Chamber of Commerce Institute For Legal Reform Releases Report On Legal Climate In States Around The Country

ILR15077-HarrisReportCongratulations to the Chamber of Commerce’s Institute for Legal Reform for its recently issued report on the legal climate of the various states. The report is a thoroughly researched and elegantly presented compilation of information about various elements of each state’s legal climate. Based on a survey of in-house counsel, the report ranks the states by overall legal climate, as well as on various aspects of the legal climate.

As in ILR’s previous two reports, Delaware is the overall winner, followed by Vermont, Nebraska, Iowa, and New Hampshire. (Notably, both Nebraska and New Hampshire ban punitive damages.) West Virginia ranks last, followed by Louisiana, Illinois, California, and (somewhat to my surprise) Alabama.

The report includes a very cool interactive map. Readers can click on a state and be brought to a page that is chock full of information about the state’s legal climate. The ILR also came up with a nifty video presentation on each state that is a take off on election night TV coverage.

Why Shady Grove Should Be No Impediment To Obtaining Bifurcation In Federal Court

As we have noted in prior posts, many states require courts to bifurcate punitive damages trials upon the defendant’s request. The question therefore arises whether a federal court sitting in diversity must or, at least should, require bifurcation when the applicable state law requires bifurcation.

Shady GroveMost federal courts that have confronted the issue have concluded that bifurcation is procedural and that, under Erie, they therefore need not adhere to the bifurcation requirements of the state whose substantive law governs the case. While at first blush, the Supreme Court’s 2010 decision in Shady Grove Orthopedic Associates v. Allstate Insurance Co. may appear to reinforce that conclusion, on closer inspection it does not affect the analysis one way or the other.

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Missouri Court Of Appeals Finds Juror Research Into Who Receives Punitive Damages Awards Non-Prejudicial

Self Employed ManThe Missouri courts seem to provide more than their share of material worthy of comment.  In Ross-Paige v. St. Louis Metropolitan Police Department, decided on June 30, a jury had found for the plaintiff, a St. Louis police officer, on her claim of retaliation under the Missouri Human Rights Act.  After the jury awarded $300,000 in compensatory damages and found the defendant liable for punitive damages, a second phase was held to set the amount of punitive damages.

The jury set punitive damages at a staggering and manifestly excessive $7.2 million, which was reduced under Missouri’s statutory cap of five times compensatory damages to about $2.5 million after attorneys’ fees were added to the compensatory damages.  (As noted in a prior post, the Missouri Supreme Court has declared the cap statute unconstitutional as applied to common-law actions, but has upheld it as applied to statutory causes of action such as that in the instant case.)

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Montana Supreme Court Fails To Reach Constitutionality Of Punitive Damages Cap In Masters Group v. Comerica

sealA year ago, my colleagues Andy Frey and Rory Schneider wrote this post about a case in which the Montana Supreme Court had been asked to review, among other things, the trial court’s holding that the state’s cap on punitive damages is unconstitutional.  On July 1, the Montana Supreme Court decided the case—Masters Group International, Inc. v. Comerica Bank—on grounds that mooted the issue of the constitutionality of the cap.

To make a long story short, the court held that (i) the trial court erroneously failed to give effect to the provision in the parties’ agreement that required application of Michigan law; (ii) under Michigan law, the tort claims (and hence the punitive damages) were unsustainable; and (iii) an evidentiary error necessitated a new trial on the breach-of-contract claim.  Congratulations to our friend Jim Goetz on this excellent outcome for his client, Comerica.

As Andy Frey and I noted in a more recent post, the Montana Supreme Court may have another opportunity to address the constitutionality of the cap in Kelly Logging, Inc. v. First Interstate Bank, in which the trial court held the cap unconstitutional in the course of upholding a $16,760,000 punitive award.  The docket in that case reflects that no briefs have yet been filed and that the case is subject to mediation—so it is possible that a final determination of the constitutionality of the cap may be deferred still further.

Virginia Supreme Court Holds That Courts May Not Instruct Juries That Punitive Damages Are Disfavored

Virginia_supreme_court_sealThe drafting of jury instructions on punitive damages presents unique challenges for defense lawyers.  On the one hand, it is generally necessary to ask for an instruction that goes beyond existing law in order to preserve the argument that the law should be changed.  That is how the harm-to-nonparties issue was teed up in Philip Morris v. Williams.  And just importantly, because most pattern instructions on punitive damages are fairly perfunctory, it is often necessary to propose a more expansive alternative to ensure that the jury is adequately apprised of even existing law.

On the other hand, proposing an instruction that goes too far can result in reversal of a favorable verdict if the trial court goes along and gives it.  That is what happened in Cain v. Lee, a case recently decided by the Virginia Supreme Court.

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Third Circuit Holds That Under Pennsylvania Law An Insured Against Whom Punitive Damages Have Been Imposed May Not Recover Those Punitive Damages As Compensatory Damages In Bad-Faith Action Against His Insurer

Insurance-Certificate-Glasses_15701162As a matter of public policy, Pennsylvania (like a number of other states) prohibits insuring against punitive damages.  But what happens if an insurer refuses to settle a case against a policyholder within policy limits and the policyholder then sustains an award of punitive damages?  That was the question decided by the Third Circuit in Wolfe v. Allstate Property & Casualty Insurance Co.

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Why Criminal-Law Statute-Of-Limitations Principles Should Apply To Claims For Punitive Damages

Tall Case Grandfather Clock, Antique Empire Revival StyleThere are not many true affirmative defenses to punitive damages, much less ones that can be established on the face of the complaint.  One potential basis for dismissing a claim for punitive damages, which could be particularly useful in environmental cases alleging that conduct occurring in the distant past caused injuries that manifested only recently, involves the statute of limitations.

Although only a few courts have addressed the topic, there is a compelling conceptual argument that the statute of limitations for punitive damages should run from the date of the conduct for which punishment is sought, not the date of injury or discovery of injury, as would be the case for the underlying compensatory or remedial claims.  The basic idea is that the penal nature of punitive damages makes it appropriate to apply criminal-law limitations principles, under which the statute of limitations normally runs from commission of the wrongful act.

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Texas Supreme Court Limits Amount Of Supersedeas Bond In Decision With Possible Implications For Cases In Which Punitive Damages Are Challenged As Excessive

Seal_of_the_Supreme_Court_of_TexasOne of the biggest challenges confronting a defendant that has lost a large judgment is the need to file a supersedeas bond in order to prevent execution on the judgment during the pendency of the appeal.  There are good arguments for not requiring the defendant to bond the punitive damages part of such a judgment, but in our experience courts seldom accept them.

Recognizing the hydraulic pressure imposed on defendants by a requirement that they bond the full amount of the judgment, plus interest and costs, the Texas Legislature in 2003 enacted Section 52.006 of the Civil Practice and Remedies Code, which imposes an array of limitations on the bond requirement.

First, the Legislature limited the required bond to the amount of compensatory damages, plus the interest estimated to accrue during the appeal and any costs awarded in the judgment.  Second, the Legislature capped the amount of any bond at the lesser of $25 million or 50% of the defendant’s net worth.  And third, the Legislature gave the courts discretion to further reduce the amount of the bond if necessary to prevent the defendant from suffering “substantial economic harm.”

Earlier this year, the Texas Supreme Court provided some interesting guidance on the proper interpretation of Section 52.006. The decision in In re Longview Energy Co. may, in addition, provide useful grist for excessiveness arguments in punitive damages cases.

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West Virginia Supreme Court Of Appeals’ Refusal To Review Punitive Award For Excessiveness Under Due Process Clause Warrants Summary Reversal, Says Chamber Of Commerce In Mayer Brown-Authored Amicus Brief

wvscaSealAs readers of this blog and litigants and their attorneys in punitive damages cases well know, the U.S. Supreme Court gets the final say on matters of constitutional interpretation, including the due-process requirements for punitive damages awards. Except if you happen to live in West Virginia.

It turns out that the West Virginia Supreme Court of Appeals has made it something of a habit in recent years to ignore, sidestep, or outright reject controlling principles of federal law by, as the U.S. Supreme Court itself pointed out in 2012, “misreading and disregarding” Supreme Court precedents. This trend has been particularly noticeable in punitive damages cases, in which members of the West Virginia court have openly expressed their hostility toward the Supreme Court’s due-process holdings in State Farm v. Campbell, BMW v. Gore, and Philip Morris USA v. Williams.

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Montana Supreme Court Upholds $5 Million Punitive Award That Is Five Times The Compensatory Damages

Montana Punitive-DamagesMontana is known fondly to many as Big Sky Country, but it also is quickly gaining a reputation for big punitive damages awards.  Not only are juries imposing breathtaking amounts of punitive damages with increasing regularity, but the courts of Montana generally have been upholding those awards (or reducing them to amounts that would still be considered excessive in most other jurisdictions). Most recently, the Montana Supreme Court upheld a $5 million punitive award that was five times the already generous amount of compensatory damages.

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