May 5, 2017

Kimberly-Clark sues former subsidiary over $450 million punitive damages award

Law 360 reports that Kimberly-Clark Corporation has sued former subsidiary Halyard Health, Inc. over a $450 million punitive damages award handed out by a Los Angeles jury earlier this month.  

The litigation arises out of a class action in the U.S. District Court for the Central District of California.  The class members include those who bought surgical gowns made by Halyard, which  Kimberly-Clark spun off in 2014.  Attorneys for the class argued that the defendants committed fraud by marketing the gowns as impermeable when in fact they failed to protect against pathogens like Ebola.  Apparently, the plaintiffs presented no evidence of any incident in which a gown failure resulted in an injury or infection.  But that did not stop the jury from awarding $4 million in compensatory damages and $450 million in punitive damages ($350 million against Kimberly-Clark and $100 million against Halyard). 

Given the enormous size of the award and the disproportionate ratio between the punitive damages and the compensatory damages, it is not surprising that both sides have already brought in appellate lawyers for the post-trial proceedings.

Meanwhile, Kimberly-Clerk is suing Halyard in the Delaware Chancery Court, seeking indemnity for the entire award, based on an agreement the companies entered into at the time of the spin-off.  And Halyard has filed its own action in California state court, seeking a declaration that Kimberly-Clark has no right to seek reimbursement. 

We will keep an eye on this one.  With three pending lawsuits and nearly a half a billion dollars at stake, this litigation is likely to be in the news for a while.

Johnson & Johnson gets hit again for punitive damages in Missouri talc litigation

Bloomberg news reports that a jury in St. Louis has awarded $5 million in compensatory damages and $105 million in punitive damages against Johnson & Johnson, in a lawsuit alleging that the company's talcum powder products (Shower to Shower and Baby Powder) caused the plaintiff's ovarian cancer.

This is the fourth time a jury in Missouri has awarded punitive damages against J&J based on claims that talc can cause ovarian cancer. A fifth trial resulted in a defense verdict.  The company says it plans to appeal, and that the verdict is contrary to governmental and scientific consensus that talc is safe.  The plaintiff's counsel accuses the company of "spending millions in efforts to manipulate scientific and regulatory scrutiny."

Johnson & Johnson is also fighting against an award of $1 billion in punitive damages in a lawsuit over allegedly defective hip implants  (Update: they also got hit for $17.5 million in punitive damages in a pelvic mesh lawsuit in Philadelphia last week.)

Related posts:

Johnson & Johnson hit for $65 million in punitive damages in third big talc verdict
Johnson & Johnson hit with another big punitive damages award in Missouri over talc-based powder products

Johnson & Johnson vows to appeal $1 billion punitive damages award in hip implant case    

April 27, 2017

Los Angeles jury awards $22 million in punitive damages against medical device company

The Star Tribune reports that yesterday a Los Angeles jury awarded $2.7 million in compensatory damages and $22 million in punitive damages in an wrongful termination suit against Minnesota-based Cardiovascular Systems, Inc., a medical device manufacturer.

The plaintiff, who worked as a regional sales manager for the defendant, claimed the company fired him for informing management of an illegal kickback scheme in which sales reps were bribing doctors to use the company's products.  The article says the company plans to appeal

April 15, 2017

Sacramento jury awards $7.5 million in punitive damages against group home

The Sacramento Bee is reporting that a jury in Sacramento has awarded $7.5 million in punitive damages and $4.5 million in compensatory damages against EMQ Families First, a group home for emotionally troubled youth.  The plaintiffs alleged that their adopted son, who was a resident at the facility, left the facility without supervision and was sexually assaulted by another minor.

March 29, 2017

Another proposal to eliminate tax deductions for punitive damages in California (SB 66)

Under current law, a business that is ordered to pay a punitive damages award can take a tax deduction for that payment, as a business expense.  In recent years it has become an annual ritual for state and federal legislators to propose bills to eliminate such deductions.

In keeping with that trend, California senator Bob Wieckowski, D-Fremont, has introduced SB 66.  The bill was approved by the Senate Governance and Finance Committee last week and is set for a hearing before the Senate Appropriations Committee on April 3.

We will keep an eye on this proposal, but so far we haven't seen any reason to believe that the California legislature will approve this bill after rejecting similar proposals repeatedly in the past.

Related posts:

Sen. Leahy introduces another proposal to eliminate tax deductions for payments of punitive damages

Another proposed bill to eliminate federal tax deductions for payments of punitive damages

Bill to eliminate tax deductions for punitive damages appears to be dead
Assembly approves bill to prevent tax deduction of punitive damages; Senate not expected to act until August
Committee on Appropriations approves bill to prohibit deductions of punitive damages

Another proposal to prohibit California taxpayers from deducting punitive damages

Assembly rejects proposal to eliminate tax deductions for punitive damages
Proposed California bill would prevent tax deductions for punitive damages

Proposal to eliminate [federal] tax deduction for punitive damages still alive

Senate Adopts Proposal to Eliminate Tax Deduction for Punitive Damages
More from Prof. Markel on Tax Policy and Punitive Damages

"Taxing Punitive Damages"

Proposed [federal] legislation would eliminate tax deduction for punitive damages

Obama administration proposes to eliminate tax deduction for payment of punitive damages 

March 28, 2017

Sacramento bankruptcy judge orders bank of Bank of America to pay $45 million in punitive damages, including $40 million to nonparties (Sundquist v. Bank of America)

The Daily Journal (subscription required) is reporting that U.S. Bankruptcy Judge Christopher M. Klein of Sacramento issued an opinion last week requiring Bank of America to pay $1 million in compensatory damages and $45 million in punitive damages for wrongfully foreclosing on a couple's home.  But the 45-to-1 ratio is by no means the most eye-catching aspect of the award.  According to the Daily Journal article, the order directs Bank of America to pay most of the punitive damages to non-parties: the National Consumer Law Center and the National Consumer Bankruptcy Rights Center would receive $10 million each, while five law schools in the University of California system would receive $5 million each. 

Legal commentators have argued for many years that punitive damages should be given to charities, rather than to the plaintiffs and their attorneys.  And I have seen news reports in which a victorious plaintiff promises to donate a punitive damages award to charity.  But this is the first time I can recall any court actually ordering a punitive damages award to be gifted to a non-party.  I haven't seen the order yet, but I am wondering what authority the judge relied on in making that ruling.  And how did he go about selecting the beneficiaries of that award?  This promises to be interesting. An appeal seems virtually certain.

Court of Appeal rejects challenge to $5.65 million punitive damages award, citing inadequate appellate record (Raskin v. Petrosyan)

We have reported on many cases in which the California Court of Appeal reversed a punitive damages award because the plaintiff failed to present meaningful evidence of the defendant's ability to pay.  In this case, however, the court rejected that type of challenge to a sizable punitive damages award.

The plaintiff claimed that an art dealer misrepresented the value of works he sold to the plaintiff.  The jury awarded the plaintiff over $6 million in compensatory damages and another $5.65 million in punitive damages. The defendant argued on appeal that the punitive damages award should be reversed in its entirety because the plaintiff presented insufficient evidence of the defendant's financial condition, but the Court of Appeal (Second Appellate District, Division Three) concluded in a five-page unpublished opinion that it could not evaluate that issue because the appellate record was inadequate.  The court said that the defendant failed to provide a reporter's transcript of the trial proceedings, thereby preventing the court from determining whether the testimony provided by the plaintiff, if any, was sufficient. 

March 3, 2017

A mixed bag of unpublished opinions (Haworth, Saller, Frederick)

The California Court of Appeal issued a trio of unpublished opinions on punitive damages last month, with mixed results for plaintiffs and defendants.  Here's a quick recap:

1.  In Haworth v. Adams the Second Appellate District, Division Two, affirmed a punitive damages award of $13.3 million in a case involving claims of fraud and elder abuse.

The opinion is unclear about what punitive damages issues the defendant raised on appeal.  At one point the opinion states that the defendant argued the punitive damages award was unsupported by the evidence and motivated by passion and prejudice. Those are classic state-law arguments governed by a well developed body of California cases.  But the opinion does not discuss any of those cases, and instead launches into a discussion of federal constitutional standards for excessiveness, without ever actually addressing the sufficiency of the evidence or the passion and prejudice issue.

Aside from that confusion about what issues the defendant raised, the opinion's excessiveness analysis is itself problematic.  According to the opinion, the California Supreme Court has held that a ratio of "9 or 10 to 1 is the appropriate benchmark for determining whether a reasonable relationship exists between an exemplary and compensatory damages award." The opinion then concludes that the award in this case is not excessive because the ratio of 10 to 1 falls within the Supreme Court's "benchmark."

That analysis suggests that any ratio of 10 to 1 or less is necessarily constitutional. But the California Supreme Court has expressly stated otherwise: "multipliers less than nine or 10 are not, however, presumptively valid."  (See Simon v. San Paolo U.S. Holding Co..)  And both the U.S. Supreme Court and the California Supreme Court have indicated that a ratio of 1 to 1 may be the maximum in cases involving substantial compensatory damages awards.  (See Roby v. McKesson.) The $1.3 million compensatory damages award in this case certainly qualifies as substantial, but the Court of Appeal did not address whether the size of that award required a smaller ratio.  Perhaps the defendant did not raise those issues (if the defendant even raised a constitutional excessivness argument at all).

2.  In Saller v. Crown Cork & Seal the Second Appellate District, Division One, reversed a $3.6 million punitive damages award because the plaintiff failed to present evidence of the defendant's financial condition.  Horvitz & Levy represented the defendant in that case so I won't provide any commentary about it.

3.  In Frederick v. Pacwest Security Services the Second Appellate District, Division Seven, affirmed a $63,000 punitive damages award, rejecting the defendant's argument that the plaintiff failed to present sufficient evidence of the defendant's financial condition.  The court observed that the record contained evidence of the defendant's gross receipts, net income, loan amounts, and line of credit. The court found that such evidence was enough to satisfy the plaintiff's burden of proving the defendant's ability to pay the award.  Moreover, the court found the award was not excessive in relation to the defendant's finances, because although the award was equal to the defendant's entire annual net income, it represented less than one percent of the company's annual gross receipts.

February 27, 2017

South Korea moves towards permitting limited punitive damages in products liability cases

Last year we reported on a movement towards permitting punitive damages in South Korea.  That movement appears to be gaining steam, with KBS World Radio reporting that a committee within the South Korean national assembly has approved a bill that would authorize punitive damages against corporations in product liability cases.  The proposal would limit punitive damages to no more than three times the amount of compensatory damages.

Florida appellate court orders new trial in tobacco case with $23.6 billion punitive damages award

Law 360 reports that Florida's First District Court of Appeal has ordered a new trial in a case in which a jury awarded $23.6 billion in punitive damages to the family of a smoker. (See our post about the verdict in 2014.) 

The Court of Appeal's opinion holds that the plaintiffs' counsel committed misconduct during closing arguments by making several improper arguments.  Counsel argued that RJR Reynolds acted wrongly by defending itself, and that it had employed a dishonest legal strategy.  The court observed that "the purpose of closing argument is to facilitate reasoned analysis of the facts and the evidence, not to denigrate the opposing party with outlandish conspiracy theories."   The court observed that the misconduct was "clearly intended to stir the passions of the jury," which apparently it did, judging by the size of the award.