August 1, 2018

Court of Appeal affirms $1 million punitive damages award in fraud case (Melvin v. Harkey)

In this unpublished opinion the Fourth Appellate District, Division Three, rejects a defendant's argument that a jury award of $1 million in punitive damages should be reversed because the plaintiffs failed to prove malice, oppression, or fraud.  The court finds sufficient evidence in the record that the defendant, the owner of an investment firm, engaged in a Ponzi scheme and maliciously disregarded the rights of his investors.

In the process, the Court of Appeal makes some unfortunate comments about the role of the clear and convincing evidence standard of proof in punitive damages cases, and how it impacts appellate review.

As we have noted in the past, published opinions have repeatedly held that the clear and convincing evidence standard applies both on appeal and in the trial court, and requires appellate courts to decide whether a reasonable jury could find that the plaintiff's evidence met the clear and convincing standard.  (See, for example, this recent opinion and this one.)  This opinion, however, perpetuates the contrary (and outdated) view that the clear and convincing standard applies solely to the trier of fact, and does not play any role on appeal.