Nolan v. Ford Motor Company CA4/2 (2022) · DecisionDepot
Nolan v. Ford Motor Company CA4/2
California Court of Appeal May 13, 2022 No. E073850Unpublished
Filed 5/13/22 Nolan v. Ford Motor Company CA4/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
SHAWN NOLAN et al.,
Plaintiffs and Appellants, E073850
v. (Super.Ct.No. RIC1307491)
FORD MOTOR COMPANY, OPINION
Defendant and Appellant.
APPEAL from the Superior Court of Riverside County. Daniel A. Ottolia, Judge.
Affirmed in part, reversed in part, and remanded with directions.
Lewis Brisbois and Paul Efstratis; Sanders Roberts, Justin H. Sanders, and Sabrina
C. Narain; and Jones Day, Nathaniel P. Garrett, David J. Feder, Margaret A. Maloy, and
Emily F. Knox for Defendant and Appellant.
Rosner, Barry & Babbitt, Hallen D. Rosner, and Arlyn L. Escalante; Knight Law
Group, Roger R. Kirnos, Lauren A. Ungs, and Christopher E. Swanson; the Altman Law
Group and Bryan C. Altman; Greines, Martin, Stein & Richland, Cynthia E. Tobisman
for Plaintiffs and Appellants.
1
Husband Jerry Nolan and wife Shawn Nolan bought a new Ford Excursion1 from
a Ford dealership. They chose to buy it with a 6.0-liter diesel engine (6.0L engine),
damages for same conduct does not violate due process].)
Because the question is close, we assume, without deciding, that overlapping
punitive damages awards do violate due process. On that assumption, it is irrelevant that
both the Song-Beverly Act and the CLRA state that the remedies they provide are
cumulative; regardless of the wording of the relevant statutes, and regardless of the
legislative intent, “a statutory penalty [that] . . . penalizes essentially the same conduct as
an award of punitive damages” (Fassberg Construction Co. v. Housing Authority of City
of Los Angeles, supra, 152 Cal.App.4th at pp. 759-760) is unconstitutional.
A statutory penalty under the Song-Beverly Act “is imposed as punishment or
deterrence of the defendant, rather than to compensate the plaintiff,” and therefore “is
akin to punitive damages. [Citation.]” (Kwan v. Mercedes-Benz of North America, Inc.
(1994) 23 Cal.App.4th 174, 184.) The key question is whether the statutory penalty and
the award of punitive damages “penalizes essentially the same conduct . . . .” (Fassberg
Construction Co. v. Housing Authority of City of Los Angeles, supra, 152 Cal.App.4th at
pp. 759-760.)
First, we discuss what “the same conduct” means in this context; second, we
discuss whether the two awards here were based on “the same conduct,” as thus defined.
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A. The Legal Standard for Whether Two Awards of Punitive Damages
“Penalize[] Essentially the Same Conduct.”
“The same conduct,” on its face, seems pretty clear. It means the conduct giving
rise to liability for punitive damages — i.e., the conduct being penalized. This is the
conduct that satisfies the elements of the cause of action, and that must be accompanied
by malice, oppression, or fraud.
That was the situation in Clauson v. Superior Court (1998) 67 Cal.App.4th 1253.
There, the plaintiffs asserted causes of action for invasion of privacy and for violation of
Penal Code section 637.2, subdivision (a), both based on the defendants’ conduct of
wiretapping one plaintiff’s phone and thus eavesdropping on conversations between him
and the other plaintiffs. (Id. at p. 1255.) The appellate court held that, if the plaintiffs
prevailed, they would have to elect between punitive damages on the invasion of privacy
claim or a statutory penalty under the Penal Code section. (Id. at p. 1256.)
Likewise, in Marshall v. Brown (1983) 141 Cal.App.3d 408 (Marshall), the
plaintiff asserted causes of action for slander and for misrepresentation preventing
employment, in violation of Labor Code section 1050, both based on a letter the
defendants had sent. (Marshall, supra, at pp. 411-412.) The appellate court held that the
plaintiff would have to elect between punitive damages on the slander claim and a
statutory penalty under the Labor Code claim. (Id. at p. 419.)
Ford argues that “the same conduct” means the defendant’s entire “unified course
of conduct, even if multiple and distinct acts are involved.” It cites In re Northern Dist.
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of California Dalkon Shield IUD Products Liability Litigation, supra, 526 F.Supp. 887
(Dalkon). Dalkon said, “Common sense dictates that a defendant should not be subjected
to multiple civil punishment for a single act or unified course of conduct which causes
injury to multiple plaintiffs.” (Id. at p. 900, italics added.) However, it also said, “A
defendant has a due process right to be protected against unlimited multiple punishment
for the same act.” (Id. at p. 899, italics added.)
More to the point, in Dalkon, there was simply no issue as to the scope of the bar
on overlapping punitive damages. The court mentioned it only because, in the case
before it, it was a factor in favor of certifying a class, because that would prevent
overlapping awards. (Id. at pp. 898-900.) “It is axiomatic that cases are not authority for
propositions that are not considered. [Citation.]” (California Building Industry Assn. v.
State Water Resources Control Bd. (2018) 4 Cal.5th 1032, 1043.)
Ford also cites Troensegaard, supra, 175 Cal.App.3d 218. In Troensegaard, the
plaintiff bought a motorhome manufactured by the defendant; the motorhome was
defective because it gave off formaldehyde fumes. (Id. at pp. 223-224.) The defendant
had an engineering company examine the motorhome, but it refused to release the
resulting report to the plaintiff. (Id. at p. 224.) She sued for products liability, fraudulent
concealment, and for violation of the Song-Beverly Act. (Id. at pp. 220-221, 226.)
The appellate court upheld an award of punitive damages because “intentional
concealment from plaintiff of the high level of formaldehyde fumes found in the
mobilehome, and its failure substantially to comply with its express warranty by taking
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appropriate corrective action or otherwise making Mrs. Troensegaard whole, was
reasonably found by the jury to constitute ‘oppression, fraud, or malice’ with a
‘conscious disregard of the plaintiff's rights.’” (Troensegaard, supra, 175 Cal.App.3d at
p. 226.)
It also held, however, that the plaintiff could not recover both punitive damages
and a statutory penalty under the Song-Beverly Act. (Troensegaard, supra, 175
Cal.App.3d at pp. 226-228.) It said, “Each of the awards was based upon substantially
the same conduct of [the defendant].” (Id. at p. 226.)
One justice dissented, in part. As he saw it, “the punitive damages award was
based not on the same conduct evidencing wilful noncompliance but on the separate and
distinct theory of fraudulent concealment of the unfavorable . . . report; and the jury so
specially found. That special finding, adequately supported by the evidence,
independently justified an award of punitive damages under Civil Code section 3294.
Each award rests on a separate factual basis and legal theory involving more than a single
kind of actionable conduct entitled to be redressed in damages.” (Troensegaard, supra,
175 Cal.App.3d at p. 230 [dis opn. of Racanelli, J.].)
According to Ford, Troensegaard means that the bar to overlapping punitive
damages applies to its whole course of conduct, as shown by the evidence. It claims that,
by rejecting the dissenting justice’s view, the Troensegaard majority essentially also
rejected the Nolans’ position that the two awards here are based on separate and distinct
conduct.
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That is not how we read Troensegaard. In the view of the majority, the punitive
damages award was based on both the fraudulent concealment claim and the Song-
Beverly claim; therefore, it was based on the same conduct as the Song-Beverly statutory
penalty. In the view of the dissent, it was based only on the fraudulent concealment
claim, and therefore on different conduct. Without the record in Troensegaard, it is hard
to say who had the better of this argument. We can say, however, that both sides focused
— as we do — on the conduct that gave rise to the punitive damages.9
Ford also argues, alternatively, that a statutory penalty and punitive damages are
“based on the same conduct” if they arise out of the violation of a single “primary right.”
It cites two cases that referred to a statutory penalty and punitive damages arising out of
“the same cause of action.” (Los Angeles County Metropolitan Transportation Authority
9 The dissent is laconic. Its statement that the punitive damages award was not based on the “conduct evidencing willful noncompliance” seems to mean that it was not based on the Song-Beverly claim at all.
It is possible, however, that the dissenting justice was saying (in an awkward way) that, as long as the punitive damages award was based on both the fraudulent concealment and Song-Beverly claims, it could be deemed to be based on the former, and hence to be based on different conduct from the latter.
If so, we would agree with the dissent, and not with the majority. If a punitive damages award on the Song-Beverly claim had to be struck down as duplicative, a punitive damages award on the fraudulent concealment claim could still stand.
Similarly, in this case, as already mentioned, the Nolans concede that the award of punitive damages on the promissory fraud claim is duplicative. If it stood alone, it would have to be struck down. However, we may sustain the award of punitive damages based on the CLRA claim.
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v. Superior Court (2004) 123 Cal.App.4th 261, 268 (Los Angeles); Marshall v. Brown,
supra, 141 Cal.App.3d at p. 418.)
There are several problems with this. First, the references in both Los Angeles and
Marshall were in passing. They were not intended to define the scope of the rule against
overlapping punitive damages. Once again, cases are not authority for propositions that
are not considered. (California Building Industry Assn. v. State Water Resources Control
Bd., supra, 4 Cal.5th at p. 1043.)
Second, “cause of action” is a notoriously slippery term. It may refer to each
count of a complaint, which states a distinct legal theory. It may also refer to each
distinct harm or injury asserted by the plaintiff. (See generally Boeken v. Philip Morris
USA, Inc. (2010) 48 Cal.4th 788, 798.) When used in the latter sense, “[u]nder the
‘primary rights’ theory, a cause of action arises from the invasion of a primary right.”
(DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 818, fn. 1.) The “primary rights”
definition of a cause of action is significant primarily in the field of res judicata. (Boeken
v. Philip Morris USA, Inc., supra, at p. 798.) It is not clear in which sense Los Angeles
and Marshall were using the term, but it seems most likely to have been in the pleading
sense.
It would make no sense to state the rule against overlapping punitive damages in
terms of the plaintiff’s “primary right.” In applying the rule against overlapping
compensatory damages, the focus is on the harm to the plaintiff. “‘The primary object of
an award of damages in a civil action . . . is just compensation or indemnity for the loss or
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injury sustained by complainant, and no more.’ [Citations.]” (Estate of De Laveaga
(1958) 50 Cal.2d 480, 488, italics added.) However, in applying the rule against
overlapping punitive damages, the focus is on the harmful conduct of the defendant. The
punitive damages should be sufficient to deter such conduct, but no more. If the
defendant harms the plaintiff by lying about a defective truck, and if it thereafter harms
the plaintiff by failing to fix the defective truck, a jury can fairly decide that double
deterrence is necessary.
As contrary authority, Ford cites Holmberg v. Morrisette (8th Cir. 1986) 800 F.2d
205, cert. den. (1987) 481 U.S. 1028. There, the defendants wrongfully drew down a
letter of credit issued by plaintiff Holmberg by submitting false and misleading
documents. (Id. at pp. 207-208.) The plaintiff sued the defendants for, among other
things, fraud and conversion. (Id. at p. 208.) The appellate court, applying Minnesota
law (see id. at p. 211), said: “[A] recovery of compensatory damages on both the fraud
and conversion claims clearly would be duplicative and should not be allowed.
Holmberg has suffered only one injury — the wrongful drawing down of his letter of
credit — and is entitled to be compensated for that injury only once. Similar reasoning
applies to the question of punitive damages on both the fraud and conversion
claims. Fraud and conversion are separate legal theories of liability, but in reality
defendants have injured Holmberg only once. Accordingly, they are to be punished only
once, not as many times as there are separate legal theories that have been found to fit the
case.” (Id. at p. 212.)
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We agree with the result in Holmberg. The punitive damages, whether for fraud
or conversion, arose from a single act by the defendants — drawing down the letter of
credit. However, we do not agree with Holmberg’s focus on the injury to Holmberg
rather than on the conduct of the defendants.
B. The Application of the Legal Standard to This Case.
As the jury was instructed, to be liable under the CLRA, Ford had to have either:
“[one,] represented that the 2004 Ford Excursion had characteristics, uses, or benefits,
which it did not have, or [two,] represented that the 2004 Ford Excursion was of a
particular standard, quality, or grade, or of particular style or model, if it is another; or,
three, advertised the 2004 Ford Excursion with the intent not to sell them as advertised
. . . .” (CACI No. 4700.) These “unfair or deceptive acts and practices” had to have
occurred “in a transaction that resulted, or was intended to result, in the sale or lease of
goods or services to a consumer . . . .” Moreover, the Nolans had to have “relied” on the
representation. If Ford “acted with malice, oppression, or fraud,” the jury could award
punitive damages. (CACI No. 3845.)
The jury was also instructed that, to be liable under the Song-Beverly Act, Ford
had to have “failed to repair the vehicle to match the written warranty after a reasonable
number of opportunities to do so,” and thereafter failed to “promptly replace or buy back
the vehicle.” (CACI No. 3201.) If the jury found that Ford’s “failure to promptly
repurchase or replace the vehicle after a reasonable number of repair opportunities . . .
was willful,” it could award a civil penalty. (CACI No. 3244.)
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In sum, then, Ford’s liability under the CLRA — including its liability for punitive
damages — was based on its acts prior to the sale. By contrast, its liability under the
Song-Beverly Act — including its liability for a civil penalty — was based on its acts
after the sale.
Thus, if Ford had misrepresented the truck prior to sale but then had either (1)
repaired it to conform to the warranty, or (2) repurchased or replaced the truck, it would
be liable under the CLRA, but not under the Song-Beverly Act. Conversely, if Ford had
not misrepresented the truck prior to sale but then had failed to either repair or repurchase
it, it would be liable under the Song-Beverly Act, but not under the CLRA.
Admittedly, both claims required a defect in the truck. For purposes of the CLRA,
the defect had to exist when the truck was sold. For purposes of the Song-Beverly Act, it
could exist before the truck was sold or it could develop after the sale. Most important,
for both purposes, the existence of a defect was necessary but not sufficient for liability.
Ford argues that “[t]here was . . . no . . . instruction that required the jury to
consider only pre-sale evidence on the CLRA . . . claim[] and only post-sale evidence on
the Song-Beverly claim.” This is a red herring. Post-sale evidence could be relevant to
pre-sale conduct (and vice versa). For example, to show that Ford’s pre-sale
representations were false, the Nolans were entitled to show that Ford and/or the truck
ultimately did not live up to them post-sale.
As another example, Exhibit 62, a post-sale email from Koszewnik, said that the
6.0L engine had a 15-newton EGR valve rather than a 200-newton EGR valve, which
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was the “industry standard.” This was relevant both to whether the 6.0L engine was
defective and to whether Ford knew — even pre-sale — that it was defective.
Moreover, as already discussed, the jury instructions did effectively instruct the
jury that the CLRA claim had to be based on pre-sale conduct and the Song-Beverly
claim had to be based on post-sale conduct. The CLRA instruction stated that liability
had to be based on a representation by Ford, on which the Nolans relied, and which
resulted in a consumer transaction — i.e., pre-sale conduct. And the Song-Beverly
instruction stated that Ford had to have failed to repair the vehicle and had to have failed
to replace or buy back the vehicle — i.e., post-sale conduct.
Ford also argues that in closing argument, counsel for the Nolans relied on post-
sale evidence both to prove the CLRA claim and to support the claim for punitive
damages under the CLRA.
Ford cites counsel’s “continuing fraud” argument — that “every time the Nolans
. . . would bring their truck in, Ford would tell them it was fixed.” The Nolans’ counsel,
however, related this specifically to the promissory fraud claim, not the CLRA claim.
Ford also cites counsel’s argument that Ford made a pre-sale misrepresentation by
stating that the truck came with a warranty, and that this was an implied representation
“that not only would they honor the warranty, but they would fix the vehicle.” Once
again, however, evidence that Ford failed to fix the vehicle post-sale was relevant to show
that its pre-sale representation was false. Even so, Ford’s liability was based on the pre-
sale representation, which had to be false and had to be made with pre-sale knowledge
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that it was false. (Wilson v. Hewlett-Packard Co. (9th Cir. 2012) 668 F.3d 1136, 1145
[“under the CLRA, plaintiffs must sufficiently allege that a defendant was aware of a
defect at the time of sale”]; Stewart v. Electrolux Home Products, Inc. (E.D. Cal. 2018)
304 F.Supp.3d 894, 906 [“[a] representation will not violate the CLRA if the defendant
did not know or have reason to know of the facts that rendered the representation
misleading at the time it was made.”].) The post-sale failure to fix was merely evidence
of pre-sale falsity.
Next, Ford cites counsel’s argument that fraud, for the purpose of punitive
damages under the CLRA, was shown by post-sale emails, such as the one telling the
recipient to delete it. Post-sale emails were evidence that Ford had an intent to conceal; it
was inferable that this intent also existed pre-sale. In any event, to find Ford liable under
the CLRA at all, the jury had to find that Ford made a knowingly false pre-sale
representation. It is inconceivable that the jury found fraud for purposes of punitive
damages on this claim based solely on the post-sale emails and not on the pre-sale fraud.
Finally, Ford points to counsel’s argument that Ford knew its representations were
false because, at the time, “they were ramping up their lawsuit to fi[le] against Navistar.”
Ford asserts that that lawsuit “wasn’t filed until several years after the Nolans purchased
their vehicle.” However, Ford does not cite the record; as far as we can tell, all we know
is that it was filed sometime before August 2007. A fortiori, there was no evidence of
when Ford was “ramping up” a lawsuit against Navistar, which must have been sometime
before the lawsuit was actually filed. Most important, when the Nolans’ counsel made
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this statement, he was specifically discussing the intentional misrepresentation claim, not
the CLRA claim.
C. Anderson.
Anderson v. Ford Motor Co. (2022) 74 Cal.App.5th 946 (Anderson), pet. for rev.
filed Mar. 21, 2022, supports our conclusions. Anderson was yet another case against
Ford arising out of alleged defects in the 6.0L engine. (Id. at pp. 950-959.) There, as
here, Ford argued that the plaintiffs could not recover both a statutory penalty under the
Song-Beverly Act and punitive damages. (Id. at pp. 962-963.) The appellate court
disagreed because “the punitive damages and statutory penalties were based on different
conduct that took place at different times. The punitive damages were based on conduct
underlying the fraud . . . cause[] of action and took place before the sale. The civil
penalty was based on defendant’s post-sale failure to comply with its Song-Beverly Act
obligations to replace the vehicle or make restitution when reasonable attempts to repair
had failed.” (Id. at p. 966; see also id. at p. 971.)
It rejected Ford’s argument that “the same conduct” should be defined in terms of
the plaintiffs’ primary right. (Anderson, supra, 7 Cal.App.5th at pp. 968-969.) “‘The
primary right theory has a fairly narrow field of application’” — namely the field of res
judicata. (Id. at p. 969.) “‘[T]he primary right must also be distinguished from the
remedy sought . . . . ‘[M]ultiple remedies may be available to vindicate a single primary
right.’ [Citation.]” (Ibid.) Rather, “the appropriate inquiry should be focused on the
underlying conduct.” (Anderson, supra, at p. 965.) “[T]he recovery of both punitive
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damages and civil penalties is prohibited when the underlying conduct for both remedies
is the same conduct, i.e., identical conduct.” (Id. at pp. 970-971.)
Finally, it also rejected Ford’s argument that the plaintiffs had relied on the same
evidence to prove “a pattern and practice of misconduct” constituting both fraud and a
Song-Beverly violation. (Anderson, supra, 7 Cal.App.5th at pp. 970-973.) “To be sure,
the corporate communications were probative of Ford’s culpability for its pre-sale
conduct, the level of reprehensibility of that conduct, and the amount of punitive damages
to be imposed. But the fact some of those communications may have also been probative
of the willfulness of Ford’s Song-Beverly Act noncompliance does not bar plaintiffs from
both an award of punitive damages and civil penalties. [Citation.]” (Id. at p. 971.) “Ford
simply cannot escape liability for both awards by virtue of the fact that it engaged in a
pattern or practice of deceitful misconduct throughout the course of the discrete events
and conduct involved here.” (Id. at p. 973.)
In short, Anderson is dispositive of Ford’s present contention. Nevertheless,
because the opinion in Anderson is not yet final, we have analyzed the contention
independently, and we have come to the same conclusions as Anderson.
For these reasons, we conclude that the statutory penalty and the punitive damages
did not punish the same conduct.
IX
THE AMOUNT OF PUNITIVE DAMAGES
Ford contends that the punitive damages award is unconstitutionally excessive.
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A. Additional Factual and Procedural Background.
The trial court explained its decision to reduce the punitive damages award from
$8.125 million to $1 million only as follows: “The Court notes that the actual damages in
this case are just under $60,000, and the penalties are just under $60,000. So using the
principle of proportionality, the Court feels that an adequate award is $1 million . . . .”
B. The Three “Guideposts.”
“The Due Process Clause of the Fourteenth Amendment prohibits the imposition
of grossly excessive or arbitrary punishments on a tortfeasor. [Citations.] The reason is
that ‘[e]lementary notions of fairness enshrined in our constitutional jurisprudence dictate
that a person receive fair notice not only of the conduct that will subject him to
punishment, but also of the severity of the penalty that a State may impose.’ [Citation.]
To the extent an award is grossly excessive, it furthers no legitimate purpose and
constitutes an arbitrary deprivation of property. [Citation.]” (State Farm Mut. Auto. Ins.
Co. v. Campbell (2003) 538 U.S. 408, 416-417.)
“[C]ourts reviewing punitive damages [must] consider three guideposts: (1) the
degree of reprehensibility of the defendant’s misconduct; (2) the disparity between the
actual or potential harm suffered by the plaintiff and the punitive damages award; and (3)
the difference between the punitive damages awarded by the jury and the civil penalties
authorized or imposed in comparable cases. [Citation.]” (State Farm Mut. Auto. Ins. Co.
v. Campbell, supra, 538 U.S. at p. 418.)
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“In deciding whether an award of punitive damages is constitutionally excessive
. . . , we are to review the award de novo . . . . [Citations.]” (Simon v. San Paolo U.S.
Holding Co., Inc. (2005) 35 Cal.4th 1159, 1172; accord, State Farm Mut. Auto. Ins. Co.
v. Campbell, supra, 538 U.S. at p. 418.)
1. The disparity between the compensatory and punitive damages.
We jump first to the second guidepost — the disparity between the compensatory
and punitive damages. There is no “bright-line ratio which a punitive damages award
cannot exceed. . . . [H]owever, . . . in practice, few awards exceeding a single-digit ratio
between punitive and compensatory damages, to a significant degree, will satisfy due
process.” (State Farm Mut. Auto. Ins. Co. v. Campbell, supra, 538 U.S. at p. 425.)
“Absent special justification, ratios of punitive damages to compensatory damages that
greatly exceed 9 or 10 to 1 are presumed to be excessive and therefore unconstitutional.
[Citation.]” (Nickerson v. Stonebridge Life Ins. Co. (2016) 63 Cal.4th 363, 367.) The
ratio of punitive to compensatory damages here is $1 million to $59,634.91, or about 16.7
to 1.
2. The disparity between the punitive damages and civil penalties.
Moving on to the third guidepost — civil penalties authorized or imposed in
comparable cases — we note that the Song-Beverly Act authorizes a statutory penalty of
up to double the compensatory damages. (Civ. Code, § 1794, subd. (c).)
The Nolans argue that the Song-Beverly Act penalty is not relevant, because the
punitive damages were not awarded on the Song-Beverly claim, but rather on the fraud
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and CLRA claims. However, they do not point to any other civil penalty that is any more
relevant. “The third guidepost is less useful in a case . . . where plaintiff prevailed . . . on
a cause of action involving ‘common law tort duties that do not lend themselves to a
comparison with statutory penalties’ [citation] . . . .” (Simon v. San Paolo U.S. Holding
Co., Inc., supra, 35 Cal.4th at pp. 1183-1184.) Statutory penalties for particular
fraudulent acts are generally not more than treble damages. (See id. at p. 1184 and
statutes cited.)
Thus, Johnson v. Ford Motor Co. (2005) 135 Cal.App.4th 137 (Johnson) held that,
in a case like this, the Song-Beverly penalty is relevant, but not controlling. There, the
evidence showed that Ford had fraudulently concealed a defect in the vehicle that the
plaintiffs bought; it had also manipulated its vehicle buyback program to evade the Song-
Beverly Act. (Johnson, supra, at pp. 140-143.) As here, the plaintiffs asserted claims
under the Song-Beverly Act, the CLRA, and for fraud. (Id. at p. 141.) The jury awarded
compensatory damages of $17,811.60 and punitive damages of $10 million. (Johnson,
supra, at p. 143.)
Regarding the third guidepost, the court said, “[T]he Song-Beverly Consumer
Warranty Act is the most comparable statutory regulation of the kind of conduct involved
in this case. . . . Here, however, the jury found, in essence, that defendant intentionally
concealed information with the intent to defraud plaintiffs. . . . [I]n our view, the
comparison with Song-Beverly does not begin to justify the $10 million punitive
damages award, but neither does Song-Beverly represent a legislative determination that
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punitive damages for the intentional conduct before us must be limited to the lower end
of the ordinary range of such damages.” (Johnson, supra, 135 Cal.App.4th at pp. 148-
149.)
Applying Johnson here, the maximum Song-Beverly penalty “does not begin to
justify” the $1 million punitive damages award. The award must be justified, if at all,
based on reprehensibility. However, if Ford’s conduct was sufficiently reprehensible, the
maximum Song-Beverly statutory penalty does not set a ceiling on a punitive damages
award.
3. Reprehensibility.
The key question, then, is whether Ford’s reprehensibility here provides “special
justification” for a ratio of 16.7 to 1.
“‘[C]ourts [must] determine the reprehensibility of a defendant by considering
whether: [1] the harm caused was physical as opposed to economic; [2] the tortious
conduct evinced an indifference to or a reckless disregard of the health or safety of
others; [3] the target of the conduct had financial vulnerability; [4] the conduct involved
repeated actions or was an isolated incident; and [5] the harm was the result of intentional
malice, trickery, or deceit, or mere accident. [Citation.] The existence of any one of
these factors weighing in favor of a plaintiff may not be sufficient to sustain a punitive
damages award; and the absence of all of them renders any award suspect.” (State Farm
Mut. Auto. Ins. Co. v. Campbell (2003) 538 U.S. 408, 419.)
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“On appeal, ‘“determining the ‘degree of reprehensibility’ ultimately involves a
legal conclusion . . . ”’ [Citation.] ‘[F]indings of historical fact made in the trial court
are still entitled to the ordinary measure of appellate deference.’ [Citation.]” (Rubio v.
CIA Wheel Group (2021) 63 Cal.App.5th 82, 96-97.)
a. The nature of the harm.
Although State Farm used binary phrasing — whether the harm is physical or
economic — the nature of the harm is not either black or white but a spectrum. For
example, causing bruises is less reprehensible than causing quadriplegia.
In the face of State Farm’s binary phrasing, courts have held that mental or
emotional harm can be deemed to be on the physical end of the spectrum. (E.g., Roby v.
McKesson Corp. (2009) 47 Cal.4th 686, 713 [“the harm to Roby was ‘physical’ in the
sense that it affected her emotional and mental health, rather than being a purely
economic harm.”].) “‘[P]unitive damages can — and traditionally do — consider the
effects of the tortfeasor’s conduct on the victim’s mentality, not just his pocketbook.’
[Citation.] ‘The [United States] Supreme Court has recognized conduct causing
emotional as well as economic harm can be more reprehensible than conduct causing
mere economic harm.’ [Citation.]” (King v. U.S. Bank National Assn. (2020) 52
Cal.App.5th 728, 778.)
On the same spectrum, emotional harm that causes physical symptoms (or at least
a diagnosed mental ailment) deserves more weight than other emotional harm. (Compare
gain, bouts of crying, loss of sleep, physical tension, and tightness in his chest”] with
Nickerson v. Stonebridge Life Ins. Co. (2016) 5 Cal.App.5th 1, 16-17 [plaintiff “felt
upset, frustrated, angry, and betrayed”].)
Here, there was almost no evidence of emotional distress.10 The Nolans testified
that they always worried about the truck breaking down. When it broke down on trips,
Mr. Nolan felt he had let his family down. If only from their many difficulties with the
truck, it is inferable that the Nolans did suffer some emotional distress. However, there
was no evidence that it led to any physical symptoms. This case is on the lower end of
the emotional distress continuum and hence in the lower midrange of harm.
b. Indifference to or reckless disregard of health or safety.
In evaluating Ford’s state of mind, it is important to focus on the conduct that
made Ford liable under the CLRA.
There is no evidence that Ford ever became aware of the incomplete combustion
“root cause” that Lepper identified.11 Rather, over time, by tracking warranty repairs, it
found that individual parts were failing excessively — fuel injectors, EGR valves, EBP
sensors, etc. Exhibit 47 noted that Ford “d[id] not have a definitive repair action . . . to
properly address the concern universe.” “[W]e . . . may experience repeat symptoms
10 The trial court granted Ford’s motion in limine to exclude evidence of “emotional distress damages.” The Nolans do not claim that this was an error. 11 The Nolans pointed to Exhibit 62, Freeland’s presentation. He argued that all of the excessive warranty claims had a single root cause, namely leaks from the fuel injectors and the combustion chambers. This was different from Lepper’s theory that they were due to incomplete combustion.
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once certain repairs are performed . . . .” Exhibit 189 said, “[T]here are no fixes on
certain symptoms.” Ford’s liability arose from its failure to disclose these excessive rates
of failure, along with its inability to fix the failures, to the Nolans and to the public.
Lepper testified that the defects of the 6.0L engine impaired safety because (1) “oil
leaks . . . affect the safety,” (2) “[i]f you’re driving along and your car dies,” in traffic or
in an intersection, that is “a significant safety risk,” and (3) “lack of power,” in an
intersection or when “[g]oing up the on-ramp[] and blending into traffic,” “presents a
potential safety problem.” It is reasonably inferable that Ford was aware of these rather
obvious risks, even if it did not know what was causing them.
On this record, then, Ford’s failure to disclose did constitute indifference to the
health and safety of others.
c. Financial vulnerability.
The Nolans had working-class jobs. To buy the truck, they made a $29,350 down
payment and traded in their Chevrolet Suburban. Once the truck kept breaking down,
they were not in a position to buy a replacement. After the truck became wholly
inoperable, they had to move so one spouse or the other could bicycle to work.
However, they were only moderately financially vulnerable. This is not a case
where they lost their jobs or depleted their savings. (Cf. Contreras-Velazquez v. Family
Health Centers of San Diego, Inc. (2021) 62 Cal.App.5th 88, 106.) There is no evidence
that they lost any earning opportunities. They did not get what they paid for — a classic
economic injury; however, they did not suffer any additional economic injury as a result.
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d. Repeated actions.
Ford’s blameworthy conduct consisted of inaction — failure to disclose. Thus,
there are two ways of looking at whether it involved “repeated actions.” In Ford’s point
of view, there was a single nondisclosure or, at worst, a single ill-chosen corporate policy
of nondisclosure. From the Nolans’ point of view, however, there was a new
nondisclosure every time Ford sold a vehicle with the 6.0L engine.
We agree with the Nolans. Similar nondisclosures to multiple consumers have
been deemed to be repeated actions. (Pilliod v. Monsanto Co. (2021) 67 Cal.App.5th
591, 647 [failure to warn that product could cause cancer]; Izell v. Union Carbide Corp.
(2014) 231 Cal.App.4th 962, 986 [same].) And for purposes of reprehensibility, this
makes sense. Even assuming Ford made only one bad decision, it made it knowing that it
could have an effect on many people. Moreover, Ford could have reconsidered as it
continued to receive reports that parts of the 6.0L engine were failing excessively, but it
did not.
We must be careful, however, not to give this factor too much weight in this case.
Increasing the Nolans’ punitive damages award because Ford engaged in similar conduct
toward other buyers “creates the possibility of multiple punitive damages awards for the
same conduct . . . . [Citation.]” (State Farm Mut. Auto. Ins. Co. v. Campbell, supra, 538
U.S. at p. 423.) This possibility is not hypothetical. The record shows that there was a
class action against Ford. There are also references to other actions in California courts
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brought by buyers who, like the Nolans, opted out of the class action. According to the
Nolans, Lepper “ha[d] participated in 100 trials and depositions all on the 6.0-liter . . . .”
“[P]unitive damages previously imposed against [a defendant] for the same
conduct in other cases, as well as possible future awards, are relevant in determining the
amount of punitive damages required to sufficiently punish and deter, so long as they are
shown to have identical issues. [Citation.]” (Boeken v. Philip Morris, Inc. (2005) 127
Cal.App.4th 1640, 1701.)
We recognize that “due process does not prohibit state courts, in awarding or
reviewing punitive damages, from considering the defendant’s illegal or wrongful
conduct toward others that was similar to the tortious conduct that injured the plaintiff or
plaintiffs.” (Johnson, supra, 35 Cal.4th at p. 1204.) “[T]hat a defendant has repeatedly
engaged in profitable but wrongful conduct tends to show that ‘strong medicine is
required’ to deter the conduct’s further repetition. [Citations.]” (Id. at p. 1207.) Here,
however, it appears that if Ford’s repeated conduct calls for strong medicine, Ford will
get it, in repeated doses.
We have no evidence of how many other buyers of the 6.0L engine had the same
problems with it to which Lepper testified. We also have no evidence of how many of
them were placed in an unsafe situation as a result. We can say only that it was probably
more than a few and less than all. Presumably, of course, not all of those affected sued.
For that reason, Ford’s repeated actions toward others do call for some upward
adjustment of punitive damages in this case. A large upward adjustment, however, would
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violate due process, because it would be based on speculation and therefore arbitrary, and
also because it would pose a very real threat of multiple liability.
e. Intentional malice, trickery, or deceit.
“This factor is of little value in assessing a California punitive damages award
because ‘accidentally harmful conduct cannot provide the basis for punitive damages
under our law.’ [Citation.]” (King v. U.S. Bank National Association, supra, 52
Cal.App.5th at p. 779; see also Bankhead v. ArvinMeritor, Inc. (2012) 205 Cal.App.4th
68, 86 [“Our obligation to conduct a due process analysis regarding punitive damages
does not create an opportunity for [a defendant] to make an end run around [the jury’s
malice, fraud, or oppression] findings.”].)
f. Reprehensibility Plus Wealth.
It must be remembered that the reprehensibility subfactors go primarily to whether
punitive damages should be awarded at all. Even where conduct is sufficiently
reprehensible to support some award of punitive damages, it will be a rare case in which
it is so reprehensible as to support a double-digit ratio.
On the whole, Ford’s reprehensibility was moderately high but not extreme. Ford
caused moderate harm to the Nolans. It displayed great disregard for the health and
safety of others. However, this was tempered by the lack of evidence that any failure of
any of the weak-link parts of the 6.0L engine had ever actually resulted in any injury to
anybody. The Nolans were moderately financially vulnerable. Ford’s conduct was
repeated; as already discussed, however, because Ford is also exposed to repeated
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punitive damages awards, this factor calls for a higher ratio, but not an extreme one.
Finally, Ford’s conduct was characterized by oppression, malice, and/or fraud, but so is
all conduct that that gives rise to punitive damages in California.
The Nolans ask us to additionally consider Ford’s wealth. “It is certainly relevant
for a reviewing court to consider the wealth of a defendant when applying federal
constitutional limits to an award of punitive damages, thereby ensuring that the award has
the appropriate deterrent effect, but the punitive damages award must not punish the
defendant simply for being wealthy. [Citation.] As the high court said in State Farm,
wealth ‘“provides an open-ended basis for inflating awards’” [citation] and ‘cannot
justify an otherwise unconstitutional punitive damages award’ [citation].” (Roby v.
McKesson Corp., supra, 47 Cal.4th at p. 719.)
The question is whether the ratio of the punitive damages to the defendant’s
wealth is such that the punitive damages award will be an effective deterrent.
“‘[O]bviously, the function of deterrence . . . will not be served if the wealth of the
defendant allows him to absorb the award with little or no discomfort.’ [Citation.]”
(Simon v. San Paolo U.S. Holding Co., Inc., supra, 35 Cal.4th at p. 1185.)
In Contreras-Velazquez v. Family Health Centers of San Diego, Inc., supra, 62
Cal.App.5th 88, the court found that the defendant’s “conduct was moderately
reprehensible.” (Id. at p. 108.) The defendant’s net worth was $213 million. (Id. at
p. 110.) However, “[t]he punitive damages award . . . was . . . $1,831,290 — quite a
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large figure.” (Ibid.) Hence, the defendant’s wealth did not justify a ratio of more than 2
to 1 between the punitive and compensatory damages. (Ibid.)
By contrast, “[i]n some cases, the defendant’s financial condition may combine
with high reprehensibility and a low compensatory award to justify an extraordinary ratio
between compensatory and punitive damages. [Citation.]” (Simon v. San Paolo U.S.
Holding Co., Inc., supra, 35 Cal.4th at p. 1186.) Here, Ford’s net worth, $36.469 billion,
was extremely high. The compensatory damages, $59,634.91, were very low (only a
little more than double the minimum for an unlimited civil case, Code Civ. Proc., § 86,
subd. (a)(1)).
Nickerson v. Stonebridge Life Ins. Co., supra, 5 Cal.App.5th 1 is loosely
analogous and provides helpful guidance. There, the plaintiff’s insurance company
wrongfully refused to pay part of his claim for hospitalization costs. A jury awarded the
plaintiff $35,000 in emotional distress damages and $12,500 in attorney fees. (Id. at
p. 13.) The trial court reduced the jury’s punitive damages award to $350,000. (Id. at
p. 14.)
The appellate court found that four out of five of the reprehensibility factors
applied: (1) the harm was economic, not physical; but (2) the defendant acted with
indifference to, and a reckless disregard of, the health or safety of the plaintiff and others;
(3) the plaintiff was financially vulnerable; (4) the defendant’s conduct involved repeated
actions; and (5) the harm was the result of intentional deceit. (Nickerson v. Stonebridge
Life Ins. Co., supra, 5 Cal.App.5th at pp. 16-23.) It upheld a 10 to 1 ratio of punitive
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damages to emotional distress damages, based not only on the defendant’s “high degree
of reprehensibility” (id. at p. 20), but also on the “relatively small economic damage
award” as compared to the defendant’s “$368 million net worth.” (Id. at p. 26.) It
rejected the plaintiff’s request for a ratio larger than 10 to 1 as unconstitutional. (Id. at
pp. 26-27.) Finally, it held that the relevant compensatory damages figure included the
attorney fees (id. at p. 27), resulting in a lower ratio of 9.33 to 1.
Here, similarly, Ford’s reprehensibility was moderately high. At the same time,
the compensatory damages were to Ford’s net worth as a mosquito bite is to an elephant.
Hence, an award of punitive damages at the high-water mark of 9 to 1 is called for. We
are not convinced that any lesser ratio will be adequate to deter and punish. At the same
time, we are not convinced that there is any special justification for any greater ratio.
Accordingly, we will reduce the punitive damages to $536,714.19.
X
PREJUDGMENT INTEREST
In their cross-appeal, the Nolans contend that the trial court erred by denying
preverdict interest and by basing prejudgment interest on the wrong interest rate.
A. Additional Factual and Procedural Background.
The Nolans filed a motion for prejudgment interest. They sought:
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(1) Interest at ten percent on the purchase price of the truck from the date of the
purchase through the date of the verdict;12 and
(2) Interest at ten percent on the compensatory and punitive damages from the
date of the verdict through the date of the judgment.
The trial court ruled that the appropriate interest rate was seven percent, not ten
percent. It denied prejudgment interest for the period before the verdict, because until
then, the amount of damages was not certain. However, it did grant prejudgment interest
for the period between the verdict and the entry of judgment.
B. The Appropriate Interest Rate.
The prejudgment interest rate on damages for breach of contract is ten percent,
unless the contract provides otherwise. (Civ. Code, § 3289, subd. (b); see also Cal.
Const., art. 15, § 1.) The California Constitution provides that prejudgment interest rate
on all other damages is seven percent. (Cal. Const., art. 15, § 1; Michelson v. Hamada
(1994) 29 Cal.App.4th 1566, 1585-1586; Wegner et al., Cal. Practice Guide: Civil Trials
and Evidence, supra, ¶ 17:1137 at p. 17-235.)
The Nolans contend that, under the California Constitution, because their claim
arises out of the purchase of a good primarily for use for personal, family, or household
purposes, a ten percent rate applies. This contention is frivolous.
12 Alternatively, the Nolans sought interest at ten percent on the compensatory damages under the Song-Beverly Act from the date of the complaint through the date of the verdict, citing Civil Code section 3287, subdivision (b). The trial court ruled that Civil Code section 3287, subdivision (b) does not authorize prejudgment interest on a Song-Beverly claim. The Nolans have abandoned this theory on appeal.
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The Constitution says: “The rate of interest upon the loan or forbearance of any
money, goods, or things in action, or on accounts after demand, shall be 7 percent per
annum but it shall be competent for the parties to any loan or forbearance of any money,
goods or things in action to contract in writing for a rate of interest: [¶] (1) For any
loan or forbearance of any money, goods, or things in action, if the money, goods, or
things in action are for use primarily for personal, family, or household purposes, at a rate
not exceeding 10 percent per annum . . . .” (Cal. Const., art. 15, § 1, subd. (1), italics
added.)
The Nolans’ damages are not on any “loan or forbearance.” The Nolans and Ford
did not “contract in writing” for any interest rate that Ford was to pay. Hence, it is
irrelevant that the truck was primarily for personal, family, or household use. The
applicable interest rate was seven percent.
C. The Certainty of the Amount of Damages.
Civil Code section 3287 governs prejudgment interest. Subdivision (a) of that
section, as relevant here, provides: “A person who is entitled to recover damages certain,
or capable of being made certain by calculation, and the right to recover which is vested
in the person upon a particular day, is entitled also to recover interest thereon from that
day . . . .”
“Damages are certain or capable of being made certain by calculation, or
ascertainable, for purposes of the statute if the defendant actually knows the amount of
damages or could calculate that amount from information reasonably available to the
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defendant. [Citation.] In contrast, damages that must be determined by the trier of fact
based on conflicting evidence are not ascertainable. [Citation.]
“Thus, the general rule is that damages are unascertainable if the amount of
damages depends on disputed facts or the available factual information is insufficient to
determine the amount; and damages are ascertainable if the only impediment to the
determination of the amount is a legal dispute concerning liability or the measure of
damages.” (Collins v. City of Los Angeles (2012) 205 Cal.App.4th 140, 150-151.)
“‘“On appeal, we independently determine whether damages were ascertainable
for purposes of the statute, absent a factual dispute as to what information was known or
available to the defendant at the time” [citation].’ [Citation.]” (State of California v.
The Nolans argue that the purchase price of the truck was certain. However, the
purchase price was just one element of their compensatory damages.
The Nolans elected to recover compensatory damages under the CLRA.13 As
already discussed (see part VII, ante), on their CLRA claim, they were entitled to the
purchase price of the truck, minus its market value at the time of purchase, plus the cost
of repairs and any other incidental damages. However, its market value at the time of
purchase — i.e., if its defects had been known at that time — was uncertain. In fact, no
13 The Nolans concede that their compensatory damages under the Song- Beverly Act “are not as easily ascertainable” as under the CLRA.
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witness ever testified to that amount. Moreover, no one could possibly have known the
amount of the cost of repairs at the time of purchase; it accrued over time.
The Nolans argue that they “were entitled to seek, and could rightfully be
awarded,” the full purchase price, on the theory that the truck was worthless at the time of
purchase. However, that was not the only possible award. The jury determined that the
truck was worth $3,380 at the time of purchase, and in part VII, ante, we upheld that
finding. It could also have accepted Ms. Nolan’s deposition testimony that the truck was
worth $8,000 or Kalis’s testimony that it was worth $6,000 to $8,000.
As the Nolans point out, damages that are “‘“readily ascertainable by reference to
well-established market values”’” can be sufficiently certain. (Thompson v. Asimos
(2016) 6 Cal.App.5th 970, 991.) Here, however, there were no “well-established market
values” that applied to the truck. No Kelly Blue Book (or similar) valuation was
introduced; no such valuation would have accounted for the truck’s many defects.
The Nolans also advert to the rule that “‘[o]nly the claimant’s damages
themselves must be certain. Damages are not made uncertain by the existence of
unliquidated counterclaims or offsets interposed by the defendant.’ [Citation.]” (Los
Angeles Unified School Dist. v. Torres Construction Corp. (2020) 57 Cal.App.5th 480,
508-509.) The market value of the truck at the time of purchase, however, was not an
offset; it was an integral element in the calculation of damages.
One could imagine a case where the plaintiff’s damages consist of two
components, one certain and one uncertain, which the jury must add together. Arguably,
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that plaintiff should be entitled to prejudgment interest on the certain component, even if
not on the uncertain component. However, we have found very little law on this. (See In
re Pago Pago Aircrash of January 30, 1974 (C.D. Cal. 1981) 525 F.Supp. 1007, 1016-
1018.)
This is not that case. Here, the jury had to subtract an uncertain component from a
certain component. Thus, there was not even a certain minimum amount for which Ford
was liable. “The rationale for precluding prejudgment interest on unliquidated claims is
‘that it is unreasonable to expect a defendant to pay a debt before he or she becomes
aware of it or is able to compute its amount.’ [Citation.]” (Hewlett-Packard Co. v.
Oracle Corp. (2021) 65 Cal.App.5th 506, 576.) It is unreasonable to expect a defendant
to pay a debt when an uncertain amount must be subtracted from a certain amount.
The trial court therefore properly denied preverdict interest.
XI
DISPOSITION
The award of punitive damages is reversed. In all other respects, the judgment is
affirmed. On remand, the trial court must enter a modified judgment reducing the award
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of punitive damages from $1 million to $536,714.19. In the interest of justice, each side
shall bear its own costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS RAMIREZ P. J.
We concur:
McKINSTER J.
MILLER J.
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AI Brief
AI-generated · verify before citing
Holding. The court held that while the trial court erred by admitting internal Ford emails without a limiting instruction, the error was not prejudicial because the emails were admissible to prove Ford's knowledge. Additionally, the court held that the $1 million punitive damages award was unconstitutionally excessive and reduced it to $536,714.19.
Issues
Whether the trial court erred by admitting internal Ford emails and former employee depositions as hearsay.
Whether the jury's damages awards under the CLRA and for common-law fraud were inconsistent.
Whether the $1 million punitive damages award was unconstitutionally excessive.
Whether the trial court erred in its calculation of preverdict and postverdict interest.
Disposition. Affirmed in part, reversed in part, and remanded with directions.
Quotations verified verbatim against the opinion
“We will hold that the trial court erred by admitting the emails without a limiting instruction; however, the emails were admissible as evidence of Ford’s knowledge, and the trial court’s failure to give a limiting instruction was not prejudicial.”
“We will also hold that the $1 million punitive damages award is unconstitutionally excessive and must be reduced to $536,714.19.”