BILL ANALYSIS
AB 840
Page 1
Date of Hearing: April 24, 2001
ASSEMBLY COMMITTEE ON JUDICIARY
Darrell Steinberg, Chair
AB 840 (Robert Pacheco) - As Introduced: February 22, 2001
SUBJECT : PUNITIVE DAMAGES CAP FOR SMALL BUSINESS DEFENDANTS
KEY ISSUES :
1)SHOULD THE TRADITIONAL RIGHT OF JURORS TO DETERMINE IF A
DEFENDANT'S CONDUCT WAS SO OPPRESSIVE, FRAUDULENT OR MALICIOUS
SO AS TO REQUIRE SUBSTANTIAL PUNITIVE DAMAGES BE SEVERELY
CURTAILED IN ALL CASES WHERE DEFENDANTS APPEAR TO FIT WITHIN
THE DEFINITION OF "SMALL BUSINESS" UNDER FEDERAL REGULATIONS?
2)SHOULD THE LEGISLATURE CODIFY, FOR "SMALL BUSINESS" DEFENDANTS
ONLY, THE CONCURRING OPINION OF SUPREME COURT JUSTICE JANICE
ROGERS BROWN LAST YEAR IN THE CASE OF LANE V. HUGHES AIRCRAFT,
WHEREBY THE JUSTICE ARGUES "PUNITIVE DAMAGES SHOULD RARELY
EXCEED COMPENSATORY DAMAGES BY MORE THAN A FACTOR OF THREE"?
WOULD THE APPROACH ADVOCATED BY JUSTICE ROGERS BROWN IN HER
CONCURRING OPINION IN LANE CONSTITUTE A "BRAND OF JUDICIAL
LAWMAKING," AS SUGGESTED BY JUSTICE MOSK IN THE SAME CASE?
3)MIGHT THE BILL'S PROPOSED SPECIAL "CARVE-OUT" INADVERTENTLY
SEND THE MESSAGE THAT IN CALIFORNIA IT IS MORE ACCEPTABLE FOR
SMALL BUSINESSES TO ENGAGE IN OPPRESSIVE, FRAUDULENT OR
MALICIOUS CONDUCT THAN IT IS FOR OTHERS?
4)SHOULD PUNITIVE DAMAGE AWARDS THAT EXCEED THREE TIMES THE
AMOUNT OF COMPENSATORY DAMAGES IN NON-SMALL BUSINESS CASES BE
SUBJECT TO A TOUGHER STANDARD OF REVIEW, CONSTITUTING A NEW
STATE POLICY THAT LARGE PUNITIVE DAMAGE AWARDS ARE DISFAVORED
REGARDLESS OF HOW OUTRAGEOUS THE PARTICULAR MISCONDUCT?
5)IS THERE SUFFICIENT EVIDENCE OF ABUSE BY JURIES IN THE
AWARDING OF PUNITIVE DAMAGES AGAINST SMALL BUSINESSES IN
CALIFORNIA TO SUPPORT VITIATING THE LONG-STANDING RIGHT VESTED
IN JURIES TO COMPETENTLY MAKE THESE DECISIONS?
SYNOPSIS
This Bill Continues A Long Tradition By Some Business Groups In
California To Try To Restrict The Historical Right Of
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Californians Serving On Juries To Determine The Appropriate
Amount Of Punitive Damages In The Rare Cases Where Punitive
Damages Are Deemed Necessary. Contrary To Last Year's Effort To
Limit The Right Of Juries To Award Punitive Damages In All
Cases, This Legislation Seeks To Limit Jury Authority In This
Area Solely For Those Defendants That Meet Federal Regulations
Classifying "Small Businesses." For Such Small Business
Defendants Alone, Potential Punitive Damages Will Be Capped At 3
Times The Compensatory Damages, Regardless Of How Oppressive,
Fraudulent Or Malicious Their Conduct. This Approach Thereby
Essentially Codifies For Small Business Defendants The
Concurring Opinion By California Supreme Court Justice Janice
Rogers Brown In Last Year's Case Of Lane V. Hughes Aircraft .
In Addition To Creating A Special Punitive Damages "Carve Out"
For Small Business Defendants, This Bill Also Seeks To Reduce
The Imposition Of Substantial Punitive Damage Awards Against
Larger Business Defendants Through The Use Of A Much Stricter
Standard Of Appellate Review. The Bill Seeks To Do This By
Requiring That Any Punitive Damages Found Appropriate By A Jury
Which Exceed Justice Rogers Brown's Proposed Judicial Policy Of
"3 Times Compensatories" Must Be Reviewed "De Novo," Requiring
Appellate Courts To Substitute Their Own Judgment For That Of
The Jury As To The Correct Amount Of Punitive Damages.
Currently All Punitive Damage Awards In California Assessed By
Juries Face A More Deferential Standard Of Review, Whereby
Appellate Courts Ensure That There Is "Clear And Convincing"
Evidence Supporting The Jury's Punitive Damages Determination.
SUMMARY : Essentially codifies the concurring opinion of
California Supreme Court Justice Janice Rogers Brown in last
year's case of Lane v. Hughes Aircraft , whereby the Justice
argues that the courts should adopt a public policy generally
limiting punitive damage awards in California to three times the
compensatory damages awarded. Specifically, this bill :
1)Seeks to curtail the traditional right and responsibility of
California jurors to determine appropriate levels of punitive
damage awards by arbitrarily capping at "3 times
compensatories" all such awards for small business defendants,
irrespective of how oppressive, fraudulent or malicious the
conduct involved, thereby codifying for small business
defendants alone the concurring opinion of California Supreme
Court Justice Janice Rogers Brown in Lane v. Hughes Aircraft .
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2)Seeks to reduce the size of punitive damage awards imposed
against larger business defendants by requiring that any
punitive damages found appropriate by California jurors which
exceed Justice Rogers Brown's proposed policy cap of "3 times
compensatories" be subjected to de novo appellate review,
whereby the appellate court must review the evidence in the
case anew, and substitute its own determination for that of
the jury as to the correct amount of punitive damages.
EXISTING LAW :
1)Provides for the award of punitive damages in addition to
actual damages in cases not arising in contract (i.e., tort
cases) "for the sake of example and by way of punishing the
defendant": (a) when it is proven by clear and convincing
evidence; and (b) where the defendant is guilty of oppression,
fraud, or malice. (Civil Code Section 3294(a). All further
statutory references are to this code unless otherwise
stated.)
2)Defines, for the purpose of determining punitive damages, the
following key terms:
a) "Malice" means conduct which is intended to cause injury
or despicable conduct with a willful and conscious
disregard of the rights or safety of others.
b) "Oppression" means despicable conduct that subjects a
person to cruel and unjust hardship in conscious disregard
of that person's rights.
c) "Fraud" means an intentional misrepresentation, deceit,
or concealment of a material fact known to the defendant
with the intention of depriving a person of property or
legal rights or otherwise causing injury. (Section
3294(c).)
3)Provides for punitive damages in wrongful death actions
against persons convicted of homicide. (Section 3294(d).)
4)Authorizes courts to grant a defendant a protective order
requiring the plaintiff to produce evidence of a prima facie
case of liability for punitive damages prior to introducing
evidence of the defendant's profits or financial condition.
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(Section 3295(a).)
5)Precludes the plaintiff from pretrial discovery of evidence of
defendant's profits or financial condition, unless the court
determines that the plaintiff has established that there is a
substantial probability that the plaintiff will prevail on the
claim for punitive damages. (Section 3295(c).)
6)Prohibits the admission of evidence of a defendant's profits
or financial condition until after the trier of fact returns a
verdict for the plaintiff awarding actual damages and finds
that a defendant is guilty of malice, oppression or fraud
entitling the plaintiff to punitive damages. (Section
3295(d).)
7)Precludes a claim for punitive damages from stating an amount.
(Section 3295(e).)
8)Requires, pursuant to SB 241 (Lockyer, Ch. 1498 of 1988), that
a jury's punitive damages determination be reviewed on appeal
solely to confirm that there was "clear and convincing"
evidence supporting the jury's punitive damages determination.
(Section 3294(a).) Prior to SB 241, a mere preponderance of
the evidence was required to support a punitive damages award.
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
COMMENTS : This bill continues a long line of similar bills
sponsored by the Civil Justice Association of California (CJAC -
formerly the Association for California Tort Reform) seeking to
curtail the right of California jurors to determine when, and to
what extent, punitive damages are necessary to punish
particularly egregious acts and deter the commission of wrongful
acts in the future.
The author wrote the following statement in support of the bill:
AB 840 addresses serious concerns of California's
small businesses. The threat of a large punitive
damage award against a small business has created a
situation where small businesses will settle lawsuits
for large sums of money rather than risk a punitive
damage award that could bankrupt the business. Small
businesses employ a majority of Californians, operate
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on small profit margins and therefore deserve
protection. AB 840 simply gives a limited measure of
protection to a small business without limiting any
amount a plaintiff can recover for their damages plus
pain and suffering. In a time when small businesses
are being squeezed by higher energy costs, rising
salaries and greater regulatory burdens, protection
from excessive penalties is appropriate.
Background : In civil law, the term "damages" refers to the
monetary sum assessed by a court against a wrongdoer. The
primary objective of an award of damages in a civil action is
just compensation for the actual loss or injury sustained by the
complaining party. These are called "actual" or "compensatory"
damages. "Punitive damages," also referred to as "exemplary
damages," are seldom awarded, and when they are they are awarded
for the sake of example and to punish a defendant who has been
found to meet a strict legal standard of "outrageous" conduct.
Traditionally, punitive damages must bear a reasonable
relationship to the damage actually sustained by the plaintiff.
But there has never been any statutory ratio in California
jurisprudence arbitrarily limiting a jury's right to decide the
appropriate level of punitive damages when they are deemed
necessary.
Overview Of California Case Law : The purposes of punitive
damages are to punish wrongdoers and to deter future misconduct
by making an example of the defendant. ( PPG Industries v.
Transamerica Ins. Co. (1999) 20 Cal.4th 310, 317.) However,
there is no right to punitive damages. ( Hannon Engineering v.
Reim (1981) 126 CalApp.3d 415.) Punitive damages are merely
incident to the underlying cause of action. ( James v. Public
Finance (1975) 47 Cal.App.3d 995.) Nor may punitive damages be
awarded unless actual damages are suffered. ( A. Esparza v.
Specht (1976) 55 Cal.App.3d 1.)
Historically, the propriety and amount of punitive damages is
within the discretion and province of the jury. ( Fenlon v.
Brock (1989) 216 Cal.App.3d 1174.) However, when an award of
punitive damages is excessive or is so grossly disproportionate
as to raise a presumption that it is the result of passion or
prejudice, an appellate court will reverse the award. ( Godfrey
v. Steinpress (1982) 128 Cal.App.3d 154.) In determining the
amount of a punitive damages award, guidance is provided by the
amount of compensatory damages, the wealth of the particular
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defendant and the particular nature of the defendant's acts in
light of the whole record. ( Neal v. Farmers Insurance Exchange
(1978) 21 Cal.3d 910.)
Overview of U.S. Supreme Court Cases : In BMW of North America,
Inc. v. Gore (1996) 517 U.S. 559, the Supreme Court, in a 5-4
decision, held that: (a) a $2 million punitive damages award
was grossly excessive in relation to a state's legitimate
interests in punishing unlawful conduct and deterring its
repetition, and therefore exceeds constitutional limits in
violation of due process; (b) elementary notions of fairness
dictate that a person receive fair notice of the conduct that
will subject him to punishment as well as the severity of the
penalty the state may impose; and (c) a punitive damages award
that is 500 times the amount of actual damages is clearly
outside the acceptable range. However importantly in the
context of this legislative proposal, the U.S. Supreme Court
also held that it is not possible to draw a mathematical bright
line between a constitutionally acceptable and constitutionally
unacceptable formula that will fit every case.
In two previous cases, Pacific Mutual Life Insurance Company v.
Haslip (1991) 499 U. S. 1 and TXO Production Corp. v. Alliance
Resources Corp. (1994) 509 U.S. 443, the Supreme Court had
endorsed the principle that exemplary damages must bear a
"reasonable relationship" to compensatory damages. In TXO , the
Court stated that the proper inquiry is "whether there is a
reasonable relationship between the punitive damages award and
the harm likely to result from the defendant's conduct as well
as the harm that actually has occurred." (509 U.S. at 460.)
Current California Supreme Court Doctrine on the Role and Scope
of Punitive Damages : In 1978, the California Supreme Court set
forth its definitive review to date of the role and scope of
punitive damages. In Neal v. Farmers Ins. Exchange (1978) 21
Cal.3d 910, the Court stated that "The purpose of punitive
damages is to punish wrongdoers and thereby deter the commission
of wrongful acts." (21 Cal.3d at 928, fn. 13.) In that case,
an injured motorist sued for compensatory and punitive damages
for the bad faith failure of her insurance company to pay
uninsured motorist benefits to her under her policy, and the
jury returned an undifferentiated verdict in her favor for about
$1.5 million. In upholding the award, the Supreme Court set
forth three factors relevant to the assessment of punitive
damages: (1) the degree of reprehensibility of the act; (2) the
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amount of compensatory damages awarded; and (3) the wealth of
the particular defendant. (Id. at 928.)
The Unusual "Double Opinion" of Justice Janice Rogers Brown in
Lane v. Hughes Aircraft: Not all justices on the Supreme Court
continue to agree with the statements made by the state Supreme
Court in the 1978 Neal decision, however. Just last year, in
Lane v. Hughes Aircraft (2000) 22 Cal.4th 405, in an unusual
situation Justice Janice Rogers Brown wrote both a majority and
concurring opinion in the same case. While the majority opinion
did not address the issue of punitive damages, since it was not
the issue being decided by the Court, Justice Rogers Brown felt
compelled to write a separate concurring opinion, joined in by
Justice Chin, setting forth her policy thoughts regarding how
courts in California should regulate jury decisions regarding
punitive damages.
In her concurrence in Lane , Justice Rogers Brown wrote:
I, of course, agree with the majority opinion [which I
wrote] as far as it goes. I write separately to
address the punitive damages issue in greater detail?.
The Legislature has expressly authorized trial courts
to grant new trials when damages are "excessive"
[citation omitted], and the trial court here granted a
new trial as to punitive damages on that ground. Our
role as the final interpreter of state law obligates
us to give meaning to the term 'excessive' in relation
to punitive damages. ? We must ask what anchoring
variable will make an award of punitive damages an
appropriate measure of punishment rather than a test
of a jury's ability to imagine big numbers? In the
case of large awards, punitive damages should rarely
exceed compensatory damages by more than a factor of
three, and then only in the most egregious
circumstances clearly evident in the record. In
arguing for this standard, I do not mean to suggest
that three times compensatory damages is a benchmark
measure of punitive damages. [citation omitted]. Far
from it. The standard is an uppermost limit, and most
punitive damage awards should fall well below that
limit. (22 Cal.4th at 422-23.) (emphasis added.)
Justice Mosk's Concurring Response in Lane v. Hughes Aircraft :
In a separate concurrence, Justice Stanley Mosk wrote "to
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disagree with the views expressed in Justice Brown's concurring
opinion." (Id. at 416.) Justice Mosk then stated:
Although no measure adopted by the Legislature so
provides, the concurring opinion advocates a brand of
judicial lawmaking by declaring that punitive damages
must not, absent some special, unspecified showing,
exceed actual damages by more than three times. Such
a rule cannot be justified. 'The purpose of punitive
damages is to punish wrongdoers and thereby deter the
commission of wrongful acts.' (Citing Neal , supra.)
The concurring opinion proposes to fix a 'soft'
ceiling on punitive damages by using only one of the
three Neal factors-the amount of compensatory damages.
But the primary purpose of compensatory damages is
fundamentally different from punitive damages-to make
plaintiffs whole, not to deter future harm. There is
simply no reason why punitive damages should be
limited by some fixed ratio to actual damages.
What the United States Supreme Court stated in the
context of a due process analysis of punitive damages
is directly relevant here: '[W]e have consistently
rejected the notion that the constitutional line [for
limiting punitive damages] is marked by a simple
mathematical formula, even one that compares actual
and potential damages to the punitive award.
[Citation omitted.] Indeed, low awards of
compensatory damages may properly support a higher
ratio than high compensatory awards, if, for example,
a particularly egregious act has resulted in only a
small amount of economic damages. A higher ratio may
also be justified in cases in which the injury is hard
to detect or the monetary value Citing of non-economic
harm might have been difficult to determine.' (Citing
BMW of North America, Inc. v. Gore (1996) 517 U.S.
559, 582.) Given that the 'simple mathematical
formula' has been rejected in the constitutional
context because it is illogical, and given that no
such formula has been dictated by statute, it is
difficult, to say the least, to see why we should
impose the rule by judicial fiat, as the concurring
opinion proposes. (Emphasis added.)
New Standard of Review : In addition to capping punitive damage
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awards for small businesses, this legislation also seeks to
impose the toughest standard of review on large punitive damages
awards, requiring de novo review for any punitive damage award
exceeding three times compensatories. In support of this
proposed heightened scrutiny, CJAC argues that the bill "does
not require an appellate court to lower the punitive damage
award, it simply allows another court to review the existing
record to ensure the award meets existing standards of fairness.
This is the current standard set forth by the United States
Supreme Court under BMW v. Gore (1996) and the current practice
in some parts of California." CJAC further states that the
California Supreme Court's decision in McCoy v. Hearst Corp.
(1986) 42 C.3d 835, 842, may even require the bill's proposed
heightened level of review. However that case merely held that
independent appellate review of the record is required under
federal constitutional law in cases implicating constitutional
rights, not in all cases where punitive damages are awarded.
CJAC also asserts that some appellate districts have required
independent review of punitive damage awards, citing Stewart v
Truck Insurance Exchange, 17 Cal. App. 4th 468 (1993). However
an independent review of that case suggests that assertion may
not be correct. In that 1993 case, the court instead merely
noted that since 1988, "a claim for punitive damages has
required evidence which establishes by 'clear and convincing
evidence' that the defendant has been 'guilty of oppression,
fraud, or malice.... We see no reason why this standard should
not apply here." (Id. at 482, emphasis added.) However CJAC
appears to confuse the holding in Stewart. By stating that
since 1998 appellate courts in California must ensure that there
was "clear and convincing" evidence supporting a jury's punitive
damages award, it is not clear this court was stating de novo,
or independent, appellate review was required. These are two
different issues.
In addition, it should be noted that Justice Janice Rogers Brown
herself has, in the majority opinion in the Lane case, noted the
benefits of the current more deferential standard of appellate
review of such awards. Writing for the majority in Lane,
Justice Rogers Brown gave these reasons for supporting such
judicial deference: "The trial court sits much closer to the
evidence than an appellate court. Even the most comprehensive
study of a trial court record cannot replace the immediacy of
being present at the trial, watching and hearing as the evidence
unfolds. The trial court, therefore, is in the best position to
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assess the reliability of a jury's verdict and, to this end, the
Legislature has granted trial courts broad discretion to order a
new trial." (Lane, supra, at page 412.)
The de novo review contemplated in AB 840, however, would
require an appellate court to substitute its judgment, far
removed from a trial, for that of a trial court. Such an
approach would seemingly undercut the purpose described by
Justice Janice Rogers Brown of trial by jury, and the jury's
power to award an appropriate measure of punitive damages
without arbitrary caps.
The Ambiguity Surrounding the Definition of "Small Business: "
Stating that this bill "proportionalizes punitive damages,
limiting them to three times compensatory damages for small
businesses only," the bill's sponsor states that "small business
is defined in AB 840 using current definitions set forth under
the Small Business Administration Act." However a review of
this Act suggests that it will not always be clear whether a
particular business would or would not be eligible for the
"small business" punitive damages limitation, and how and when
the court would make that determination.
As the Consumer Attorneys of California (CAOC) note, many of the
over 300,000 manufacturing companies in the U.S. are businesses
of 25 employees or fewer, according to the Small Business
Administration (SBA). Moreover, the SBA regulations defining a
small business (which form the definition of a small business in
AB 840) show that "small businesses" are sometimes anything but
small. Part 121 of Title 13 of the Code of Federal Regulations
contains the size standards that define whether a business
entity is small. The SBA considers many factors in its
determination and sets industry specific standards. For
example, according to CAOC, "an oil and gas exploration company
with less than $5 million in sales is a small business. A
petroleum refining company with less than 1500 employees is
small. An asbestos manufacturer employing less than 750
employees is small. Tire companies employing less than 1000 is
considered small. Put another way, a petroleum refining company
with 1499 employees that poisons a neighborhood water system is
a small business for purposes of AB 840 and would never be fully
accountable for the harm caused to a community."
Recent Legislative Reforms Of Punitive Damages : The original
punitive damages statute was enacted in California in 1872. In
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recent years, there have been a series of procedural
modifications to punitive damages determinations:
In 1979, SB 227 (Robbins) granted defendants the authority to
obtain a protective order requiring the plaintiff to produce
evidence of a prima facie case of liability for punitive
damages, prior to introducing evidence of the defendant's wealth
or profits.
In 1980, SB 1242 (Maddy): (a) established the specific
definitions of "malice, oppression, and fraud" which appear in
the punitive damages section; (b) provided that an employer is
not liable for punitive damages for an act of an employee unless
the employer had advance knowledge of the unfitness of the
employee and employed him or her with a conscious disregard of
the rights or safety of others, or authorized or ratified the
wrongful conduct; and (c) precluded pretrial discovery as to
profits and financial condition unless the court first
determined that a plaintiff had established a substantial
probability that the plaintiff would prevail on the claim for an
award of punitive damages.
In 1987, SB 241 (Lockyer) required proof of malice, oppression
or fraud by clear and convincing evidence, instead of by a mere
preponderance of the evidence.
Recent Studies Show Punitive Damages Awards Are Rare : According
to statistics provided to the Committee by CAOC, a number of
recent studies appear to demonstrate that punitive damages
awards are actually infrequent, contrary to widespread public
opinion. The Wall Street Journal reported on July 16, 1996, on
a punitive damages study that was conducted by the National
Center for State Courts. The Journal reported: "Punitive
damages are generally modest, and meted out in only the most
extreme circumstances. ? According to the study, most punitive
awards aren't random, as critics have argued, but instead are
closely tailored to the amount of compensatory damages, such as
medical expenses and lost wages."
According to CAOC, a U.S. Department of Justice study analyzing
civil jury cases over a 12-month period in the nation's most
populous counties found that juries awarded punitive damages in
only 6% of all successful suits, and that approximately half of
these punitive damage awards were for $50,000 or less.
Similarly, a recent study by the American Bar Foundation found
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that punitive damages are awarded in less than 5% of civil jury
verdicts in its review of 25,000 verdicts in eleven states over
a four year period. CAOC also points to a recent study by the
RAND Institute for Civil Justice which reportedly shows that
punitive damages were awarded in only 2% of successful verdicts.
National Center for State Courts Study : The Wall Street Journal
reported on July 16, 1996, on a punitive damages study that was
conducted by the National Center for State Courts. The Journal
reported:
? Punitive damages are generally modest, and meted out in only
the most extreme circumstances. ? According to the study, most
punitive awards aren't random, as critics have argued, but
instead are closely tailored to the amount of compensatory
damages, such as medical expenses and lost wages.
? Plaintiffs were awarded punitive damages in just 6% of the
jury verdicts in which the plaintiffs prevailed. Because
plaintiffs succeeded about half the time, punitive damages
were awarded in just 3% of all jury trials . (Emphasis added.)
? In 2,849 trials won by plaintiffs, there was a mean
compensatory damages award of $386,000. In those cases, 177
punitive damages awards also were meted out, with a mean of
$534,000.
ARGUMENTS IN SUPPORT : In support of this bill, the Civil
Justice Association of California (CJAC) writes that a new study
released last week by McGeorge School of Law Professor J. Clark
Kelso "confirms the escalation of punitive damages awarded in
California." CJAC states that the study identifies three main
points:
First, there is an increase in punitive damage awards
during the 1990s. Second, in cases where punitive
damages are awarded, punitive damages account for an
overwhelming proportion of all damages awarded, more
than 7.5 times greater than the total amount of
compensatory damages awarded. Finally, the study
found that regardless of the defendant, the type of
case, or size of award, there are high multiple
punitive damage awards across the spectrum, but most
notably in a distinctive set of 'high punitive damage
cases' ('HPDCs'). In these 'high punitive damage
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cases,' the average punitive awards and the ratio
between the punitive and compensatory awards are
substantially greater than in non-HPDC cases.
CJAC also writes that increasing punitive damage awards lead to
greater numbers of demands for punitive damages. They cite a
Washington Legal Foundation (WLF) study involving the incidence
of demands for punitive damages in lawsuits filed in various
California counties, which apparently found the following:
In San Diego, punitive damages were demanded in 60% of the
tort and contract suits against government entities, 41% of
the suits against businesses, and 26% of the suits filed
against individuals. In Los Angeles county, the
percentages were 36% in lawsuits filed against government
entities, 50% of the suits against businesses, and 20% of
the suits filed against individuals. (Citing Legal
Backgrounder, Washington Legal Foundation, Vol. 12 No. 2,
February 1997.)
ARGUMENTS IN OPPOSITION : Consumer Attorneys of California
(CAOC) strongly opposes the bill, stating that AB 840 would
arbitrarily limit the amount of punitive damages in an action
against a "small" business and change the standard of appellate
review for punitive damages.
CAOC writes:
Limiting punitive damages to an arbitrary level would
undercut their deterrent value since businesses might
find it cheaper and more cost effective to continue
their bad behavior and to risk paying punitive
damages? As Justice Mosk noted in his concurring
opinion in the California Supreme Court case, Lane v.
Hughes Aircraft 22 Cal.4th 405, 418, "large and
disproportionate punitive damage awards are not a
problem in our judicial system in any significant
degree - there is not punitive damages crisis."
(Citing Rustad, Unraveling Punitive Damages: Current
Data and Further Inquiry (1998) Wis. L. Rev. 15,
54-55.) Indeed, any risk that an award is "excessive"
is properly addressed in a motion for a new trial
pursuant to Code of Civil Procedure 657.
Prior Pertinent Legislation : AB 1443 (Zettel) of 1999 would
have prohibited the award of punitive damages for harm caused by
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a drug or device approved or licensed by the FDA unless the
product manufacturer knowingly withheld or misrepresented
information or violated federal law with the intent to defraud
or mislead. Status: Died in the Assembly Judiciary Committee
without a hearing.
AB 169 (Ackerman) of 1999, would have strictly limited punitive
damages to three times the amount of compensatory damages,
required that the amount of punitive damages be decided by
judges rather than juries, and imposed other restrictions on the
award of punitive damages in civil actions. Status: Failed
passage in the Assembly Judiciary Committee.
AB 1371 (Morrow) of 1998, would have required that the amount of
punitive damages be decided by judges rather than juries,
prohibited the defendant's financial condition from being
considered in determining the amount of the damages award, and
required that the amount of damages be reduced by the extent to
which it would unfairly duplicate other punitive damages awards
paid for the same conduct. Status: Failed passage in the
Assembly Judiciary Committee.
AB 1862 (Morrow) of 1995, which was identical to AB 169
(described above), failed passage in the Senate Judiciary
Committee.
AB 2582 (Ackerman) of 2000, similar to AB 1443 (Zettel), would
have prohibited the award of punitive damages for harm caused by
a drug or device approved or licensed by the FDA unless the
product manufacturer knowingly withheld or misrepresented
information or violated federal law with the intent to defraud
or mislead. Status: Failed passage in the Assembly Judiciary
Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
Civil Justice Association of California (CJAC) (sponsor)
Association of California Insurance Companies
Association of California Life & Health Insurance Companies
California Chamber of Commerce
California Medical Association
Consulting Engineers and Land Surveyors of California
Personal Insurance Federation of California
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South Orange County Regional Chambers of Commerce
Opposition
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Labor Federation, AFL-CIO
Congress of California Seniors
Consumer Attorneys of California
Consumers for Auto Reliability and Safety
Engineers and Scientists of California
Foundation for Taxpayer and Consumer Rights
Hotel Employees, Restaurant Employees International Union
Region 8 States Council of the United Food & Commercial Workers
Analysis Prepared by : Drew Liebert / JUD. / (916) 319-2334