place in Florida in which smokers and their families are seeking punitive damages from tobacco companies. These trials are the fallout from the Florida Supreme Court’s reversal of a $145 billion punitive damages award in a tobacco class action. The plaintiffs won the first two individual trials, but according to AmLaw Litigation Daily, round three has gone to the defendants.

    Point of Law has commentary about this litigation here.

  • How Will the California Supreme Court React to the Williams III Cert. Dismissal?

    As we noted below, the U.S. Supreme Court today dismissed certiorari in Philip Morris v. Williams (Williams III). Among the many questions raised by the dismissal is what will happen in Buell-Wilson v. Ford, currently pending before the California Supreme Court.

    The Cal. Supremes granted review in Buell-Wilson last summer, but deferred briefing pending the disposition of Williams III. Now that the U.S. Supreme Court has dismissed Williams III without a decision , the Cal. Supreme Court will either have to order briefing in Buell-Wilson and address the issue that was unaddressed in Williams III, or dismiss review in that case as well. As my co-blogger Jeremy Rosen pointed out, two of the three issues raised in the Buell-Wilson petition for review are not dependent on the outcome of Williams III, so even if the court decides not to address the Williams III issue, it may decide to resolve these issues.

  • Cert. Dismissed in Williams III

    The U.S. Supreme Court has issued an order dismissing certiorari as improvidently granted in Philip Morris v. Williams (Williams III), which was argued last December (click here to view the transcript). As readers of this blog will recall, the issue before the court was:

    Whether, after this Court has adjudicated the merits of a party’s federal claim
    and remanded the case to state court with instructions to “apply” the correct constitutional standard, the state court may interpose–for the first time in the litigation–a state-law procedural bar that is neither firmly established nor regularly followed.

    I certainly didn’t see this dismissal coming. It was apparent from the oral argument transcript that the court was sharply divided, but I guessed that the result would be a 5-4 reversal. Looking back at the transcript, I suppose this comment by Justice Breyer might have been a hint that dismissal was possible: “When I read that petition for cert, I thought this is a run-around, and I’m not sure that I think that now.”

    No one really knows why the court dismissed review (and we may never know), but one of my colleagues, John Querio, has offered this assessment, which makes sense to me:

    It means they realized this issue was tangled up with state law issues that they
    didn’t anticipate (but could have), meaning there was a very good argument that the Oregon S.Ct.’s rationale represented an adequate and independent state ground for the decision, which deprives the USSCT of jurisdiction. I’m guessing the liberals and at least some of the conservatives agreed on this – the liberals because they wanted to preserve the award, and the conservatives because they favor the AISG doctrine in the criminal context and didn’t want to make new and harmful precedent cutting back on that ground to get to the merits of the punitive damages issue here. Such an opinion could have been cited by criminal defense lawyers in the future.

    You can read more about the dismissal at:

    WSJ Law Blog

    Reuters

    Bloomberg

    SCOTUSblog (Observing that, with interest, Philip Morris will now owe over $150 million, but noting that Philip Morris plans to keep the Williams litigation going by challenging the state of Oregon’s claim to 60 percent of the punitive damages award)

  • Taxation of Punitive Damages

    As April 15 approaches, this is an appropriate time to observe that punitive damages are subject to federal income tax, even if they are awarded in connection with a personal injury award that is not otherwise taxable. Don’t take my word for it; take it from TaxGirl.

  • Rich v. Koi Restaurant: Plaintiff Not Entitled to Retrial on Punitive Damages When Jury Ignores Defendant’s Admission

    Last Friday, the California Court of Appeal (Second District, Division Four) issued this unpublished opinion affirming the trial court’s denial of the plaintiff’s motion for new trial after a jury declined to award punitive damages.

    In this sexual harassment case, the corporate defendant admitted before trial (in response to a request for admissions) that the alleged harasser was a managing agent of the corporation within the meaning of Civil Code section 3294. The jury was informed of this admission and told to accept it. Defense counsel also conceded the point in closing argument.

    When the case was submitted to the jury, the jury found in favor of the plaintiff and awarded compensatory and punitive damages against the alleged harasser. But when the jury was asked to decide whether the alleged harasser was a managing agent, the jury answered “no,” and therefore awarded no punitive damages against the corporation.

    The plaintiff moved for a new trial, arguing that the jury’s answer to the managing agent question was improper. The trial court denied the motion, finding that the jury’s answer was “a technical error at most,” and that the denial of punitive damages against the corporation represented “a measured and calculating or calculated decision to punish the truly culpable and to treat the less culpable with a lighter touch.”

    The Court of Appeal affirmed, finding that the trial court did not abuse its discretion in denying the new trial motion. The Court of Appeal cited the California Supreme Court’s decision in Brewer v. Second Baptist Church (1948) 32 Cal.2d 791 and Sumpter v. Matteson (2008) 158 Cal.App.4th 928 (which we blogged about here in one of our earliest posts), both of which held that a plaintiff has no right to punitive damages even when the statutory prerequisites for awarding punitive damages are established.

    For what it’s worth, I think the Court of Appeal correctly deferred to the trial court’s discretion, but I’m not sure I would have decided this issue the same way the trial court did. It seems possible that the jury’s response on the verdict form was just a mistake, and not a measured or calculated decision. At the same time, I have to wonder why plaintiffs’ counsel did not object to the inclusion of the managing agent question on the verdict form, given that the defense had already conceded the issue.

  • Vermont Supreme Court Considers Punitive Damages Against Diocese for Abuse by Priest

    As reported by the Burlington Free Press, the Vermont Supreme Court heard oral arguments yesterday in an appeal by the state’s Roman Catholic Diocese from a judgment awarding $8.7 million to a former altar boy who was molested by a priest in the 1970’s. The judgment included $7.75 million in punitive damages.

    According to the story, the diocese is arguing that the trial court committed instructional error by allowing the jury to award punitive damages without making a finding of “bad motive” on the part of the diocese. The plaintiff contends that the trial court correctly instructed the jury that they could award punitive damages for “reckless” conduct.

    As we mentioned in a previous post, the Vermont diocese is also facing a separate award of $3.4 million in another case involving the same priest. At the time of that verdict, there were 19 other pending abuse cases involving the same priest, who has not yet been stripped of his priesthood.

  • UCL Practitioner Reports on Dukes Oral Argument

    Kim Kralowec has a detailed post on her UCL Practitioner blog describing yesterday’s Ninth Circuit en banc oral argument in Dukes v. Walmart. As we noted in a prior post, Dukes raises questions about the propriety of classwide determination of punitive damages for Title VII claims. Kim concludes her post by agreeing with The Recorder’s assessment that the outcome of the case is difficult to predict.