November 13, 2015

The pitfalls of requesting a specific amount of punitive damages

This Reuters report about a Florida appellate decision highlights an interesting dilemma for attorneys seeking punitive damages.  The report notes that a $30 million punitive damages award was reversed because it exceeded the amount requested by the plaintiff.  That's not the first time we have reported on a reversal of that nature.  (See this report about another Florida opinion.)

Some trial lawyers reading those stories might conclude that they need to ask for a sky-high amount of punitive damages, a request so outlandish that it is guaranteed to exceed whatever the jury might reasonably award.  Indeed, some lawyers seem to employ that practice.  A few years ago, when we reported on a case in which a lawyer asked for $2.5 billion in punitive damages, we noted there is research showing that the most significant predictor for a large punitive damages award is a large request.

But of course, asking for too much carries its own risks.  If a lawyer asks for an absurdly high amount and gets it, that too creates a likelihood of a reversal. This creates a sort of Catch-22 for plaintiffs' attorneys in punitive damages: if you ask for little or too much, either way your request can create a basis for reversal of punitive damages.  Perhaps the answer to this problem is not to request any specific number at all.  In some jurisdictions, courts have actually prohibited plaintiffs from "anchoring" the punitive damages award by requesting a specific number.  Defendants are usually the ones seeking to bar that practice, but perhaps plaintiffs' counsel should consider whether a specific request is going to hurt more than it will help.

November 12, 2015

Seattle jury awards $16.5 million in punitive damages against Holland America

Washington state law does not permit punitive damages in civil cases, so we rarely ever see a large punitive damages award in that state unless the case is tried under the law of some other jurisdiction.  

AP reported yesterday that a federal court jury in Seattle awarded $21.5 million, including $16.5 million in punitive damages, against the Holland America Cruise Line.  The plaintiff claimed he was injured by an automatic sliding glass door on a cruise ship, and that Holland America knew about and covered up problems with the motion sensors on the doors.  Presumably the case was tried under maritime law, which permits punitive damages under some circumstances.

October 29, 2015

"The new concept of punitive damages in Mexico"

This Lexology article reports that courts in Mexico are beginning to recognize the legitimacy of punitive damages under Mexican law.  Most other countries do not permit American-style punitive damages awards, and refuse to enforce U.S. judgments that include such awards, but Mexico is not alone in backing away from that categorical approach.

October 28, 2015

Punitive damages vacated because senior management did not approve misconduct of lower-level employees (Bryant v. SDG&E)

This unpublished opinion is a useful reminder of the principle that, under California law, punitive damages are not available against an employer for an employee's misconduct unless the employer's upper-level management authorized, ratified, or committed the misconduct.

In this wrongful termination case, a jury awarded the plaintiff $860,000 in compensatory damages and $1.3 million in punitive damages.  The California Court of Appeal (Fourth District, Division One) vacated the punitive damages award because the plaintiff failed to prove that the employer's management either participated in or approved the misconduct at issue. At trial, the plaintiff identified a specific member of the employer's management team who purportedly approved the malicious and oppressive treatment of the plaintiff.  But the plaintiff apparently realized his argument on that point was weak, so on appeal he placed the blame on three additional members of the management team.

The Court of Appeal, however, refused to consider the three new individuals.  ("We do not consider whether Aguilar, Heiner, and DaSilva were managing agents as they were not presented as such to the jury.")  That approach is consistent with the general principle of California appellate procedure that a party cannot change its factual theory of the case on appeal.  Our courts will not affirm a jury verdict based on theories not litigated below, because that would unfairly deprive the opposing party of the opportunity to develop the evidence on that new factual issue.

The Court of Appeal agreed that the one individual identified at trial (Boland) was indeed a managing agent within the meaning of Civil Code section 3294(b).  But the court found no evidence that Boland, who made the final decision to terminate the plaintiff's employment, had any actual knowledge of any malicious or oppressive conduct by his subordinates who recommended firing the plaintiff.  In the absence of any awareness by the managing agent of the "outrageous character" of the actions of the lower-level employees, the punitive damages could not stand.

October 7, 2015

Punitive damages awards in favor of corporations and wealthy individuals

Many folks think of punitive damages as a tool for leveling the playing field between corporations and the little guy.  Under that narrative, punitive damages make it possible for the average person on the street to strike back at the wealthy and the powerful.

One problem with that narrative is that it overlooks the fact that punitive damages are often awarded in favor of the wealthy and the powerful.   For example, Sears, Roebuck & Co. won an appeal last week that permits it to seek punitive damages against its landlord in a constructive eviction case.   (Read more about that decision here.)  And billionaire Bill Koch recently won an appeal upholding a punitive damages award he collected from a wine dealer.

These are just a couple of examples.  I have personally been involved in a number appeals challenging punitive damages awarded in favor of a corporation or a wealthy individual (like this one, this one, and this one), or awarded against an individual of modest means (like this one).

Of course, there are also plenty of punitive damages awards that fit the popular narrative, i.e., awards in favor of an individual against a wealthy defendant.  But when discussing the public policy implications of punitive damages (and the limitations on punitive damages), we should all be aware that many cases don't fit that mold, and that punitive damages often permit the transfer of wealth in the other direction as well. 

October 6, 2015

Kentucky Supreme Court recognizes that compliance with safety regulations is generally inconsistent with malicious conduct

Over two decades ago, the Supreme Court of Georgia in Stone Man v. Green held that punitive damages are generally improper where a defendant has adhered to applicable safety regulations.  The rationale behind that proposition is fairly obvious: if a defendant sets out to follow regulations designed to make a product or activity reasonably safe, the defendant’s state of mind is necessarily inconsistent with the sort of “conscious disregard” for safety that justifies punitive damages.  The Georgia rule also increases the predictability of what conduct is punishable, and thereby avoids the problem of punishing a defendant without fair notice, a concern at the heart of the U.S. Supreme Court’s punitive damages jurisprudence.

Like any general rule, the Georgia rule has exceptions.  Compliance with safety regulations will not be an absolute defense to punitive damages in all circumstances.  For example, Georgia courts have permitted punitive damages against a defendant who knew that government safety tests would not detect a serious safety problem with its product.

Last year, our firm prepared an amicus brief for the DRI in the Kentucky Supreme Court, asking that court to adopt the same approach as the Georgia Supreme Court.  On September 24, the court did exactly that.  In Nissan Motor Co. v. Maddox, the Kentucky Supreme Court cited with approval to Stone Man and stated that regulatory compliance does not automatically foreclose punitive damages, but “typically” the required state of mind necessary to punitive damages cannot be established “where undisputed evidence indicates that regulatory duties have been satisfied.”

You can read more about the opinion on the Mayer Brown Guideposts blog, which has a post entitled Kentucky Supreme Court Sets Forth Helpful Principles On Liability For Punitive Damages.

September 23, 2015

Huffington Post editorial criticizes limits on punitive damges

Joanne Doroshow, director of NYU Law's Center for Justice & Democracy (CJD), wrote a piece for the Huffington Post last week entitled "When a Corporation is 'Too Big to Care' About Breaking the Law."  The theme is that corporations (particularly Johnson & Johnson) are running amok, and that punitive damages are no longer an effective deterrent of corporate misconduct now that statutory caps and U.S. Supreme Court decisions have taken away the threat of unlimited punitive damages.

Doroshow supports her argument by linking to an earlier CJD paper that purported to debunk myths about punitive damages.  As we observed when that paper was issued, it didn't do much debunking.  Instead of focusing on the main criticism of punitive damages (that they are awarded arbitrarily), the article dispelled the "myth" that punitive damages are awarded in a high percentage of cases.  That myth is itself mythical (a meta-myth?) because no-one seems to actually be taking that position.

The CJD's arguments about the effects of tort reform seem to be based entirely on anecdotal evidence.  Alleged misconduct by Johnson & Johnson is offered as proof that bad actors don't fear punitive damages.  The award of punitive damages in Dalkon Shield litigation is offered as proof that punitive damages are needed to deter corporate misconduct.  Of course, critics of punitive damages have plenty of anecdotes of their own to show that juries can and do render arbitrary punitive damages awards against corporations and individuals alike, with devastating effects.  None of that really provides concrete information about whether unlimited punitive damages would provide a net benefit to society.

I'm still hoping that someone will attempt to elevate this debate with actual data, by devising a method for studying whether malicious misconduct is more prevalent in states that have caps on punitive damages, or states that ban punitive damages altogether, versus states that do not.  States are supposed to provide a laboratory for experimentation on the effects of legislation, but so far no one seems to be monitoring this particular experiment.  


September 12, 2015

Florida juries continue to make news with big punitive damages awards

California has a reputation for headline-grabbing jury awards, especially when it comes to punitive damages.  But Florida juries make a lot of headlines of their own, as illustrated by several news stories this week. 

Florida juries handed out two mega-verdicts involving punitive damages in the past few days.  NBC6 of South Florida reports that a jury awarded $2.4 million in compensatory damages and $15 million against a produce grower in an employment discrimination lawsuit. That comes just one day after Law 360 (subscription required) reported that a jury awarded $8.5 million in compensatory damages and $3.5 million in punitive damages against Philip Morris in a lawsuit brought by the family of a smoker.

In some consolation for Florida defendants, JDJournal reports that the Eleventh Circuit overturned an $11 million judgment, including $8.5 million in punitive damages, in a lawsuit alleging that a medical supply company violated anti-kickback laws by giving away free urine specimen cups to doctors.  (Yep, a Florida jury thought sort of conduct warranted hefty punitive damages).

September 4, 2015

Court of Appeal publishes decision on financial condition evidence (Soto v. Borg-Warner)

We previously reported on this decision in which the Court of Appeal reversed a $32.5 million punitive damages award due to a lack of meaningful evidence of the defendant's financial condition. As we noted, the decision explains how plaintiffs can be prepared to present evidence of the defendant's financial condition, notwithstanding the statute that prohibits pretrial discovery on that issue without a court order.

Since that report, the opinion has now been certified for publication.  This actually happened about a month ago but we neglected to report it at the time.  Sorry for the delay, loyal blog readers.

(Disclosure: Horvitz & Levy LLP submitted one of two requests for publication.)