On June 16, 2005, the Supreme Court of California reversed a lower court decision that allowed a $1.7 million punitive damages award in a business tort case where no personal injury occurred and only economic harm was claimed. WLF had filed a brief urging reversal of the lower court decision, arguing that the award violated the Due Process Clause of the Constitution. The lawsuit was filed by a businessman who tried unsuccessfully to buy an office building in Los Angeles from a bank. After the transaction fell through, the businessman sued for breach of contract and fraud. A jury found that there was no contract, and determined that the plaintiff’s out-of-pocket losses were only $5,000, but nonetheless awarded the heavy punitive damages. The Supreme Court of California said in its decision that the 340-to-1 ration of punitive damages to compensatory damages was “breathtaking.” It reduced the punitive damages to $50,000, or ten times the compensatory damages.
Simon v. San Paolo U.S. Holding Co.