California Punitives by Horvitz & Levy

  • U.S. Supreme Court decisions in BMW and State Farm have failed to reduce punitive damages awards, according to new paper

    Tort reform of punitive damages has failed, according to Cornell law professor Theodore Eisenberg.

    In The Empirical Effects of Tort Reform, a chapter from the forthcoming Research Handbook on the Economics of Torts, Professor Eisenberg uses statistical analysis to study the effects of various efforts to rein in punitive damages, including the U.S. Supreme Court’s opinions in BMW v. Gore and State Farm v. Campbell.  As most readers of this blog know, those decisions held that an award of punitive damages is unconstitutionally excessive if it is disproportionate to the reprehensibility of the defendant’s conduct and the actual harm that the defendant inflicted upon the plaintiff.  One might expect those decisions to produce a general decline in the average ratio between punitive damages and compensatory damages.  Eisenberg’s statistics show no such decline. In fact, his statistics show that, in cases involving compensatory damages awards up to $100,000, the average ratio of punitive damages to compensatory damages actually increased after State Farm.

    Eisenberg characterizes the Supreme Court’s tort reform effort as a failure, but that’s OK with him because he does not believe there was anything to reform in the first place.  Rather, he blames the Chamber of Commerce for stoking public outrage about a mythical punitive damages crisis that never really existed.

    He grudgingly acknowledges, however, the existence of evidence showing that tort reform has succeeded in reducing “extreme” punitive awards.  He makes that acknowledgment only in passing, but it seems to severely undercut his conclusion that reform of punitive damages has failed.  The main focus of tort reform in the punitive damages context has been to reduce the “outliers,” not to reduce the average ratio on a nationwide basis.  That’s certainly what the Supreme Court was aiming at in BMW and State Farm.  So if tort reform is responsible for a reduction of the the extreme awards, perhaps it isn’t a failure after all.  Anyway, it’s an interesting article and well worth a read to anyone interested in empirical analysis of tort reform, not just of punitive damages, but also in the context of medical malpractice and products liability litigation.
     
    Hat tip: TortsProf Blog

  • Federal judge piles on punitive damages against Iran and Sudan: $1.67B and $236M

    In the past few years we have seen a flurry of colossal punitive damages awards against Iran and Cuba in cases involving state-sponsored terrorism and human rights violations.

    In one of those cases back in 2010, U.S. District Judge Royce Lamberth awarded $61.3 million against Iran for its role in the 1983 bombing of the U.S. Marine Corps barracks in Beirut.  Chief Judge Lambert has  now upped the ante in a big way, awarding another $487 million in compensatory damages and $1.67 billion in punitive damages against Iran for the same conduct.  As in the prior case, nobody expects the plaintiffs to collect on this judgment.  But Chief Judge Lambert stated in his opinion that he hopes the families of the victims find some measure of solace in his ruling.

    Chief Judge Lamberth issued another symbolic opinion on the same day, awarding $79 million in compensatory damages and $236 million in punitive damages in a default judgment against the Republic of Sudan for its involvement in the bombing of the USS Cole.

    Perhaps these awards will indeed provide some comfort to the victims. That certainly is a laudable goal.  But I keep wondering whether these gigantic uncontested awards might have some unforeseen consequences for punitive damages jurisprudence.  Punitive damages are supposed to be used to provide punishment and deterrence, and these awards don’t seem to be serving either purpose.  Will this departure from traditional principles spill over into other cases involving more traditional civil litigation? Probably not in any direct way.  I don’t foresee any court citing these rulings for their precedential or even persuasive value.  But it’s impossible to measure the impact of these awards on our society’s perceptions about the appropriate use (and amount) of punitive damages in the long run. 

    Hat tip: The Huffington Post

    Related posts:

    Federal Judge Awards $300 Million In Punitive Damages Against Iran

    Federal judge awards $61.3 million in punitive damages against Iran

    $25 Million in Punitive Damages Against Cuba

    Miami Judge Awards $393 Million in Punitive Damages Against Cuba

  • Unpublished opinion affirms trial court’s rejection of jury instruction limiting punitive damages to one to one ratio

    It has been very quiet here lately.  We haven’t had any big verdicts, appellate decisions, legislative proposals, or law review articles to report in the past few weeks.  If you’re desperate for your fix of punitive damages news, this will have to do: in this unpublished opinion, the California Court of Appeal (Second Appellate District, Division One) held that the trial court properly refused to instruct the jury that the maximum punitive damages award was $12,250 (the amount of compensatory damages). It’s hard to argue with the court’s analysis; there isn’t any law that would impose a one-to-one ratio with a compensatory damages award of that size.  The defendant was clearly over-reaching by requesting that instruction.

  • New law review article: “Punitive Damages in Cyberspace”

    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.

  • Sacramento jury awards $125 million in punitive damages against hospital for sexual harassment

    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.

  • Punitive damages for inadequate warnings

    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.

  • Oregon jury awards $25 million to smoker in retrial; original award was $150 million

    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.

  • California’s special pleading requirements for punitive damages claims against healthcare providers don’t apply to health care service plans (Kaiser Foundation Health Plan v. Superior Court)

    Under California law, plaintiffs seeking punitive damages from a healthcare provider must satisfy special pleading requirements. Specifically, California Code of Civil Procedure section 425.13 requires plaintiffs to submit evidence demonstrating a substantial probability of success before they can plead a claim for punitive damages in an “action for damages arising out of the professional negligence of a health care provider.”

    The question in this case is whether section 425.12 applies to a lawsuit against an HMO or other health care plan, alleging that it devised a compensation scheme that induced the participating health care providers to deny costly medical services to plan members. In a published opinion, the California Court of Appeal (Second District, Division Seven) held that a plaintiff does not have to comply with section 425.13 in an action brought against a health care service plan because such a plan “does not directly provide medical care to its subscribers.  Instead, the Health Plan contracts with other entities to deliver medical care to subscribers who enroll in its plans.”

  • Florida appellate court reverses $40 million punitive damages award in tobacco case

    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.

  • Missouri Supreme Court upholds state cap on punitive damages

    Missouri Supreme Court Building

    State courts continue to disagree about the constitutionality of caps on punitive damages.  The Arkansas Supreme Court recently declared that state’s cap on punitive damages unconstitutional. On January 31, the Missouri Supreme Court issued a contrary opinion, rejecting constitutional challenges to that state’s statutory cap on punitive damages.  The cap limits punitive damages to five times the amount of actual damages, but permits awards up to $500,000 if the actual damages are less than $100,000.

    This case, Overbey v. Chad Franklin National Auto Sales, involved a cause of action created by statute, namely, the Missouri Merchandising Practices Act (MMPA).  The court ruled that, because the Missouri legislature created the MMPA cause of action, the legislature had authority to set limits on the remedies permitted under statute. The court expressly declined to address the constitutionality of the statute as applied to common law causes of action.  (See footnote 3 on page 16.)   Two justices dissented, taking the position that any cap on punitive damages violates the constitutional right to a jury trial.