March 12, 2020

Court of Appeal reduces $13.8 million punitive damages award to $5.7 million in discrimination case (Moland v. McWane)

In this employment case involving claims of racial discrimination and wrongful termination, a jury awarded $13.8 million in punitive damages and $2.87 million in compensatory damages, a ratio of 4.8 to 1.  On appeal, the defendant argued that the punitive damages should be vacated entirely or at least reduced as excessive.

The California Court of Appeal (Second District, Division Seven) held in an unpublished opinion that an award of punitive damages was justified because the evidence, viewed in the light most favorable to the plaintiff, could support an inference that the defendant acted with extreme indifference to the plaintiff's right to be free of racial discrimination in the workplace.

Turning to the question of excessiveness, the court analyzed the three BMW/State Farm guideposts: (1) the reprehensibility of the conduct, (2) the ratio of punitive to compensatory damages, and (3) the difference between the punitive damages award and civil penalties authorized by the Legislature for similar misconduct.

1.  The court found several indicators of a higher level of reprehensibility: the defendant's acts affected the plaintiff's emotional and mental health (i.e., did not inflict purely economic harm), the defendant should have known the plaintiff would suffer emotional harm, and the plaintiff was financially vulnerable.  But the court rejected the plaintiff's argument that the level of reprehensibility was enhanced by the fact that the defendant made multiple decisions that harmed the plaintiff.  The court explained that discrimination against the plaintiff was a single instance of wrongdoing, and in the absence of further instances against the plaintiff or others, the defendant could not be treated as a repeat offender.

2.  When analyzing the ratio of punitive damages to compensatory damages, the court rejected the defendant's argument that a 1 to 1 ratio should be the constitutional maximum in light of the substantial noneconomic damages (about $2.5 million of the total compensatory damages award).  The court held that the ratio can exceed 1 to 1 when the noneconomic damages and the reprehensibility of the defendant's conduct are both high.  Relying heavily on a Second Circuit decision, the court concluded that a limit of 2 to 1 is the constitutional maximum in a case of this nature.

3.  Finally, the court compared the punitive damages award to a now-repealed $150,000 cap on administrative fines for claims before the California Fair Employment and Housing Commission.  The court found that the cap weighed in favor of an award less that the jury's verdict, but did not mandate an award below a 2 to 1 ratio.

Accordingly, the court ordered the trial court to modify the judgment to reduce the punitive damages award to $5.8 million, roughly double the amount of compensatory damages.  Appropriately, the court did not give the plaintiff the option of rejecting the lower amount in favor of a new trial.

Ninth Circuit affirms $2.5 million punitive damages award in insurance bad faith case (McClure v. Country Life)

The unpublished opinion affirms $2.5 million in punitive damages and $1.29 million in compensatory damages in an insurance bad faith case.  The analysis is sparse, as usual for a memorandum disposition.  The court affirms the punitive damages because the plaintiff presented sufficient evidence that the defendant acted with an "evil mind" under Arizona punitive damages law.  Apparently the defendant did not argue that the punitive damages were excessive.

March 2, 2020

Ninth Circuit reduces punitive damages from $52 million to $32 million (Ramirez v. TransUnion LLC)

In this published opinion, the Ninth Circuit reduced a punitive damages award from roughly $52 million to roughly $32 million.  Even that reduced figure represents one of the largest sums of punitive damages that has ever survived a Ninth Circuit appeal. 

In this class action against credit reporting agency TransUnion, the plaintiffs alleged that TransUnion incorrectly placed terrorist alerts on the front page of their credit reports and send confusing and incomplete information about the alerts and how to remove them.  A jury awarded punitive damages in the amount of $6,353.08 per class member, for a total of $52 million.  That resulted in a 6.45 to 1 ratio of punitive to compensatory damages.

The Ninth Circuit rejected most of TransUnion's arguments on appeal but concluded that the award of punitive damages is constitutionally excessive, primarily because the defendant's conduct, although "egregious," did not involve health or safety and was not the result of intentional malice, trickery, or deceit.  The court determined that the 4 to 1 is the maximum ratio permitted by due process on the facts of this case.  Accordingly, the court directed the district court to modify the judgment to reduce each class member's award of punitive damages to $3,936.88.  Judge Murguia wrote the opinion, joined by Judge Fletcher.  Judge McKeown dissented.

"Recent cases highlight strategies to defeat punitive damages even when compensatory liability may be difficult to avoid"

The JD Supra Blog features this post by attorneys at Butler Snow offering advice based on recent jury verdicts in punitive damages cases: "Recent cases highlight strategies to defeat punitive damages even when compensatory liability may be difficult to avoid."

February 24, 2020

Court of Appeal reverses $2 million punitive damages award due to lack of financial condition evidence (Chen v. Bam Brokerage)

In this unpublished opinion, the California Court of Appeal (Second District, Division Seven) once again reversed a punitive damages award because the plaintiff failed to present evidence of the defendant's financial condition.

The plaintiff presented evidence that the defendant owned four pieces of real property, but presented no evidence of the defendant's liabilities, including the encumbrances on those properties.  That was insufficient to support a punitive damages award, under the well-established rule that "evidence of liabilities should accompany evidence of assets."  Accordingly, the court directed the trial court to enter judgment for the defendant on the issue of punitive damages.

Bayer plans to challenge $250 million punitive damages award over Dicamba weedkiller

Earlier this month a jury in federal court in Missouri awarded $15 million in compensatory damages and $250 million in punitive damages to a peach farm that alleged its orchards were damaged by Bayer's weedkiller Dicamba. 

Dicamba was made by Monsanto, which Bayer acquired in 2018.  This litigation is unrelated to litigation involving the weedkiller Roundup, also made by Monsanto. 

Bayer plans to challenge this verdict on appeal, per Reuters.

January 21, 2020

$8 billion punitive damages award against J&J reduced to $6.8 million in Risperdal case

FiercePharma reports that a Philadelphia trial court has reduced the $8 billion punitive damages award against Johnson & Johnson to $6.8 million.  The case involves J&J's alleged failure to warn about the potential side effects of the anti-psychotic drug Risperdal.

According to the story, the court found that the punitive damages award was grossly disproportionate to the compensatory damages award of $680,000.  Johnson & Johnson says it still plans to appeal the award as reduced.  No doubt the plaintiffs will also appeal from the reduction of the award.

December 26, 2019

Court of Appeal vacates punitive damages in default judgment due to lack of evidence of defendant's finances (Dong v. Ryu)

This case is a reminder that California law requires plaintiffs to present evidence of the defendant's financial condition as a prerequisite to obtaining punitive damages, even in default judgments.

In this case, the plaintiffs argued on appeal that their default judgment should be affirmed, including $57,000 in punitive damages, even though they presented no evidence of the defendant's finances.  They argued that the defendant's failure to respond to their complaint deprived them of the opportunity to obtain information about the defendant's finances. 

The Court of Appeal (Second District, Division Two) rejected that argument in an unpublished opinion.  The court noted that plaintiffs failed to show that they even tried to meet their burden: "our review of the record reveals no showing of what efforts, if any, were undertaken by plaintiffs to obtain information regarding defendant’s financial condition."  The Court of Appeal reversed the punitive damages portion of the judgment and directed the trial court to enter judgment for the defendant on that issue.

December 23, 2019

Anti-whistleblower retaliation act for school employees does not authorize punitive damages against school districts (Visalia Unified School District v. Superior Court)

This published opinion addresses an issue of first impression: whether the Reporting by School Employees of Improper Activities Act (the Act) authorizes recovery of punitive damages against school districts.

The plaintiff, a former employee of the Visalia Unified School District, sued the District for retaliation in violation of the Act, seeking compensatory and punitive damages.  The Act authorizes recovery of punitive damages against a "person" who intentionally and maliciously engages in an act of retaliation.  For purposes of the Act, a "person" includes any state or local government.

The District moved to strike the punitive damages claim under Government Code section 818, which prohibits punitive damages against public entities.  The superior court denied the motion, finding that the Act impliedly supersedes section 818 because the Legislature adopted the Act in 2000, long after it adopted section 818 (in 1983). 

The Fifth Appellate District granted the District's petition for writ relief and reversed the trial court's ruling.  The Court of Appeal concluded that the trial court had overlooked key language in section 818, which bars punitive damages against public entities "notwithstanding any other provision of law."  The Court of Appeal also held that section 818 is a fundamental part of California public entity law, supported by strong public policy.  The court concluded that, if the Legislature had intended to overturn such an important rule, it would have done so expressly.

Labor Code whistleblower provision authorizes punitive damages (Mathews v. Happy Valley Conference Center)

This published opinion from the Sixth Appellate District holds that Labor Code section 1102.5, which prohibits retaliation against whistleblowers, impliedly authorizes punitive damages as a remedy.

Disclosure: Horvitz & Levy represents the defendant in this action.  Litigation is ongoing, so we will not comment on the court's analysis.