Last April we blogged about a $3.5 million punitive damages award against USAA in an insurance bad faith case in San Diego. The case generated a fair amount of publicity because the plaintiff was a Marine captain serving in Iraq. USAA appealed from the judgment, but the online docket reveals that a notice of settlement was filed on February 20.
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Blanks v. Seyfarth Shaw: $15 Million Punitive Damages Award Reversed
The California Court of Appeal (Second District, Division Three) issued this published opinion last week, reversing a $15 million punitive damages award in a legal malpractice action brought by Tae Bo creator Bill Blanks against the law firm Seyfarth Shaw and one if its partners, William Lancaster.
The opinion doesn’t contain any analysis of punitive damages issues per se, because the court found that the entire judgment had to be reversed due to instructional errors committed by the trial court during the liability phase of the trial. Nevertheless, we thought the opinion merited a brief mention here because the $15 million punitive damages award was one of the largest punitive awards generated by the California courts in 2005, and the total verdict was the 7th largest that year.
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Editorial Touts Deterrent Effect of Punitive Damages
The South Carolina legislature is considering a proposal to cap punitive damages at $250,000. This editorial in the Greeneville Times criticizes that proposal, arguing that punitive damages are necessary to deter corporations from distributing products that a dangerous to the public.
The editorial cites the salmonella contamination scandal involving Peanut Corporation of America (in neighboring Georgia) as an example of the sort of corporate behavior that punitive damages deter. That seems like an odd example. Georgia law allows punitive damages, and has no cap on punitive damages in products liability cases. In other words, the Peanut Corporation of America was exposed to claims for punitive damages up to the maximum amounts permitted by the Due Process Clause. Indeed, someone has already sued PCA for punitive damages. Apparently, the possibility of a large punitive damages award did nothing to deter PCA from shipping tainted products. Does that example really support the editorial’s argument?
Whenever a state considers imposing caps on punitive damages, opponents tout the deterrent value of punitive damages and argue that the state will become more dangerous for consumers if the cap is adopted. Someday, someone will conduct a study comparing the states that have adopted caps (or have outlawed punitive damages altogether) with the states that haven’t, to determine whether citizens in the uncapped states really are safer.
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Tobacco Plaintiffs Recover $5 Million in Punitive Damages
Bloomberg reports that the jury in the Hess retrial awarded $3 million in compensatory damages and $5 million in punitive damages, a far cry from the $130 million the plaintiffs requested. Altria Group, Inc., the parent company of Philip Morris, says it will appeal.
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Tobacco Plaintiffs Seek $100 Million in Punitive Damages
The plaintiffs in Hess v. Philip Morris, which we blogged about last week, have asked the jury to award $30 million in compensatory damages and $100 million in punitive damages.
As readers of this blog know, punitive damages awards of that size rarely survive appeal. But it’s possible that the plaintiffs are asking for such a large number because they know, as the Cal Biz Lit blog has pointed out, that statistical studies show that a large request for punitive damages is the most significant predictor of a large punitive damages award. So the plaintiffs may not get $100 million, but they’ll get more than they would have gotten if they had asked for something less.
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Utah District Court’s Order Reducing $63 Million Punitive Damages Award Now Available
As a follow-up to last week’s post about the District of Utah opinion that cut a $63 million punitive damages award to $3.6 million (for a 1-to-1 ratio with the compensatory damages), here’s a link to the copy of the opinion. The punitive damages discussion begins on page 15. The Westlaw citation is 2009 WL 361267.
In addition to the ratio analysis, the opinion is interesting because it highlights a significant difference between Utah law and California law. Unlike California, Utah does not require plaintiffs to present evidence of the defendant’s financial condition as a prerequisite to obtaining a punitive damages award. Accordingly, the district court here rejected the defendants’ argument that the plaintiffs failed to introduce sufficient evidence of the defendants’ financial condition, even though that argument likely would have succeeded in California.
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Utah District Court Cuts $63 Million Punitive Damages Award to $3.6 Million
The Salt Lake Tribune reports that U.S. District Judge Tena Campbell has dramatically reduced a jury’s punitive damages award in a lawsuit between two rival insurance companies. The jury awarded $63 million in punitive damages but Judge Campbell, in response to the defendant’s post-trial motions, reduced the punitive damages to $3.6 million, equal to the amount of the jury’s award of compensatory damages.
As we have observed, a greater number of courts have been limiting punitive damages to a one-to-one ratio recently, at least in cases involving substantial compensatory damages awards. I have written a short paper on this topic which will be published by the Washington Legal Foundation later this month.
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La Baw v. Campbell: Court of Appeal Vacates $100,000 Punitive Damages Award Against Defendant With Negative Net Worth
In this unpublished opinion, the California Court of Appeal (Fourth District, Division Two) vacated a punitive damages award of $100,000 because the defendant could not afford to pay.
We have previously blogged about California’s rather unique rule that plaintiffs seeking punitive damages must present evidence of the defendant’s financial condition. As we observed, California plaintiffs routinely overlook this rule and end up losing their punitive damages awards on appeal.
Even when plaintiffs do meet their burden, California courts will reduce punitive damages awards that are disproportionate to the defendant’s ability to pay. For individual defendants, the courts have adopted a rule of thumb that any award that exceeds 10 percent of the defendant’s net worth is excessive. (See Michelson v. Hamada (1994) 29 Cal.App.4th 1566, 1596.)
This case is a little unusual because the evidence showed that the defendant had a negative net worth. He testified that his debts exceeded his assets, and the plaintiff presented no evidence to the contrary. The court therefore concluded that the defendant is unable to pay any punitive damages award. It vacated the award in its entirety and did not afford the plaintiff a new trial on this issue, because she had a full and fair opportunity to present her evidence in the first trial. (See Kelly v. Haag (2006) 145 Cal.App.4th 910, 914.) That aspect of the opinion conflicts with this recent unpublished decision, in which the Court of Appeal inexplicably gave the plaintiff a second chance to present evidence of the defendant’s financial condition after failing to do so the first time around.
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Jury Rules For Plaintiff in First Phase of Retrial After Reversal of $145 Billion Punitive Damages Award
The Associated Press is reporting that a Florida jury ruled in favor of plaintiff Elaine Hess in the first phase of the first trial in a series of cases brought by 8,000 Florida smokers. The jury ruled that the plaintiff’s husband, Stuart Hess, a longtime chain smoker, was addicted to nicotine before he died of lung cancer. The trial will now consider the issues of liability and, if necessary, damages.
As we noted here, these cases are the result of the failed Engle class action, in which Florida smokers collectively obtained an award of $145 billion in punitive damages, the largest civil award in U.S. history. In 2006, the Florida Supreme Court overturned that award, ruling that the plaintiffs had to prove individually that cigarettes caused their illnesses.
Hat tip: How Appealing
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Georgia Jury Awards Punitive Damages Against California Corporation
The Atlanta Journal-Constitution reports that a Georgia jury has awarded $250,000 in compensatory damages and $2 million in punitive damages against Vesta Strategies, a now defunct California investment company. According to the plaintiff’s lawyers, Vesta defrauded victims nationwide and the FBI has opened an investigation.
If other plaintiffs come forward seeking punitive damages, this litigation could raise some interesting questions. Will the court in the next case take the first punitive damages award into account when deciding whether further punitive damages are appropriate? Will this become a race between plaintiffs, competing to see who can get a punitive damages award and enforce it before the company’s assets are gone, leaving subsequent plaintiffs unable to recover their actual losses? Many law review articles have been written about the problems presented by punitive damages claims for mass torts, but the courts have yet to devise any workable solution.