California Punitives by Horvitz & Levy

  • Gnesda v. UPS—California Court of Appeal Vacates Punitive Damages Award in Unpublished Opinion

    This opinion is unpublished, but notable for a few reasons.

    First, the punitive damages verdict was a big one – $20 million. Compared to roughly $750,000 in compensatory damages, that’s a ratio of about 27 to one. The trial court reduced the punitive damages to $3.5 million (a ratio of 4.7 to one) and both sides appealed.

    Second, the Court of Appeal vacated the punitive damages award in its entirety because the plaintiff failed to meet his burden of proving the defendant’s financial condition. California has a unique requirement that a plaintiff must introduce evidence of the defendant’s financial condition in order to recover punitives. The evidence must provide meaningful insight on the defendant’s ability to pay, as of the time of trial. Evidence of earnings or assets, without evidence of liabilities, is not enough. The California Supreme Court announced this rule in 1991, but every year there are a few appellate decisions reversing a punitive damages award on this basis. Here, plaintiff introduced evidence of the defendant’s income a few years before trial, but did not prove the defendant’s net worth at the time of trial. Because of that, the plaintiff is out $3.5 million.

    Incidentally, this case featured two prominent California appellate lawyers: professor Erwin Chemerinsky for the plaintiff and former appellate justice Dan Kolkey for the defense.

  • Oregon Voters and the Oregon Supreme Court

    Since the Oregon Supreme Court is in the news today, I thought it would be interesting to learn more about that court. It is not every day that a state Supreme Court refuses to find error in a trial after the United States Supreme Court had held that the defendant’s due process rights were violated during the trial. A poll of Oregon voters commissioned in 2006 explored voter attitudes and knowledge of the Oregon Supreme Court. 44 percent thought the court engaged in “judicial activism” while 26 percent said the court did not, and 30 percent did not have an opinion. 70 percent said they had “trust” in the court. Only 20 percent knew how many justices (7) sit on the court. 79 percent could not name a single justice on the court, and only a bare majority realized that justices were elected by the voters. 53% thought voters should have the final say on the validity of laws in Oregon, and only 30% thought the Supreme Court should have that authority.

    The poll contains many other questions about specific cases decided before 2006 by the court. It is a very interesting snapshot of how the people who live in Oregon view the Supreme Court.

  • Rationale of Oregon Supreme Court Decision in Philip Morris v. Williams Should Not Apply in California

    The Oregon Supreme Court’s decision handed down today finding a defendant waived its due process rights to proper calculation of punitive damages (see earlier post here) is based on reasoning which, whether valid or not under Oregon law, should not apply in California. The Oregon Supreme Court concluded that the trial court had an adequate basis under state law for refusing to instruct the jury that “you are not to punish the defendant for the impact of its alleged misconduct on other persons.” The U.S. Supreme Court had held that a defendant is entitled to due process protections such as are reflected in this sort of instruction upon request, but the Oregon Supreme Court said the trial court properly refused the proposed instruction in this case because it included other language, some of which was erroneous under Oregon state law. Apparently, under Oregon law, a trial court can refuse a party’s request for an instruction that correctly sets forth relevant principles of law – even principles essential to ensuring constitutional rights – if the proposed instruction is bundled with other language that is incorrect.

    The same reasoning would not apply in California. California courts have held that, even when a proposed jury instruction is flawed, if the subject matter of the instruction is “vital” or “material” to the case and not covered by other instructions, the trial court is required to give a proper instruction that captures the substance of the law. Thus, in California, if no other jury instruction addressed the fundamental due process concerns discussed in Williams, the trial court could not properly reject a proposed instruction on that issue without providing some sort of alternate instruction to protect the defendant’s due process rights. (See, e.g., Orient Handel v. United States Fid. & Guar. Co. (1987) 192 Cal.App.3d 684, 698.)

    How Appealing has another post on Williams entitled “The cost to Philip Morris of trying to slant jury instructions too far in its favor — $79.5 million in punitive damages.”

  • More on Bullock v. Philip Morris: Curing Legal Error with a Remittitur?

    Another interesting aspect of yesterday’s opinion in Bullock (discussed in earlier posts here and here) is the court’s analysis of the conditional new trial/remittitur procedure, under which a court orders that a new trial will take place unless the plaintiff consents to a reduction of the damages award. The Bullock court outlines the usual use of a remittitur to cure an award that is flawed simply because it is just too high in light of the evidence. But the court goes on to say a remittitur can also be used in some cases to cure a defect in an award that is the result of a legal error that affected the jury’s deliberations. Specifically, “remittitur may be appropriate where instructional error resulted in an excessive award and the amount of the excess is ascertainable.” Ultimately, on the particular facts of Bullock, the court concluded, “we cannot determine how the instructional error that we have found affected the amount of the punitive damages award and we cannot substitute our own assessment of the appropriate amount of punitive damages for that of a jury (or a judge on a new trial motion). We therefore conclude that a remittitur by this court would be inappropriate.”

    This result – an unconditional new trial order – makes sense to me, but what’s a little harder to fathom is the court’s reference, without further elaboration, to Stevens v. Snow (1923) 191 Cal. 58, 68, in which the Supreme Court used a remittitur to, in the words of the Bullock court, “reduc[e] by one-half the amount of a judgment based on instructional error and error in the admission of evidence despite the Supreme Court’s express acknowledgment that it could not determine how the errors affected the amount of the judgment.” What’s a little odd here is that no subsequent court seems to have followed Stevens on this matter of using a remittitur to cure an award that is potentially inflated due to legal error, and the Supreme Court 60 years later – in Schelbauer v. Butler Manufacturing Co. (1984) 35 Cal.3d 442, 454 – exhaustively analyzed and expressly disapproved the use of a remittitur as a means to cure legal error, holding that use of remittitur is “confined to cases in which an excessive damage award [is] the only error in the jury’s verdict.” Several other courts have reached the same conclusion, but the Bullock court didn’t cite Schelbauer or any of the other decisions limiting remittitur to cases involving only pure excessiveness challenges to a damages award.

    It would appear that, if a court follows the Stevens approach in any future case, a clear conflict will be set up between Stevens and Schelbauer.

  • Philip Morris v. Williams—Oregon Supreme Court Reaffirms $79.5 Million Punitive Damages Award

    The Oregon Supreme Court has issued its opinion on remand in Philip Morris v. Williams. Surprisingly, the court reaffirmed the $79.5 million punitive damages award (compared to compensatory damages of $821,000).

    The U.S. Supreme Court’s opinion last year strongly suggested that a new trial, or at least a reduction of the punitive damages award, would be necessary because the Oregon Supreme Court’s prior opinion improperly relied on harm to nonparties as a justification for the award. (From the conclusion of the court’s opinion: “Because the application of this standard may lead to the need for a new trial, or a change in the level of the punitive damages award, we shall not consider whether the award is constitutionally “grossly excessive.”)

    Hat tip to Howard Bashman.

  • Friends in High Places: Plaintiffs Garner More Amicus Briefs in Exxon Valdez Case

    The brief filed yesterday in the U.S. Supreme Court by the State of Alaska in the Exxon Valdez case (Exxon Shipping Co. v. Baker) brings the total number of amicus curiae briefs in support of the plaintiffs to 13. That’s compared to only five amicus briefs on Exxon’s side. (Click here for links to all the briefs.)

    That’s a bit of a turnaround from the prior punitive damages cases in the Supreme Court, where the defense amici significantly outnumbered those for the plaintiffs. In State Farm v. Campbell, for example, there were 19 amici for the defense and only six for the plaintiffs.

    Alaska has a split-recovery statute which provides that 50 percent of all punitive damages awards go to the state, but unfortunately for the state in this case, the $2.5 billion award was rendered in federal court under federal law.

  • More on Bullock v. Philip Morris

    This 60-page opinion covers a lot of ground, but the core of the court’s rationale for reversing the $28 million punitive damages award is that the trial court erred when it refused to instruct the jury, “You are not to impose punishment for harms suffered by persons other than the plaintiff before you.” By requesting that instruction, Philip Morris invoked the due process protection recognized by the U.S. Supreme Court in Philip Morris v. Williams, namely, that the Due Process Clause forbids states from imposing punitive damages to punish a defendant for injury inflicted on nonparties. Contrary to the arguments of Bullock and her amici, Philip Morris was not required to include in its instruction a statement that the jury could consider harm to others in evaluating the reprehensibility of the conduct that harmed Bullock. Philip Morris had no duty to qualify its proposed instruction to encompass a rule of law favorable to Bullock – – each party in a civil case has a duty to propose instructions that accurately state the law supporting its own theory of the case.

    Interestingly, the opinion states in a footnote that although Philip Morris’s proposed instruction was sufficient, the official California jury instructions (also known as “CACI“) should be modified to more accurately reflect the holding of Williams. The court’s criticism of the CACI instructions is notable because the author of the Bullock opinion, Justice Walter Croskey, is the current chair of the Judicial Council’s Advisory Committee on Civil Jury Instructions, which is responsible for keeping the CACI instructions up to date. That committee modified the CACI instructions just a few months ago to reflect the holding of Williams. If I recall correctly, Justice Croskey recused himself from that process because the Bullock case was pending before him. Now Justice Croskey says in his opinion that the committee didn’t go far enough. The opinion says the instructions could do a better job of conveying the distinction that a jury may consider evidence of harm to others for the purpose of determining reprehensibility, but not for the purpose of punishing the defendant directly for harm caused to others. I’m going to go out on a limb and predict that the next set of proposed revisions to the CACI instructions will include a modification based on the Bullock opinion.

  • Bullock v. Philip Morris—California Court of Appeal Reverses $28 Million Punitive Damages Award

    We blogged here about this pending appeal involving the intersection of California law and the U.S. Supreme Court’s decision in Philip Morris v. Williams. This afternoon, the Court of Appeal (the Second Appellate District, Division Three) issued a published opinion reversing the $28 million punitive damages award and remanding the case for a new trial on the amount of punitive damages. The same court had previously approved the $28 million award, but the U.S. Supreme Court vacated that decision and remanded for reconsideration in light of Williams.

    We’ll post further about this opinion after we’ve had a chance to digest it. For now, here’s the Court of Appeal’s summary of its disposition:

    “We conclude that Philip Morris has shown no error with respect to its liability for fraud and products liability, but that the refusal of Philip Morris’s proposed instruction not to impose punishment for harm caused to nonparties to the litigation was error. We therefore affirm the judgment as to the finding of liability, the award of compensatory damages, and the finding that Philip Morris was guilty of oppression, fraud, or malice, and reverse the judgment as to the amount of punitive damages, with directions to conduct a new trial limited to determining that issue.”

  • Thanks for the Links

    Thanks to the following blogs for adding California Punitive Damages to their blogroll:

    The California Blog of Appeal

    UCL Practitioner

    Lowering the Bar

    The Volokh Conspiracy

    And a special thanks to Greg May at the California Blog of Appeal for this post and for his helpful advice on our foray into the blogosphere.

    UPDATE (1/30/08 at 1:46 pm): Additional thanks to Rick Hasen at Election Law Blog for this post.

  • Dueling Op-Eds on Punitive Damages

    We previously blogged (here and here) about the California Chamber of Commerce’s (unsuccessful) sponsorship of a bill to impose a ratio-based cap on punitive damages. In support of that bill, Kyla Christofferson, a Policy Advocate with the Chamber, submitted a letter to the editor of the Daily Journal (subscription required).

    Last week, the Consumer Attorneys of California responded with their own Daily Journal letter to the editor. The letter, authored by Don Ernst, president of the Consumer Attorneys, describes the Chamber of Commerce as a dishonest “front group for corporations seeking to avoid accountability for wrongdoing and negligence.” Aside from attacking the Chamber’s credibility, Ernst’s main argument is that reform is unnecessary because disproportionate punitive damage awards are rare.

    I am puzzled by the argument about the rarity of excessive punitive awards. Why should our justice system tolerate any excessive awards, even if they are rare? I doubt that the defendants who get hit with excessive punitive awards find much solace in the notion that such awards are uncommon. And if excessive punitive damages are so rare, why are the Consumer Attorneys so opposed to limiting such awards? What difference would it make, except to the defendants who are unlucky enough to be on the wrong end of those rare awards?

    Ernst supports his argument by listing cases in which punitive damages motivated manufacturers to remove dangerous products from the market. Interestingly, he doesn’t mention whether the awards in those cases would have been subject to the cap proposed by the Chamber. Out of curiousity, I looked up one of the awards he mentions – -the $125 million punitive damage award in Grimshaw v. Ford Motor Co., the infamous Ford Pinto case. Ernst cites Grimshaw as an example of an award that changed corporate behavior, but he doesn’t mention that the punitive damages award in Grimshaw was reduced to $3.5 million (by the trial court), compared to compensatory damages of $2 million. If a ratio of 1.75-to-one was sufficient to change Ford’s conduct in Grimshaw, that case hardly supports Ernst’s argument against the three-to-one cap proposed by the Chamber.