September 20, 2016

Ninth Circuit reduces $1.16 million punitive damages award to $352,000 (Mitri v. Walgreen)

Law 360 reported yesterday on the Ninth Circuit's memorandum disposition in this wrongful termination case in which the plaintiff claimed he was fired for reporting potential Medicare fraud.  It's only five pages long, so there isn't much analysis.  In a nutshell, the jury awarded $88,000 in economic damages and $1.155 million in punitive damages, a ratio of 13 to 1.  The Ninth Circuit determined the punitive damages award was constitutionally excessive and reduced it to $352,000, a ratio of 4 to 1.

Interestingly, the Ninth Circuit noted that a lower ratio was appropriate in light of the "substantial" compensatory damages.  Contrast that approach to the California Court of Appeal's decision in Bullock v. Philip Morris, which held that a compensatory damages award of $850,000 (nearly ten times larger than the award in this case) was not substantial.  The Bullock court reached that conclusion by comparing the amount of the award to the defendant's wealth.  We are not aware of any other decisions following that approach, and the Ninth Circuit certainly didn't follow it here.

The Ninth Circuit also observed that the jury's punitive damages award was excessive in relation to the $10,000 fine that the California Labor Code authorizes for unlawful retaliation against whistleblowers.  California courts have gotten into the habit of saying that such comparisons are "not useful" (see Bullock again), even though the third guidepost of BMW v. Gore calls for courts to "accord substantial deference to legislative judgments concerning appropriate sanctions for the conduct at issue."

August 26, 2016

Jury awards $1.7 million in punitive damages against Long Beach hospital

The Long-Beach Press Telegram reported earlier this week on a $1.7 million punitive damages verdict against the Community Hospital of Long Beach and a co-defendant, Memorial Psychiatric Health Services.

According to the article, the case involved three former hospital employees who claimed they were subjected to harassment and discrimination by an openly gay male nurse who worked for the defendants.  The jury awarded one of the plaintiffs $1.5 million in punitive damages and $165,175 in compensatory damages (a 9-to-1 ratio), and awarded the other two each $100,000 in punitive damages and $1.4 million in compensatory damages (a .07 to 1 ratio).

According to the article, both defendants presented evidence that they could not afford to pay even the compensatory damages, much less a sizable punitive damages award.  That suggests the defendants will argue in post-trial motions that the award is excessive in relation to their financial condition.

August 23, 2016

Court of Appeal orders new trial in case that generated $55 million punitive damages award (Grow Land & Water v. McCarthy Family Farms)

The Hanford Sentinel reported over the weekend on a decision from the Fifth Appellate District in Fresno that reversed a judgment awarding $73.4 million in compensatory damages and $3 million in punitive damages.  A jury had originally awarded $55.2 million in punitive damages, one of the largest punitive damages awards in California in recent years.  But the trial court reduced that to $3 million.

The case arises from a failed development project.  The plaintiff, Grow Land & Water, alleged that it was in the process of acquiring land and water rights when the defendant interfered with his deal and acquired the rights for himself.

The unpublished opinion doesn't say much about the punitive damages.  The reversal was based entirely on problems with the compensatory damages, namely, that the plaintiff failed to prove some elements of its damages claims and the compensatory award was tainted by irrelevant and prejudicial evidence.  The Court of Appeal concluded that a new trial was therefore required on all the damages, including the punitives:

Punitive damages must bear a reasonable relationship to the actual damages.  Thus, the reversal of the compensatory damages requires that the punitive damages be redetermined as well.
While that may seem like an intuitive result, other divisions of the California Court of Appeal have issued opinions that dramatically reduced a compensatory damages award without ordering a new trial on punitive damages.  (See, for example, here and here.)  Under the reasoning of this case, those cases should have come out differently.  The defendants in those cases were entitled to have a jury decide in the first instance what amount of punitive damages would be reasonable in relation to the actual damages.  I'm still hoping the California Supreme Court will examine this issue, although it has passed up several opportunities to do so.

July 6, 2016

California Court of Appeal finds $5.5M in punitive damages unconstitutional, gives plaintiffs the option of a new trial or $900k (Vaughn v. Darwish)

In this lawsuit by six tenants against their landlord, a Los Angeles jury awarded punitive damages totaling roughly $5.5 million.  That award was ultimately deemed constitutionally excessive in this unpublished opinion, but the path to that result was a rocky one, and I have doubts about whether the Court of Appeal's disposition is procedurally correct.

The procedural weirdness began in the trial court, where the court issued a rolling series of rulings on the defendants' post-trial motions.

After the jury's verdict, the trial court entered judgment and the plaintiffs served notice of entry of that judgment on August 30, 2013.  The defendants then filed post-trial motions arguing, among other things, that the punitive damages were excessive.  The trial court's deadline for ruling on those motions was October 29 (60 days after the service of notice of entry of judgment).

On October 25 the trial court issued a minute order stating that the post-trial motions were denied, except that a new trial would be granted unless the plaintiffs consented to a remittitur of the total punitive damages to $900,000.  The minute order referenced a separate formal order dated October 25, but the trial court never signed or entered any other order on that date.

Three days later, on October 28, the trial court issued another order stating that its October 25 ruling was only tentative and not final.

On November 12, roughly two weeks after deadline, the trial court issued an "amended" order, again stating that the post-trial motions were denied, except that a new trial would be granted on punitive damages unless the plaintiffs accepted a remittitur of the amount to $900,000.

On November 20, the trial court issued yet another purported amendment to its ruling on the post-trial motions, changing the amount of the remittitur.

Both sides appealed.  The Second Appellate District, Division Two, determined that the trial court's order purporting to grant a conditional new trial was ineffective because the trial court failed to issue a signed statement of its reasons when it initially granted a conditional new trial, and because the trial court later vacated its initial ruling by deeming it to be "tentative."  The November 12 and November 20 rulings were ineffective because the deadline had already passed.

Having reversed the trial court's grant of a conditional new trial, the Court of Appeal then proceeded to grant a conditional new trial on its own, finding that the jury's punitive damages award was constitutionally excessive under Simon v. San Paolo U.S. Holding Co., and ordering a remittitur in exactly the same amount as in the trial court's original order.

That disposition is questionable, because the Supreme Court of California said in Simon that, when a court determines that a punitive damages award is constitutionally excessive, the appropriate remedy is to modify the judgment by reducing the award to the constitutional maximum.  Simon explains that courts should not give plaintiffs the option of choosing a new trial as an alternative to the reduction:

Giving a plaintiff the option of a new trial rather than accepting the constitutional maximum for this case would be of no value. If, on a new trial, the plaintiff was awarded punitive damages less than the constitutional maximum, he would have lost. If the plaintiff obtained more than the constitutional maximum, the award could not be sustained. Thus, a new trial provides only a ‘heads the defendant wins; tails the plaintiff loses' option.
The Court of Appeal here cited Simon but ordered precisely the sort of disposition that Simon cautions against. In so doing, the court cited a Court of Appeal opinion that pre-dates Simon.  This is probably just an oversight, which the court may correct before the opinion becomes final. 

$360 million punitive damages award reduced under Texas cap

Reuters is reporting that U.S. District Judge Ed Kinkeade of the Northern District of Texas has reduced a $360 million punitive damages award against Johnson & Johnson.  A jury had awarded that amount, on top of $140 million in compensatory damages, in a case involving allegedly defective hip implants.  Per the story, the judge has reduced the total award to $151 million, pursuant to a Texas statute limiting punitive damages. That total suggests the punitive damages were reduced to $11 million, but the story does not elaborate.

July 5, 2016

Punitive damages: coming soon to South Korea?

The New York Times is reporting on a movement in South Korea to permit punitive damages in civil cases, as a response to scandals involving product safety.  According to the article, a former president of the Seoul Bar Association rounded up a thousand signatures from lawyers on a letter stating that punitive damages are needed to balance a legal system that is geared too much towards protecting businesses.  The article does not mention whether the supporters have identified any data showing that products are safer in countries that permit punitive damages. 


June 9, 2016

California Supreme Court rules for plaintiff in dispute over ratio calculations in insurance bad faith cases (Nickerson v. Stonebridge)

The California Supreme Court issued its opinion this morning in Nickerson v. Stonebridge.

Ordinarily, a California Supreme Court decision on punitive damages would be big news around here.  But in this case, not so much.  The scope of the decision is so narrow that it won't apply to many cases, and even when it does it will not make much difference. 

The issue involves "Brandt fees," a particular type of compensatory damages available only in insurance bad faith cases. Brandt v. Superior Court held that when an insurance company withholds policy benefits in bad faith, forcing the policyholder to bring a lawsuit to obtain those benefits, the policyholder can recover the attorney's fees he or she incurred to obtain the benefits that the insurer unreasonably withhold.  Those fees are treated as an element of the policyholder's compensatory damages.

Brandt fees can be awarded by a jury along with all the other available damages, or the parties can stipulate to allow the trial court to decide the issue of Brandt fees. 

In this case, the parties stipulated that the trial court would decide the Brandt fees after the jury's verdict.  The jury then awarded $35,000 in damages for emotional distress and $19 million in punitive damages.  The trial court tacked on $12,500 in Brandt fees.

As you might expect, the defendant challenged the punitive damages as excessive in violation of due process.  The trial court agreed with that argument and concluded that 10-to-1 was the maximum permissible ratio of punitive damages to compensatory damages under the facts of this case.  In applying that ratio, the court considered only the $35,000 in compensatory damages awarded by the jury, and not the additional $12,500 in compensatory damages that the court had awarded in Brandt fees.  Accordingly, the trial court stated that it would order a new trial unless the plaintiff agreed to a reduction of the punitive damages to $350,000.

The plaintiff rejected the reduction in punitive damages and appealed the order granting a new trial.  The Court of Appeal affirmed the trial court's ruling, rejecting the plaintiff's argument that the trial court should have taken the Brandt fees into account for ratio purposes.  The Court of Appeal observed that the jury did not know about the Brandt fees when it awarded punitive damages, and therefore the Brandt fees could not be considered in determining the propriety of the jury's award.

The Supreme Court disagreed.  Justice Kruger, writing for a unanimous court, explained that a court reviewing a punitive damages award for constitutional excessiveness is not tasked with regulating the jury's decisionmaking process.  Instead, the court must determine whether the result reached by the jury exceeds the bounds of due process:

Because the Gore guideposts are designed to govern postverdict judicial review of the amount of a jury‘s award, not the adequacy of the jury‘s deliberative process, there is no apparent reason why a court applying the second guidepost may not consider a postverdict compensatory damages award in its constitutional calculus.
The Supreme Court therefore sent the case back to the Court of Appeal, where the punitive damages award will presumably be increased to $475,000, which is ten times the combined emotional distress damages and Brandt fees.

A few notes and observations:

1.  The Supreme Court did not address whether the lower courts were correct in setting a 10-to-1 ratio.  The petitioner raised that issue when seeking review, but the Supreme Court expressly declined to tackle that question.

2.  Nothing in this opinion authorizes courts to consider other types of attorney's fees, besides Brandt fees, for ratio purposes.  The court was careful to explain that Brandt fees are in a special category because, unlike other attorney's fees, they are a form of compensatory damages.

3.  The Supreme Court pointed out an error by the trial court that the parties themselves did not identify: when the trial court concluded the jury's punitive damages awarded was excessive, it should not have allowed the plaintiff to choose between a new trial or a reduction in punitive damages. The trial court should have just reduced the award to the constitutional maximum without ordering a new trial.  A new trial would be pointless because the plaintiff could not possibly obtain anything higher than the constitutional maximum.  The Supreme Court made the same point in its earlier decision in Simon v. San Paolo, but courts continue to make this error, so it is nice to see the Supreme Court trying to fix that problem.

4.  The opinion highlights problems with the statement in Brandt that trial courts can perform a postjudgment assessment of punitive damages, if the parties so stipulate.  Under California's longstanding "one final judgment rule," a trial court should not enter judgment until all the issues in a case have been resolved.  That means there can be no judgment until after the compensatory damages are have been determined.  So how can a trial court award Brandt fees after judgment, when Brandt fees are an element of compensatory damages?  And how can jurors deciding punitive damages comply with the CACI instruction that tells them to make their award proportionate to the plaintiff's actual harm, if the jury does not yet know the extent of the plaintiff's actual harm because the Brandt fees have not yet been calculated?  The Supreme Court's opinion hints at some of these problems, but ultimately declines to address them because both parties had stipulated to the procedure adopted.

June 8, 2016

Nickerson opinion coming tomorrow

For all you insurance bad faith mavens, the California Supreme Court has announced that it will issue its opinion in Nickerson v. Stonebridge tomorrow at 10 a.m.   The opinion will be available here.

As a reminder, the opinion will decide the following issue:

Is an award of attorney fees under Brandt v. Superior Court (1985) 37 Cal.3d 813 properly included as compensatory damages for purposes of calculating the ratio between punitive and compensatory damages where the fees are awarded by the jury, but excluded from compensatory damages when they are awarded by the trial court after the jury has rendered its verdict?
 Related posts:

California Supreme Court will hear oral arguments in punitive damages case on April 7 (Nickerson v. Stonebridge Insurance)

California Supreme Court limits issues for review in Nickerson v. Stonebridge

California Supreme Court grants review in Nickerson v. Stonebridge

Court of Appeal orders reduction of $19M punitive damages award to $350,000 (Nickerson v. Stonebridge) - PART II

Court of Appeal orders reduction of $19M punitive damages award to $350,000 (Nickerson v. Stonebridge) - PART I

May 16, 2016

Supreme Court declines to address due process question arising from partial retrial on punitive damages

The Supreme Court has denied Philip Morris' petition for certiorari in the Schwarz case, in which an Oregon jury awarded $25 million in punitive damages after a previous award of $150 million was reversed on appeal.  The $25 million award was still 148 times larger than the compensatory damages awarded by the first jury.

PM's petition raised the following due process question that arises when a court allows punitive damages to be awarded by a separate jury that did not decide the liability issues in the case:

[W]hether it violates due process for a jury in a partial retrial to determine the amount of punitive damages, but not the threshold question of liability for punitive damages, where the first jury did not specify which of multiple possible tort theories was the basis for its finding that the defendant was liable for punitive damages.
This question touches on just one of the many problems that can arise when punitive damages and compensatory damages are awarded by separate juries.  Courts have disagreed about how juries should be instructed in these situations, and what evidence the second jury should be permitted to hear.  For now these questions will remain unanswered.

May 6, 2016

Johnson & Johnson hit with another big punitive damages award in Missouri over talc-based powder products

Many of our readers have probably already heard about this verdict, which came down a few days ago, but in case you missed it . . .

Reuters is reporting that a Missouri state jury has decided Johnson & Johnson should pay $5 million in compensatory damages and $55 million in punitive damages in a products liability lawsuit involving Baby Powder and Shower to Shower Powder.  The plaintiff's theory is that talc in these products caused her to develop ovarian cancer. 

If this all sounds familiar, that's because in February another jury in the same court awarded $72 million, including $62 million in punitive damages, in a case with nearly identical allegations.  Johnson & Johnson has announced its intention to appeal in both cases.