April 5, 2021

Court of Appeal orders new trial on punitive damages in conjunction with reallocation of fault (Putt v. Ford Motor Co.)

In this asbestos-injury case, a jury awarded approximately $8.5 million in compensatory damages and $25.5 million in punitive damages against Ford Motor Co. The trial court ruled the punitive damages were excessive and reduced the amount to $8.7 million.

Ford appealed and the Court of Appeal (Second District, Division Two) reversed in an unpublished opinion, finding that the jury’s allocation of fault could not be squared with the evidence. The jury allocated 100% of the fault to the one defendant remaining at trial (Ford), even though the evidence showed that the plaintiff used identical asbestos-containing products made by others. Accordingly, the Court of Appeal ordered a new trial on the allocation of fault.

The Court of Appeal then concluded it should also order a new trial on the amount of punitive damages. The court reasoned that the jury in the first trial based its award of punitive damages on the assumption that Ford was 100 percent responsible for the plaintiff’s injury, but if the jury had apportioned fault based on the plaintiff’s proportional exposure to Ford products as compared to other defendants’ products, the jury would have assigned only 8 percent fault to Ford, possibly less. The court concluded that the possibility of a much smaller allocation to Ford weighed in favor of retrying the amount of punitive damages: “the potential for a jury to find that Ford's violation is of a substantially smaller magnitude counsels in favor of letting the jury on retrial evaluate the opprobrium of Ford's conduct in light of Ford's proportionate fault for plaintiff's injury rather than simply using the constitutional maximum as a back-end safety valve.”

Disclosure: Horvitz & Levy represents Ford in this case

April 1, 2021

Court of Appeal confirms that trier of fact can decline to award punitive damages even if malice is proven (Lei v. Yan)

The plaintiffs in this malicious prosecution won a judgment in their favor after a bench trial, but they were disappointed that the trial judge did not award punitive damages.  They appealed, arguing they were entitled to punitive damages as a matter of law.

The Court of Appeal (First District, Division Three) agreed that the plaintiffs presented "abundant evidence" to support a finding that the defendant acted with malice.  The unpublished opinion went on to explain, however, that even when the evidence could support a finding of malice, a jury (or a court in a bench trial) is never required to award punitive damages.  As prior courts have explained, a plaintiff is never entitled to punitive damages as a matter of right.  Accordingly, the court here found no basis for overturning the trial court's decision not to award punitive damages.

March 26, 2021

Johnson & Johnson seeks SCOTUS review of Missouri punitive damages award

We previously reported on this talc case in which the Missouri Court of Appeal affirmed a $1.62 billion punitive damages award against Johnson & Johnson.  

Johnson & Johnson has filed a petition for certiorari in that case, raising the following issues:

(1) Whether a court must assess if consolidating multiple plaintiffs for a single trial violates due process, or whether it can presume that jury instructions always cure both jury confusion and prejudice to the defendant; (2) whether a punitive-damages award violates due process when it far exceeds a substantial compensatory-damages award, and whether the ratio of punitive to compensatory damages for jointly and severally liable defendants is calculated by assuming that each defendant will pay the entire compensatory award; and (3) whether the “arise out of or relate to” requirement for specific personal jurisdiction can be met by merely showing a “link” in the chain of causation, as the Court of Appeals of Missouri held, or whether a heightened showing of relatedness is required, as the Ford Motor Company in Ford Motor Co. v. Montana Eighth Judicial District Court has argued.

The first issue falls into a category that the Supreme Court has avoided thus far---the special concerns that arise when courts award punitive damages in mass tort situations.  The Supreme Court has repeatedly denied petitions raising these sorts of issues, but perhaps the eye-popping award here will make this the case that finally draws the court's attention.

The Court may feel that it has already answered "yes" to the first part of the second question, because the BMW and State Farm cases both held that a punitive damages award usually violates due process when it far exceeds a substantial compensatory damages award.  But the Court has not yet addressed the second part of that question, namely, whether in cases involving multiple defendants, courts can double-count the compensatory damages when calculating the punitive-to-compensatory ratio.  When this issue has come up in California, most courts have recognized that double-counting would result in an artificially low ratio, so our courts will generally calculate the ratio by comparing the punitive damages award against each defendant to that defendant's proportionate share of the compensatory damages award, taking into account the jury's allocation of fault.  It would be helpful to have a Supreme Court opinion validating that approach.

The third question seems to be DOA, now that the Supreme Court has ruled against Ford in the Montana case referenced in the question.

Law 360 has coverage of Johnson & Johnson's opinion here.

March 24, 2021

Ninth Circuit affirms district court's bifurcation of punitive damages trial (Phanpradith v. Griego)

In California state court, defendants have a statutory right to request bifurcation in punitive damages trials.  (See Civil Code section 3295, subsection (d).)  The statute provides that the plaintiff cannot present evidence of the defendant's financial condition until after the jury finds that the defendant acted with malice, oppression, or fraud.  

Federal law does not require such bifurcation, but leaves it to the discretion of the district court. In this prisoner's civil rights case in federal court, the district court exercised its discretion to bifurcate a punitive damages trial after the plaintiff attempted to introduce evidence about a prison official's income before the plaintiff had established liability for punitive damages. 

When the prisoner challenged that bifurcation order on appeal, the Ninth Circuit affirmed in an unpublished memorandum disposition, finding that the district court did not abuse its discretion in ordering because such financial evidence could have been confusing to the jury when the plaintiff had not yet established entitlement to punitive damages.  

March 23, 2021

"All-Women Hogan Lovells Team Secures $152M Award From Texas Jury Over Claims of Pirated Software"

Law.com reports here on a Texas verdict awarding $32 million in compensatory damages and $120 million in punitive damages to a company that makes software for apartment management companies, against a client who allegedly allowed a third-party to pirate the software.

February 5, 2021

Court of Appeal vacates $15 million punitive damages award in asbestos-injury case (Morgan v. J-M Manufacturing, Inc.)

This unpublished opinion addresses a significant recurring issue in California punitive damages litigation, and should be published. 

A jury awarded $15 million in compensatory damages and $15 million in punitive damages against J-M Manufacturing, a company that sold asbestos-containing pipes in the early 1980s.  The jury found that the plaintiff was exposed to dust from the pipes while he was overseeing construction sites and watching other workers cut those pipes.  

The plaintiffs' claim for punitive damages was not based on the conduct of any particular corporate officer, director, or managing agent.  Instead, they treated the defendant as a monolithic entity.  They argued that  "they" engaged in despicable conduct, without specifying exactly who "they" were.

On appeal, when the defendant pointed out the absence of evidence of wrongdoing by an officer, director, or managing agent, as required by Civil Code section 3294, the plaintiffs argued that they did not need to present such evidence under the circumstances of this case.  Citing Romo v. Ford Motor, they argued they could obtain punitive damages by proving that the entire organization acted with malice, without identifying any particular individual who did so.  

We have seen this argument repeatedly from plaintiffs in California products liability cases. The Court of Appeal here (Second District Division One) rejected it, correctly recognized that what Romo actually held is that a plaintiff can satisfy the managing agent requirement "through evidence showing the information in possession of the corporation and the structure of management decisionmaking that permits an inference that the information in fact moved upward to a point where corporate policy was formulated.  These inferences cannot be based merely on speculation, but they may be established by circumstantial evidence, in accordance with ordinary standards of proof."

Because the plaintiffs here had presented no evidence about the "structure of management decisionmaking" they could not take advantage of this aspect of Romo.  Accordingly, due to a total lack of evidence to satisfy the managing agent requirement, the Court of Appeal vacated the punitive damages award.

UPDATE (2/19/21):  This opinion has now been certified for publication.  

January 29, 2021

Court of Appeal affirms trial court order that vacated $7.5 million punitive damages award due to insufficient managing agent evidence (Verotel Merchant Services v. Rizal Commercial Bank)

This unpublished opinion is worth a read for anyone litigating a California punitive damages case involving a "managing agent" issue under Civil Code section 3294.

The facts are complicated but here's a simplified recap:  Plaintiff was an online merchant who accepted credit card payments. Plaintiff sent its credit card transactions to the defendant, a bank.  The transactions were processed by an intermediary, who was secretly pocketing a percentage of the transactions.  The plaintiff caught on and sued the bank for fraud, claiming the intermediary was the bank's agent.  The bank argued that the intermediary was actually the plaintiff'agent.  A jury sided with the plaintiff, awarding $1.5 million in compensatory damages and $7.5 million in punitive damages.

The trial judge, Michael J. Raphael (who is now a Court of Appeal justice), granted the defendant's JNOV motion and vacated the punitive damages.  He ruled that the bank could not be liable for punitive damages because the intermediary was not a managing agent of the bank. In so doing, he correctly anticipated the Supreme Court's holding in Conservatorship of O.B., and took the clear-and-convincing evidence standard into account when evaluating the sufficiency of the evidence.

The plaintiff appealed, arguing that the trial court applied the wrong standard in its JNOV order because it focused too much on the small number of accounts that the intermediary handled, in comparison to the bank's overall business.  The Court of Appeal (Second District, Division Four) rejected that argument because the trial court's analysis was squarely in line with the Supreme Court's decision in White v. Ultramar, which held that a managing agent must have the ability to affect a "substantial portion" of the defendant's business.    

The plaintiff also argued that the trial court, when it ruled on the JNOV, should not have applied the holding in Roby v. McKesson that a managing agent must be in a position to create "formal policies that affect a substantial portion of the company."  The plaintiff argued that standard was inapplicable because the jury was not instructed on it.  That argument was actually adopted by a different Court of Appeal last year in a published opinion. (See Colucci v. T-Mobile [refusing to follow the Roby standard because it was not set forth in jury instructions].)  In this case, however, the Court of Appeal didn't buy it.  The court held that nothing about the holding of Roby is inconsistent with the standard CACI jury instruction that tells jurors to consider whether a managing agent has the power to determine corporate policy.  Therefore, the court was correct to consider Roby's guidance when evaluating the sufficiency of the evidence under that standard.

Retirement tribute to Andy Frey

Mayer Brown's Guideposts blog has a nice tribute to Andy Frey, who retired from that firm at the end of 2020.  It's no exaggeration to say that Andy had more influence on the development of punitive damages law over the past 40 years than any other lawyer.  

Andy argued four punitive damages cases in the Supreme Court, all of which had a profound impact on the development of modern punitive damages law: Browning-Ferris v. Kelco, Honda v. Oberg, BMW v. Gore, and Philip Morris v. Williams.

I had the pleasure of working with Andy on several occasions, starting with the Lockheed Litigation cases in the late 1990s.  He consulted with our firm on on those appeals, always offering creative suggestions and exploring new ideas for moving the boundaries of the law in this area.  The California Court of Appeal ultimately reversed a $380 million punitive damages award in one of those appeals, which marked the beginning of my focus on this practice area.

Congratulations Andy and best wishes for a happy retirement.

January 27, 2021

Court of Appeal affirms $8 million punitive damages award against owner of mobile home park (Belanger v. Biggs)

Here's a belated post about a decision issued last month.  I've been meaning to write about it for a while  but I've been unable to get to it until now.

The case involves a protracted dispute between the owners of a mobile home park and two individual mobile home owners.  The dispute began in 2005, when heavy rains caused a landslide on the hillside above the two mobile homes owned by the plaintiffs, rendering the homes uninhabitable.  Litigation ensued, and the parties reached a settlement in 2011.  The settlement permitted the plaintiffs to keep their homes in the park and did not permit the park owners to remove them unless specifically ordered to do so by a governmental agency, or if their removal was necessary to stabilize the hillside.
The park owners decided to remove the plaintiffs' mobile homes and sell them to third parties, even though the neither of the two conditions had been satisfied.  To complete the sale, the owners forged signatures on bills of sale and title applications.
The plaintiffs sued for fraud and breach of contract.  A jury awarded them each about $470,000 in compensatory damages and $4 million in punitive damages (a ratio in excess of eight to one).
The defendants appealed, challenging the punitive damages as excessive. The Court of Appeal (Second District, Division Three) rejected that argument in an unpublished opinion.
First, the court found that the defendants' conduct implicated nearly all of the factors that indicate a high level of reprehensibility.  Typically, conduct that causes purely economic injury is viewed as less reprehensible than conduct that involves intentional physical injuries (as in the O.J. Simpson civil case), but the court here was so outraged by the defendants' deliberate deceit that it placed the conduct at the top of the reprehensibility scale.
Next, the court rejected the defendants' reliance on the principle that the ratio of punitive damages to compensatory damages should be low, perhaps no more than one-to-one, where the compensatory damages are substantial.  The Supreme Court first announced this principle in State Farm v. Campbell, where it explained that the principle applies with even more force when the compensatory damages include an award for emotional distress.  The Court of Appeal declined to follow that aspect of State Farm, on the ground that the plaintiffs presented evidence of emotional and mental harm.  That aspect of the opinion is a bit puzzling, because every plaintiff who recovers emotional distress damages must present some evidence of emotional distress.  Otherwise the award would be vacated.  So it is difficult to see how this case differs from the other cases in which courts have applied the State Farm rationale.  Fortunately, the opinion is not published, so lower courts will not need to figure out how to harmonize this opinion with the reasoning of State Farm.

December 16, 2020

Supreme Court grants cert in punitive damages case, but declines to consider punitive damages issue (TransUnion v. Ramirez)

Today the Supreme Court granted a certiorari petition that raised two remedies issues, the second of which involves punitive damages:

1. Whether either Article III or Rule 23 permits a damages class action where the vast majority of the class suffered no actual injury, let alone an injury anything like what the class representative suffered. 

2. Whether a punitive damages award that is multiple times greater than an already-substantial classwide award of statutory damages, and is orders of magnitude larger than any actual proven injury, violates due process. 

However, the order granting certiorari expressly limits review to the first issue.  The Supreme Court has not considered the issue of excessive punitive damages since Exxon Shipping in 2008, and the justices apparently have no interest in revisiting that issue again anytime soon.

Hat tip: Rick Hasen