Defendants Win Latest Round of Florida Tobacco Litigation

As we've noted in prior posts, a series of individual trials are taking place in Florida in which smokers and their families are seeking punitive damages from tobacco companies. These trials are the fallout from the Florida Supreme Court's reversal of a $145 billion punitive damages award in a tobacco class action. The plaintiffs won the first two individual trials, but according to AmLaw Litigation Daily, round three has gone to the defendants.

Point of Law has commentary about this litigation here.

How Will the California Supreme Court React to the Williams III Cert. Dismissal?

As we noted below, the U.S. Supreme Court today dismissed certiorari in Philip Morris v. Williams (Williams III). Among the many questions raised by the dismissal is what will happen in Buell-Wilson v. Ford, currently pending before the California Supreme Court.

The Cal. Supremes granted review in Buell-Wilson last summer, but deferred briefing pending the disposition of Williams III. Now that the U.S. Supreme Court has dismissed Williams III without a decision , the Cal. Supreme Court will either have to order briefing in Buell-Wilson and address the issue that was unaddressed in Williams III, or dismiss review in that case as well. As my co-blogger Jeremy Rosen pointed out, two of the three issues raised in the Buell-Wilson petition for review are not dependent on the outcome of Williams III, so even if the court decides not to address the Williams III issue, it may decide to resolve these issues.

Cert. Dismissed in Williams III

The U.S. Supreme Court has issued an order dismissing certiorari as improvidently granted in Philip Morris v. Williams (Williams III), which was argued last December (click here to view the transcript). As readers of this blog will recall, the issue before the court was:

Whether, after this Court has adjudicated the merits of a party’s federal claim
and remanded the case to state court with instructions to "apply" the correct constitutional standard, the state court may interpose--for the first time in the litigation--a state-law procedural bar that is neither firmly established nor regularly followed.

I certainly didn't see this dismissal coming. It was apparent from the oral argument transcript that the court was sharply divided, but I guessed that the result would be a 5-4 reversal. Looking back at the transcript, I suppose this comment by Justice Breyer might have been a hint that dismissal was possible: "When I read that petition for cert, I thought this is a run-around, and I'm not sure that I think that now."

No one really knows why the court dismissed review (and we may never know), but one of my colleagues, John Querio, has offered this assessment, which makes sense to me:

It means they realized this issue was tangled up with state law issues that they
didn’t anticipate (but could have), meaning there was a very good argument that the Oregon S.Ct.’s rationale represented an adequate and independent state ground for the decision, which deprives the USSCT of jurisdiction. I’m guessing the liberals and at least some of the conservatives agreed on this – the liberals because they wanted to preserve the award, and the conservatives because they favor the AISG doctrine in the criminal context and didn’t want to make new and harmful precedent cutting back on that ground to get to the merits of the punitive damages issue here. Such an opinion could have been cited by criminal defense lawyers in the future.

You can read more about the dismissal at:

WSJ Law Blog

Reuters

Bloomberg

SCOTUSblog (Observing that, with interest, Philip Morris will now owe over $150 million, but noting that Philip Morris plans to keep the Williams litigation going by challenging the state of Oregon's claim to 60 percent of the punitive damages award)

Taxation of Punitive Damages

As April 15 approaches, this is an appropriate time to observe that punitive damages are subject to federal income tax, even if they are awarded in connection with a personal injury award that is not otherwise taxable. Don't take my word for it; take it from TaxGirl.

Rich v. Koi Restaurant: Plaintiff Not Entitled to Retrial on Punitive Damages When Jury Ignores Defendant's Admission

Last Friday, the California Court of Appeal (Second District, Division Four) issued this unpublished opinion affirming the trial court's denial of the plaintiff's motion for new trial after a jury declined to award punitive damages.

In this sexual harassment case, the corporate defendant admitted before trial (in response to a request for admissions) that the alleged harasser was a managing agent of the corporation within the meaning of Civil Code section 3294. The jury was informed of this admission and told to accept it. Defense counsel also conceded the point in closing argument.

When the case was submitted to the jury, the jury found in favor of the plaintiff and awarded compensatory and punitive damages against the alleged harasser. But when the jury was asked to decide whether the alleged harasser was a managing agent, the jury answered "no," and therefore awarded no punitive damages against the corporation.

The plaintiff moved for a new trial, arguing that the jury's answer to the managing agent question was improper. The trial court denied the motion, finding that the jury's answer was “a technical error at most,” and that the denial of punitive damages against the corporation represented “a measured and calculating or calculated decision to punish the truly culpable and to treat the less culpable with a lighter touch.”

The Court of Appeal affirmed, finding that the trial court did not abuse its discretion in denying the new trial motion. The Court of Appeal cited the California Supreme Court's decision in Brewer v. Second Baptist Church (1948) 32 Cal.2d 791 and Sumpter v. Matteson (2008) 158 Cal.App.4th 928 (which we blogged about here in one of our earliest posts), both of which held that a plaintiff has no right to punitive damages even when the statutory prerequisites for awarding punitive damages are established.

For what it's worth, I think the Court of Appeal correctly deferred to the trial court's discretion, but I'm not sure I would have decided this issue the same way the trial court did. It seems possible that the jury's response on the verdict form was just a mistake, and not a measured or calculated decision. At the same time, I have to wonder why plaintiffs' counsel did not object to the inclusion of the managing agent question on the verdict form, given that the defense had already conceded the issue.

Vermont Supreme Court Considers Punitive Damages Against Diocese for Abuse by Priest

As reported by the Burlington Free Press, the Vermont Supreme Court heard oral arguments yesterday in an appeal by the state's Roman Catholic Diocese from a judgment awarding $8.7 million to a former altar boy who was molested by a priest in the 1970's. The judgment included $7.75 million in punitive damages.

According to the story, the diocese is arguing that the trial court committed instructional error by allowing the jury to award punitive damages without making a finding of "bad motive" on the part of the diocese. The plaintiff contends that the trial court correctly instructed the jury that they could award punitive damages for "reckless" conduct.

As we mentioned in a previous post, the Vermont diocese is also facing a separate award of $3.4 million in another case involving the same priest. At the time of that verdict, there were 19 other pending abuse cases involving the same priest, who has not yet been stripped of his priesthood.

UCL Practitioner Reports on Dukes Oral Argument

Kim Kralowec has a detailed post on her UCL Practitioner blog describing yesterday's Ninth Circuit en banc oral argument in Dukes v. Walmart. As we noted in a prior post, Dukes raises questions about the propriety of classwide determination of punitive damages for Title VII claims. Kim concludes her post by agreeing with The Recorder's assessment that the outcome of the case is difficult to predict.

Banana Litigation Losing Its Appeal?

Sorry about the bad pun. I just couldn't help myself.

This post relates to Tellez v. Dole, a case we blogged about last year. In Tellez, Nicaraguan banana workers sued Dole Food Company in California state court, seeking punitive damages because they allegedly became sterile when they were exposed to the agricultural chemical DBCP on Nicaraguan banana farms nearly 30 years ago. A jury awarded nearly $6 million to the plaintiffs, including $2.5 million in punitive damages. L.A. Superior Court judge Victoria Chaney vacated the punitive damages award and the Dole appealed from the remainder of the award. (See the court of appeal's on-line docket here.)

The National Law Journal is now reporting that Judge Chaney is threatening to dismiss other similar cases brought by the same plaintiffs' lawyers, amid allegations of fraud by the plaintiffs and their counsel. Judge Chaney's order refers to evidence that some plaintiffs never even worked on a banana farm, employment documents that were falsified, and a Nicaraguan radio broadcast on which the lead plaintiffs' lawyer told listeners not to cooperate in the case.

This isn't the first time that banana litigation has backfired for plaintiffs' lawyers here in L.A. As readers of this blog will recall, prominent L.A. trial lawyers Tommy Girardi and Walter Lack got themselves into hot water for their ethical lapses in related litigation, resulting in the Ninth Circuit's appointment of a special prosecutor to pursue disciplinary action against them.

Obama Administration Endorses Broad Application of Punitive Damages in Employment Class Actions Without Need for Individual Determinations

The EEOC has recently reversed course and decided to get involved in Dukes v. Wal-Mart Stores, Inc., currently set for oral argument before an en banc panel of the 9th Circuit on March 24. The district court and a divided panel of the Ninth Circuit have previously held that a class of 2 million potential plaintiffs in a gender discrmination lawsuit could be certified and that claims for punitive damages would not be tried on a case-by-case basis. The EEOC had decided not to get involved in this case as it worked its way up through the courts. According to the Recorder, Brad Seligman of the Impact Fund said that the recent amicus brief filing does not represent "a radical new EEOC making this decision." Robin Conrad of the U.S. Chamber of Commerce disagrees, telling the Recorder, "It's very troubling that the Obama administration thinks it might be appropriate to impose massive punitive damages on companies without ever giving them their day in court."

In its amicus brief, the EEOC argues that "Punitive damages lend themselves to classwide determination in a Title VII pattern-or-practice case since neither the claim nor the damages focuses on individual victims of discrimination. The focus of a claim under a pattern-or-practice theory is not on individual employment decisions but rather on an overall 'pattern of discriminatory decisionmaking.'"

Wal-Mart's lawyer, Theodore Boutrous Jr. at Gibson, Dunn & Crutcher, called the EEOC's position "fundamentally incorrect."

The composition of the en banc panel suggests that this could be a closely divided opinion. The panel members include Chief Judge Kozinski, and Circuit Judges Reinhardt, Rymer, Hawkins, Silverman, Graber, Fisher, Paez, Berzon, Bea and Ikuta.

Korean Pop Star Rain Gets Hit With $4.8 Million Punitive Damages Award In Hawaii

The Associated Press is reporting that a jury in federal district court in Hawaii has awarded $4.8 million in punitive damages against Korean pop star Rain, aka Jung Ji-hoon.

The plaintiff, a Hawaii concert promoter, sued Rain for breach of contract and fraud in connection with Rain's decision to back out of a concert at the last minute. The jury awarded compensatory damages of $1 million for fraud and $2.3 million for breach of contract.

Rain cancelled his Hawaii concert just days before the scheduled date. The plaintiffs argued that Rain never intended to perform in Hawaii, saying his crew never applied for proper visas or shipped their equipment. A similar lawsuit was recently filed here in L.A., where Rain's concert at the Staples Center was canceled a few hours before show time.

Red Hill Enterprises v. Gould: Defendant Who Refuses To Turn Over Requested Documents Cannot Challenge Plaintiffs' Failure to Prove Net Worth

Yesterday, the California Court of Appeal (Second District, Division Seven) issued this unpublished opinion reversing a nonsuit order and allowing the plaintiff to proceed with a claim for punitive damages.

This fraud trial was bifurcated into two phases. Before the trial began, the plaintiff asked the defendant to produce certain documents regarding its financial condition, so that the plaintiff could meet its burden of proving the defendant's net worth in the punitive damages phase of the trial. (See our prior posts about other recent opinions apply this unique rule of California appellate procedure.) After the jury ruled for the plaintiff in the first phase, the defendant said it would promptly produce the requested documents for the plaintiff's review. A few days passed and the defendant failed to turn over the documents as promised. Instead, the defendant waited until the morning of the second phase of the trial and then turned over only some of the documents.

The plaintiff tried to establish the defendant's financial condition through other means, such as asking the trial court to take judicial notice of public records. The trial court shot down all of the plaintiff's requests, and then granted nonsuit on the ground that the plaintiff had failed to present sufficient evidence of the defendant's financial condition.

The Court of Appeal reversed, ruling that the defendant, by failing to turn over the requested documents, forfeited its right to complain about the plaintiff's failure of proof. In so doing, the court extended the holding of Mike Davidov Co. v. Issod (2000) 78 Cal.App.4th 597. That opinion found a forfeiture where the defendant refused to comply with a court order to turn over financial condition documents. The court here extended that ruling to situations where the is no court order, only a request by the plaintiff.

The Court's reasoning makes sense to me, so long as the record established that the defendant actually had additional documents that it failed to turn over. When a defendant turns over all the information in its possession, there should be no forfeiture, even if the defendant's documents are inadequate to establish the defendant's net worth. The defendant should not be required to create documents to satisfy the plaintiff's burden. If the defendant does not have an adequate statement of its net worth, the plaintiff bears the burden of gathering the necessary information, by eliciting testimony from the defendant or through other means. In this case, however, it seems that trial court blocked the plaintiff from pursuing any other means, leaving the plaintiff with no way to meet its burden.

California Supreme Court Denies Review in Brewer v. Premier Golf

According to the California Supreme Court's Conference Results posted today, the court has denied review in Brewer v. Premier Golf Properties, a case we previously blogged about here and here.

Among other things, the Court of Appeal's opinion in Brewer held that punitive damages are unavailable in an action for violations of statutes and regulations governing pay stubs, minimum wages, and meal and rest breaks. The court concluded that, because those statutes and regulations created new rights that did not exist at common law, the statutory remedies for violations of meal/rest break, minimum wage, and pay stub laws are the exclusive remedies. Also, the court held that punitive damages are unavailable for these sorts of claims because they ultimately arise from a contractual obligation, whereas Civil Code section 3294 provides that punitive damages are only available for the breach of an obligation not arising from contract.

Punitive Damages, Remunerated Research, and the Legal Profession

The December 2008 edition of the Stanford Law Review, now available on Westlaw, contains this student note entitled "Punitive Damages, Remunerated Research, and the Legal Profession." The Westlaw citation is 61 STNLR 711.

The note, authored by recent Stanford graduate Shireen A. Barday, explores an issue that attracted a lot of attention last summer when Justice Souter, while authoring the majority opinion in Exxon Shipping, included a footnote stating that the court would not rely on academic research that was funded by Exxon. (Footnote 17.) Adam Liptak wrote a New York times piece on that footnote, and Rick Hasen questioned the Supreme Court's approach on his Election Law Blog.

Barday's note observes that medical and scientific journals require authors to disclose their sponsors, but law reviews freely publish articles without requiring any financial disclosure. Barday proposes (1) mandatory financial disclosure requirements for law review submissions, and (2) the creation of a conflicts database that would allow lawyers and judges to track industry funded research. The first proposal seems eminently reasonable, but the second may be a little too ambitious to be realistic.

Market Share Liability & Punitive Damages

The Winter 2008 edition of the Columbia Journal of Law & Social Problems, now available on Westlaw, contains an article entitled "Market Share Liability: the Case for Evolution in Tort Law." The Westlaw citation is 42 CLMJSP 225.

The note, authored by Columbia student Andrew B. Nick, is primarily an attack on the California Court of Appeal's opinion in Magallanes v. Superior Court (1985) 167 Cal.App.3d 878, which held that punitive damages are unavailable in lawsuits based on market-share liability. The article criticizes the reasoning of Magallanes and argues that extending punitive damages to market-share cases "would allow the benefits of punitive damages to be achieved on a truly grand scale."

P.S. The name of the Magallanes opinion is misspelled throughout the article. Aren't law review editors supposed to catch that sort of thing?

No Punitive Damages in Exxon Gas-Leak Lawsuit

The Baltimore Sun reports that the jury in the Maryland gas-leak lawsuit against Exxon Mobil ruled for the plaintiffs, awarding $150 million in compensatory damages but no punitive damages. The plaintiffs had asked for billions, but they'll have to make do with $150 million. It seems entirely likely that their outlandish request was nothing more than a strategic ploy designed to make a sum like $150 million seem modest by comparison.

The Baltimore Sun story reports that Exxon had already agreed to pay $38 million to clean up the spill, and agreed to pay a $4 million penalty to the state of Maryland, the largest environmental penalty ever paid to the state.

Plaintiffs Seek "Several Billion Dollars" from Exxon; Verdict to be Announced Tomorrow

The Baltimore Sun reports that the jury has reached a verdict in a Baltimore lawsuit in which the plaintiffs are seeking "several billion dollars" in compensatory and punitive damages from Exxon Mobil Corp. The verdict will be read at 9 am tomorrow.

The plaintiffs are 300 residents of Jacksonville Maryland who allege that 26,000 gallons of gasoline seeped into that city's groundwater from a leaking pipe in 2006. They contend that Exxon officials knew leak-detection equipment was inadequate. Exxon says it accepts responsibility for cleaning up the spill but did not commit fraud or act with intentional malice or negligence. The jury began deliberating February 27 after a 19-week trial.

More Celebrity Punitive Damages News

After a dearth of celebrity-related punitive damages news, we have two stories today:

Bruce Willis is suing two producers at Foresight Unlimited, claiming they lied to him about the financing they had obtained for Three Stories About Joan, a film Willis was supposed to direct. He wants punitive damages for fraud.

"Joe the Plumber" (is he still a celebrity?) is seeking punitive damages from three former Ohio officials for allegedly violating his privacy when they gathered his personal information in a records search.

Spinks v. Equity Residential: Court of Appeal Reverses Summary Judgment on Punitive Damages for Wrongful Eviction

The California Court of Appeal (Sixth District) issued this published opinion ruling that a trial court erred in dismissing a plaintiff's punitive damages claims on summary judgment.

The primary issue in this case--whether the plaintiff had a viable claim for breach of contract on a third-party beneficiary theory--is outside the scope of this blog. But the opinion also contains a brief discussion of some punitive damages issues.

First, the opinion concludes that the trial court properly rejected the plaintiff's claim for punitive damages for breach of the covenant of good faith and fair dealing. The court noted that in California, insurers are the only defendants who can be liable for tort damages for bad faith breach of contract.

Second, the opinion concludes that the trial court erred in dismissing plaintiffs' claims for punitive damages for wrongful eviction, trespass, invasion of privacy, and intentional infliction of emotional distress. The court said plaintiff should be able to seek punitive damages on those claims because she presented evidence that the defendant landlord evicted her despite concerns about the legality of the eviction and the impact on the plaintiff. The court said that evidence could support a finding that the defendant acted in "conscious disregard" of the plaintiff's rights within the meaning of California's punitive damages statute, Civil Code section 3294.

Indiana Judge Finds Punitive Damages Cap Unconstitutional

Indystar.com reports that an Indiana trial court has ruled that the Indiana legislature violated that state's constitution by adopting a cap on punitive damages. Professor Andrew Klein of the Indiana University School of Law-Indianapolis says the ruling is well-researched and "reflects serious analysis that courts in other states have used to strike down similar laws."

Enriquez v. Amerifirst: Court of Appeal Affirms Nonsuit on Punitive Damages

The California Court of Appeal (Fourth District, Division Three) issued this unpublished opinion affirming a trial court order granting nonsuit on a claim for punitive damages.

Plaintiff, a homeowner who lost her home through foreclosure, sued the lender (Amerifirst) that had refinanced her initial mortgage. She presented evidence that Amerifirst had overstated her income on a mortgage application and forged her signature. The trial court ruled, however, that the plaintiff failed to present sufficient evidence of intentional misconduct by Amerifirst.

The Court of Appeal affirmed, but on a different ground. It relied on Civil Code section 3294, subdivision (b), which provides that a corporation cannot be liable for punitive damages unless an officer, director, or managing agent of the corporation authorized or ratified the misconduct at issue. In this case, the evidence suggested that the person who prepared the loan application was an employee in the processing department. She was not an officer or a director of Amerifirst, and she did not qualify as a managing agent because she did not have authority to set corporate policy. Accordingly, the plaintiff's evidence was insufficient to support the findings required by Civil Code section 3294, subdivision (b)

Media Frenzy Surrounds Supreme Court Argument on Maritime Punitive Damages

OK, not really. As far as I can tell, the mainstream media is completely ignoring yesterday's oral argument in Atlantic Sounding Co. v. Townsend. Even the blogosphere is silent. You know a case is really obscure when it makes it to the U.S. Supreme Court and nobody cares.

For what it's worth, I got the impression from the oral argument transcript that the court is likely to rule that punitive damages are not available in maintenance and cure cases.

Supreme Court Hears Arguments on Maritime Punitive Damages

The U.S. Supreme Court heard oral arguments this morning in Atlantic Sounding Co. v. Townsend, a case involving the availability of punitive damages in maritime cases. Specifically, the question presented is whether whether a seaman may recover punitive damages against a shipowner for failing to pay "maintenance and cure" (i.e., living expenses and medical costs) for shipboard injuries.

Click here for links to the briefs on the merits, courtesy of the American Bar Association.

We'll post a link to the oral argument transcript as soon as its available.

UPDATE: The transcript is available here.

Washington Legal Foundation Paper on 1-to-1 Ratios

The Washington Legal Foundation has published a short paper that I wrote about the Third Circuit's recent Jurinko decision. The paper focuses on how Jurinko fits into a trend of cases holding that 1-to-1 is the maximum permissible ratio of punitive damages to compensatory damages in cases involving substantial compensatory awards. Footnote 2 lists 10 such cases from the past 2 years.