California Punitives by Horvitz & Levy

  • “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.

  • “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.