Walter J. Lack (SBN 57550)
Daniel G, Whalen (SBN 126847)
Jennifer R, Schrack (SBN 190402)
Engstrom, Lipscomb & Lack
State Bar No. 57550
10100 Santa Monica Blvd.
16th Floor
Los Angeles, CA 90067-4107
(310) 552-3800Donald W. Ricketts(SBN 39825)
28855 Kenroy Ave.
Santa Clarita,CA 91351
(805) 250-3091
Ernster Law Offices, P.C.
John H. Ernster, Jr. (SBN 59338)
70 South Lake Ave. Suite 750
Pasadena, CA 91101
(626) 844-8800
Attorneys for the Plaintiff and Plaintiff in Pro Per
SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES, CENTRAL
DISTRICT
Donald W. Ricketts, an individual, Plaintiff
v.
Farmers Group, Inc. etc. et al, Defendants,
Case No. BC 165961 - STATEMENT OF DECISION
This is an action for wrongful discharge from employment by an attorney
against his former insurance-carrier employer.
Following the trial of the liability and compensatory damages phase of this
action by the court, without jury, the court ordered the entire proceedings transcribed by
the court reporter, reviewed the court file and transcript, and, on August 12, 1999,
issued its Tentative Decision finding in favor of plaintiff and against defendants. It
awarded plaintiff special damages (past lost #835 p. 7/20)$144,172.00 and determined that
plaintiff was entitled to recover punitive damages from the defendants, or some of them.
It ordered further proceedings to be held to determine the proper and reasonable amount of
punitive damages to be assessed.
Both sides requested a statement of decision and both sides submitted
proposed statement of decision. In his statement, plaintiff requested an award of general
damages.
On September 2, 1999, the court issued an Order that adopted the Proposed
Statement of Decision which had been submitted by plaintiff as its Proposed Statement of
Decision, awarded general damages to plaintiff in the amount of $140,000, and allowed
defendants 15 days to object to the Proposed Statement of Decision.
Defendants filed Objections to the Proposed Statement of Decision and a
Request for Hearing on September 23, 1999.
On September 30,1999, plaintiff submitted a Proposed First Amended Statement
of Decision.
On October 12, 1999, defendants filed and several objections to the Proposed
First Amended Statement of Decision.
On October 27, 1999, plaintiff submitted a Proposed Second Amended Statement
of Decision.
On November 1, 1999, the court conducted a trial to determine the amount of
punitive damages that would be assessed.
On November 3, 1999, plaintiff submitted a Proposed Third Amended Statement
of Decision.
Having reviewed the court file and transcript in this manner, all admissible
testimony and documents presented by the parties, all stipulated facts, and the argument
of counsel, the court renders this Statement of Decision, signs the accompanying Judgment,
the ORDERS both filed.
Based upon the clear and convincing credible and admissible evidence
presented by the parties, the court finds as follows:
Findings, Conclusions and Discussions:
Plaintiff DONALD W. RICKETTS is an individual residing within and is
a citizen of the County of Los Angeles, State of California.
Defendants FARMERS GROUP, INC. is a management company providing management
services to the P&C Group. The P&C Group is owned by the policyholders of FARMERS
INSURANCE EXCHANGE, Fire Insurance Exchange and Truck Insurance Exchange, their respective
subsidiaries and Farmers Texas County Mutual Insurance Company. Accordingly, FARMERS
GROUP, INC. has no ownership interest in the P&C Group. The policyholders each appoint
FARMERS GROUP, INC. as the exclusive attorney-in-fact ("AIF") to provide
management fees based primarily on the gross premiums earned by the P&C Group.
Consequently, FARMERS GROUP, INC. is not directly affected by the underwriting results of
the P&C Group. This is in contrast to a typical property and casualty insurance
holding company which depends on dividends from owned and operated subsidiaries which are
subject to fluctuations in underwriting results. The management fees compromise a major
past FARMERS GROUP, INC's revenue and, as a result, FARMERS GROUP, INC's ongoing financial
performance depends on the volume of business written by, and the business efficiency and
financial strength of, the P&C Group. As AIF of the P&C Group, FARMERS GROUP, INC.
selects risks, prepares and mails policy forms and invoices, collects premiums and
performs certain other administrative and managerial functions. The P&C Group is
responsible for its own claim functions, including the settlement for the payment of
claims and claim adjustment expenses. The P&C Group is also responsible for the
payment of commissions, benefits for agents and district managers, and its premium and
income taxes. FARMERS GROUP, INC. is entitled to receive a management fees of up to 20%
(25% in the case of Fire Insurance Exchange) of the gross premiums earned by the P&C
Group. During the past five years, aggregate management fees averaged between 12% and 13%
of gross premiums earned by the P&C Group. The P&C Group has reported a growing
volume of premiums which has generated a corresponding rise in management fee income to
FARMERS GROUP, INC.
Defendant FARMERS INSURANCE EXCHANGE ("EXCHANGE") is qualified to
and is engaged in the business of insurance within the Sate of California with a principal
place of business at 4680 Wilshire Blvd., Los Angeles, California.
Exchange is a reciprocal insurance carrier owned by its policyholders.
Defendant EARLY, MASLACH & PRICE (now known as Early, Maslach, Price
& Baukol,and hereinafter referred to as "EM&P") holds itself out as a
law firm. It represents, exclusively, insureds or punitive insureds of the P&C Group.
All of its costs and expenses are paid for by the P&C Group and its employee-attorneys
are employees of EXCHANGE. It is one of approximately 50 such "firms" nationwide
operated by EXCHANGE.
Plaintiff provides services to and represents insured of EXCHANGE and the
other carriers which comprise the P&C Group.
EM&P (and the names of the other "firms" operated by EXCHANGE)
is a tradename owned by EXCHANGE. Messrs. Early and Maslach in the "firm name"
are decreased attorneys. The Mr. Price in the "firm name" is Stephen Price, an
attorney licensed to practice law in the State of California.
Stephen S. Price was the managing attorney of EM&P at the time he, with
the advice and concurrence of plaintiff's supervisor, Joseph S. Fern, decided to terminate
plaintiff. EM&P had approximately 40 attorneys and in excess of 80 employees. Mr.
Price, as Managing Attorney, was directly responsible for setting company policy and
procedures regarding the activities of the "firm". At the time he approved his
decision to terminate plaintiffs employment, Mr. Price had been promoted to Vice
President, Claims Administration, in charge of EXCHANGE's nationwide in-house counsel
operation and reported only to the Vice President, and General Counsel. he was the senior
officer within EXCHANGE with responsibility for the practices of the nationwide in-house
counsel operation.
In terminating plaintiff, Mr. Price was a managing agent within the course
and scope of his employment and his conduct was authorized and ratified by EXCHANGE.
Plaintiff Donald W. Ricketts was hired as a senior
Trial Attorney by Defendants EXCHANGE and EM&P on July 12, 1993, and was employed by
them on the date of his termination, February 15, 1996.
Employees working for EM&P as in-house lawyers for EXCHANGE were subject
to the progressive discipline system as outlined in the Human Resources Manual system
designed to provide feedback to employees and to recognize possible problems early enough
to prevent detriment to the company and the employee. The process included four steps:
Counseling, formal warning, probation and termination. The normal process was to advance
through each step to try to improve the employee's conduct and prevent termination.
Counseling as the first step could either be written or in person. This step
was intended as a process for resolution of minor and routine complications and not
necessarily as a negative event. It was appropriate to have multiple counseling sessions
with positive results.
A formal warning was intended as the next step to formalize the issues
addressed in the counseling sessions for the inclusion in the employee's personnel file.
The warning was to include a notice of possible future actions and consequences for
non-improvement.
Probation as the next step was intended to give the employee a set time
period to improve or face termination.
Finally, if counseling, formal warnings and probation failed, the employee
was subject to termination. Human resources procedures dictated that careful documentation
be kept and copies sent to human resources for inclusion in the employee's personnel file
to justify any disciplinary actions taken.
This progressive discipline system also included several alternatives to
termination: Demotion, suspension for varying lengths of time without pay, and the
deferral of salary increase reviews were three suggested alternatives to termination.
Termination under the progressive discipline system required the approval of
both the employee's supervisors and the human resources manager. In the event of extreme
circumstances, such as allegations of theft, fraud, or criminal and/or actionable conduct,
a supervisor with approval of his or her direct superior could terminate the employee.
At trial, Stephen Price gave two examples of his use of progressive
discipline system. An attorney who exhibited bizarre behavior such as talking to the walls
and performed unsatisfactorily was given a number of counseling sessions, suspended,
placed on probation and finally terminated. A young attorney whose work was unsatisfactory
was also given a number of counseling sessions, placed on probation several times and
transferred to another location. Mr. Price testified that he did not follow the
recommendations to terminate given by this employee's direct supervisor and gave the young
lawyer another chance.
In October of 1993, plaintiff successfully completed his 90-day probation. In
December of 1993, he received a positive performance review and was recommended for a
salary increase. His reviews noted that he worked at a high level, commensurate with his
extensive trial experience.
In May of 1994, after approximately ten months into his employment with
EXCHANGE, his supervisor wrote a letter to managing attorney Stephen S. Price praising
plaintiff's abilities as a trial lawyer and supervisor. This letter included the following
praise regarding plaintiff's work:
He was assigned a significant number of cases which needed immediate
attention. He promptly organized his caseload, reviewed each file and took those action
steps necessary to resolve each and every problem on those files.
At his request, he was placed in a position for taking and attending all
in-house management development classes and courses and has completed a number of those.
He was thrust into the position of acting intern Supervising Attorney as well
as dealing with his day-to-day Senior Trial Attorney duties. While juggling the day-to-day
administrative and other caseload as well as personnel issue, he was successful in trying
a case with an exposure of $150,000.00 by obtaining a jury verdict of $71,000.00.
He completed a complex jury trial with significant injuries including a total
hip replacement with a demand and probable reasonable value of $350,00.00. Based primarily
on his legal background and experience and the utilization of technical experts, he was
able to obtain a defense verdict.
IN the meantime, he was thrust into the arena of acting Supervising Attorney
wherein he was not only required to deal with the day to day administration tasks and
personnel challenges and opportunities,but was required to make new case and file
assignments as appointed.
(Exhibit 18)
One year later, on June 20, 1995, plaintiff's supervisor as head of the
Commercial Team (recognized as the team of lawyers handling the more complex cases) wrote
to Edward Morris, Vice President of Claims Administration and Stephen Price, Managing
Attorney, to recommend a salary increase for Plaintiff. The letter included the following
language:
Don has been a Senior Trial Attorney with the firm for two years. He was
assigned to the Commercial Team in the fall of 1994.
Don is a very experienced attorney with a lot of trial experience and is
never intimidated by opposing counsel and is capable of handling cases of the greatest
complexity.
He presently has the second largest category on the Commercial Team and his
clients are being well represented. Attorneys like Don enable the Commercial Team to
function without having to be concerned that the attorney will not have the knowledge or
expertise to handle a case.
Don is well liked by the members of the team and is only too happy to share
his knowledge and expertise with them, He is unquestionably a great asset to the firm.
(Exhibit 67)
In August of 1995, approximately two months after being the subject of
the above described praise, and contemporaneous with receipt of plaintiff's second Premier
Award, Plaintiff was transferred to a litigation team by Joe Fern. Mr. Fern knew plaintiff
to be an experienced litigator of over 100 jury trials. At trial Fern testified that he
had been an attorney for approximately 27 years, and had conducted three trials during his
seven years with EXCHANGE. During his five and one half years as a supervisor with
EXCHANGE, he supervised a total of approximately twenty to thirty people. He testified
with certainty that the number of employees to which he issued "counseling memos
number less than ten" and possibly less than five.
Between August 21, 1995 and mid-November of that year, a period of
approximately 90 days, Joe Fern issued 29 counseling memos to plaintiff.
The evidence is undisputed that during this 90 day period:
Plaintiff took over approximately 54 active cases;
Plaintiff did not receive summary reports, calendaring or contract from prior
lawyers on these cases;
Plaintiff was assigned approximately 26 additional new cases;
Plaintiff had on his trial calendar for a one month period between November
and December five trials and one binding arbitration;
As of mid-November, plaintiff's caseload of 73 cases consisted of 54 Superior
Court matters, 6 Municipal Court matters and 13 other matters. This was a caseload with at
least twice as many Superior Court matters than any other member of his team;
Plaintiff was called to Jury Service as of October;
In mid-October, Plaintiff's minor son was struck by an automobile and
required extensive hospitalization.
In addition to the counseling memos, Fern created a "Ricketts File"
to which he directed memos from himself describing in detail routine supervisory
conversations with plaintiff. This file was separate from and in addition to the personnel
file maintained by the human resources department.
On October 20, 1995, Plaintiff informed Fern in writing that his minor
son had been struck by an automobile requiring him to undergo extensive hospitalization.
Plaintiff requested time off either as a vacation or time of under the Family Leave Act, Despite
the numerous memos directed to plaintiff in the span of their short team relationship, Mr.
Fern did NOT respond to this request. Instead, he directed plaintiff to prepare
case summaries for files to be transported to the claims department for review within
three days.
On November 15, 1995, Plaintiff informed Mr. Fern in writing that his
caseload has reached an unmanageable level and requested that not be assigned any new
files for the next two months. A list showing the distribution of the case within the team
was attached.
The following day,plaintiff was issued a Formal Warning. The day after, Mr.
Price directed Mr. Fern to submit his package on Ricketts to human resources to get the
approval to terminate.
Having assessed the testimony of the witness at trial and the admissible
evidence that was offered, this court finds credible and finds as a matter of clear and
convincing fact that plaintiff's demise within the organization was a direct result of his
formal submission to management of comments and memoranda expressing concern regarding the
possible ethical violations and suggesting significant changes in the organization and
structure of the legal department to avoid such violations.
There is clear and convincing admissible evidence that Stephen Price
considered any considerations of potential ethical issues raised in connection within
house insurance companies as "attacks by outside counsel who want the
business." EXCAHNGE's in house counsel were encouraged in writing to become
active in the ethics subcommittees of bar groups so that such "attacks" could be
"fought head on". Price told plaintiff that if the California legislature was to
follow in the direction of several other states and prohibit in-house insurance counsel
holding itself out and operating as if it were a law firm, he would "just go down the
street, open up the Law Offices of Stephen Price and hire the people he liked out of the
disbanded Farmers office and serve Farmers from down the street." It is in this
environment that Plaintiff expressed his concern that the interests of his clients, the
insureds, were not primarily served by the overwhelming amount of power and authority of
the claims department in the legal decision making of litigation.
One month after plaintiff presented his concerns and suggestions in writing
to senior attorneys he received his first criticism of his work performance. By evaluating
the testimony at trial and the clear and convincing admissible evidence presented, this
Court finds credible plaintiff's assertions that upon plaintiff's assignment to Team Fern,
Mr. Fern and Mr. Price decided and acted with intent to immediately begin a memo trial
required by human resources to justify termination.
It is significant that Plaintiff not only voiced his concerns regarding the
conflict he faced serving the insureds with undue pressure from Claims but took action he
believed was favorable to the insureds but clearly disliked by Claims. There is clear and
convincing admissible evidence that the Claims Department expressed criticism of plaintiff
because he reported that the liability of an insured in a third party action was
approximately 40% where Claims had insured in a third party action was approximately 40%
where Claims had to(unreadable)insured's policy of insurance did not provide
coverage. Needless to say, this situation has severe ramifications in any potential bad
faith actions.
Joe Fern testified that plaintiff was terminated for cause. Stephen Price
attempted to contradict his own witness and establish an at-will status. There is credible
compelling, and admissible testimony that during the second year of Plaintiff's
employment, EXCHANGE attempted to have employees sign an "at-will" employment
acknowledgment. Plaintiff crossed out the language establishing acknowledgment of at-will
employment and signed a document acknowledging receipt of the new employee handbook. The
court finds that plaintiff was not at at-will employee but could only be terminated for
just cause.
Mr. Price testified that he made the decision to terminate plaintiff without
following the formal disciplinary process under the extreme circumstances provisions.
Price testified that he made the decision to terminate plaintiff at a point in time when
he knew he was about to be promoted to the position of his then supervisor - Vice
President of Claims Administration. Following promotion, Mr. Price approved the
termination. Having made the decision to terminate in one capacity and approving the
decision in the promoted capacity, enabled Price to both recommend and approve the
termination with technical compliance of the human resources requirement that in case of
termination outside the progressive disciplinary system, a supervisor must have the
approval of his or her immediate superior before termination. As argued by plaintiff's
attorney, it may be that following the proper channels through the progressive
disciplinary system, that Mr. Ricketts might well have lost his job and may not have cause
of action. But Mr. Price with the help of Mr. Fern violated Farmer's own policy by not
following the established progressive system and frustrating the exceptions established
for deviation from the policy.
Careful assessment of the credibility of the testimony of the witnesses and
of the clear and convincing admissible evidence has established to this court that the
motive behind these actions was the recognition that plaintiff was not going to cease
voicing his concerns regarding the ethical dilemmas in which he found himself. The
evidence is uncontradicted that Mr. Price requested and received at least one legal
opinion that EM&P was not legal entity but a department within EXCHANGE. He was given
a legal opinion that this created the potential for numerous violations of the Rules to
Professional Conduct and the Business and Professional Code. Specifically, Mr. Price
was informed that for an attorney to lend his name to be used by another person who is not
an attorney is cause for disbarment or suspension under section 6105 of the Business
Professions Code. He was given the legal opinion that given their legal status as a legal
department within EXCHANGE created issues regarding the unauthorized practice of law under
section 6125 of the Business and Professions Code. These were the very issues plaintiff
had pointed out and addressed throughout his relationship with Mr. Price and his
employment. Prior to being transferred to Team Fern, Plaintiff took the bold step of
putting his concerns and drastic suggestions in writing and distributing the same.
Credible testimony and evidence has lead this court to conclude that Mr. Fern commenced
the supervision of plaintiff with the intention of creating the documentation needed to
gain approval and justification for plaintiffs termination.
Plaintiff's employee contract contained an implied covenant of good faith
and fair dealing, which obligated his employers to perform the terms and
conditions of the agreement fairly and in good faith and to refrain from doing and act
that would prevent or impede plaintiff from performing any or all of the conditions of the
contract that he agreed to perform, or any act that would deprive plaintiff of the
benefits of the contract.
Plaintiff reasonably relied upon the representations of his employers
regarding their desire to have employees submit comments, suggestions, and criticisms and
regarding the causes for and manner of assessing discipline, including termination, and
reasonably expected that comments, criticisms and suggestions would be welcomed and given
due regard, and reasonably expected that defendants would apply their discipline
procedures even-handedly to afford plaintiff the protections of those procedures if they
believed there was cause to discharge plaintiff.
There is clear and convincing evidence that defendants EM&P and
EXCHANGE breached the implied covenant of good faith and fair dealing under the employment
contract by summarily terminating plaintiff without affording him the administrative due
process guaranteed by the contract and in terminating him for his complaints and
suggestions regarding (unreadable) discussed above.
There is clear evidence that the willful act of defendants EM&P and
EXCHANGE in terminating plaintiff in the manner described above because of strong
expression of potential serious ethical and legal considerations regarding the legal
representation of insureds of EXCHANGE and/or other entities within the P&C Group was
malicious, oppressive, retaliatory and a violation of public policy. The pretextual nature
of the termination was fraudulent. Plaintiff suffered humiliation and mental distress
because of the violation of public policy by defendants EXCHANGE and EM&P in
terminating plaintiff for, in part, voicing his reasonably based allegations that EXCHANGE
and EM&P may have been acting in violation of specific statutory standards governing
the practice of law in the State of California.
The court finds that plaintiff sustained a loss of earnings for two years
which had a value of $154,172. The court finds that during these two years plaintiff
earned $10,000 and awards plaintiff $144,172 as special damages. In light of evidence that
attorneys at EXCHANGE were permitted to practice law separated from their duties at
EXCHANGE, the court finds that proceeds from settlement of an action instituted by
plaintiff against third parties prior to termination, but concluded following termination
is not relevant to the calculation of plaintiff's lost earnings.
The court finds that an award to plaintiff of $1240,000.00, as general
damages is reasonable compensation for the pain, suffering, mental anguish and humiliation
suffered by plaintiff during the approximately two years he was unemployed and virtually
without any income.
There is clear and convincing evidence that plaintiff's strong expression of
potential serious ethical considerations additionally included concerns regarding the
control of an attorney's representation of others by nom-attorneys, the knowing assistance
in or inducing a violation of the Rules of Professional Conduct of the State Bar of
California, advising the violation of law, all of which are contrary to the public policy
of the State of California as enunciated in California Business and Professions Code
sections 1-120, 1-300, and 3-210. Similarly, preventing the illegal practice of law is a
matter of public policy of the State of California expressed in the statues and
(unreadable) Conduct of the State Bar of California cited above. The Standing Committee on
Professional Responsibility and Conduct: of the State bar of California (in Formal Opinion
No. 1987-91) has declared:
"Attorneys working within the Law Division [of a
carrier] should be alert that the Law Division does not become a front or subterfuge for
lay adjusters or other unlicensed personnel to practice law ....."
*********************
"In-house counsel for an insurer may represent
insureds in litigation without violating the prohibition against the unauthorized practice
of law set forth in rule 3-100(A). However, the attorney's must ensure that the insurance
company does not control or interfere with the exercise of professional judgment in
representing insureds ...." Ibid
Without reaching the issue of whether or not violations of these standards
actually exist within the policies, procedures and practices of EXCHANGE and EM&P,
this Court finds that it is the clear and convincing evidence that Mr. Price terminated
plaintiff in the manner described above for the plaintiff having even raised such concerns
that is reprehensible, particularly in light of EXCAHNGE's subsequent ratification of Mr.
Price's conduct. This creates the strong potential for an improper and chilling effect
upon other attorneys in situations similar to that of the plaintiffs herein when
confronted with professional and ethical concerns and amply justifies the awarding of
exemplary damages against EXCHANGE and EM&P.
In Neal v. Farmers Insurance Exchange (1978) 21 Cal.3d 910,
927-9287 the California Supreme Court affirmed an award of this court (L.A. No. 30775) for
punitive damages and enunciated general guidelines to assess the reasonableness of
punitive damages awards. It stated:
"As we pointed out in Bertero v. National General
Corp., supra, 13 Cal. 3d 43, our review of punitive damage awards rendered at the trial
level is guided by the historically honored standard of reversing as excessive only those
judgments which the entire record, when viewed most favorably to the judgment, indicates
were rendered as the result of passion and prejudice ...." (13 Cal.3d at p.65, fn 12)
Stating the matter somewhat differently in a similar case, we indicated that an appellate
court may reverse such an award (unreadable) as a matter of law appears excessive, or
where the recovery is so grossly disproportionate as to raise a presumption that it is the
result of passion or prejudice." (Schroeder v. Auto Driveway Co. (1974) 11 Cal.3d
908, 919 [114 Cal. Rptr. 622, 523 P.2d 662].)
"In making the indicated assessment we are afforded guidance by certain
established principles, all of which are grounded in the purpose and function of punitive
damages. [Fn.] One factor is the particular nature of the defendant's acts in light of the
whole record; clearly different acts may be of varying degrees of reprehensibility, and
more reprehensible the act, the greater the appropriate punishment, assuming all the
factors are equal. (See Bertero v. National General Corp., suora, 13 Cal.3d 43, 65;
Fletcher v. Western National Life Ins. Co.,supra, 10 Cal.App.3d 376, 408-409; Ferraro v.
Pacific Fin. Corp. (1970) & Cal.App.3d 339, 352-353 [87 Cal.Rptr.226].) Another
relevant yardstick is the mount of compensatory damages awarded; in general, even an act
of considerable reprehensibility will not be seen to justify a proportionally high amount
of punitive damages if the actual harm suffered thereby is small. (But cf. Finney v.
Lockhart (1950) 35 Cal.2d 161,164 [217 P.2d 19].) Also to be considered is the wealth of
the particular defendant; obviously, the function of deterrence (see fn. 13, ante), will
not be served if the wealth of the defendant allows him to absorb the award with little or
no discomfort. (See Bertero, supra, at p. 65, Roemer v. Retail Credit Co. (1975) 44 Cal.
App.3d 926, 270-271 [95 Cal.Rptr.82]; Wetherbee v. United Ins. Co. of America (1971) 18
Cal.App3d 266, 270-271 [95 Cal.Rptr. 678]; Ferraro v. Pacific Fin. Corp., supra, 8
Cal.App.3d 339, 353, MacDonald v. Joslyn (1969) 275 Cal.App.2d 282, 293-294 [79 Cal.Rptr.
707, 35 A.L.R.3d 641].) By the same token, of course, the function of the punitive damages
is not served by an award which, in light of the defendant's wealth and the
gravity of the particular act, exceeds the level necessary to properly punish and
deter."
In Weeks v. Baker & McKenzie (1998) 63 Cal.App.1128,1166, the
Court noted that "punitive damages awards generally are not permitted to exceed 10
percent of defendant's net worth"
Neal, noting with approval the decision in Wetherbee v. United
Insurance Corp. of America (1971) 18 Cal.App3d 266, 271, held that the jury and the
trial court "could reasonably conclude that an award equal to one week's earnings was
required to effect the necessary punishment of defendant and to serve as an example for
other insurers." (Cf. Zhadan v. Downtown L.A. Motors (1976) 66Cal.3d 481, 499-501
[136 Cal.Rptr. 132].)
Although not enunciating a formula as a standard to be followed, Neal
approved punitive damages that were 70 times the amount of compensatory damages and Weeks
approved a ratio of punitive damages to compensatory damages of 74:1.
The court finds that the net worth of defendant EXCHANGE as of December 31,
1998, was $1,878,825,000.00, and that in 1998, EXCHANGE had net income of
$19,556,000.00.
Applying the standards set forth in the above opinions to the facts set forth
above, the Court finds that exemplary damages in the amount of $2,500,000.00 (two million,
five hundred thousand dollars)is reasonable and plaintiff is awarded that amount against
defendants EXCHANGE and EM&P, and each of them.
Plaintiff is awarded costs.
Dated:January 27,2000
Soussan
G. Bruguera
Judge
of the Supreme Court
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