California Punitives by Horvitz & Levy

  • Oregon Seeks To Collect $82 Million of Adidas’s $137 Million Punitive Damages Award Against Payless

    According to this Bloomberg.com report, the state of Oregon has filed papers to protect its right to collect a share of the $137 million punitive damages award Adidas recovered from Collective Brands, Inc. (the owner of Payless Shoes) in a trademark infringement case.

    An Oregon statute provides that 60 percent of all punitive damages awards go to the state. In a case decided earlier this year, the Oregon Court of Appeals recognized the state’s right to intervene in a case with a large punitive damages award. In that case, the parties had reached a settlement that did not involve the state. The state, a non-party, appealed the judgment of dismissal, arguing that the parties could not bargain away the state’s share of the award. The Court of Appeal, on its own motion, called for briefing on the state’s standing to pursue the appeal, and ultimately ruled in favor of the state.

  • Mercer Law Review Casenote: “Who’s on First? Why Philip Morris USA v. Wililams Left Juries Confused . . .”

    The Spring 2008 edition of the Mercer Law Review has a casenote on Philip Morris v. Williams entitled “Who’s on First? Why Philip Morris USA v. Williams Left Juries Confused About Whose Injuries Can Be Considered When Determining Punitive Damages.” (I don’t have a link to the article, but the Westlaw citation is 59 MERLR 1043.)

    The note, written by Steven Moulds, is largely a summary of the Williams decision and the Supreme Court’s recent series of punitive damages decisions. But the note concludes with a few interesting observations. Among them is the observation that only Justice Thomas, and not Justice Scalia, dissented on the ground that the Constitution does not protect defendants from excessive punitive damages. The article notes that Justice Scalia consistently dissented on that basis in the Court’s prior punitive damages cases, but he did not do so in Williams. He did not write a separate opinion on that basis nor did he join Justice Thomas’ dissent. Instead he joined Justice Ginsburg, who did not address whether the Constitution limits the jury’s discretion to award punitive damages.

    The article suggests that “Justice Scalia’s shift from Justice Thomas’s to Justice Ginsburg’s dissent might suggest that he is backing down from his previous dissents in Gore and Campbell, and that he may accept some limitations on punitive damages in future cases.” It never occurred to me before that Justice Scalia’s nonparticipation in Justice Thomas’s dissent might suggest a shift in Justice Scalia’s views. I had always assumed Justice Scalia did not think it necessary to reiterate his standing objection to the court’s due process excessiveness analysis in Williams because the Court did not reach that issue in Williams. We may have to wait some time to learn whether Justice Scalia’s views have shifted. Although the forthcoming decision in the Exxon Valdez case could conceivably shed some light on the issue, in all likelihood that decision will not delve into any Constitutional issues.

  • Plaintiffs in “Rocky Flats” Case Don’t Expect to Collect on $200 Million Punitive Damages Award

    This story from the Rocky Mountain News reports that plaintiffs who won a massive judgment against Dow Chemical and Rockwell International (see our prior posts here and here) don’t expect to collect any of it. Said one of the plaintiffs, “I’m realistic. If you got a dollar you’d be lucky. You don’t count on it.”

    The plaintiffs’ skepticism is warranted. In our experience, appellate courts heavily scrutinize these kind of jackpot awards. Often, a close review of the record in these cases indicates that the awards lack a solid legal foundation, and that the large award is more a reflection of the passions and emotions of the jurors than any legitimate legal basis. I certainly don’t have any data to back this up, but it seems that awards of this size have a greater likelihood of being vacated altogether (as opposed to merely being reduced), whereas more modest awards are more likely to survive appellate scrutiny. That’s true in most jurisdictions anyway, but perhaps not in West Virginia.

  • “Exxon Valdez Ruling Could Reshape Tort Law”

    LegalNewsline has this story about the impact of the forthcoming decision in the Exxon Valdez case. The article quotes Ted Frank, director of the American Enterprise Institute’s Legal Center for the Public Interest (and blogger at Overlawyered):

    “It has the potential to be a major case,” Frank said. “The court could remove strictures on punitive damages and leave it to the discretion of the lower courts and juries, and if that happens that obviously gives free rein for gigantic punitive damages.”

    He said the “more likely scenario” is that the high court “does something” to the punitive damage verdict against Exxon, noting that the justices decided to take the case when they could have declined it.

    Our own assessment of the likely outcome, based on our review of the oral argument transcript, was that: “The most likely outcome seems to be a split-decision affirming the plaintiffs’ entitlement to punitive damages, but holding the amount of the award excessive under federal common law.“

  • Wow – Taxpayers to Foot Bill for $200 Million in Punitive Damages for Rocky Flats Nuclear Plant Activities?

    As we previously reported, Rockwell International and Dow Chemical Company were whacked for $350 million in a case brought by landowners who claimed that contamination from the Rocky Flats nuclear weapons facility reduced their property values. The judgment included punitive damages of $111 million against Dow and $89 million against Rockwell, plus an award of interest dating back to 1990, which could bring the total judgment to more than $900 million.

    The Denver Post now reports that, “The ruling in the 18-year-old case was stayed by[Judge] Kane to give Dow and Rockwell time to appeal.” That certainly helps avoid one major stumbling block faced by defendants hit with mega-awards – how to bond the judgment to stay enforcement pending appeal. The Post also reports that the defendants “were indemnified by the federal government in the case, meaning taxpayers will ultimately pay any judgment and the companies’ legal fees.” Ouch. Interestingly, these other reports about the case don’t mention the indemnity angle (though they mention that Boeing is liable for Rockwell’s portion of the judgment because Boeing acquired Rockwell).

  • Marcisz v. Movie Theatre Entertainment Group: CA Court of Appeal Upholds New Trial on Punitive Damages Because Jury’s Award Was Excessive

    In this unpublished opinion, the Fourth Appellate District, Division One, upheld an order granting a new trial on the issue of punitive damages. The plaintiffs, movie theater employees, claimed they were subjected to a hostile work environment and discrimination because of their gender. The jury agreed and awarded a total of $1.4 million in compensatory damages to the four plaintiffs, plus a total of $6 million in punitive damages.

    The trial court granted a new trial on the punitive damages, on the ground that the award was excessive in light of the defendant’s financial condition. The Court of Appeal agreed. Although the plaintiffs pointed to the defendant’s annual revenues of over $20 million, the Court of Appeal said that was only “half the equation,” because it ignored the defendant’s expenses and liabilities. Taking everything into account, the defendant had a negative net worth (-$300,000) and a negative annual income. Thus, the Court of Appeal concluded that “the $6 million punitive damages total far exceeded UltraStar’s ability to pay and the jury clearly should have reached a different verdict.”

    Incidentally, the plaintiffs made an unsuccesful argument that illustrates a pattern in cases like this. The plaintiffs, citing Mike Davidov Co. v. Issod (2000) 78 Cal.App.4th 597, argued that the defendant forfeited its right to challenge the award as excessive in relation to its net worth. In the Mike Davidov case, the court found a waiver because the defendant refused to comply with a court order directing it to turn over evidence of its financial condition. Plaintiffs who fail to present sufficient evidence of the defendant’s financial condition (as required by a unique rule of California procedure that plaintiffs frequently overlook), often attempt to save their punitive damages claim by citing the Mike Davidov case and arguing forfeiture, even where, as here, they never obtained any court order requiring the defendant to turn over financial condition information. In keeping with the pattern, the Court of Appeal rejected the plaintiffs’ argument because of there was no evidence the defendant violated any court order: “this contention is not supported by any references to the record showing that UltraStar failed to respond to a valid court order to produce financial records.”

  • Still No Ruling On Cert. Petition in Williams II

    As we noted in a prior post, the Supreme Court originally distributed the third cert. petition in Philip Morris v. Williams for consideration at its May 22 conference, but when the court issued its order list for the May 22 conference, the court did not rule on Williams II. The court then redistributed the case for consideration at its May 29 conference. Today, the order list for that conference is now available, and there’s still no ruling on Williams II. Does this mean (as my co-blogger Jeremy Rosen has suggested) that the Supreme Court is planning to issue a summary reversal and they’re taking additional time to draft their opinion? Are they having trouble reaching a decision on whether to grant cert.? Are they holding the case pending the disposition of the Exxon Valdez case (which seems unlikely, since the excessiveness issue in that case arises under federal common law rather than the Due Process clause, as in Williams)?

    UPDATE: SCOTUSblog reports that Williams II has been re-distributed for the court’s June 5 conference.

    FURTHER UPDATE: A reader points out: “Actually, it is the third petition for cert. in this saga. The first was GVR’d in light of State Farm, the second granted, and now this one.” Good point. We’ve corrected our post accordingly. We’re still referring to this as Williams II for now, since the Supreme Court’s opinion (if cert. is granted) will be its second in this case.

  • California Attorney’s Fees: New California-Centric Blog on Attorney’s Fees

    Marc Alexander and William M. (Mike) Hensley of Adorno Yoss Alvarado & Smith have launched a blog called California Attorney’s Fees, with a mission to: “provide a resource tool to practitioners, jurists, and the public about the law governing attorneys’ fees/costs awards, but focused on the law and pragmatic experiences in California state or California federal judicial forums.” The blog launched in May and is off to a roaring start, with a steady stream of informative and thoughtful posts.

    Hat tip: UCL practitioner.

  • Plaintiff’s Lawyer in Texas Vioxx Case Suggests Appellate Justices Were Influenced by Campaign Contributions

    Yesterday we blogged about Merck’s appellate victories in two Vioxx cases that involved large punitive damages awards. Mark Lanier, the plaintiff’s lawyer in the Texas case, has issued a press release suggesting that he lost because the “activist” appellate justices were swayed by campaign contributions: “This decision was handed down by a group of judges who regularly accept campaign contributions from law firms representing corporations that appear in their courts. We will appeal this decision to the United States Supreme Court if necessary.”

    Hat tip: WSJ Law Blog.

    Update: Ted Frank at Overlawyered has some harsh words for Mark Lanier. Frank suggests that Lanier may have violated the Texas rules of professional conduct when he implied that campaign contributions from law firms influenced the appellate court to rule in Merck’s favor.

  • Chesapeake Energy, Diasappointed with West Virginia Supreme Court’s Refusal to Hear Case, Cancels Plans for New West Virginia Headquarters

    We recently blogged about the West Virginia Supreme Court’s decision not to review a case involving a $404 million judgment, including $270 million in punitive damages, against energy company NiSource Inc. According to the Charleston Gazette, Chesapeake Energy, a co-defendant in that case, is so angry with the denial of review that it is canceling its plans to build a new $30 million headquarters in Charleston. A company vice president said in an official statement: “While we hold a less significant amount of the liability in the verdict, we do believe it sends a profoundly negative message about the business climate in the state. The reality of this decision is that nobody in West Virginia, similarly situated, has a guaranteed right of appeal in the judicial system.”

    This has all taken place after West Virginia placed dead last in a national survey of corporate lawyers about the reasonableness of each state’s tort liability system. Now we know at least one company exec who isn’t going to change his vote any time soon.