The West Virginia Record has this report about oral arguments in the West Virginia Supreme Court in a case involving an $80 million punitive damages award.
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.
The Associated Press is reporting that a judge in Miller County Arkansas has awarded $525 million in compensatory and punitive damages against Twenty First Century Holiness Tabernacle Church. The church is an arm of Alamo Ministries, founded by evangelical preacher Tony Alamo. The plaintiffs in the lawsuit are seven women who alleged they were physically and sexually abused by Alamo starting when they were as young as nine years old.
The article doesn't specify how much of the $525 was for punitive damages, but it indicates that the ratio of punitive damages was 2 to 1, which suggests the punitive damages award must be about $350 million.
Alamo himself was already hit with a $60 million punitive damages award for abusing young boys. The Eighth Circuit reduced that award to $24 million.
In a separate criminal proceeding, Alamo was sentenced to 175 years in prison.
Posted by Curt Cutting at 11:25 AM
February 26, 2014
The U.S. Supreme Court's last two punitive damages cases both involved maritime law (Exxon Shipping v. Baker and Atlantic Sounding Co. v. Townsend.) Could this be the next one?
Howard Bashman reports: "Fifth Circuit grants rehearing en banc to reconsider whether seamen may recover punitive damages for their employer's willful and wanton breach of the general maritime law duty to provide a seaworthy vessel."
February 21, 2014
A Mondaq.com article by law firm Norton Rose Fulbright reports a trend towards rising punitive damages awards in Canada. As evidence of the trend, the article discusses recent awards of $4.5 million, $200,000, and $500,000. Everything is relative; such awards would not provide any evidence of "rising" punitive damages in California.
Posted by Curt Cutting at 4:19 PM
February 20, 2014
Last October we reported on the Court of Appeal's published opinion in Pfeifer v. John Crane, which affirmed a $14.5 million punitive damages award. Yesterday, the Supreme Court denied two requests to depublish the opinion. The defendant, John Crane, had submitted one of those requests. The other was a combined submission on behalf of the Association of Southern California Defense Counsel and the Association of Defense Counsel of Northern California and Nevada.
In our prior post, we suggested the Supreme Court might grant John Crane's petition for review and hold this case pending the disposition of Webb v. Special Electric, another case involving the "sophisticated purchaser" defense. John Crane, however, asked to withdraw its petition for review. The Supreme Court granted that request as part of its order yesterday, so Pfeifer remains good law. But the Supreme Court will have the last say on the sophisticated purchaser issue when it issues its opinion in Webb.
Posted by Curt Cutting at 2:54 PM
January 29, 2014
The defendants in Asahi Kasei Pharma v. Actelion Ltd. have petitioned the Supreme Court of California for review. As we mentioned in a previous post, the Court of Appeal upheld a $30 million punitive damages award in that case, the third largest punitive damages award ever to survive appeal in California.
Aside from the enormity of the award, the case is notable because the plaintiff was a large corporation that obtained punitive damages against three individuals. The individuals were officers of a corporate defendant that itself was not hit for punitive damages. That scenario is highly unusual, if not unprecedented. Many corporate officers would no doubt be surprised to learn that, when their company gets sued by a corporate competitor, they can end up being individually liable for millions in punitive damages.
You can track the Supreme Court's online docket here.
Court of Appeal affirms $30 million punitive damages award - the third largest to survive appeal in California (Asahi v. Actelion)
January 21, 2014
Credit card late fees and over-limit fees are not punitive damages, according to the Ninth Circuit (Pinon v. Bank of America)
This published Ninth Circuit opinion is quite an entertaining read.
The plaintiffs in the case are a class of consumers who hold credit cards with major banks. They filed a complaint alleging that the defendants charged them fees ranging from $15 to $39 for missing payments and for exceeding their borrowing limits. The plaintiffs conceded that the penalties were authorized by their borrowing agreements, but they alleged that the amount of the fees are unconstitutionally excessive under the due process principles set forth BMW v. Gore and State Farm v. Campbell. The district court dismissed their complaint for failure to state an actionable claim.
The Ninth Circuit affirmed, agreeing that due process principles do not prevent enforcement of excessive penalty clauses in private contracts. But that's not the entertaining part. The entertaining part is Judge Reinhardt's concurring opinion. The concurrence, dripping with sarcasm, explains that the Supreme Court has "recently discovered" constitutional limitations on punitive damages, and should consider extending those limitations for the benefit of not just corporate evildoers, but ordinary consumers as well. Here's the full introduction to Judge Reinhardt's concurrence:
I concur, reluctantly. The Supreme Court has recently discovered that the Constitution prevents courts from imposing disproportionate punitive damages in tort cases. If the Court continues to adhere to its newfound view, it would be well advised to apply the same rule to prevent disproportionate penalties from being imposed on consumers when they breach contracts of adhesion. Consumers must frequently enter into such one-sided contracts if they are to obtain many of the practical necessities of modern life, such as credit cards, cellular phones, utilities, and other vital consumer goods. Applied to such contracts, the Court’s most recent substantive due process rule—which has to date served primarily to protect wealthy corporations from liability for repeated wrongdoing—would also protect ordinary consumers from paying excessive court-enforced damages for minimal breaches of contract. These excessive penalties are currently paid to large national business entities which, each year, collect billions of dollars in late fees alone. They reflect a compensatory to penalty damages ratio higher than 1 to 100, which far exceeds the ratio of non-punitive to punitive damages that the Court has held to be prohibited by the Constitution in tort cases. In sum, if due process is violated when courts award disproportionate punitive damages in the tort context, due process is equally violated when courts enforce the punitive and substantially more disproportionate penalty clauses in contracts of adhesion.
I ultimately agree with the opinion of the court, however, that the Constitution has not yet been so interpreted. Thus, I cannot disagree with the ultimate decision. I do believe, however, that the proposition I discuss deserves further exploration and analysis, and that, should the new Supreme Court doctrine continue in effect, the extension of that doctrine as requested by Cardholders should eventually become the law under the Due Process Clause.The full concurring opinion is worth a read and is only about seven pages long.
January 18, 2014
Court of Appeal affirms order vacating $200,000 in punitive damages against defendants with negative net worth (Gelhar v. Baldwin)
This unpublished opinion addresses a scenario that seems to be arising more frequently in California punitive damages litigation: the award of punitive damages against defendants with a negative net worth.
The jury in this fraud and elder abuse case ordered two defendants to pay a total of $200,000 in punitive damages. The trial court, however, granted the defendants' motion for a new trial and vacated the punitive damages award as excessive in relation to the defendants' financial condition. The court noted that at the time of trial the defendants had a combined net worth of negative $350,000 to $400,000. The court concluded that the jury's $200,000 punitive damages award was so disproportionate to the defendant's wealth "that it [wa]s presumptively based on passion and prejudice."
The California Court of Appeal (Fourth Appellate District, Division Three) affirmed. It held that "[e]vidence of a negative net worth was a valid reason for the court to hold the punitive damages award was excessive." That is not exactly a novel holding, but it is notable in light of several recent decisions that have affirmed punitive damages awards notwithstanding the defendant's claimed negative net worth. (For example, Pfeifer v. John Crane, Miracle v. Mehrban, and Bankhead v. ArvinMeritor.)