California Punitives by Horvitz & Levy

  • City of Hope v. Genentech: California Supreme Court Affirms $300 Million Compensatory Damages Award, Reverses $200 Million Punitive Damages Award

    The California Supreme Court’s opinion in City of Hope v. Genentech is available here. We haven’t yet had time to digest the opinion, but here’s the crux of the court’s holding:

    In this complex case, which has 25,567 pages of reporter’s transcript plus 12,267 pages of clerk’s transcript and has generated 18 friend-of-the-court briefs, the primary issue is whether, as the jury found, a fiduciary relationship necessarily arose when City of Hope, in return for royalties, entrusted a secret scientific discovery to Genentech to develop, to patent, and to commercially exploit. Our answer is “no.” That conclusion invalidates the jury’s punitive damages award, which was based on City of Hope’s tort claim for breach of fiduciary duty.

    . . . We affirm that part of the judgment awarding City of Hope $300,164,030 in damages for Genentech’s breach of contract. Because punitive damages cannot be awarded for breaching a contract, however, our conclusion that there was no fiduciary relationship requires us to set aside the jury’s award of $200 million in punitive damages to City of Hope.

  • Little Company of Mary Hospital v. Superior Court: Court of Appeal Limits Punitive Damages Claims In Elder Abuse Actions Against Religious Org.’s

    The Second Appellate District, Division Seven, has issued a published opinion dealing with punitive damages in Elder Abuse cases against religious organizations.

    The case involves Code of Civil Procedure section 425.14, which provides that no claim for punitive damages may be made against a religious corporation unless the trial court first concludes that the plaintiff will be able to present clear and convincing evidence of malice, oppression, or fraud as required by California’s punitive damages statute.

    That seems pretty straightforward. This case involves a punitive damages claim against a religious corporation, so section 425.14 applies. End of story, right? Not quite. There’s a wrinkle. A similar statute applies to punitive damages claims against health care providers against in any action “arising out of [their] professional negligence.” (See Code of Civ. Proc., section 425.13.) But the California Supreme Court has held that this statute does not apply to professional negligence claims against health care providers if those claims involve elder abuse. (Covenant Care, Inc. v. Superior Court (2004) 32 Cal.4th 771, 777.) The Supreme Court concluded that, since elder abuse claims are are rooted in conduct far more egregious than ordinary professional medical negligence, the special pleading requirements for punitive damages in medical negligence cases don’t apply to elder abuse claims.

    So this case raised the question whether the reasoning of Covenant Care applies to elder abuse claims against religious corporations. In other words, does the egregious nature of elder abuse override the statutory restrictions on claims against religious corporations? The Court of Appeal said “no”:

    The plain language of section 425.14, coupled with its legislative history, reflects an unmistakable intent to afford religious organizations protection against unsubstantiated punitive damage claims without regard to the conduct giving rise to the claim. In this way, section 425.14’s protections are broader than those afforded secular health care providers by section 425.13. Because the trial court erred in concluding the pretrial mechanism provided in section 425.14 does not apply in elder abuse cases seeking exemplary damages against religious organizations, we grant the petition for writ of mandate and direct respondent Los Angeles Superior Court to vacate its order denying Little Company of Mary’s motion to strike the punitive damage claim in the underlying action.

    Kudos to Justice Perluss for resolving this issue in a clear and concise 11 page opinion.

  • California Supreme Court Will Decide City of Hope Punitive Damages Case Tomorrow

    The California Supreme Court has issued a “notice of forthcoming filing” in City of Hope v. Genentech, which involves a $200 million punitive damages award. The issue presented in the case, per the court’s news release is:

    “When an inventor or researcher entrusts a new idea or discovery to another under an arrangement providing for the other party to develop, patent, and commercially exploit the idea or discovery in return for royalties to be paid to the inventor or researcher, does a fiduciary relationship arise between the two parties, a breach of which may support tort, and in an appropriate case punitive, damages, or should the arrangement be treated like an ordinary contractual agreement, a breach of which supports only contract and not punitive damages?”

    As we noted in our blog post after the oral argument, the argument primarily focused on tort liability issues and not at all on the amount of the punitive damages award (although that issue was addressed in the briefing).

    Full disclosure: as we’ve mentioned before, our firm is counsel of record in this case.

  • California Comes in 44th Place in Survey on Lawsuit Climate

    The 2008 State Liability Systems Ranking Study was conducted for the U.S. Chamber Institute for Legal Reform among a national sample of in-house general counsel or other senior corporate litigators to explore how reasonable and balanced the tort liability system is perceived to be by U.S. business. According to the nationwide survey, California came in 44th, making it the 7th worst state in the nation. Los Angeles county was judged the worst county in the nation. The best five states were Delaware, Nebraska, Maine, Indiana, and Utah. The five worst states were Illinois, Alabama, Mississippi, Louisiana and West Virginia. A significant factor in California’s poor performance in the survey was the perception that California courts were too permissive with awarding punitive damages.

    The full printable .pdf version of the survey is available here.

    UPDATE (by Curt Cutting): The trial lawyers of West Virginia are taking umbrage with their state’s last place ranking. According to this article from the West Virginia Record, the West Virginia Association for Justice calls the survey: “propaganda created to dupe West Virginia lawmakers into destroying important consumer protection laws.” The president of West Virginia Citizens Against Lawsuit Abuse responds by pointing out that West Virginia has also received dismal ratings from Forbes, the American Tort Reform Association, Directorship Magazine, and the Pacific Research Institute.

    FURTHER UPDATE (by Jeremy Rosen): The American Association for Justice, formerly the Association of Trial Lawyers of America, issued its own press release Tuesday, calling the report’s rankings “phony” and saying its purpose is to serve the extreme corporate agenda.

  • Should Public Entities Be Liable for Punitive Damages?

    The Ithaca Journal reports on a recent $1 million punitive damage award against the Ithaca Public School District because the plaintiff student was harassed by other students. The article reports that the entire yearly budget for the school district is $95 million. Thus, more than one percent of the entire year’s budget will go to a single student. A glance at the website for the school district shows that there are 12 schools and over 5,000 students in the school district. Thus, the other 5,000 plus students end up having to suffer because of the failures to act by school officials. This brings up a recurring issue in cases against public entities where the public (taxpayers) end up paying for the mistakes made by the public employees. This is not to say that people injured by a public entity should not be compensated. However, it does raise the serious question whether punitive damages should also be awarded. California, for example, does not permit punitive damages against public entities. (See Cal. Gov. Code section 818.)

    [Observation by Lisa Perrochet, 10:03 a.m.: One thought to consider is that public entities are arguably directly accountable to the public in a way that private entities are not, so while punitive damages are used to make private entitites change behavior that harms the public, voters have other means to correct government behavior that harms them, without saddling themselves with an enormous financial debt.]

  • A billion in punitive damages?

    An interesting editorial in the Mississippi Democrat argues: “The Scruggs Katrina Group may have to pay a Jackson law firm punitive damages in the continuing saga in which high-powered lawyer Dickie Scruggs and others have pleaded guilty in connection with conspiring to bribe a judge.
    For years trial lawyers have argued that big rich companies should pay big settlements over and above any actual damages in order to ‘get their attention’ and ‘make them think twice’ before doing the same thing again. We trust that same argument will be made in this case. Scruggs was reported to have been paid a billion dollars in litigation proceeds. In view of the damage his actions have done to the perception of justice in our state, we think he should have to pay a large chunk of that wealth in punitive damages. The money, however, should not go to another trial lawyer. The money should be paid to the people of Mississippi – they were the ones damaged in this tragedy.”


  • Roundup of Stories on Exxon v. Grefer Cert Denial

    Bloomberg: Exxon Loses U.S. Supreme Court Challenge to $112 Million Award

    CNNMoney: Supreme Court Rejects Exxon Appeal In Property Cleanup Case

    WSJ LawBlog: High Court Says No Thanks to Exxon-Mobil Punitives Appeal

    Reuters UK: US High Court Won’t Hear Exxon Louisiana Appeal

    Point of Law: Supreme Court Refuses to Hear Exxon Appeal of $112M Individual Property Damage Award

  • Exxon v. Grefer: US Supreme Court Denies Cert

    The United States Supreme Court denied cert in Exxon v. Grefer. We previously blogged about this cert petition here.

  • Harvey v. Sybase: California Court of Appeal Reinstates Punitive Damages Award

    Last Friday, the California Court of Appeal (First District, Division Five) issued this partially published opinion reinstating a plaintiff’s claim for punitive damages in an employment discrimination case.

    The jury awarded $1.3 million in compensatory damages and $500,000 in punitive damages. The trial court granted JNOV in favor of the defendant on punitive damages, finding that no evidence supported a jury’s award. The Court of Appeal, in the unpublished part of its opinion, reversed the JNOV. For the most part, the court’s analysis is not particularly noteworthy. The court simply disagrees with the trial court’s conclusion that the plaintiff presented no substantial evidence that the defendant acted with “malice, oppression, or fraud,” the prerequisites for punitive damages under California law.

    But one small aspect of the court’s opinion caught my eye. The court acknowledges that plaintiffs must prove malice, oppression, or fraud by clear and convincing evidence, but the court then states, “Despite this more stringent burden of proof at the trial level, we nevertheless confine our review to determining whether the record contains evidence of circumstances warranting the imposition of punitive damages.” Maybe I’m misreading this, but it sounds as if the court believes that the clear and convincing evidence standard applies only at the trial court level and not on appeal. But a published California case expressly states that the clear and convincing evidence standard applies on appeal as well as in the trial court. (See Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847 [“since the jury’s findings were subject to a heightened burden of proof, [this court] must review the record . . . in light of that burden. In other words, [this court] must inquire whether the record contains ‘substantial evidence to support a determination by clear and convincing evidence’”].) Of course, Division Five is free to disagree with this opinion by their colleagues in Division One, but if they were going to disagree with a published opinion, they probably should have published that part of their analysis.

    As an interesting side note, the plaintiff in this case was represented by our fellow blogger Bruce Nye at Cal Biz Lit. Congratulations Bruce, for getting that punitive damages award reinstated.

  • Court of Appeal May Have Been Too Quick on the Trigger in Buell-Wilson Post-Opinion Order

    We’ve been following the twist and turns in Buell-Wilson v. Ford, in which the Court of Appeal reaffirmed a $55 million punitive damages award even after the US Supreme Court vacated their prior opinion affirming that same award.

    Last week we blogged about a rather harsh order from the court denying Ford’s petition for rehearing. The order said “Ford asserts that our opinion erroneously states that counsel conceded at oral argument that Ford failed to raise instructional error in the first appeal.” The court then proceeded to quote from the transcript of the oral argument to show that Ford’s counsel had in fact conceded that very point at oral argument. The court next took the rather unusual step of modifying its opinion to add this discussion, which seems to serve no other purpose than to embarrass Ford’s counsel, Gibson Dunn.

    A number of attorneys in our firm wondered why Gibson’s experienced appellate team would make such an easily refuted argument? Why would they contend they didn’t concede something at oral argument, when the portions of the transcript quoted by the court clearly show that they did in fact concede this point? Surely they must have requested a copy of the recording of the oral argument, and if they did, why would they claim they didn’t concede something when the transcript clearly shows they did?
    We figured there had to be more to the story, so we took a look at Ford’s petition for rehearing. As it turns out, there is indeed more to the story. As far as we can tell, Ford did not even make that argument that the court ascribes to it. Ford didn’t argue, “We never conceded at oral argument that we failed to raise instructional error in the prior appeal.” They argued, “We never conceded that our failure to raise the instructional error in the prior appeal amounted to a forfeiture.” That’s a big difference. The transcript excerpts quoted by the court don’t indicate that Ford’s counsel conceded a forfeiture; he only conceded that the issue wasn’t raised in the first appeal. But then he went on to say: “I think we fully preserved the issue fully by making our proposal [in the trial court] . . . now that there has been a vacating of the judgment, the issues are fresh before the court, we fully briefed them, they are important issues of public policy so we think it’s fully appropriate for this court to address the jury instruction issue . . .” (You don’t need to take our word for it – – you can view the rehearing petition here.)
    Perhaps the court simply misunderstood the distinction between (a) conceding that the issue wasn’t raised and (b) conceding that the failure to raise the issue amounted to a forfeiture. Admittedly it’s a somewhat subtle distinction buried among a lot of other issues on appeal. But the court should have given this issue a very careful look before modifying its opinion in a way that impugns the reputation of counsel. As the late Bernard Witkin observed, the criticism of an attorney in a published judicial opinion is a severe sanction. (See 1 Witkin, Cal. Procedure (4th ed. 1996) Attorneys, § 621, p. 732.)