December 17, 2014

Second Circuit uses supervisory authority to hold $5 million punitive damages award excessive (Turley v. ISG Lackawanna)

The Second Circuit issued an interesting opinion today that illustrates how a federal appellate court can apply two independent standards when reviewing a punitive damages award for excessiveness.

In this employment discrimination case, a federal jury in New York awarded a total of $1.32 million in compensatory damages and $24 million in punitive damages, broken down between individual and corporate defendants.  The district court concluded that the punitive damages were excessive, and granted a new trial conditioned on the plaintiff's acceptance of a reduction of the punitive damages award to a total of $5 million.  The plaintiff accepted the reduction and the defendant appealed.

On appeal, the Second Circuit affirmed the judgment in all respects except for the amount of punitive damages.  The court began its discussion of that issue by noting that it was required to review the excessiveness of punitive damages pursuant to the federal appellate courts' supervisory authority over the trial courts.  Such authority requires that reviewing courts "exercise relatively stringent control over the size of punitive damages," separate and apart from any obligation to review the award under constitutional due process standards.

The court then went on to explain that federal courts should exercise their common law supervisory authority first, before considering constitutional standards.  Following that approach, the court concluded that the $5 million punitive damages award in this case was still excessive.  The court explained that the award is disproportionate both to the $1.32 million compensatory damages award and to the amount of punitive damages awarded in other comparable cases.  Ultimately, the court determined that any amount in excess of a 2:1 ratio would be excessive.

Having settled on a 2:1 ratio as the maximum permissible under common standards, the court considered whether due process concerns might require an even further reduction.  The court concluded that, in light of the extremely egregious nature of the defendants' conduct, a 2:1 ratio would pass muster under the Constitution.  The court expressly declined to decide whether constitutional principles might permit a higher ratio than 2:1 on the facts of this case. 

This case stands in contrast to the Ninth Circuit's recent decision in the Arizona v. ASARCO case, in which the en banc court reviewed the punitive damages award only under federal due process standards, without even mentioning its separate obligation to review the amount of the award under federal common law.

"Judicial Hellholes" report ranks California at number two, citing recent punitive damages decision

The American Tort Reform Foundation's released its annual "Judicial Hellholes" report yesterday.  As usual, ATRF does not have kind things to say about the administration of civil justice in California. 

The report names California as the second worst jurisdiction in the nation in terms of fairness to defendants in civil litigation (behind the New York City asbestos docket).  The report offers a variety of reasons for that assessment, most of which are beyond the scope of this blog (e.g., that our courts have made it too easy for plaintiffs to "rifle the deep pockets of corporate defendants" in public nuisance actions, asbestos lawsuits, disability-access lawsuits, etc.) 

The report intersects with the focus of this blog when discussing Izell v. Union Carbide, in which the Court of Appeal recently affirmed an $18 million punitive damages award in a published decision.  The report highlights the dissenting opinion of Justice Kitching which, as we have noted, could attract the attention of the California Supreme Court as well.  (The discussion of Izell appears on page 14 of the report.)

December 11, 2014

En banc Ninth Circuit: due process limits on punitive damages have "limited applicability" in Title VII cases (Arizona v. Asarco)

Yesterday, the Ninth Circuit issued its en banc opinion in Arizona v. Asarco.  As our readers may recall, that's the sexual harassment case in which a jury awarded the plaintiff no compensatory damages, $1 in nominal damages, and nearly $900,000 in punitive damages.

The district court reduced the punitive damages to $300,000 under Title VII's statutory cap on punitive and non-economic damages.  A three-judge panel of the Ninth Circuit then ruled, in a 2-1 decision, that the punitive damages were still excessive and should be further reduced to $125,000.

Both parties sought en banc review.  The plaintiffs argued that they are entitled to the full $300,000 permitted by the cap, because an award within the cap cannot be unconstitutional.  The defendant argued that the 125,000 ratio permitted by the three-judge panel was still excessive.  Both parties got what they wanted---the court agreed to rehear the case en banc.  But the result isn't quite what the defendant envisioned.  It's a unanimous 11-0 win for the plaintiffs.

The en banc opinion starts by discussing the due process test for evaluating the excessiveness of a punitive damages award, as laid out in BMW v. Gore and State Farm v. Campbell.  The opinion then states that the due process standards are "of some relevance"in Title VII cases.  In other words, it is theoretically possible that punitive damages awarded under a carefully crafted statutory scheme could nonetheless violate due process.

But the opinion goes on to say that, when punitive damages are awarded under a "robust" statutory scheme, a "rigid application of the Gore guideposts is less necessary or appropriate." Following that logic, the court concludes that a punitive damages award under Title VII can never really violate due process, because the statute clearly states the state of mind necessary for imposition of punitive damages, and provides fair notice of the possible amount of the punitive damages (i.e., up to $300,000).

While it's clear that the en banc court has no problem with 300,000 to 1 ratios in Title VII cases, it's not at all clear how the court's analysis would translate to other statutory schemes.  How is a district court supposed to determine which statutes are sufficiently robust and carefully crafted, such that a vigorous due process analysis becomes unnecessary?  And when a statute qualifies as robust and carefully crafted, how exactly does a district court perform the relaxed and non-rigid version of the BMW and Campbell analysis that this opinion seems to require?

Given the murkiness of the court's analysis, it is a bit surprising to see that this was a unanimous opinion.  The Ninth Circuit is known as a court whose members have a wide diversity of viewpoints and aren't afraid to share them.  And this 11-member panel includes some judges whom we'd ordinarily expect to have some discomfort with an opinion holding that lower courts can, under circumstances that are not clearly defined, choose to disregard a due process analysis mandated by the U.S. Supreme Court.

So long as the analysis of this opinion is limited to Title VII cases, it's impact will be limited.  Because the $300,000 cap is a modest one, the Ninth Circuit wouldn't be striking down many punitive damages awards as excessive under the BMW standards anyway, even if the court had not excepted Title VII cases from the usual BMW analysis.  But this opinion could end up being quite significant if its analysis spreads to other areas, or if the Title VII cap ever gets raised.

As a side note, nowhere in this opinion does the court ever suggest that it might have a common-law duty to analyze the punitive damages award for excessiveness, apart from whatever the constitution requires.  As our friends over at Guideposts have pointed out, other circuits have held that in cases involving claims under federal law, federal courts have supervisory authority to ensure that those awards are not excessive, and should scrutinize them more closely under that common law authority than they would under the Due Process Clause.  Most likely, the parties did not make that argument here.

 Related posts:

New punitive damages blog analyzes case pending before en banc Ninth Circuit (Arizona v. ASARCO)

Ninth Circuit reduces $300,000 punitive damages award to $125,000 in Title VII harassment case (Arizona v. ASARCO)

Ninth Circuit grants en banc rehearing to decide excessiveness of punitive damages in Title VII case (Arizona v. ASARCO)

9th Circuit hears oral arguments in punitive damages case where jury awarded no compensatory damages

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).