Opinion ID: 2570318
Heading Depth: 2
Heading Rank: 3

Heading: The Maximum Constitutional Award

Text: Our review of the BMW/State Farm guideposts, even in light of California's interest in punishing and deterring fraudulent conduct, leads to the conclusion that the jury's award of $1.7 million in punitive damages is grossly excessive. The Court of Appeal erred in holding to the contrary. We could end our discussion here and remand to the Court of Appeal for that court to reduce the award to the constitutionally allowed maximum. But because this litigation has already lasted more than eight years, a process so far including two trips to the United States Supreme Court and three decisions by the Court of Appeal, we believe the better course is for this court itself to determine the maximum punitive damages award that satisfies the constraints of due process and to order the judgment reduced accordingly. Moreover, we agree with San Paolo Holding that the appropriate order is for an absolute reduction, rather than a conditional reduction with the alternative of a new trial, i.e., a remittitur. As constitutional excessiveness is a legal issue appellate courts determine independently ( State Farm, supra, 538 U.S. at p. 418, 123 S.Ct. 1513; Cooper Industries, supra, 532 U.S. at pp. 436-443, 121 S.Ct. 1678), we do not, in determining the maximum constitutional award ourselves, decide any question of fact plaintiff has a right to have decided by a jury. ( Johansen v. Combustion Engineering, Inc. (11th Cir. 1999) 170 F.3d 1320, 1331 ( Johansen ) [Plaintiffs consent is irrelevant if the Constitution requires the reduction]; Leatherman Tool Group, Inc. v. Cooper Industries, Inc., supra, 285 F.3d at p. 1151 [following Johansen: [A]n appellate court need not remand for a new trial in every case in which it finds that a punitive damages award exceeds the constitutional maximum.... We therefore will determine the constitutional maximum on the basis of the existing record]; see, e.g., Bardis v. Oates, supra, 119 Cal.App.4th at pp. 26-27, 14 Cal.Rptr.3d 89 [Court of Appeal reduced punitive damages award to due process limit and affirmed as modified, without offering the plaintiff a new trial alternative].) Once a maximum constitutional award has been determined, moreover, a new trial on punitive damages would be futile. Giving a plaintiff the option of a new trial rather than accepting the constitutional maximum for this case would be of no value. If, on a new trial, the plaintiff was awarded punitive damages less than the constitutional maximum, he would have lost. If the plaintiff obtained more than the constitutional maximum, the award could not be sustained. Thus, a new trial provides only a `heads the defendant wins; tails the plaintiff loses' option. ( Johansen, supra, 170 F.3d at p. 1332, fn. 19.)
To state a particular level beyond which punitive damages in a given case would be grossly excessive, and hence unconstitutionally arbitrary, `is not an enviable task.... In the last analysis, an appellate panel, convinced it must reduce an award of punitive damages, must rely on its combined experience and judgment.' ( Leatherman Tool Group, Inc. v. Cooper Industries, Inc., supra, 285 F.3d at p. 1152.) The high court's due process analysis does not easily yield an exact figure: we must attempt to arrive at such a number using imprecisely determined facts and applying guidelines that contain no absolutes. ( Continental Trend Resources v. OXY USA, Inc., supra, 101 F.3d at p. 643.) An appellate court should keep in mind, as well, that its constitutional mission is only to find a level higher than which an award may not go; it is not to find the right level in the court's own view. While we must, under Cooper Industries, supra, 532 U.S. 424, 121 S.Ct. 1678, 149 L.Ed.2d 674, assess independently the wrongfulness of a defendant's conduct, our determination of a maximum award should allow some leeway for the possibility of reasonable differences in the weighing of culpability. In enforcing federal due process limits, an appellate court does not sit as a replacement for the jury but only as a check on arbitrary awards. (See BMW, supra, 517 U.S. at p. 568, 116 S.Ct. 1589 [States necessarily have considerable flexibility in determining the level of punitive damages they will allow ... in any particular case].) Referring to our earlier reprehensibility analysis and using the comparisons to compensatory damages and civil penalties for calibration, we conclude the maximum here lies at $50,000, or 10 times the compensatory award. This amount, we believe, will further [California's] legitimate interests in punishing unlawful conduct and deterring its repetition ( BMW, supra, 517 U.S. at p. 568, 116 S.Ct. 1589)  interests limited here by the relatively light culpability of the conduct  without exceeding a level both reasonable and proportionate to the amount of harm to the plaintiff ( State Farm, supra, 538 U.S. at p. 426, 123 S.Ct. 1513). We have already explained the reasons for our evaluation of San Paolo Holding's reprehensibility as low, and the presumption against awards significantly exceeding a single-digit multiplier of the actual or potential harm inflicted. (See pts. II.A. & II.B., ante. ) In State Farm, the high court made clear that due process permits a higher ratio between punitive damages and a small compensatory award for purely economic damages containing no punitive element than between punitive damages and a substantial compensatory award for emotional distress; the latter may be based in part on indignation at the defendant's act and may be so large as to serve, itself, as a deterrent. ( State Farm, supra, 538 U.S. at pp. 425-426, 123 S.Ct. 1513.) Here the $5,000 award was for purely economic damages containing no punitive element and is quite small. Yet the compensatory award here, as earlier discussed, did accurately measure the injury proven to have been inflicted. (See pt. I., ante. ) This was not a case where the harm could not be quantified and only nominal damages were awarded. (See, e.g., DiSorbo v. Hoy, supra, 343 F.3d at p. 187.) The nature and size of the compensatory award here thus militates for a maximum award at the top of, but not significantly beyond, the single-digit range. A penalty of $50,000, though just exceeding the largest single-digit ratio amount, is in absolute size not extraordinary for fraudulent conduct. (See, e.g., Mathias v. Accor Economy Lodging, Inc., supra, 347 F.3d at pp. 677-678 [upholding $186,000 in punitives on a $5,000 compensatory award against wealthy corporate defendant for outrageous but not very harmful behavior]; McClain v. Metabolife International, Inc., supra, 259 F.Supp.2d at p. 1235 [Seventy-five thousand dollars would probably not be excessive in any gross fraud case, no matter how inconsequential the actual damages were].) But neither is it so minor, even accounting for San Paolo Holding's wealth, that it can be completely ignored, especially when imposed for conduct that led to no profit for the company; even a prosperous company would ordinarily take reasonable measures to prevent the recurrence of a $50,000 net loss. (See, e.g., Las Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal.App.3d 1220, 1255, 1 Cal.Rptr.2d 301 [$2 million award sends a forceful message even to defendants worth $500 million].) We therefore conclude $50,000 is, considering all the circumstances of this case, the maximum award of punitive damages consistent with due process.