The Associated Press is reporting that Exxon Mobil Corp. has decided not to seek certiorari from the portion of the Ninth Circuit’s recent opinion ordering Exxon to pay an additional $470 million in interest on the punitive damages award in the Exxon Valdez case. The story indicates, however, that Exxon may yet want to file a cert. petition challenging the part of the opinion that orders Exxon to bear its own costs on appeal ($70 million, consisting mostly of bond premiums). This 20 year litigation saga isn’t over quite yet.
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Magana v. Charlie’s Foods: $500,000 Punitive Damages Award is Excessive Compared to Defendant’s $600,000 Net Worth
The California Court of Appeal (4th District, Division 3) issued an unpublished opinion today, reversing a $500,000 punitive damages award as excessive.
In this sexual harassment case, the defendant asked the Court of Appeal to reverse the punitive damages award in its entirety because the plaintiff failed to meet her burden of introducing meaningful evidence of the defendant’s financial condition. As readers of this blog are well aware, this unique feature of California law is a trap for many an unwary plaintiff’s attorney. (See, for example, these two decisions last week reversing punitive damages awards on this basis.)
The Court of Appeal here agreed that plaintiff’s counsel failed to present adequate evidence of the defendant’s financial condition. (Typed opn., at p. 13 [“If all we had in this record was the evidence that Magana proffered as to Charlie’s financial condition, we would have to reverse and there would be no possibility of punitive damages on retrial . . . “].) Ordinarily, the plaintiff’s failure to present such evidence would have doomed the punitive damages award. But in this case, the court concluded that defense counsel had elicited evidence that the defendant’s net worth was at least $600,000. Based on that testimony, the court concluded that the record could support an award of some punitive damages, but not an award of $500,000 (83 percent of the defendant’s net worth).
Having concluded that the award was excessive, the court was then faced with the question of the proper remedy. The court acknowledged that California law allows appellate courts in this situation to simply reduce the amount of punitive damages without ordering a new trial. Following this approach, the court could have used the “rule of thumb” that punitive damages cannot exceed 10 percent of the defendant’s net worth, and reduced the punitive damages to $60,000. (See Michelson v. Hamada (1994) 29 Cal.App.4th 1566, 1596.)
Instead, the court chose to send the case back to the trial court to allow the jury to decide the proper amount of punitive damages in the first instance. But the court made clear that, for purposes of the retrial, the defendant’s net worth is established at $600,000.
A retrial of this nature seems to offer little upside for the plaintiff. She must incur the expense of a retrial, during which the jury will have to hear much of the evidence from the first trial in order to assess the proper amount of punitive damages. The plaintiff runs the risk that the jury will not award any punitive damages, and even if she wins, any award larger than $60,000 can be challenged as excessive.
I happened to be present in the courtroom when this case was argued. (I was arguing a different punitive damages case that has not yet been decided.) The plaintiff was represented on appeal by Norm Pine, a well-respected appellate specialist. Mr. Pine was asked by the court during argument what remedy the court should order if the court concluded that the defendant’s net worth was $600,000, based on the evidence in the record. My recollection is that Mr. Pine requested a new trial, to allow the plaintiff to present further evidence regarding the defendant’s finances. I don’t think Mr. Pine contemplated a retrial in which the defendant’s net worth would be fixed at $600,000.
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Atlantic Sounding Co., Inc. v. Townsend: U.S. Supreme Court Holds That Punitive Damages Are Available in Maritime Cases
In an unusual 5-4 grouping, Justice Thomas wrote the opinion for the court with Justices Stevens, Souter, Ginsberg and Breyer joining, holding that because punitive damages have long been an accepted remedy under general maritime law, and because neither Miles v. Apex Marine Corp., nor the Jones Act altered this understanding, punitive damages for the willful and wanton disregard of the maintenance and cure obligation remain available as a matter of general maritime law. Justice Alito dissented, joined by Chief Justice Roberts and Justices Scalia and Kennedy, arguing that punitive damages are not available under maritime law. On first impression, unlike the Exxon Shipping case, it does not appear that this case will likely have much impact beyond maritime law.
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Asfour v. Nix: Yet Another Reversal For Lack of Financial Condition Evidence
We are a bit behind on the blog this week as our main blogger, Curt Cutting, is on a well deserved vacation. I just posted a few minutes ago about a decision last week reversing a punitive damage award for lack of financial condition evidence. In going through the stack of punitive damage cases, I just came across this one which is yet another reversal for the same defect in plaintiff’s case. Here, the California Court of Appeal (Second District, Division One) issued an unpublished opinion reversing a $500,000 punitive damage award because “at trial, [plaintiff] presented no meaningful evidence of [defendant’s] financial condition.” It seems like a reversal on these ground happens at least once a month.
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Electronic Funds Solutions, LLC v. Murphy: Court of Appeal Reverses Punitive Damage Award That Is Six Times Defendant’s Annual Income
The California Court of Appeal (Fourth District, Division Three), in an unpublished opinion, reversed a $50 million punitive damages award on the ground that plaintiff failed to put forward evidence of defendant’s net worth. This is a common mistake plaintiff’s lawyers make, as seen in our prior post here. The court went on to point out that a plaintiff may be able to get around this failure of proof in situations where “net worth may be subject to manipulation, requiring the court to consider other financial indicators of a defendant’s ability to pay.” As an example, the court cited Zaxis Wireless Communications, Inc. (2001) 89 Cal.App.4th 577, 582-583 for the proposition that a “$300,000 punitive damage award [can be] upheld despite large negative net worth where defendant had annual gross revenues in excess of $100 million and cash on hand of $19 million.” By contrast, the punitive damage award in this case had to be reversed because: “Here, plaintiffs point to the income calculations for [defendant] used in supporting their compensatory damages claim, in which they determined [defendant] earned $8,128,800 per year in net income. Viewed in this light, the $50 million punitive damage award represented approximately six times [defendant’s] annual income. Such an award would be ruinous to any company, not to mention its owners.”
Will plaintiff’s lawyers learn their lessons?
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Foreign Corporation Not Liable for Punitive Damages Against U.S. Affiliate
Earlier this week, a trial judge in Miami ruled that BDO International, a Brussels-based corporation, cannot be liable for a $351 million punitive damages award against its U.S. affiliate, BDO Seidman.
The punitive damages were awarded in a lawsuit by a Portugese bank that accused BDO Seidman of bungling the audits of the bank’s subsidiary. The jury awarded $170 million in compensatory damages and $351 in punitive damages, for a total verdict of $521 million, the largest verdict ever against a U.S. accounting firm. BDO Seidman appealed. The bank then sued BDO Seidman’s parent company, BDO International, seeking to hold them liable for the punitive damages award, but Miami-Dade circuit judge John Schelsinger issued a directed verdict in favor of the defendant.
Am Law Litigation Daily has more details.
This case has a California connection. The plaintiffs’ lawyer, Steven W. Thomas, has a small firm in Venice. Coincidentally, my daughter went to preschool with his child a few years ago, but I never met Steve. His wife told me he was off trying some big case in Miami. I had no idea it was this big.
UPDATE (6/18/09 at 6:13 pm): After the trial court ruled that BDO International was not liable for the punitive damages award against BDO Seidman, the court allowed the jury to decide BDO International’s liability for the compensatory damages. According to the Legalizer, the jury today ruled in favor of BDO International, finding it not liable for the compensatory damages award.
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Exxon Owes $500 $470 Million in Interest on Valdez Punitive Damages, Says Ninth Circuit
The Ninth Circuit issued an opinion today ordering Exxon Mobil to pay interest on the Exxon Valdez punitive damages award, dating back to September 1996, when the original judgment was entered. As a result, Exxon will owe about
$500$470 million in interest on top of the $500 million in punitive damages and $500 million in compensatory damages it has already paid.As we mentioned in a prior post, Exxon was arguing that the interest didn’t start running until the Supreme Court fixed the final amount of punitive damages. Exxon tried to get the Supreme Court to decide the interest issue, but the court sent the case back to the Ninth Circuit without ruling on the interest issue.
On remand, the Ninth Circuit ruled that the plaintiffs were entitled to interest running from the date of the original judgment because that’s when the plaintiffs’ right to recover punitive damages was “meaningfully ascertained,” even though the actual amount wasn’t decided until 13 years later. The Ninth Circuit also ruled, by a 2-1 vote, that the parties should bear their own costs. Exxon argued that it was entitled to $70 million in costs because it was largely successful in reducing the jury’s $5 billion punitive damages award to $500 million. That argument persuaded Judge Kleinfeld, but not Judge Schroeder or Judge Thomas, who ruled that neither side was the clear winner, so they should bear their own costs.
This is probably the last stop for this 20-year litigation saga, unless Exxon Mobil can persuade the U.S. Supreme Court to step in again.
Hat tip: SCOTUSblog.
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California Supreme Court Denies Request to Re-Publish Buell-Wilson
The California Supreme Court today denied a request to publish the Court of Appeal opinion in Buell-Wilson v. Ford. (See the court’s online docket.) Justice Werdegar dissented.
The order denying publication is good news for defendants, especially products liability defendants, because the Buell-Wilson opinion included some language that would make it more difficult to defeat punitive damages claims in such cases.
For those of you who haven’t been following the Buell-Wilson saga, the Court of Appeal in this case reaffirmed a $55 million punitive damages award even after the US Supreme Court vacated the Court of Appeal’s prior opinion affirming the same award. As far as we know, Buell-Wilson is the largest punitive damages award ever to survive appeal in California.
The California Supreme Court granted review, which had the effect of de-publishing the Court of Appeal’s published opinion. The Supreme Court put the case on hold pending the outcome if Philip Morris v. Williams (Williams III). When the U.S. Supreme Court dismissed Williams III, the Cal. Supreme Court did the same in Buell-Wilson.
The dismissal left Ford on the hook for the judgment, but did not restore the published status of the Court of Appeal opinion. Consumer lawyers Bisnar & Chase asked the Supreme Court to re-publish the Court of Appeal opinion. In California, anyone can submit such a request, although they are rarely granted. Requesting publication in this case was a saavy move, but ultimately unsuccessful.
This will bring an end the Buell-Wilson saga, unless Ford can get the U.S. Supreme Court to step in once again.
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$4.1 Billion Judgment Is Real
When we posted last week about a judgment confirming a $4.1 billion arbitration award (including $3 billion in punitive damages), we received a few emails questioning whether that could possibly be true. People wondered whether an arbitrator could possibly award that much to an individual in an employment dispute.
Oh yes, it’s true. Settle It Now has posted a .pdf copy of the judgment.
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Punitive Damages Awards: How Rare Are They?
Those who oppose legislative or judicial restrictions on punitive damages often argue that punitive damages are rarely awarded. (See, for example, this blog post, or this one, or this book.) I have never quite understood the logic of that argument. Even if punitive damages are rarely awarded, why should we allow them to be imposed arbitrarily in the rare instances when they are imposed? The death penalty is rarely imposed, but no one argues that it can be imposed arbitrarily. Granted, there’s a qualitative difference between deprivation of life and deprivation of property, but you get the point. The debate over punitive damages reform should focus not on the rarity of punitive awards, but on whether unlimited punitive damages are an effective and/or necessary means of deterring harmful conduct.
A new law review article approaches this issue from a different angle. See The Decision to Award Punitive Damages: An Empirical Study, by Theodore Eisenberg, Michael Heise, Nicole Waters, & Martin Wells. It suggests that the rarity of punitive damages awards has been overstated. Although punitive damages are awarded in less than 5% of all trials, they are awarded in over 30 percent of the trials in which plaintiffs request punitive damages. For intentional torts, that number rises to 60 percent. Another interesting tidbit from this article is that, in personal injury cases, judges award punitive damages at a higher rate than juries, but juries award them at a higher rate in nonpersonal injury cases. The authors say this disparity may be attributable to the routing of different types of cases to judges versus juries.
Hat tip: Torts Prof Blog.