We previously reported on this pending cert. petition, which raises questions about due process constraints on the award of punitive damages in state court class action proceedings. The Supreme Court's online docket now indicates that the petition will be considered during the Court's May 2 conference.
April 17, 2014
April 9, 2014
Defendant forfeited challenge to $1.2 million punitive damages award by refusing to produce witness on financial condition (Smally v. Nationwide)
In this insurance bad faith case, a jury awarded $686,000 in compensatory damages and $1.2 million in punitive damages to one of the plaintiffs. (A second plaintiff also recovered compensatory damages, but no punitive damages).
On appeal, the insurer argued that the punitive damages should be vacated because the plaintiff failed to meet its burden of presenting meaningful evidence of the defendant's financial condition. California courts frequently strike down punitive damages awards on that basis, but not this time.
The Court of Appeal (First Appellate District, Division Four) held in an unpublished opinion that the defendant forfeited its right to complain about the absence of financial condition because the defendant refused to produce a witness on that issue. The court noted that the plaintiff asked the defendant to produce a witness knowledgeable about the defendant's financial condition, and the defendant did not object to that request. By neither objecting to nor complying with the request, the defendant forfeited its right to complain about the lack of evidence of its financial condition.
April 8, 2014
Bloomberg news reports that a jury in federal district court in Lafayette, Louisiana has awarded $1.5 million in compensatory damages and $9 billion in punitive damages in a lawsuit over the diabetes medicine Actos. That's a ratio of 6000 to 1. Bloomberg predicts the punitive damages "will probably be reduced." Yeah, that's a pretty safe prediction.
Posted by Curt Cutting at 12:11 PM
April 2, 2014
We missed this story when it came down last week: Times of San Diego reported on March 27 that a jury awarded $1.3 million in punitive damages, on top of $860,000 in compensatory damages, against San Diego Gas & Electric.
The plaintiff brought a whistleblower suit claiming he was fired after complaining that SDG&E was targeting low-income customers with delinquent notices in order to make money on late fees. SDG&E responded that it fired the plaintiff for engaging in "extremely inappropriate conduct" in his role as a supervisor. The company says it plans to appeal.
Posted by Curt Cutting at 2:19 PM
April 1, 2014
Reuters reports (via the Huffington Post) that a federal judge in New York has vacated the $12 million punitive damages that a jury awarded to billionaire William Koch in his lawsuit alleging he was duped into buying 24 bottles of phony wine.
We reported on the jury's $12 million punitive damages award back in April 2013. The Reuters story doesn't reveal why the posttrial motion process has taken so long, but the story reports that U.S.District Judge J. Paul Oetken of the Southern District of New York found the punitive damages award excessive in relation to the compensatory damages. Judge Oetken reduced the compensatory damages from $355,811 to $212,699, and ordered a new trial on punitive damages unless Koch agrees to accept a reduced amount of $711,622 (a ratio of about 3.3 to one).
Posted by Curt Cutting at 2:49 PM
March 28, 2014
Court of Appeal holds that California trial court erred by applying Michigan law to bar punitive damages (Scott v. Ford Motor Co.)
Punitive damages are not permitted under Michigan law. So what happens when a Michigan corporation is sued for punitive damages in California, based on corporate acts that took place in Michigan?
The trial court in this asbestos injury case applied Michigan law and dismissed the punitive damages claim. After the jury ruled for the plaintiff and awarded compensatory damages, the plaintiff appealed, arguing he should have been allowed to seek punitive damages as well.
The California Court of Appeal (First Appellate District, Division One), agreed with the plaintiff and reversed the trial court's ruling in a published opinion (Scott v. Ford Motor Co.).
Applying the "governmental interest analysis" test for conflicts of law issues, the Court of Appeal concluded that Michigan has little interest in having its law applied to the punitive damages claim in this case.
Ford argued that Michigan's policy should apply because Ford is domiciled in Michigan, but the Court of Appeal was not buying that argument at all:
Because the same argument would hold in all 40-odd other states permitting punitive damages, Ford effectively argues it should be found to carry a nationwide shield from punitive damage liability because the state in which it maintains its headquarters has decided punitive damages are poor public policy. We cannot agree, any more than we expect a Michigan court would yield to a plaintiff’s plea to impose punitive damages on a California-based corporation because its home state has made the opposite policy judgmentThat reasoning is not too surprising. I can't imagine any California court agreeing that businesses that incorporate in Michigan can come to California and commit acts of malice without fear of punitive damages.
But Ford also argued that Michigan law should apply because the allegedly malicious acts actually took place in Michigan, not California. The Court of Appeal struggled to explain its reasoning for rejecting that argument. Ultimately, the court said Michigan courts have never expressly articulated that the purpose of Michigan's ban on punitive damages is to preclude punitive damages for conduct occurring in Michigan:
In Ford’s telling, the Michigan ban on punitive damages represents a declaration that corporate conduct occurring in Michigan should not be subject to punitive damages, regardless of its nature. . . . Michigan has never articulated this as a motive for banning punitive damages, and Michigan courts do not preclude punitive damages based on conduct occurring only within the state. Rather, the ban on punitive damages is entirely independent of the location of the alleged conduct in connection with which punitive damages are sought and applies to any defendant’s conduct, regardless of where it occurred.That seems a little questionable. Isn't it a safe assumption that, when the Michigan Supreme Court outlawed punitive damages in 1884, the court was thinking, at least primarily, about Michigan conduct? Do we really need a Michigan court to say that? (A federal district court in Michigan has said that, but the Court of Appeal here did not believe that was sufficient.)
In any event, this may not be a big deal for Ford in this case. Although this case is going back to the trial court for a trial on punitive damages, the Court of Appeal's opinion indicates that the evidence here would not support a punitive damages award. To get punitive damages, the plaintiff would have to prove that Ford consciously disregarded a known risk in the 1960s, when the conduct occurred. But the opinion explains (while discussing an unrelated issue) that there was no known risk associated with Ford's asbestos products at the time:
From 1966, the beginning of the relevant time period, there appears to have been a scientific consensus that industrial exposure to the type of asbestos used in insulation was dangerous. There was no similar consensus about exposure to asbestos through automotive work, given the far less potent type of asbestos involved.The court explains that a known risk for high-exposure to one type of asbestos does not establish a known risk for low-dose exposure to a different type:
That workers with relatively heavy and constant exposure to one type of asbestos fiber develop asbestosis does not necessarily mean that workers with intermittent, lower level exposure to a different type of asbestos fiber will also be adversely affected, particularly by an entirely different disease.That does not sound like a punitive damages case to me. Ford cannot have disregarded a known risk if, according to the Court of Appeal, the risk was not known at the time.
March 12, 2014
The California Supreme Court's online docket indicates that the court has denied review in Asahi Kasei Pharma v. Actelion Ltd. So the punitive damages award in that case will stand as the third largest ever to survive appeal in California.
Defendants seek California Supreme Court review in Asahi v. Actelion
Court of Appeal affirms $30 million punitive damages award - the third largest to survive appeal in California (Asahi v. Actelion)
March 6, 2014
DRI amicus brief challenges constitutionality of Montana Supreme Court opinion allowing classwide adjudication of punitive damages (Allstate v. Jacobsen)
Our firm has filed an amicus curiae brief on behalf of DRI, asking the U.S. Supreme Court to decide whether the Montana Supreme Court violated Allstate's due process rights in a class action punitive damages case.
This lawsuit began when Robert Jacobsen sued to challenge Allstate's claims adjustment practices in Montana. The trial court certified the case as a class action and approved a procedure calling for punitive damages to be awarded on a classwide basis. The Montana Supreme Court determined that the trial court's procedure violated due process because it would permit the award of punitive damages to class members who may not have suffered any actual harm from the challenged claims-handling procedures.
Unfortunately, the Montana Supreme Court "fixed" that problem in a way that still violates due process. The court authorized the trial court to determine entitlement to punitive damages on a classwide basis, followed by individual trials to determine the amount of compensatory and punitive damages to be awarded to each class member.
Our brief argues that the revised procedure still runs afoul of the Due Process Clause because entitlement to punitive damages cannot be decided on a classwide basis when the defendant engaged in different conduct towards each class member. An individualized assessment of the defendant's conduct towards each particular plaintiff is required.
Other aspects of the Montana Supreme Court's opinion raise serious due process concerns, and as a result the case has attracted a lot of attention from defense-oriented interest groups. At least five different amici have filed briefs supporting Allstate's petition for review. There may still be others that haven't yet shown up on the docket.
See additional coverage on Overlawyered and Legal NewsLine.
February 28, 2014
Ninth Circuit grants en banc rehearing to decide excessiveness of punitive damages in Title VII case (Arizona v. Asarco)
The Ninth Circuit has ordered en banc rehearing in Arizona v. Asarco, a Title VII sexual harassment case in which a jury awarded the plaintiff no actual damages, $1 in nominal damages, and $868,750 in punitive damages.
The original panel decision, described in an earlier post, was split 2-1. Judge O'Scannlain, writing for the majority, reduced the punitive damages to $125,000. Judge Hurwitz dissented, arguing that the award should be affirmed in full.
Hat tip: Howard Bashman via Rick Hasen.