August 23, 2016

Court of Appeal orders new trial in case that generated $55 million punitive damages award (Grow Land & Water v. McCarthy Family Farms)

The Hanford Sentinel reported over the weekend on a decision from the Fifth Appellate District in Fresno that reversed a judgment awarding $73.4 million in compensatory damages and $3 million in punitive damages.  A jury had originally awarded $55.2 million in punitive damages, one of the largest punitive damages awards in California in recent years.  But the trial court reduced that to $3 million.

The case arises from a failed development project.  The plaintiff, Grow Land & Water, alleged that it was in the process of acquiring land and water rights when the defendant interfered with his deal and acquired the rights for himself.

The unpublished opinion doesn't say much about the punitive damages.  The reversal was based entirely on problems with the compensatory damages, namely, that the plaintiff failed to prove some elements of its damages claims and the compensatory award was tainted by irrelevant and prejudicial evidence.  The Court of Appeal concluded that a new trial was therefore required on all the damages, including the punitives:

Punitive damages must bear a reasonable relationship to the actual damages.  Thus, the reversal of the compensatory damages requires that the punitive damages be redetermined as well.
While that may seem like an intuitive result, other divisions of the California Court of Appeal have issued opinions that dramatically reduced a compensatory damages award without ordering a new trial on punitive damages.  (See, for example, here and here.)  Under the reasoning of this case, those cases should have come out differently.  The defendants in those cases were entitled to have a jury decide in the first instance what amount of punitive damages would be reasonable in relation to the actual damages.  I'm still hoping the California Supreme Court will examine this issue, although it has passed up several opportunities to do so.