The New York Times reports that a San Diego jury has awarded the $1.1 million in compensatory damages and $5.7 million in punitive damages against the Chicago Title Company and the Chicago Title Insurance Company for their role in an allegedly fraudulent real estate transaction. The story reports that the same jury also awarded $2.1 million in compensatory damages and $5.2 million in punitive damages against Rollo Richard Norton II, the alleged mastermind of the fraudulent scheme.
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Trattman v. Key: Punitive Damages Claim Reinstated Because Trial Court Fumbled Bifurcation Procedure
In this unpublished opinion, the California Court of Appeal (Second Appellate District, Division 8) corrects an obvious error by the trial court.
The case involves Civil Code section 3295, which gives defendants the right to request a bifurcated trial on punitive damages. If a defendant invokes its rights under section 3295, the trial court must bifurcate the trial so that the jury does not hear any evidence of the defendant’s financial condition (or any other evidence relating to the amount of punitive damages), until the trier of fact has already ruled in the plaintiff’s favor on liability and ruled that the defendant acted with malice, oppression, or fraud, the prerequisites for awarding punitive damages under Civil Code section 3294.
The defendant in this case requested bifurcation under section 3295. The first phase went forward and the trial court, acting as the trier of fact, ruled in favor of the plaintiff on liability and found that the defendant had acted with malice, oppression, or fraud. But the court concluded that the plaintiff waived his right to punitive damages by failing to introduce evidence of the defendant’s financial condition during the first phase.
I can’t figure out what the trial court could have been thinking. Under section 3295, the plaintiff was prohibited from presenting any evidence of the defendant’s financial condition during the first phase of trial. Clearly the plaintiff did not waive any rights by complying with the plain language of the statute. That’s exactly what the Court of Appeal said, and reversed the case for a limited retrial on the punitive damages. (See our prior discussion of problems associated with limited retrials on punitive damages.)
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Cert. Denied in Wyeth v. Scroggin (Constitutionality of Partial Retrials)
A few months ago we blogged about the cert. petition in Wyeth v. Scroggin. Today, the Supreme Court denied that petition (see the order list). We’ll have to wait a while for the Supreme Court (or some other court) to tackle the problems that can arise when a new trial is limited to the issue of punitive damages.
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Texas Jury Hits JDA Software with Big Punitive Damages, But How Big?
Various media outlets are reporting that a jury in Dallas has awarded $246 million in damages against DJA Software Group in a software-licensing dispute with Dillard’s Inc. Exactly how much of that award is punitive damages, I can’t tell.
The Wall Street Journal reports that the jury awarded $238 million in punitive damages. The Associated Press, however, says the jury awarded $238 million in “indirect or punitive damages.” Reuters reports that the jury awarded $238 million in “consequential, special or punitive damages.”
To the non-legal press, those might not seem like significant differences. But for purposes of analyzing whether the award is excessive, it obviously makes a big difference whether the $238 million was entirely punitive damages, or whether it included some compensatory damages. If the jury really awarded $8 million in compensatory damages and $238 million in punitive damages, JDA could virtually guarantee that the punitive damages would be overturned as excessive. Under that scenario, the punitive damages award would quite possibly be reduced to $8 million, resulting in a 1-to-1 ratio.
But if a big chunk of the $238 million includes compensatory damages, the analysis changes dramatically. The award might not be reduced at all, if the total compensatory damages already exceed the punitive damages.
Bradenton.com, the website for the Bradenton Herald, contains a press release from Susman Godfrey, counsel for Dillard’s, indicating that the jury actually awarded $96 million in various types of compensatory damages and $150 million in punitive damages. Assuming that’s accurate, the punitive damages may be excessive, but Dillard’s may still end up with a total award in excess of $100 million (assuming there are no other defects in the award besides the excessiveness of the punitive damages).
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New Law Review Article on Punitive Damages After Exxon Shipping v. Baker
Professor Alexandra Klass of the University of Minnesota Law School has posted an article on SSRN entitled “Punitive Damages After Exxon Shipping Company v. Baker: The Quest for Predictability and the Role of Juries.” Among other things, it contains a collection of lower court opinions that have followed the reasoning of Exxon Shipping outside the maritime context.
Here’s the abstract:
This Symposium Essay considers the impact of the Supreme Court’s 2008 decision in Exxon Shipping Company v. Baker on the ability of juries to award punitive damages in a manner that comports with the law. In that case, the Court continued its two-decade crusade to place federal limits on punitive damages awards. The Exxon case was a federal maritime case arising out of the 1989 grounding of the Exxon Valdez in Prince William Sound, Alaska, resulting in arguably the biggest environmental disaster in U.S. history. In its decision, the Court for the first time identified “unpredictability” as the fundamental problem with punitive damages today. It then set out to make those damages more predictable by reaffirming the need for very low ratios, in this case 1:1, between punitive damages and compensatory damages. In this Essay, I argue that the Court’s quest for predictability has resulted in reviewing courts being forced to rely too heavily on the facts of other cases involving similar claims in order to determine if the punitive damages award in the case at bar is constitutional. Such a system is fraught with error and, more importantly, creates a situation where juries cannot possibly render punitive damages verdicts that meet due process requirements because the very evidence they need to assess predictability – the facts and damage awards in other cases – cannot be made available to them.
Part I provides a brief discussion of punitive damages generally and the Court’s recent effort to place federal constitutional limits on those damages. Part II discusses the Exxon case itself and highlights the Court’s focus on “unpredictability” as the fundamental problem with punitive damages. Part III shows how lower courts have applied the Exxon case. This Part reveals that even though courts recognize that the Exxon case is a federal maritime case rather than a substantive due process case, courts have embraced the call for predictable awards by ensuring punitive damages awards are in line (both as a matter of ratio and as an absolute dollar amount) with other similar cases. Part IV illustrates how the quest for predictability requires information on other similar cases that cannot be given to juries, and how the premium now placed on predictable damages awards makes it difficult, if not impossible, for juries to arrive at constitutional verdicts.
Hat tip: TortsProf Blog.
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Media Misses the Boat on Parallels Between BP Oil Spill Fund and Exxon Valdez Punitive Damages Litigation
Many of the recent media reports about the Gulf of Mexico oil spill have, understandably, compared that spill to the Exxon Valdez disaster. But there’s one recurring theme in the media reports that is a bit misleading.
The press often reports that the Valdez victims had to wait 20 years to be compensated, because Exxon litigated the case all the way to the Supreme Court. For example, this story in the Wall Street Journal discusses the $20 billion fund that BP is establishing to satisfy claims arising from the gulf disaster, and says that the fund will speed up payouts to claimants, who won’t have to wait 20 years like the Valdez claimants did.
That’s misleading because the award ExxonMobil litigated for 20 years was a punitive damages award. It had nothing to do with compensating the plaintiffs. Like all punitive damages awards, the Exxon Valdez punitive award was a windfall to the plaintiffs. ExxonMobil paid all the compensatory damages years before the punitive damages litigation made its way to the Supreme Court. So it doesn’t really make sense to compare that litigation to the fund being established by BP. The BP fund will be for compensation, not for punitive damages.
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“Punitive Damages: Inching Towards Predictability”
I wrote a short article for this month’s online edition of Claims magazine.
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Senate Adopts Proposal to Eliminate Tax Deduction for Punitive Damages
A few months ago we blogged about a proposed bill that would prevent defendants from treating payments of punitive damages as tax-deductible business expenses. The Senate adopted that proposal yesterday, stating that the revenues from the proposal would be used to fund a 90-day extension of the home buyer’s tax credit.
Hat tip: TaxProf Blog.
UPDATE (6/18/10 at 2:07 pm): The National Law Journal has more on this story. The NLJ story clarifies that the Senate adopted this proposal as an amendment to the American Jobs and Closing Tax Loopholes Act of 2010, which was approved by the House last month. The Senate has not yet acted on the full act.
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Richard Epstein: Punitive Damages Against BP Will Only Make Matters Worse
Law professor Richard A. Epstein of the University of Chicago has a column in Forbes magazine entitled “BP’s Endless Nightmare in the Gulf,” in which he argues against the imposition of punitive damages for the oil spill in the Gulf of Mexico.
Prof. Epstein contends that punitive damages against BP, Transocean, and Halliburton would be a bad idea for two reasons: (1) a large punitive damages award could deplete the funds that would otherwise be available to provide full compensation for all injured parties, including those whose injuries may not be immediately apparent, and (2) tying up the companies in punitive damages litigation will distract them from the more pressing task of stopping the leak and cleaning up the damage.
Related posts:
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W. Va. Supreme Court Denies Rehearing of Punitive Damages Award Against DuPont, Citing “Fact” Established at Oral Argument
We’ve been following this case, which involved a $196.2 million punitive damages award against DuPont in West Virginia, for a while. The case has taken some interesting twists and turns, but this latest installment may be the most bizarre.
When we last checked in, the W. Va. Supreme Court had reversed the judgment and remanded for further proceedings to determine whether the claim was barred by the statute of limitations. The court also ordered that, if the claims are not barred altogether, then the punitive damages should be reduced by $20 million to reflect payments DuPont had already made, and then further reduced 40 percent. The court determined that 40 percent of the punitive damages were attributable to the plaintiffs’ claims for medical monitoring, and the court determined that medical monitoring claims could not support a punitive damages award because punitive damages can only be based on “actual harm.”
That brings us to the latest stage of the proceedings. DuPont petitioned for rehearing, arguing that the punitive damages should be reduced by 70 percent, rather than 40 percent, because the lower court had allocated 70 percent of the punitive damages to the medical monitoring claims.
The Supreme Court denied DuPont’s petition, finding that DuPont had waived this point by failing to raise it during oral argument. At oral argument, the court asked plaintiffs’ counsel how much of the punitive damages were attributable to the medical monitoring claims. Plaintiffs’ counsel answered “40 percent.” When DuPont’s counsel later got up to argue, he focused on other issues and never addressed the plaintiffs’ “40 percent” representation.
The Supreme Court concluded that DuPont’s silence at oral argument amounted to a waiver, and therefore the 40 percent figure could be treated as an established fact, even though it was not supported by any evidence. In fact, it was actually contrary to documents in the record showing that the lower court had allocated 70 percent of the punitive damages to the medical monitoring claims, at the request of plaintiffs’ counsel.
In other words, plaintiffs’ counsel misrepresented the record at oral argument, but since that misrepresentation was unchallenged, the court could treat it as an established “fact.” Perhaps that is consistent with West Virginia law, but I am confident that no California appellate court would take such an approach.
Related posts:
West Virginia Supreme Court Reduces $196.2 Million Punitive Damages Award to $98 Million
West Virginia Supreme Court Agrees to Review $196.2 Million Punitive Damages Award Against Dupont
W. Va. Supreme Court Candidates Support Appellate Review of Punitive Damages
West Virginia Gov. Defends His Amicus Brief in Punitive Damages Case
West Virginia Governor Draws Fire for Intervening in Punitive Damages Case
Does West Virginia’s Lack of a Right to Appeal a Punitive Damages Award Violate Due Process?
DuPont Asks West Virginia Supreme Court to Review $196.2 Million Punitive Damages Award