We previously blogged about a judgment against the NFL Players Association for $7.1 million in compensatory damages and $21 million in punitive damages. The Associated Press is now reporting (via ESPN) that the Players Association has filed a notice of appeal. Perhaps this case will give the Ninth Circuit an opportunity to clear up the confusion about its policy regarding the appropriate remedy for excessive punitive damages.
Hat tip: ProFootballTalk.com
The case involved a claim against an attorney who allegedly stole money from his clients and lied to them about it. A jury awarded compensatory damages but determined that the defendant did not act with malice and was therefore not subject to punitive damages.
The Vermont Supreme Court reversed, ruling that the defendant’s conduct amounted to malice as a matter of law. Accordingly, the court sent the case back for a retrial on the amount of punitive damages. The court based its decision on the fact that the defendant admitted stealing plaintiffs’ money and lying to them. The defendant argued nevertheless that the jury could reasonably have found no malice because (1) he did not intend to harm them, and (2) he always intended to return the money to them sooner rather than later. But the court concluded that even if the jury accepted this explanation entirely, the defendant’s conduct still satisfied Vermont’s definition of malice, which includes “deliberate and outrageous conduct aimed at securing financial gain or some other advantage at another’s expense, even if the motivation underlying the outrageous conduct is to benefit oneself rather than harm another.”
I don’t recall ever reading any punitive damages opinion in which an appellate court concluded as a matter of law that a defendant acted with malice, and reversed a jury’s determination to the contrary. But the Vermont Supreme Court’s opinion cites two such cases: a 1989 decision from Alabama and a 1908 decision from Minnesota. (See Dependable Ins. Co. v. Kirkpatrick (Ala. 1987) 514 So. 2d 804, 806 and Anderson v. Int’l Harvester Co. of Am. (Minn. 1908) 116 N.W. 101, 102.) The fact that the Vermont Supreme Court had to rely on a 100-year-old case from another jurisdiction tells you that this doesn’t happen every day.
Despite ruling that the defendant’s conduct amounted to malice as a matter of law, the court emphasized that, during the retrial, the jury would still be free to decide not to award punitive damages.
The California Court of Appeal (Second District, Division Three) issued this unpublished opinion last week, affirming a trial court’s decision that prohibited a plaintiff from seeking punitive damages. In a nutshell, the plaintiff was barred from seeking punitive damages because he failed to make a timely request for punitive damages on any of the liability theories he presented to the jury.
The plaintiff’s complaint asserted multiple theories of liability, but requested punitive damages only for intentional infliction of emotional distress. The trial court, however, granted a nonsuit on that claim prior to trial. The case went to trial, bifurcated into a liability phase and a damages phase. During the liability phase, the plaintiff did not ask to amend his complaint to seek punitive damages on the other claims, nor did he ask the jury to make a finding that the defendant acted with malice, oppression, or fraud. The jury found for the plaintiff on liability.
During the damages phase, when the plaintiff began to assert a claim for punitive damages, the trial court asked the plaintiff how he could obtain punitive damages when the complaint did not seek punitive damages on any of the theories the jury had addressed in the liability phase. The plaintiff then sought leave to amend his complaint to request punitive damages on one of the claims the jury had addressed. The trial court denied the request as untimely.
The Court of Appeal affirmed, finding that the trial court did not abuse its discretion. The court noted that a belated amendment of the complaint would have prejudiced the defendant, who might have adopted a different strategy during the liability phase, and might have presented different evidence, if the defendant had known the plaintiff was seeking punitive damages.
The court’s reasoning makes sense, but it seems like the court could have affirmed on another more straightforward ground, without even going into a prejudice analysis. The plaintiff, by failing to obtain a finding of malice, oppression, or fraud during the liability phase, forfeited its claim to punitive damages as a matter of law. See Westrec Marina Management Inc. v. Jardine Ins. Brokers Orange County, Inc. (2000) 85 Cal.App.4th 1042, 1050. Under Westrec, it really wouldn’t matter whether the plaintiff had been allowed to amend his complaint or not. Without a finding of malice, oppression, or fraud, no punitive damages could be awarded.
The National Law Journal reports that the plaintiffs who filed the first lawsuit against the Peanut Corporation of America in connection with the recent salmonella outbreak have added a claim for punitive damages to their lawsuit.
The punitive damages claim is apparently based on a recent FDA report, which indicated that PCA shipped products that had tested positive for salmonella contamination at least 12 times in the past two years, and that federal investigators found unsanitary conditions and numerous health violations at the plant. According to the plaintiffs, the FDA report shows that PCA knew they were shipping products that were likely to be contaminated.
According to this story from India PRWire, the Delhi States Consumer Disputes Redression Commission has issued an opinion setting aside a punitive damages award of 100,000 rupees in a case in which the plaintiff claimed he became ill after drinking a bottle of Pepsi that had a condom in it. The Commission affirmed the compensatory damages award of 23,000 rupees.
If I understand the exchange rate correctly, 100,000 rupees is equal to about $2,000.
Perhaps the plaintiff would have been better off if he found a mouse in his bottle of Elsinore beer.
We haven’t had any serious punitive damages news to discuss for a few days, so here’s a bit of fluff: MSNBC reports that Slash, the former guitarist for Guns N Roses and current guitarist for Velvet Revolver, is suing a real estate agent for punitive damages and has successfully defeated the agent’s motion for summary judgment.
Slash (whose real name is Saul Hudson) and his wife claim the agent duped them into buying the home by exaggerating the square footage of the home and by falsely telling them the home was on a private street, when in fact it is on a public street with inadequate parking. They never actually lived in the home, but they claim they sold it at a $500,000 loss.
In our previous post we discussed this unpublished opinion from the California Court of Appeal, which affirmed the trial court’s adoption of a 1-to-1 ratio of punitive-to-compensatory damages. The same opinion is notable for another reason: it addresses a standard of review issue that has divided California’s intermediate appellate courts.
As we mentioned in our prior post, the Court of Appeal rejected the defendant’s argument that the plaintiff failed to present sufficient evidence to support the imposition of punitive damages. In the process, the court ruled that the “clear and convincing evidence” standard, which governs punitive damages issues at the trial court, also applies on appeal, when a reviewing court examines the record to determine whether substantial evidence supports the imposition of punitive damages.
As we have noted in prior posts, California appellate courts have been all over the map on this issue, with some courts taking the position that the clear and convincing evidence standard applies only in the trial court and has no relevance on appeal. Last year the California Supreme Court granted review to resolve the split among the lower courts on this precise issue, but the Supreme Court later dismissed review after the parties settled. This case presents another vehicle for the Supreme Court to address that issue, although the chances of review are diminished somewhat by the fact that this is an unpublished opinion.
The California Court of Appeal (Second District, Division Six) issued this unpublished opinion yesterday, affirming a trial court’s decision to reduce a large punitive damages award.
The plaintiff, a grocery store employee, sued for sexual harassment and retaliation. A jury ruled for the plaintiff and awarded $1,672,988 in compensatory damages and ten times that amount in punitive damages ($16,729,880). The trial court ordered a conditional new trial on excessive damages grounds, but offered the plaintiff a choice of accepting a remittutur, reducing the damages to $1.2 million in compensatory damages and an equal amount in punitive damages. The plaintiff accepted the remittitur. The defendant appealed from the judgment and the plaintiff cross-appealed from the reduction of the punitive damages.
The defendant argued on appeal that the plaintiff failed to prove that a managing agent of the store had ratified the conduct of the employee who harassed the plaintiff. The Court of Appeal rejected that argument, finding that there was sufficient evidence to support the award of punitive damages.
On the plaintiff’s cross-appeal, however, the Court of Appeal affirmed the trial court’s determination that the the 10-to-1 ratio of punitive damages to compensatory damages awarded by the jury was excessive, and that the proper ratio is 1-to-1. In affirming the reduced the award, the Court of Appeal noted that the reprehensibility of the defendant’s conduct was “low to moderate,” that the maximum statutory penalty for the defendant’s conduct is only $150,000, and that the compensatory damages were “substantial.” As we noted recently in another post, a small but growing number of appellate courts have finally begun to implement the Supreme Court’s statement in State Farm v. Campbell that the ratio of punitive damages should be low, perhaps only 1-to-1, when compensatory damages are substantial.
This opinion also draws on the U.S. Supreme Court’s recent decision in Exxon Shipping as support for the 1-to-1 ratio:
The reasonableness of the trial court’s selection of a 1:1 ratio is supported by Exxon Shipping Co. v. Baker (2008) __U.S. __ [128 S.Ct. 2605, 171 L.Ed.2d 570]. In that case the United States Supreme Court observed that there are “several studies . . . showing the median ratio of punitive to compensatory verdicts, reflecting what juries and judges have considered reasonable across many hundreds of punitive awards.” (Id., 128 S.Ct. at p. 2632.) The “studies cover cases of the most as well as the least blameworthy conduct triggering punitive liability, from malice and avarice, down to recklessness, and even gross negligence in some jurisdictions. The data put the median ratio for the entire gamut of circumstances at less than 1:1, . . . meaning that the compensatory award exceeds the punitive award in most cases. In a well functioning system, we would expect that awards at the median or lower would roughly express jurors’ sense of reasonable penalties in cases with no earmarks of exceptional blameworthiness within the punishable spectrum . . . .” (Id., at p. 2633.)
The Supreme Court noted that it “has long held that ‘[p]unitive damages by definition are not intended to compensate the injured party, but rather to punish the tortfeasor . . . and to deter him and others from similar extreme conduct.’ [Citation.]” (Exxon Shipping Co. v. Baker, supra, 128 S.Ct. at p. 2633.) The trial court here could have reasonably concluded that punitive damages of $1.2 million, together with compensatory damages in the same amount, were sufficient to punish appellant and “‘deter [it] and others from similar extreme conduct.’ ” (Ibid.)
This is exactly the sort of thing we had in mind when we predicted that the Exxon Shipping case, although not binding on state courts, will nonetheless be persuasive to some lower courts because the reasoning of Exxon Shipping applies to all types of punitive damages cases, not just maritime cases.
The plaintiff in this case was represented on appeal by appellate specialist and blogger Donna Bader, who operates An Appeal to Reason.
Hat tip: California Attorney’s Fees.
Last September we blogged about a San Diego jury that awarded $15.2 million in compensatory damages and $40.4 million in punitive damages against San Diego Gas & Electric Company in case involving a helicopter crash that killed four Marines. The trial court in that case, after hearing post-trial motions, has reduced the punitive damages down to $8.5 million, but has otherwise left the verdict intact.
As reported by the San Diego Union Tribune, the crash occurred when the Marines’ helicopter hit a utility tower located on Camp Pendleton during a nighttime training exercise. The plaintiffs blamed SDG&E for not installing safety lights on the tower. SDG&E argued that they complied with the Marine Corps’ request to light certain towers on Camp Pendleton, but the Marine Corps never asked SDG&E to light the tower in question, which had been in place for 25 years.
The trial court, in its posttrial order, found sufficient evidence to support the award of punitive damages, but found that that SDG&E’s conduct did not warrant a $40.4 million penalty.
Unfortunately, we can’t provide much commentary or analysis, because the litigation is ongoing and our firm represents SDG&E in this matter.
The Arizona Court of Appeals (Division One) issued this opinion last week, reducing two $4 million punitive damages awards down to $500,000 each, equal to the amount of compensatory damages.
By adopting a one-to-one ratio of punitive to compensatory damages, the court joined a small but growing number of courts around the country that have finally begun to implement the U.S. Supreme Court’s statement in State Farm v. Campbell that, in cases involving substantial compensatory damages, the ratio of punitive to compensatory damages should be low, perhaps only one-to-one. (For another example of this trend, see our recent blog post about the Third Circuit’s decision in Jurinko. See also the Jet Source and Walker opinions from the California Court of Appeal.) I am working on a short paper about this trend, which I hope to post on this blog some time in the next few weeks.
Aside from the ratio analysis, this opinion contains an interesting statement about the role of the defendant’s wealth. The opinion concludes with the statement that the court might have reduced the punitive damages award even further, but decided to stick with a one-to-one ratio because “SWA’s wealth warrants a more substantial punitive damages award.” That sort of analysis seems directly contrary to the Supreme Court’s admonition in Campbell that lower courts should not use wealth to support an otherwise excessive award.
Many lawyers disagree about how to interpret the U.S. Supreme Court’s statements about the role of the defendant’s wealth in the constitutional analysis of punitive damages for excessiveness. Some defense lawyers take the position that, in light of BMW and Campbell, the defendant’s wealth can no longer be considered for any purpose. My personal view is that the Supreme Court has not categorically ruled out consideration of the defendant’s wealth for all purposes. I think the Court’s statements about wealth leave open the possibility that a jury might be able to consider the defendant’s wealth in assessing punitive damages, so long as the end result does not exceed the maximum amount permitted under the guideposts established in BMW v. Gore. But it seems to me that Campbell forecloses the sort of reasoning that the court adopted here, i.e., using the defendant’s wealth to uphold an award that would otherwise be excessive under the guideposts. Given that this case is otherwise a win for the defense on the excessiveness issue, however, the defendant may not be interested in challenging the court’s analysis on this point.
Hat tip: EvidenceProf Blog.