Legal News and Appellate Tips

Question: What’s the difference between an arbitration ruling based on an interpretation of contract that is merely wrong, and one that is irrational?

The answer in Hayday Farms, Inc. v. FeedX Holdings, Inc., No. 21-55650 (9th Cir. Dec. 19, 2022), an appeal from an arbitration award, is about $7 million.

This is yet another cautionary tale that arbitration severely constrains the litigants’ appellate rights. The 9th Circuit panel agreed that the appellant’s interpretation of the contract was the right one, but that was not enough: the arbitration award was not “irrational” or “some form of vigilante justice,” so it stands.

The arbitration panel awarded the plaintiffs $21 million on the contract dispute, but when the plaintiffs moved the district court to confirm the award, the defendants argued that $21 million was excessive. The large award was more than the plaintiffs stood to receive had the contract been performed, and so under California Civil Code section 3358, the award was excessive.

The district court agreed the arbitration award was excessive, and reduced it by $7 million.

The 9th Circuit reversed the district court and reinstated the aribtral award, even though the panel agreed with the district court that the award was excessive. As Judge Milan wrote, the defendant "probably offers the best interpretation of the parties’ agreements,” and the panel expressed "concern about a seemingly unfair damages award that likely violates § 3358.”

But as long as the arbitral award "was not some form of vigilante justice,” it has to be affirmed.

When a jury returns a large verdict, the unhappy defendant has to file a motion for new trial to reduce the verdict. (You can't just appeal directly, or else you'd waive the excessive-damages issue.) One way to argue the damages are excessive is to demonstrate the amount is the result of passion or prejudice. And one way to demonstrate that might be to compare verdicts in similar cases.

That is what the defendant-appellant tried after it was hit with a $25 million noneconomic verdict in the mesothelioma case of Phipps v. Copeland Corp. (D2d7 May 18, 2021) 278 Cal.Rptr 3d 688 (2021 WL 1973560). The appellant compiled 15 comparable cases into a report, and submitted that with a declaration in support of its motion for a new trial. But the trial court excluded the report as irrelevant and denied the motion. On appeal, the appellant argued the trial court erred in this ruling because verdicts in other cases were relevant.

Held: The compilation of other cases was not based on "the minutes of the court" under Code of Civil Procedure section 658, and thus could not be considered as a basis to reduce damages on a motion for new trial. Affirmed.

This analysis seems harsh, but it is based on the statutes. Do not rely on declarations in a new trial motion. Support your motion based on the court minutes.

I find it noteworthy the court decided this case the way it did. The court apparently did as well, as it published the opinion. This signals a bigger uphill climb for defendants challenging large jury verdicts. This is an important reason to have appellate counsel present at trial.

Motions for new trial are seldom granted. So seldom, in fact, that many attorneys — and judges, too — don't even know what to do when it happens. For example, a plaintiff has a right to a jury trial, and that includes a right to have the jury determine the amount of damages. So what happens when the judge, in ruling on a new trial motions, decides the jury's award was way too high and a remittitur (reduction of the award) is appropriate? How may the judge reduce the jury's award consistent with the plaintiff's right to a jury trial?

That is the situation that arose in Duncan v. Kihagi (D1d1 Aug. 9, 2021) no. A153521 (nonpub. opn.). Following trial in a slumlord lawsuit, the tenant received a verdict of $3.5 million (after a statutory trebling of damages). On the landlord's new trial motion, the judge agreed the verdict should be reduced to $2.7 million. The Court of Appeal explained the procedure for reducing jury verdicts, and even though the judge failed to follow that procedure completely, the court affirmed anyway.

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Awards for emotional distress can add tens or hundreds of thousands of dollars to a workplace-retaliation claim. But there are limits. And in Briley v. City of West Covina (D2d4 Jul. 1, 2021) no. B295666, 2021 WL 2708945, the court pointed to counsel's personal attack during closing argument as evidence the verdict was based on improper factors."[C]ounsel's attack on the integrity of opposing counsel during his rebuttal argument further suggests that the jury's noneconomic damages award rested on improper factors."

The result was a $1.5 million award was reduced to $100,000. (It probably would have been reduced even without counsel's improper argument.)

Here is another recent opinion in which the Court of Appeal thumbs its nose at the California Rule of Court that prohibits the citing of unpublished opinions for any reason. (Ironically, the Court of Appeal does its nose-thumbing in an unpublished opinion.)

In the hit-and-run personal injury case of Shui v. B.R. & Sons (D2d2 Feb. 25, 2021) No. B299251 (unpublished), the Second District also provides a good illustration for personal-injury plaintiffs how to get key evidence into the record, and how to make a judgment more appeal-proof through the use of jury instructions.

This is another installment in a series of posts about ways appellate courts have cited unpublished cases, despite Rule of Court 8.1115. These cases might inspire ideas of how, with a little ingenuity, you too might bring up unpublished cases. But there is one thing you can bank on: if ever we find an example of someone being sanctioned for violating 8.1115, the perpetrator will not be an appellate justice. So follow these judges' examples, if at all, with extreme caution.