When we are asked to assist with post-verdict motions after a jury has returned a large punitive award, all too often we find that the verdict form relating to punitive liability asks only whether the standard for punitive liability has been satisfied. That presents a handicap from which it may be impossible to recover.
In mid-January, Senator Patrick Leahy (Dem. Vt.) proposed—again—legislation that would prevent businesses from deducting from taxable income any punitive damages they have paid during the relevant tax year.
Although it would seem that this legislation has little chance of being enacted in the current Republican-controlled Congress, out of an abundance of caution we think it is worth reciting the reasons why this proposal is a bad idea.
In late December, the Second Circuit released a significant and interesting decision on excessiveness of punitive damages—and we say that not just because we represented the defendants in the case.
Turley v. ISG Lackawanna, Inc. involved racial harassment of a steel worker by his fellow employees. The plaintiff alleged that his employer and its parent did not respond adequately to the harassment. A jury agreed and awarded the plaintiff a total of $1.25 million in compensatory damages—all for emotional distress—and $24 million in punitive damages against the corporate defendants. The district court determined that the punitive damages were excessive and ordered a remittitur to approximately $5 million.
Although rejecting the defendants’ other arguments, the Second Circuit agreed with defendants that the punitive damages as remitted remained excessive.
In prior posts, we have occasionally adverted to the issue of multiple punishments in the constitutional context. Just before the new year, a California appellate court issued an unpublished decision in Paletz v. Adaya bearing on a different aspect of the multiple punishment problem. In Paletz, the Court of Appeal reversed an award of punitive damages as duplicative of an award of statutory penalties, concluding that the plaintiffs were not entitled to collect both forms of punishment for the same course of conduct.
We congratulate our Editor-in-Chief Evan Tager for his inclusion in the National Law Journal’s inaugural list of fifty “Litigation Trailblazers and Pioneers.” The NLJ recognized Evan for, among other things, his groundbreaking efforts to limit punitive damages. It highlighted his work with Andy Frey in BMW v. Gore, the the seminal case in which the Supreme Court first established the now-familiar guideposts for evaluating the constitutionality of a punitive damages award. We’re proud of Evan!
We have noticed a disturbing trend recently of courts upholding punitive damages awards that are high multiples of the compensatory damages. One example is Mitri v. Walgreen Co., in which the U.S. District Court for the Eastern District of California upheld a punitive award that is thirteen times the substantial compensatory award based almost entirely on the fact that the defendant is a wealthy corporation.
Everyone who follows punitive damages law knows that the Supreme Court has identified three guideposts for determining whether a punitive award is excessive under the Due Process Clause: (i) the degree of reprehensibility of the defendant’s conduct; (ii) the ratio of the punitive damages to the compensatory damages and/or the harm to the plaintiff that was likely to result from the defendant’s conduct; and (iii) the disparity between the punitive damages and the legislatively established penalties for comparable conduct. The first guidepost in particular requires an assessment predicated on the facts of the case, which the parties will likely have disputed. How should courts go about resolving those disputes?
Earlier this year, the Ninth Circuit granted en banc review in Arizona v. ASARCO LLC to consider whether a punitive damages award that is subject to Title VII’s cap of $300,000 could nonetheless be unconstitutionally excessive when the compensatory damages are nominal and the ratio of punitive to compensatory damages accordingly is high.
In a post about the case a few weeks before the argument, I expressed the view that the parties and the courts were focused on the wrong question and that the right question is whether, as a matter of federal common law, a punitive award at the high end of the range is appropriate under the facts of the particular case. And in a subsequent post, I explained why under that approach the punitive award in ASARCO should be considered excessive.
Yesterday, in an opinion by newly minted Chief Judge Sidney Thomas the en banc Ninth Circuit unanimously held that the concerns underlying the Supreme Court’s due process decisions—that the defendant receive fair notice of the extent of punishment to which it could be subjected and that defendants not be subjected to arbitrary punishments—are fully satisfied by Title VII’s cap.
The U.S. Postal Service advertises that “shipping isn’t complicated.” Taking a page from the Postal Service’s book, the Supreme Court of Louisiana on Tuesday said much the same thing about res judicata. In a concise unanimous decision, the court reversed an award of punitive damages against Exxon on res judicata grounds. The court held that a defendant may not be required to relitigate whether its conduct warrants punitive damages after a jury found in its favor on that very question in an earlier case involving the same plaintiff.
Although this doesn’t have anything to do with punitive damages, readers of this blog may find an upcoming webinar sponsored by the Washington Legal Foundation to be of interest. The webinar, which features my partner Andy Pincus and Jones Day partner Meir Feder (whom I have known for almost as long as I know Andy), will focus on so-called no-injury class actions—i.e., class actions seeking statutory damages for violations that didn’t cause actual injury to the named plaintiff(s) or to the similarly situated members of the putative class.
Andy and Meir will address, in particular, the pending certiorari petition in Spokeo Inc. v. Robins, which presents the question whether Congress may confer Article III standing on a plaintiff who suffered no concrete harm merely by creating a cause of action for statutory damages. Andy is counsel of record for Spokeo, and Meir filed an amicus brief for Experian Information Solutions in support of Spokeo.
Sixteen other companies and associations filed a total of nine additional amicus briefs in support of Spokeo, which are available here. The issue intrigued the Supreme Court enough to invite the Solicitor General to submit a brief setting forth the views of the United States. That brief has not yet been filed.
The webinar will take place on Tuesday, December 9, from 10:00 to 11:00 EDT. Readers who are interested in listening in may use this link to register.