August 14, 2011

Jim & Ray Telecom v. Kim: unpublished appellate decision shows the Supreme Court really should clarify the status of punitive damages awards after compensatories are cut

As we've discussed a number of times before (see related posts linked below), there's a lot of uncertainty out there about what's supposed to happen when a jury does its job of weighing the amount of punitive damages in light of a reasonable relationship to compensatory damages, but then the compensatory damages are cut on posttrial motions or on appeal. The Supreme Court recently declined to take up that question, denying review in Behr v. Redmond, despite the split of authority on the recurring issue.

An unpublished decision handed down last week from the California Court of Appeal is yet another case in point confirming that some guidance is needed here. In that matter involving a commercial dispute, the jury awarded $374,646.01 in compensatory damages and a matching $375,000 in punitive damages, for a 1:1 ratio. The trial court then found the compensatory damages were subject to an offset for amounts owed by the plaintiff to the defendant, and thus reduced those damages to $202,533.75. The court did not, however, adjust the punitive damages accordingly. So much for a 1:1 ratio.

Now, it may be that a postverdict reduction of compensatory damages due to a counterclaim by the defendant is treated differently from a reduction on excessiveness or legal error grounds. But this case won't provide a vehicle for the Supreme Court to analyze that issue because, while the court of appeal noted that the defendant (acting in pro per) raised six arguments on appeal, a challenge to the amount of punitive damages was not among them. Nonetheless, the case highlights another example of the interconnected complex questions arising when compensatory damages are reduced in a punitive damages case.

Related posts:

Rex Heeseman op-ed discusses Behr v. Redmond

Two out of three ain't bad: Supreme Court denies review in Behr v. Richmond, despite my prediction that they'd take the case

Petition for review asks Cal. Supreme Court to resolve split in authority regarding the proper treatment of a punitive damages award after reduction of compensatories

Behr v. Redmond: Court of Appeal publishes previously unpublished opinion, creates split of authority

Behr v. Redmond: $2.8M punitive award affirmed, despite reduction of compensatory damages from $4M to $1.6M