An Ars Technica article titled Bill Would Penalize Companies for Aiding Internet Censorship describes an interesting pending bill that includes a provision for punitive damages against companies that give up user information to would-be censors or block content from US government sites. As summarized by Ars Technica:

“US-based companies could be held liable for helping officials in other countries censor the Internet, if a bill proposed by House Representative Chris Smith (R-NJ) is approved. Smith recently announced his plans to push the Global Online Freedom Act (HR 275) to the House floor for voting after having lobbied human rights organization Reporters Without Borders for support. Among other things, the Global Online Freedom Act will bar US companies from disclosing personally-identifiable information about a user, except for ‘legitimate foreign law enforcement purposes.’

‘American high-tech firms have produced the technology and know-how that has led to a modern-day information revolution,’ Smith said in a statement. ‘Sadly, however, instead of working to allow everyone to benefit from these advancements, these same high-tech firms are colluding with dictators and tyrannical regimes such as China to suppress human rights information and punish pro-democracy advocates.’

Among other things, the Act appears to be a direct response to the furor over Yahoo’s involvement in outing a number of Chinese dissidents to the government, resulting in their arrest and imprisonment. At least two Chinese pro-Democracy advocates have filed lawsuits against Yahoo for turning over their e-mails to the government, but Yahoo has said repeatedly that it simply complied with the requests of local law enforcement and was not aware of the nature of the investigations. . . .

The Global Online Freedom Act would not only prevent companies like Yahoo from giving up the goods to totalitarian regimes, but would also prohibit US-based Internet companies from blocking online content from US government or government-financed web sites in other countries. When it comes to non-government sites, the Act would require companies to disclose to the newly-created Office of Global Internet Freedom the terms that they do filter, and for the Office to continually monitor these filtered terms.

If the companies violate any of these new restrictions, they could face civil and criminal penalties of up to $2 million, and aggrieved citizens (those who have suffered from the companies’ violations, like the Chinese dissidents discussed above) are free to pursue punitive damages and other legal remedies from the offenders.”

The current version of the bill is available here. The official summary of the bill is available here.

The specific provision on punitive damages provides: “(c) Private Right of Action- Any person aggrieved by a violation of this section may bring an action for damages, including punitive damages, or other appropriate relief in the appropriate district court of the United States, without regard to the amount in controversy, and without regard to the citizenship of the parties.”

According to LegalNewsline.com, Utah’s attorney general is open to the idea of capping punitive damages in order to preserve the state’s favorable legal climate. As we mentioned last week, Utah ranked 5th in the recent Harris Poll/U.S. Chamber of Commerce survey of in-house corporate counsel. The State Farm v. Campbell case apparently did little to tarnish Utah’s reputation as a favorable venue for defendants, even though the Utah Supreme Court approved a $145 million punitive damages award (compared to $1 million in compensatory damages) which the U.S. Supreme Court later reversed, saying the case was “neither close nor difficult.”

UPDATE (By Jeremy Rosen on 4/29 at 4:50 pm): On remand in State Farm v. Campbell, after the United States Supreme Court had made it very clear that the case (with high compensatory damages that included a punitive component) would only permit a 1:1 ratio of punitive to compensatory damages, the Utah Supreme Court nonetheless found that a 9:1 ratio would be permitted. It must not take much for a jurisdiction to be considered a favorable legal climate for business.

The California Chamber of Commerce has posted a video on its website with clips from the hearing on SB 423, which would have imposed a cap on punitive damages in California. The bill was rejected by the judiciary committee of the California State Senate, as we reported in our previous coverage of the bill. Yes, this is somewhat old news, but hey, it isn’t often that we can link to a video about punitive damages.

In an interesting opinion, the Ohio Supreme Court recently upheld a state tort reform statute that limits punitive damages to three times compensatory damages among other provisions. The official summary of the opinion states that:

“In a 5-2 decision authored by Chief Justice Thomas J. Moyer, the Court ruled that legislation capping the amount of noneconomic damages that may be awarded to personal injury plaintiffs and placing limits on the amount of punitive damages that may be awarded in Ohio tort actions does not violate the constitutional rights of injured parties to trial by jury, to a remedy at law for their injuries, or to due process and equal protection of the laws. The Court also held that the challenged statutes do not violate provisions of the Ohio Constitution that guarantee open courts and the separation of powers between the legislative and judicial branches of government.

“The case involved multiple constitutional challenges to S.B. 80, legislation enacted by the General Assembly in 2004 which took effect in April 2005. One of the challenged provisions, R.C. 2315.18, limits the amount of “noneconomic” damages (damages for intangible injuries such as pain and suffering, loss of consortium, disfigurement, mental anguish, etc.) that may be awarded to a plaintiff in a personal injury suit to the greater of $250,000 or three times the amount of “economic damages” awarded to the same plaintiff based on the same injuries, up to an absolute maximum of $350,000. The bill makes an exception to those limits for plaintiffs who suffer permanent disability or the loss of a limb or bodily organ system. Another challenged provision in the bill, R.C. 2315.21, prohibits Ohio courts from awarding a plaintiff punitive damages that exceed two times the amount of his or her compensatory damages from the same defendant.”

UPDATE (by Curt Cutting on 2/5/08 at 10:40 am): This decision is particularly interesting given the Ohio Supreme Court’s history of striking down tort reform legislation, including restrictions on punitive damages, as unconstitutional. In 1999, the court struck down a prior statute that capped punitive damages. I’m certainly no expert on Ohio law, but this decision appears to represent a sea change in that state’s high court, at least with respect to punitive damages.

FURTHER UPDATE (by Jeremy Rosen on 2/5/08 at 10:45 pm): To follow-up on Curt’s point, a 2004 analysis of the Ohio Supreme Court describes its history of decisions striking down tort reform legislation passed by the Legislature and suggests that the court was then at a crossroads with a consistent 4-3 split. Perhaps the more recent opinion discussed above shows a new direction for that court.

The Judiciary Committee of the California State Senate held a brief hearing yesterday on SB423 (which we blogged about previously here), a proposal to limit punitive damages to no more than three times compensatory damages. At the conclusion of the hearing, the committee voted 3-2 not to refer the bill to the full Senate.

Kyla Christofferson, a policy advocate for the California Chamber of Commerce, spoke in favor of the proposal. Also testifying in support of the bill was a former colleague of ours, Jason Weintraub, who is now vice president and general counsel for DRI Companies.

Testifying against the bill was Christine Spagnoli, president elect of the Consumer Attorneys of California.

The California Senate Judiciary Committee will conduct a hearing tomorrow, January 15, on a proposal to cap punitive damages in California. The bill, SB423, was introduced by Senator Tom Harman (R-Huntington Beach) and is sponsored by the California Chamber of Commerce. The bill would limit punitive damages to no more than three times compensatory damages. 22 other states already have caps, including 13 states that impose a cap of 3-to-1 or smaller. Nevada, for example, caps punitive damages at a ratio of 3-to-1, with a fixed limit of $300,000.

According to the Chamber, adoption of this bill would address California’s reputation as hostile litigation environment for businesses; California’s punitive damages system ranked ranks 48th out of 50 states in the 2007 U.S. Chamber/Harris nationwide survey of in-house counsel and senior attorneys representing businesses. Only Mississippi and West Virginia ranked worse.