California Punitives by Horvitz & Levy

  • Man v. Freightliner—Oregon Court of Appeals Allows State to Pursue a Share of $350 Million Punitive Damages Verdict After Parties Settle

    In this fascinating opinion issued yesterday, the Oregon Court of Appeals ruled in favor of the Oregon Attorney General in his effort to collect the state’s share of a $350 million punitive damages verdict in a case where the state was not a party litigant.

    In the underlying case, German truck manufacturer Man AG brought a lawsuit in Oregon state court against Freightliner, now known as Daimler Trucks North America. Man won an $850 million jury verdict, including $500 million in compensatory damages and $350 million in punitive damages. Under Oregon law, the state becomes a creditor on any punitive verdict when entered, and is entitled to 60 percent of any punitive award.

    Before the state could collect its cut, while Freighliner’s posttrial motion challenging the punitive award was pending, the parties settled and Man agreed to drop the punitive damages portion of the verdict. Without ruling on the posttrial motion, the trial court vacated the original judgment on the jury verdict and entered a new judgment dismissing the case pursuant to the settlement.

    The state appealed from the judgment of dismissal, arguing that the parties could not bargain away the state’s 60 percent share of the award. The Court of Appeals, on its own motion, asked the parties to brief the question of the state’s standing to pursue this appeal. After briefing and argument, the court concluded that the state has standing to proceed on the merits of the appeal.

    It will be interesting to see how this plays out. If the state wins the right to prevent a plaintiff from agreeing to dismissal of an action after verdict, the ability of parties to enter post-verdict settlement agreements will be greatly inhibited. But if the state loses, the split-recovery statute may be effectively nullified because many parties will realize that they both come out ahead if they jettison the state’s statutory share of the judgment to arrive at a settlement figure that is lower than the defendant would have to pay under the judgment, but perhaps higher than the plaintiff would receive if the judgment were affirmed.

    This is the sort of issue that may arise in California if the Legislature revives our punitive damages sharing statute. In 2004 our Legislature passed a bill entitling the state to 75 percent of any punitive damages award, but the law had a built-in sunset provision of only two years. Because the law applied only to complaints that were filed and litigated to conclusion (including appeals) within a narrow two-year window, it expired without impacting a single case. In August 2006 the Legislature attempted to extend the effective date of the bill, by passing the bill in a late-night session without any hearings or debate. Governor Schwarzenegger vetoed the bill, inviting the sponsor to resubmit the bill in the next legislative session for proper hearings and debate. Nothing has happened since.

  • Alabama Jury Awards $175 Million in Punitive Damages Against Drugmaker AstraZeneca

    The state of Alabama won a huge $175 million punitive damages award today against AstraZeneca, the maker of Nexium and Crestor. A jury found that AstraZeneca had overcharged Alabama’s Medicaid agency. Alabama was once famous for its punitive damages awards, especially the awards that led to the U.S. Supreme Court decisions in Pacific Mutual v. Haslip and BMW v. Gore. After the high-profile reversal in BMW, however, Alabama’s appellate courts have reined in the big awards. Earlier this year the Alabama Supreme Court vacated a $3.5 billion punitive damages award against Exxon Mobil. We’ll see what Alabama’s courts do with this one.

    UPDATE (by Curt Cutting on 2/21/08 at 7:39): AstraZeneca has issued a statement, which you can find here. (Scroll down.) You probably won’t believe this, but they plan to appeal.

  • Philip Morris v. Accord—Supreme Court Conference on Punitive Damages Cert. Petition Rescheduled for Feb. 22

    As we noted here, the Supreme Court’s Feb. 15 conference list included this cert. petition raising punitive damages issues. But yesterday when the Court posted its order list containing the rulings from the Feb. 15 conference, this case was nowhere to be found. Today the Supreme Court’s online docket indicates this case has been moved to the Feb. 22 conference list.

  • New York Court of Appeals Allows Potential End-Run Around Limitations on Punitive Damages in Contract Cases

    The New York Law Journal discusses an opinion by the New York Court of Appeals involving the allowance of consequential damages in breach of contract actions involving insurance policies. According to the article, “The Court of Appeals’ determination Tuesday that commercial property owners can assert a claim for consequential damages against insurers that breached their policies prompted a sharp disagreement among the judges. Five agreed in a ruling by Judge Eugene F. Pigott Jr. that commercial insurance consumers should be entitled to recover damages more than the stated value of their policies if those damages are the ‘natural and probable consequence’ of a breach of contract. But Judges Robert S. Smith and Susan Phillips Read, in a dissent written by Smith, accused their colleagues of legitimizing hitherto prohibited punitive damages in breach-of-contract claims by renaming them ‘consequential’ damages. The dissenters predicted on Tuesday that the ‘bad policy choice’ will come at ‘too great a cost’ to the insurance system in New York. ‘Insurers will fear that juries will view even legitimate claim denials unsympathetically, and that insurers will thus be exposed to damages without any predictable limit,’ Smith wrote. ‘This fear will inevitably lead insurers to increase their premiums — and so will inflect a burden on every New Yorker who buys insurance.’”

  • Nevada Judge Cuts $99 Million Punitive Damages Award Against Wyeth

    According to this Forbes article, a Nevada trial court has reduced a jury’s $99 million punitive damages award against Wyeth down to $35 million. The court also reduced the compensatory damages from $35 million to $23 million. The resulting $58 million judgment is still the largest personal injury award in Nevada history, according to the article.

    The case involves Wyeth’s hormone replacement drugs, Premarin and Prempro. The plaintiffs claim they developed breast cancer as a result of those drugs.

  • Texas Supreme Court Holds That Punitive Damages Against Employer Are Insurable

    On February 15, the Texas Supreme Court issued an opinion deciding the following certified question from the Fifth Circuit: “Does Texas public policy prohibit a liability insurance provider from indemnifying an award for punitive damages imposed on its insured because of gross negligence?” The court answered that question in the negative. That puts Texas law at odds with California law, which provides that punitive damages are not insurable.

  • Can the Red Cross, FDIC, or Federal Credit Unions Be Sued for Punitive Damages?

    We previously blogged here about our firm’s pending cert petition in McGee v. Tucoemas Federal Credit Union. My partner Rob Wright, who is counsel of record for the credit union, explains the important issues raised by the petition:

    Congress has given most federal instrumentalities, including federal credit unions, authority to “sue and be sued.” In Tucoemas Federal Credit Union v. McGee, we have petitioned for a writ of certiorari on the issue of whether a federal credit union’s authority to sue and be sued includes being sued for punitive damages. The appellate court in this case was confronted with two lines of seemingly conflicting authority. One line includes decisions by the Sixth, Eighth, Ninth, and Eleventh Circuits of the United States Court of Appeals holding that a federal instrumentality’s authority to sue and be sued does not include being sued for punitive damages. Typical of these decisions is Matter of Sparkman, 703 F.2d 1097 (9th Cir. 1983), which relied on “the long-established principle that the United States, its agencies, and instrumentalities cannot be held liable for punitive damages unless there is express statutory authorization for such liability.” Id. at 1100. As a result, the Ninth Circuit held that while the “sue and be sued” clause in the enabling legislation for the federal instrumentality at issue in that case (a production credit association) “waives sovereign immunity from ordinary lawsuits, it does not subject production credit associations to liability for punitive damages. Such immunity must be waived expressly.” Id.

    The other line of authority consists of decisions by the United States Supreme Court holding that “sue and be sued” clauses are construed liberally. Typical of these decisions is FDIC v. Meyer, 510 U.S. 471 (1994), which holds that courts “‘liberally construe the sue-and-be-sued clause’” and will presume that a federal instrumentality’s liability “‘is the same as that of any other business.’” Id. at 481 (original emphasis). However, none of the decisions in this second line of authority address punitive damage claims.

    In this case, the California Court of Appeal held that the line of United States Supreme Court decisions liberally construing the sue and be sued clause impliedly overrule the line of Court of Appeals decisions construing the clause to exclude punitive damage claims. As a result, the California Court of Appeal affirmed the punitive damages award against the federal credit union.

    Because the issue here could affect not just federal credit unions but other federal instrumentalities with sue and be sued clauses as diverse as the American Red Cross and the Federal Deposit Insurance Corporation, this petition may be worth watching.

  • Cornell Previews Exxon Valdez Oral Argument

    Cornell University’s Legal Information Institute has prepared this excellent summary and preview of the Exxon Valdez case scheduled to be argued in the U.S. Supreme Court on February 27, 2008. The preview concludes with this assessment: “The first question for the Court is when a shipowner can be held liable for punitive damages for a ship master’s tort. In answering this, the Court will resolve disagreement among the circuits. However, the question has a case-specific complication: Exxon’s possible independent liability. The second question—whether CWA displaces punitive damages under maritime law—may have little significance beyond this case. The Oil Pollution Act of 1990, not the CWA, is now the controlling statute in oil spill cases. Nevertheless, resolving the second question in Exxon’s favor may enable the court to avoid sending the case back for further factfinding if Exxon’s independent liability proves pivotal to judgment on Question 1.”

  • President Bush Supports Proposal to Cap Punitive Damages in Medical Malpractice Actions

    According to this Associated Press article issued today, President Bush is asking Congress to pass legislation aimed at reducing Medicare’s drain on the general treasury. The article says Bush’s proposal would impose limits on non-economic and punitive damages awarded in medical malpractice cases.

  • U.S. Supreme Court Expands Oral Argument Time in Exxon Valdez Punitive Damages Case

    The Supreme Court issued an order today expanding the time allowed for oral argument in the Exxon Valdez case. Instead of the usual 30 minutes per side, the court has alloted 45 minutes per side for oral argument. The Court rejected the state of Alaska’s request to participate in oral argument.

    Hat tip to SCOTUSblog.