December 21, 2017

Court of Appeal conditionally affirms $500,000 punitive damages award despite vacating all compensatory damages (Jensen v. Charon Solutions)

This unpublished opinion continues an unfortunate trend in the California Court of Appeal.

Readers of this blog have heard me complain before that an appellate court should not affirm a punitive damages award after ordering a significant reduction in compensatory damages.  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.

In this malicious prosecution case, a jury awarded $1 million in compensatory damages and $500,000 in punitive damages.  On appeal, the Court of Appeal (Second Appellate District, Division Two) concluded that the trial court erred by allowing the plaintiff's counsel to seek over $400,000 in damages in the form of attorneys fees, based on bills which were so heavily redacted that almost no content was left.  Accordingly, the court sent the case back for a new trial on compensatory damages.

The court should have ordered a new trial on the punitive damages as well.  That's what some other  Courts of Appeal have done in this situation.  (See e.g., SEIU v. Colcord (2008) 160 Cal.App.4th362.)

Instead, the Court of Appeal here affirms the punitive damages award, on the theory that, as long as the compensatory damages on remand total at least $50,000, the jury's award of $500,000 in punitive damages will be below the "10-to-1 cap" for punitive damages.

That's wrong for at least two reasons.  First, as noted, the defendant has a right to have a jury decide what amount of punitive damages is appropriate based on the harm caused.  Second, our Supreme Court has explained that punitive damages are not presumptively valid whenever they are less than ten times the amount of compensatory damages.   (See Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159, 1182 ["Multipliers less than nine or 10 to one are not, however, presumptively valid"].)  A lesser ratio may still be excessive, depending on the other circumstances of the case.

The Supreme Court will have to sort this out someday, but this case may not be the right vehicle.  The opinion is not only unpublished, but the Court of Appeal observes that "both parties' briefs on appeal mispresent the facts and the law."  That isn't going to encourage the Supreme Court to solicit further briefing in this case.