The blog asbestosland.com has this post about yesterday’s denial of certiorari in Philip Morris v. Accord. The post predicts that West Virginia will impose a huge punitive damages award, which will then end up back in federal court and will ultimately be overturned.
As we mentioned yesterday, the Supreme Court has another chance to address this issue in the pending cert. petition in Chemtall v. Stern.
In this published opinion, the California Court of Appeal (First Appellate District, Division One) reduced the amount of compensatory damages by $300,000 and then remanded the case for reconsideration of the punitive damages award in light of the reduced amount. That seems like a straightforward proposition. Juries are instructed that punitive damages must bear a reasonable relationship to the plaintiff’s actual harm, so if a jury or trial court awards punitive damages based on an a false understanding of the plaintiff’s actual harm, they should reconsider their award in light of the correct amount of compensatory damages. At the least, the punitive damages award should be reduced to preserve the original ratio of punitive to compensatory damages (assuming that ratio was not excessive). (See Las Palmas Associatesv. Las Palmas Center Associates (1991) 235 Cal.App.3d 1220, 1254 [reducing compensatory damages and reducing punitive damages to preserve the ratio awarded by the jury]; but see Stevens v. Owens-Corning Fiberglas Corp. (1996) 49 Cal.App.4th 1645, fn. 11 [dicta stating “there is no rule requiring preservation of the original ratio between punitive damages and compensatory damages”].)
But compare this decision to the Fifth Appellate District’s opinion in McGee v. Tucoemas, in which the court refused to order a reconsideration (or reduction) of the punitive damages award after a reduction of the compensatory damages award.
Full disclosure: our firm (Horvitz & Levy) represents the defendant in McGee, in which a cert. petition is currently pending before the U.S. Supreme Court (on a different issue).
On the eve of oral arguments in the Exxon Valdez case pending in the U.S. Supreme Court, ExxonMobil has filed another cert. petition raising punitive damages issues.
ExxonMobil v. Grefer, arising from a toxic tort case in Louisiana state court, involves a claim for property damage to a piece of industrial property worth $1.5 million. The plaintiff leased its property to a company that cleaned oil pipes for various oil companies, including ExxonMobil. The plaintiff contends the property is contaminated by material released from the pipes. A jury awarded $56 million in remediation costs and $1 billion in punitive damages. The Court of Appeal reduced the punitive damages award to $112 million. The Louisiana Supreme Court denied review, but the U.S. Supreme Court granted cert., vacated the lower court decision, and remanded the case for reconsideration in light of Philip Morris v. Williams. On remand, the Court of Appeal reaffirmed the $112 million punitive damages award in full.
ExxonMobil’s cert. petition raises the following three issues:
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.
The Supreme Court may think it has already answered questions one and three, even if many lower courts haven’t gotten the message. Issue number two, however, is a recurring issue that the Supreme Court has not addressed. We have encountered this issue in several California punitive damages cases, with conflicting results. A resolution of that issue by the Supreme Court would be enormously beneficial.
The petition for certiorari in Philip Morris v. Accord, which we mentioned previously here, has been denied.
The issue (constitutionality of a reverse-bifurcation procedure in which punitive damages issues are decided before liability and compensatory damages) is still before the court in another case, Chemtall v. Stern. The petition in that case was filed Feb. 8 and the opposition is due March 10.
UPDATE (2/25/08 at 11:39 AM): Here is an Associated Press story on the denial of certiorari in Accord. The headline is a bit misleading; the Supreme Court did not “side with” the plaintiffs, it just denied the cert. petition.
The Washington Post has an interesting article focusing on the fact that it is now twenty years since the spill and fourteen years since the verdict in the Exxon Valdez litigation. During that time, twenty percent of the 33,000 fishermen, Native Alaskans, cannery workers and others who triumphed in court that day are dead.
Hat Tip to Above the Law.
We’re not going to link to all of the many articles previewing the Exxon Valdez oral argument (coming up this Wednesday), but this one is worth mentioning. It takes a different angle from most of the others; it focuses on one of the 61 different firms representing the plaintiffs, Minnesota’s Faegre & Benson. The article says Faegre & Benson has invested $30 million dollars worth of attorney time in the case and has recovered only $1.5 million so far (from the compensatory damage award), but stands to earn over $100 million if the Supreme Court affirms the $2.5 billion punitive damages award.
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.
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.
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.
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.’”