Michael Rustad of Suffolk University Law School has posted on SSRN a copy of his article: “Punitive Damages in Cyberspace: Where in the World is the Consumer?”

From the abstract:

A content analysis of all Internet-related cases reveals that no consumer obtained punitive damages during a decade of cyberlaw litigation. Tort remedies have the potential of filling the gap left by ineffective criminal sanctions against cyberwrongs such as online stalking. Public enforcement needs to be augmented by consumers operating as “private attorneys general” who pursue punitive justice against cyberlaw wrongdoers. At present, punitive damages serve as a form of corporate self-help to assist corporations in protecting rights and consolidating market share in cyberspace. I explore the reasons why punitive damages have not yet developed as a consumer protection remedy in cyberspace. This Article will demonstrate that punitive damages are a necessary consumer remedy against Internet wrongdoers where the probability of discovery is low and the harm to consumers is generally undetected and unpunished by public authorities.

The LA Times is reporting that a jury in federal district court in Sacramento has awarded $42.7 million in compensatory damages and $125 million in punitive damages against Catholic Healthcare West.  The lawsuit involves allegations of sexual harassment and retaliation against a physician’s assistant at Sacramento’s Mercy General Hospital. 

The article says the combined $168 million award is believed to be the largest award for a single victim of workplace harassment in U.S. history.  The plaintiff’s attorney is quoted as conceding that the amount of the award is likely to be reduced. 

Sacramento juries have been doling out some big punitive damages awards in recent years, including awards of  $28 million and $10 million in 2010, but this one is in a different level of the atmosphere.

Drug & Device law has an interesting post about punitive damages in failure-to-warn cases.  The post focuses on a federal district court decision (Salvio v. Amgen) that held “punitive damages are unfounded where a manufacturer-defendant warns of the potential danger that resulted in injury to a plaintiff.”  In other words, even if the warning is inadequate in some way, the fact that the defendant gave some warning about the risk defeats the “conscious indifference” mental state required for punitive damages.  The post discusses a number of prior cases in various jurisdictions and concludes that the court’s holding is on solid ground.

The California Court of Appeal decision in Johnson & Johnson v. Superior Court stands in stark contrast to all the cases discussed in the Drug & Device Law post.  In that case, as we previously reported, the court allowed the plaintiff to seek punitive damages based on a claim that the defendant’s warning about potential allergic reactions to Motrin was not sufficiently detailed.  That decision led to a $15.6 million punitive damages award, one of the top ten punitive damages awards of the year in California.  The case is up on appeal again, so the Court of Appeal will have the opportunity to take a look at the evidence to decide whether this really is a case of malice or oppression within the meaning of Civil Code section 3294.

Oregonlive is reporting that an Oregon jury has awarded $25 million in punitive damages to the family of a smoker in a lawsuit against Philip Morris.  This was a partial retrial of a case in which the original jury awarded $169,000 in compensatory damages and $150 million in punitive damages.  As we reported in June 2010, the Oregon Supreme Court reversed that award because the trial court had given a jury instruction that improperly allowed the jury to punish Philip Morris for injuries to nonparties.  Although the second jury’s award of $25 million is much less than the original award, it still represents a ratio of 148 to one, and Philip Morris says it plans to appeal again on the grounds that the award is excessive.  The case is Schwarz v. Philip Morris.

Yesterday an intermediate appellate court in Florida (First District Court of Appeal) reversed $40.8 million in punitive damages awarded to a smoker’s family in a lawsuit against RJ Reynolds.  A jury award had awarded $10.8 million in compensatory damages and $80 million in punitive damages, but the trial court reduced those amounts under state law to $5.5 million and $40.8 million, to reflect the jury’s finding that the smoker was 51% responsible for his own death.  Ordinarily punitive damages awards are not reduced to reflect a finding of comparative fault, but the plaintiffs in this case consented to the trial court’s reduction of the punitive damages on that basis.  (See footnote 2 on page 2.) 

The appellate court affirmed the compensatory award, but concluded that the punitive damages award was excessive.  When calculating the ratio between punitive damages and compensatory damages, the court compared the reduced amount of the punitive damages award ($40.8 million) to the unreduced compensatory damages ($10.8 million), resulting in a ratio of 3.7 to one.  If the court had used the reduced amount of compensatory damages (as it did in this opinion), the ratio would have been 7.58 to one.  Even though this method of calculation favored the plaintiff by generating a lower ratio, the court still concluded that the punitive damages award was unconstitutionally excessive in light of the “substantial” compensatory damages award.  Unlike the California Court of Appeal in Bullock, the court did not compare the compensatory damages award to the defendant’s wealth in order to determine whether the award was substantial.  The court simply concluded that the award was “substantial by any measure.”

Strangely, after concluding that the award was excessive, the court remanded the case to the trial court to give the plaintiff the option of choosing a new trial on punitive damages or accepting a reduced amount of punitive damages. As many other courts have explained (including the California Supreme Court), that sort of disposition doesn’t really make sense when a court determines that a punitive damages award is constitutionally excessive.  Once a court determines the maximum award permissible, there is no reason to allow the plaintiff to reject that amount and choose a new trial, because the plaintiff would never be permitted to obtain anything more than the constitutional maximum.

The Shernoff Bidart law firm, which specializes in suing insurance companies, has posted an essay on their website about punitive damages in cases of institutional bad faith.

The essay, originally published in the Daily Journal, argues that courts should not apply the U.S. Supreme Court’s analysis in State Farm v. Campbell to cases of institutional bad faith.  In particular, the essay contends that lower courts should not follow State Farm‘s statements about ratio (“few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process”) in bad faith cases, and that much higher ratios should be permitted in cases where the defendant’s misconduct arises from a “bad corporate culture.”

The essay seems to overlook the fact that State Farm itself was a bad faith case.  If anything, State Farm‘s principles should apply with more force in bad faith cases than in other types of cases.  State Farm expressly rejected the notion of punishing a defendant for a bad corporate culture:  “a defendant should be punished for the conduct that harmed the plaintiff, not for being an unsavory individual or business.”

The Shernoff essay correctly observes that State Farm did not prohibit ratios in excess of 9 to 1 in all situations.  But State Farm recognized only a limited exception where larger ratios may be permitted: where “a particularly egregious act has resulted in only a small amount of economic damages.”  Nothing in State Farm remotely suggests that an additional exception exists for bad faith cases. To the contrary, State Farm holds that the permissible ratio in a particular case depends upon the nature of the conduct, and that conduct involving violence or physical harm should be punished more harshly than purely economic torts like bad faith.   

Earlier this year, a Mississippi jury awarded $300 million in punitive damages and $22 million in compensatory damages to a man who claimed he developed asbestosis as a result of working with drilling mud additives.  That award was reportedly the largest verdict in U.S. history for an individual asbestos plaintiff.  But it didn’t last very long.  A new trial judge has vacated that award and ordered a new trial, according to this Associated Press report (via the Witchita Eagle).  It seems that the original judge failed to disclose that his parents had been involved in asbestos litigation against the same defendants.  The Mississippi Supreme Court removed that judge from the case and appointed a new judge, who ordered a retrial.

We’ve previously reported on the series of punitive damages awards against Wyeth for injuries allegedly caused by its hormone replacement drug Prempro.

The appeals in two of those cases were decided today by the Pennsylvania Superior Court.  In one of the cases, Kendall v. Wyeth, a Philadelphia jury awarded $28 million in punitive damages, which the trial court reduced to $1 million.  In today’s opinion, the Pennsylvania Superior Court reinstated the original award, concluding that a 4.44 to 1 ratio was not excessive in light of evidence that the defendants “elevated profits above public health.”

Wyeth argued that a 1 to 1 ratio was the constitutional maximum, citing State Farm‘s statement 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 court rejected that argument, observing that in State Farm, when the U.S. Supreme Court sent the case back to the Utah Supreme Court, the Utah Supreme Court disregarded the suggestion of a 1 to 1 ratio and permitted a 9 to 1 ratio.  (Note that, in California, at least one division of our Court of Appeal has refused to give any weight to the Utah Supreme Court’s opinion on remand in State Farm; see Walker v. Farmer Ins. Exchange.)

In a companion case involving another Prempro punitive damages award against Wyeth, Barton v. Wyeth, the same appellate court ordered a reduction of a $75 million punitive damages award to $7.4 million, for a ratio of 2 to 1.  That result is actually a victory for the plaintiff, because the trial court had remitted the award to $5.6 million, for a ratio of only 1.5 to 1.  In a footnote at the end of the opinion, the court reconciles the seeming inconsistency in its two opinions.  The footnote says that the award in Kendall warranted a higher ratio because the plaintiff in that case suffered devastating physical and emotional injuries.

Hat tip: How Appealing‘s Howard Bashman (who argued the Kendall case for the successful plaintiffs).

Related posts:

Trial Judge Reduces $75M Punitive Damages Award to $5.6M in Pfizer Litigation

More Punitive Damages Against Pfizer in Prempro Litigation: Philadelphia Jury Awards $28 million

A Mixed Bag For Pfizer On Prempro Punitive Damages

Jury Awards Undisclosed Amount of Punitive Damages Against Pfizer in Prempro Litigation

Arkansas District Court Vacates $27 Million Punitive Damages Award Against Wyeth and UpJohn

Nevada Judge Cuts $99 Million Punitive Damages Award Against Wyeth

This article in the National Law Journal discusses a new study released by the John D. and Catherine T. MacArthur Foundation Research Network of Law and Neuroscience, housed at Vanderbilt University.  The participants in the study were asked to determine the appropriate punishment for different types of misconduct, and were unable to draw distinctions between knowing and reckless misconduct.  Sometimes they punished reckless conduct more harshly than knowing conduct. 

The study involved criminal conduct, but the there’s no reason to believe that jurors are any better at making this sort of determination in civil cases involving punitive damages.  As appellate lawyers we see plenty of cases where the punishment doesn’t seem to fit the crime.  We see jurors awarding punitive damages at the high-end of the single-digit ratio spectrum, even though the conduct at issue can’t be characterized as highly reprehensible in relation to other types of punishable conduct.  (See, for example, this recent case in which a jury awarded $1,000,000 in punitive damages to a plaintiff who was allegedly slandered by a family member, but according to the jury’s findings suffered no out-of-pocket loss.)  Fortunately, our experience has been that judges are more attuned to these types of distinctions, and are often able to bring these awards into line.

No, that heading isn’t a typo.  That’s $150 billion in punitive damages.  According to this story in the Salt Lake Tribune, a Texas jury awarded $370 million in compensatory damages and $150 billion in punitive damages (a ratio in excess of 400 to one) against a man who allegedly sexually assaulted the plaintiffs’ son and set him on fire.  The defendant did not even bother to show up for trial. 

The verdict is reportedly the largest in U.S. history, topping the $145 billion award in the Engle class action against the tobacco industry (which was later reversed by the Florida Supreme Court).

This award won’t have any practical significance, since it’s obviously uncollectible.  It’s not likely to have much legal significance either; the defendant who didn’t show up for trial probably won’t bother to challenge the award through post-trial motions or an appeal, so we’re not going to end up with any judicial opinion evaluating the propriety of the award.  Thus, the impact of the award is largely symbolic, as a reflection of the jury’s outrage at the defendant’s extraordinarily reprehensible conduct. 

There may also be a more subtle effect as well.  As I have noted before, I think these  massive awards, even if they are uncollectible and uncontested, have a tendency to seep into the public perception of our judicial system, contributing to the impression that awards like this are within the range of acceptable outcomes in civil litigation. 
If you are a plaintiff or a plaintiff’s lawyer, you may view that as a good thing.  If you’re a defendant or a defense lawyer, not so much.