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Holdgrafer v. Unocal Corp.

ELR Citation: 38 ELR 20059
Nos. No. B175953, (Cal. App. 2d Dist., 03/04/2008)

A California appellate court reversed a lower court's award of $5 million in punitive damages against a pipeline company for trespass, nuisance, and negligence in connection with underground oil contamination that was caused by a leak from one of the company's pipelines. The company argued that its due process rights were violated by the admission of evidence of its dissimilar conduct relating to other spills that occurred on other pipelines at different locations. The U.S. Supreme Court has held that "[a] defendant's dissimilar acts, independent from the acts upon which liability was premised, may not serve as the basis for punitive damages." Here, the evidence of two massive oil spills is too dissimilar to be considered in assessing the company's reprehensibility in causing and responding to the underground contamination at issue in this case. And because the company's dissimilar conduct was admitted not only for the purpose of evaluating the degree of its reprehensibility in setting the amount of punitive damages, but also to prove that the company was guilty of malice, fraud, or oppression, the jury's findings of liability for punitive damages and the amount of the award are both fatally undermined. The court, however, affirmed the lower court's award of $2.5 million in compensatory damages.