A federal appeals court in San Francisco has tossed out a $241 million award won by the state of California in a lawsuit stemming from the 1991 takeover of the failed Executive Life Insurance Company.
The U.S. 9th Circuit Court of Appeals overturned the award against Artemis S.A. Paris, over allegations of fraud against the company.
In its decision issued on Monday, the appeals court remanded the case back to the district court for reconsideration.
Judge Jay S. Bybee threw out the case on the grounds that a jury had awarded punitive damages against Artemis but not compensatory damages. Under California law, a jury may not award punitive damages without also imposing compensatory damages, according to the judge.
Bybee upheld a ruling by a lower-court judge vacating the judgment and ordered a new trial to recalculate the damages that Artemis should pay the state.
The case originated in 1991, when the state’s department of insurance took over Executive Life after the market for its junk bond portfolio collapsed.
State Insurance Commissioner John Garamendi sold the portfolio in 1992 for $3.25 billion to an investor group that included the French bank Credit Lyonnais and Artemis, which was created to avoid the appearance that it was controlled by the French government.
In 1999, the state department of insurance sued Artemis after finding that the French government controlled the company, in violation of state law.
Other investors, including Credit Lyonnais, settled the case in 2005 for almost $700 million.
Artemis and another investor, however, went to trial over the charge. It lost that case, and the jury imposed $700 million in punitive damages but no compensatory damages. On appeal, the federal district threw out the punitive damages but ordered Artemis to pay $241 million in restitution.
In remanding the case back to the district court, the appeals court said the restitution award could be reinstated after a new trial to recalculate damages.