California Punitives by Horvitz & Levy

  • La Baw v. Campbell: Court of Appeal Vacates $100,000 Punitive Damages Award Against Defendant With Negative Net Worth

    In this unpublished opinion, the California Court of Appeal (Fourth District, Division Two) vacated a punitive damages award of $100,000 because the defendant could not afford to pay.

    We have previously blogged about California’s rather unique rule that plaintiffs seeking punitive damages must present evidence of the defendant’s financial condition. As we observed, California plaintiffs routinely overlook this rule and end up losing their punitive damages awards on appeal.

    Even when plaintiffs do meet their burden, California courts will reduce punitive damages awards that are disproportionate to the defendant’s ability to pay. For individual defendants, the courts have adopted a rule of thumb that any award that exceeds 10 percent of the defendant’s net worth is excessive. (See Michelson v. Hamada (1994) 29 Cal.App.4th 1566, 1596.)

    This case is a little unusual because the evidence showed that the defendant had a negative net worth. He testified that his debts exceeded his assets, and the plaintiff presented no evidence to the contrary. The court therefore concluded that the defendant is unable to pay any punitive damages award. It vacated the award in its entirety and did not afford the plaintiff a new trial on this issue, because she had a full and fair opportunity to present her evidence in the first trial. (See Kelly v. Haag (2006) 145 Cal.App.4th 910, 914.) That aspect of the opinion conflicts with this recent unpublished decision, in which the Court of Appeal inexplicably gave the plaintiff a second chance to present evidence of the defendant’s financial condition after failing to do so the first time around.

  • Jury Rules For Plaintiff in First Phase of Retrial After Reversal of $145 Billion Punitive Damages Award

    The Associated Press is reporting that a Florida jury ruled in favor of plaintiff Elaine Hess in the first phase of the first trial in a series of cases brought by 8,000 Florida smokers. The jury ruled that the plaintiff’s husband, Stuart Hess, a longtime chain smoker, was addicted to nicotine before he died of lung cancer. The trial will now consider the issues of liability and, if necessary, damages.

    As we noted here, these cases are the result of the failed Engle class action, in which Florida smokers collectively obtained an award of $145 billion in punitive damages, the largest civil award in U.S. history. In 2006, the Florida Supreme Court overturned that award, ruling that the plaintiffs had to prove individually that cigarettes caused their illnesses.

    Hat tip: How Appealing

  • Georgia Jury Awards Punitive Damages Against California Corporation

    The Atlanta Journal-Constitution reports that a Georgia jury has awarded $250,000 in compensatory damages and $2 million in punitive damages against Vesta Strategies, a now defunct California investment company. According to the plaintiff’s lawyers, Vesta defrauded victims nationwide and the FBI has opened an investigation.

    If other plaintiffs come forward seeking punitive damages, this litigation could raise some interesting questions. Will the court in the next case take the first punitive damages award into account when deciding whether further punitive damages are appropriate? Will this become a race between plaintiffs, competing to see who can get a punitive damages award and enforce it before the company’s assets are gone, leaving subsequent plaintiffs unable to recover their actual losses? Many law review articles have been written about the problems presented by punitive damages claims for mass torts, but the courts have yet to devise any workable solution.

  • “The Failure of Punitive Damages in Employment Discrimination Cases: A Call for Change”

    This article on punitive damages in discrimination cases, which we blogged about last September when Prof. Seiner posted an advance copy on SSRN, has now been published in the latest edition of the William & Mary Law Review. The article is available on Westlaw and the citation is 50 Wm. & Mary L. Rev. 735.

  • NFL Players Association Appeals Punitive Damages Award

    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

  • Vermont Supreme Court Overturns Defense Verdict, Finds that Defendant Acted with Malice as a Matter of Law

    The Vermont Supreme Court’s opinion last week in DeYoung v. Ruggerio reached a highly unusual result for a punitive damages case.

    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.

  • Duffy v. Technicolor: Plaintiff Forfeited Punitive Damages By Not Seeking Them During First Phase of Trial

    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.

  • Salmonella Outbreak Leads to Claim for Punitive Damages

    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.

  • Indian Court Sets Aside Punitive Damages for Condom in Pepsi Bottle

    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.

  • Judge Allows Slash to Seek Punitive Damages

    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.