February 15, 2012

Florida appellate court reverses $40 million punitive damages award in tobacco case

Yesterday an intermediate appellate court in Florida (First District Court of Appeal) reversed $40.8 million in punitive damages awarded to a smoker's family in a lawsuit against RJ Reynolds.  A jury award had awarded $10.8 million in compensatory damages and $80 million in punitive damages, but the trial court reduced those amounts under state law to $5.5 million and $40.8 million, to reflect the jury's finding that the smoker was 51% responsible for his own death.  Ordinarily punitive damages awards are not reduced to reflect a finding of comparative fault, but the plaintiffs in this case consented to the trial court's reduction of the punitive damages on that basis.  (See footnote 2 on page 2.) 

The appellate court affirmed the compensatory award, but concluded that the punitive damages award was excessive.  When calculating the ratio between punitive damages and compensatory damages, the court compared the reduced amount of the punitive damages award ($40.8 million) to the unreduced compensatory damages ($10.8 million), resulting in a ratio of 3.7 to one.  If the court had used the reduced amount of compensatory damages (as it did in this opinion), the ratio would have been 7.58 to one.  Even though this method of calculation favored the plaintiff by generating a lower ratio, the court still concluded that the punitive damages award was unconstitutionally excessive in light of the "substantial" compensatory damages award.  Unlike the California Court of Appeal in Bullock, the court did not compare the compensatory damages award to the defendant's wealth in order to determine whether the award was substantial.  The court simply concluded that the award was "substantial by any measure."

Strangely, after concluding that the award was excessive, the court remanded the case to the trial court to give the plaintiff the option of choosing a new trial on punitive damages or accepting a reduced amount of punitive damages. As many other courts have explained (including the California Supreme Court), that sort of disposition doesn't really make sense when a court determines that a punitive damages award is constitutionally excessive.  Once a court determines the maximum award permissible, there is no reason to allow the plaintiff to reject that amount and choose a new trial, because the plaintiff would never be permitted to obtain anything more than the constitutional maximum.