June 2, 2008

Marcisz v. Movie Theatre Entertainment Group: CA Court of Appeal Upholds New Trial on Punitive Damages Because Jury's Award Was Excessive

In this unpublished opinion, the Fourth Appellate District, Division One, upheld an order granting a new trial on the issue of punitive damages. The plaintiffs, movie theater employees, claimed they were subjected to a hostile work environment and discrimination because of their gender. The jury agreed and awarded a total of $1.4 million in compensatory damages to the four plaintiffs, plus a total of $6 million in punitive damages.

The trial court granted a new trial on the punitive damages, on the ground that the award was excessive in light of the defendant's financial condition. The Court of Appeal agreed. Although the plaintiffs pointed to the defendant's annual revenues of over $20 million, the Court of Appeal said that was only "half the equation," because it ignored the defendant's expenses and liabilities. Taking everything into account, the defendant had a negative net worth (-$300,000) and a negative annual income. Thus, the Court of Appeal concluded that "the $6 million punitive damages total far exceeded UltraStar's ability to pay and the jury clearly should have reached a different verdict."

Incidentally, the plaintiffs made an unsuccesful argument that illustrates a pattern in cases like this. The plaintiffs, citing Mike Davidov Co. v. Issod (2000) 78 Cal.App.4th 597, argued that the defendant forfeited its right to challenge the award as excessive in relation to its net worth. In the Mike Davidov case, the court found a waiver because the defendant refused to comply with a court order directing it to turn over evidence of its financial condition. Plaintiffs who fail to present sufficient evidence of the defendant's financial condition (as required by a unique rule of California procedure that plaintiffs frequently overlook), often attempt to save their punitive damages claim by citing the Mike Davidov case and arguing forfeiture, even where, as here, they never obtained any court order requiring the defendant to turn over financial condition information. In keeping with the pattern, the Court of Appeal rejected the plaintiffs' argument because of there was no evidence the defendant violated any court order: "
this contention is not supported by any references to the record showing that UltraStar failed to respond to a valid court order to produce financial records."