We haven’t seen many media reports of big punitive damages awards lately, in California or elsewhere. But here’s a report from the Associated Press (via the Columbia Daily Tribune) that a jury in Arkansas has awarded $5.9 million in compensatory damages and $42 million in punitive damages against Bayer CropScience. The plaintiffs, a dozen farmers, alleged that Bayer allowed genetically modified herbicide-resistant rice into the American rice market, causing some nations to ban American rice, which thereby depressed prices.
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Justice Stevens, Pro-Business Activist?
In the wake of Justice Stevens’ announcement that he will retire from the Supreme Court, a wide array of commentators (Jan Crawford, Dahlia Lithwick, Ilya Shapiro) are writing about his legacy. Most of the commentary focuses on his status as the most liberal justice on the current Court. Erwin Chemerinsky’s profile of Justice Stevens in today’s Daily Journal (subscription required) contains a nice summary of Justice Stevens’ greatest hits from a liberal perspective.
I won’t take issue with the characterization of Justice Stevens as the Court’s most reliable liberal in most areas, but it’s worth noting that Justice Stevens was also the author of one of the most business-friendly decisions issued by the Supreme Court in the past few decades: BMW v. Gore. That was the case in which the Supreme Court first recognized a federal constitutional limitation on excessive punitive damages. Justice Stevens also joined the majority when the Supreme Court further developed those limitations in State Farm v. Campbell. As readers of this blog are aware, the application of those two opinions in the lower courts has saved American businesses billions of dollars. The Court’s most conservative justices, Justices Scalia and Thomas, dissented from those opinions and criticized them as unprincipled judicial lawmaking (or, to use a hackneyed political buzzword, judicial “activism”).
Looking solely at the Supreme Court’s punitive damages cases, one could say that when Justice Stevens retires, the Court will lose its most prominent pro-business “activist.”
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Cupps v. Mendelson: Trial Court Properly Vacated $160,000 Punitive Damages Award Because Plaintiff Failed to Prove Defendant’s Financial Condition
Here’s another case in which a plaintiff forfeited his right to punitive damages because he failed to present meaningful evidence of the defendant’s financial condition.
The plaintiff won a verdict for $288,000 in compensatory damages and $160,000 in punitive damages. The trial court granted the defendant’s motion for partial JNOV and eliminated the punitive damages award, on the ground that the plaintiff had failed to introduce meaningful evidence of the defendant’s financial condition.
The California Court of Appeal (Fourth District, Division One) affirmed. The plaintiff apparently conceded on appeal that he presented no direct evidence of the defendant’s financial condition, but he tried to prop up the punitive damages award by pointing to expert testimony regarding the value of a business partly owned by the defendant. The Court of Appeal determined that the expert never directly opined about the value of the business, and was not even qualified to do so.
The plaintiff also tried to rely on Cummings Medical Corp. v. Occupational Medical Corp. (1992) 10 Cal.App.4th 1292 for the proposition that a plaintiff need not introduce evidence of the defendant’s financial condition, and can rely instead on the amount of profit the defendant gained from the misconduct at issue. The Court of Appeal noted that it had previously rejected that reasoning in Kenly v. Ukegawa (1993) 16 Cal.App.4th 49, which held that an award cannot be based solely on the alleged “profit” gained by the defendant, “without examining the liabilities side of the balance sheet.”
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Proposal to Cap Punitive Damages in California is Still Alive
A few weeks ago we reported that a proposed bill to cap punitive damages in California (AB X8 40) was dead. As it turns out, the reports of that proposal’s death were greatly exaggerated.
That particular bill is indeed dead, but the substance of it has been added to another pending bill (AB 2740) through a gut-and-amend procedure, by which the contents of one bill are stripped out and replaced with something new. The original version of AB 2740 dealt with benefits for National Guard veterans, but now it contains three entirely different proposals: (1) cap punitive damages to three times compensatory damages, (2) prohibit punitive damages against product manufacturers who comply with federal or state regulations, and (3) limit non-economic damages in negligence cases to $250,000. We will continue to follow the status of this bill as it moves through the legislative process.
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Louisiana Law Review, Punitive Damages Symposium
The Winter 2010 issue of the Lousiana Law Review is a symposium edition on the topic of punitive damages. Here’s a list of all the articles, with links to the text:
Foreword: Punitive Damages Today and Tomorrow
Thomas C. Galligan, Jr.Punitive Damages and the Constitution
Thomas H. Dupree, Jr.Punitive Damages and Class Actions
Francis E. McGovernPunitive Damages in U.S. Maritime Law: Miles, Baker, and Townsend
David W. RobertsonVicarious Liability for Punitive Damages
Michael F. SturleyPunitive Damages, Forum Shopping, and the Conflict of Laws
Patrick J. BorchersA Common Lawyer’s Perspective on the European Perspective on Punitive Damages
Michael L. WellsLouisiana Punitive Damages—A Conflict of Traditions
John W. deGravellesJ. Neale deGravelles -
“Federal Incursions and State Defiance: Punitive Damages in the Wake of Philip Morris v. Williams “
Professor Catherine M. Sharkey of NYU Law has posted her forthcoming Willamette Law Review article on SSRN: “Federal Incursions and State Defiance: Punitive Damages in the Wake of Philip Morris v. Williams.”
Here’s the abstract:
For more than a decade, the United States Supreme Court has intervened in state courts to police outlier punitive damages jury awards. As an interloper in the domain of state common law, the Court walks a fine line. The Court has been forthright about its resolve to restrain what it deems to be grossly excessive punitive damages jury awards, invoking its constitutional authority under the Due Process Clause of the Fourteenth Amendment. At the same time, the Court treads gingerly to avoid trampling upon the legitimate state interests inherent in the award by juries, and subsequent appellate review by state courts, of punitive damages. The resultant partial “federalization” of punitive damages produces an inherently unstable equilibrium, with the Court’s federal excessiveness review superimposed on state substantive and procedural law of punitive damages. Fault lines have emerged in the federal-state punitive damages tectonics.
The tale of Philip Morris v. Williams is a hiccup in the unfolding story of increasing federalization of the law of punitive damages. It highlights some underappreciated inherent limitations, given our federal system, on federal court authority and power in the state law realm of punitive damages. It provides an example alternately of courage or of woeful defiance on the part of a state court that stood up to the U.S. Supreme Court. But, most significantly, it lays bare – and, more provocatively, may unleash – the untapped potential on the part of state courts and legislatures to stake out the metes and bounds of the legitimate state interests in punitive damages.
To date, states have not pressed non-retributive punishment rationales for punitive damages. But if a state were to articulate a societal compensatory or deterrence purpose in enacting a statutory multiplier for certain torts, or a split-recovery scheme (or a combination of both), the Court would be hard-pressed to strike down these legislative enactments as unconstitutional. Should Williams awaken the sleeping state giants, that would be an ironic twist of fate for a Court that has downplayed the federalism interests at stake in its unfolding punitive damages jurisprudence.
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April 30 Hearing for Proposal to Change the Rate of Post-Judgment Interest
We previously posted about a pending bill that would have a significant effect on California punitive damages appeals by reducing the rate of postjudgment interest, currently set at 10 percent. The bill, SB 1117, is set for a hearing before the judiciary committee of the California Senate on April 30. (See the status page for this bill on the legislature’s website.)
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Vohra v. Cadigan Arbor Park: Trial Court Properly Granted Motion to Strike Punitive Damages
We don’t see many California appeals involving motions to strike punitive damages allegations on the ground that a complaint fails to allege clear and convincing evidence of malice, oppression or fraud. There have only been two such opinions since we started this blog over two years ago: one that affirmed a trial court order denying a motion to strike, and one that affirmed a trial court order granting a motion to strike.
Here’s number three. In this unpublished opinion, the California Court of Appeal (Fourth Appellate District, Division Three) concludes that a trial court properly granted a motion to strike.
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Neman v. Elyaszadeh: $1.3 Million in Punitive Damages Affirmed
In this unpublished opinion, the California Court of Appeal (Second Appellate District, Division Five) affirms a punitive damages award of $1.3 million in an action for breach of contract and fraud arising out of a dispute between the co-owners of a real estate development corporation. The compensatory damages were nearly $13 million.
The defendant argued on appeal that the punitive damages award was procedurally improper because the trial court conducted a bifurcated trial even though the defendant had not requested bifurcation. The Court of Appeal concluded that the defendant had waived the argument because at one point he had filed a trial brief requesting bifurcation.
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McDonald’s Settles Case Involving Punitive Damages for Strip Search
Last year we posted about a case in which McDonald’s was hit for punitive damages because a prank caller supposedly tricked a McDonald’s store manager into performing a strip search on a store employee. Actually, the manager asked her boyfriend, who was not even a store employer, to perform a body cavity search. He ended up sexually abusing the employee in the process.
Amazingly, the Kentucky Court of Appeals ordered McDonald’s to pay $1 million in punitive damages to the manager who authorized the body cavity search, plus another $5 million to the victim of the strip search. The Courier-Journal of Louisville, Kentucky is now reporting that McDonald’s has settled the case for an undisclosed amount.