California Punitives by Horvitz & Levy

  • “Foreign Torts and the Commerce Clause: Territorial Limitations on State Power to Impose Punitive Damages”

    The Spring 2008 edition of Mass Torts, a publication of the Mass Torts Litigation Committee of the ABA’s Litigation Section, contains this punitive damages article (ABA membership required) by William E. Thompson of Gibson Dunn’s LA office. The article examines the constitutional problems that arise when a plaintiff seeks punitive damages for out-of-state or out-of-country conduct. Drawing on Commerce Clause principles and the Supreme Court’s recent series of punitive damages decisions, the article offers five guidelines:

    1. Punitive damages must vindicate an identified, concrete state interest.
    2. Generalized assertions that out-of-state or overseas conduct was “unlawful” where it occurred are insufficient.
    3. There must be more than “some” actions emanating from the forum to support asserting punitive damages jurisdiction.
    4. The court must rigorously examine the lawfulness of the defendant’s specific in-state acts, if any.
    5. Where the foreign jurisdiction does not provide for punitive damages, that fact is relevant, especially under the due process fairness litigation.

    The idea of imposing punitive damages for overseas conduct came into the spotlight recently when a group of Nicaraguan farm works sued Dole and others in Los Angeles, complaining about the use of the agricultural chemical DBCP on banana farms in Nicaragua nearly 30 years ago. The case fizzled, however, when the plaintiffs obtained only $2.5 million in punitive damages (a fraction of what they were seeking) and the trial court later tossed out the entire amount.

    Hat tip to Mass Tort Litigation Blog.

  • Grimes v. Rave Motion Pictures: District Court Holds FACTA Punitive Damages Provision Unconstitutional

    The Fair and Accurate Credit Transactions Act (FACTA), 15 U.S.C. sections 1681c(g) and 1681n, prohibits anyone who accepts credit cards for a business transaction from printing more than the last 5 digits of the credit card number or the expiration date of the credit card on any receipt provided to the cardholder. FACTA also provides that any person who “willfully fails to comply” with the act is subject either to actual damages suffered or strict liability damages of not less than $100 and not more than $1000, and such amount of punitive damages as the court may allow. This act has spawned numerous class action lawsuits across the country. The Northern District of Alabama ruled that those provisions of FACTA as applied in that case are unconstitutional under the Due Process Clause. The court first found that the strict liability provision standing alone was unconstitutional because there is no criteria for determining whether the strict liability award should be $100 or $1000 or any amount in between. To the extent the higher award was given as a form of punishment, that would run into difficulties if punitive damages were also given in that the defendant would be punished twice for the same conduct.

    The court went on to find that the statute’s allowance of punitive damages where there are no actual damages (i.e., strict liability awards between $100 and $1000) is independently unconstitutional because “to impose punitive damages without the suffering of any harm is inherently disproportionate” and thus suspect under State Farm v. Campbell. The court distinguishes these damages from nominal damages, which in some cases are a substitute for actual damages. But, here, the damages “are by statute expressly not compensatory in nature.”

    The reasoning in this opinion, especially if affirmed on appeal, could have an important impact on a host of similar statutes.

    Hat Tip: Overlawyered.

  • Merck Wins Appellate Reversals in Two Vioxx Cases With Big Punitive Damages Awards

    Merck scored two big appellate victories today in Vioxx cases in New Jersey and Texas. In the Texas case, Merck & Co. v. Ernst, a jury had awarded $253.4 million, including $229 million in punitive damages, to a plaintiff who claimed Vioxx caused her husband’s death. That judgment was reduced to $26 million under Texas law capping damage awards. The Texas appellate court (the Fourteenth Court of Appeals) reversed the judgment in its entirety, ruling there was “no competent evidence that a blood clot triggered by Vioxx ingestion” caused Mr. Ernst’s death. This follows on the heels of another recent appellate win for Merck in a Texas Vioxx case in which the jury awarded $25 million punitive damages.

    In the New Jersey case, McDarby v. Merck & Co., the Appellate Division of the Superior Court of New Jersey tossed out a $9 million punitive damages award. The court also reduced a portion of the $4.5 million compensatory damages award that was based on the state’s consumer fraud statute.

    In light of Merck’s string of appellate victories, the WSJ law blog asks whether Merck jumped the gun in reaching a $4.85 billion Vioxx settlement last November.

    Hat tip: Texas Appellate Law Blog.

  • Stahl v. Acuna: CA Court of Appeal Vacates Another Punitive Damages Award Because Plaintiff Failed to Present Evidence of the Defendant’s Net Worth

    In this unpublished decision, the California Court of Appeal (Second Appellate District, Division Four) reversed two $40,000 punitive damages awards because the plaintiffs failed to present evidence of the defendants’ financial condition. As we observed in a previous post, California has a unique requirement that a plaintiff must introduce evidence of the defendant’s financial condition in order to recover punitive damages. The California Supreme Court announced this rule in 1991, but as we said in our prior post, “every year there are a few appellate decisions reversing a punitive damages award on this basis.” Perhaps we underestimated, since this is already the second such decision this year.

    The Stahl opinion also illustrates the operation of procedural forfeiture rules that may be surprising to those who are unfamiliar with this area of litigation. The plaintiffs argued that the defendants forfeited their objection to the lack of financial condition evidence by not raising that point in the trial court. The court rejected the plaintiff’s forfeiture argument because this particular issue need not be raised in the trial court to preserve it for appeal. On the other hand, the court agreed with the defendants’ argument that the plaintiffs had forfeited their counter-argument that their failure to present financial condition evidence was due to the defendant’s noncompliance with subpoenas for the information. In other words, the defendants did not need to raise their argument in the trial court, but the plaintiffs needed to anticipate the argument and make their counter-arguments in the trial court.

    While these forfeiture rules may seem counterintuitive at first, they flow logically from the rule that the plaintiff has the burden of introducing financial condition evidence, and the rule that a defendant can always challenge a plaintiff’s failure to present substantial evidence, even if that issue wasn’t raised below. On appeal, the plaintiff is not in a position to complain about the belated challenge to the sufficiency of the evidence, since the plaintiff was on notice all along that it had to prove the elements of its claim. Nevertheless, this is an area of the law where the forfeiture rules can present a trap for the unwary plaintiff.

  • Williams Cert. Petition Moved to May 29 Conference

    Yesterday we reported that the U.S. Supreme Court did not rule on the second cert. petition in Philip Morris v. Williams at its May 22 conference, even though the court’s online docket indicated that the petition was on the May 22 conference list. Today the court’s docket has been updated to reflect that the Williams petition has been moved to the court’s May 29 conference.

  • Medical Blog Criticizes “Regulation by Lightning Bolt”

    A post at the medical blog Kevin M.D. criticizes the use of punitive damages in medical device litigation. The author of the blog post is Mark Herriman, a Jones Day lawyer who blogs at the Drug and Device Law Blog. He contends that “[r]andomly imposing breathtaking damages is regulation by lightning bolt, not a carefully calibrated regulatory policy. . . . Zeus should dispense justice only in ancient Greek myths, not in modern American courts.”

  • No Ruling Yet on Second Cert. Petition in Philip Morris v. Williams

    As we noted in a prior post, the second cert. petition in Philip Morris v. Williams was distributed for consideration at the Supreme Court’s May 22 conference. (See the online docket.) Today the Supreme Court has released its Order List showing the rulings made at the May 22 conference. The list makes no mention of Williams. Apparently, the court has deferred consideration of that petition to a later conference.

  • West Virginia Supreme Court Declines to Hear Case Involving $270 Million in Punitive Damages

    Legal Newsline reports that the West Virginia Supreme Court declined to consider a case involving a $404 million verdict against NiSource Inc., an Indiana-based energy company. The case involves NiSource’s alleged failure to make royalty payments to property owners who had leased gas rights to the utility. NiSource says it will seek a stay of the judgment so it can petition the U.S. Supreme Court for certiorari.

  • Will the Exxon Valdez Case Produce a Unanimous Opinion?

    Linda Greenhouse has an interesting article, “At Supreme Court, 5-to-4 Rulings Fade, but Why?” noting the substantial decline in 5-4 opinions from the United States Supreme Court this term. So far this term, only one of 35 opinions has been decided 5-4, whereas at this point last term, 13 out of 41 had been decided 5-4. Greenhouse posits that the reasons for this are “liberals using their limited leverage to exact some modest concessions as the price of helping the conservatives avoid another parade of 5-to-4 decisions.” As Greenhouse points out, three recent cases resulted in majority opinions with 6 or 7 justices in cases that might have been thought of as candidates for 5-4 decisions (the Indiana voter id law, the Kentucky lethal injection case, and the federal law on child pornography). This trend limits the influence of Justice Kennedy who last term was in the majority in all 24 5-4 decisions and only dissented in 2 of the 68 cases decided. This term, Justice Kennedy has already dissented 5 times.

    The interesting question for purposes of this blog is how this potential trend toward greater agreement among the justices will play out in the Exxon Valdez case. By not focusing on the constitutional limits on punitive damages, Justices Scalia, Thomas and Ginsberg will not need to adhere to their prior dissents finding no due process limit on punitive damages. This potentially opens up a larger coalition to reverse the award. There is also a suggestion by Greenhouse that the recent cases that one might have expected to be 5-4 were more fact-driven opinions that did not rely on broad rules, which potentially enabled more justices to sign on. However, as we posted earlier, the oral argument in the Exxon case suggested a divided court. The question is how divided? Stay tuned to this blog to find out.

  • California Courts Number One?

    We previously blogged here about the Chamber of Commerce rankings which placed the California courts in 44th place nationwide for having a reasonable and balanced tort liability system for U.S. business. A new article by Stephen J. Choi, G. Mitu Gulati, and Eric A. Posner, “Which States Have the Best (and Worst) High Courts?” concludes, contrary to the Chamber of Commerce rankings, that the top five state court systems in the nation are California, Arkansas, North Dakota, Montana, and Ohio.

    Hat Tip: How Appealing.

    UPDATE: (by Curt Cutting): The two studies aren’t quite as inconsistent as they might seem at first glance. The Choi, Gulati & Posner article ranks only the highest courts of each state, not the state’s court system as a whole. Also, the Choi, Gulati & Posner rankings are based on three objective criteria: influence, independence, and productivity. By contrast, the study sponsored by the U.S. Chamber surveyed corporate counsel about their perceptions of the fairness of each state’s judicial system. It’s not hard to imagine how a state could excel under the Choi et al. criteria but still fare poorly in the Chamber survey.