California Punitives by Horvitz & Levy

  • NY Times Story on Exxon Shipping Footnote 17

    The New York Times has this story by Adam Liptak about Exxon Shipping‘s footnote 17, in which the Supreme Court stated that it would not rely on research funded by Exxon. Liptak suggests that the footnote may represent a trend away from reliance on empirical work:

    The Supreme Court has often considered academic studies in its decisions, starting with Louis D. Brandeis’s famous 1908 brief collecting medical and other evidence to support laws limiting work hours. Lawyers still call such submissions “Brandeis briefs.” The court’s signal triumph, Brown v. Board of Education in 1954, cited studies from psychologists and others, and citations to empirical work are commonplace these days. The Exxon footnote, many law professors fear, may be a sign that the court is moving in a different direction, at least when studies are financed by interested parties.

    The last clause (“at least when the studies are financed by interestd parties”) is an important qualifier, since the Exxon Shipping opinion relied heavily on empirical studies. Just not the studies funded by Exxon.

    Loyola Law Professor (and H&L academic consultant) Rick Hasen previously posted a critique of footnote 17 on his Election Law blog.

  • Cornell Previews Williams III Argument

    The Supreme Court is set to hear oral arguments in the latest incarnation of Philip Morris v. Williams (Williams III) next week, on December 3. Cornell University Law School’s Legal Information Institute previews the oral argument, summarizing both side’s contentions. (See this post for links to all the briefs.)

    Note: the LII lists two issues presented for review, but the Supreme Court has expressly limited its grant of certiorari to the first issue.

  • Federalist Society Conference Panel: “The Roberts Court and Federalism”

    The second panel at the recent national Federalist Society Conference that had discussions of punitive damages was called “The Roberts Court and Federalism.” The panel was moderated by the Hon. David Sentelle of the DC Circuit Court of Appeals and the panelists included the Hon. Walter Dellinger III, former Solicitor General of the United States, Dean John Eastman of the Chapman University School of Law, Professor Jeffrey Rosen of George Washington University School of Law, and the Hon. Paul Clement, former Solicitor General of the United States.

    Professor Dellinger noted that he sees a tension in two competing visions held by various parts of the “conservative” legal movement between states rights and free markets. He speculated that similar fissures might develop in the “progressive” legal movement during the Obama era between old line liberals who see the states as barriers to civil rights and the broad group of plaintiff’s lawyers and environmentalists who want rigorous state regulation and pro-plaintiff state rules. This change in focus in the liberal legal movement came to the forefront after the massive state attorney general tobacco settlement which showed how attorney generals could become profit centers for their states. Now states rights look more appealing for those who want high punitive damages and greater regulation. Professor Dellinger wonders if this focus on states rights by some in the liberal community will continue when the Obama administration and the Democrats in Congress begin enacting greater regulations at the national level. Once an Obama-run agency determines the “right” balance of regulation, will the states-rights liberals still want to see 50 competing regulatory schemes in the states? And, what will conservative judges do when faced with aggressive federal regulations promulgated by the new powers in Washington?

    Professor Dellinger noted that Justice Scalia’s dissent in BMW and State Farm show he does not believe in using substantive due process to invalidate state decisions even though, as shown by his vote in Exxon Shipping, he clearly believes in the need for limitations on punitive damages.

    Professor Rosen discussed what he referred to as the “constitution in exile” movement supposedly made up of the conservative legal establishment. He also focused on the tensions within the conservative legal movement between states rights and federal power. He discussed a 1984 debate at the Cato Institute between then-Judge Scalia and Professor Epstein of the University of Chicago. Professor Epstein argued that courts should promote economic liberty and Judge Scalia said that the Lochner case should remain dead and that substantive due process should not be revived in any form including promoting economic liberty. Professor Rosen says this tension between states rights conservatives and federal deregulation conservatives continues. He said the BMW v. Gore case is a victory for the deregulation conservatives in that it applied substantive due process to set aside a state punitive damage award. It is a loss for states rights conservatives.

  • Federalist Society Conference Panel: “Civil Litigation Under the Roberts Court”

    At the annual Federalist Society Conference in Washington D.C., there have been numerous interesting panel discussions and speakers. Two of the panels offered interesting insights into punitive damages jurisprudence in the Roberts Court.

    The first panel was moderated by Dean Kenneth W. Starr of the Pepperdine Law School. The panelists were Carter Phillips, nationally known appellate lawyer at Sidley & Austin, Gregory Katsas, Assistant Attorney General, Civil Division, Robert Peck of the Center for Constitutional Litigation, Dr. Roger Pilon of the Cato Institute, and the Hon. Jerry Smith of the Fifth Circuit Court of Appeals. The official title of this panel was “Civil Litigation Under the Roberts Court,” but many of the panelists discussed punitive damages in some detail.

    Carter Phillips noted that the court is taking a much greater interest in business cases generally and such cases are making up a much higher percentage of cases on the docket. He made the point that in his view there has never been a US Supreme Court opinion that has been more ignored and defied than State Farm v. Campbell in that almost no lower court will give effect to its strong suggestion that a 1:1 ratio is the constitutional maximum in cases of high compensatory damages. He also contended that the Roberts court seems to be avoiding the substantive due process aspect of its punitive damages jurisprudence. He pointed to Williams II, Exxon Shipping and Williams III as cases where the due process ratio argument was raised but the court has declined to reach that question. This continues to leave open the mystery of where Chief Justice Roberts and Justice Alito stand on this issue. Will they be like the two justices they replaced (Renhquist and O’Connor) or will they be more like Justices Scalia and Thomas who do not believe there is any substantive due process limit on state punitive damage awards (even though they personally believe in a 1:1 ratio as shown in their concurrence in Exxon Shipping‘s common law holding that such a ratio is important).

    Greg Katsas pointed out that he believes the holding in Williams II on the jury instruction required to show juries the appropriate and inappropriate uses for evidence of harm to others (punishment vs. evidence of reprehensibility) is not likely to drive many jury outcomes in a different direction. He believes it is significant that Justice Souter and others embraced the empirical and other reasons for supporting a 1:1 ratio in Exxon Shipping, but it is too soon to tell if this will spill over into the due process cases.

    Robert Peck referred to the court’s punitive damages docket as the modern obscenity cases: the justices know a too high punitive award when they see it. He found it significant that the court upheld a $500 million plus award of punitive damages in Exxon Shipping in a case where they found Exxon had basically been a good corporate citizen after the spill. Thus, the 1:1 ratio is not going to apply in any but the least egregious cases. He thought a very significant aspect of the opinion was its footnote refusing to credit good scholarship because it was funded by Exxon. He also thought the empirical evidence was very telling and demonstrates that there really is no nationwide problem with punitive damages. He says it is only outlier cases that get attention and social scientists would say that society does not need to worry about outliers. Also, the outliers are mostly low compensatory awards which should have higher ratios.

    He mentioned that he had a punitive damage case where the court of appeals had upheld a $17.5 million punitive award on a $2 million compensatory award. The other side filed cert on the 1:1 ratio argument. It was held for 9 months while Exxon Shipping was decided and then was denied a few days later. He believes the 1:1 statement in State Farm was very weak and noted that the Utah Supreme Court on remand in State Farm upheld a 9:1 ratio and the Supreme Court denied cert.

    He then discussed the Williams III case. He is one of the counsel for Williams. He said that the court’s “prurient interest in this case is huge.” He said the majority of focus in the briefing and oral argument of Williams II was on the excessiveness argument, which the court ultimately did not reach. At oral argument, he said Justice Breyer commented that a 100:1 ratio would be ok if Phillip Morris behaved badly enough. He agreed that the court’s approach to harm to non-parties would ultimately have no effect. At oral argument Justice Scalia said sending the case back to Oregon would be pointless because the Oregon courts could reject the proposed instruction on a different ground. This is, of course, what happened and now the case is back at the court. Peck contends that the Oregon Supreme Court simply applied a 92 year old rule in Oregon requiring a proposed instruction to be perfect.

    At the end of the day, Peck thinks if this case went back to trial with the proper instruction, the result will be the same.

  • Has the Ninth Circuit Created a Circuit Split (or an Intra-Circuit Split) on the Appropriate Remedy for Excessive Punitive Damages?

    My colleague Peder Batalden has raised an interesting question regarding the 9th Circuit’s recent order in Southern Union v. Irvin. (See our recent post about that case here.) Peder notes that the 9th Circuit, after determining that any punitive damages award above $1.2 million would violate due process, remanded the case to the district court to give the plaintiff the option of accepting that amount or opting instead for a new trial.

    The 9th Circuit’s approach is inconsistent with the 11th Circuit’s holding (followed in California) that plaintiffs have no right to a new trial when a court reduces a punitive damages award to the constitutional maximum:

    Giving a plaintiff the option of a new trial rather than accepting the constitutional maximum for this case would be of no value. If, on a new trial, the plaintiff was awarded punitive damages less than the constitutional maximum, he would have lost. If the plaintiff obtained more than the constitutional maximum, the award could not be sustained. Thus, a new trial provides only a “heads the defendant wins; tails the plaintiff loses” option.

    (Johansen v. Combustion Engineering (11th Cir. 1999) 170 F.3d 1320, 1332, fn. 19; see also Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159, 1187-1188 [following Johansen].)

    Peder asks whether the 9th Circuit’s order in Southern Union (which did not cite Johansen or otherwise indicate that the court considered an alternate disposition) is consistent with the 9th Circuit’s approach in other punitive damages cases, and if so, is there now a circuit split between the 9th Circuit and the 11th Circuit on this issue?

    I took a look at the 9th Circuit’s recent punitive damages and I found that the court has been inconsistent in its approach.

    The court tackled this issue head-on back in 2002, when it decided Leatherman Tool Group, Inc. v. Cooper Industries, Inc. (9th Cir. 2002) 285 F.3d 1146, on remand from the Supreme Court. At that time, the 9th Circuit expressly followed the Johansen approach:

    Absent clear authority or even argument from the parties to the contrary, we see no reason to disagree with the Eleventh Circuit’s opinion in Johansen [citation], that an appellate court need not remand for a new trial in every case in which it finds that a punitive damages award exceeds the constitutional maximum. That conclusion usually follows from the fact that a plaintiff would not be entitled to any greater award on remand and therefore cannot be aggrieved.

    Three years later, the court took the opposite approach in Planned Parenthood of Columbia/Willamette Inc. v. American Coalition of Life Activists (9th Cir. 2005) 422 F.3d 949. The court ordered a remittitur of the punitive damages to a nine-to-one ratio and gave the plaintiff the option of accepting the remittitur or opting for a new trial, without addressing Johansen or explaining why the court was departing from its earlier decision in Cooper.

    The following year, the court changed its approach yet again, when it issued its third opinion in the Exxon Valdez litigation. In that opinion, the 9th Circuit ordered a reduction of the punitive damages to $2.5 billion without giving the plaintiff the option of a new trial. (See 472 F.3d 600.)

    So it appears that there is not only a split within the 9th Circuit on this issue, but also a split between the 9th Circuit and 11th Circuit, at least to the extent that Southern Union and Planned Parenthood represent the law of the 9th Circuit.

    In light of the conflicting opinions from prior panels, the panel in Southern Union probably should have called for en banc review. (See Atonio v. Wards Cove Packing Co., Inc. (9th Cir. 1987) 810 F.2d 1477, 1478-79 (en banc).) By failing to call for en banc review, the panel appears to have violated the en banc court’s command in Atonio, but this panel was certainly not alone in doing so.

  • District Court Rejects Challenge To Exxon Valdez Payment Plan

    The Anchorage Daily News is reporting that Judge H. Russel Holland, the district court judge presiding over the Exxon Valdez case, has rejected a challenge to his previously approved plan for allocating the $507.5 million punitive damages award.

    Exxon has paid $383 million of that total (with the rest to be paid after the parties resolve their dispute about the amount of interest Exxon owes), but infighting among the plaintiffs has delayed payment of the $383 million. Judge Holland’s ruling clears the way for payments to begin, unless the party who challenged the payment plan decides to appeal. As the history of this case illustrates, an appeal to the 9th Circuit can result in years of delay.

  • Missouri Court of Appeal Allows $3.75 Million Punitive Damages Award, 75 Times Greater Than Compensatory Damages

    The Missouri Court of Appeals has issued a remarkable opinion allowing $3.75 million in punitive damages in a sexual harassment case in which the compensatory damages were only $50,000.

    The jury in this case awarded $6.75 million in punitive damages against auto parts supplier TNT Logistics of North America. The trial judge reduced the amount to $450,000.

    TNT argued on appeal that even $450,000 was too much and that the plaintiff deserved no more than $250,000. The Court of Appeals said $6.75 million was excessive but that $450,000 was insufficient.

    The Court of Appeals determined that TNT should pay $3.75 million in punitive damages because the extremely reprehensible conduct of the defendant warranted a departure from a single-digit ratio. But the court did not discuss or analyze any of the reprehensibility factors set forth in State Farm v. Campbell, such as whether the conduct involved physical harm, whether the defendant was a repeat offender, or whether the defendant took advantage of the plaintiff’s financial vulnerability. Most of those factors appeared not to be present in the case. It is hard to fathom how the court could conclude that a 75-to-1 ratio passes muster under Campbell.

    Another curious aspect of the case is that the Court of Appeals gave the plaintiff a choice between accepting the $3.75 million or opting for a new trial. If $3.75 million is the constitutional maximum, what would be the point of affording the plaintiff a new trial? Any award higher than $3.75 million would be excessive, so the plaintiff could not possibly hope to do better at the retrial.

  • San Francisco Jury Awards $21 Million in Punitive Damages Against NFL Players Association

    The Associated Press is reporting that a jury in federal district court in San Francisco has awarded $7.1 million in compensatory damages and $21 million in punitive damages against the NFL Players Association in a lawsuit brought by retired players. The plaintiffs alleged that the union failed to properly market their images, and cut them out of licensing deals so that active players could receive bigger royalty payments.

    The AP story says the $21 million is slightly less than 10 percent of the union’s net worth at the start of the year. If the case was tried under California law, it’s the union’s net worth at the time of trial that’s relevant, not the net worth at the start of the year. (See, e.g., Washington v. Farlice (1991) 1 Cal.App.4th 766, 777 [the only relevant financial condition is that existing as of the time of trial].) Given the recent events in the stock market, the union’s current net worth could be quite a bit lower. If the award exceeds the union’s net worth at the time of trial, that could lead to a reduction of the award on appeal. (See Michelson v. Hamada (1994) 29 Cal.App.4th 1566, 1596 [punitive damages are generally are not allowed to exceed 10 percent of the net worth of the defendant].)

  • New W. Va. Supreme Court Justice Wins Election Because of Ketchup and Now Promises to Have Significant Impact on Punitive Damages

    We have previously posted here on a candidate forum in the West Virginia Supreme Court race where two candidates promised they would always vote to review punitive damage awards.

    As readers of this blog are aware, West Virginia is one of the few states without an automatic right of appeal, which has left defendants no remedy after being hit with significant punitive damage awards. Prior posts are here and here. One of the candidates who made that promise was democrat Menis Ketchum who said in response to a question at a candidate’s forum that “he would agree to hear any case involving punitive damages ‘no matter how large or how small.’”

    Ketchum recently won his election to the West Virginia Supreme Court in large part because of a clever series of advertisements where he played off the similarity of his name with the famous condiment. The first advertisement was set in the popular Jim’s Steak and Spaghetti House in Huntington. A man and woman sit at a lunch counter while a waitress serves them. The advertisement begins: “‘What do you know about this Ketchup guy running for the Supreme Court?’ begins the man. ‘Not Ketchup. Ketchum. Menis Ketchum,’ corrects the waitress. The woman sitting at the counter points to a newspaper and says: ‘It says here Menis Ketchum has been in the courtroom for 40 years. He’s a no-nonsense straight shooter and he can’t be bought.’” Apparently, this series of ketchup ads was instrumental in securing new Justice Ketchum’s election.

    The other candidate to make the pledge to review all punitive damage awards, democrat Margaret Workman, also won election. Interestingly, the losing Republican candidate opposed automatic review for all punitive damage awards unless called for by the Legislature.

    This goes to show that the oddest things can have an impact on punitive damages jurisprudence. It also goes to show that party labels on some issues like punitive damages may not tell you everything about a candidate’s views.

    UPDATE (by Curt Cutting): According to the website of the California state bar, there are 6 licensed attorneys in California named “Ketchum.” If any of them wants to run for a spot on the bench, they should take a page from Justice Ketchum’s playbook. The 30 licensed attorneys named “Mayo” also may want to take this into consideration.

  • Oakland Jury Awards $5.5 Million in Punitive Damages Against Landlord

    The San Francisco Chronicle is reporting that a jury in Oakland has awarded $183,000 in compensatory damages and $5.5 million in punitive damages against a landlord who allegedly defrauded tenants out of security deposits. Interestingly, the story quotes the plaintiffs’ attorney as conceding that the punitive damages are excessive and should be reduced by the trial judge. The lawyer also says that, after the punitive damages are reduced, she will ask the judge to award the reduced amount to charity, instead of her clients.