California Punitives by Horvitz & Levy

  • Missouri Court of Appeal Allows $3.75 Million Punitive Damages Award, 75 Times Greater Than Compensatory Damages

    The Missouri Court of Appeals has issued a remarkable opinion allowing $3.75 million in punitive damages in a sexual harassment case in which the compensatory damages were only $50,000.

    The jury in this case awarded $6.75 million in punitive damages against auto parts supplier TNT Logistics of North America. The trial judge reduced the amount to $450,000.

    TNT argued on appeal that even $450,000 was too much and that the plaintiff deserved no more than $250,000. The Court of Appeals said $6.75 million was excessive but that $450,000 was insufficient.

    The Court of Appeals determined that TNT should pay $3.75 million in punitive damages because the extremely reprehensible conduct of the defendant warranted a departure from a single-digit ratio. But the court did not discuss or analyze any of the reprehensibility factors set forth in State Farm v. Campbell, such as whether the conduct involved physical harm, whether the defendant was a repeat offender, or whether the defendant took advantage of the plaintiff’s financial vulnerability. Most of those factors appeared not to be present in the case. It is hard to fathom how the court could conclude that a 75-to-1 ratio passes muster under Campbell.

    Another curious aspect of the case is that the Court of Appeals gave the plaintiff a choice between accepting the $3.75 million or opting for a new trial. If $3.75 million is the constitutional maximum, what would be the point of affording the plaintiff a new trial? Any award higher than $3.75 million would be excessive, so the plaintiff could not possibly hope to do better at the retrial.

  • San Francisco Jury Awards $21 Million in Punitive Damages Against NFL Players Association

    The Associated Press is reporting that a jury in federal district court in San Francisco has awarded $7.1 million in compensatory damages and $21 million in punitive damages against the NFL Players Association in a lawsuit brought by retired players. The plaintiffs alleged that the union failed to properly market their images, and cut them out of licensing deals so that active players could receive bigger royalty payments.

    The AP story says the $21 million is slightly less than 10 percent of the union’s net worth at the start of the year. If the case was tried under California law, it’s the union’s net worth at the time of trial that’s relevant, not the net worth at the start of the year. (See, e.g., Washington v. Farlice (1991) 1 Cal.App.4th 766, 777 [the only relevant financial condition is that existing as of the time of trial].) Given the recent events in the stock market, the union’s current net worth could be quite a bit lower. If the award exceeds the union’s net worth at the time of trial, that could lead to a reduction of the award on appeal. (See Michelson v. Hamada (1994) 29 Cal.App.4th 1566, 1596 [punitive damages are generally are not allowed to exceed 10 percent of the net worth of the defendant].)

  • New W. Va. Supreme Court Justice Wins Election Because of Ketchup and Now Promises to Have Significant Impact on Punitive Damages

    We have previously posted here on a candidate forum in the West Virginia Supreme Court race where two candidates promised they would always vote to review punitive damage awards.

    As readers of this blog are aware, West Virginia is one of the few states without an automatic right of appeal, which has left defendants no remedy after being hit with significant punitive damage awards. Prior posts are here and here. One of the candidates who made that promise was democrat Menis Ketchum who said in response to a question at a candidate’s forum that “he would agree to hear any case involving punitive damages ‘no matter how large or how small.’”

    Ketchum recently won his election to the West Virginia Supreme Court in large part because of a clever series of advertisements where he played off the similarity of his name with the famous condiment. The first advertisement was set in the popular Jim’s Steak and Spaghetti House in Huntington. A man and woman sit at a lunch counter while a waitress serves them. The advertisement begins: “‘What do you know about this Ketchup guy running for the Supreme Court?’ begins the man. ‘Not Ketchup. Ketchum. Menis Ketchum,’ corrects the waitress. The woman sitting at the counter points to a newspaper and says: ‘It says here Menis Ketchum has been in the courtroom for 40 years. He’s a no-nonsense straight shooter and he can’t be bought.’” Apparently, this series of ketchup ads was instrumental in securing new Justice Ketchum’s election.

    The other candidate to make the pledge to review all punitive damage awards, democrat Margaret Workman, also won election. Interestingly, the losing Republican candidate opposed automatic review for all punitive damage awards unless called for by the Legislature.

    This goes to show that the oddest things can have an impact on punitive damages jurisprudence. It also goes to show that party labels on some issues like punitive damages may not tell you everything about a candidate’s views.

    UPDATE (by Curt Cutting): According to the website of the California state bar, there are 6 licensed attorneys in California named “Ketchum.” If any of them wants to run for a spot on the bench, they should take a page from Justice Ketchum’s playbook. The 30 licensed attorneys named “Mayo” also may want to take this into consideration.

  • Oakland Jury Awards $5.5 Million in Punitive Damages Against Landlord

    The San Francisco Chronicle is reporting that a jury in Oakland has awarded $183,000 in compensatory damages and $5.5 million in punitive damages against a landlord who allegedly defrauded tenants out of security deposits. Interestingly, the story quotes the plaintiffs’ attorney as conceding that the punitive damages are excessive and should be reduced by the trial judge. The lawyer also says that, after the punitive damages are reduced, she will ask the judge to award the reduced amount to charity, instead of her clients.

  • Ninth Circuit Reduces Punitive Damages Award; $60 Million Jury Award Reduced to $1.1 Million After Two Appeals

    The Ninth Circuit has issued a published order reducing a $4 million punitive damages award down to $1.1 million, for a three-to-one ratio of punitive to compensatory damages.

    The case, Southern Union Company v. Irvin, involved a lawsuit by Southern Union Company against James Irvin, the chairman of the Arizona Corporation Commission. Southern Union argued that Irvin was motivated by “personal interests” to block a proposed merger between Southern Union and an Arizona utility company. A jury awarded $975,181 in compensatory damages to Southern Union and assessed 40 percent fault to Irvin. The jury then awarded an additional $60 million in punitive damages against Irvin.

    Irvin appealed and the Ninth Circuit vacated the punitive damages award as constitutionally excessive. (See S. Union Co. v. Sw. Gas Corp. (9th Cir. 2005) 415 F.3d 1001, 1009.) On remand, the district court offered Southern Union the chance to accept a remittitur of the punitive damages to $4 million, which was slightly more than ten times the compensatory damages assessed against Irvin. Southern Union accepted the remittitur and Irvin appealed again.

    In the second appeal, the Ninth Circuit issued an order, joined by Judges Fernandez and Reinhardt, concluding that the $4 million punitive damages award was still excessive. Instead of remanding the case to the district court again, the Ninth Circuit reduced the punitive damages to $1.1 million, three times the compensatory damages awarded against Irvin. The court focused primarily on the lack of reprehensibility of Irvin’s conduct, noting that (1) the harm was not physical and did not involve health or safety, (2) the harm was inflicted on a wealthy corporation, not a financially vulnerable individual, (3) the incident was isolated, (4) Irvin was not motivated by a desire for personal financial gain, and (5) the compensatory damages award against Irvin provided significant deterrence by itself.

    Judge Reinhardt wrote a separate concurrence suggesting that he would have affirmed the award if the defendant were a wealthy corporation.

    Jude Noonan wrote a dissenting opinion in which he suggested that the majority was “mak[ing] up facts” and “suppress[ing] facts established at trial.” In Judge Noonan’s view, the record established, contrary to the majority’s view, that Irvin was motivated by a desire for personal financial gain. Also, Judge Noonan argued that Irvin’s misconduct during litigation justified a higher punitive damages award. (Note: if this case were tried under California law, consideration of the defendant’s litigation would be inappropriate. See De Anza Santa Cruz Mobile Estates Homeowners Assn. v. De Anza Santa Cruz Mobile Estates (2001) 94 Cal.App.4th 890, 895-896 [“[P]unitive damages in a tort action cannot be based on evidence of defendants’ litigation conduct occurring subsequent to the underlying tort . . .”].)

    A few points about the majority opinion jump out at me:

    • In keeping with recent trends, the majority essentially ignored the third BMW guidepost for reviewing the constitutionality of punitive damages—the “comparable penalties” guidepost. This guidepost seemed like a significant innovation when BMW was decided, but it has not had much of an impact on the development of punitive damages law since BMW.
    • The majority dropped a footnote citing the Exxon Valdez case (Exxon Shipping v. Baker). The majority noted that Baker was a maritime law case, not a constitutional case, but the majority nevertheless called attention to the adoption of a one-to-one ratio in Baker.
    • For purposes of calculating the ratio, the majority compared the punitive damages award to Irvin’s share of the compensatory damages award, as reduced by the allocation of fault. That may seem like the obvious approach, but we have seen several cases in which plaintiffs argue that a punitive damages award should be compared to the plaintiff’s total compensatory damages, ignoring any allocation of fault.
    • When evaluating the reprehensibility of Irvin’s conduct, the majority treated Irvin’s conduct as an isolated incident, even though Irvin’s actions in this case involved a four-month course of conduct. The majority’s approach is consistent with other cases holding that a defendant should not be treated as a repeat offender just because the conduct towards the plaintiff involved multiple different acts; there must be evidence that the defendant previously engaged in the same sort of conduct towards someone else.
    • The majority expressly stated that Irvin’s $400,000 share of the compensatory damages award was “substantial,” but the majority did not discuss the Supreme Court’s statement in State Farm v. Campbell that the ratio of punitive to compensatory damages should be low, perhaps only one-to-one, in cases involving “substantial” compensatory damages. I wonder whether the defendant called that statement to the court’s attention.

    All in all, it’s somewhat surprising to see the Ninth Circuit, particularly Judge Reinhardt, taking a fairly conservative and restrained approach to the punitive damages award in this case. I suspect that may have a lot to do with the fact that the plaintiff in this case is a wealthy corporation and the defendant is an individual, instead of the other way around.

  • SCOTUS Grants Cert. in Another Case Involving Punitive Damages Under Martime Law

    According to today’s order list, the U.S. Supreme Court has granted certiorari in Atlantic Sounding Co. v. Townsend, docket number 08-214. As we noted in a previous post, the case involves the availability of punitive damages in maritime cases, specifically, whether a seaman may recover punitive damages against a shipowner for failing to pay “maintenance and cure” (i.e., living expenses and medical costs) for shipboard injuries.

    See: the 11th Circuit’s opinion, the cert. petition, the brief in opposition, and amicus briefs by the American Waterways Operators, the Cruise Lines International Association, and United Maritime Group, all in support of the petitioner.

  • Boeing Hit with $237 Million in Punitive Damages

    According to Reuters, a Los Angeles jury has awarded $236.86 million in punitive damages against Boeing, on top of $370.6 million in compensatory damages awarded last week. The plaintiff in the case is ICO Global Communications Ltd., a satellite communications company. Apparently, ICO accused Boeing of fraud and breach of contract for its failure to deliver on a contract to launch a dozen satellites that were supposed to form the basis of a new global communications network.

    According to this story on Am Law, ICO’s lawyers asked for $1.5 billion in compensatory damages and $949 million in punitive damages. They’ll just have to make do with a total judgment in excess of $600 million.

    The case number is BC320115, in case any enterprising readers want to download case documents from the L.A. Superior Court’s website.

    Not surprisingly, Boeing says it plans to appeal. If the appeal is unsuccessful and the full punitive damages award is affirmed on appeal, this would apparently be the 6th highest punitive damages award ever to survive appeal, behind these five:

    1. Hilao v. Estate of Marcos (9th Cir. 1996) 103 F.3d 767 ($1.2 billion)

    2. Motorola Credit Corp. v. Uzan (2d Cir. 2007) 509 F.3d 74 ($1 billion)

    3. Exxon Shipping Co. v. Baker (2008) 128 S.Ct. 2605 ($507.5 million)

    4. The $270 million punitive damages award against NiSource and Chesapeake Energy that the West Virginia Supreme Court declined to even review

    5. Time Warner Entertainment v. Six Flags Over Georgia (Ga. Ct. App. 2002) 563 S.E.2d 178, cert. denied ($257 million)

    If anyone knows of a larger award that survived appeal, we’d love to hear about it. Earlier this year we invited our readers to identify anything missing from this list, and no one named anything bigger than these five.

  • Human Rights Suit Against Chevron May Raise Interesting Punitive Damages Issues

    Much has been written in the press about Bowoto v. Chevron, which began trial this week in San Francisco federal court. (See, e.g., L.A. Times, Reuters, Huffington Post.) In a nutshell, the plaintiffs allege that Chevron committed human rights violations in a 1998 incident on an oil platform off the coast of Nigeria. The plaintiffs are seeking recover under the Alien Tort Claims Act, a little-used law that dates back to 1789. They say they were staging a peaceful protest on the platform when they were assaulted by Nigerian military forces who were paid, fed, and housed by Chevron. Chevron contends that the protest was anything but peaceful, and that the plaintiffs threatened the safety of its workers.

    Of relevance to this blog, the plaintiffs’ case includes a claim for punitive damages. As noted in a prior post, interesting constitutional questions arise when a plaintiff seeks punitive damages in a U.S. court based on actions that took place in another country. Earlier this year, similar issues were raised in a Los Angeles case involving a group of Nicaraguan farm works who sued Dole and others, complaining about the use of the agricultural chemical DBCP on banana farms in Nicaragua nearly 30 years ago. The plaintiffs obtained $2.5 million in punitive damages, but the trial judge tossed out the award, apparently in response to Dole’s argument that the punitive damages were improper because they were based on conduct that was lawful in the jurisdiction where it occurred.

  • DOJ Report Contains Stats on State Court Punitive Awards

    The U.S. Department of Justice, Bureau of Justice Statistics, has released a report entitled Civil Bench and Jury Trials in State Courts, 2005, containing all sorts of interesting statistics regarding the outcomes of state court civil trials. For example, the median total award in civil trials in 2005 was $28,000, including compensatory and punitive damages. But as you would expect, the median award is considerably higher for certain types of cases. In asbestos cases, for example, the median total award is $682,000.

    For our purposes, the most interesting stats are the punitive damages figures that appear on pages 6 and 7 of the report. There is too much information to repeat here, but some highlights include:

    • Plaintiffs recovered punitive damages in 700 of the 1,823 trials in which punitive damages were sought.
    • Punitive damages were awarded more frequently, and in higher amounts, in cases involving contract-related torts (e.g., tortious interference with contract, fraud, employment discrimination) than in tort cases not involving contractual relationships.
    • Punitive damages exceeded compensatory damages in 62% of cases involving contract-related torts and 37% in cases not involving contractual relationships.
    • Punitive damages were at least four times greater than compensatory awards in 26% of all trials where punitive damages were awarded.
    • Punitive damages exceeded compensatory damages by a ratio of 10 to 1 or greater in 17% of all trials where punitive damages were awarded.

    I’m somewhat surprised by the statistics about contract-related tort claims. I would have thought those sorts of cases would generate lower punitive damages than cases involving personal injuries and deaths. But the opposite is true – – cases with purely economic injuries generate higher and more frequent punitive damages awards.

    It bears noting that the study only reports the amounts awarded, and does not provide any statistics about the final punitive damages after post-trial motions and appeals.

  • NiSource and Chesapeake Energy Settle Case with $270 Million Punitive Damages Award

    We previously blogged about a $404 million judgment in West Virginia against two energy companies, NiSource and Chesapeake Energy. The judgment, which included a $270 million punitive damages award, was based on the defendants’ failure to make royalty payments to property owners who had leased natural gas rights to the defendants.

    Today, the Northwest Indiana and Illinois Times is reporting that NiSource has agreed to settle the case for $338.8 million. Co-defendant Chesapeake Energy is chipping in another $41.2 million.

    The West Virginia Supreme Court’s refusal to even consider this case raised questions about the constitutionality of West Virginia’s post-verdict review of punitive damages, and NiSource filed a petition for certiorari with the U.S. Supreme Court. Those issues will have to wait for another day.