When he was a practicing lawyer, Senator Obama successfully defended an arbitration award of punitive damages in the Seventh Circuit. According to the Sun Times, “In 1994, Obama went before the 7th Circuit to defend Ahmad Baravati, a trader blackballed by his bosses after he reported them for fraud. An arbitrator awarded Baravati $60,000 in damages plus $120,000 in punitive damages against the former bosses. They appealed, saying arbitrators don’t have the power to award punitive damages. Obama had a tough job because the same court had ruled a week earlier that an arbitrator could not award punitive damages. But Obama convinced them this case was different. ‘You’re suggesting that there’s a federal common law that likes punitive damages, but this could be preempted by a state law that says ‘no punitive damages,’ Posner told Obama. ‘I don’t think I’m saying there’s a federal law that ‘likes punitive damages,’ Obama responded, not dropping his tone of respect. ‘I think what I’m saying is that there’s a federal law that likes the notion that the same remedies that will be available in court will be available in arbitration.’ Obama won, and Baravati got to keep the extra $120,000. He still is grateful. ‘I found he’s a very smart, innovative, skilled, relentless advocate for his client,’ Baravati said. ‘When I met him, he reminded me of Abraham Lincoln.’”

A few months ago, in McGee v. Tucoemas Federal Credit Union, the California Court of Appeal held federal credit unions were not entitled to sovereign immunity from punitive damages claims.

As counsel of record for the defendant, we (Horvitz & Levy LLP) are filing today a cert petition to the US Supreme Court challenging this holding. Here’s a summary from the petition outlining the question presented:

“Federal credit unions are federal instrumentalities chartered under the Federal Credit Union Act, 12 U.S.C. §§ 1751 to 1795k. Does their authority under that Act to ‘sue and be sued,’ 12 U.S.C. § 1757(2), waive their immunity as federal instrumentalities from punitive damage claims? The decision of the Court of Appeal of the State of California, which allowed the punitive damage claims here, declined to follow decisions of the Sixth, Eighth, Ninth, and Eleventh Circuits of the United States Court of Appeals.”

Stay tuned!

The estate of author J.R.R. Tolkien has sued New Line Cinema for more than $150 million in compensatory damages for the alleged failure to pay the estate contractual royalties from the three Lord of the Rings movies. The lawsuit apparently also seeks punitive damages. However, whether the Tolkien estate can claim punitive damages for New Line’s alleged breach of the contract may well be determined by the City of Hope case recently argued in the California Supreme Court.

Although not directly relevant to punitive damages, since William Lerach has been responsible for seeking major punitive damage awards in the past, his recent sentence and conviction (as well as the information on how he found certain clients) is noteworthy. As reported in the Recorder:

“After criticizing a plea deal, Los Angeles federal Judge John Walter accepted it, but sentenced star plaintiff attorney William Lerach to the highest term under the agreement — 24 months in federal prison.

Walter hammered prosecutors in court Monday about why they cut the deal with Lerach, who pleaded guilty in connection with kickbacks to lead plaintiffs of his former law firm, now known as Milberg Weiss. Lerach pleaded guilty to a single count of giving an improper payment to a plaintiff.

Checking his famous bravado at the courtroom door, the former securities class action king expressed humble regret as Walter reluctantly accepted the deal hashed out between Lerach and federal prosecutors.

Lerach’s lawyer, John Keker of San Francisco’s Keker & Van Nest, had asked that Lerach serve six months in prison and six months’ home confinement, while the government wanted 24 months behind bars.”

This op-ed by Kyla Christofferson at the California Chamber of Commerce was published in the Daily Journal on January 7, but is now available on-line without a subscription on the Chamber’s website. The op-ed supported a bill that would have capped punitive damages at no more than three times compensatory damages. (See our posts about that bill here and here.)

Don Ernst, president of the Consumer Attorneys of California, submitted a letter to the editor in response to the Chamber’s op-ed. Here’s what I said previously about Ernst’s letter:

The letter . . . describes the Chamber of Commerce as a dishonest “front group for corporations seeking to avoid accountability for wrongdoing and negligence.” Aside from attacking the Chamber’s credibility, Ernst’s main argument is that reform is unnecessary because disproportionate punitive damage awards are rare.

I am puzzled by the argument about the rarity of excessive punitive awards. Why should our justice system tolerate any excessive awards, even if they are rare? I doubt that the defendants who get hit with excessive punitive awards find much solace in the notion that such awards are uncommon. And if excessive punitive damages are so rare, why are the Consumer Attorneys so opposed to limiting such awards? What difference would it make, except to the defendants who are unlucky enough to be on the wrong end of those rare awards?

Ernst supports his argument by listing cases in which punitive damages motivated manufacturers to remove dangerous products from the market. Interestingly, he doesn’t mention whether the awards in those cases would have been subject to the cap proposed by the Chamber. Out of curiousity, I looked up one of the awards he mentions – -the $125 million punitive damage award in Grimshaw v. Ford Motor Co., the infamous Ford Pinto case. Ernst cites Grimshaw as an example of an award that changed corporate behavior, but he doesn’t mention that the punitive damages award in Grimshaw was reduced to $3.5 million (by the trial court), compared to compensatory damages of $2 million. If a ratio of 1.75-to-one was sufficient to change Ford’s conduct in Grimshaw, that case hardly supports Ernst’s argument against the three-to-one cap proposed by the Chamber.

Helium is featuring a series of short essays debating the merits of unlimited punitive damage awards. Currently, the site contains four essays in favor of unlimited awards and four essays opposing unlimited awards. Visitors to the site can cast their vote.

What is Helium, you ask? The site bills itself as “a community of writers who are revolutionizing publishing.” It is not “a blog or a collection of edited encyclopedic listings.”

The Albuquerque Journal reports that a jury has awarded $33 million in punitive damages in an abuse-of-process lawsuit by one attorney against another. The jury awarded $165,000 in compensatory damages, which makes for a ratio of exactly 200 to 1. The losing party says he plans to appeal. I hope the winner isn’t making plans to spend the $33 million quite yet.

Hat tip to Howard Bashman.

UPDATE (By Jeremy Rosen on 2/7/08 at 3:45 pm): On the other hand, the plaintiff may take comfort in the fact that the New Mexico appellate courts have been named as “dishonorable mention judicial hellholes” by ATRA.

In this political year, illegal immigration has been a hot topic. In some cases debates over the immigration issue have intersected with punitive damages issues. In Arizona, voters passed an initiative in 2006 that prohibits illegal aliens from being able to receive punitive damages in any lawsuit they bring. In Iowa, a proposed new law would call for employers who continue to hire illegal aliens as employees to be subject to punitive damages in addition to other civil fines.

This article discusses a new American Medical Association study, which “proves that capping punitive damages in medical malpractice cases both reduces doctors’ malpractice insurance premiums and increases the number of physicians available to care for patients.” According to the article, the AMA claims that placing a $250,000 cap on punitive damages in states that don’t have effective reforms in place could reduce medical malpractice premiums by $1.4 billion nationwide.

The author of the article may have misinterpreted this AMA press release, issued yesterday. The press release discusses a study about the impact of caps on noneconomic damages, not punitive damages. (As most readers of this blog probably know, California has a cap of $250,000 on noneconomic damages in medical malpractice cases, but no statutory cap on punitive damages.)