Thursday, September 24, 2020
By Sandra Hong, Staff Writer
Expert testimony on punitive damages “usurped the jury’s role” as well as that of the trial court in instructing the jury how to calculate such damages, the Court of Appeal for this district has held, reversing a judgment which included more than $725,000 in punitive damages in a lawsuit against Ford Motor Company.
Justice Lamar W. Baker of Div. Five wrote the opinion, filed Tuesday, which was not certified for publication. It reverses a judgment by Los Angeles Superior Court Judge Mel Red Recana, with directions to conduct a new trial to determine the amount, if any, of a punitive-damage award.
“A new trial on punitive damages is required because it is reasonably probable the jury’s punitive damages decision would have been more favorable to Ford had the trial court excluded the improper testimony,” Baker said in his opinion, joined in by Presiding Justice Laurence D. Rubin and Justice Carl H. Moor.
Ford also contested a $953,793.90 attorney-fee award by Recana, which Baker did not separately discuss, explaining:
“We… need not address Ford’s challenge to the trial court’s attorney fees order because our partial reversal of the judgment compels reversal of that order as well—since resolution of the question of punitive damages may figure in the determination of attorney fees.”
Plaintiff Charles Margeson sued Ford for fraud and other wrongdoing after the F-350 pickup he purchased in 2006 experienced recurring problems.
Margeson’s pickup began emitting black smoke a month after he purchased the vehicle and problems continued for the next six years.
Margeson’s complaint included various fraud allegations, as well as negligent misrepresentation and violations of the Consumers Legal Remedies Act and the Song-Beverly Consumer Warranty Act, the “lemon law.”.
At trial, Margeson’s expert, a Harvard-educated forensic accountant and certified fraud examiner, gave her opinion as to the “indicia of fraud” she observed in reviewing Ford’s internal documents and emails.
The expert, Barbara Luna, also gave her opinion on how to calculate a “reasonable punitive damages award.”
Luna described the process as one of “triangulation” and involving a multiplier of compensatory damages. But Luna also testified that the upper limit of a punitive damages award could exceed the multiplier calculation by considering the net worth of the company found liable.
During closing arguments, Margeson’s counsel repeatedly reminded the jury of Luna’s training, describing her as “not the gold standard, but the platinum standard on fraud damages” and that her damages calculations were only a “baseline” estimate of a reasonable punitive damages award.
The jury found for Margeson on all claims and awarded $72,564 in compensatory damages, $141,973 in civil penalties, and punitive damages of $1,451,973.
Ford moved for a new trial and judgment notwithstanding the verdict. Recana denied the motion, finding the jury “could not have reached a different verdict except for the amount of punitive damages.”
However, Recana conditionally granted a new trial unless Margeson agreed to limit punitive damages to 10 times the compensatory award. Margeson agreed, and punitive damages were reduced to $725,640.
Baker concluded that even that might be too high an amount because Luna’s testimony on the calculation of punitive damages should have been excluded.
“Luna not only usurped the role of the jury in determining the amount of a punitive damages award, she also usurped the role of the trial court to instruct the jury on punitive damages awards,” he declared.
Ford had objected to Luna being allowed to testify, at all, as a fraud expert. Baker concluded there was no error in allowing her testimony as to her opinion on the “indicia of fraud” in Ford’s documents and communications.
“We hold the trial court was within its discretion to permit Luna to identify herself as a fraud examiner, to highlight internal Ford documents that in her experience raised red flags, and to state Ford did not disclose (and should have disclosed) problems with the 6.0-liter engine in the document she reviewed,” Baker said.
The case is Margeson v. Ford Motor Co., B287445.
Counsel for Margeson were Hallen D. Rosner and Arlyn L. Escalante of Rosner, Barry & Babbitt in San Diego and Steve Mikhov and Roger Kirnos of Knight Law Group in Los Angeles. Representing Ford were Frederic D. Cohen, Lisa Perrochet, and Allison W. Meredith of Horvitz & Levy in Los Angeles and Kevin W. Alexander and Spencer P. Hugret of Gordon & Rees in Los Angeles.
The pickup’s 6.0-liter diesel engine had been costly for Ford since its launch in 2002, with warranty repairs of $479 million and buybacks amounting to more than $82 million between 2002 and 2007. Ford sued the engine manufacturer, Navistar, in 2007 for failing to pay its share of repairs covered under warranty.
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