A federal judge has thrown out a $700 million (euro586 million) award for punitive damages won by the state of California in a lawsuit stemming from the takeover of failed insurer Executive Life by French investors.
U.S. District Court Judge A. Howard Matz concluded Tuesday that the state’s Department of Insurance was not entitled to receive the $700 million (euro586 million) awarded by jurors in July as part of their judgment against French company Artemis SA, according to a summary of the order posted on the court’s Web site.
“This order addresses only the question of whether plaintiff (Insurance Commissioner) John Garamendi is entitled to the judgment he seeks, which would include the $700,000,000 punitive damages award. He is not,” the order summary said. “The court will not include any punitive damages award in the ultimate judgment.”
Norman Williams, a spokesman for Garamendi, said Wednesday the department’s lawyers had yet to review the complete ruling.
“Obviously, we’re disappointed that the judge has rejected the jury’s finding,” Williams said.
Matz was forced to rule on the jury’s award because the panel ordered only punitive and not compensatory damages, raising questions about whether the punitive award would stand.
Lawyers for Artemis argued U.S. Supreme Court precedent established punitive damages had to be based on compensatory damages.
Garamendi had expressed confidence the award would stand based on other precedents that allowed punitive damages comparable to a defendant’s “ill-begotten gains.”
The state argued that Artemis reaped $851 million from selling part of Executive Life’s junk bond portfolio.
Matz did not issue rulings Tuesday on other questions pending in the case, including whether the state should receive any restitution.
The state took over the bankrupt Executive Life in 1991. A year later, Garamendi sold its junk bond portfolio for $3.25 billion to an investor group financed by French bank Credit Lyonnais.
The junk bonds later jumped in value and were worth billions of dollars more.
In 1999, the state Department of Insurance sued the French investors, claiming they had conspired to effectively give Credit Lyonnais control over all of Executive Life’s assets, thereby violating California law at the time, which prohibited foreign governments from owning insurers in the state.
Most of the original parties named as civil defendants, including Credit Lyonnais, reached a $600 million out-of-court settlement in February. The state gained another $110 million when Artemis settled criminal allegations.
In May, jurors cleared Artemis’s owner, billionaire Francois Pinault, of any wrongdoing but found his company conspired with a subsidiary of Credit Lyonnais and other investors to defraud California regulators.
The jury determined Artemis’ actions caused harm to Executive Life policyholders.
Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Topics Lawsuits California Legislation
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