California Punitives by Horvitz & Levy

  • Wal-Mart Settles With Adidas In Case With Potential for Major Punitive Damages


    According to Bloomberg.com, Adidas and Wal-Mart have settled a lawsuit in which Adidas contended that Wal-Mart infringed on Adidas’s trademark by copying its distinctive three-stripe sneaker design. As we previously reported, Adidas had boldly predicted it would obtain a huge punitive damages award in this case. The prediction wasn’t all that far fetched, since Adidas recently won $137 million in punitive damages in the same court in a nearly identical lawsuit against Collective Brands, the parent company of Payless Shoes.

    Both parties may have been motivated to settle in part because the state of Oregon (where this case was pending) claims 60 percent of all punitive damages awards. Indeed, Oregon stepped forward to claim its share of Adidas’ big win against Payless. As previous experience has shown, if an Oregon plaintiff wins a big punitive damages award, the parties will have difficulty settling without giving the state its cut. As a result, parties in Oregon (and other states with similar statutes) have an added incentive to settle before trial if they think a major punitive damages award is possible.

  • The First Batch of Merits Briefs in Williams III Available Online

    Philip Morris and its amici have filed the first batch of briefs on the merits in Philip Morris v. Williams (Williams III). (Click here for our prior post about the grant of certiorari in Williams III. The post contains the issued presented.)

    Links (via the ABA):

    Philip Morris’s opening brief on the merits.

    Amicus brief of Pacific Legal Foundation in support of petitioner.

    Amicus brief of National Association of Manufacturers in support of petitioner.

    Amicus brief of the U.S. Chamber of Commerce in support of petitioner.

    Amicus brief of Associated Oregon Industries in support of petitioner.

    Amicus brief of Washington Legal Foundation in support of petitioner.

    Amicus brief of Criminal Justice Legal Foundation in support of neither party.

    Note on terminology: I have been referring to this case as Williams II, even though it’s actually the third time the case has been before the Supreme Court. The first time around the Court simply GVR’d the case without an opinion. The second time around the Court issued an opinion. To me, it makes sense to call the first opinion Williams I and call this case Williams II, since it will generate the second Supreme Court opinion. But several of the briefs linked above refer to the first Supreme Court opinion as Williams II and this case as Williams III. To minimize confusion, I’ll adopt that same terminology from now on.

  • Video Interview With Gov. Palin on Exxon Valdez Decision

    Following up on the posts below, here’s a video interview with Governor Palin about the Supreme Court’s opinion reducing the punitive damages in Exxon Shipping Co. v. Baker.

  • VP Candidate Palin Was Eligible to Participate in Exxon Valdez Class

    This post on the Blog of Legal Times reports that Senator McCain’s running mate, Alaska governor Sarah Palin, was eligible to join the plaintiff class in the Exxon Valdez case. Her husband, Todd Palin was a commercial fisherman at the time of the Valdez spill. They were eligible to join the class but they declined to file claims by last February’s deadline.

    Stanford law professor Jeffrey Fisher, who represented the plaintiffs in the Supreme Court, says that Gov. Palin was always strongly supportive of the plaintiffs’ quest for punitive damages. Fisher observes, however, that “the Justices Sen. McCain likes” were not as supportive.

  • The Presidential Race, and Views on Punitive Damages

    Interesting that Slate faulted Obama for not bashing SCOTUS over the “activist” Exxon Valdez decision, saying, “Obama spent the final days of the Supreme Court term celebrating conservative constitutional outcomes rather than calling out dubious conservative methodology. Who was better situated to chide the court’s conservatives for what sure seems to be an activist ruling that saved Exxon $2 billion in damages stemming from the Valdez oil spill?”

    Meanwhile, McCain’s newly announced running mate, Alaska governor Sarah Palin, did express disappointment with the Exxon Valdez decision, reportedly saying that the court “gutted the jury’s decision on punitive damages” and undercut one of the principal deterrents for marine shipping accidents in Alaska. Without apparently identifying any flaw in the court’s legal analyis (which, as an interpretation of federal common law was well within their purview, and would hardly seem the type of “activist” treatment of statutes or state law that judges are often accused of), Palin was also reported as complaining, “It is tragic that so many Alaska fishermen and their families have had their lives put on hold waiting for this decision” and, “My heart goes out to those affected, especially the families of the thousands of Alaskans who passed away while waiting for justice.”

  • Lu v. Qi: California Court of Appeal Grants Rehearing and Affirms a Punitive Damages Award It Had Previously Reversed

    Here’s something you don’t see every day. Or even every year. It’s not often that the California Court of Appeal grants a petition for rehearing and completely changes directions from its original opinion. But that’s exactly what happened in this case. Last month, the Second Appellate District, Division Five, issued an unpublished opinion reversing a $180,000 punitive damages award because the plaintiff failed to present meaningful evidence of the defendant’s net worth. (See our prior post discussing that decision.)

    Yesterday, the court issued a new opinion affirming the punitive damages award in its entirety. Here’s what happened: the defendant had filed separate appeals, both from the judgment and from a subsequent order denying the defendant’s motion to vacate the judgment. In the original opinion, the Court of Appeal concluded that the motion to vacate the judgment was untimely, and therefore the defendant was entitled to no relief on its appeal from the denial of that motion. But the court nevertheless granted relief on the defendant’s appeal from the judgment itself. The Court of Appeal never noticed, however, that the appeal from the judgment was untimely. The plaintiff raised that issue on rehearing and the court, realizing its mistake, granted rehearing and issued a new opinion. Thus, the court ended up affirming an $180,000 punitive damages award that would have been reversed if the defendant had not blown (a) the deadline for appealing from the judgment and (b) the deadline for filing a post-judgment motion to vacate.

  • Forthcoming Law Review Article: “How Should Punitive Damages Work?”

    Professor Dan Markel of Florida State University College of Law has posted on SSRN a draft of his forthcoming law review article “How Should Punitive Damages Work?” As he describes in his post on Prawfsblog, the article is part of a three-part series that he intends to assemble into a book, tentatively titled “The Punitive Damages Mess: How to Fix It.”

    In this installment, he explains that there are three main goals of punitive damages: (1) to vindicate a public interest in retribution (which he calls “retributive damages”), (2) to vindicate a plaintiff’s private interest in redress for harms to his/her dignity (which he calls “aggravated damages”), and (3) to provide cost-internalization of harmful conduct (“deterrence damages”). He suggests that it’s a mistake to include all these different concepts under the umbrella of punitive damages. He says each form of damages should be assessed separately, with defendants enjoying different procedural protections depending on the type of damages at issue. It’s an intriguing idea, but unfortunately we aren’t likely to see that level of sophistication from actual policy makers anytime soon.

  • Partial Settlement Reached on Exxon Valdez Punitive Damages

    The Associated Press is reporting (via the Seattle Post Intelligencer) that the parties in Exxon Shipping Co. v. Baker have reached a partial settlement.

    As anyone reading this blog probably knows by now, the U.S. Supreme Court cut the punitive damages in that case down to $507 million earlier this year, but the parties have continued to fight about the amount of interest that should be added to that amount. The plaintiffs contend Exxon owes interest from the date of the original judgment, for a total of about $488 million. Exxon contends that it doesn’t owe any interest at all, but if it does, the interest did not start running until June 25, 2008, when the Supreme Court issued its decision.

    Apparently, Exxon has agreed to pay $383 million now, but intends to continue litigating over the interest issue. If all of the $383 million went to the 33,000 commercial fisherman in the plaintiff class, they’d get about $11,600 each. That’s on top of roughly $500 million in compensatory damages Exxon already paid (approx. $15,000 per plaintiff). If the plaintiffs prevail on the interest issue, the additional $488 million plus the remaining balance of the punitive damages ($124 million), would come out to about $18,500 per plaintiff. So the maximum recovery per plaintiff seems to be around $45,000. Of course, a big chunk of the payments will go towards attorneys’ fees and costs. At the end of the day, the plaintiffs might end up with less than $25,000 each, even in a best case scenario (i.e., including the maximum interest award that plaintiffs are seeking).

  • No Punitive Damages Awarded in Bratz Trial

    Mattel’s lawsuit against MGA Entertainment, Inc., the maker of Bratz dolls, has been widely covered in the media. In case you missed it, Mattel claims that former employer Carter Bryant conceived the idea for the Bratz dolls and prepared the initial sketches for the dolls while he was still working for Mattel, before he took his idea and sketches to MGA. Last month, a jury ruled in Mattel’s favor in the liability phase of the trial.

    In the damages phase, Mattel sought nearly $2 billion in compensatory damages plus an additional award of punitive damages. Today the jury returned a verdict awarding $100 million in compensatory damages and no punitives.

    UPDATE: Everyone agrees that the jury awarded no punitive damages, but reporters are having a very difficult time figuring out exactly how much the jury awarded in compensatory damages. Reuters says $100 million. AP (via the Washington Post) is calling it $40 million. Either way, it’s a far cry from the $2B that Mattel was hoping for.

    UPDATE #2: This story on the Huffington Post explains the discrepancy in the media reports. The jury apparently awarded damages totaling $100 million, including three awards of $30 million on three related causes of action plus another $10 million on another cause of action. MGA contends the three $30 million awards on the related claims are duplicative, and is asking the trial court to reduce the total award to no more than $40 million.

  • California DOI Loses Out on Collecting $700 Million Punitive Damages Award—For Now

    It wasn’t enough to balance California’s budget, but the $700 million punitive damages jury verdict in favor of the California Department of Insurance (DOI) would have been a welcome addition to state coffers. A 9th Circuit Court of Appeals opinion in Poizner v. Artemis S.A., however, put the kibosh on that, affirming a trial court order vacating the jury’s verdict.

    The federal appellate court reviewed a judgment arising out of the 1991 insolvency and subsequent rehabilitation of the Executive Life Insurance Company following what the court characterized as the largest insurance failure in California history. The DOI sued a variety of entities that had bid for the right to assume the insolvent insurer’s assets and preside over the rehabilitation, which was deemed a resounding success both for the former Executive Life policyholders as well as for the defendant entities, which reportedly made hundreds of millions of dollars from appreciation of Executive Life’s junk bond portfolio. The basis for the DOI suit was the claim that purchasing entities had engaged in an unlawful conspiracy that improperly wrested the winning bid from another contender. The jury agreed, but awarded $0 in compensatory damages (because misrepresentations by the defendants had not actually harmed Executive Life)—but then awarded $700 million in punitive damages. The trial court struck the punitive award, but awarded $241 million on an equitable restitution claim. On appeal, the court rejected the DOI’s effort to reinstate the punitive damages award, and disappointed the DOI further by reversing the $241 million, remanding the case for further proceedings. (At least the DOI collected $680 million in pretrial settlements.)

    Ordinarily, an order striking a punitive damages award where there are no compensatory damages would seem unremarkable, but as the 9th Circuit noted, the figures at stake in this case are enough to make one look very, very closely, even if ultimately the result remains the same. As the court put it:

    Although the numbers in this case are breathtaking, California law is well-established and quite clear. Where the jury here explicitly found “$0” of compensatory damages, the general rule precludes punitive damages. [Citation.] The $0 figure assessed by the jury is striking because the district court clearly instructed the jury on the availability of nominal damages: “If you find for the plaintiff but you find that the plaintiff has failed to prove damages as defined in these instructions, you must award nominal damages.” The jury explicitly declined to award nominal damages, instead awarding “$0” compensatory damages as urged by counsel for Artemis. The California rule that might authorize $700 million in punitive damages if the jury awards $1, but no punitive damages if the jury awards nothing, may seem harsh. But the rule is no less a rule when it prohibits large punitive awards than when it prohibits much smaller punitive awards.


    In arriving at this result, the court distinguished Gagnon v. Cont’l Cas. Co., 211 Cal. App. 3d 1598, 1603 n.5 (1989), in which a California appellate court held “an actual award of compensatory damages is not necessary; rather the plaintiff need only prove that he or she suffered damages or injury.” The 9th Circuit noted that Gagnon addressed a situation where harm was shown but damages were barred by statute. Here, the court explained, “The Commissioner has not persuaded us that the reasoning of Gagnon should extend to this case where compensatory damages, even nominal damages, were legally available and explicitly sought by the Commissioner.” The court also rejected the DOI’s argument, based on Ward v. Taggart, 51 Cal. 2d 736, 743 (1959), that the district court’s restitution award could serve as the anchor for the punitive damages verdict:

    Ward is distinguishable on two grounds. First, Ward, like Gagnon, is a case where the compensatory damages sought by the plaintiff were legally unavailable. Here, lost profit compensatory damages were legally available and explicitly sought by the Commissioner, yet the jury declined to award even nominal compensatory damages. Second, the jury in Ward found that all of the elements of fraud, including harm, were proven against the defendant. Here, . . . [defendant Artemis] had no legal liability for its own misrepresentation or concealment. The Commissioner sought restitution based on the same record evidence of Artemis’ intentional misrepresentation and concealment. The district court ultimately awarded restitution calculated to disgorge only a portion of the profit that the Commissioner sought as compensatory damages. Permitting the restitution award in this case to serve as a predicate for the jury’s punitive damages award would cast doubt on the equity in the district court’s award and would potentially result in a windfall to the Commissioner. [fn. omitted] We conclude that California courts would not extend the reasoning of Ward to permit restitution to serve as the predicate for punitive damages where a defendant is not legally liable for fraud and a jury has expressly awarded “$0” in compensatory damages.

    The DOI won’t be giving up yet, however. Because the district court erroneously precluded the DOI from putting on one part of its case, the 9th Circuit remanded the matter for further proceedings at which punitive damages could again be awarded: “We reverse the Post-Verdict Order and remand for a new damages phase trial limited to proffer of the NOLHGA Premise and a determination of damages (including punitive damages), if any, on that theory.”

    Back in 2005 when the jury’s verdict came down, my co-blogger Curt Cutting was quoted as questioning whether the punitive damages award would pass muster. The appellate court’s treatment of the award is discussed in a Mercury News article and in a Business Insurance news piece, which offer more details about the history of the protracted litigation.