January 12, 2010

Geragos v. Borer: $9 Million in Punitive Damages Reduced to $600,000

We haven't blogged about a celebrity punitive damages case in a while. But here's an unpublished opinion from the California Court of Appeal (Second District, Division Three) involving one of the biggest celebrities ever: Michael Jackson.

In 2003, Jackson hired prominent attorney Mark Geragos to defend him against criminal charges in Santa Barbara County. Geragos chartered a private plane from XtraJet, Inc. to fly with Jackson from Las Vegas to Santa Barbara, so that Jackson could surrender for his arrest.

According to the opinion, Jeffrey Borer, the owner of XtraJet, decided to make a few extra bucks on the transaction by installing hidden video recorders on the plane, with the intent of selling the recordings to the media. Predictably, Borer got busted when he tried to sell the tapes. Greta Van Susteren of Fox News called Geragos and told him that Borer was shopping the tapes to various media outlets. Geragos sued Borer, alleging a variety of claims including invasion of privacy, misappropriation of name and likeness, and unfair business practices.

After a bench trial before Judge Soussan Bruguera in Los Angeles County, judgment was entered for $2.25 million in compensatory damages and $9 million in punitive damages. Borer was also convicted of illegal wiretapping in federal criminal proceedings.

Borer appealed the civil judgment, challenging both the compensatory damages and the punitive damages. The Court of Appeal agreed with his arguments on both counts and ordered a remittitur of the compensatory damages to $150,000 and a remittitur of the punitive damages to $600,000.

First, the Court of Appeal concluded that no substantial evidence supported Judge Bruguera's determination that Borer was liable for misappropriation and misuse of the Geragos's name and likeness, because Borer never actually sold or profited from the videotape. Next, the Court of Appeal concluded that Judge Bruguera's compensatory damages award was excessive as a matter of law because there was no evidence of any out-of-pocket damages by Geragos, and no evidence that Gergagos sought any treatment or counseling for the emotional distress that he claimed to suffer.

Finally, the Court of Appeal concluded that the punitive damages were excessive in violation of the Due Process Clause of the federal constitution. The court concluded that Borer's conduct was not as reprehensible as other forms of punishable conduct because he did not endanger anyone's health or safety, he did not target a financially vulnerable victim, and he had never engaged in similar misconduct in the past. Accordingly, the court determined that 4 to 1 is the maximum permissible ratio of punitive damages to compensatory damages on the facts of this case.

Ordinarily, it is nonsensical for a court to give the plaintiff the option of new trial instead of accepting the constitutional maximum punitive damages award. By definition, the constitutional maximum represents the plaintiff's best possible outcome, so a new trial would be pointless. (Unfortunately, that doesn't stop some courts from offering the plaintiff a new trial under such circumstances, as discussed here, here, and here.)

This case, however, illustrates a rare instance in which it is entirely proper for the court to offer the plaintiff a choice between the maximum award or a new trial. That's because the remittitur here applies to both the compensatory damages and the punitive damages. If Geragos chooses a new trial, he might be able to recover more than the remittitur offered by the court. The court said the award of $2.25 million in compensatory damages was excessive but it didn't say that number represented the maximum recovery. So Geragos might be able to do better on retrial, in which case he might be able to recover a larger amount of punitive damages, even assuming that the maximum ratio is four to one.

Related posts:

New Trial Motion Denied in Mark Geragos/Michael Jackson Punitive Damages Case

Mark Geragos, Michael Jackson, and Punitive Damages