May 18, 2009

Leeper-Johnson v. Prudential: Court of Appeal Affirms $4 Million Punitive Damages Award

The California Court of Appeal (Fourth District, Division One) issued this unpublished opinion last week, affirming a trial court's grant of a new trial on punitive damages.

The jury awarded compensatory damages of nearly $2 million, plus $14 million in punitive damages. The trial court ruled that the punitive damages award was excessive, and granted a new trial on punitive damages unless the plaintiff agreed to accept a remittitur of the punitive award to $4 million. The plaintiff refused the remittitur so the trial court ordered a new trial on punitive damages. The defendant appealed.

The Court of Appeal eliminated some elements of the compensatory damages award, reducing the total compensatory award to $1.7 million.

The court then addressed the defendant's argument that, on the facts of this case, 1-to-1 is the constitutional maximum ratio of punitive damages to compensatory damages. Presumably, the defendant cited the U.S. Supreme Court's statement in Campbell that 1-to-1 may be the maximum ratio in cases involving "substantial" compensatory damages. The Court of Appeal opinion doesn't discuss that aspect of Campbell, but it does indicate that the defendant relied on Gober v. Ralph's Grocery, which held that trial and appellate courts both have the power to reduce a punitive damages award to the constitutional maximum without affording the plaintiff a new trial.

Gober reasoned that it would be pointless to award a plaintiff a new trial when the defendant is willing to pay the constitutional maximum. The plaintiff could not possibly do any better on retrial.

Curiously, the court in this case rejected the defendant's reliance on Gober because the defendant had not agreed to forgo its right to a new trial. I don't quite understand how the defendant could cite Gober and ask the Court of Appeal to reduce the punitive damages award to the constitutional maximum without forgoing its right to a new trial. Was the defendant asking the court to affirm the new trial order, while at the same time rendering an advisory opinion about the maximum amount of punitive damages that could be permitted upon retrial? If so, I can understand why the court would be unwilling to do that. But if the defendant didn't expressly insist on its right to a new trial, and was urging the Court of Appeal to simply reduce the award to a 1-to-1 ratio, I think some courts might have interpreted the defendant's reliance on Gober as an implied agreement to waive a new trial (assuming the punitive damages were capped at a 1-to-1 ratio).