November 14, 2016

Court of Appeal reverses $7.5 million in punitive damages (Bigler-Engler v. Breg)

The $7.5 million punitive damages verdict in this case was #10 on our list of the biggest punitive damages verdicts in California in 2012.  Four years later, only $150,000 of that award survived appeal.

The plaintiff brought a personal injury action against a medical device manufacturer (Breg) and the doctor (Chao) who recommended and sold the device.  The jury awarded roughly $5.8 million in compensatory damages, plus $7 million in punitive damages against Breg and $500,000 against Chao. Both defendants appealed.

In a partially published opinion, the California Court of Appeal (Fourth Appellate District, Division One) reversed.

It tossed the entire punitive damages award against Breg, because the plaintiff's intentional concealment against Breg was not supported by substantial evidence. The jury's malice finding against Breg was based solely on that claim, so without it there could be no punitive damages as to Breg.

As for Chao, the court found that both the compensatory damages and the punitive damages were excessive.  California courts rarely reverse non-economic damages as excessive, but the court concluded that $5.1 million awarded by the jury for plaintiff's pain and suffering was simply too much.  Although plaintiff sustained an injury that required multiple surgeries, by the time of trial she was suffering only "minimal physical discomfort, intermittent curtailment of daily activities, and some anxiety over the condition of her scar."  The court ordered a new trial, subject to the plaintiff's agreement to accept a reduction of the compensatory damages to $1.3 million.

We have previously observed that California courts are divided on whether an appellate court should automatically reverse a punitive damages award after making a substantial reduction to the compensatory damages award.  In our view, the better reasoned answer is "yes."  Punitive damages are supposed to bear a reasonable relationship to the plaintiff's actual harm.  Juries are instructed to make that determination in every case, and the defendant is entitled to have the jury decide that issue in the first instance.

This court, however, took the alternative approach, and held that the Chao was not entitled to have a jury decide the reasonable relationship question in the first instance.  In other words, no automatic reversal of the punitive damages.  Instead, the court held Chao would be entitled to a reversal only if the court determined that the punitive damages were excessive, taking into account the reduced compensatory award.  Fortunately for him, the court answered that question in the affirmative.  The court held that the $500,000 punitive damages award against Chao was excessive as a matter of state law.  The court noted that the award exceeded 14% of Chao's net worth, and that California courts have held that anything over 10% is presumptively excessive.  The court ordered a new trial, subject to plaintiff's acceptance of a reduction of the punitive damages to $150,000, which is roughly 5 percent of Chao's net worth.

Having found the punitive damages excessive under state law, the court did not consider Chao's alternative argument that the award was also excessive as a matter of federal due process.