California Punitives by Horvitz & Levy

  • Forthcoming article: “Surprisingly Punitive Damages”

    Professor Bert Huang of Columbia Law School has posted a preview of his forthcoming Virginia Law Review article entitled Surprisingly Punitive Damages.  The article proposes a solution for the redundant effect of punitive damages in mass tort cases, as described in the abstract:

    Think first of the classic problem of redundant punitive damages: A defendant has caused a mass tort. Plaintiff 1 sues, winning punitive damages based on the overall reprehensibility of that original act. Plaintiff 2 also sues — and also wins punitive damages on the same grounds. So do Plaintiff 3, Plaintiff 4, and so forth.

    Next, consider a more subtle problem: Many statutes set the minimum award per claim at a super-compensatory level, based on the assumption that private suits may need extra inducement. But when enforcement turns out to be more vigorous than was assumed — most famously, when thousands or millions of claims are brought at once — then the damages in even a single case can stack up to surprisingly punishing effect.

    These problems share a conceptual feature that I analyze here: The damages in each context can be seen as encompassing two distinct components — a “variable” portion that properly varies with the number of claims, and a “fixed” portion that should be awarded only once. The crucial error that leads to surprisingly punitive damages is repeatedly awarding not only the variable but also the fixed component of damages, in cases with multiple claims.

    One natural solution for neutralizing such redundancy is to allow courts to run concurrently the fixed component of such repeated awards. This paper explores how a “concurrent damages” approach might be applied to variations of each problem; addresses its pros, cons, and complications; and explores how it relates to other procedural devices, including preclusion and aggregation.

    I haven’t had a chance to read the article yet, but it comes “highly recommended” by Professor Lawrence Solum (Georgetown) at Legal Theory Blog.

  • “The Future of Classwide Punitive Damages”

    The Summer 2013 edition of The University of Michigan’s Journal of Law Reform contains an article entitled “The Future of Classwide Punitive Damages,” written by Professor Catherine M. Sharkey of NYU School of Law.  Here’s an excerpt from the abstract:

     Conventional wisdom holds that the punitive damages class action is susceptible
    not only to doctrinal restraints imposed on class actions but also to constitutional
    due process limitations placed on punitive damages. Thus, it would seem that the
    prospects for punitive damages classes are even grimmer than for class actions
    generally.

    This conventional picture misunderstands the role of punitive damages and, in
    particular, the relationship between class actions and punitive damages. It either
    ignores or underestimates the distinctly societal element of punitive damages, which
    makes them especially conducive to aggregate treatment. Furthermore, punitive
    damages classes offer a solution to the constitutional due process problem of juries
    awarding “classwide” damages in a single-plaintiff case.

  • Law review article predicts the end of punitive damages in America

    Law professor Jill Wieber Lens has posted “Justice Holmes’sBad Man and the Depleted Purposes of Punitive Damages” on SSRN.  The thesis of the article is that the U.S. Supreme Court’s opinion in ExxonShipping v. Baker contains the seeds of the destruction of punitive damages in America.  As I read the article, that thesis is based on the following logic:
    • Punitive damages have been held constitutional because, under common law, punitive damages are designed to punish and deter misconduct, which is a legitimate state interest 
    •  In the Exxon Shipping case, the Supreme Court identified a different common law purpose for punitive damages: informing a bad actor what price he will pay for misconduct
    •  By not relying on the traditional common law justifications for punitive damages, Exxon Shipping tacitly undermined those justifications 
    • Now that the Supreme Court has undermined the traditional justifications for punitive damages, state legislatures will move to eliminate punitive damages under state law and, if they don’t, state courts will declare punitive damages unconstitutional
     It’s certainly a bold prediction.  But I’m a bit skeptical, even from my perspective as an appellate lawyer who regularly challenges punitive damages awards on appeal.  There is no question that a growing number of state legislatures have enacted laws curtailing punitive damages.  That trend was in place well before Exxon Shipping and shows no signs of slowing any time soon.  But many holdout jurisdictionsstill permit punitive damages without any statutory limitations on amount (e.g., California), and I don’t think it likely that we’ll see a wave of proposed legislation to do away with punitive damages in those jurisdictions, much less decisions declaring punitive damages unconstitutional as a result of Exxon Shipping. 

  • Does the “clear and convincing evidence” standard of proof for punitive damages make any difference?

    In California and many other U.S. jurisdictions, plaintiffs seeking punitive damages must meet a higher burden of proof than the usual “preponderance of the evidence” standard that applies to civil cases.  Plaintiffs must prove by clear and convincing evidence that the defendant engaged in punishable misconduct.  That higher standard of proof is thought to provide defendants with a significant procedural protection against unwarranted punitive damages.

    But how does this play out in practice?  Does empirical data confirm that juries are less likely to award punitive damages when the plaintiff is saddled with a higher burden of proof?  The answer is “no,” according a recent study entitled Jurors’ Use of Standards of Proof in Decisions about Punitive Damages, published in Behavioral Sciences and the Law.  Here’s the abstract of the article:

    Standards of proof define the degree to which jurors must be satisfied that a fact is true, and plaintiffs in civil lawsuits assume the burden of proving their claims to the requisite standard of proof. Three standards—preponderance of evidence, clear and convincing evidence, and beyond a reasonable doubt—are used by different jurisdictions in trials involving liability for punitive damages. We investigated whether individual mock jurors apply these standards appropriately by instructing them to read two personal injury trial summaries and to use one of three standards in either qualitative or quantitative format when deciding punitive liability. Results showed that jurors tended not to incorporate the standard into their judgments: defendants were just as likely to be found liable when the plaintiff’s burden was high (“beyond a reasonable doubt”) as when the burden was low (“preponderance of evidence”). The format of the instruction also had a negligible effect. We suggest that nonuse of the standard of proof is related to jurors’ preferences for less effortful or experiential processing in situations involving complicated or ambiguous material.

    That’s sobering stuff for defendants facing punitive damages in California.  Worse yet, some of our appellate courts have held that the clear and convincing evidence standard is irrelevant in appeal challenging the sufficiency of the plaintiffs’ evidence of malice, oppression, or fraud.  In other words, according to those courts, if the plaintiff fails to meet its higher burden at trial but the jury awards punitive damages anyway, there is absolutely nothing the defendant can do about it.  Some of our appellate courts, however, have rejected that notion and held that the sufficiency of the evidence must be measured through the prism of the clear and convincing standard.  Our Supreme Court granted review to resolve that split a few years ago but dismissed review when the parties settled the case.  We assume they’ll take the issue up again when the right vehicle comes along.  

    Hat tip: Robert Richards on Twitter

  • U.S. Supreme Court decisions in BMW and State Farm have failed to reduce punitive damages awards, according to new paper

    Tort reform of punitive damages has failed, according to Cornell law professor Theodore Eisenberg.

    In The Empirical Effects of Tort Reform, a chapter from the forthcoming Research Handbook on the Economics of Torts, Professor Eisenberg uses statistical analysis to study the effects of various efforts to rein in punitive damages, including the U.S. Supreme Court’s opinions in BMW v. Gore and State Farm v. Campbell.  As most readers of this blog know, those decisions held that an award of punitive damages is unconstitutionally excessive if it is disproportionate to the reprehensibility of the defendant’s conduct and the actual harm that the defendant inflicted upon the plaintiff.  One might expect those decisions to produce a general decline in the average ratio between punitive damages and compensatory damages.  Eisenberg’s statistics show no such decline. In fact, his statistics show that, in cases involving compensatory damages awards up to $100,000, the average ratio of punitive damages to compensatory damages actually increased after State Farm.

    Eisenberg characterizes the Supreme Court’s tort reform effort as a failure, but that’s OK with him because he does not believe there was anything to reform in the first place.  Rather, he blames the Chamber of Commerce for stoking public outrage about a mythical punitive damages crisis that never really existed.

    He grudgingly acknowledges, however, the existence of evidence showing that tort reform has succeeded in reducing “extreme” punitive awards.  He makes that acknowledgment only in passing, but it seems to severely undercut his conclusion that reform of punitive damages has failed.  The main focus of tort reform in the punitive damages context has been to reduce the “outliers,” not to reduce the average ratio on a nationwide basis.  That’s certainly what the Supreme Court was aiming at in BMW and State Farm.  So if tort reform is responsible for a reduction of the the extreme awards, perhaps it isn’t a failure after all.  Anyway, it’s an interesting article and well worth a read to anyone interested in empirical analysis of tort reform, not just of punitive damages, but also in the context of medical malpractice and products liability litigation.
     
    Hat tip: TortsProf Blog

  • “Economic Analysis of Punitive Damages”

    Prof. Catherine M. Sharkey at NYU Law has posted a chapter entitled Economic Analysis of Punitive Damages: Theory, Empirics, and Doctrine, from the forthcoming Research Handbook on the Economics of Torts.  Here’s the abstract:

    This chapter — to be included in Research Handbook on the Economics of Torts (Arlen ed., Kluwer, forthcoming 2012) — assesses economic rationales for punitive damages in light of contemporary empirics and doctrine. The primary economic rationale for supra-compensatory damages is optimal deterrence (or loss internalization): when compensatory damages alone will not induce an actor to take cost-justified safety precautions, then supra-compensatory damages are necessary to force the actor to internalize the full scope of the harms caused by his actions. Alternative economic rationales — disgorgement of ill-gotten gains and enforcement of property rights — have been proposed to align the theory with the historical and conventional focus of punitive damages on intentionally wrongful behavior.

    Notwithstanding its academic prominence, the economic deterrence rationale has not dominated doctrine. In fact, the U.S. Supreme Court has all but rejected economic deterrence, by instead placing increasing emphasis on a competing retributive punishment rationale. But, since punitive damages lie squarely within the purview of state law, state legislatures and courts possess a degree of freedom to articulate state-based goals of punitive damages — such as economic deterrence — even in the face of heavy-handed federal constitutional review imposed by the U.S. Supreme Court.

    Hat tip: TortsProf Blog.

  • New law review article on enforcement of U.S. punitive damages awards in France

    Professor François-Xavier Licari, of the University of Metz law school, has written another interesting article on the enforcement of American punitive damages awards in France.  The article, co-authored by Benjamin West Janke, is entitled Enforcing Punitive Damages Awards in France after Fountaine Pajot.  Here’s the abstract:

    In a landmark ruling, the Cour de cassation held that “an award of punitive damages is not, per se, contrary to public policy,” but that “it is otherwise when the amount awarded is disproportionate with regard to the damage sustained and the debtor’s breach of his contractual obligation.” Schlenzka & Langhorne v. Fountaine Pajot, S.A. involved the failed attempt by American judgment creditors to enforce their California judgment against a French defendant in France. At the same time that the judgment creditors were taking their case through the French legal system, the Cour de cassation, in a different line of cases, liberalized the conditions under which a foreign judgment could be enforced in France. But when the Court opened one door for the American plaintiffs, it closed another by refusing to enforce the judgment because it included disproportionate punitive damages. The Court’s reasons were inconsistent with prior interpretations of proportionality and disingenuous to the court’s modern approach to the enforcement of foreign judgments. In just a few words, the Court echoed prevailing French and European sentiments about American punitive damage awards. Unfortunately, the prevailing attitudes are dominated more by prejudice than by fact and reason.

    The article will appear in the American Journal of Comparative Law.

  • Yale Law Journal student note: Reconciling Punitive Damages with Tort Law’s Normative Framework

    If you’re interested in the theoretical underpinnings of punitive damages, you might want to read Yale law student Amir Nezar’s note in the Yale Law Journal: Reconciling Punitive Damages with Tort Law’s Normative Framework.  The theme of the note is that courts and commentators have missed the boat in coming up with a theoretical justification of punitive damages that’s consistent with tort law.  Economic theorists haven’t gotten it right when they attempt to explain punitive damages as a method for deterring inefficient behavior, and “retributive justice” theorists haven’t gotten it right when try to explain punitive damages as retribution for wrongs to society.  In the author’s view, punitive damages are better explained by corrective justice theory, which views punitive damages as the defendant’s payment of a moral debt owed to the plaintiff.  Or at least I think that’s what he’s trying to say.  Check it out for yourself. 

    Hat tip: Prof. François-Xavier Licari.

  • Punitive damages may be available in copyright infringement actions under the U.S. Copyright Act

    In a prior post, we noted a case where Viacom was denied punitive damages under the copyright act. A law review article by Marketa Trimble makes the claim that the copyright act does not bar punitive damages simply because it does not affirmatively provide for them. The article also discusses cases in the Southern District of New York which suggest that plaintiffs may elect punitive damages under the act, and which differ from the Viacom ruling we discussed in our prior post.

  • Yet more from Prof. Markel on taxing and deducting punitive damages awards

    We’ve chronicled some of the academic debate concerning the ins and outs of tax treatment of punitive damages awards. One of the debaters, Professor Dan Markel, posted an update this week (“What will Congress do regarding the tax treatment of punitive damages?“), outlining more recent papers on the subject, authored by himself and others, including Professors Larry Zelenak and Paul Mogin. He remarks, “in an Escheresque-turn, we now invite comments on our comments on their comments on our paper.” Some readers of this blog just might want to take him up on the offer!

    For our last analysis of thoughts from Professor Markel, see “More from Professor Markel on Tax Policy and Punitive Damages.”