The American Tort Reform Foundation’s released its annual “Judicial Hellholes” report yesterday.  As usual, ATRF does not have kind things to say about the administration of civil justice in California. 

The report names California as the second worst jurisdiction in the nation in terms of fairness to defendants in civil litigation (behind the New York City asbestos docket).  The report offers a variety of reasons for that assessment, most of which are beyond the scope of this blog (e.g., that our courts have made it too easy for plaintiffs to “rifle the deep pockets of corporate defendants” in public nuisance actions, asbestos lawsuits, disability-access lawsuits, etc.) 

The report intersects with the focus of this blog when discussing Izell v. Union Carbide, in which the Court of Appeal recently affirmed an $18 million punitive damages award in a published decision.  The report highlights the dissenting opinion of Justice Kitching which, as we have noted, could attract the attention of the California Supreme Court as well.  (The discussion of Izell appears on page 14 of the report.)

Yesterday, the Ninth Circuit issued its en banc opinion in Arizona v. Asarco.  As our readers may recall, that’s the sexual harassment case in which a jury awarded the plaintiff no compensatory damages, $1 in nominal damages, and nearly $900,000 in punitive damages.

The district court reduced the punitive damages to $300,000 under Title VII’s statutory cap on punitive and non-economic damages.  A three-judge panel of the Ninth Circuit then ruled, in a 2-1 decision, that the punitive damages were still excessive and should be further reduced to $125,000.

Both parties sought en banc review.  The plaintiffs argued that they are entitled to the full $300,000 permitted by the cap, because an award within the cap cannot be unconstitutional.  The defendant argued that the 125,000 ratio permitted by the three-judge panel was still excessive.  Both parties got what they wanted—the court agreed to rehear the case en banc.  But the result isn’t quite what the defendant envisioned.  It’s a unanimous 11-0 win for the plaintiffs.

The en banc opinion starts by discussing the due process test for evaluating the excessiveness of a punitive damages award, as laid out in BMW v. Gore and State Farm v. Campbell.  The opinion then states that the due process standards are “of some relevance”in Title VII cases.  In other words, it is theoretically possible that punitive damages awarded under a carefully crafted statutory scheme could nonetheless violate due process.

But the opinion goes on to say that, when punitive damages are awarded under a “robust” statutory scheme, a “rigid application of the Gore guideposts is less necessary or appropriate.” Following that logic, the court concludes that a punitive damages award under Title VII can never really violate due process, because the statute clearly states the state of mind necessary for imposition of punitive damages, and provides fair notice of the possible amount of the punitive damages (i.e., up to $300,000).

While it’s clear that the en banc court has no problem with 300,000 to 1 ratios in Title VII cases, it’s not at all clear how the court’s analysis would translate to other statutory schemes.  How is a district court supposed to determine which statutes are sufficiently robust and carefully crafted, such that a vigorous due process analysis becomes unnecessary?  And when a statute qualifies as robust and carefully crafted, how exactly does a district court perform the relaxed and non-rigid version of the BMW and Campbell analysis that this opinion seems to require?

Given the murkiness of the court’s analysis, it is a bit surprising to see that this was a unanimous opinion.  The Ninth Circuit is known as a court whose members have a wide diversity of viewpoints and aren’t afraid to share them.  And this 11-member panel includes some judges whom we’d ordinarily expect to have some discomfort with an opinion holding that lower courts can, under circumstances that are not clearly defined, choose to disregard a due process analysis mandated by the U.S. Supreme Court.

So long as the analysis of this opinion is limited to Title VII cases, it’s impact will be limited.  Because the $300,000 cap is a modest one, the Ninth Circuit wouldn’t be striking down many punitive damages awards as excessive under the BMW standards anyway, even if the court had not excepted Title VII cases from the usual BMW analysis.  But this opinion could end up being quite significant if its analysis spreads to other areas, or if the Title VII cap ever gets raised.

As a side note, nowhere in this opinion does the court ever suggest that it might have a common-law duty to analyze the punitive damages award for excessiveness, apart from whatever the constitution requires.  As our friends over at Guideposts have pointed out, other circuits have held that in cases involving claims under federal law, federal courts have supervisory authority to ensure that those awards are not excessive, and should scrutinize them more closely under that common law authority than they would under the Due Process Clause.  Most likely, the parties did not make that argument here.

 Related posts:

New punitive damages blog analyzes case pending before en banc Ninth Circuit (Arizona v. ASARCO)

Ninth Circuit reduces $300,000 punitive damages award to $125,000 in Title VII harassment case (Arizona v. ASARCO)

Ninth Circuit grants en banc rehearing to decide excessiveness of punitive damages in Title VII case (Arizona v. ASARCO)

9th Circuit hears oral arguments in punitive damages case where jury awarded no compensatory damages

A week ago we reported on a jury award of $185 million in punitive damages in a single-plaintiff employment case against AutoZone.  Not surprisingly, that colossal award got a lot of media attention.  Some even called it a “preposterous” verdict by a runaway jury.

In response to this criticism, the Consumer Attorneys of California issued a remarkable press release.  The press release says that criticism of the verdict is unwarranted, which isn’t a surprising position for CAC to take.  But CAC’s reasoning is quite surprising.  According to CAC, it makes no sense to talk about runaway juries or preposterous damage awards until the post-verdict proceedings are resolved, because “such big punitive damages awards are inevitably scaled back to a fraction of what was ordered by the jury.”  The press release goes on to say that “nobody at AutoZone is expecting to write a check for $185 million” because U.S. Supreme Court precedent limits punitive damages to no more than nine times the amount of compensatory damages.

CAC has a point.  Many of the big punitive damages awards that generate media attention are later reduced during post-trial proceedings or on appeal.  And those rulings rarely get the same kind of press as the original verdict. 

Nevertheless, CAC’s position is a startling one.  CAC’s members fight vigorously to obtain awards like this. And they fight to hold on to them during post-verdict review.

Consider, for example, Bullock v. Philip Morris, in which a California jury awarded $28 billion in punitive damages to a single plaintiff.  The plaintiff’s lawyer fought hard to hold on to that award.  When the trial court reduced it to $28 million, plaintiff’s counsel filed a cross-appeal asking the Court of Appeal court to reinstate the full amount of the jury’s award.  (See 2005 WL 4656293.)  That lawyer—Michael J. Piuze—is a past recipient of CAC’s “Trial Lawyer of the Year Award.” One of the attorneys at his firm is currently on CAC’s board. 

It isn’t just CAC’s individual members who defend punitive damages awards in the nine-figure range and above.  CAC itself files amicus curiae briefs to defend such awards.  For example, in Romo v. Ford Motor Co., CAC filed an amicus brief to defend a $290 million punitive damages award. (See 2003 WL 22455474.)

Given this history, the CAC press release on the Auto Zone case comes as a great surprise, because it  seemingly acknowledges that an award much smaller than the Bullock and Romo awards is obviously excessive and will inevitably be reduced or vacated.  Having taken that position, it would now be difficult for CAC to file another amicus brief like the one it filed in Romo if the AutoZone case ends up on appeal.

The Sacramento Bee reports that Judge Stephen Berrier of the Yuba County Superior Court has vacated nearly all of a jury’s $16.2 million damages award against a New Jersey company that provides mortgage loan servicing.

The article reports that the plaintiff bought a home and was unable to afford his monthly mortgage, so he obtained a loan modification from the defendant (PHH Mortgage Services).  He thought the modification would reduce his monthly payments from $2,100 to $1,543 but, for reasons not explained in the story, things didn’t work out that way and the plaintiff ended up over $7000 in arrears.

PHH initiated foreclosure proceedings and the plaintiff sued PHH to fend off foreclosure.  It worked.  PHH halted foreclosure and a jury awarded the plaintiff $16.2 million in damages, including $15.7 million in punitive damages.

Judge Berrier, however, ruled that plaintiff was entitled to only $159,000.  Presumably that ruling was in response to posttrial motions filed by PHH, but the article doesn’t say.  And the article doesn’t say whether the $159,000 represents compensatory damages or punitive damages.  It does mention, however, that Judge Berrier found that PHH did not act with malice or reckless disregard.  That suggests he tossed out the entirety of the punitive damages award.

Thanks to Evan Tager of Guideposts for calling the story to our attention.

The absurd $9 billion dollar punitive damages award that made headlines earlier this year is no more.  The National Law Journal reports that U.S. District Judge Rebecca Doherty of the Western District of Louisiana has reduced the award to $36.8 million.

According to the story, Judge Doherty concluded that the 6000 to 1 ratio between the punitive damages and compensatory damages was unconstitutionally excessive.  No surprise there.  She reduced the award to $27.6 million against one defendant (Takeda Pharmaceuticals) and $9.2 million against the other (Eli Lilly & Co.).  She also reduced the total compensatory damages to $1.27 million.

Even as reduced, the punitive damages are roughly 29-to-1, which is awfully hard to square with State Farm v. Campbell and its admonition that substantial compensatory damages of $1 million or more call for a low ratio.  Eli Lilly says it plans to appeal.

Earlier this year we reported on a jury verdict in federal court in Sacramento that awarded $22.2 million in compensatory damages and $17.4 million in punitive damages.  That verdict was apparently based on allegations that the defendant railroad breached a nondisclosure agreement and improperly poached the plaintiff railroad’s clients. 

Now the Sacramento Bee is reporting that the judge in the case, U.S. District Judge Troy L. Nunley, has awarded another $13.1 million in exemplary damages for the defendant’s violations of California trade secrets law.  That claim was apparently tried to the court after the conclusion of the jury trial. According to the story, Judge Nunley believed the award was appropriate because California courts have held that “an exemplary damage award of 17.5 percent of an offending company’s value is sufficient to punish extremely reprehensible conduct.”

I haven’t yet been able to read Judge Nunley’s opinion, but presumably he pulled the 17.5 percent number from a 1984 case called Devlin v. Kearny Mesa AMC/Jeep/Renault, Inc.  In that case, the court affirmed an $80,000 punitive damages award that happened to be 17.5% of the defendant’s net worth.  But the court certainly did not announce a rule that punitive damages should be 17.5 percent of the defendant’s net worth when the defendant’s conduct was highly reprehensible.  And in the years since Devlin, other California courts have held that punitive damages are presumed to be excessive when they exceed 10 percent of the defendant’s net worth.  (See, e.g., Grassilli v. Barr.)  In any event, it’s hard to imagine how the purely economic harm in this business dispute could be characterized as highly reprehensible.The defendant plans to appeal, and based on the information in this article there appears to be a decent chance the Ninth Circuit will conclude Judge Nunley’s decision went off the rails.

The Winston-Salem Journal brings us a report on the latest verdict in the ongoing post-Engle litigation in Florida.  The article states that a jury has awarded a long-time smoker $14.5 million in compensatory and punitive damages against R.J. Reynolds, and $23.6 million in compensatory and punitive damages against Philip Morris.  Unfortunately, the article just states the totals without breaking down the verdicts between compensatory and punitive damages.

The story further reports that smokers and their families have won at least 80 verdicts against tobacco companies in the post-Engle cases, while the tobacco companies have won about 40 defense verdicts.

Related posts:

Florida jury awards $14 million in punitive damages to smoker’s family

 Florida jury awards smoker’s family $22.5M in punitive damages

Florida appellate court reverses $79 million judgment in tobacco case

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

Philip Morris wins sixth straight trial in Florida smoker litigation

Florida jury awards relatively modest punitive damages in smoker lawsuit

Another punitive damages award in Florida tobacco litigation

Florida jury awards $20 million in punitive damages to smoker’s widow

Smoker’s widow wins $12.5 million in punitive damages

Florida trial judge cuts $244 million punitive damages award

Florida jury awards $25 million in punitive damages to smoker’s widow

“Smokers, tobacco, both winners in early Engle cases”

Jury rules for plaintiff in first phase of retrial after reversal of $145 billion punitive damages award

After reversal of $145 billion class action punitive damages award, Florida smokers seek punitive damages in individual suits

Several years ago we reported on a jury verdict awarding a California taxpayer $250 million in punitive damages against the California Franchise Tax Board.  In a nutshell, the plaintiff claimed that the Tax Board made misrepresentations to him and portrayed him in a false light by telling others he was a tax cheat.

The Nevada Supreme Court issued an opinion last month affirming some of the liability findings in the plaintiff’s favor but wiping out most of the damages, including the punitive damages.  The court held that, “Because punitive damages would not be available against a Nevada government entity, we hold, under comity principles, that FTB is immune from punitive damages.”  Just like that, a $250 million punitive damages award is gone.  Poof! (Apologies to California Attorney’s Fees.)

Incidentally, California has the same rule: public entities are immune from punitive damages. (Government Code section 818.)

You can read more about the case at Taxable Talk and CalCorporateLaw.

 

Today, Judge William H. Pauley III of the Southern District of New York issued a decision reducing a punitive damages award from $7.5 million to $750,000 in a lawsuit brought by numerous record companies against a guy who operated an MP3 downloading service.

Yes, people are still litigating over free MP3 downloads. This case has been dragging on for seven years, generating over 628 docket entries and some apparent frustration on the part of Judge Pauley, judging by the tone of his opinion.

The record industry plaintiffs obtained a jury verdict awarding over $48 million in damages, including $7.5 million in punitive damages.  In his order, Judge Pauley notes that the plaintiffs introduced no evidence of actual harm, and obtained nominal damages of only $40.  (The other damages were all civil statutory penalties.)  For this and other reasons, Judge Pauley concluded that the $7.5 million in punitive damages awarded by the jury was grossly excessive, and that the defendant is entitled to a new trial unless the plaintiffs agree to a remittitur of the damages to $750,000.  That still seems awfully high given the complete lack of evidence of any actual harm.  But it pales in comparison to the huge statutory penalties in the case, which will probably be the focus of any appeal by the defendant.

Although media reports and commentaries about punitive damages often speak as if punitive damages are only awarded against big corporations in favor of individual consumers, this case is an illustration that many actual punitive damages cases don’t fit that mold.  Sometimes, as here, they involve big corporations suing an individual. 

Hat tip: Ray Beckerman

I’m catching up on punitive damages news after being out of the office last week.  While I was out, the AP reported that a jury in New Mexico awarded $2.3 million in compensatory damages and $65 million in punitive damages in a lawsuit alleging that the plaintiff was given a pacemaker he didn’t need.  That’s a ratio in excess of 28 to one, which should not survive post-trial and appellate review.

Also last week, Crain’s Cleveland Business reported that a jury in Texas awarded $3.6 million in compensatory damages and $15 million in punitive damages in a mesothelioma case against the Goodyear Tire & Rubber Company.  By statute, punitive damages in Texas are capped at the greater of (1) $200,000 or (2) two-times the economic damages, plus an amount equal to the non-economic damages, not to exceed $750,000.  So unless the plaintiffs can persuade the Texas courts that the cap is unconstitutional (see the post below), that award won’t survive either.