Cal Biz Lit

Do California Courts Follow Federal Punitive Damages Guidelines?

Last month, Iowa Law School professor N. William Hines published a study of close to 500 nation-wide punitive damages awards between 2004 and 2011.  He and his researchers looked at all post-trial proceedings, including any appeals, trying to determine the extent to which the courts  were following the due-process mandates of State Farm Mutual Automobile Insurance Co. v. Campbell (2003) 538 U.S. 408,  BMW of North America, Inc. v. Gore (1995) 517 U.S. 559 and similar SCOTUS decisions.  Their conclusion:  yes, the courts seem to largely be reducing punitive damages awards in conformance with federal requirements.

Here at CBL, we were interested in whether this would hold for California cases.  There seems to be a vague belief outside the borders of the Golden State that our courts are, shall we say, kind of imaginative, and that the Ninth Circuit freely engages in nose-thumbing in the direction of East Capital and First Street NE. Are these views accurate when it comes to punitive damages awards?

Professor Hinds was kind enough to provide an Excel spreadsheet of all his data.  The crack CBL data processing division stripped out all the non-California cases, leaving us with 66 State and Federal California cases involving punitive damages.  What did we find?  To the extent we can measure due process by the final ratio between compensatory and punitive damages, and to the extent that there is a bright line at a ratio of 9, as State Farm suggests, our courts seem to be generally following the law.  The following chart shows what we found.

There were two ratios of 10 or more from the State Courts, and two from the Federal Courts.  One case involved a jury award of $5,000 compensatory damages and $1.7 million punitive damages, a ratio of 340 to one.  The Court of Appeal reduced the punitive damage award to $50,000, resulting in a 10 to 1 ratio.  In two of the cases, the compensatory awards were nominal -- $1 or $2 -- with very large punitive awards.

Many thanks to Professor Hines for sharing his data.  And hat tip to California Punitive Damages, an Exemplary Blog for its July post on his article, entitled "Marching to a Different Drummer?  Are Lower Courts Faithfully Implementing The Evolving Due Process Guideposts to Catch and Correct Excessive Punitive Damages Awards?"

What's New At Cal Supremes

Here are a couple of updates on cases CBL has reported on over the last few months.

First, under the category "Court of Appeals Pokes SCOTUS in Eye," binding arbitation division, CBL reported on July 14 about Brown v. Ralph's Grocery Stores (July 12, 2011) ___Cal.App.4th ___ (2nd Dist., B222689) wherein the Court of Appeals used some extremely convoluted reasoning to try to get around the US Supremes' disapproval of  Discover Bank v.  Superior Court (2005) 36 Cal.4th 148.  The Brown court essentially tossed a  binding arbitration provision with a class action waiver in an employment action brought under California's Private Attorney General Act.  The employer has petitioned the Cal Supremes for a hearing.  They have until November 21 to grant or deny a  hearing (if they grant themselves a 30-day extension).  The Cal Supremes' case number is S195850.

Second, under the category "Who just took my $15 million verdict away?" ancient precedent division, CBL reported in March on Leung v. Verdugo Hills Hospital (now an unciteable case) where the Court of Appeal relied on some very old authority to hold that release of one defendant in a multi-defendant lawsuit could result in the release of all defendants.  The Court of Appeal begged the Cal Supremes to take the case up.  The Cal Supremes have obliged and granted a hearing, and the first brief on the merits is due September 7.  The Cal Supremes' case number for this one is S192768.

Stay tuned.  CBL will keep you up to date.

Cal Supremes Decide Howell v. Hamilton Meats . . . . Correctly

So CBL had lots of posts about this issue, and lots of detail (if this all fascinates you, try this link, which has more links, where you'll find still more links, etc.), but frankly, the question is really simple:

You're a plaintiff in a tort. case.  You have bills from the doctor and hospital for $100K.  Your health insurance carrier pays them $15K, and they accept that as payment in full.  What do you get at trial, $100k in special damages, or $15K in special damages?

CBL's collegeague Georges Haddad went to the Cal Supremes hearing on this, and his crystal ball said the defense would win -- the answer was $15K.

Georges didn't get the last word -- the Cal Supremes did.  And turns out, Georges was right:

When a tortiously injured person receives medical care for his or her injuries, the provider of that care often accepts as full payment, pursuant to a preexisting contract with the injured person‘s health insurer, an amount less than that stated in the provider‘s bill.  In that circumstance, may the injured person recover from the tortfeasor, as economic damages for past medical expenses, the undiscounted sum stated in the provider‘s bill but never paid by or on behalf of the injured person?  We hold no such recovery is allowed, for the simple reason that the injured plaintiff did not suffer any economic loss in that amount.

Howell v. Hamilton  Meats (August 18, 2011) ___ Cal.4th ___.  End of story.  Plaintiff gets what was paid, not what was billed.  Correct result, sez CBL. 

Cal Biz Lit Re-emerges From Under Rock

Here at CBL, we were pretty overwhelmed with our day job for a number of weeks, and then left town with Mrs. CBL to lie on a beach for a week reading books about rock and roll and baseball.  All of which means it’s been awhile between posts. 

Meanwhile, the legal wheels in California (and all over the country) kept spinning along.  Here are a few glimpses of what’s new:

Class Actions:  Those who do not themselves live under rocks already know that the US Supremes poleaxed the employment discrimination case against Wal-Mart Stores in  Wal-Mart Stores, Inc. v. Dukes, No. 10–277, (U.S. June 20, 2011).  CBL thinks this decision may have some major impacts in California consumer litigation, and will have a post devoted to that subject coming soon.

Medicare Reporting:  A district court judge in Arizona took a big swipe at CMS’s practice of demanding that plaintiff’s and their attorneys cough up Medicare reimbursements when the amounts are contested.  Haro v. Sebelius, No. CV 09-134 TUC DCB, (D. Az., May 5, 2011).  The court granted summary judgment and class certification, ruling:

• . . .  Defendant's demand for payment of her MSP reimbursement claims, under threat of collection actions before there has been a resolution of an appeal regarding the amount of the Defendant's MSP claim or a waiver request, exceeds her authority under the Medicare statute, and Defendant is enjoined from demanding payment of a MSP reimbursement claim with threats of commencing collection actions before there is a resolution of an appeal or waiver request.

and

• . . . Defendant's demand that attorneys withhold liability proceeds from clients pending payment of amounts claimed by the Defendant as MSP reimbursement exceeds her authority under the Medicare statute, and Defendant is enjoined from demanding that attorneys withhold liability proceeds from their clients pending payment of disputed MSP reimbursement claims.

CMS has suspended the use of its heavy-handed “Rights and Responsibilities” letters, but NB:  all of the obligations on both sides to protect the interests of Medicare, and all of the MMSEA reporting requirements, are still in effect.

Civil Procedure:  Hey there, defense counsel.  You won an order granting summary judgment.  Good for you. But that’s not a “judgment.”  You still have to get the court to sign one of those.  And if you don’t, the plaintiff can get a writ of mandate from the Court of Appeal forcing the trial court to sign one.  That way, the plaintiff has a judgment to appeal from. Even if it's a year or more after the motion was granted. Davis v. Superior Court (City of Los Angeles), No. B230666 (Second Dist., Div. Eight, June 13, 2011).

Torts/Personal Injury Practice:  Nineteen years ago, in Knight v. Jewett (1992) 3 Cal.4th 296, the Cal Supremes pretty much reinvented the legal defense of “assumption of risk.” They held that assumption of risk was a complete defense to some personal injury actions involving sports and other rough activity involving inherent risks.  Put somewhat simplistically, the court held that the doctrine barred liability for injuries arising out of such activities, including acts or omissions that increased the risk, based on a judicial determination of 1) the nature of the activity or sport, and 2) the relationship between the parties.  So, unless the injury is inflicted intentionally, there’s usually no recovery for injuries caused by touch football games, baseball, skiing, fencing, raquet ball, etc. 

Which brings us to Nalwa v. Cedar Fair, LP, No. H034535 (Sixth Dist., June 10, 2011).  Dr. Nalwa went to Great America Amusement Park and rode the bumper cars.  The bumper cars ran into each other (Surprise!)  She broke her wrist.  She sued.  The trial court granted summary judgment on the basis of the assumption of risk doctrine.  The Court of Appeal reversed, holding the doctrine didn’t apply to bumper cars.  CBL’s prediction:  if the case doesn't settle, this goes to the Supremes and they either reverse or depublish.

Big Ol’ Product Liability Verdict:  And finally, from the Cal Biz Lit schadenfreude files, a $30 million product liability verdict in Butte County Superior Court (which used to be referred to as one of the “cow county courts”).  Design defect case against MasterCraft Boat Co. on a stability theory.  Really bad propeller injury (27 year old woman, loss of eye, frontal lobe damage, skull fracture).  Boat operator had been drinking, wasn’t legally drunk, was held for 20%.  But he’d apparently paid his $1 million policy for a covenant not to execute, meaning plaintiff intends to collect all the rest from MasterCraft.  The operator’s lawyer said he felt “vindicated.”  And in the now famous words of losing defense lawyers everywhere (and CBL has been there, done that, owns the T-shirt) MasterCraft’s attorney announced that "Obviously, we are very disappointed in the outcome," and they would explore their “appellate options.”

 

Supreme Court Visits Hanif: Looks As Though The Defense Is Winning

At times, it has seemed like this blog should be called "Medical Specials Recovery Blog."  CBL has blogged many times on this question:  "Just what does a personal injury plaintiff get when her medical bills are $200,000 but the hospitals and doctors have deals with the insurance companies, Medicaid (or MediCal as we Californians call it) or Medicare to take a whole bunch less as payment in full?"  Some of the previous posts are here,  here, here and here.

Well, yesterday the Cal Supremes heard argument on the question.  CBL's colleague Georges Haddad attended the argument, and here, in a guest post, are his summary and tea-leaf reading:

Defendant Hamilton's truck driver crashed into Ms. Howell, causing severe spinal injuries that required treatment at two medical facilities.  At each medical facility, Ms. Howell signed agreements that she would be responsible for the medical charges – standard hospital contractual language.  The parties stipulated at trial that the amount of medical expenses billed was $189,824.68. 

The jury awarded Ms. Howell the full stipulated amount as past medical expenses.  Post trial, Hamilton moved pursuant to Hanif v. Housing Authority of Yolo County to reduce the awarded to the amount paid by Ms. Howell’s insurers - $59,537.78.  Hamilton supported its motion with declarations from the two treating facilities that showed Ms. Howell no longer owed them money.  The trial court granted Hamilton’s motion and reduced the award from past medical expenses to the amount paid by Ms. Howell’s insurers.  The Court of Appeal upheld the trial court.

The Supreme Court framed the issues presented as follows:

(1) Is the “negotiated rate differential” – the difference between the full billed rate for medical care and the actual amount paid as negotiated between a medical provider and an insurer – a collateral source benefit under the collateral source rule, which allows plaintiff to collect that amount as economic damages, or is the plaintiff limited in economic damages to the amount the medical provider accepts as payment?

(2) Did the trial court err in this case when it permitted plaintiff to present the full billed amount of medical charges to the jury but then reduced the jury’s award of damages by the negotiated rate differential?

In answer the first questioned posed, I believe that a divided court, most like lead by Justice Kennard or Chin, will answer the question that a plaintiff is entitled to  the amount  the medical provider accepts as payment. As defined by the court, the “negotiated rate differential” is never incurred by the plaintiff, and therefore is not recoverable as damages

Planitiff argued that there are situations, such as with a person who is uninsured, where there is no negotiated rate available for determination and therefore the reasonable cost for the services may be examined to ensure that there is no “windfall.”  Noting that no two plaintiffs are alike, counsel for the defense argued that in the case of the uninsured, the damages would still be the amount paid or accepted as satisfaction by the medical facility. 

The justices seemed to agree  that  the collateral source rule survives the defendant's proposed approach, since judgment is not reduced by the sum contributed by a third party.  When an insurer pays $50K on behalf of the plaintiff for a procedure that can cost $100K, the damage to the plaintiff is still $50K.  Because the $50K was paid by the plaintiff’s insurer, it cannot be deducted from the judgment under the collateral source rule. 

As to the second question, the Justices barely touched on the subject, other then Justice Corrigan, who questioned whether the case should be sent back to the trial court with instructions.

 

 

 

How To Make a $15 Million Verdict Fly Away

[August 25, 2011 Update:  The Cal Supremes granted a hearing of this case on June 8.  Opening brief on the merits is due on September 8.]

There are lots and lots of multi-defendant tort cases in California.  And in many of them, some defendants settle without getting a good faith order under Code of Civil Procedure section 877.6, leaving other defendants to go to trial.  What if I were to tell you that, when that happens, the first defendant who takes a release wipes out most of the plaintiff's case against the other defendants?  I'm going out on a limb here and telling you that's the law.

Work with me here for a minute.  This is kind of inside baseball, but for those of you in the tort world, it's worth taking a look at.  Our case for today is called Leung v. Verdugo Hills Hospital (March 23, 2011) ___Cal.App.4th___ (Court of Appeals, 2nd Dist., B204908).

  Medical malpractice case v. doctor and hospital.  (If you do tort work but not med mal, keep reading anyway -- the med mal part doesn't matter). Catastrophic and tragic injury to newborn.  Doctor and plaintiff settle for doctor's $1 million policy, on condition that doctor sits as a defendant at trial.  Jury awards $250K in non-economic damages (the maximum under California's med mal reform statutes) and a thumping $15.2 million in economic damages (past and future medical, future lost earnings, etc., everything reduced to present cash value).  Jury finds doctor 55% at fault, hospital 40% and parents 5%.  But since California is a joint and several state for economic damages, the hospital is on the hook for (a) 40% of the $250K; (b) all of the $15.2M, less (c) about $10,000 from the doctors' settlement (just trust CBL on this -- we'll explain it some other time, and how the math works isn't the point of this case or this post). 

Instead, the point is this:  The case goes to the Court of Appeals, which takes all of the $15M+ in economic damages away.  Why? Because the Plaintiff's release of the doctor for the $1M policy is deemed a release of the hospital.

CBL hears you ask:  How did this happen and what does it mean to me?  Go the jump, and all will be revealed.

Court of Appeal Issues New Tort Decision On Fault Allocation

    Today, Cal Biz Lit presents a guest post from Adams | Nye partner Barbara Adams.  Barbara discusses a new case allowing apportionment of fault to the U.S. Navy, even in situations where the Navy can't be sued.

    In California, since the passage of Proposition 51 (Civil Code §§ 1431 and following) in 1986, defendants in personal injury cases have been liable for non-economic damages only according to their share of “fault” as found by the jury at trial.  It is, of course, to the advantage of the defense to have as many entities as possible on the verdict form to whom the jury can attribute “fault” for the plaintiff’s injuries.  In 1992, the California Supreme court held that even if employers could not be used, they were entities to whom a share of “fault” could be attributed (DaFonte v. Up-Right, Inc. (1992) 2 Cal.4th 593.)  In 2003, a California Appellate Court held that, even if the plaintiff cannot recover damages from the Navy, the Navy is an entity to whom the jury can allocate “fault” (Taylor v. John Crane, Inc. (2003) 113 Cal.App.4th 1063.) 

    In 2008, in a trial in Alameda County Superior Court,  plaintiffs’ counsel managed to convince the trial judge that Taylor no longer applied, and after the defendant had offered lots of evidence of Navy fault, the Navy  could not be on the verdict form at all.

    The plaintiffs in the most recent case were the wife and daughter of Ulysses Collins, who died of mesothelioma in 2005.  He had worked as a welder at the Hunters Point Naval Shipyard from 1960 to 1973, and at Mare Island Naval Shipyard from 1976 to 1994 (from 1973 to 1976, he worked at an oil refinery.)  At the close of evidence, plaintiffs’ counsel moved for a directed verdict as to the Navy, arguing that, pursuant to Munoz v. City of Union City (2007) 148 Cal.App.4th 173, the Navy enjoyed sovereign immunity, without exception, and thus could not be listed on the verdict form.  The trial Judge agreed.  During deliberations, the jury asked why the Navy did not appear on the verdict form as an entity to whom they could allocate fault, and they were instructed that they could not apportion to the Navy as a matter of law.  The jury found Plant Insulation 20% at fault, in a verdict that included $1.8 million in non-economic damages (that’s $360,000 in liability, with no ability for set off), and $1,038,000 in economic damages (I would tell you what the set-off was, but the wording of the decision makes no sense whatsoever.)

    Appeal followed, resulting in last week's decision in Collins v. Plant Insulation Co. (June 3, 2010) ___Cal.App.4th___ Case  (California Court of Appeal No. A124268), overturning the trial court’s decision.   As the Collins Court explained, the difference between the holding in Munoz  and Taylor is that the former case held that there was an absence of duty, and thus a true absence of fault, where in the latter instance, there was only a decision that the Navy cannot be sued in civilian court, not an abrogation of fault. 

    The clearest case on this issue, cited by the Collins court, is Richards v. Owens Illinois (1997) 14 Cal.4th 985.  There, a defendant in an asbestos case attempted to have non-party tobacco companies on the verdict form for fault allocation.  The California Supreme Court held that fault could not be allocated to tobacco companies.  At that time, California barred suits against tobacco companies (a ban that has since been lifted).  The Supreme Court reasoned that the legislature had not just granted the tobacco companies immunity from suit;  it  had declared that the tobacco companies did not owe, and therefore could not breach, a duty to smokers.   Thus, there was no “fault” to allocate.

    The Court also distinguished Munoz.  In that police unreasonable use of force case,  the jury allocated fault both to the police officer for unreasonable use of force, and to the City of Union City for vicarious liability.  But the Court of Appeal held that, based provisions of the California Government Code designed to shield public entities from liability, the City owed no duty to the decedent, and therefore could not have any share of “fault.” 

    Plaintiff’s counsel in Collins attempted to construct a "sovereign immunity" parallel between Munoz and their case, arguing that since  sovereign immunity means, “the king can do no wrong”, then the Navy, like tobacco companies and the City of Union City, had no potential duty, and thus no “fault.”  But the Court held that the Navy can act "wrongfully" and still be immune.  And that .   British concepts of sovereign immunity don't, and never have, applied in the U.S..

    In conclusion, if you hope to add an unusual party to the verdict form in your trial, an entity that cannot otherwise be sued for this injury, be ready to examine the basis of that immunity.  Is it just immunity from suit, or complete lack of  duty, and thus fault?

Cal Supremes To Decide Personal Injury Reduced Medical Specials Issue

CalBizLit has posted on numerous occasions on the cases addressing this question:  "Just what does a personal injury plaintiff get when her medical bills are $200,000 but the hospitals and doctors have deals with the insurance companies, Medicaid (or MediCal as we Californians call it) or Medicare to take a whole bunch less as payment in full?"  Previous posts are here,  here and here.   The defense has Hanif v. Housing Authority (1988) 200 Cal.App.3d 635 and Nishihama v. City and County of San Francisco (2001) 93 Cal.App.4th 298  both holding that the plaintiff only gets the medicals that were actually paid.  After a concerted effort, the plaintiff side had Howell v. Hamilton Meats &  Provisions holding to the contrary:  that the plaintiff could recover the entire amount billed, regardless of what the providers too as payment in full.

But no more.  Last week, the Cal Supremes granted a hearing in Howell, describing the issues to be decided as follows:

(1) Is the "negotiated rate differential" (the difference between the full billed rate for medical care and the actual amount paid as negotiated between a medical provider and an insurer) a collateral source benefit under the collateral source rule, which allows plaintiff to collect that amount as economic damages, or is the plaintiff limited in economic damages to the amount the medical provider accepts as payment? (2) Did the trial court err in this case when it permitted plaintiff to present the full billed amount of medical charges to the jury but then reduced the jury's award of damages by the negotiated rate differential?

So Howell is no longer citeable authority, and until the Supremes decide (many months from now), the only published decisions on these questions are the Hanif and Nishihama, both favoring the defense.

Blockbuster Punitive Damage Awards: California Leads The Way!

    Alison F. Del Rossi and W. Kip Viscusi have a recent article on "blockbuster punitive damages awards" up at Social Science Research Network.  This is the first time CBL has run across Dr. Del Rossi.  Dr. Viscusi writes extensively on punitive damages, and co-authored (with U. of Chicago's Cass Sunstein and others) the book Punitive Damages: How Juries Decide.  The book is a pretty interesting read, finding that the best predictor for how high the punitive award goes is how much the plaintiff attorney had the nerve to ask the jury for.  In other words, the plaintiff doesn't necessarily get what he asks for, but the more he asks for, the more he gets.

    Anyway, back to the article, this is full of all kinds of distributions and trends and means and medians and ratios and regressions and p-values and chi-squared tests and other barnburners like that, all intended to show that in cases where the punitive award is $100 million or more, jury awards -- not just judgments -- are trending downward since SCOTUS's State Farm v. Campbell decision.  For us California-centric types, though, Table 3 is the most interesting:  it shows 99 "blockbuster" punitive awards from 1985 to 2008.  Twenty-one are in California, twenty are in Texas.  The next highest number for any state is Alabama, with six.

    Hat tip to Horvitz and Levy's California Punitive Damages, an Exemplary Blog.

SF Chron Reports On The Personal Injury Reduced Medical Specials Issue

    Cal Biz Lit has been following the trail of cases addressing what happens when a successful personal injury plaintiff had his or her medical bills paid by insurance, and the insurer has a deal with the providers to reduce fees to a pre-negotiated rate.  As CBL has posted here and here, the question is whether the plaintiff recovers the amounts the providers accept as full payment, or the amounts they initially billed before the write-offs. 

    This morning's San Francisco Chronicle has coverage of the issue, and the new decision in Howell v. Hamilton Meats & Provisions, Inc. (November 23, 2009) ___ Cal.App.4th ___ (Fourth Dist., D053620), here.

    As the Chron points out, Howell was the result of an aggressive campaign by the California plaintiff bar to find suitable cases and attack this issue in the Courts of Appeal.  There are three other cases on this issue pending in appellate courts.  And the Chron also quotes predictions, accurate in CBL's view, that this issue is headed to the Cal Supremes.