March 10, 2008

Buell-Wilson v. Ford—Court of Appeal Says Ford Waived Due Process Protections Against Excessive Punitive Damages

Today's opinion from the Fourth Appellate District, Division One, in San Diego holds Ford waived any claim to a new trial based on its argument that that the jury improperly imposed punitive damages to punish Ford for harm caused to nonparties.

In the third of three recent California appellate decisions to confront the fallout from the United States Supreme Court's opinion in Philip Morris USA v. Williams (2007) 166 L.Ed.2d 940, 127 S.Ct. 1057 (see our earlier post on Bullock v. Philip Morris and our post on Holdgrafer v. Unocal), the court summarized its views as follows in the introduction to its decision:

"Philip Morris holds that upon request, courts must adopt procedures to ensure juries do not punish defendants for harm caused to third parties when determining the amount of punitive damages to award. The Supreme Court also reiterated, however, juries could consider harm to third parties in determining the reprehensibility of a defendant's conduct.

"Ford asserts that based on Philip Morris it is entitled to a new trial (or at least a further reduction in the punitive damages award) because there is a "significant risk" the punitive damages verdict in this case was based on improper evidence and arguments concerning third party harm. Ford also asserts that we should reconsider our original decision's rejection of its arguments that (1) California's punitive damages statute (Civil Code section 3294) is unconstitutionally vague as applied to this case, and (2) the trial court erred in excluding its industry custom and practice evidence.
"Based on our analysis of Philip Morris and our review of our original decision and the proceedings in the trial court, we conclude Philip Morris does not compel a reversal or a further reduction of the punitive damages awarded in this case. Ford has forfeited the right to assert there is a significant risk the punitive damages verdict in this case was based on improper evidence and arguments concerning third party harm because Ford (1) submitted incorrect and misleading jury instructions on third party harm; (2) did not timely object to plaintiffs' closing argument at the punitive damages phase of the trial; (3) did not request a limiting instruction during the liability phase of the trial; and (4) did not raise instructional error as an issue on its original appeal. We also conclude our original decision reduced the punitive damages award to a constitutionally permissible amount that does not punish Ford for harm to third parties. We hold there was no evidence or argument at trial that created a significant risk that the jury, in deciding the amount of punitive damages to award, punished Ford for harm it caused to third parties."

One reason the court gave for holding Ford could and should have proposed a better jury instruction during the 2004 trial in this product liability case is kind of interesting: in an earlier case (White v. Ford Motor Co. (9th Cir. 2007) 500 F.3d 963), the company offered an instruction that the court believed more accurately presaged the 2007 Philip Morris v. Williams decision. From this, the court in Buell-Wilson concluded:

"Here, counsel for Ford was aware during the 2004 trial that United States Supreme Court and California precedent provided that, in determining the reprehensibility of a defendant's conduct, juries could consider (1) whether the defendant's conduct demonstrated an indifference or reckless disregard for the health or safety of others; and (2) whether a defendant's actions were repeated or an isolated act that only impacted the plaintiff, both factors relating to third party harm. (State Farm, supra, 538 U.S. at p. 419; Simon, supra, 35 Cal.4th at p. 1180.) As discussed, ante, Ford argued against giving such an instruction to the jury and instead proposed a jury instruction that would have forbidden the jury from considering these factors."

One other interesting note is that the court did not see any need for a retrial on punitives even though both the trial court and the court of appeal found both compensatory and punitive elements of the jury's verdict to be excessive - by tens of millions of dollars. Finding that plaintiff's Ford Explorer was defectively unstable, that it lacked sufficient roof strength, and that Ford failed to warn plaintiff of these defects, the jury awarded plaintiff over $109 million in compensatory damages, including $105 million in noneconomic damages. The jury also awarded plaintiff’s husband $5 million for loss of consortium. The jury further found that Ford acted with oppression, fraud, or malice, and awarded $246 million in punitive damages. The trial court reduced plaintiff’s noneconomic damages award to $65,393,996 and reduced the punitive damages to $75 million, a one-to-one ratio to the total compensatory damages. On appeal, the court further reduced the damages, concluding that the jury’s compensatory award resulted from passion and prejudice, and ordering a remittitur of the noneconomic damages to $18 million, roughly four times the economic damages. Finally, the court reduced the punitive damages to $55 million, which represents about twice the amount of compensatory damages awarded, after reduction by the trial and appellate courts. It's notable that, with the jury's damages findings so thoroughly discredited, the court decided to come up with a new number on its own rather than sending the whole thing back for a retrial untainted by legal error, passion and prejudice, and so forth.

The net result? A total reduced award to the Wilsons of $82,606,004 ($4,606,004 in economic damages + $18 million in noneconomic damages + $5 million in loss of consortium + $55 million in punitive damages).