LAW OFFICES OF JEFFREY K. WINIKOW
1801 CENTURY PARK EAST
SUITE 1520
LOS ANGELES, CALIFORNIA 90067
(310) 552-3450
JEFFREY K. WINIKOW
ATTORNEY-AT-LAW
November 11, 2001
Clerk of the Court
California Court of Appeal
Division 4
350 McAlister Street
San Francisco, California 94102
Re: Henly v. Philip Morris (Case No. Case No. AO86991)
To the Clerk of the Court:
Pursuant to California Rule of Court 978, the California Employment Lawyers Association (CELA) hereby submits for filing a request that this Court to publish Section VIII of the opinion in Henly v. Philip Morris, Inc., Case No. AO86991 (San Francisco Superior Court No. 995172). CELA is a statewide organization of employee rights attorneys who primarily represent plaintiffs in employment termination and discrimination cases. CELA believes that meaningful punitive damages are absolutely necessary to deter California employers from violating the civil rights of their employees. Publication of the punitive damages portion of the Henly opinion is vital to ensure that those who oppressively treat their low wage workers continue to suffer meaningful punishment.
In In Re The Exxon Valdez, __ F.3d __, 01 CDOS xxx (Nov.7, 2001), the United States Court of Appeal for the Ninth Circuit purports to erect a constitutional barrier to punitive damage awards that exceed compensatory damages by an arbitrary 17-to-1 ratio. Indeed, according to the Exxon Valdez opinion, any punitive award that exceeds a 4-to-1 ratio becomes constitutionally suspect. In the absence of published authority from the California courts, trial courts will likely look to this Ninth Circuit opinion as the constitutional benchmark for punitive damages in this State. Given that compensatory damages for hourly workers tend to be very low (at least in comparison to economic damages for corporate executives who earn upwards of $500,000 per year), trial courts guided by the Exxon Valdez decision will rarely - if ever - permit meaningful punitive damages to stand in a situation involving a relatively small wage loss.
That the California courts are not bound to follow Ninth Circuit authority on matters of federal law is of little comfort when the Exxon Valdez opinion is allowed to go unchecked by any contrary authority. Trial courts will be guided by this decision, and trial courts will be mis-applying the law. In the end, employers will be able to discriminate, retaliate, and harass their low wage workers with relative impunity, knowing that regardless of the circumstances a trial court will likely deem unconstitutional any significant assessment of punitive damages in the face of a relatively minuscule wage loss. The California courts must take issue with the Ninth Circuit’s erroneous interpretation of the law, and do so in a published opinion if trial courts are to be given meaningful guidance in this developing area of the law.
1. California Courts Are Not Bound to Adopt the Ninth Circuit’s Interpretation of Federal Law
Although the Ninth Circuit has seemingly imposed a constitutional straight-jacket on punitive awards that exceed compensatory awards by as much as a 17-to-1 ratio, the California courts are not bound to adopt this interpretation of the law. See Irwin v. City of Hemet, 22 Cal.App.4th 507, 520 fn 8 (1994) (“On a federal question, the decisions of the United States Supreme Court are binding on state courts. However, the decisions of the lower federal courts, while persuasive, are not binding on us.”). The California courts should neither expressly nor impliedly endorse the Ninth Circuit’s erroneous interpretation of the law.
2. The Ninth Circuit’s Interpretation of Federal Law is Incorrect: The Constitution Does Not Compel an Arbitrary and Fixed Ratio Between Compensatory and Punitive Damages
As a constitutional matter, the Ninth Circuit’s Exxon Valdez opinion is incorrect. While the United States Supreme Court’s opinion in BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996) is the starting point for any inquiry into the constitutional limitations of punitive damage award, the ending point must rest with each state’s particular method for calculating such damages and ensuring proper notice to potential defendants. Indeed, the basis for the Supreme Court’s decision in Gore was that “BMW did not receive adequate notice of the magnitude of the sanction that Alabama might impose for [the wrongful conduct].“ Lacking such notice under Alabama law, the Gore court deemed the award therein to be unconstitutionally excessive.
The Ninth Circuit, however, has seemingly announced a national standard for the assessment of punitive awards. This is wrong. Under the United States Supreme Court’s rubric, the real question that California courts must address is whether a defendant received adequate notice of the magnitude of the sanction that California might impose for wrongful conduct.
In California, one of the touchstones for any punitive damage award has long been a defendant’s net worth. In California, punitive damage awards are supposed to be large enough that wealthy defendants can not absorb it “with little or no discomfort.” Neal v. Farmers Ins. Exchange., 21 Cal.3d 910, 928 (1978). And in California, this has led to punitive awards that have exceeded compensatory damages by as much as a 70-to-1 ratio. Id; Weeks v. Baker & McKenzie, 63 Cal.App.4th 1128, 1166 (1998). At bottom, it is the facts of each particular case, and the application of the three factors in Adams v. Murakami, 54 Cal.3d 105, 110 (1991), that dictate whether one has adequate notice of the magnitude of the sanction that California might impose for the particular conduct at issue.
In its Exxon Valdez decision, the Ninth Circuit seemingly adopted the very type of fixed ratio analysis that the United States Supreme Court rejected. Indeed, the United States Supreme Court has made it clear that there is no legitimate place for the type of straightjacket application of fixed ratios such as the one applied in the Exxon Valdez decision. Indeed, in Gore, supra, the Court stated that the ratio of punitive to compensatory damages will not be a factor in “most cases,” but that in the extreme case where “the ratio is a breathtaking 500 to 1" the award must raise a suspicious judicial eyebrow.” Even where the ratio is as wide as that, however, reversal is not necessarily warranted. TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 113 S.Ct. 2711 (1993) (affirming a $10 million punitive damage award where compensatory damages were only $19,000: a staggering 526:1 ratio).
Quite simply, the California courts should not be bound to follow the Ninth Circuit’s interpretation of the law – especially where it stands in marked conflict with both the United States Supreme Court and a wealth of California jurisprudence concerning punitive damages.
3. The Ninth Circuit’s Interpretation of Punitive Damages Law Will Eradicate Meaningful Punishment For Misconduct Directed at Low Wage Workers
By ignoring net worth, and by rigidly applying a fixed and arbitrary ratio between compensatory and punitive damages, the Ninth Circuit has erected an artificial barrier to punitive damages awards which smacks of class bias. Indeed, a corporate employer unlawfully discriminating or retaliating against its minimum wage workers needs to be punished as much - if not more - than when it mistreats its executives. However, minimum wage workers rarely experience six figure wage loss, which under the Ninth Circuit’s rigid calculus would permit a wealthy employer to skirt meaningful punishment in favor of the proverbial slap on the wrist.
The severity of punishment should relate to one’s conduct, not to the status of one’s victim. While compensatory damages are - by definition - tailored to one’s earning capacity, punishment should not be. If anything, the only constitutional issue that should be legitimately raised with a fixed ratio approach, which metes out punishment in direct proportion to a terminated employee’s wage rate, is whether such an approach violates fundamental principles of equal protection.
4. Publication of the Punitive Damages Portion of the Henly Opinion Is Necessary to Guide the Trial Courts Away From the Ninth Circuit’s Erroneous Pronouncement of Law
This Court’s analysis of how a California court should apply federal law in assessing the constitutionality of punitive damage awards is correct, and flies squarely in the face of the Ninth Circuit’s Exxon Valdez decision. Like the proverbial tree falling in the forest, unless this Court publishes the Henly decision it will offer absolutely no guidance to California trial courts when reviewing punitive awards upon post-trial motion. Instead, simply because it is published, the trial courts will likely rely upon the Exxon Valdez decision in the aftermath of the United States Supreme Court’s decision in Cooper Industries, Inc. v. Leatherman Tool Group, Inc. 532 U.S. 424,121 S.Ct. 1678 (2001) (appellate courts should review the constitutionality of punitive awards under a de novo standard of review).
There is currently a conflict between how the California courts assess the constitutionality of punitive damage awards, and how the Ninth Circuit has opined it should be done. Publication of the punitive damages portion of Henly is a necessary step in informing the State courts (i) that Exxon Valdez does not correctly state the law, (ii) that the California courts are not bound to follow that decision, (iii) that the California courts should not follow that decision, and (iv) that the California courts should continue to assesses the constitutionality of punitive damage awards without regard to a fixed and arbitrary ratio between punitive and compensatory damages. Accordingly, CELA respectfully requests that this Court publish Section VIII of this opinion.
Sincerely,
Jeffrey K. Winikow