May 11, 2010

Rex Heeseman's Latest Daily Journal Article on Punitive Damages

Judge Rex Heeseman of the Los Angeles Superior Court contributes regularly to the Los Angeles Daily Journal on various topics, including punitive damages. In his latest piece, Calculation of the "PD Ratio" (May 11, 2010), which you can view here if you have a subscription, Judge Heeseman discusses the decision a few months ago in Amerigraphics v. Mercury.

Judge Heeseman's article provides a nice overview of some of the major California appellate decisions addressing the proper ratio of punitive damages to compensatory damages. The article discusses the Amerigraphics decision in light of these precedents, and examines some of the questions raised by Amerigraphics.

For example, Judge Heeseman notes that in Amerigraphics, an insurance bad faith case, the court excluded from the ratio calculation any amounts awarded to the policyholder as "Brandt" fees (fees that the policyholder incurred in order to obtain wrongfully withheld policy benefits). Judge Heeseman notes that other decisions (such as Major v. Western Home) included Brandt fees in the ratio analysis. He suggests that California law is now unclear as to whether Brandt fees should be considered for ratio purposes.

Judge Heeseman also notes that the Amerigraphics court ultimately settled upon a ratio of 3.8 to 1 as the constitutional maximum on the facts of that case, and he says "[i]t appears this is the first occasion, in California at least, where an appellate court utilized a 'fraction' in the ratio."

I think it's true that California appellate courts generally adopt whole-number ratios, but fractional ratios are fairly common in California, because appellate courts often prefer to set the punitive damages at a nice round number. (See, e.g., Diamond Woodworks v. Argonaut (2003) 109 Cal.App.4th 1020, 1056-1057 [ordering a remittitur of punitive damages to $1 million, for a ratio of 3.8 to one, exactly the same ratio adopted in Amerigraphics]; Notrica v. State Compensation Insurance Fund (1999) 70 Cal.App.4th 911, 951-954 [ordering a remititur of punitive damages to $5 million, for a ratio of 10.3 to 1]; Rosener v. Sears, Roebuck & Co. (1980) 110 Cal.App.3d 740, 746, 757 [ordering a remittitur of punitive damages to $2.5 million, resulting in a ratio of 15.8 to one].) In the most recent example, the Court of Appeal in Roby v. McKesson adopted a ratio of 1.4 to 1, only to see that number reduced to 1 to 1 by the California Supreme Court.