October 30, 2014

Court of Appeal affirms $3 million punitive damages under federal maritime law (Colombo v. BRP US Inc.)

This published California Court of Appeal opinion is a rarity.  It's a state appellate decision analyzing punitive damages awarded under federal maritime law.

Federal maritime law differs dramatically from California law on the issue of punitive damages.  For instance, the burden of proof is much lower in maritime cases; California law requires proof by clear and convincing evidence, but maritime law requires only proof by a preponderance of the evidence. California law requires proof that the defendant acted with malice, oppression, or fraud, whereas maritime law permits punitive damages based on showing of recklessness or gross negligence.  And the Supreme Court in Exxon Shipping set forth an excessive analysis for maritime cases that differs from the due process standards that apply to punitive damages awards arising under state law.

For all of these reasons, this opinion isn't likely to have much impact on punitive damages cases involving California law.  Nevertheless, the opinion is an interesting read.

The plaintiffs in this case suffered serious injuries when they fell off the back of a personal watercraft and the jet thrust from the watercraft ripped their flesh.  (The injuries were pretty gruesome; skip that part of the opinion if you are squeamish).

The defendant manufacturer had placed a warning on the watercraft, specifically addressing the risk that injured the plaintiffs.  The warning advised users of the watercraft to wear a wetsuit bottom or other protective clothing.  But the plaintiffs alleged that the defendant acted with callous disregard for safety by placing the warning in a place where only the driver of the vehicle could see it.  Plaintiffs claimed that a second warning should have been placed on the back of the vehicle.  They presented evidence that another watercraft manufacturer placed multiple warnings in different places on its vehicles.

The defendant's safety manager testified that the defendant deliberately chose not to use multiple warnings to avoid the "dilution effect" that occurs when a product bears too many warnings, including multiple warnings about the same hazard.  (See, e.g., Broussard v. Continental Oil (La.App. 1983) 433 So.2d 354, 358 [placing too many warnings on a product would "decrease the effectiveness of all the warnings"]; see also Restatement (Third) of the Law of Torts: Product Liability, Section 2, comment i ["excessive detail may detract from the ability of typical users to focus on the important aspects of the warnings"].)

Although the defendant sought to present this issue as a balancing of competing safety interests, the Court of Appeal (Fourth Appellate District, Division One) said a jury could reasonably conclude under the preponderance of the evidence standard that the defendant's conduct was reckless.

The opinion also held that the amount of the punitive damages ($1.5 million to each plaintiff) was not excessive.  The ratio of punitive damages to compensatory damages was 1-to-1 for one plaintiff and 3.78-to-1 for the other.  The defendant argued that, under Exxon Shipping, the maximum ratio under federal maritime law is 1-to-1. The court disagreed, holding that the 1-to-1 limit adopted by the majority in Exxon Shipping only applies to cases where the defendant's conduct is low on the scale of blameworthiness.  The court concluded that the defendant's conduct in this case (failing to add a duplicate warning in a different place on the product)  was "on the higher end of the scale of blameworthiness" and therefore could support the ratios awarded by the jury.