The "Big Oil Polluter Pays Act": Probably Unconstitutional

Senator Sheldon Whitehouse (D-RI) has introduced a proposed bill called the "Big Oil Polluter Pays Act" (S.3345), which is intended to overrule the U.S. Supreme Court's decision in Exxon Shipping v. Baker. In light of the Gulf of Mexico oil spill disaster, the proposal is likely to be popular. But the Act's constitutionality is questionable at best.

The Act would amend the U.S. Code to provide:

In a civil action for damages arising out of a maritime tort, punitive damages may be assessed without regard to the amount of compensatory damages assessed in the action.

There's nothing unconstitutional about the basic premise of passing legislation to override the Exxon Shipping decision. The majority in that case adopted a 1-to-1 ratio of punitive damages to compensatory damages for maritime cases as a matter of federal common law, and not as a matter of constitutional law. Congress clearly has the authority to change a common law rule.

The actual text of the act, however, goes much further than just changing the common law rule adopted in Exxon Shipping. The act says that punitive damages would be assessed "without regard to the amount of compensatory damages" in maritime actions. That language is directly contrary to the Supreme Court's decisions in BMW v. Gore and State Farm v. Campbell, which held that the constitution requires proportionality between punitive damages and actual damages.

Thus, if the Act passed, the lower courts would be required to strike it down under BMW and Campbell. The more interesting question is: what would happen if the Act passed and the question of its constitutionality made its way up to the Supreme Court? There is no guarantee that the court as presently constituted would adhere to the BMW and Campbell analysis. Justices Souter and O'Connor, who joined the majority in both cases, are gone. Justices Thomas, Scalia, and Ginsburg dissented in both cases. If the dissenters could pick up two more votes from the new members of the court, they might be willing to jettison the BMW/Campbell analysis.

$25 Million Punitive Damages Award in Florida Tobacco Litigation

Bloomberg news is reporting that a smoker's widow has recovered $4.1 million in compensatory damages and $25 million in punitive damages in the latest installment of the ongoing series of Florida tobacco trials. The awards in these cases are piling up. I've lost track of the exact count, but the total punitive damages seem to be in the neighborhood of $200 million. That's still a far cry from the $145 billion class-action award that the Florida Supreme Court reversed, launching this series of individual trials.

Related posts:

Another Punitive Damages Award in Florida Tobacco Litigation

Florida Jury Awards $20 Million in Punitive Damages to Smoker's Widow

Smoker's Widow Wins $12.5 Million in Punitive Damages

Florida Trial Judge Cuts $244 Million Punitive Damages Award

Florida Jury Awards $25 Million in Punitive Damages to Smoker's Widow

"Smokers, tobacco, both winners in early Engle cases"

Jury Rules For Plaintiff in First Phase of Retrial After Reversal of $145 Billion Punitive Damages Award

After Reversal of $145 Billion Class Action Punitive Damages Award, Florida Smokers Seek Punitive Damages in Individual Suits

Plaintiffs' Attorneys Win $218 Million Fee Award for Helping Obtain a Punitive Damages Verdict that Was Reversed on Appeal

Rodriguez v. Daniel: $100,000 in Punitive Damages Reversed

Here's another unpublished opinion that reverses a punitive damages award because a plaintiff failed to present meaningful evidence of the defendant's financial condition.

The plaintiff argued that he met his burden because he introduced evidence about the profitability of the defendant's misconduct. The California Court of Appeal (Second District, Division Four) said that's not good enough; a plaintiff must provide evidence of the defendant's overall financial condition, including assets and liabilities. Because the plaintiff here didn't do that, he gets no punitive damages. He doesn't get a new trial because he failed to prove his case the first time around, and is not entitled to a second bite at the apple.

I've lost track of how many times we seen punitive damages get reversed for this reason since we started this blog. Without a doubt, this is most frequent basis for reversal of punitive damages in California.

Oliver v. Pacific Real Estate: Default Judgment Awarding $292,717 in Punitive Damages Affirmed

In this unpublished opinion, the California Court of Appeal (Fifth District) affirmed a default judgment that includes a $50,000 punitive damages award.

The appellant asked the court to strike the punitive damages award because the plaintiff did not comply with Code of Civil Procedure section 425.115. Under that statute, a plaintiff cannot obtain punitive damages in a default judgment unless the plaintiff serves the defendant with a statement requesting a specific amount of punitive damages. The idea is to notify the defendant of the amount at stake so the defendant can decide whether to put up a fight.

In this case, the plaintiff did not serve a statement of damages as described in section 425.115. But he did attach a document to his complaint indicating that he sought $500,000 in punitive damages. The court said that was close enough to satisfy section 425.115.

New York Jury Awards $250 Million in Punitive Damages Against Novartis

Wow. After a brief lull in blockbuster punitive damages awards, juries seem to be making up for lost time. Reuters is reporting that a New York jury has awarded $250 million in punitive damages against drugmaker Novartis AG in an employment discrimination class action.

The Reuters story says that the jury awarded $3.3 million in compensatory damages to 12 of the plaintiffs, but compensatory damages have not yet been determined for the other 5,588 women in the class.

The availability of punitive damages in class actions is a hot topic in punitive damages litigation. As we have previously noted, some commentators believe that awarding punitive damages via class action is inconsistent with the U.S. Supreme Court's recent decisions on punitive damages, particularly Philip Morris v. Williams. This case may also be a vehicle for challenging the so-called "reverse bifurcation" procedure, which some courts have used in mass tort cases to decide the amount of punitive damages before the amount of compensatory damages have been determined. (See our prior posts about two cert. petitions that were filed back in 2008 on this issue.)

Sacramento Jury Awards $28 Million in Punitive Damages

The Sacramento Bee is reporting that a Sacramento jury has awarded $1.1 million in compensatory damages and $28 million in punitive damages against Horizon West Healthcare, a nursing home company. The plaintiffs claimed that Horizon was responsible for the death of their 79-year-old mother. With a ratio like that (25.5 to 1), this award is going down.

Hat tip: Fred Pilot

New Law Review Article on Philip Morris v. Williams

Professor Benjamin Zipursky of Fordham School of Law has posted an article on SSRN entitled Punitive Damages After Philip Morris v. Williams.

Among other things, the article discusses the Williams-based language that appears in California's model jury instructions (CACI). Prof. Zipursky gives the CACI language a favorable review, but he thinks Ohio's pattern instructions are a little better.

Here's an excerpt from the abstract:

Philip Morris USA v. Williams has struck some commentators as hypertechnical, but it is in fact among the Court’s most significant pronouncements on the topic of punitive damages. At its center is the “Nonparty Harm Rule”: it is a violation of due process for a court to permit a jury in a tort case to use punitive damages to punish a defendant for harming persons who are not parties in the litigation. The holding is difficult to understand because the Court simultaneously stated that it is permissible to augment a punitive damages award in light of a defendant’s heightened reprehensibility and it is permissible to infer heightened reprehensibility from the numerosity of the persons injured by defendant’s conduct, including nonparties. It is surprising because it appears to sound more in process, while prior cases have focused on the magnitude of the award. For both of these reasons, it is challenging to lower courts, who must craft jury instructions implementing Williams’ mandate. This article tackles all three problems.

Hat tip: TortsProf Blog.

Rex Heeseman's Latest Daily Journal Article on Punitive Damages

Judge Rex Heeseman of the Los Angeles Superior Court contributes regularly to the Los Angeles Daily Journal on various topics, including punitive damages. In his latest piece, Calculation of the "PD Ratio" (May 11, 2010), which you can view here if you have a subscription, Judge Heeseman discusses the decision a few months ago in Amerigraphics v. Mercury.

Judge Heeseman's article provides a nice overview of some of the major California appellate decisions addressing the proper ratio of punitive damages to compensatory damages. The article discusses the Amerigraphics decision in light of these precedents, and examines some of the questions raised by Amerigraphics.

For example, Judge Heeseman notes that in Amerigraphics, an insurance bad faith case, the court excluded from the ratio calculation any amounts awarded to the policyholder as "Brandt" fees (fees that the policyholder incurred in order to obtain wrongfully withheld policy benefits). Judge Heeseman notes that other decisions (such as Major v. Western Home) included Brandt fees in the ratio analysis. He suggests that California law is now unclear as to whether Brandt fees should be considered for ratio purposes.

Judge Heeseman also notes that the Amerigraphics court ultimately settled upon a ratio of 3.8 to 1 as the constitutional maximum on the facts of that case, and he says "[i]t appears this is the first occasion, in California at least, where an appellate court utilized a 'fraction' in the ratio."

I think it's true that California appellate courts generally adopt whole-number ratios, but fractional ratios are fairly common in California, because appellate courts often prefer to set the punitive damages at a nice round number. (See, e.g., Diamond Woodworks v. Argonaut (2003) 109 Cal.App.4th 1020, 1056-1057 [ordering a remittitur of punitive damages to $1 million, for a ratio of 3.8 to one, exactly the same ratio adopted in Amerigraphics]; Notrica v. State Compensation Insurance Fund (1999) 70 Cal.App.4th 911, 951-954 [ordering a remititur of punitive damages to $5 million, for a ratio of 10.3 to 1]; Rosener v. Sears, Roebuck & Co. (1980) 110 Cal.App.3d 740, 746, 757 [ordering a remittitur of punitive damages to $2.5 million, resulting in a ratio of 15.8 to one].) In the most recent example, the Court of Appeal in Roby v. McKesson adopted a ratio of 1.4 to 1, only to see that number reduced to 1 to 1 by the California Supreme Court.

Bill To Cap Punitive Damages is Dead. Again.

In a prior post, we reported on the death of a bill to cap punitive damages in California at three times the amount of compensatory damages. That report turned out to be premature, because the proposal wasn't really dead. It came back to life with a different number (AB 2740). Now that bill is really dead. It was rejected by the Assembly Judiciary Committee. Don't take our word for it; the Civil Justice Association of California (CJAC), which sponsored the bill, has the full report on its blog.

Las Vegas Jury Awards $500 Million in Punitive Damages

For those of you wondering where have all the punitive damages gone, they're baaack! With a vengeance. On the heels of a $200 million punitive damages award by a jury in Los Angeles, a jury in Las Vegas has topped that by dishing out $500 million in punitive damages.

As reported by the Associated Press, a jury awarded awarded $5 million in compensatory damages and $500 million in punitive damages to a husband and wife who alleged that the husband was infected with Hepatitis C during a colonoscopy. The jury awarded punitive damages not against the medical facility that infected the plaintiff, but against two drug companies that made and distributed propofol, the anesthetic drug used during the procedure. The plaintiffs alleged that the companies, Teva Parenteral Medicines and Baxter Healthcare Corp., supplied the drugs in vials that were larger than necessary, tempting the healthcare providers to re-use the vials on multiple patients, even though the vials were labeled for individual use. During the trial, the plaintiffs' attorney referred to the vials as "weapons of mass infection." (See this report in the Sun Times.)

This award is destined to be reversed or reduced. The basis for imposing punitive damages seems shaky and the amount of the award is simply absurd. An affirmance of this award would literally be unprecedented. Not surprisingly, the defendants have announced their plans to appeal. But even if the defendants get this award tossed, they won't be out of the woods. Apparently there are series of similar cases in the pipe-line. This was just the first to make it to trial.