March 31, 2011

Law professors' $5 million punitive damages award cut to $220,000

Last December we reported on a $5 million punitive damages award in favor of two law professors against West Publishing.  The professors, as you may recall, were the authors of a West treatise on criminal procedure.  They won the big punitive award (along with $180,000 in compensatory damages) based on allegations that West wrongly identified them as the authors of shoddy updates to the treatise.

Predictably, that punitive award did not survive post-trial review.  The trial court has issued an order (link via Courthouse news) finding that the award is excessive and that the professors must choose between a new trial or a remittitur of the total punitive damages to $220,000.

UPDATE:  The original post erroneously reported that the trial court ordered a remittitur of the punitive damages to $400,000.  The correct figure is $220,000 (for a total award of $400,000 including the compensatory damages).  The text of the post has been corrected.

March 30, 2011

U.S. Supreme Court hears oral argument in Wal-Mart v. Dukes

Yesterday, the U.S. Supreme Court heard oral argument in Wal-Mart v. Dukes, which we’ve been tracking for its possible impact on the availability of punitive damages in class actions.

Based on a reading of the oral argument transcript, at least five justices appeared ready to overturn the district court’s decision to certify what is reportedly the largest class action in history. Justices Alito, Kennedy, Roberts, and Scalia seemed to signal that they agree the class does not satisfy the threshold requirements set by Federal Rule of Civil Procedure 23(a) for all federal class actions. Even several of the other justices who one might expect would be sympathetic to the plaintiffs’ argument appeared troubled by aspects of the class certification decision, although they did not necessarily agree the plaintiffs failed to satisfy Rule 23(a)’s threshold requirements.

For example, the questions Justice Ginsburg asked suggested she may yet conclude at least some portion of plaintiffs’ lawsuit cannot be certified solely under Rule 23(b)(2) even if the plaintiffs satisfied Rule 23(a). Justice Ginsburg indicated that, under the advisory committee’s note for Rule 23(b)(2), a class action cannot be certified under that rule if the monetary relief sought predominates over injunctive relief. She questioned how plaintiffs could say injunctive rather than monetary relief predominates here given that nearly half of the class members are not interested in injunctive relief but all of the members are interested in money.

Interestingly, Justice Sotomayor seemed to suggest that, where a class seeks both injunctive and monetary relief, it may be appropriate for courts to decide whether the class should be certified under Rule 23(b)(2) based on a test developed by the Fifth Circuit in Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5th Cir. 1998). If the Allison test were applied to the plaintiffs’ lawsuit, the plaintiffs in Wal-Mart—and plaintiffs in future class actions—may face an uphill struggle persuading a court to certify requests for back pay and punitive damages for class treatment under Rule 23(b)(2). See Allison, 151 F.3d at 416-418 (affirming determination that class certification for claims seeking compensatory and punitive damages was inappropriate under Rule 23(b)(2) because these claims for monetary relief were not sufficiently incidental to the injunctive and declaratory relief sought).

Given the questions posed by Justices Ginsburg and Sotomayor, it will be interesting to see whether the Supreme Court reverses class certification in a close (perhaps 5 to 4) decision holding the plaintiffs failed to satisfy Rule 23(a)’s threshold requirements or whether, either in lieu of or in addition to this determination, a broader coalition of justices agrees the class fails to satisfy Rule 23(b)(2).

Related posts:

Wal-Mart v Dukes argument set for March 29

Cert. granted in Dukes v. Wal-Mart; review limited to first question plus new issue added by the Court

Wal-Mart v. Dukes cert. petition redistributed for Dec. 3 conference

Wal-Mart v. Dukes cert. petition up for consideration next week

Cert. Petition in Wal-Mart v. Dukes raises class certification issues that may impact whether punitive damages are subject to class treatment

Ninth Circuit’s Dukes v. Wal-Mart decision addresses class certification of punitive damages claims

March 28, 2011

Holmes v. Burke: punitive damages affirmed against defendant with negative net worth

This blog has reported on many decisions in which the California Court of Appeal reversed a punitive damages award because the plaintiff failed to introduce meaningful evidence of the defendant's financial condition.  The appellant in this unpublished opinion from the Fourth Appellate District, Division Three, was hoping to add another decision to that list, but the court concluded that the plaintiff's evidence, although imperfect, was enough to constitute "meaningful" evidence.   

The interesting twist here is that the defendant had a negative net worth, but the court affirmed anyway.  The record showed that the defendant had $120,000 in net annual income, but had no significant assets (his home is underwater and proceeding to foreclosure) and a tax liability approaching $2 million.  Nevertheless, the court affirmed the punitive damages award because the defendant waived any argument that the punitive damages were excessive.  It seems that the defendant argued only that the record lacked meaningful financial condition evidence, but did not argue that the award was excessive in relation to the defendant's financial condition evidence. 

UPDATE:  Odds are good that, if the defendant had raised an excessiveness argument, the court would have reversed the punitive damages, based on what the same court did in another case last year.

March 27, 2011

Martinucci v. So. Cal. Permanente: Trial court properly vacated a $7.5 million punitive damages award

This unpublished opinion from the California Court of Appeal (Second Appellate District, Division Two) affirms a trial court order tossing out a $7.5 million punitive damages award in an employment case. 

The plaintiff, a doctor of radiology, claimed he was fired from a Kaiser medical facility because he insisted on the highest standards of patient care, causing resentment among other personnel and staff.  He sued for retaliatory termination in violation of public policy and various other claims.  After a three-week trial, a jury awarded $3.9 million in compensatory damages and $7.5 million in punitive damages.

The defendant moved for a new trial and for judgment notwithstanding the verdict (JNOV).  The trial court granted a complete new trial on various grounds, including instructional error.  The court also took the issue of punitive damages off the table for the retrial by granting a JNOV on that issue.  The court found that the plaintiff failed to meet his burden of proving malice, oppression, or fraud, the prerequisites to punitive damages under Civil Code section 3294.

The Court of Appeal affirmed both the new trial order and the JNOV on punitive damages, agreeing that the plaintiff presented no evidence of malice.  The court also rejected the plaintiff's argument that his allegations of retaliatory discharge amounted to "per se malice and/or oppression." The court said he waived that argument by not raising it when the trial court asked him to identify all evidence of malice, fraud or oppression.  Instead of finding waiver, the court could have just said that "per se malice and/or oppression" does not exist under California law.

March 26, 2011

Wyeth v. Scofield cert. petition raises punitive damages issues

Drug maker Wyeth has filed a petition for certiorari in Wyeth v. Scofield, asking the U.S. Supreme Court to decide two questions:

1. Whether, when a verdict has been tainted by a jury's passion or prejudice, due process requires a trial court to grant a new trial instead of a remittitur.
2.Whether, and in what circumstances, a trial court violates due process when it awards a substantial amount in compensatory damages but nevertheless proceeds to award punitive damages in an amount exceeding the one-to-one ratio indicated in State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003) and Exxon Shipping v. Baker, 554 U.S. 471 (2008).
California courts have already grappled with the first question as a matter of state law.  The California Supreme Court held in Schelbauer v. Butler Manufacturing Co. (1984) 35 Cal.3d 442, 454 that the proper use of a remittitur, as opposed to ordering a new trial, is "confined to cases in which an excessive damage award [is] the only error in the jury’s verdict."   And the Court of Appeal held in Fidler v. Hollywood Park Operating Co. (1990) 223 Cal.App.3d 483, 489 that courts should order a new trial rather than a remittitur in cases where it appears the jury was influenced by passion and prejudice: "[t]he fairest result is to remand the matter for a new trial."  (See also Tan Jay Internat., Ltd. v. Canadian Indemnity Co. (1988) 198 Cal.App.3d 695, 705 [trial court properly ordered a new trial where it appeared that "the jury was impermissibly swayed by passion and prejudice"].)  Although California is fairly well settled on the issue, it couldn't hurt to have a definitive opinion on this issue from the U.S. Supreme Court.      

The second issue is one where courts nationwide have been all over the map.  The cert. petition does an excellent job of listing all the cases in which courts have, or have not, adhered to the U.S. Supreme Court's admonition that a one-to-one ratio is appropriate in cases involving "substantial" compensatory damages award.  For the most part, California courts have followed the Supreme Court's guidance, in cases like Jet Source Charter v. Doherty, Walker v. Farmers, and most recently, the California Supreme Court's decision in Roby v. McKesson.  But we have observed a few instances in which, in unpublished opinions, our courts have affirmed punitive damages awards that exceeded an already substantial compensatory award.  (See our prior posts here and here.)

The Supreme Court recently denied another petition asking for further guidance on State Farm's one-to-one ratio.  We'll see if this one fares any better.

Hat tip: Drug & Device Law

March 24, 2011

Johnson & Johnson asks California Supreme Court to review case allowing punitive damages for ibuprofen warnings

Johnson & Johnson has filed a petition for review with the California Supreme Court in Johnson & Johnson v. Superior Court, the case in which the California Court of Appeal (Second Appellate District, Division Four) held that punitive damages could be imposed on Johnson & Johnson for failing to include enough details in its warning labels for ibuprofen.  The labels warned about the possibility of severe allergic reactions, but didn't specifically warn about skin reddening, blisters, or rash.  You can view the Supreme Court's on-line docket to track the status of the petition.  As I said in earlier posts, the Court of Appeal's opinion allowing plaintiffs to proceed with a punitive damages claim, in a case that seems marginal at best on the issue of liability, is inconsistent with California's stringent requirements for the proof necessary to recover punitive damages.

Related posts:

Court of Appeal publishes opinion on punitive damages against Johnson & Johnson for ibuprofen warnings

Johnson & Johnson v. Superior Court; plaintiffs can seek punitive damages for incomplete ibuprofen warnings

March 23, 2011

Assembly Judiciary Committee rejects bill that would prevent juries from deciding the amount of punitive damages

The Judiciary Committee of the California Assembly has rejected AB 556, which would have given California's trial judges the exclusive authority to decide the appropriate amount of punitive damages, even in cases that are otherwise decided by a jury.

Related post:

Proposed bill would require that judges, not juries, determine the amount of punitive damages in California

March 18, 2011

L.A. jury awards $19 million in punitive damages and $35,000 in compensatory damages in insurance bad faith case

Bloomberg Businessweek is reporting that a jury in Los Angeles has awarded a former Marine $19 million in punitive damages and $35,000 in compensatory damages, in an insurance bad faith case against Stonebridge Life Insurance.  The plaintiff claimed that Stonebridge unreasonably refused to pay for a lengthy hospital stay, agreeing to pay only for 19 days out of a 109-day stay.

Stonebridge says it intends to appeal.  An appeal may not be necessary, however, if Stonebridge files post-trial motions asking the trial court to reduce or vacate the punitive damages.  Although there is some case law stating that a low compensatory damages award can support a higher punitive-to-compensatory ratio, nothing would support the extreme ratio here.  The trial court may conclude that the punitive is so high and so disproportionate to the actual harm that it raises a presumption that the jury acted out of passion and prejudice.

March 16, 2011

Bill on punitive damages in products cases fails to pass Senate Judiciary Committee

The Judiciary Committee of the California Senate held a hearing yesterday on Assembly Bill 158, which would eliminate punitive damages in products liability cases in which the defendant complied with applicable regulations.  The committee did not approve the bill, but will consider it again at a future hearing.

Related posts:

Proposed cap on punitive damages in California is deleted from amended version of bill

Another year, another proposal to cap punitive damages in California

March 14, 2011

Behr v. Redmond: Court of Appeal publishes previously unpublished opinion, creates split of authority

A week ago we reported on the unpublished opinion in Behr v. Redmond, in which the Court of Appeal reduced a jury's award of compensatory damages from $4 million to $1.6 million, without disturbing the jury's award of $2.8 million in punitive damages.  As we noted at the time, the opinion's treatment of the punitive damages conflicts with published cases, making the court's decision not to publish its opinion rather surprising.

Today, the Court of Appeal ordered publication of its opinion.  It appears from the court's online docket that neither of the parties requested publication; the court ordered publication on its own motion.

Now that there is a split in California case law about the proper treatment of a punitive damages award following a large reduction in compensatory damages, this case may end up in the California Supreme Court.

March 9, 2011

Proposed bill would require that judges, not juries, determine the amount of punitive damages in California

California Assembly member Don Wagner has introduced a bill that would give trial courts exclusive authority to determine the amount of punitive damages awards in California.  The bill, Assembly Bill 556, provides that juries will continue to determine whether punitive damages can be imposed, i.e., juries will still decide whether the plaintiff has proved by clear and convincing evidence that the defendant acted with malice, oppression, or fraud.  But if the jury answers "yes" to that question, the jury would not be permitted to determine the amount of punitive damages.  That would be determined by the judge.

This is the first time I have seen anyone propose this type of bill in California.  Someone seems to propose a cap on punitive damages every year, but I don't recall seeing this one before.  This bill is scheduled for a hearing before the Assembly Judiciary Committee on March 22.

Proposed cap on punitive damages in California is deleted from amended version of bill

We previously blogged about Assembly Bill 158, which, in its original form, would have limited punitive damages in California to three times compensatory damages.  The bill also included proposals to (1) eliminate punitive damages in products liability cases in which the defendant could establish that its product was in compliance with applicable regulations, and (2) limit noneconomic damages to $250,000 in all negligence cases.

An amended version of the bill is now scheduled for a hearing on March 1315.  The amended version of the bill, however, no longer includes the caps on punitive damages or noneconomic damages.  It contains only the limitation on punitive damages for products liability cases.

March 8, 2011

No punitive damages for former law firm associate who was passed over for partnership

I haven't been following this case, but apparently a former associate at the Orrick Herrington law firm is suing the firm for $100 million, including punitive damages, because they promised to make him a partner but didn't.  This New York Law Journal story reports that the trial judge granted Orrick's motion to strike the claim for punitive damages, on the ground that being passed over for partnership isn't the sort of egregious misconduct that could support an award of punitive damages.  The plaintiff says he will appeal.  Good luck with that. 

Smoker's family wins $11.3 million in punitive damages

The latest jury verdict in the on-going Florida tobacco litigation: $6 million in compensatory damages and $11.3 million in punitive damages to the children of a deceased smoker, per this story on the Courtroom View Network.

Related posts:

Smoker asks for $10 billion in punitive damages; jury awards $260,000

Plaintiffs break losing streak in Florida smoker lawsuits, win $72 million punitive damages award
Philip Morris wins sixth straight trial in Florida smoker litigation

Florida jury awards relatively modest punitive damages in smoker lawsuit

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

March 7, 2011

Behr v. Redmond: $2.8M punitive award affirmed, despite reduction of compensatory damages from $4M to $1.6M

Here's a somewhat surprising unpublished opinion from the California Court of Appeal (Fourth Appellate District, Division Two).

The plaintiff, who claimed the defendant gave her genital herpes, won a verdict of $4 million in compensatory damages and $2.8 million in punitive damages.  That compensatory award included $2.5 million for future medical expenses.

On appeal, the defendant argued (among other things) that no substantial evidence supported the award of future medical expenses.  The Court of Appeal agreed and reduced the compensatory damages from $4 million to $1.6 million.

After reading that part of the opinion, I was expecting the Court of Appeal to do one of two things: (1) reduce the amount of punitive damages to preserve the punitive-to-compensatory ratio awarded by the jury, as the Court of Appeal did in Las Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal.App.3d 1220, 1254, or (2) send the case back to the trial court to re-evaluate the amount of punitive damages in light of the reduced compensatory damages award, as the Court of Appeal did in SEIU v. Colcord (2008) 160 Cal.App.4th362.

Surprisingly, the court followed neither approach, and instead affirmed the punitive damages award based on its conclusion that the ratio of compensatory damages, as reduced, was not excessive.  In my view, that approach overlooks the fact that juries are instructed to make their punitive award proportionate to the actual harm to the plaintiff.  The jury in this case performed this task based on an extremely inaccurate assessment of the actual harm.  It seems very unlikely that the jurors would have awarded exactly the same amount of punitive damages if they had known that the correct amount of "actual harm" was $2.5 million less than they thought.

More surprisingly, the court did not publish its opinion, even though it departs from the approach taken in published cases on this issue.  I guess I shouldn't be too surprised, because this has happened before.  As I said at that time, I expect this issue will eventually make its way to the California Supreme Court.

March 4, 2011

Does Michigan have more truck accidents because it doesn't allow punitive damages?

Opponents of limits on punitive damages typically argue that unlimited punitive damages are necessary to deter bad corporate behavior and protect public safety.  See this recent blog post, for example.  If that reasoning is correct, states with caps on punitive damages should be experiencing a rise in corporate misconduct and a decline in public safety.  And the situation should be even worse in states that have banned punitive damages altogether.  But is there any evidence this is true?  Yes, according to these Michigan plaintiffs' lawyers.

They argue, in this video and on this page of their website, that Michigan is suffering from a high rate of trucking accidents because that state does not allow punitive damages.  They say that trucking companies, free from the threat of punitive damages, "knowingly hire unqualified, unfit truck drivers who commit safety violations that cause accidents."  They cite evidence that Michigan experiences more than 100 fatal truck accidents per year, and another 5,000 truck accidents causing serious personal injuries per year.

One thing seems to be missing: evidence that the rate of truck accidents in Michigan is higher than in states where punitive damages are allowed.  Without such evidence, it seems awfully difficult to argue that truck accidents in Michigan are caused by that state's prohibition on punitive damages.

I decided to take a look at the data available on the internet to see if I could test the hypothesis that Michigan's lack of punitive damages has resulted in more truck accidents.  According to this University of Michigan study, Texas had the most fatal truck accidents between 2003 and 2007, a total of 2,545.  Michigan had a total of 606 during the same time period.  According to the 2010 census figures, Texas has a population of  25.1 million and Michigan has a population of 9.9 million.  That means that Texas actually has a higher rate of truck accidents per capita, .0001 per person for Texas compared to .00006 per person for Michigan.  Texas, by the way, allows punitive damages (subject to a cap).   

Florida also had a very high number of fatal truck accidents during the same time period, a total of 1,894.  With a population of 18.8 million, Florida's rate of fatal truck accidents per person is .0001, the same as Texas, and higher than Michigan.  Florida, of course, has no caps on punitive damages and is home to many of the largest punitive damages awards in the country in recent years.  Hmmm, the hypothesis isn't looking so good.  In fact, the only correlation so far is that states that allow punitive damages have a higher rate of fatal truck accidents, but I'm certainly not confusing correlation with causation.

Let's look at a Ohio, a state that is more economically and geographically similar to Michigan.  Ohio had 828 fatal truck accidents in 2003-2007, with a population of 11.5 million, for a rate of .00007 per person.  Again, higher than Michigan.  And Ohio law permits punitive damages (subject to a cap).

Based on this limited examination of the data, there appears to be no support whatsoever for the theory that Michigan has a higher rate of truck accidents as a result of its prohibition on punitive damages. To truly isolate the impact of punitive damages law on trucking accidents, a researcher would have to dig a lot deeper, and isolate a lot of other variables - economic, geographic, demographic.  That may be possible, but I haven't seen any such study. If any of our readers have seen one, let us know.