April 14, 2015

Court of Appeal affirms reduction of punitive damages to a 1-to-1 ratio (Banks v. General Atomics)

A few years ago, we observed a mini-trend of California courts reducing punitive damages to match the amount of the compensatory damages, at least in cases involving substantial compensatory damages awards.  That trend reached its peak in 2009 when the California Supreme Court imposed a 1-to-1 ratio in Roby v. McKesson.

Ironically, we haven't seen many 1-to-1 ratios from the California Court of Appeal in the years since Roby.  But in this unpublished opinion, the Court of Appeal (Fourth District, Division One) affirms a trial court's decision that ordered a remittitur of a punitive damages award from $5.8 million to $2.9 million, resulting in a 1-to-1 ratio.

The plaintiff argued on appeal that the trial court went too far in imposing a 1-to-1 ratio.  The plaintiff pointed to provisions in the Labor Code authorizing double damages for comparable misconduct, and cited the U.S. Supreme Court's statements that courts should defer to legislative judgments regarding the appropriate level of punishment (see State Farm v. Campbell at p. 528). According to the plaintiff, "[Labor Code] section 972's penalty of double damages contemplates the precise 2-to-1 ratio of punitive to compensatory damages the jury originally awarded."

That argument backfired.  The Court of Appeal agreed with plaintiff that Labor Code section 972 offers an appropriate analogy, but the court observed that the plaintiff's math was wrong.  Double damages result in a 1-to-1 ratio, not a 2-to-1 ratio.  Therefore, the Court of Appeal concluded that the Labor Code only provided further support for the trial court's imposition of a 1-to-1 ratio.