We’ve been blogging about California litigation brought by Nicaraguan banana workers against Dole, based on alleged exposure to pesticides. Early on, the plaintiffs obtained (and then lost) a punitive damages award against Dole. The litigation has taken some bizarre twists and turns since then, including a disciplinary proceeding instigated by the Ninth Circuit against one set of plaintiffs’ lawyers, and a dismissal of another action, prompted by the revelation that many of the plaintiffs in that action never worked on a banana farm and/or had fathered children, despite their claims of sterility.

The latest news in this saga is that Dole is bringing a lawsuit of its own. According to LABIZObserved, Dole has sued a filmmaker who made a pro-plaintiff documentary about Dole’s conduct and the subsequent litigation. Dole claims the filmmaker (Fredrik Gertten) ignored the truth, even after the California court proceedings unfolded and revealed the falsity of the plaintiffs’ claims. Dole is asking for punitive damages.

Earlier this week, a trial judge in Miami ruled that BDO International, a Brussels-based corporation, cannot be liable for a $351 million punitive damages award against its U.S. affiliate, BDO Seidman.

The punitive damages were awarded in a lawsuit by a Portugese bank that accused BDO Seidman of bungling the audits of the bank’s subsidiary. The jury awarded $170 million in compensatory damages and $351 in punitive damages, for a total verdict of $521 million, the largest verdict ever against a U.S. accounting firm. BDO Seidman appealed. The bank then sued BDO Seidman’s parent company, BDO International, seeking to hold them liable for the punitive damages award, but Miami-Dade circuit judge John Schelsinger issued a directed verdict in favor of the defendant.

Am Law Litigation Daily has more details.

This case has a California connection. The plaintiffs’ lawyer, Steven W. Thomas, has a small firm in Venice. Coincidentally, my daughter went to preschool with his child a few years ago, but I never met Steve. His wife told me he was off trying some big case in Miami. I had no idea it was this big.

UPDATE (6/18/09 at 6:13 pm): After the trial court ruled that BDO International was not liable for the punitive damages award against BDO Seidman, the court allowed the jury to decide BDO International’s liability for the compensatory damages. According to the Legalizer, the jury today ruled in favor of BDO International, finding it not liable for the compensatory damages award.

Greg Stohr reports for Bloomberg that “Sotomayor on High Court May Mean Looser Limits on Damage Awards.” The article describes a couple of cases in which Sotomayor voted to affirm punitive awards (including the $1 billion award in Motorola Credit Corp. v. Uzan (2d Cir. 2007) 509 F.3d 74 ). The article notes, however, that the constitutional challenges to those awards may not have been very strong on the particular facts of those cases, so the rulings do not necessarily suggest hostility to court review of out-of-whack punitive damages.

But defendants in punitive damages cases might be more disturbed to hear that the judge is on record as being unfavorably disposed to legislative caps on compensatory damages. Stohr’s article quotes Judge Sotomayor’s 1996 comments in the Suffolk University Law Review in Boston, criticizing lawmakers who “introduced bills that place arbitrary limits on jury verdicts in personal injury cases.” She wrote that such laws are “inconsistent with the premise of the jury system,” and that laws’ focus “must be shifted back to monitoring frivolous claims, uncovering pervasive misrepresentation in court and educating the public that no system of justice is perfect.” This doesn’t bode well for those who rely on courts’ de novo review of the constitutionality of punitive damages to protect against excessive awards.

Related musings on the effect of President Obama’s replacement for Justice Souter can be found in earlier posts on this blog (“Will Justice Souter’s Retirement Revolutionize Punitive Damages Litigation?”; “Souter Favored Limits on Punitive Damages” and “The Effect of Justice Souter’s Retirement on Punitive Damages”).

As reported on Bloomberg.com, a jury in Pensacola Florida has awarded $30 million, including $25 million in punitive damages, in a lawsuit against R.J. Reynolds. This case is apparently the seventh individual smoker case to go to trial after the Florida Supreme Court ruled in its 2006 Engle decision that Florida smokers could not sue as a class. Some of these cases have resulted in defense verdicts, and one resulted in a $5 million punitive damages award, but the defense lawyers in this case (Martin v. R.J. Reynolds) say none of the other cases have resulted in an award of this magnitude.

Rex Heeseman, a Los Angeles County superior court judge, frequently writes op-eds on punitive damages for the Los Angeles & San Francisco Daily Journal. His latest piece, “Sustaining Damages” (subscription required) appeared in this Monday’s addition of the DJ.

Judge Heeseman recaps the U.S. Supreme Court’s recent dismissal of certiorari in Philip Morris v. Williams (Williams III) and the California Supreme Court’s dismissal of review in Buell-Wilson. (To read our posts on those dismissals, click here and here.) Judge Heeseman predicts that, because those questions raised questions about punitive damages jury instructions that were not resolved by the high courts, we can expect a series of upcoming punitive damages decisions focusing on instructional issues. He predicts that plaintiff’s lawyers will cite the Oregon Supreme Court’s opinion in Williams III as support for the proposition that a defendant cannot assert error in the refusal of a jury instruction on punitive damages unless the defendant’s requested instruction was “correct in all respects.” Judge Heeseman notes that the California Court of Appeal adopted a variation of that argument in Buell-Wilson.

In my view, California plaintiffs will have a very difficult time convincing appellate courts to adopt Oregon’s “correct in all respect” standard. Two recent published opinions have already rejected that argument. In Bullock v. Philip Morris and Holdgrafer v. Unocal, the courts held that a trial court committed reversible error by refusing to instruct the jury, under Philip Morris v. Williams (Williams II), that the jury should not punish the defendant for harm to nonparties. In both cases, the court expressly rejected the plaintiffs’ argument that the defendant had waived its rights under Williams II by proposing an instruction that was somehow defective. The courts held that, even if the defense instructions were not perfect, they were sufficient to invoke the defendant’s right to the protections guaranteed by the Due Process Clause. (See, e.g., Holdgrafer, typed opn. at p. 28 [“While Unocal’s proposed instruction does not squarely present the relevant principle enunciated in Philip Morris, it would have properly informed the jury that Unocal could not be punished for the impact its alleged misconduct had on others who were not parties to the litigation”].)

Bullock and Holdgrafer were both issued before the contrary decision in Buell-Wilson. The Supreme Court denied the plaintiffs’ petitions for review in Bullock and Holdgrafer, but granted the defendant’s petition in Buell-Wilson. The result is that the Bullock and Holdgrafer opinions are citeable, while Buell-Wilson is not. Thus, the current state of the law in California is contrary to Oregon’s “correct in all respects” rule. Trial courts throughout the state are bound to follow Bullock and Holdgrafer, and a plaintiff asserting the “correct in all respects” rule will have to convince an appellate court to reject both of those decisions.

The Associated Press is reporting that a trial judge in Miami has awarded $1 billion, including $393 million in punitive damages, against Cuba, Fidel Castro, Raul Castro, and Che Guevara. (Presumably Guevara’s estate is the actual defendant, not Guevara himself, who was executed in Bolivia in 1967.) The plaintiff claims that Guevara and the Castros imprisoned his father after the 1959 Cuban revolution and caused him to commit suicide.

As the AP story notes, the plaintiff is not likely to collect any portion of this punitive award. So in that sense, the amount of the award is irrelevant. The judge said he awarded the eye-popping amount because he wanted to “send a message.” In my view, however, absurdly high awards like this send an unfortunate message to the American public that no amount of punitive damages is too high. Awards like this receive major publicity, even though the appellate reversals of such awards often go largely unnoticed (except on this blog, of course). As a result, many jurors have become conditioned to believe that our legal system freely allows them to award hundreds of millions or even billions of dollars in punitive damages. While such awards may provide lots of business for appellate lawyers, ultimately they are a burden on the American economy.

The Los Angeles and San Francisco Daily Journal (subscription required) reports today that a jury in Los Angeles County Superior Court has awarded $50 million in punitive damages against Greg Daily, chairman and CEO of Nashville-based credit card processing company iPayment.

According to the Daily Journal story, the trial judge granted the parties’ joint request to temporarily seal the amount of the punitive damages award. But the Daily Journal cites anonymous sources for the $50 million figure.

Ordinarily, a punitive damages award of this size against an individual would be excessive under California’s “rule of thumb” that punitive damages cannot exceed more than 10 percent of a defendant’s net worth. In this case, however, the defendant is worth $1 billion, according to the plaintiff’s expert witness.

The plaintiff is L.A.-based venture capitalist Douglas Shooker. Shooker claimed at trial that he spent months conducting research to develop a business plan for iPayment, and in exchange he received an option to purchase a 57 percent share of iPayment for $26 million. According to Shooker, Daily stole his business plan, installed himself as CEO, and blocked Shooker from exercising his option. Last week the jury awarded $300 million in compensatory damages. Daily promptly declared bankruptcy, so it remains to be seen whether any of the damages are collectible (assuming they survive post-trial motions and appeal).

The Atlanta Journal-Constitution is reporting that a Georgia jury has awarded $30 million in punitive damages and $10 million in compensatory damages against Ford Motor Co. in a case involving an alleged defect in a 2004 Ford Explorer. The plaintiff claims she put the car in park and got out to mail a package when the vehicle suddenly shifted into reverse, backing into her and fracturing her spine.

Ford is taking a beating in punitive damages litigation lately, between this award and the California Supreme Court’s decision to dismiss review in Buell-Wilson, which effectively affirmed a $55 million punitive damages award.

Noozhawk.com reports that a Santa Barbara jury has awarded $14 million in compensatory damages and $2.3 million in punitive damages to the parents of a 4-year-old boy who drowned in a swimming pool at a summer camp operated by the defendants. Counsel for one of the defendants, Cal-West, stated that the punitive damages award was improper because the drowning was accidental. Presumably, he intends to raise that argument in post-trial motions and on appeal.

Attorney Kirk Pasich has an op-ed in the Los Angeles Daily Journal (subscription required) arguing that, under California law, insurers may be obligated to indemnify their policyholders for punitive damages awards. While Mr. Pasich certainly deserves points for creativity, his argument runs afoul of settled California law.

California Insurance Code section 533 states that an insurer is not liable for the willful acts of its insured. The California Supreme Court, interpreting section 533, has unequivocally held that indemnification of punitive damages “is disallowed for public policy reasons.” (Peterson v. Superior Court (1982) 31 Cal.3d 147, 159.) The Supreme Court has never overruled or even questioned its decision in Peterson, which is binding in all California courts.

Despite the clear rule established in Peterson, Mr. Pasich argues that California law is unsettled. He relies on other cases applying section 533 outside the punitive damages context. He notes that, in those cases, courts have held that section 533 does not bar a corporate defendant’s claim for indemnification from an insurer where the corporate defendant is held vicariously liable for compensatory damages arising from the wilful or intentional acts of its employee or agent, except that it does bar indemnification by the insurer where corporate management authorized or ratified the employee’s intentional acts. Relying on these cases, Mr. Pasich contends that a corporate insured may be entitled to insurance coverage for punitive damages, so long as the corporation’s management has not authorized or ratified the conduct that gave rise to the punitive damages.

Regular readers of this blog can probably spot the flaw in Mr. Pasich’s reasoning already: under California law, punitive damages cannot be awarded against a corporation unless corporate management authorized or ratified the wrongful conduct. (See Civil Code section 3294, subdivision (b).) Thus, the scenario in which Mr. Pasich says indemnity would be available – – an award against a corporate employer without a finding of authorization or ratification by corporate management – – simply cannot occur under California law. (See Weeks v. Baker & McKenzie (1998) 63 Cal.App.4th 1128, 1154-1155 [noting that Civil Code section 3294(b) “does not authorize an award of punitive damages against an employer for the employee’s wrongful conduct. It authorizes an award of punitive damages against an employer for the employer’s own wrongful conduct”].)

Mr. Pasich’s opinion notwithstanding, corporations in California should not expect indemnity for punitive damages awards unless the California Supreme Court overrules its opinion in Peterson.