According to the St. Petersberg Times, a jury has awarded $55 million in compensatory damages and $275 million in punitive damages against a drunk driver who killed a 13-year-old girl. The award seems largely symbolic, since the defendant could never possibly pay it. But if this award survives appeal, it would be the fourth largest punitive damages award ever affirmed in the U.S., as far as we are aware. (The current top five awards are listed in this post.)

I swear I’m not making this up. According to this story on Law.com, a Georgia jury has awarded $750,000 in compensatory damages and $8.5 million in punitive damages to a man who allegedly suffered permanent damage to his penis as a result of a botched treatment for erectile dysfunction.

The plaintiff responded to an ad by the Boston Medical Group promising “sex for life.” The company’s clinic gave him its “secret formula” to inject into his penis. After he gave himself the first injection, he experienced “the best erection he’s ever had in his life.” Unfortunately, it proved to be a little too good. Two days later, he still had the erection. He went back to the clinic for treatment, but the clinic couldn’t help him and he ended up in a hospital emergency room. Ultimately, he suffered permanent damage to his penis and is now unable to have an erection without the use of Viagra or Cyalis.

It certainly sounds like an unpleasant experience (especially the part about the plaintiff sticking a needle into his penis), but if the guy already had an erectile problem when he visited the clinic, isn’t he now in exactly the same position he was in before he went there? Does that really merit an $8.5 million punitive damages award, on top of $750,000 in compensatory damages? Something tells me this verdict is not going to withstand review.

I can’t wait to hear what Lowering the Bar has to say about this one.

Professors Joni Hersch and W. Kip Viscusi have posted a paper on SSRN entitled “Saving Lives Through Punitive Damages.” From the title, you might expect this paper to assert one of the traditional arguments in favor of punitive damages: that the threat of unpredictably large punitive damages awards is necessary to deter corporate misconduct and protect consumer safety. In fact, the article takes a different approach. Here’s an excerpt from the abstract:

This article proposes that the value of statistical life be used to set the total damages amount needed for deterrence when punitive damages are warranted in wrongful death cases. The appropriate level of damages should be achieved by adjusting the value of punitive damages. . . . The U.S. Supreme Court’s focus on punitive damages ratios is misplaced, as it is the total damages amount, not the ratio, that is instrumental. The criteria for evaluating punitive damages in bodily injury cases should be different than for property damages cases.

You may be wondering, as I was, exactly how “the value of statistical life” is calculated. In a nutshell, the value of statistical life is somewhere between $5 million and $9 million. Here’s an explanation from the article:

To illustrate the VSL concept, consider the following example. Suppose a worker is willing to accept a fatality risk of 1/10,000 in return for annual wage compensation of $900. The value of statistical life, or the value per unit risk, is $900 divided by 1/10,000, or $9 million. Viewed somewhat differently, if 10,000 workers were each exposed to a 1/10,000 risk of death and each required $900 in compensation to face this risk, there would be a total of $9 million in compensation paid for the 1 expected, or statistical, death. By the same token, these workers would be willing to pay $900 for a fatality risk reduction of 1/10,000. Thus, the buying price and selling price for changes in risk are the same for very small changes in risk.

The VSL approach is accepted methodology within the economics literature and government agencies. Dozens of peer reviewed studies that estimate the VSL have been published in major economics journals, and the methodology has been recommended for use by government agencies by the U.S. Office of Management and Budget. While the values used by government agencies differ and have changed over time, most agencies now use figures in the range of $5 million to $9 million. Here we will focus on the $9 million figure for concreteness.

As the authors point out, this approach would sometimes yield ratios of punitive damages to compensatory damages exceeding 1-to-1, and possibly exceeding single digits. On the other hand, this approach would not allow 8 or 9-figure awards to a single plaintiff, like the $50 million punitive damages award affirmed by the California Court of Appeal in Boeken v. Philip v. Morris.

This is an entirely academic exercise, because the states are not likely to abandon their traditional methods for awarding punitive damages. I can just hear the howls that would be generated by this approach. Critics would say it reduces the value of human life to a cold statistical computation. No state legislator is going to get behind that one. But this proposal is nonetheless a very thought-provoking and innovative solution to a problem (the lack of any concrete standards for imposing punitive damages in personal injury cases) that has long plagued American tort law.

Hat tip: Torts Prof Blog.

Although this blog is generally California-centric, last week we reported on an interesting out-of-state opinion, and here’s another one. In Malcolm v. Evenflo, a products liability action against a manufacturer of child seats, the Montana Supreme Court reversed a $3.7 million punitive damages award because the trial court wrongly excluded evidence that the defendant complied with federal safety standards.

Some readers may think this is a no-brainer. After all, if a jury is being asked to decide whether a manufacturer acted with reckless disregard towards the safety of its consumers, the jury should at least be allowed to consider the fact that the defendant complied with all applicable safety regulations, right? Well, at least two Montana Supreme Court justices didn’t see it that way.

Two justices dissented from this opinion, taking the position that a defendant’s compliance with safety regulations is not relevant to the issue of punitive damages, and would only confuse and mislead the jury. The dissent recites in detail all of the plaintiffs’ evidence in support of their claim for punitive damages. That evidence, as described by the dissent, certainly makes the defendant look bad. But even if the weight of the evidence favored the plaintiff, it seems to me that the defendant should have at least been allowed to present its evidence to the jury.

As the name of this blog suggests, our primary focus is California punitive damages litigation. We summarize all of the punitive damages decisions, published and unpublished, issued by the California appellate courts and the Ninth Circuit. Occasionally, however, we discuss notable punitive damages decisions from other jurisdictions, especially where the award is especially high or the issues are especially interesting. This opinion from the South Carolina Supreme Court is one of those out-of-jurisdiction cases that caught my eye.

This case, Mitchell v. Fortis Insurance, involved an insurer’s recission of a health insurance policy for an HIV-positive teenager. The jury awarded the plaintiff $150,000 in damages for the bad faith recission of the policy and $15 million in punitive damages (a ratio of 100 to 1).

On appeal, the South Carolina Supreme Court affirmed the liability finding and the compensatory damages but reduced the punitive damages from $15 million to $10 million. Although the reduced number was still 67 times larger than the plaintiff’s actual damages, the court justified the award based on the potential harm the plaintiff could have suffered. The court cited the U.S. Supreme Court’s 1993 decision in TXO Production Corp., which stated that reviewing courts may compare a punitive damages award not only to the actual harm inflicted on the plaintiff, but also “the magnitude of the potential harm that the defendant’s conduct would have caused to its intended victim if the wrongful plan had succeeded.”

The South Carolina Supreme Court said the evidence showed the defendant’s conduct could have caused the plaintiff an additional $1.1 million in damages. Comparing the punitive damages to the jury’s actual damages award plus the potential harm, the court came up with a ratio of 9.2 to 1. The court concluded that such a ratio was acceptable given the highly reprehensible nature of the defendant’s conduct.

This case illustrates one of the possible avenues for plaintiffs to circumvent the single-digit ratio language in BMW v. Gore and State Farm v. Campbell. Although many plaintiffs cite “potential” harm as a way of justifying an otherwise unconstitutional ratio, courts rarely uphold awards on that basis. In California, our Supreme Court has held that courts may consider potential harm only to the extent that such harm was foreseeable by the defendant and “likely to occur.” (See Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1149, 1177-1178.) Those limitations make it difficult for plaintiffs to rely on potential harm in many cases, but as this case illustrates, the concept can be a powerful weapon for plaintiffs under the right circumstances.

Retired federal judge H. Lee Sarokin has posted this essay on the Huffington Post: “Do Corporate Fines and Punitive Damages Serve Their Purposes?” Judge Sarokin argues that the purposes of punitive damages – – punishment and deterrence – – are not accomplished when courts impose punitive damages against corporations. Judge Sarokin reasons that the company’s innocent shareholders end up paying the price, while the corporate executives who committed the punishable acts (who are often long gone from the corporation by the time of any punitive damages judgment) get to keep their huge salaries and bonuses. Judge Sarakon argues that punitive damages should be imposed on the executives, not their companies.

Judge Sarokin’s argument has a certain logic to it, but something tells me we won’t see states outlawing punitive damages against corporations any time soon. It’s not out of the question, however, that a court reviewing a punitive damages award against a corporation might take into consideration the fact that the wrongful conduct was committed long ago by people who are no longer involved with the company.

We previously reported on a huge judgment against Microsoft for alleged infringement of a patent owned by i4i Limited Partnership. In our report, we said (based on another blog’s post about the same case) that the judgment included $40 million in punitive damages.

Microsoft has now filed its opening brief on appeal (link courtesy of AmLaw Daily), which makes clear that this is technically not a punitive damages case at all. The district court awarded $40 million in “enhanced damages,” which are authorized under the Lanham Patent Act for cases of wilful infringement. Such damages are conceptually similar to punitive damages (since they are awarded to punish the defendant, not to compensate the plaintiff), but they are not true “punitive damages” in the traditional sense of that term. Sorry for the misinformation. Nothing to see here. Move along.

Bloomberg reports that a Los Angeles jury has awarded $13.8 million in punitive damages in the retrial of Bullock v. Philip Morris. The compensatory damages were $850,000.

As readers of this blog may recall, last year the Court of Appeal reversed a $28 million punitive damages award in this case and ordered a retrial on punitive damages. We blogged quite a bit about that decision and the subsequent proceedings before the California Supreme Court. In a nutshell, the Court of Appeal reversed because the trial court improperly refused a defense request for an instruction telling the jury not to punish for harm to others (i.e., an instruction based on Philip Morris v. Williams.)

The jury in the first trial actually awarded $28 billion in punitive damages, resulting in the second largest judgment in U.S. history. The trial court, however, cut that down to $28 million on posttrial motions. On retrial, plaintiffs’ lawyer Michael Piuze again asked the jury to award “billions,” but instead he got a little less than half of the previous $28 million award. Still a lot of money, but surely a disappointment to Piuze. According to Bloomberg, one of the dissenting jurors wanted to award $500 million. As it is, the $13.8 million award is more than 16 times higher than the actual damages.

The Hawaii Intermediate Court of Appeals has issued an opinion reversing a $12.5 million punitive damages award in a products liability case.

The plaintiff was injured in an auto accident and sued Takata Corporation, a seatbelt manufacturer. The plaintiff claimed he was wearing his seatbelt during the accident but it failed to restrain him and he was ejected from the vehicle. After a jury trial, the plaintiff obtained a judgment for $4.5 million in compensatory damages and $12.5 million in punitive damages.

The Hawaii appellate court reversed the entire judgment and ordered a new trial, ruling that the trial court had erroneously excluded testimony by a defense expert. The court, having ordered a complete new trial, did not need to address any punitive damages issues. Nevertheless, it went on to hold that the plaintiff was not entitled to punitive damages because he failed to prove by clear and convincing evidence that Takata knew or should have known that the seatbelt in question was susceptible to failure.

This is just my personal nonscientific observation, but there seems to be an above-average percentage of complete reversals in cases involving huge punitive damages awards. If that’s true, it’s probably because a disproportionately large punitive damages award is often a sign that something went wrong during the trial. That’s my defense lawyer perspective but I’m sure the plaintiffs’ bar sees things differently.

UPDATE: For a summary of other aspects of the opinion (Udac v. Takata), see Hawaii Legal News.