October 22, 2014

Court of Appeal affirms $18 million in punitive damages; reduction of compensatory damages from $30 million to $6 million does not require retrial of punitive damages (Izell v. Union Carbide)

This published opinion from the California Court of Appeal (Second District, Division Three) could be headed to the California Supreme Court.

In this asbestos personal injury action, the jury awarded $30 million in compensatory damages and $18 million in punitive damages.  The trial court ruled that the compensatory damages were excessive and reduced them to $6 million. (Technically, the court ordered a conditional new trial subject to the plaintiffs' acceptance of a remittitur.)

The defendant argued on appeal that it was entitled to a new trial on punitive damages in light of the dramatic reduction of the compensatory damages.  As noted in prior posts, California case law supports the notion that the punitive damages award should be reversed in these circumstances. The Court of Appeal in this case, however, ruled that reversal was not necessary because the punitive damages award was not constitutionally excessive when compared to the reduced compensatory damages.

The Court of Appeal's opinion overlooked a problem that has nothing to do with whether the award is constitutionally excessive.  In the punitive damages phase of this trial, the jury was instructed to select an amount of punitive damages that bears a reasonable relationship to the actual harm to the plaintiff.  So the jury came up with a number---$18 million---that the jurors thought was reasonable in relationship to $30 million in actual harm.  In other words, they thought a punitive damages award that was 60% of the compensatory damages award was reasonable. 

But it turns out that the actual harm was only $6 million.  There's at least a fair chance that the jury would have come up with a different number if they had known that.  Perhaps they would have awarded $3.6 million (60% of $6 million).  Maybe they would have gone higher.  Or lower.  No one can know.  Because no jury ever decided what amount of punitive damages is appropriate in relation to the $6 million of actual harm that occurred here, the defendant should be entitled to a new trial on that issue.

I think there's a decent chance the California Supreme Court will review this issue, for several reasons.  First, the opinion is published.  Second, Justice Kitching wrote a dissenting opinion that points out the error of the majority opinion on exactly this point.  Third, there is a conflict in California law on this issue, with multiple published opinions on point.

The last time I predicted that that the Supreme Court would grant review on this issue, I was wrong.  But there was no dissenting opinion in that case. So I'm going out on a limb and predicting that the dissent will be enough to get the Supreme Court's attention this time.

Full disclosure: our firm represents the defendant in this cases, Union Carbide, in other matters.  We were not involved in this appeal.