The U.S. Supreme Court has placed McGee v. Tucoemas Federal Credit Union on its April 11 conference list, according to the on-line docket. As we previously blogged, here and here, the question presented is: “Federal credit unions are federal instrumentalities chartered under the Federal Credit Union Act, 12 U.S.C. §§ 1751 to 1795k. Does their authority under that Act to ‘sue and be sued,’ 12 U.S.C. § 1757(2), waive their immunity as federal instrumentalities from punitive damage claims? The decision of the Court of Appeal of the State of California, which allowed the punitive damage claims here, declined to follow decisions of the Sixth, Eighth, Ninth, and Eleventh Circuits of the United States Court of Appeals.”
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U.S. Supreme Court Will Consider Exxon v. Grefer Cert. Petition on April 18
The U.S. Supreme Court has placed Exxon v. Grefer on its April 18 conference list, according to the court’s online docket for that case. As we mentioned in a prior post, this case involves a $112 million punitive damages award and involves the following issues (as framed by Exxon’s cert. petition):
1. Whether the Court of Appeal on remand denied due process when it continued to punish ExxonMobil for harm to nonparties, left intact a punitive damages award without finding that ExxonMobil’s conduct was reprehensible as it affected plaintiffs, and held that the jury could “consider the harm suffered by both parties and non-parties regardless of the type or similarity of harm suffered.”
2. Whether, contrary to the decisions of other federal and state appellate courts, a court may remedy a concededly tainted punitive damages trial by affirming the maximum punitive damages award due process permits, rather than by ordering a new trial.
3. Whether due process permits punitive damages twice the amount of compensatory damages in a case of economic injury when compensatory damages are $56 million and plaintiffs’ actual harm is no greater than $1.5 million.
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Answers to Petitions for Review in Bullock v. Philip Morris
We’ve been tracking the developments in Bullock v. Philip Morris, including the petitions for review filed by both parties. Now the parties have filed their answers to the opposing petitions. The plaintiff’s answer agrees with Philip Morris that review should be granted on the first issue raised in Philip Morris’s petition, namely, the proper scope of retrial after an appellate court reverses a punitive damages award because of a legal error (specifically, the failure to instruct the jury not to impose punishment for harm nonparties). Philip Morris, on the other hand, takes the position that none of the plaintiff’s issues merit review.
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Woody Allen Sues American Apparel for Punitive Damages
According to Variety, famed director and actor Woody Allen has sued American Apparel, Inc. for compensatory and punitive damages: “The lawsuit complained of a billboard featuring a frame from ‘Annie Hall,’ a film that won Allen a best director Oscar. The image showed Allen dressed as a Hasidic Jew with a long beard and black hat and Yiddish text meaning ‘the holy rebbe.’ The words ‘American Apparel’ also were on the billboard. The billboard falsely implied that Allen sponsored, endorsed or was associated with American Apparel, said the lawsuit, which seeks at least $10 million in compensatory damages and unspecified punitive damages.”
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The Puzzle of Punitive Damages
Jacob Sullum at Reason has posted commentary on the recent New York Times article on punitive damages that we blogged about here. Sullum argues: “Last week The New York Times ran a front-page story by Adam Liptak that describes the dismay caused in foreign courts by the American concept of punitive damages. It’s not just that such awards are sometimes jaw-droppingly high; it’s also that they serve a purpose, punishment/retribution, that is usually said to be a function of the criminal justice system, where defendants enjoy stronger procedural safeguards than they do in civil courts. Punitive damages—which are not really damages at all, since compensation for injuries is not the goal—invite juries to pick numbers out of thin air, with little or no statutory guidance, as an expression of how reprehensible they think the defendant’s conduct was. And while the Supreme Court has said the Due Process Clause imposes some limits on the ratio of punitive to compensatory damages, it has not taken the next logical step of saying that when the goal is explicitly punishment rather than compensation, defendants should receive all the protections they would get in a criminal case, including a higher burden of proof for the accuser.”
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Punitive Damages Articles from Charleston Law Review Symposium Now Available Online
Our prior posts have discussed some of the papers generated by the Charleston Law Review symposium on punitive damages last September. TortsProfBlog now has this post linking to online versions of all the articles from the symposium volume of the Charleston Law Review.
Here are the titles of all articles (see the TortsProfBlog post for the links):
Anthony J. Sebok, After Philip Morris v. Williams: What is Left of the “Single-Digit” Ratio?
Anthony J. Franze, Clinging to Federalism: How Reluctance to Amend State Law-Based Punitive Damages Procedures Impedes Due Process.
Neil Vidmar & Matthew W. Wolfe, Fairness Through Guidance: Jury Instruction on Punitive Damages after Philip Morris v. Wiliams.
Christopher J. Robinette, Peace: A Public Purpose for Punitive Damages.
Keith N. Hylton, Due Process and Punitive Damages: An Economic Approach.
Victor E. Schwartz & Christopher E. Appel, Putting the Cart Before the Horse: The Prejudicial Practice of a “Reverse Bifurcation” Approach to Punitive Damages.
Elizabeth J. Cabraser & Robert J. Nelson, Class Action Treatment of Punitive Damages Issues After Philip Morris v. Williams: We Can Get There From Here.
Byron G. Stier, Now It’s Personal: Punishment and Mass Tort Litigation After Philip Morris v. Williams.
Michael L. Rustad, The Uncert-Worthiness of the Court’s Unmaking of Punitive Damages.
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U.S. Supreme Court Holds That Punitive Damages Are Subject to the Eighth Amendment
In 1989, in Browning Ferris Industries v. Kelco Disposal, Inc., the Supreme Court held that the Excessive Fines Clause of the Eight Amendment does not apply to awards of punitive damages in cases between private parties. Today, the Court surprisingly overturned Browning-Ferris and held that punitive damages imposed by state courts are in fact governed by the Eighth Amendment. It remains to be seen how the overlay of Eighth Amendment jurisprudence will impact the ratio analysis set forth in State Farm v. Campbell and other cases; a colorable argument can be made that any awards exceeding compensatory damages are inherently excessive and therefore unconstitutional. Read the Court’s opinion here.
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Cert. Denied in Chemtall v. Stern
According to the Order List posted today, the U.S. Supreme Court has denied the petition for certiorari in Chemtall v. Stern, a case involving the constitutionality of a reverse bifurcation procedure in which punitive damages issues are resolved before liability and compensatory damages. (See prior posts here and here.)
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A New York Court Holds No Punitive Damages for Bedbugs
According to the New York Law Journal, a New York trial judge found that a lawsuit over bedbugs could not include a claim for punitive damages because the bugs were merely a nuisance. However, the court let go forward the negligence claims of two Maryland tourists for bites they sustained during a two-night stay at the theater district’s Milford Plaza. In holding that plaintiffs could not seek punitive damages, the court had to distinguish a Judge Posner 7th Circuit opinion which had upheld a significant punitive damage award for bedbugs.
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Garza v. Asbestos Corporation: Court of Appeal Affirms $10 Million Punitive Damages Award
The First Appellate District, Division Three, upheld a $10 million punitive damages award in an asbestos case. The opinion is only partially published, and the punitive damages issues are discussed in the unpublished portion of the opinion. The opinion was authored by Judge Horner, a superior court judge sitting on the Court of Appeal by temporary assignment.
The ratio of punitive-to-compensatory damages, six-to-one, is not particularly noteworthy by itself. But the court’s reasoning in upholding the award is surprising in several respects, and seems to depart from established principles of California law.
First, in upholding the jury’s finding that the defendant acted with malice and oppression, the court relied on historical studies, dating back to 1918, showing a link between asbestos and health problems. But the court cites no evidence that the defendant knew, back in the 1930’s through the 1950’s when it sold the products at issue, that those particular products would generate the sort of exposure levels that might cause health problems. That is an important element of a punitive damages claim in asbestos cases, because the scientists who prepared the early studies believed (incorrectly as it turns out) that asbestos was hazardous only in cases of prolonged exposure at high concentrations. The tragedy of asbestos is that it took decades for anyone to realize that even relatively low-level exposures could result in health problems. When that became clear, most everyone stopped using asbestos. For that reason, few asbestos cases involve punitive damages awards, because plaintiffs are ordinarily unable to show that the defendant knew about hazards that were unknown even to the scientific community at the time. Indeed, in most asbestos cases the plaintiffs do not even seek punitive damages. Yet this opinion seems to conclude that punitive damages can be obtained based on nothing more than a showing that the defendant was aware of some connection between asbestos and health risks, regardless of the exposure levels at issue.
The second surprising aspect of the court’s opinion is its discussion of the defendant’s financial condition. According to the plaintiffs’ own expert testimony, the $10 million punitive damages award represents between 28 and 77 percent of the company’s value. As the court acknowledged, California courts have repeatedly stated that punitive damages should not exceed 10 percent of the defendant’s net worth. But the court avoided this rule by stating that the plaintiffs’ evidence of net worth was “patchy and limited,” and that the defendant “could have presented evidence on these questions but chose not to do so.” According to the court, the plaintiffs “filled the evidentiary void” as best they could. There is a serious problem with that analysis: the California Supreme Court held in Adams v. Murakami that the plaintiff has the burden of introducing evidence of the defendant’s financial condition, and if the evidence is lacking the plaintiff cannot recover punitive damages. Thus, unless the plaintiff can show that the defendant wrongly refused discovery requests regarding its financial condition, the plaintiff’s failure to prove the defendant’s ability to pay the punitive damages award should be a reason to reverse the award, not affirm it. The court’s opinion does not even mention Adams.