Low, Ball & Lynch’s

WEEKLY LAW RESUME

January 5, 2026 Issue   By: Ray Coates

Punitive Damages - Standards For Application

Greg Johnson, et al. v. Ford Motor Company

 (December 23, 2005)

Court of Appeal, Fifth District

Since the United States Supreme Court decision in State Farm Mutual Auto Insurance Company v. Campbell (2003) 538 U.S. 408, California has been attempting to apply the standards set forth in this opinion.  This decision shows the difficulties involved in its application. 

Greg and Jo Ann Johnson bought a used 1997 Ford Taurus from Decker Ford for $17,411.  They were told the vehicle had no significant repair history.  In fact, the previous owner had many problems with the car’s transmission, and the car was accepted by Decker as a trade-in for a new vehicle in order to avoid repurchase as a “Lemon.”  After sale of the vehicle to the Johnsons, there were continuous transmission problems.  When the Johnsons finally learned of the car’s repair history, they sued Ford Motor Company and Decker for intentional and negligent misrepresentation and concealment, violations of the Song-Beverly Consumer Warranty Act, the Consumer Legal Remedies Act, the unfair competition law and prohibition on false and misleading advertising.  The Johnsons settled with Decker prior to trial, and voluntarily dismissed the unfair competition and false advertising causes of action against  Ford Motor Company.  The jury returned with a verdict of $17,811.60 in compensatory damages, and $10,000,000 in punitive damages against Ford Motor Company.  On appeal to the Court of Appeal, the punitive damages were reduced to $54,435.  The Johnsons petitioned the California Supreme Court for review, which was granted.  The Court ordered the Court of Appeal to reconsider the punitive damage award in light of the State Farm decision. 

The Court of Appeal reset the punitive damages at the sum of $175,000.  The Court stated that grossly excessive or arbitrary punitive damage awards violate the defendant’s right to due process under the Fourteenth Amendment.  The Courts are required under the Constitution to engage in an exacting de novo review of punitive damage awards, and make an independent assessment of the award.

The Court noted that a punitive damage award first must meet the State’s interest in punishing and deterring oppressive, fraudulent or malicious conduct to the individual plaintiffs.  The Court found Ford’s conduct highly reprehensible, and that the State  had a very strong interest in deterring similar conduct.  This conduct was Ford’s attempt to avoid the lemon law statutes of California. 

As to the second step of weighing the scope and profitability  of Ford’s conduct in determining the amount of punitive damages, the Court stated there was substantial evidence that Ford structured its programs to avoid the lemon law statutes, and the transaction with the plaintiffs was typical of this program.   When used in this manner, it saved up to $10,000 per car.  However, there was no showing of extraordinary reprehensibility.  Thus, there was no basis for an award in excess of the single digit range. 

Looking at comparable civil penalties under the Song-Beverly Act, twice the compensatory award is justified when there is a willful violation of the Act.  The Court felt that the conduct here was more reprehensible than a willful act, but no so high as to justify a $10,000,000 award. 

Finally, in considering the ratio of punitive damages to actual damages, the Court concluded that there was no justification to exceed a single digit ratio.  The Court concluded that an award  of ten times the compensatory award, or $175,000, sufficiently vindicated California’s legitimate interest in punishing unlawful conduct and deterring its repetition.

The judgment was modified to award punitive damages in the total sum of $175,000.

COMMENT

This opinion shows the difficulty in trying to apply the new standards to cases involving punitive damages.  Because of the individualized nature of each case, it is likely that such awards will be reviewed de novo on an individual basis. 

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