May 16, 2008

Interplay Between Punitive Damages and Statutory Penalties/Remedies?

Our recent posts about the "new right/exclusive remedy" issue pending in Savaglio v. Walmart and about the inapplicability of the Adams v. Murakami financial condition rule in statutory penalty cases prompt this observation: I wonder if courts and litigants are broadly aware of the election of remedies rule discussed in Fassberg Const. Co. v. Housing Authority of City of Los Angeles (2007) 151 Cal.App.4th. 267. Here's an excerpt with part of that discussion:

The Housing Authority contends it is entitled to recover the compensatory damages for breach of contract, treble damages for false claims, civil penalty, and punitive damages. We conclude that the trial court correctly required an election of remedies. (FN 27)

California courts have held that if a defendant is liable for a statutory penalty or multiple damages under a statute, the award is punitive in nature, and the award penalizes essentially the same conduct as an award of punitive damages, the plaintiff cannot recover punitive damages in addition to that recovery but must elect its remedy. (Troensegaard v. Silvercrest Industries, Inc. (1985) 175 Cal.App.3d 218, 226-228, 220 Cal.Rptr. 712 [civil penalty under Civ.Code, § 1794]; Marshall v. Brown (1983) 141 Cal.App.3d 408, 419, 190 Cal.Rptr. 392 [treble damages under Lab.Code, § 1054]; see Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1256, 79 Cal.Rptr.2d 747 [stating that the plaintiffs must elect between statutory penalties or treble damages under Pen.Code, § 637.2, subd. (a) and punitive damages]; Turnbull & Turnbull v. ARA Transportation, Inc. (1990) 219 Cal.App.3d 811, 826, 268 Cal.Rptr. 856 [treble damages under Bus. & Prof.Code, § 17082].) To impose both a statutory penalty or multiple damages award and punitive damages in those circumstances would be duplicative. (Troensegaard, supra, at pp. 227-228, 220 Cal.Rptr. 712; Marshall, supra, at p. 419, 190 Cal.Rptr. 392.) We presume that the Legislature did not intend to allow such a double recovery absent a specific indication to the contrary. (Troensegaard, supra, at p. 228, 220 Cal.Rptr. 712; see Hale v. Morgan (1978) 22 Cal.3d 388, 405, 149 Cal.Rptr. 375, 584 P.2d 512 [narrowly construing Civ.Code, § 789.3 with regard to the amount of a civil penalty]; People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 294, 313-314, 58 Cal.Rptr.2d 855, 926 P.2d 1042 [discussing Hale].)

The court went on to discuss and reject the plaintiff's contention that the penalties were really compensatory in nature, and thus did not preclude an additional award of punitive damages:

We need not decide categorically whether the recovery of treble damages and a civil penalty under the California False Claims Act precludes the recovery of punitive damages on a common law cause of action arising from the same conduct in all cases. Instead, we focus on the nature of the awards in this case (see Cook County, supra, 538 U.S. at p. 130, 123 S.Ct. 1239) to determine whether the treble damages award and civil penalty included sufficient amounts serving a punitive objective so as to render an additional award of punitive damages a prohibited double recovery under California law. Because there was no qui tam relator entitled to a significant portion of the treble damages award, we conclude that most of the treble damages award here served a punitive rather than a compensatory purpose. Moreover, particularly in light of the treble damages award, we conclude that the additional civil penalty served primarily a punitive purpose. Considering the amount of the civil penalty ($1,491,500) relative to the amount of the Housing Authority's purported actual damages resulting from false claims ($455,000), together with our conclusion that the majority of the treble damages award served a punitive purpose, we are compelled to conclude that the aggregate punitive portion of the treble damages award and civil penalty is sufficiently large that any additional award of punitive damages would be duplicative and unwarranted.