We haven’t had a post about a celebrity punitive damages award in quite a while. Assuming that Larry Hagman still qualifies as a “celebrity,” here’s one for you: Bloomberg reports that Hagman just won an arbitration award against Citigroup, including $10 million in punitive damages. Hagman doesn’t get to keep the punitive award though: it goes to the charities of his choice. The story doesn’t give any details about the conduct that prompted the award, and doesn’t mention whether the arbitration agreement gives Citigroup any rights to appellate review.
-
Pending cert. petitions raise punitive damages issues
Two recent cert. petitions ask the U.S. Supreme Court to address interesting questions of punitive damages law.
The first is Lawnwood Medical Center, Inc. v. Sadow, featured today on SCOTUSblog as a “Petition of the Day.” The defendant, challenging a punitive damages award of $5 million, raises questions about the application of the due process limitations on excessive punitive damages in cases involving intentional harm and nominal damages:
1. Are punitive damages for intentional harm exempt
from the guidepost analysis?2. Can state law exempt punitive awards for certain
conduct from the guidepost analysis mandated
by the Federal Constitution?3. When actual damages are small or nominal, may
a court rely on the defendant’s wealth–rather
than awards in similar cases or comparable legislative
penalties–as an objective indicator of
whether a punitive award is constitutional?Links: Petition for certiorari, lower court opinion, Supreme Court docket.
The second notable petition is Shell Oil v. Hebble, in which the plaintiff obtained a $53.6 million punitive damages award. The defendant’s cert. petition asks the Court to consider what components of a plaintiff’s recovery can properly be considered as “actual harm” for the purposes of comparing a punitive damages award to the plaintiff’s actual harm:
1. Whether, in calculating the ratio of punitive damages
to harm to the plaintiff, heightened penalties such as
12% interest imposed to compel compliance may be
treated as “compensatory.”2. Whether, in determining the maximum punitive
damages award in a case involving a substantial compensatory
award and only economic harm, courts should be
guided by the 1-to-1 ratio mentioned in State Farm or
instead presume that anything within the range of 4-to-1
is permissible.Links: Petition for certiorari, National Association of Manufacturers (NAM) amicus brief, Supreme Court docket, our prior blog post.
The Hebble petition has been distributed for the Supreme Court’s Oct. 15 conference, so we will have a ruling on that one soon.
Both petitions impliedly assume that, if the Supreme Court accepts these cases, it will adhere to its recent line of cases holding that the Due Process Clause limits the imposition of excessive punitive damages. That assumption is not necessarily a foregone conclusion. Of the Justices who joined the majority in BMW v. Gore and State Farm v. Campbell, only Justices Kennedy and Breyer remain with the Court. Three justices who dissented from those opinions, Justices Scalia, Thomas, and Ginsburg, all remain with the Court. Chief Justice Roberts signed on to the majority opinion in Philip Morris v. Williams, which probably means he is not ready to jettison the BMW/Campbell line of precedent, but the views of Justices Alito, Sotomayor, and Kagan are unknown (at least to me). If two of those three joined with the trio of dissenters, they could conceivably toss this precedent aside.
-
L.A. jury awards $4.8 million in punitive damages against Rite Aid in employment suit
The Beverly Hills Courier is reporting that a Los Angeles jury has awarded $3.5 million in compensatory damages and $4.8 million in punitive damages against drug store chain Rite Aid. The plaintiff, a former Rite Aid employee, claimed that Rite Aid discriminated against her based on disability (psychiatric illness) and retaliated against her for complaining that a manager sexually harassed her. This is the largest California punitive damages award we’ve heard about in several months.
-
Kentucky appellate court holds that statutory limitation on punitive damages is unconstitutional
Although we focus primarily on California punitive damages litigation, we occasionally discuss interesting punitive damages decisions from other jurisdictions. This recent opinion from Kentucky caught our attention.
In it, the court declares unconstitutional a Kentucky law that prohibits the award of punitive damages against a dram shop. The decision is based on a provision of the Kentucky constitution which, as interpreted by the Kentucky courts, prohibits the state legislature from limiting the remedies available to plaintiffs in personal injury or wrongful death actions.
That’s a stark contrast to California law, where we have no such provision in the constitution and, as noted last week, our legislature has prohibited the recovery of punitive damages in all wrongful death actions (not just a subcategory of cases against a particular class of defendants). So despite California’s reputation for a pro-plaintiff litigation climate, here’s at least one situation in which California law is not as plaintiff-friendly as another state.
-
Canadian court orders Facebook spammer to pay $437 million California punitive damages award
Two years ago, Judge Jeremy Fogel of the Northern District of California entered a judgment against Canadian resident Adam Guerbuez, ordering him to pay Facebook $873 million, half of which is punitive damages, for violating the “CAN-SPAM Act.” The Quebec Superior Court has now recognized the enforceability of that judgment in Canada, according to this report in the Montreal Gazette.
Mr. Guerbez doesn’t seem all that concerned about the award. In fact, he seems proud. He’s billing himself as “the $1 billion dollar man” on his personal blog. He didn’t bother to contest the suit, and I’m guessing he doesn’t have $873 million laying around, so this may be another award that is more symbolic than anything else.
As I have commented before, I fear that the publicity surrounding these massive but uncontested and uncollectible awards may be contributing to a culture that views 9-digit punitive damages awards as an accepted part of our legal system.
-
Federal judge awards $61.3 million in punitive damages against Iran
Courthouse News is reporting that a Washington DC federal district court has ordered the Republic of Iran to pay $92 million, including $61.3 million in punitive damages, to the victims of the 1983 bombing of the Marine barracks in Beirut. This is the latest in a series of large punitive damages damages awards against Iran. As we have noted, the awards have only a symbolic significance because Iran never pays a penny.
-
Daily Journal reports on punitive damages strategy in Toyota litigation
An article in today’s Los Angeles & San Francisco Daily Journal describes an interesting punitive damages strategy by the plaintiffs’ counsel in a lawsuit alleging that a woman (Marie Edwards) was killed when her Lexus suddenly accelerated. The article, “Toyota Fends off Punitive Damages Claims” (subscription required), describes correspondence in which plaintiffs’ counsel argues that he will be able to obtain punitive damages based on the pain and suffering experienced by the decedent in the moments before her death.
I’m not sure that strategy is going to work. Under California law, plaintiffs in a wrongful death action are not entitled to recover punitive damages. (See, e.g., Nelson v. County of Los Angeles (2003) 113 Cal.App.4th 783, 794 [“‘[I]t has long been established in California that punitive damages may not be recovered in a wrongful death action’”].) The estate of the decedent can recover punitive damages in a survivorship action, but the estate cannot recover damages for the decedent’s pain and suffering, because those damages are, by statute, extinguished if the decedent dies before entry of a verdict.
Perhaps the plaintiffs here intend to argue that Ms. Edwards’ momentary distress or pain and suffering represents “actual harm,” which even though it is legally noncompensable, could nonetheless be considered as the basis for imposing punitive damages in the survivor action. There would seem to be a good argument on the defense side, however, that it would be improper to base punitive damages on an element of compensatory damages that has been expressly rejected by the Legislature. Such an approach would effectively be an end-run around the Legislature’s policy decision. Moreover, using a disapproved measure of compensatory damages as the hook for punitives would introduce an element of unpredictability and arbitrariness, something the U.S. Supreme Court has consistently railed against.
-
Article analyzes punitive damages decisions after Exxon Shipping v. Baker
When the Supreme Court decided Exxon Shipping v. Baker in 2008, observers wondered whether about the impact of the opinion beyond the maritime context. This article attempts to answer that question. The authors (Barbara A. Lukeman and Raymond Mariani at Nixon Peabody) conclude that “Exxon did not drive the lower courts to impose a 1:1 ratio more than had been occurring beforehand.”
As far as California punitive damages litigation is concerned, that statement is accurate. The Exxon Shipping opinion itself did not launch a wave of cases imposing 1-to-1 ratios; that wave actually began a few years before Exxon Shipping.
A few years ago, the idea of a court reducing an award to a 1-to-1 ratio was unheard of in California. But in 2006 our courts, taking their cue from State Farm v. Campbell, began reducing awards to a 1-to-1 ratio, even when those awards were already in the single digits. (See, e.g., Jet Source Charter, Inc. v. Doherty (2007) 148 Cal.App.4th 1 [ratio reduced from 4-to-1 down to 1-to-1]; Walker v. Farmers Ins. Group (2007) 153 Cal.App.4th 965 [ratio reduced from 5.6-to-1 down to 1-to-1]; Grassilli v. Barr (2006) 142 Cal.App.4th 1260 [ratios reduced from 8.4-to-1 and 7.5-to-1 down well below 1-to-1]; see also Roby v. McKesson HBOC (2006) 146 Cal.App.4th 63, review granted [ratio reduced from 10.7-to-1 down to 1.4-to-1].)
That trend continued after Exxon, with courts citing Exxon in support of reduced 1-to-1 ratios. (See Stevens v. Vons (2009) [unpublished] [ratio reduced from 10-to-1 down to 1-to-1]; Essex Ins. v. Prof. Building Contractors [unpublished] [ratio reduced from 3.7-to-1 down to 1-to-1]; see also Roby v. McKesson (2009) 47 Cal.4th 686 [ratio reduced from 10.7-to-1 down to 1.4-to-1, further reduced to 1-to-1 by California Supreme Court].)
This wave of cases isn’t exactly a flood, but compared to the state of the law a few years ago, the number of 1-to-1 ratio cases in recent years is remarkable.
-
Uzyel v. Kadisha: An increase in compensatory damages does not entitle plaintiffs to a new trial on punitive damages
This published opinion holds that a plaintiff cannot take advantage of a procedural rule adopted for the benefit of defendants.We have previously blogged about California’s rule that, when a defendant gets hit with both compensatory damages and punitive damages, and a court later reduces the compensatory damages, the defendant is entitled to a reduction of the punitive damages (or possibly a retrial on punitive damages, depending on the reason why the compensatory damages were reduced). That’s the general rule, although we have seen some inconsistent decisions in this area. The rationale behind the rule is to ensure that the punitive damages bear a reasonable relationship to the reduced compensatory damages award.In this opinion from the Second Appellate District, Division Five Three, the court holds that when a trial court or appellate court increases the compensatory damages, the plaintiff is not entitled to a proportionate increase in punitive damages, nor to a retrial on punitive damages to try for a larger amount.Full disclosure: Horvitz & Levy represents the defendant on appeal in this case. -
Proposal to Eliminate Tax Deduction for Punitive Damages Still Alive
Business Insurance reports that the newest version of the proposed federal tax bill, the American Jobs and Closing Tax Loopholes Act, still includes a provision to eliminate the deductibility of punitive damages.
Related posts:
More from Prof. Markel on Tax Policy and Punitive Damages
Proposed Legislation Would Eliminate Tax Deduction for Punitive Damages
Obama Administration Proposes To Eliminate Tax Deduction for Payment of Punitive Damages