July 23, 2008

Robles v. Autozone Inc.: Unpublished Opinion Affirms Trial Court's Reduction of Punitive Damages Award from 100-to-1 Ratio Down to 6-to-1

In this unpublished opinion issued yesterday, the California Court of Appeal (Fourth Appellate District, Division One) affirmed a trial court's decision to reduce a $7.5 million punitive damages award down to $438,900.

The plaintiff was a former employee of AutoZone. He brought a claim against AutoZone for false imprisonment, claiming that he was wrongly accused of stealing money, questioned for three hours, and then coerced into signing a false confession. A jury awarded him $73,150 in compensatory damages and $7.5 million in punitive damages. In response to the defendant's motion for JNOV, the trial court reduced the punitive damages to $438,900, six times the compensatory damages.

The punitive damages discussion in this opinion is unusually long and I haven't had time to read it carefully, but the court seems to reach these basic conclusions:

1. The trial court did not err when it used a verdict form that did not require the jury to identify, by name, the corporate managing agent who authorized the misconduct at issue.

2. Substantial evidence supported the jury's conclusion that the defendant's managing agents did in fact authorize the misconduct of lower level employees. Although the employees violated express company policies, the Court of Appeal said there was evidence to support a reasonable inference that AutoZone management had effectively authorized the employees' conduct by structuring the company loss prevention department and procedures in such a way that effectively fostered abuses of power. (Without knowing all the details of the case, it's a little hard to imagine how a jury could reasonably infer that corporate management authorized conduct which corporate management had expressly prohibited.)

3. The trial court did not err in reducing the amount of punitive damages. The Court of Appeal found that the facts justified a significant punitive damages award because: (a) the defendant took advantage of a financially vulnerable plaintiff, (b) the conduct was not an isolated incident, and (c) the defendant engaged in intentional trickery and deceit. At the same time, however, the Court of Appeal found there were no extremely unusual circumstances that could support a double-digit ratio of punitive to compensatory damages. Accordingly, the Court of Appeal agreed with the trial court that 6-to-1 was the maximum ratio permitted by due process. Notably, the court observed that:

[E]ven a six-to-one ratio of punitive damages represents a blot on a corporation's reputation and has a punitive effect. The level of punitive damages imposed is not required to be so large as to impede the activities of the corporation.

As I was reading through this opinion, a few peculiarities jumped out at me. First, the court cites its own prior opinion in Buell-Wilson v. Ford, without acknowledging that the California Supreme Court has granted review in that case, which therefore cannot be cited under California's rules of court.

Second, the court states that "It was appropriate for [plaintiff] to go forward and make out a case for punitives, to fully redress his injury." That language seems contrary to the California rule that punitive damages can never be awarded to compensate for a plaintiff's injuries, and are only available to serve the purposes of punishment and deterrence. See, e.g., Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379, 1387 (“‘punitive damages by definition are not intended to compensate the injured party’”).

Presumably, these are things that the court would have cleaned up if it decided to publish this opinion.

Hat tip to California Attorney's Fees.