Sunday, September 8, 2013

It's Really Malice, Fraud "and/or" Oppression...

Nickerson v. Stonebridge Life Ins. Co., No. B234271 (D2d3 Aug. 29, 2013)

In a case seeking punitive damages, the majority and dissent agree that the superior court should instruct on malice fraud or oppression as a single disjunctive concept instead of asking for separate special interrogatories.

In a bad faith insurance case, the jury found that the insurer had acted with fraud and awarded $19 million in punitive damages and a compensatory award of $35,000. The insurer challenged the constitutional adequacy of the award in both a motion for new trial and from JNOV. The trial court denied JNOV, but issued a remittitur, affording the plaintiff a choice between a new trial and a punitive award of $350,000, at the top of the 10:1 ratio suggested as the maximum appropriate by the U.S. Supreme Court’s Gore/State Farm line of cases. Plaintiff rejected the remittitur, which effectively resulted in the court granting a new trial on damages. Both parties appealed.

The big procedural issue in the case garners a footnote in the majority opinion, but occupies the bulk of Justice Croskey’s dissent. When instructing on Civil Code § 3294’s familiar “malice, fraud, or oppression” standard, the special verdict form asked separate interrogatories on each of malice, fraud, and oppression. The jury returned a “yes” verdict on fraud only. The majority, recognizing that such polling is unnecessary and has a potential to subject a verdict to post-trial attack, explained in a footnote that jurors should not be presented with a special verdict that makes distinct interrogatories on the three points. That said, on appeal, the parties agreed that a verdict on fraud alone was not necessarily inconsistent with a “no” finding on malice or oppression, so the majority thought that there was no need to upset the verdict and that reaching the issue would be an advisory opinion.

The dissent, however, declined to be bound by the parties stipulation, and, looking to the definitions in Civil Code § 3294(c) and CACI 3946, determined that—because by definition fraud always includes an intent to cause injury, and because the presence of such an intent meets the definition of malice, a fortiori—any finding of fraud would also require a finding of malice. Thus the jury’s finding of “yes” for fraud and “no” for malice constituted an irreconcilably inconsistent verdict. Justice Croskey noted, in agreement with the majority, that this all could be avoided by asking the jury a single question presented in the disjunctive, as provided in the CACI verdict form on punitive damages.

The other looming procedural issue—also mostly unaddressed by the majority—is whether the potentially excessive punitive damages should be addressed as a remittur/motion for new trial under Code of Civil Procedure § 662.5 or as a JNOV under § 629. The court of appeal reversed both the denial of the JNOV and the grant of the new trial motion, but offered very little in the way of explanation as to why it chose that result procedurally. Presumably, in holding that, based on the record evidence, a 10:1 ratio was the maximum that was constitutionally defensible, it was implicitly holding that there was no substantial evidence to justify anything more, and thus that granting JNOV was appropriate and a remand for a new trial on damages was unnecessary.

Reversed and new judgment entered.

Update: Review granted.

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