April 20, 2012

Published opinion affirms $4.5M punitive damages award in asbestos case (Bankhead v. ArvinMeritor)

In this asbestos personal injury action, the jury awarded $1.85 million in compensatory damages and $4.5 million in punitive damages (a ratio of 2.4 to one).  Defendant ArvinMeritor appealed, challenging only the amount of the punitive damages.  ArvinMeritor raised two arguments: (1) the punitive damages are excessive under state law in light of ArvinMeritor's negative net worth, and (2) the ratio of punitive to compensatory damages is unconstitutionally excessive.

In this published opinion, the California Court of Appeal (First Appellate District, Division Four) rejected both arguments and affirmed the award in full.

On the first issue, the court observed that despite ArvinMeritor's negative net worth, the record showed it could afford to pay the punitive damages award.  At the time of trial, it had annual sales revenue of $3.6 billion and cash reserves exceeding $343 million.  

On the second issue, the court held that the 2.4 ratio was "well within the range for comparable cases."  Curiously, the opinion never addresses the U.S. Supreme Court's statement in State Farm v. Campbell, repeated by the California Supreme Court in Roby v. McKesson, that “When compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee.”  The $1.85 million punitive damages award in this case would seem to qualify as "substantial," but the court never discussed that aspect of State Farm.