California Punitives by Horvitz & Levy

  • Court of Appeal holds that California trial court erred by applying Michigan law to bar punitive damages (Scott v. Ford Motor Co.)

    Punitive damages are not permitted under Michigan law.  So what happens when a Michigan corporation is sued for punitive damages in California, based on corporate acts that took place in Michigan?

    The trial court in this asbestos injury case applied Michigan law and dismissed the punitive damages claim.  After the jury ruled for the plaintiff and awarded compensatory damages, the plaintiff appealed, arguing he should have been allowed to seek punitive damages as well.

    The California Court of Appeal (First Appellate District, Division One), agreed with the plaintiff and reversed the trial court’s ruling in a published opinion (Scott v. Ford Motor Co.).

    Applying the “governmental interest analysis” test for conflicts of law issues, the Court of Appeal concluded that Michigan has little interest in having its law applied to the punitive damages claim in this case.

    Ford argued that Michigan’s policy should apply because Ford is domiciled in Michigan, but the Court of Appeal was not buying that argument at all:

    Because the same argument would hold in all 40-odd other states permitting punitive damages, Ford effectively argues it should be found to carry a nationwide shield from punitive damage liability because the state in which it maintains its headquarters has decided punitive damages are poor public policy. We cannot agree, any more than we expect a Michigan court would yield to a plaintiff’s plea to impose punitive damages on a California-based corporation because its home state has made the opposite policy judgment

    That reasoning is not too surprising.  I can’t imagine any California court agreeing that businesses that incorporate in Michigan can come to California and commit acts of malice without fear of punitive damages.

    But Ford also argued that Michigan law should apply because the allegedly malicious acts actually took place in Michigan, not California.  The Court of Appeal struggled to explain its reasoning for rejecting that argument.  Ultimately, the court said Michigan courts have never expressly articulated that the purpose of Michigan’s ban on punitive damages is to preclude punitive damages for conduct occurring in Michigan:

    In Ford’s telling, the Michigan ban on punitive damages represents a declaration that corporate conduct occurring in Michigan should not be subject to punitive damages, regardless of its nature. . . . Michigan has never articulated this as a motive for banning punitive damages, and Michigan courts do not preclude punitive damages based on conduct occurring only within the state. Rather, the ban on punitive damages is entirely independent of the location of the alleged conduct in connection with which punitive damages are sought and applies to any defendant’s conduct, regardless of where it occurred.

    That seems a little questionable.  Isn’t it a safe assumption that, when the Michigan Supreme Court  outlawed punitive damages in 1884, the court was thinking, at least primarily, about Michigan conduct?  Do we really need a Michigan court to say that?  (A federal district court in Michigan has said that, but the Court of Appeal here did not believe that was sufficient.)

    In any event, this may not be a big deal for Ford in this case.  Although this case is going back to the trial court for a trial on punitive damages, the Court of Appeal’s opinion indicates that the evidence here would not support a punitive damages award.  To get punitive damages, the plaintiff would have to prove that Ford consciously disregarded a known risk in the 1960s, when the conduct occurred.  But the opinion explains (while discussing an unrelated issue) that there was no known risk associated with Ford’s asbestos products at the time:

    From 1966, the beginning of the relevant time period, there appears to have been a scientific consensus that industrial exposure to the type of asbestos used in insulation was dangerous. There was no similar consensus about exposure to asbestos through automotive work, given the far less potent type of asbestos involved.

    The court explains that a known risk for high-exposure to one type of asbestos does not establish a known risk for low-dose exposure to a different type:

    That workers with relatively heavy and constant exposure to one type of asbestos fiber develop asbestosis does not necessarily mean that workers with intermittent, lower level exposure to a different type of asbestos fiber will also be adversely affected, particularly by an entirely different disease.

    That does not sound like a punitive damages case to me.  Ford cannot have disregarded a known risk if, according to the Court of Appeal, the risk was not known at the time.

  • California Supreme Court declines to review $30 million punitive damages award (Asahi v. Actelion)

    The California Supreme Court’s online docket indicates that the court has denied review in Asahi Kasei Pharma v. Actelion Ltd.  So the punitive damages award in that case will stand as the third largest ever to survive appeal in California.

    Related posts:

    Defendants seek California Supreme Court review in Asahi v. Actelion
     
    Court of Appeal affirms $30 million punitive damages award – the third largest to survive appeal in California (Asahi v. Actelion)

  • “WV SC hears appeal of $91M nursing home verdict”

    The West Virginia Record has this report about oral arguments in the West Virginia Supreme Court in a case involving an $80 million punitive damages award.

  • DRI amicus brief challenges constitutionality of Montana Supreme Court opinion allowing classwide adjudication of punitive damages (Allstate v. Jacobsen)

    Our firm has filed an amicus curiae brief on behalf of DRI, asking the U.S. Supreme Court to decide whether the Montana Supreme Court violated Allstate’s due process rights in a class action punitive damages case.

    This lawsuit began when Robert Jacobsen sued to challenge Allstate’s claims adjustment practices in Montana.  The trial court certified the case as a class action and approved a procedure calling for punitive damages to be awarded on a classwide basis.  The Montana Supreme Court determined that the trial court’s procedure violated due process because it would permit the award of punitive damages to class members who may not have suffered any actual harm from the challenged claims-handling procedures.

    Unfortunately, the Montana Supreme Court “fixed” that problem in a way that still violates due process.  The court authorized the trial court to determine entitlement to punitive damages on a classwide basis, followed by individual trials to determine the amount of compensatory and punitive damages to be awarded to each class member.

    Our brief argues that the revised procedure still runs afoul of the Due Process Clause because entitlement to punitive damages cannot be decided on a classwide basis when the defendant engaged in different conduct towards each class member.  An individualized assessment of the defendant’s conduct towards each particular plaintiff is required.

    Other aspects of the Montana Supreme Court’s opinion raise serious due process concerns, and as a result the case has attracted a lot of attention from defense-oriented interest groups.  At least five different amici have filed briefs supporting Allstate’s petition for review.  There may still be others that haven’t yet shown up on the docket.

    See additional coverage on Overlawyered and Legal NewsLine.

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

    The Ninth Circuit has ordered en banc rehearing in Arizona v. Asarco, a Title VII sexual harassment case in which a jury awarded the plaintiff no actual damages, $1 in nominal damages, and $868,750 in punitive damages. 

    The original panel decision, described in an earlier post, was split 2-1.  Judge O’Scannlain, writing for the majority, reduced the punitive damages to $125,000. Judge Hurwitz dissented, arguing that the award should be affirmed in full. 

    Hat tip: Howard Bashman via Rick Hasen.

  • $350 million in punitive damages against Arkansas evangelical church

    The Associated Press is reporting that a judge in Miller County Arkansas has awarded $525 million in compensatory and punitive damages against Twenty First Century Holiness Tabernacle Church.  The church is an arm of Alamo Ministries, founded by evangelical preacher Tony Alamo.  The plaintiffs in the lawsuit are seven women who alleged they were physically and sexually abused by Alamo starting when they were as young as nine years old. 

    The article doesn’t specify how much of the $525 was for punitive damages, but it indicates that the ratio of punitive damages was 2 to 1, which suggests the punitive damages award must be about $350 million.

    Alamo himself was already hit with a $60 million punitive damages award for abusing young boys.  The Eighth Circuit reduced that award to $24 million.

    In a separate criminal proceeding, Alamo was sentenced to 175 years in prison. 

  • Fifth Circuit grants rehearing to address availability of punitive damages in seaworthiness cases

    The U.S. Supreme Court’s last two punitive damages cases both involved maritime law (Exxon Shipping v. Baker and Atlantic Sounding Co. v. Townsend.)  Could this be the next one? 

    Howard Bashman reports: “Fifth Circuit grants rehearing en banc to reconsider whether seamen may recover punitive damages for their employer’s willful and wanton breach of the general maritime law duty to provide a seaworthy vessel.”

  • Are Canadian Punitive Damages Awards on the Rise?

    A Mondaq.com article by law firm Norton Rose Fulbright reports a trend towards rising punitive damages awards in Canada. As evidence of the trend, the article discusses recent awards of $4.5 million, $200,000, and $500,000.  Everything is relative; such awards would not provide any evidence of “rising” punitive damages in California.

  • California Supreme Court leaves Pfeifer v. John Crane on the books

    Last October we reported on the Court of Appeal’s published opinion in Pfeifer v. John Crane, which affirmed a $14.5 million punitive damages award.  Yesterday, the Supreme Court denied two requests to depublish the opinion.  The defendant, John Crane, had submitted one of those requests. The other was a combined submission on behalf of the Association of Southern California Defense Counsel and the Association of Defense Counsel of Northern California and Nevada.

    In our prior post, we suggested the Supreme Court might grant John Crane’s petition for review and hold this case pending the disposition of Webb v. Special Electric, another case involving the “sophisticated purchaser” defense.  John Crane, however, asked to withdraw its petition for review. The Supreme Court granted that request as part of its order yesterday, so Pfeifer remains good law.  But the Supreme Court will have the last say on the sophisticated purchaser issue when it issues its opinion in Webb. 

  • Defendants seek California Supreme Court review in Asahi v. Actelion

    The defendants in Asahi Kasei Pharma v. Actelion Ltd. have petitioned the Supreme Court of California for review.  As we mentioned in a previous post, the Court of Appeal upheld a $30 million punitive damages award in that case, the third largest punitive damages award ever to survive appeal in California.

    Aside from the enormity of the award, the case is notable because the plaintiff was a large corporation that obtained punitive damages against three individuals.  The individuals were officers of a corporate defendant that itself was not hit for punitive damages.  That scenario is highly unusual, if not unprecedented.  Many corporate officers would no doubt be surprised to learn that, when their company gets sued by a corporate competitor, they can end up being individually liable for millions in punitive damages.

    You can track the Supreme Court’s online docket here.

    Related posts:

    Court of Appeal affirms $30 million punitive damages award – the third largest to survive appeal in California (Asahi v. Actelion)