October 28, 2020

Court of Appeal re-issues opinion vacating $16 million punitive damages award and orders reduction to $2.5 million (Tilkey v. Allstate)

In May of this year we reported on a decision affirming a $1.7 million compensatory damages award for the tort of "self-published defamation" but vacating the jury's $16 million punitive damages award as excessive.

The Court of Appeal (Fourth District, Division One) granted defendant Allstate's petition for rehearing, which identified some facts omitted from the opinion.  After accepting supplemental briefing and considering the additional facts, the Court of Appeal reached the same conclusion in its new opinion: compensatory damages affirmed, punitive damages vacated as excessive.  

The new opinion, however, adopted a different remedy with respect to the excessive punitive damages.  The first opinion simply vacated the award and sent the case back to the trial court for further proceedings, rather than reducing the punitive damages to a fixed amount.  That's because the Court of Appeal had also eliminated one element of the jury's damages award (a $1 million award for wrongful termination), and the court said it was impossible to know to what extent the jury based its punitive damages award on that claim.

In the new opinion, the court decides to reduce the punitive damages rather than ordering a new trial.  The court says "[t]here is some authority that doing so is appropriate," but no authority is cited.  The opinion reduces the punitive damages award to the amount of $2.5 million, which is about 1.5 times the amount of compensatory damages. 

That remedy seems to deprive Allstate of its right to have a jury decide in the first instance the proper  punishment for the defamation alone.  Perhaps a jury would award less than $2.5 million.  But given the relatively low ratio that the court adopted, Allstate may actually prefer to simply pay that amount rather than undergoing a new trial and risking a larger award that would generate another appeal.