November 25, 2014

Press release by Consumer Attorneys of California defends jury's $185 million verdict---by saying it is obviously excessive

A week ago we reported on a jury award of $185 million in punitive damages in a single-plaintiff employment case against AutoZone.  Not surprisingly, that colossal award got a lot of media attention.  Some even called it a "preposterous" verdict by a runaway jury.

In response to this criticism, the Consumer Attorneys of California issued a remarkable press release.  The press release says that criticism of the verdict is unwarranted, which isn't a surprising position for CAC to take.  But CAC's reasoning is quite surprising.  According to CAC, it makes no sense to talk about runaway juries or preposterous damage awards until the post-verdict proceedings are resolved, because "such big punitive damages awards are inevitably scaled back to a fraction of what was ordered by the jury."  The press release goes on to say that "nobody at AutoZone is expecting to write a check for $185 million" because U.S. Supreme Court precedent limits punitive damages to no more than nine times the amount of compensatory damages.

CAC has a point.  Many of the big punitive damages awards that generate media attention are later reduced during post-trial proceedings or on appeal.  And those rulings rarely get the same kind of press as the original verdict. 

Nevertheless, CAC's position is a startling one.  CAC's members fight vigorously to obtain awards like this. And they fight to hold on to them during post-verdict review.

Consider, for example, Bullock v. Philip Morris, in which a California jury awarded $28 billion in punitive damages to a single plaintiff.  The plaintiff's lawyer fought hard to hold on to that award.  When the trial court reduced it to $28 million, plaintiff's counsel filed a cross-appeal asking the Court of Appeal court to reinstate the full amount of the jury's award.  (See 2005 WL 4656293.)  That lawyer---Michael J. Piuze---is a past recipient of CAC's "Trial Lawyer of the Year Award." One of the attorneys at his firm is currently on CAC's board. 

It isn't just CAC's individual members who defend punitive damages awards in the nine-figure range and above.  CAC itself files amicus curiae briefs to defend such awards.  For example, in Romo v. Ford Motor Co., CAC filed an amicus brief to defend a $290 million punitive damages award. (See 2003 WL 22455474.)

Given this history, the CAC press release on the Auto Zone case comes as a great surprise, because it  seemingly acknowledges that an award much smaller than the Bullock and Romo awards is obviously excessive and will inevitably be reduced or vacated.  Having taken that position, it would now be difficult for CAC to file another amicus brief like the one it filed in Romo if the AutoZone case ends up on appeal.

Another punitive damages award reversed due to insufficient financial condition evidence (Wilson v. Autler)

This unpublished opinion is the latest example of the California Court of Appeal vacating a punitive damages award because the plaintiff failed to present meaningful evidence of the defendant's financial condition. 

The defendant testified that she owned a home and paid cash for it.  But the Court of Appeal (Fourth District, Division Two) said that evidence was not nearly sufficient to support a punitive damages award; the plaintiff presented no evidence of the value of the house, the defendant's other assets or liabilities, or her income and expenses.  As a result, the court vacated $50,000 in punitive damages.

November 24, 2014

Court of Appeal re-issues Izell opinion without changing punitive damages analysis

Last week we noted that the Court of Appeal granted rehearing in Izell v. Union Carbide, the case in which the court had issued a published 2-1 decision upholding an $18 million punitive damages award.  On Friday afternoon the court re-issued its opinion, without making any changes to the punitive damages analysis.

The court modified its causation analysis and depublished the part of the opinion addressing allocation of fault, but none of that had any impact on the punitive damages award.  The majority stuck to their view that the defendant has no right to a new trial on punitive damages, to allow a jury re-assess the appropriate amount of punitive damages in relation to the dramatically reduced award of compensatory damages.  And Justice Kitching re-issued her dissent on that issue.  So the case is still teed up for review by the Supreme Court of California on that point.

Related posts:

Court of Appeal grants rehearing in Izell v. Union Carbide

Court of Appeal affirms $18 million in punitive damages; reduction of compensatory damages from $30 million to $6 million does not require retrial of punitive damages (Izell v. Union Carbide)

November 20, 2014

Court of Appeal grants rehearing in Izell v. Union Carbide

Last month we blogged about this opinion, which affirmed an $18 million punitive damages award.  Earlier this week, the Court of Appeal granted rehearing in that case and ordered the case resubmitted.  (Click here to view the court's online docket.)   The resubmission restarts the court's 90-day clock for issuing an opinion.

Strangely enough, the Court of Appeal denied the defendant's petition for rehearing, and then simultaneously granted rehearing on "[o]n the court's own motion."  Does that mean that the court granted rehearing to address an issue that was not raised in the defendant's rehearing petition?  That would be surprising, given the comprehensive nature of the defendant's 30-page petition. Stay tuned for further developments.

November 18, 2014

California federal jury awards $185 million in punitive damages in pregnancy discrimination case (Juarez v. AutoZone)

ABC10 News in San Diego is reporting that a federal court jury has awarded a staggering $185 million in punitive damages in a pregnancy and gender discrimination case against AutoZone.  The compensatory damages award was $900,000.

There's no chance that punitive damages award survives post-trial and appellate review.  It is more than three times higher than the largest punitive damages award ever affirmed in California.

The ABC10 story reports that the punitive damages award is $25 million more than the plaintiff's attorneys requested.  That means they asked for $160 million in punitive damages in a case with a $900,000 compensatory damages award.  They would have been better off asking for a more modest amount, which might have stood a chance of surviving judicial review.   

October 30, 2014

Court of Appeal affirms $3 million punitive damages under federal maritime law (Colombo v. BRP US Inc.)

This published California Court of Appeal opinion is a rarity.  It's a state appellate decision analyzing punitive damages awarded under federal maritime law.

Federal maritime law differs dramatically from California law on the issue of punitive damages.  For instance, the burden of proof is much lower in maritime cases; California law requires proof by clear and convincing evidence, but maritime law requires only proof by a preponderance of the evidence. California law requires proof that the defendant acted with malice, oppression, or fraud, whereas maritime law permits punitive damages based on showing of recklessness or gross negligence.  And the Supreme Court in Exxon Shipping set forth an excessive analysis for maritime cases that differs from the due process standards that apply to punitive damages awards arising under state law.

For all of these reasons, this opinion isn't likely to have much impact on punitive damages cases involving California law.  Nevertheless, the opinion is an interesting read.

The plaintiffs in this case suffered serious injuries when they fell off the back of a personal watercraft and the jet thrust from the watercraft ripped their flesh.  (The injuries were pretty gruesome; skip that part of the opinion if you are squeamish).

The defendant manufacturer had placed a warning on the watercraft, specifically addressing the risk that injured the plaintiffs.  The warning advised users of the watercraft to wear a wetsuit bottom or other protective clothing.  But the plaintiffs alleged that the defendant acted with callous disregard for safety by placing the warning in a place where only the driver of the vehicle could see it.  Plaintiffs claimed that a second warning should have been placed on the back of the vehicle.  They presented evidence that another watercraft manufacturer placed multiple warnings in different places on its vehicles.

The defendant's safety manager testified that the defendant deliberately chose not to use multiple warnings to avoid the "dilution effect" that occurs when a product bears too many warnings, including multiple warnings about the same hazard.  (See, e.g., Broussard v. Continental Oil (La.App. 1983) 433 So.2d 354, 358 [placing too many warnings on a product would "decrease the effectiveness of all the warnings"]; see also Restatement (Third) of the Law of Torts: Product Liability, Section 2, comment i ["excessive detail may detract from the ability of typical users to focus on the important aspects of the warnings"].)

Although the defendant sought to present this issue as a balancing of competing safety interests, the Court of Appeal (Fourth Appellate District, Division One) said a jury could reasonably conclude under the preponderance of the evidence standard that the defendant's conduct was reckless.

The opinion also held that the amount of the punitive damages ($1.5 million to each plaintiff) was not excessive.  The ratio of punitive damages to compensatory damages was 1-to-1 for one plaintiff and 3.78-to-1 for the other.  The defendant argued that, under Exxon Shipping, the maximum ratio under federal maritime law is 1-to-1. The court disagreed, holding that the 1-to-1 limit adopted by the majority in Exxon Shipping only applies to cases where the defendant's conduct is low on the scale of blameworthiness.  The court concluded that the defendant's conduct in this case (failing to add a duplicate warning in a different place on the product)  was "on the higher end of the scale of blameworthiness" and therefore could support the ratios awarded by the jury.

October 29, 2014

Court of Appeal vacates $500,000 punitive damages award because plaintiff failed to serve statement of damages (Chen v. Institute of Medical Education)

We have reported before on cases in which a court reversed a default-judgment punitive damages award because the plaintiff failed to serve the defendant with a statement of damages.

The plaintiffs in this case tried to avoid that fate by arguing that the record contained no evidence to support a finding that they did not serve a statement of damages.  According to the plaintiffs, the defendant could not prove that point simply by pointing out that no such statement appeared in the record.

It's a somewhat clever argument, because a statement of damages wouldn't necessarily appear in the trial court record.  It could be served but not filed with the court.  Thus, the absence of a statement of damages in the record doesn't necessarily mean that statement of damages was filed. 

But the Sixth Appellate District didn't buy it.  In this unpublished opinion, the court observed that the  plaintiffs had never actually claimed, in the trial court or on appeal, that they did serve a statement of damages.  Accordingly, the court was comfortable presuming that the plaintiffs never served a statement of damages, despite the void in the record on that point.  As a result, the court vacated the punitive damages portion of the default judgment ($500,000).

Yuba County judge vacates $15.7 million punitive damages award against mortgage loan servicing company

The Sacramento Bee reports that Judge Stephen Berrier of the Yuba County Superior Court has vacated nearly all of a jury's $16.2 million damages award against a New Jersey company that provides mortgage loan servicing.

The article reports that the plaintiff bought a home and was unable to afford his monthly mortgage, so he obtained a loan modification from the defendant (PHH Mortgage Services).  He thought the modification would reduce his monthly payments from $2,100 to $1,543 but, for reasons not explained in the story, things didn't work out that way and the plaintiff ended up over $7000 in arrears.

PHH initiated foreclosure proceedings and the plaintiff sued PHH to fend off foreclosure.  It worked.  PHH halted foreclosure and a jury awarded the plaintiff $16.2 million in damages, including $15.7 million in punitive damages.

Judge Berrier, however, ruled that plaintiff was entitled to only $159,000.  Presumably that ruling was in response to posttrial motions filed by PHH, but the article doesn't say.  And the article doesn't say whether the $159,000 represents compensatory damages or punitive damages.  It does mention, however, that Judge Berrier found that PHH did not act with malice or reckless disregard.  That suggests he tossed out the entirety of the punitive damages award.

Thanks to Evan Tager of Guideposts for calling the story to our attention.

October 28, 2014

Judge cuts Actos punitive damages award from $9 billion to $36.8 million

The absurd $9 billion dollar punitive damages award that made headlines earlier this year is no more.  The National Law Journal reports that U.S. District Judge Rebecca Doherty of the Western District of Louisiana has reduced the award to $36.8 million.

According to the story, Judge Doherty concluded that the 6000 to 1 ratio between the punitive damages and compensatory damages was unconstitutionally excessive.  No surprise there.  She reduced the award to $27.6 million against one defendant (Takeda Pharmaceuticals) and $9.2 million against the other (Eli Lilly & Co.).  She also reduced the total compensatory damages to $1.27 million.

Even as reduced, the punitive damages are roughly 29-to-1, which is awfully hard to square with State Farm v. Campbell and its admonition that substantial compensatory damages of $1 million or more call for a low ratio.  Eli Lilly says it plans to appeal.

October 27, 2014

Sacramento federal judge tacks on another $13.1 million in punitive damages against railroad, bringing total to $30.5 million (Sierra Railroad v. Patriot Rail)

Earlier this year we reported on a jury verdict in federal court in Sacramento that awarded $22.2 million in compensatory damages and $17.4 million in punitive damages.  That verdict was apparently based on allegations that the defendant railroad breached a nondisclosure agreement and improperly poached the plaintiff railroad's clients. 

Now the Sacramento Bee is reporting that the judge in the case, U.S. District Judge Troy L. Nunley, has awarded another $13.1 million in exemplary damages for the defendant's violations of California trade secrets law.  That claim was apparently tried to the court after the conclusion of the jury trial. According to the story, Judge Nunley believed the award was appropriate because California courts have held that "an exemplary damage award of 17.5 percent of an offending company's value is sufficient to punish extremely reprehensible conduct."

I haven't yet been able to read Judge Nunley's opinion, but presumably he pulled the 17.5 percent number from a 1984 case called Devlin v. Kearny Mesa AMC/Jeep/Renault, Inc.  In that case, the court affirmed an $80,000 punitive damages award that happened to be 17.5% of the defendant's net worth.  But the court certainly did not announce a rule that punitive damages should be 17.5 percent of the defendant's net worth when the defendant's conduct was highly reprehensible.  And in the years since Devlin, other California courts have held that punitive damages are presumed to be excessive when they exceed 10 percent of the defendant's net worth.  (See, e.g., Grassilli v. Barr.)  In any event, it's hard to imagine how the purely economic harm in this business dispute could be characterized as highly reprehensible.The defendant plans to appeal, and based on the information in this article there appears to be a decent chance the Ninth Circuit will conclude Judge Nunley's decision went off the rails.