Some updates on punitive damages

Today the California Supreme Court filed its Opinion in Roby v. McKesson, 2009 WL 4132480.  In Roby, the jury found plaintiff was wrongfully discharged due to her medical condition and related disability.  It awarded Roby $3,511,000 in compensatory damages and $15 million in punitive damages on her claims of harassment and discrimination against defendant McKesson.  Roby also obtained an award of $500,000 in compensatory damages and $3,000 in punitive damages against the harassing supervisor.

The Court of Appeal was unpersuaded there was sufficient evidence of harassment and reduced the compensatory damages to $1,405,000.  It also found the punitive damage award was excessive under federal constitutional standards and reduced it to $2 million.

The California Supreme Court found the jury's noneconomic damages awards to be hopelessly ambiguous, but plaintiff conceded this issue rather than face a new trial, a concession the defendants accepted.  The Court rejected the Court of Appeal's determination that the record was insufficient to support the harassment verdict.  Finally, the Court agreed that the punitive damages exceeded the federal constitutional limit, but disagreed with the limit set by the Court of Appeal (1.42 times the reduced compensatory damages of $1,405,000), reducing the amount even further, and stating, "We hold that in the circumstances of this case the amount of compensatory damages sets the ceilings for the punitive damages."  (Opn., pg. 2)

The Court applied the three guideposts set forth in State Farm Mut. Auto Ins. Co. v. Campbell (2003) 538 U.S. 408, including the five reprehensibility factors, and concluded McKesson's reprehensibility was at the low end of the range of wrongdoing.  It also concluded the compensatory damages might include punitive damages.  As such, where the compensatory damages are substantial, the Court stated "then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee." (Opn., pg.  38; State Farm, supra, 538 U.S. at p. 425.)  The punitive damages against McKesson were modified to $1,905,000.  The Court also ordered the trial court to reinstate the jury's $3,000 punitive damage award against plaintiff's supervisor.

The Opinion was written by Justice Kennard and Chief Justice George, and Justices Baxter, Chin and Corrigan concurred. Even though the Court concluded a 1:1 ratio is the federal constitutional limit, it noted, "We based this conclusion on the specific facts of this case." (Opn., pg. 39)

Justice Werdegar wrote a concurring and dissenting opinion, in which Justice Moreno concurred, opining that McKesson's reprehensibility was significantly higher.  Justice Werdegar's award would have been $3.8 million, for a 2:1 ratio.  She pointed out the "unusual task" given to the appellate court to make a "culpability assessments independently" on the basis of a factual record.  Because the appellate courts make their decisions on the "cold record" rather than based on live testimony, Justice Werdegar noted the appellate court "is not as well situated as the jury or trial court to make a fine-tuned culpability judgment about conduct that has been the subject of a trial. "  As such, review should be "performed modestly and with caution."  (Dissenting Opn., pg. 2)

She notes that appellate courts do not sit as a replacements for the jurors but as a check on arbitrary awards.  (Ibid.) Justice Werdegar did not necessarily believe the large noneconomic damages award had a punitive component, and believed the majority failed to consider McKesson's wealth, noting McKesson was #38 on the Fortune 500 and had a market value of $5 billion.  Certainly the reduced punitive damage award could not have a truly deterrent effect on McKesson.

I agree with Justice Werdegar's assessment that fixing a constitutional maximum is a "lamentably inexact enterprise."  (Dissenting Opn., pg. 6.)  But since the difference between highest award, which would have been given by Justice Werdegar (representing a 2:1 ratio), compared to the lowest by the California Supreme Court, represents a difference of over $1.8 million, one might assume that this fact alone demonstrates how the appellate courts may be exceeding their roles in determining the highest constitutionally permissible award, and instead, the courts are deciding the proper amount as if they were replacement jurors who did not have the benefit of actually attending the trial.  But neither award, representing $11.2 million less than the jury's award, will cause McKesson to lose much corporate sleep.