Recently in Punitive Damages Category

Defendant's negative net worth does not render punitive damage award reversible

Defendant.jpgBetween 2006 and 2010, ArvinMeritor, Inc., attained $3 billion in sales revenue each year and had an annual cash-flow profit of $111 million, a primary business being manufacturing brake shoes. Its lowest annual profit during this period was $95 million. However, as of 2010, it reported a negative "net worth" of $1.023 billion; the company's losses resulted primarily from significant capital expenditures and development expenses.

Gordon Bankhead contracted mesothelioma as a result of 30 years of exposure to asbestos dust while working in automobile maintenance facilities. Brake shoes for which ArvinMeritor is in part responsible caused the deleterious asbestos dust. Bankhead sued a number of defendants including ArvinMeritor. After trial in Alameda Superior Court, a jury awarded a verdict in favor of Bankhead including a 15% share of the fault against ArvinMeritor which resulted in joint and several liability in the sum of $1.47 million in economic damages, and several liability of $375,000 in noneconomic damages. In addition to this total compensatory award of $1.845 million, the jury later awarded punitive damages against this defendant in the sum of $4.5 million.

In Bankhead v. ArvinMeritor, Inc. (filed April 19, 2012) 2012 DJDAR 5011), ArvinMeritor disputed the punitive damage award on two grounds: 1) the award is excessive because ArvinMeritor proved its negative net worth, and 2) the 2.4 to 1 ratio of punitive damages to compensatory damages is constitutionally excessive. The Court of Appeal, First Appellate District, Division Four, disagreed and affirmed the judgment. In particular, the appellate court held there is no legal requirement that punitive damages must be measured against a defendant's net worth.

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Another chapter on punitive damages: California's Bullock v. Philip Morris

Since the United States Supreme Court decided State Farm Mutual Automobile Ins. Co. v. Campbell (2003) 538 U.S. 408, legal scholars have debated the use of the corporate defendant's wealth and prior conduct in assessing punitive damages, and the stringency/flexibility of the high court's stated constitutional limitations ("few awards exceeding a single digit ratio between punitive and compensatory awards, to a significant degree, will satisfy due process. . ." [at p. 425]). One might think that once the Supreme Court speaks, these matters become clear cut. Not so. Rather, the debate seems to have intensified. In Bullock v. Philip Morris USA, Inc. (filed August 17, 2011) 2011DJDAR 12485, the California Court of Appeal, Second Appellate District, Division Three, gives the reader both sides of these issues at their persuasive best (majority opinion by Croskey, J., joined by Klein, P.J.; dissenting opinion by Kitching, J.)

Philip Morris appealed the jury's punitive award of $13.8 million in the retrial of the matter upon remand. The compensatory award of $850,000 (including $100,000 in noneconomic "pain and suffering") remained from the previous jury trial; the first jury had awarded $28 billion in punitive damages, reduced by the trial judge to $28 million.
In the previous appeal, the appellate court found error in the trial court's refusal to instruct the jury that Philip Morris could not be punished for harm caused to others. In this appeal, the Court of Appeal found that in light of the defendant's strong financial condition and extreme reprehensibility (vast scale and profitability resulting from defendant intentionally deceiving smokers such as plaintiff for decades concerning the adverse effects of smoking, while it formulated cigarettes to be more addictive), the punitive damage award of approximately 16 times the compensatory award was not unconstitutionally excessive.

The Bullock majority methodically and thoroughly analyzed two of the three guideposts for appellate review prescribed by the U.S. Supreme Court and restated by the California Supreme Court: reprehensibility, and disparity between harm to plaintiff and the punitive damages award. Allow me to focus on what I view as determinative in this case.

The majority found off-the-charts reprehensibility in reviewing the extensive history of the defendant's behavior. Yet its analysis depended on the effect this conduct had not only on plaintiff, but also on the massive number of smokers over the years, causing the need for some explanation reconciling this analysis with the principle that defendant should not be punished because of harm to other injured parties. As the majority explains, a defendant should not be punished for being an "unsavory" business, but similar wrongful conduct toward others may be considered in determining the amount of punitive damages as a matter of recidivist reprehensibleness. (See Johnson v. Ford Motor Co. (2005) 35 Cal.4th 1191, 1206-1208.) This provides the "scale" of the wrongful conduct.

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Tort Claim Is Actionable As Plaintiff May Recover Damages for Reasonable Treatment of Pet Even If Animal Has No Market Value

Thumbnail image for Thumbnail image for Walking_the_Dog_3154_(10).JPGRecently, the issue of awardability of claimed medical damages against tortfeasors has been a hot appellate topic. The California Supreme Court currently has under submission the case of Howell v. Hamilton Meats concerning medical expenses incurred yet paid to the provider in a lesser sum due to downwardly negotiated collateral medical insurance benefits. (See March 10 blog.) When it comes to future medical expenses, the question arises as to whether the expense is too speculative. (See March 31 blog and Behr v. Redmond.) These cases, of course, deal with human medical expenses. Today I will write about animal medical expense (in particular those incurred regarding a wrongfully injured pet).

In Kimes v. Grosser (filed May 31, 2011) 2011 DJDAR 7866), plaintiff's cat Pumkin was shot with a pellet gun allegedly fired by one of the defendants, who were neighbors. Emergency surgery at a cost of $6,000 saved Pumkin's life and an additional $30,000 was spent caring for Pumkin's partially paralyzed condition. Plaintiff sued for these medical costs and further claimed punitive damages. Defendants succeeded on a motion in limine in the trial court to exclude any evidence of plaintiff's expenses because Pumkin was "an adopted stray of very low economic value." With the granting of this motion, plaintiff could not proceed resulting in judgment of dismissal.

The Court of Appeal, First Appellate District, Division One, disagreed with the trial court, reversing the judgment and holding the pet owner can recover the costs of care of the pet attributable to the injury if the costs are found to be reasonable and necessary, and punitive damages if proven. While pets are considered property of their owners, the jury instruction on injury to personal property (CACI NO. 3903J) does not apply here as was argued by defendants. That capsulation of law suggests that an owner can only recover the lesser of the diminution in market value of the property and the reasonable costs of repair. Nor is this a case of the plaintiff trying to recover due to the sentimental or emotional value of the pet (in contrast to McMahon v. Craig (2009) 176 Cal.App.4th 1502). Under California Civil Code section 3355, one is entitled to value property based upon its unique economic value.

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Plaintiff's Future Medical Damage Award For Tortious Transmission Of Herpes Must Be Based On Substantial Evidence, But Punitive Damages Award Was Not Excessive

After receiving a $6.75 million Riverside County Superior Court jury verdict against him for tortiously transmitting genital herpes to his ex-girlfriend, Aussie hair care products founder Thomas Redmond appealed. In Behr v. Redmond (filed March 2, 2011, certified for publication on March 14, 2011) 2011 DJDAR 3795, the California Court of Appeal, Fourth Appellate District, Division Two, reduced the award of $2.5 million in future medical expenses to $72,000, otherwise affirming the judgment that provided $3,600 for past medical expenses, $500,000 for past general damages, $1million for future general damages and 2.75 million for punitive damages (reduced total of $4,325,600).

Plaintiff and defendant began having sexual relations in October 2003. Defendant knew he had genital herpes since 1975, but did not initially inform plaintiff. After they had sex on 10 occasions, he decided in February 2004 to tell her about this long-time medical condition, but misinformed her that it was safe for them to have sex so long as he was not experiencing an outbreak, so they continued their sexual activity. The following month she started having outbreaks and was eventually diagnosed with genital herpes in February 2005. Plaintiff sued and prevailed at trial as indicated above. Defendant's contentions on appeal included the evidence was insufficient that plaintiff contracted herpes prior to defendant's disclosure, and the compensatory and punitive damages were excessive.

The appellate court was satisfied that the evidence was sufficient to establish causation because the jury could have reasonably concluded that defendant's eventual disclosure was incomplete due to his assurances to plaintiff that she could safely continue to engage in sexual activity with him; this could reasonably constitute negligence and fraudulent concealment even if it was unclear as to when she contracted herpes. The court was not satisfied however that plaintiff produced sufficient evidence to support the award of future medical loss in the sum of $2.5 million. The only medical cost projected by the evidence was that of the medication Valtrex which costs $200 for a one-month supply. Based on the 56-year-old plaintiff's life-expectancy, the amount of expense over her lifetime would be no more than $72,000, far short of the $2.5 million award. The verdict was reduced accordingly. But the court was unpersuaded that the punitive award of 2.75 million required either reduction or remand. Defendant's argument was that a jury's mistake in awarding an excessive compensatory award necessarily taints the amount of the punitive award, citing Krusi v. Bearn, Stearns & Co. (1983) 144 Cal.App.3d 664 and Auerbach v. Great Western Bank (1999) 74 Cal.App.4th 1172. Misplaced reliance, responded the court: Krusi merely holds that when a trial court is instructed to reconsider compensatory damages, it may wish to reduce the punitive award as well; Auerbach involved a grossly disproportionate award of punitive damages relative to compensatory damages in a ratio of 385 to 1. After reduction here, the ratio is only 1.75 to 1, so this punitive award, in the court's view, is not "suspect."

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