January 4, 2019

Court of Appeal reduces punitive damages award from $1 million to $11,800 (Rinehart v. Bank Card Consultants)

This unpublished opinion holds that a $1 million punitive damages award is excessive in light of the defendant's financial condition.

A jury found the defendant liable for wrongful termination and awarded $500,000 in compensatory damages and $1 million in punitive damages.  The defendant appealed, arguing that the punitive damages award was excessive because it was disproportionate to the defendant's ability to pay.

The Court of Appeal (Fourth District, Division Three) agreed.  The only evidence of the defendant's financial condition showed an annual net income of $180,000 and a net worth of $86,000.  The Court of Appeal said the punitive damages award was "clearly excessive" because it represented five times the defendant's annual net income and more then 10 times its net worth. The court explained that an award of one month of net income, or 10 percent of net worth, "would approximate the maximum award that would pass muster."  Ten percent of net worth would be $8,600, and one month of net income would be $15,000, so the court averaged those two amounts and concluded that the maximum permissible award would be $11,800.

The Court of Appeal should have ended the proceedings by ordering the trial court to reduce the punitive damages to the maximum amount.  (See Simon v. San Paolo U.S. Holding Co.)  As some courts put it, the plaintiff should not get a "second bite at the apple" after having failed to present sufficient financial condition evidence to support the punitive damages award the first time around.  (See Kelly v. Haag.)  Here, however, the Court of Appeal did exactly that.  It let the plaintiff choose between a new trial or a reduction of the punitive damages to $11,800.

November 28, 2018

Published opinion exacerbates split over application of clear-and-convincing evidence standard on appeal (Morgan v. Davidson)

This published opinion may cause the California Supreme Court to finally settle a long-simmering split of authority.

The issue in question is whether appellate courts should consider the clear-and-convincing evidence standard of proof when reviewing the sufficiency of the evidence to support a punitive damages award.

By statute, California plaintiffs must prove all the prerequisites for a punitive damages award by clear and convincing evidence.  When a defendant challenges a punitive damages award on appeal, arguing that the plaintiff failed to meet the burden of proof, appellate courts often take the heightened standard of proof into account, and ask whether a reasonable factfinder could have found that plaintiff's evidence amounted to clear and convincing proof of malice, oppression, or fraud. (See, e.g. Shade Foods v. Innovative Products ["since the jury’s findings were subject to a heightened burden of proof, we must review the record in support of these findings in light of that burden . . . . we must inquire whether the record contains substantial evidence to support a determination by clear and convincing evidence' "]; Pfeifer v. John Crane ["we review the evidence in the light most favorable to the Pfeifers, give them the benefit of every reasonable inference, and resolve all conflicts in their favor, with due attention to the heightened standard of proof"].)

Some courts have concluded, however, that the clear-and-convincing standard applies only in the trial court and "disappears" in the Court of Appeal.  As we have observed, that view is supported by some older opinions and continues to pop up in unpublished decisions.

Earlier this year, Division Four of the First Appellate District attempted to put and end to the notion that the clear-and-convincing evidence standard disappears on appeal.  T.J. v. Superior Court explained why it is important for appellate courts to take the heightened standard of proof into account:

If the clear and convincing evidence standard "disappears" on appellate review, that means the distinction between the preponderance standard and the clear and convincing standard imposed by statute is utterly lost on appeal, an outcome we believe undermines the legislative intent as well as the integrity of the review process. . . . If that standard is ignored on appeal, the heightened standard of proof . . . loses much of its force, or at least the ability of the appellate court to correct error is unacceptably weakened.
We hoped that would put an end to the debate, but yesterday Division Two of the Fourth Appellate District reached the opposite conclusion and embraced the older cases holding that the higher standard of proof disappears.  The court did not cite the T.J. v. Superior Court opinion, but did acknowledge some of the other recent decisions that applied the clear-and-convincing standard on appeal.  The court rejected these cases as inconsistent with Supreme Court precedent, citing Crail v. Blakely, a 1973 decision in which the Supreme Court indicated outside the punitive damages context that the clear and convincing standard was adopted only "for the edification and guidance of the trial court." 

The court failed to recognize, however, that the Supreme Court has held otherwise, more recently, in the punitive damages context.  The Supreme Court's decision in In re Angelia P. adopted the view that the clear and convincing evidence standard is incorporated into the substantial evidence standard on appeal.  And the Supreme Court has continued to follow that approach in more recent decisions in other contexts.  (See Conservatorship of Wendland (2001) ["The 'clear and convincing evidence' test requires a finding of high probability . . . we ask whether the evidence [on the issue before the court] has that degree of clarity"]; Estate of Ford (2004) [finding that certain testimony "was not clear and convincing evidence" on the issue of equitable adoption].)

We can only hope that the Supreme Court will grant review to sort this out.  The Supreme Court actually attempted to do that a decade ago.  In an unpublished decision, Harvey v. Sybase, the Court of Appeal took the same position as the Court of Appeal here (i.e., that the clear-and-convincing standard disappears on appeal), and the Supreme Court granted review to address that issue.  But the parties settled that case and the issue became moot.  Perhaps the defendant in this case will seek review, providing the Supreme Court with another opportunity to take up the issue.

Los Angeles jury awards $34 million in punitive damages against owner of mobile home park

Law 360 (subscription required) reports on a jury verdict awarding $34 million in punitive damages, on top of $5.56 million in compensatory damages, to the residents of a Long Beach mobile home park.  The plaintiffs alleging that the park was built on top of a former landfill, and that the shifting ground released noxious odors and damaged their homes.

November 21, 2018

Divided Ninth Circuit affirms punitive damages award in unpublished decision (Fair Housing Center of Washington v. Breier-Scheetz Properties)

This unpublished memorandum disposition from the Ninth Circuit affirms a punitive damages award in a housing discrimination case. 

The defendant landlord limited occupancy in certain studio apartments to one person per studio.  The Fair Housing Center of Washington argued that this policy unfairly discriminated against families, in violation of federal, state, and local housing laws. The district court ruled agreed and imposed punitive damages on the landlord, who appealed.

The Ninth Circuit affirmed in an opinion with very little analysis, as is typical of unpublished memorandum dispositions.  The discussion is so cursory, it does not even reveal the amount of punitive damages at issue.  (Press reports indicate the award was $100,000.)

Although the majority seemed to think the case was a slam-dunk, Judge Bea dissented from the decision to affirm the punitive damages.  He explained that the plaintiff presented no evidence that the defendant acted with an "evil motive" as required for punitive damages under the Fair Housing Act:

[The defendant] was simply unwilling to change a longstanding and reasonable business policy—which [the defendant] maintained was legal—until ordered to do so by a court. It cannot be the case that in order to avoid being subjected to punitive damages, a business must immediately change its policies whenever it is accused of misconduct by an advocacy group or an administrative agency, rather than insist that the group or agency prove liability in a court of law. A defendant similarly cannot be subjected to punitive damages for failing prophetically to cease conduct that is only subsequently enjoined by a court order. . . . . None of the district court’s findings in this case come close to evincing the “reckless or callous indifference” required to award punitive damages under the FHA.
This is an issue that comes up fairly often in California punitive damages litigation.  Plaintiffs' counsel will sometimes argue that a defendant's failure to admit liability is itself a reason for punishment.  California courts have recognized, however, that a defendant cannot be punished merely for defending itself.  In light of Judge Bea's dissent on this point, it's a bit surprising that the judges in the majority did not bother to offer any response to his arguments.

"Circuit Split Encourages Forum Shopping by Injured Seamen"

Law 360 has this Expert Analysis-Opinion piece by Troy McMahan, Joe Akrotirianakis, and Andrew Stakelum at King & Spalding, about the split between the Fifth Circuit and the Ninth Circuit about whether merchant seamen can recover punitive damages for the common law claim of unseaworthiness.

We reported on the split when the Ninth Circuit issued its opinion in Batterton v. Dutra Group.

The defendant's cert. petition in Batterton is pending before the U.S. Supreme Court and is on the list for the Court's November 30 conference, according to the online docket.

October 29, 2018

"Dallas judge preserves bulk of $242M verdict against Toyota"

The Dallas Business Journal reports on a ruling denying Toyota's motions for judgment notwithstanding the verdict in a case in which a Texas jury awarded $29 million in compensatory damages and $213 million in punitive damages. 

October 24, 2018

Trial judge in Roundup case decides not to follow her tentative opinion, and reduces punitive damages award instead of vacating it

We previously reported that Judge Suzanne Bolanos, who is presiding over the Roundup trial that led to a $250 million punitive damages award, issued a tentative opinion indicating that she intended to vacate that award and order a new trial.  She decided not to vacate the award after all, but instead to reduce it from $250 million to $39.2 million, according to the San Francisco Chronicle. The reduced amount is equal to the jury's award of compensatory damages. The plaintiff can either accept that reduction or reject it in favor of a new trial.

October 12, 2018

Trial judge likely to vacate $250 million punitive damages award against Monsanto in Roundup case

A few months ago we reported on the huge verdict against Monsanto in San Francisco, and we questioned whether the facts of this case could support an award of punitive damages.  It appears the trial judge has doubts as well.  Reuters reports that Judge Suzanne Bolanos has indicated she is likely to toss the verdict and grant a new trial. 

September 10, 2018

Court of Appeal affirms trial court's decision not to award punitive damages in bench trial (Williams v. Pep Boys)

The First Appellate District, Division Four, certified this opinion for partial publication, but the punitive damages discussion is unpublished.  That discussion is an interesting read anyway, especially for anyone involved in asbestos litigation.

J.D. Williams died of mesothelioma.  His children brought this lawsuit claiming their father's disease was caused by exposure to asbestos in a number of ways, including through his occasional use of asbestos-containing replacement brakes he purchased from The Pep Boys.  After a bench trial, the trial court found the Pep Boys liable and awarded compensatory damages, but rejected the plaintiffs' claim for punitive damages.  The plaintiffs appealed, challenging that ruling (and a few other rulings not relevant for our purposes).

On appeal, the plaintiffs cited other recent opinions that have affirmed punitive damages awards in asbestos cases, and argued that they had presented a "classic case" for punitive damages.  I.e., they offered evidence that the defendant sold asbestos-containing products, and that there was scientific information available at the time showing that asbestos could cause disease.  The Court of Appeal found those cases distinguishable for two primary reasons: (1) the plaintiffs failed to show that Pep Boys was actually aware of any dangers posed by its products at the time of Mr. Williams' alleged exposures, and (2) the trial court could reasonably conclude the defendant did not act with malice "because of the how the state of scientific knowledge regarding the risks of asbestos exposure evolved over time."

That second point is particularly interesting.  In the early days of California asbestos litigation, punitive damages claims were rare, because it was understood that scientific and medical information about asbestos-related diseases had evolved considerably between the time of exposures and the time of trial. But hindsight bias powerfully suggests that something that has in fact come to pass was foreseeable all along. For that reason, it has become all too easy in recent years for judges and jurors, especially those who are too young to remember a time when asbestos did not have the stigma it has today, to conclude that any company that used asbestos, at any time, had necessarily ignored a known health risk.  This opinion shows there's still at least a little resistance to that way of thinking in some corners of the California judicial system.