According to this report from the Legal Intelligencer (via Law.com), a Philadelphia jury returned a verdict yesterday awarding $20.5 million, including $15 million in punitive damages, to the parents of an 18-year-old college student who allegedly died from a botched liposuction procedure.
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Trial Court Declines to Overturn $350 Million Verdict Against Dow and Rockwell In “Rocky Flats” Case
According to this report from the Chicago Tribune, Judge John Kane of the federal district court in Denver has denied the post-trial motions filed by Dow Chemical Co. and Rockwell International Corp. in a case involving a $350 million verdict. Judge Kane also ordered the defendants to pay 8 percent interest dating back to 1990, when the suit was filed. The plaintiffs’ attorney says that brings the total to more than $900 million.
The defendants operated a nuclear weapons facility known as “Rocky Flats,” and the plaintiffs are neighboring landowners who claim that contamination from the plant lowered their property values. Earlier press reports indicated that the verdict included $110.8 million in punitive damages against Dow and $89.4 million in punitive damages against Rockwell. Not surprisingly, the Chicago Tribune report says both defendants plan to appeal.
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Guardado v. Superior Court: Court of Appeal Holds That a Determination of Plaintiff’s Ability to Seek Punitive Damages Is Not a Ruling on the Merits
This published opinion involves the intersection of two California procedural rules in the context of punitive damages litigation.
The first rule is Code of Civil Procedure (section 170.6), which allows parties to assert one peremptory challenge to a trial judge without a showing of cause, but requires parties to assert the challenge before the judge makes a “determination of contested fact issues relating to the merits.”
The second rule is Civil Code (section 3295(c)), which provides that a plaintiff cannot conduct discovery of the defendant’s financial condition for the purposes of seeking punitive damages unless the plaintiff first demonstrates a substantial probability that he or she will prevail on a claim for punitive damages.
The question presented in this case was whether a finding by the trial court that a plaintiff has a substantial probability of prevailing on a claim for punitive damages is a “determination of contested fact issues relating to the merits” under section 170.6. The trial court concluded that it was not such a determination, and the Court of Appeal (Second District, Division Eight) agreed. The Court of Appeal relied on the statutory language of Sec. 3295(c), which expressly states that a pretrial punitive damage discovery determination “shall not be considered to be a determination on the merits of the claim.” The court concluded that a decision that is not on the “merits” for the purpose of section 3295(c) is also not on the “merits” for the purpose of section 170.6.
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Daily Journal Focus Column on Holdgrafer v. Unocal Opinion
Rex Heeseman had a column in the Daily Journal last Friday called “Price Fixing” (subscription required) which discusses the Holdgrafer v. Unocal opinion. His primary contention is that the Court of Appeal’s opinion is a departure from the approach taken by other courts in the wake of the U.S. Supreme Court’s recent decision in Philip Morris v. Williams. This is similar to the argument raised by plaintiffs in their petition for review. However, as we set forth in our answer to the petition for review, we believe the opinion simply applies the principles set by the United States Supreme Court in Campbell v. State Farm in precluding plaintiffs from seeking to punish a defendant for its dissimilar conduct toward non-parties.
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The Complex Litigator Weighs in on the Likely Impact of Savaglio v. Wal-Mart
H. Scott Leviant at The Complex Litigator has a thoughtful and detailed post referring to our post last week on the pending Savaglio v. Wal-Mart appeal. He argues that the “new right-exclusive remedy” rule that Wal-Mart urges as a bar to the punitive damages award is inapplicable to claims based on a right to wages, since he contends that the right to wages was a common law “right[] in existence prior to California’s Labor Code . . . .” But even if that were so, as Scott correctly acknowledges the Savaglio class action is primarily a case about meal periods. One could certainly characterize the right at issue in Savaglio (for purposes of the “new right-exclusive remedy” rule) as a right to meal periods rather than a right to wages. Several courts appear to have recognized that the right to such meal periods did not exist at common law but are instead the product of wage orders and statutory law. (E.g., Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1105 [explaining that the Industrial Welfare Commission “issued wage orders mandating the provision of meal and rest periods in 1916 and 1932”].)
Moreover, even if courts were to accept the argument that the right to wages was a common law right, perhaps courts may distinguish between a right to wages generally and an entitlement to certain premium payments created by statute. For example, the California Supreme Court has indicated that both overtime pay and Labor Code section 226.7 payments for missed or late meal periods are “premium” payments. (Murphy, supra, 40 Cal.4th at pp. 1109, 1120.) At least one federal district court, applying the “new right-exclusive remedy” rule, has held that a plaintiff could not maintain a conversion claim based on the right to overtime pay on the ground that this was a right created by statute rather than by common law for which the detailed remedial scheme in the Labor Code provided exclusive remedies. (See, e.g., Green v. Party City Corp. (C.D.Cal. Apr. 9, 2002), Case No. CV-01-09681 CAS (EX), 2002 WL 553219, at pp. *4-*5.) If other courts arrive at the same conclusion, the “new right-exclusive remedy” rule may bar punitive damages claims based on the right to premium wage payments.
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New Trial Motion Denied in Mark Geragos/Michael Jackson Punitive Damages Case
We previously blogged about a bench trial in which Los Angeles County superior court judge Soussan Bruguera awarded $2 million in compensatory damages and $16 million in punitive damages against defendants who supposedly taped attorney Mark Geragos’s conversations with Michael Jackson on a private airplane the day Jackson surrendered to face child molestation charges. This story on Law.com reports that Judge Bruguera has denied the new trial motions filed by defendants XTraJet Inc. and its owner Jeffrey Borer. Borer’s attorney says he will appeal. XtraJet is apparently bankrupt.
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Oklahoma Jury Hits Shell With $53 Million in Punitive Damages for Underpayment of Royalties
NewsOK.com reports that Shell Oil Co. is mulling an appeal from a $66 million jury verdict, which includes $53 in punitive damages. The plaintiffs claimed that Shell underpaid royalties on an oil-well lease agreement that was originally executed in 1927.
Any appeal will likely involve some discussion of the California Supreme Court’s recent decision in City of Hope v. Genentech, in which the court reversed a $200 million punitive damages award in a case involving underpayment of royalties.
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Interplay Between Punitive Damages and Statutory Penalties/Remedies?
Our recent posts about the “new right/exclusive remedy” issue pending in Savaglio v. Walmart and about the inapplicability of the Adams v. Murakami financial condition rule in statutory penalty cases prompt this observation: I wonder if courts and litigants are broadly aware of the election of remedies rule discussed in Fassberg Const. Co. v. Housing Authority of City of Los Angeles (2007) 151 Cal.App.4th. 267. Here’s an excerpt with part of that discussion:
_____________The Housing Authority contends it is entitled to recover the compensatory damages for breach of contract, treble damages for false claims, civil penalty, and punitive damages. We conclude that the trial court correctly required an election of remedies. (FN 27)California courts have held that if a defendant is liable for a statutory penalty or multiple damages under a statute, the award is punitive in nature, and the award penalizes essentially the same conduct as an award of punitive damages, the plaintiff cannot recover punitive damages in addition to that recovery but must elect its remedy. (Troensegaard v. Silvercrest Industries, Inc. (1985) 175 Cal.App.3d 218, 226-228, 220 Cal.Rptr. 712 [civil penalty under Civ.Code, § 1794]; Marshall v. Brown (1983) 141 Cal.App.3d 408, 419, 190 Cal.Rptr. 392 [treble damages under Lab.Code, § 1054]; see Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1256, 79 Cal.Rptr.2d 747 [stating that the plaintiffs must elect between statutory penalties or treble damages under Pen.Code, § 637.2, subd. (a) and punitive damages]; Turnbull & Turnbull v. ARA Transportation, Inc. (1990) 219 Cal.App.3d 811, 826, 268 Cal.Rptr. 856 [treble damages under Bus. & Prof.Code, § 17082].) To impose both a statutory penalty or multiple damages award and punitive damages in those circumstances would be duplicative. (Troensegaard, supra, at pp. 227-228, 220 Cal.Rptr. 712; Marshall, supra, at p. 419, 190 Cal.Rptr. 392.) We presume that the Legislature did not intend to allow such a double recovery absent a specific indication to the contrary. (Troensegaard, supra, at p. 228, 220 Cal.Rptr. 712; see Hale v. Morgan (1978) 22 Cal.3d 388, 405, 149 Cal.Rptr. 375, 584 P.2d 512 [narrowly construing Civ.Code, § 789.3 with regard to the amount of a civil penalty]; People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 294, 313-314, 58 Cal.Rptr.2d 855, 926 P.2d 1042 [discussing Hale].)
____________________The court went on to discuss and reject the plaintiff’s contention that the penalties were really compensatory in nature, and thus did not preclude an additional award of punitive damages:
We need not decide categorically whether the recovery of treble damages and a civil penalty under the California False Claims Act precludes the recovery of punitive damages on a common law cause of action arising from the same conduct in all cases. Instead, we focus on the nature of the awards in this case (see Cook County, supra, 538 U.S. at p. 130, 123 S.Ct. 1239) to determine whether the treble damages award and civil penalty included sufficient amounts serving a punitive objective so as to render an additional award of punitive damages a prohibited double recovery under California law. Because there was no qui tam relator entitled to a significant portion of the treble damages award, we conclude that most of the treble damages award here served a punitive rather than a compensatory purpose. Moreover, particularly in light of the treble damages award, we conclude that the additional civil penalty served primarily a punitive purpose. Considering the amount of the civil penalty ($1,491,500) relative to the amount of the Housing Authority’s purported actual damages resulting from false claims ($455,000), together with our conclusion that the majority of the treble damages award served a punitive purpose, we are compelled to conclude that the aggregate punitive portion of the treble damages award and civil penalty is sufficiently large that any additional award of punitive damages would be duplicative and unwarranted. -
In re Estate of Sheen: California Court of Appeal Holds Statutory Penalty is Not Subject to Rule Requiring Proof of Net Worth for Punitive Damages
npublished opinion (2008 WL 2059133), the Second District court of appeal reviewed a trial court’s decision not to award statutory penalties under Probate Code section 859 where the plaintiff failed to produce evidence of net worth. Section 859 allows a court to award twice the amount of damages against a person who, in bad faith, wrongfully takes estate or trust property. The court of appeal reversed, holding that the California Supreme Court’s Adams v. Murakami rule (plaintiffs must present evidence of the defendant’s financial condition to preserve a claim for punitive damages) does not apply to statutory penalties:
“In cases of statutory penalties, with amounts or ranges legislatively fixed, the precondition of showing the defendant’s financial condition (Adams v. Murakami (1991) 54 Cal.3d 105) does not apply – although the defendant may raise financial condition as a fact in mitigation of the penalty or its amount. (E.g., Rich v. Schwab (1998) 63 Cal.App.4th 803, 814-817.) The trial court here overlooked this distinction, or misconstrued petitioners’ prayer for a penalty as one for conventional punitive damages.”
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Pending Appeal Will Affect Punitive Damages Claims in Wage & Hour Class Actions
The California Court of Appeal may soon resolve a punitive damages issue of critical importance to California employers: whether employees may seek punitive damages when they sue their employers for wage and hour violations.
In 2003, a California trial court certified a class in Savaglio v. Wal-Mart, reportedly consisting of more than 115,000 hourly Wal-Mart employees, which sought to recover premium payments from Wal-Mart under Labor Code section 226.7 for missed or late meal periods. Subsequently, the class amended their allegations to seek punitive damages in addition to premium payments. In December 2005, following a rare class action trial, an Alameda jury awarded the class more than $66 million in premium payments and $115 million in punitive damages. Wal-Mart appealed and the case is currently pending before the First Appellate District, Division Four. (See the court’s online docket.)
Among the issues that Wal-Mart has raised on appeal is whether California’s “new right-exclusive remedy” rule bars the punitive damages award in this wage and hour case. Under this rule, “where a statute creates a right that did not exist at common law and provides a comprehensive and detailed remedial scheme for its enforcement, the statutory remedy is exclusive.” (Rojo v. Kliger (1990) 52 Cal.3d 65, 79.) According to Wal-Mart’s opening appellate brief, no California appellate cases have upheld an award of punitive damages for any statutory wage and hour claims, and at least three federal district courts have applied the “new right-exclusive remedy” rule to dismiss claims seeking punitive damages predicated on alleged wage and hour violations.
California has seen a boom in wage and hour class actions in the last decade and, according to some reports, claims seeking relief for meal period violations have been among the fastest growing areas of employment law over the past few years. Indeed, a recent report issued by Littler Mendelson (which specializes in labor and employment law) indicates that at least 311 wage and hour related class actions were filed in California state courts alone in the nearly six-month period between October 1, 2007, and March 28, 2008. (Hat tip to Wage Law Blog.) Given the dramatic rise in wage and hour class actions, the issue of whether punitive damages are available in wage and hour cases will likely have a significant impact on the potential liability California employers could face in the future.