In case there was any doubt, the California Court of Appeal recently delivered an expensive reminder of its pro-employee stance. Timothy King, a former Regional President for U.S. Bank, was recently awarded $15.6 million in damages based on a jury’s finding that U.S. Bank defamed and wrongfully terminated him in order to avoid paying him a bonus.
U.S. Bank was unhappy with that outcome and filed an appeal. Following that appeal, the trial court reduced U.S. Bank’s liability to just over $5 million.
One would think U.S. Bank would have stopped there. They just saved $12.6 million dollars by filing a successful appeal in a state known to be hostile to employers. But no. U.S. Bank had their egos in it, and they got greedy. So they appealed again.
But this time things were different. Instead of reducing the award further, the Court of Appeal reinstated the jury’s award and ordered U.S. Bank to pay $17.2 million – more than triple what U.S. Bank owed before they appealed!
On the issue of punitive damages, the Court of Appeal applied the “three guideposts” rule: (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. Applying this rule, the Court decided that U.S. Bank was liable to the plaintiff for punitive damages.
So, after years of litigation, U.S. Bank’s refusal to quit when it was ahead cost it an additional $12.2 million, plus the millions U.S. Bank paid to their attorneys. This is an expensive lesson, obviously. U.S. Bank can no doubt absorb the cost of this lesson. But many smaller employers in California cannot. So our advice to smaller employers in litigation in California is always – know you’re in the most employee-friendly (and employer-hostile) state in the country; get your egos out of your litigation decisions; treat litigation decisions like business decisions; don’t over-react to your “losses” in litigation; take your “wins” when you get them; and, most importantly, if you ever get ahead in litigation, recognize the rarity of that in California…and quit while you’re ahead.
The full opinion can be found here.
