April 24, 2008

Follow-Up on City of Hope Decision

We've now had a chance to read the Supreme Court's decision in City of Hope v. Genentech, which the court issued this morning. Although the court reversed the punitive damages portion of the judgment, the opinion does not address any questions of punitive damages law per se. Instead, the reversal was based entirely on the court's determination that the relationship between Genentech and City of Hope did not create a fiduciary relationship. Because there was no fiduciary relationship, there was no basis for tort liability and thus no basis for imposing punitive damages. Although the court affirmed the imposition of $300 million in compensatory damages against Genentech for breach of contract, punitive damages may not be awarded for breach of contract in California.
At the end of the day, City of Hope will end up recovering the bulk of the amount awarded by the jury, notwithstanding the Supreme Court's opinion. Genentech's appeal succeeded in chopping off $200 million from the amount of the judgment, but failed to knock out the $300 million compensatory award, which has been accruing postjudgment interest at the rate of 10 percent per year since June 2002, bringing the total amount into the neighborhood of $480 million.