September 10, 2011

Kelemen v. John Crane, Inc.: new trial ordered in case where jury awarded $18.3 million in punitive damages

There's a lot of interesting stuff in this unpublished opinion.

Its a personal injury action for asbestos exposure, with a fairly typical fact pattern: Plaintiff is massively exposed to asbestos-containing insulation in the Navy and develops mesothelioma years later, but the manufacturers of the insulation aren't around anymore, so the case goes to trial against a company that made asbestos-containing gaskets and packing, which were used inside some of the ship-board equipment.  The jury finds for the plaintiff, assigns 70 percent fault to the defendant, and awards $900,000 in economic damages, $2 million in past noneconomic damages, $14 million in future noneconomic damages, and $18.3 million in punitive damages.  After posttrial motions, the trial court orders a reduction of the punitive damages to $4.5 million.  Both sides appeal.

The California Court of Appeal (Second Appellate District, Division Two), addresses several punitive damages issues in its opinion:

  • First, the opinion holds that substantial evidence supports the jury's determination that the defendant acted with malice, fraud or oppression within the meaning of Civil Code section 3294.  The court follows the Shade Foods line of authority which holds that the reviewing court must review the evidence through the prism of the "clear and convincing evidence" burden of proof.  The court does not discuss the conflicting line of authority which holds that the clear and convincing evidence standard has no impact on appellate review.   (As readers of this blog may recall, that conflict was taken up by California Supreme Court in 2008, but the case was later dismissed after the parties settled).  In the end, however, the court concludes that the evidence is sufficient to support a finding even under the heightened burden of proof.
  • Next, the opinion holds that a new trial is required due to irregularities in the presentation of evidence of the defendant's financial condition.  This analysis is pretty interesting.  As we have discussed many times on this blog (e.g., here), when a California appellate court concludes that a plaintiff has failed to meet its burden of presenting meaningful evidence of the defendant's financial condition, the court will send the case back to the trial court with directions to enter judgment in favor the defendant on the issue of punitive damages.  On the other hand, if the court concludes that the defendant failed to comply with a court order to produce financial condition evidence, the court will find a waiver by the defendant and affirm the award.  (As we reported here.) In this case, the court finds that the defendant failed to comply with a court order, but also concludes that the order itself was defective.  So instead of ordering judgment for the defendant or finding a waiver, the court orders a new trial on the issue of punitive damages. That's an approach I haven't seen before.
The opinion also holds that the jury's award of $14 million in non-economic damages is excessive in relation to the plaintiff's life expectancy.  That issue is beyond the scope of this blog, but those with a general interest in California tort damages might want to check it out.