July 6, 2016

California Court of Appeal finds $5.5M in punitive damages unconstitutional, gives plaintiffs the option of a new trial or $900k (Vaughn v. Darwish)


In this lawsuit by six tenants against their landlord, a Los Angeles jury awarded punitive damages totaling roughly $5.5 million.  That award was ultimately deemed constitutionally excessive in this unpublished opinion, but the path to that result was a rocky one, and I have doubts about whether the Court of Appeal's disposition is procedurally correct.

The procedural weirdness began in the trial court, where the court issued a rolling series of rulings on the defendants' post-trial motions.

After the jury's verdict, the trial court entered judgment and the plaintiffs served notice of entry of that judgment on August 30, 2013.  The defendants then filed post-trial motions arguing, among other things, that the punitive damages were excessive.  The trial court's deadline for ruling on those motions was October 29 (60 days after the service of notice of entry of judgment).

On October 25 the trial court issued a minute order stating that the post-trial motions were denied, except that a new trial would be granted unless the plaintiffs consented to a remittitur of the total punitive damages to $900,000.  The minute order referenced a separate formal order dated October 25, but the trial court never signed or entered any other order on that date.

Three days later, on October 28, the trial court issued another order stating that its October 25 ruling was only tentative and not final.

On November 12, roughly two weeks after deadline, the trial court issued an "amended" order, again stating that the post-trial motions were denied, except that a new trial would be granted on punitive damages unless the plaintiffs accepted a remittitur of the amount to $900,000.

On November 20, the trial court issued yet another purported amendment to its ruling on the post-trial motions, changing the amount of the remittitur.

Both sides appealed.  The Second Appellate District, Division Two, determined that the trial court's order purporting to grant a conditional new trial was ineffective because the trial court failed to issue a signed statement of its reasons when it initially granted a conditional new trial, and because the trial court later vacated its initial ruling by deeming it to be "tentative."  The November 12 and November 20 rulings were ineffective because the deadline had already passed.

Having reversed the trial court's grant of a conditional new trial, the Court of Appeal then proceeded to grant a conditional new trial on its own, finding that the jury's punitive damages award was constitutionally excessive under Simon v. San Paolo U.S. Holding Co., and ordering a remittitur in exactly the same amount as in the trial court's original order.

That disposition is questionable, because the Supreme Court of California said in Simon that, when a court determines that a punitive damages award is constitutionally excessive, the appropriate remedy is to modify the judgment by reducing the award to the constitutional maximum.  Simon explains that courts should not give plaintiffs the option of choosing a new trial as an alternative to the reduction:

Giving a plaintiff the option of a new trial rather than accepting the constitutional maximum for this case would be of no value. If, on a new trial, the plaintiff was awarded punitive damages less than the constitutional maximum, he would have lost. If the plaintiff obtained more than the constitutional maximum, the award could not be sustained. Thus, a new trial provides only a ‘heads the defendant wins; tails the plaintiff loses' option.
The Court of Appeal here cited Simon but ordered precisely the sort of disposition that Simon cautions against. In so doing, the court cited a Court of Appeal opinion that pre-dates Simon.  This is probably just an oversight, which the court may correct before the opinion becomes final. 

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