Holdgrafer v. Unocal Corp. (2008) 160 Cal.App.4th 907

In this case, Horvitz & Levy LLP obtained the reversal of a $5 million punitive damage award against Unocal Corp. The Court of Appeal reversed the punitive damages award because (1) evidence of the defendant’s dissimilar acts toward others was improperly introduced to show entitlement to punitive damages, and (2) the jury was not instructed that it could consider only similar harm to others in determining the amount of punitive damages. (Click here to read a copy of the Court of Appeal’s opinion.)

Unocal owned and operated a series of subterranean oil pipelines in Central California. A leak occurred, contaminating plaintiffs’ commercial property. Unocal immediately admitted it was responsible, worked with local officials and the plaintiffs to monitor the site and ensure there was no danger from the contamination, and provided plaintiffs with financial assistance necessitated by the contamination. Plaintiffs ultimately sued Unocal for negligence, nuisance, trespass, and punitive damages. To support their punitive damages claim, plaintiffs introduced evidence of Unocal’s response to other oil spills in the same geographic area. Unocal objected that its conduct in response to the other spills was dissimilar to its conduct toward the plaintiffs and proposed a jury instruction informing the jury that Unocal should not be punished for its conduct toward non-parties. The trial court permitted the evidence and rejected the instruction. The jury ruled in plaintiffs’ favor and awarded roughly $2.5 million in compensatory damages and $10,000,000.76 in punitive damages, which the trial court remitted to $5,000,000.

The Court of Appeal reversed the punitive damage award and ordered a new trial on both liability for punitive damages (i.e., whether Unocal acted with malice, fraud, or oppression toward plaintiffs) and the amount, if any, of the punitive damages award. The Court of Appeal found that the evidence of Unocal’s response to the other two oil spills was “too dissimilar to the evidence presented regarding Unocal’s conduct in causing and responding to the contamination of plaintiff's property and therefore should have been excluded.” The court reasoned that “State Farm [v. Campbell’s] proscription of dissimilar conduct to prove the amount of a punitive damages award also applies to evidence offered to prove that the defendant is guilty of malice, fraud, or oppression and is therefore subject to such an award.”

The Court of Appeal also held that the trial court erroneously denied “Unocal’s request to instruct the jury, in accordance with State Farm, that it should not consider conduct it deemed too dissimilar to that which harmed plaintiffs in deciding whether to award punitive damages.” The Court held this error required reversal because such an instruction “would have properly informed the jury that Unocal could not be punished for the impact its alleged misconduct had on others who were not parties to the litigation.”

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