January 27, 2021

Court of Appeal affirms $8 million punitive damages award against owner of mobile home park (Belanger v. Biggs)

Here's a belated post about a decision issued last month.  I've been meaning to write about it for a while  but I've been unable to get to it until now.

The case involves a protracted dispute between the owners of a mobile home park and two individual mobile home owners.  The dispute began in 2005, when heavy rains caused a landslide on the hillside above the two mobile homes owned by the plaintiffs, rendering the homes uninhabitable.  Litigation ensued, and the parties reached a settlement in 2011.  The settlement permitted the plaintiffs to keep their homes in the park and did not permit the park owners to remove them unless specifically ordered to do so by a governmental agency, or if their removal was necessary to stabilize the hillside.
The park owners decided to remove the plaintiffs' mobile homes and sell them to third parties, even though the neither of the two conditions had been satisfied.  To complete the sale, the owners forged signatures on bills of sale and title applications.
The plaintiffs sued for fraud and breach of contract.  A jury awarded them each about $470,000 in compensatory damages and $4 million in punitive damages (a ratio in excess of eight to one).
The defendants appealed, challenging the punitive damages as excessive. The Court of Appeal (Second District, Division Three) rejected that argument in an unpublished opinion.
First, the court found that the defendants' conduct implicated nearly all of the factors that indicate a high level of reprehensibility.  Typically, conduct that causes purely economic injury is viewed as less reprehensible than conduct that involves intentional physical injuries (as in the O.J. Simpson civil case), but the court here was so outraged by the defendants' deliberate deceit that it placed the conduct at the top of the reprehensibility scale.
Next, the court rejected the defendants' reliance on the principle that the ratio of punitive damages to compensatory damages should be low, perhaps no more than one-to-one, where the compensatory damages are substantial.  The Supreme Court first announced this principle in State Farm v. Campbell, where it explained that the principle applies with even more force when the compensatory damages include an award for emotional distress.  The Court of Appeal declined to follow that aspect of State Farm, on the ground that the plaintiffs presented evidence of emotional and mental harm.  That aspect of the opinion is a bit puzzling, because every plaintiff who recovers emotional distress damages must present some evidence of emotional distress.  Otherwise the award would be vacated.  So it is difficult to see how this case differs from the other cases in which courts have applied the State Farm rationale.  Fortunately, the opinion is not published, so lower courts will not need to figure out how to harmonize this opinion with the reasoning of State Farm.