In a recent post, we set forth our views on why, with some forethought, traditional bifurcation—i.e., trying liability for the underlying tort, compensatory damages, and liability for punitive damages in the first phase and, if necessary, the amount of punitive damages in a second phase—can be a beneficial procedural safeguard for defendants. Sometimes, however, circumstances may dictate other forms of bifurcation, or even trifurcation.
As we noted in a prior post, many state legislatures and supreme courts have mandated that the amount of punitive damages be tried separately from other issues in the case if the defendant so requests. The principal impetus for mandating this procedure was concern that evidence of the defendant’s financial condition, though assumed to be relevant to the amount of punitive damages, is undeniably irrelevant to and presents a grave risk of prejudicing the resolution of the other issues in the case—i.e., liability for the underlying tort, comparative fault, compensatory damages, and liability for punitive damages.
We will address in a future post why the assumption that an organization’s financial condition is relevant to the setting of punitive damages is false. But the purpose of this post is to take sides in the debate over whether this safeguard—colloquially known as bifurcation—is worth invoking.
The lawyer for the plaintiff in a punitive damages case frequently asks the jury to return a particular amount of punitive damages. Often the requested amount is very large—far more than the plaintiff realistically expects to recover, and certainly greater than the Constitution would permit.
This strategy has a clear purpose: Suggesting an arbitrary large number sets the jury’s “frame of reference” and anchors its assessment of the proper amount of punishment. A substantial and mounting body of social science research demonstrates that jurors exposed to high numerical “anchors” return much higher awards—even if those anchors are self-evidently arbitrary, and even if they are presented to jurors as “limits,” “caps,” or “maximums.” The plaintiff’s request has the effect of starting the jury’s discussion at the suggested level—even if the request bears no relationship at all to the facts or the evidence in the case.
There are substantial tactical questions whether or when it is in the defendant’s interest to seek bifurcation of the amount of punitive damages from other trial issues and whether the defendant should in some circumstances seek bifurcation of all punitive damages issues from compensatory damages issues or trifurcation so that punitive liability and punitive amount are each tried in separate second and third phases, respectively (if necessary).
Those are subjects for another post. This post concerns the defendant’s right to have a separate proceeding to determine punitive amount, which is the most common form of bifurcation.
We recently posted about the decision by the West Virginia Supreme Court of Appeals in Manor Care Inc. v. Douglas, — S.E.2d —-, 2014 WL 2835831 (W. Va. June 18, 2014), to cut a multimillion-dollar punitive award by more than half in a case against a Charleston nursing home. In our prior post, which is available here, we commented on the court’s decision to reduce the punitive damages proportionately (from $80 million to about $32 million) after it reduced the compensatory damages from $11.5 million to $4.6 million.
The West Virginia court’s decision to afford a proportionate reduction of the punitive damages after vacating part of the compensatory damages raises is noteworthy, but it may be even more striking that the court refused to reduce the $32 million punishment any further. In an opinion that shows little inclination to follow the U.S. Supreme Court’s guidance that high awards of compensatory damages require lower ratios, the West Virginia Supreme held that the 7:1 ratio between punitive and compensatory damages was not excessive. The decision suggests that large companies hit with very large verdicts in West Virginia state court may have difficulty obtaining any reduction of the punitive damages as long as the ratio is lower than 10:1 and the court deems the conduct to be highly reprehensible.
I was excited to receive in the mail yesterday a complimentary copy of the tenth edition of Black’s Law Dictionary, which is edited by Bryan Garner, an acquaintance of many years with whom I have long enjoyed discussing the craft of legal writing.
There is something about Black’s that brings me back to the early days of law school when virtually every legal term I encountered in the cases we read for class was mysterious. Back then, I was using the fifth edition, which I still keep on my shelf for handy reference. Now, I am pleased to bookend it with the tenth edition.
Like prior versions edited by Bryan, the tenth edition is low on jargon and uses more modern language to describe even hoary doctrines.
What does any of this have to do with punitive damages? Not much, except that a comparison of the definitions of punitive damages from the two editions—published 35 years apart—is illuminating.
As readers doubtlessly are aware, in State Farm v. Campbell the U.S. Supreme Court provided lower courts with substantial guidance on the constitutionally permissible ratio between the punitive damages and the harm to the plaintiff. In particular, the Court admonished that generally the ratio should not exceed the single-digit range and stated that, when compensatory damages are “substantial,” often a 1:1 ratio will mark the constitutional line. As a result of that guidance, the calculation of the denominator of the ratio of punitive damages to harm has become increasingly important, presenting courts with a range of interesting issues.
Nickerson v. Stonebridge Life Insurance Co., which is currently pending in the California Supreme Court, involves one such issue. In California, an insured who can persuade a jury that an insurer denied his claim for policy benefits in bad faith is entitled to recover as “compensatory damages” the amount of attorneys’ fees he incurred in pursuing payment of the policy benefits (but not in pursuing the bad-faith claim or punitive damages). Generally, the amount of attorneys’ fees is set by the court after trial, though nothing precludes the parties from agreeing to allow the jury to set the fees.
In Nickerson, the California Court of Appeal declined to include the attorneys’ fees in the denominator of the ratio of punitive damages to actual or potential harm for the simple reason that the jury was not aware of the fees, which accordingly played no affirmative role in its determination of the amount of punitive damages. The California Supreme Court granted review to consider whether attorneys’ fees set by a court post-verdict may be added to the denominator of the ratio of punitive damages to actual or potential harm.
On behalf of the Chamber of Commerce of the United States, my colleagues Don Falk, C.J. Summers, and I recently submitted an amicus brief in support of the respondent insurer.
The threat of large punitive damages awards is particularly acute for businesses, large and small. Like many of its counterparts in other states, the Montana legislature sought to relieve businesses of the unpredictability and hydraulic pressure to settle created by the risk of uncabined punitive awards by imposing a cap on such awards: the lesser of $10 million or 3% of a defendant’s net worth.
Though similar restrictions have generally, but not always, withstood state constitutional challenge, a Montana state trial court judge struck down the cap as unconstitutional a little over three months ago. The defendant, with support from the Montana Attorney General as intervenor and two Montana business organizations as amici, has urged the Montana Supreme Court to reverse the lower court and uphold the constitutionality of the cap. (For copies of their briefs, click here and search for case DA 14-0113). Continue Reading
Our friends at the California Punitive Damages Blog recently issued this post on a decision of the West Virginia Supreme Court of Appeals reducing an $80 million punitive award against a nursing home to $32 million. The post focuses on the court’s conclusion that a reduction of the compensatory damages from $11.5 million to $4.6 million necessitated a proportionate reduction in the punitive damages. The post points out that courts in California have been divided as to whether that kind of automatic proportionate reduction is appropriate.
Any time a state supreme court is asked to recognize a new tort duty, its decision necessarily will affect the potential availability of punitive damages. Hence, I consider it newsworthy that in a decision issued on June 23 the California Supreme Court declined to impose on retailers a duty to maintain automatic external defibrillators on their premises for use in the event customers experience sudden cardiac arrest. Congratulations to my colleagues Donald Falk and Richard Caldarone, who represented Target, the prevailing party, in the case.