April 30, 2019

Court of Appeal reduces compensatory damages by $1.7M but affirms punitive damages (Cardoza v. Reed)

This unpublished opinion addresses an unsettled question of California punitive damages law that we have written about a few times.  The question is what a reviewing court should do with a punitive damages award when the court significantly reduces the compensatory damages on appeal.  Should the reviewing court automatically order a retrial on the issue of punitive damages, so that a jury can determine what punishment is appropriate for the actual harm caused?

In our view, the answer to that question should be yes.  Jurors are routinely instructed to award an amount of punitive damages that bears a reasonable relationship to the plaintiff's actual harm.  And courts routinely presume that jurors follow their instructions.  So if a jury imposes punitive damages based on the understanding that the plaintiff suffered $5 million in compensatory damages, but that understanding turns out to be false, and the Court of Appeal determines that the plaintiff really suffered only $2 million in compensatory damages, then the defendant is entitled to have a jury decide what punishment is appropriate for causing that harm. 

California courts used to follow that approach, but it recent years California appellate courts are increasingly reluctant to order a new trial under these circumstances.  Instead, they will order a new trial only if they determine that the jury's punitive damages award is unconstitutionally excessive when compared to the now-reduced compensatory damages award. 

That's the approach that the Court of Appeal (First District, Division Four) took in this case.  It shaved $1.7 million off the jury's compensatory damages award, but did not order a new trial on punitive damages.  Instead, the Court of Appeal affirmed the punitive damages award after concluding that the ratio between the punitive damages and the compensatory damages (as reduced) did not violate due process.  In the process, the Court of Appeal deprived the defendant of its right to have a jury decide the appropriate amount of punishment for the harm actually caused. 

Perhaps someday the California Supreme Court will sort this out.  Until then, we will probably continued to see more unpublished opinions like this one.