Some of the most important unanswered questions in the law of punitive damages relate to the procedures governing the imposition of punitive damages in a class action. Last week, the Second Circuit addressed one such question in Johnson v. Nextel Communications Inc.
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.…
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?
We’ve been following the post-trial proceedings in Allen v. Takeda Pharmaceuticals North America, Inc., a product-liability action involving the diabetes drug Actos. The case garnered headlines earlier this year when the jury awarded an astounding $9 billion in punitive damages against the two defendants.
On August 28, the district court in the Western District of Louisiana issued a ruling denying the defendants’ motion for judgment as a matter of law (JMOL) on liability for punitive damages and other issues. Despite the suggestion of some news reports that the defendants are now on the hook for the $9 billion, the district court has not yet ruled on the defendants’ separate motion for a new trial under Rule 59, which argues among other things that the punitive damages are excessive.
In this post, I want to address a significant flaw in the district court’s reasoning concerning the defendants’ challenge to punitive liability. Although the error did not affect the decision’s outcome, the issue arises in other cases with some frequency and could make a difference in this case on appeal.
In a prior post, Andy Frey and I discussed the concern expressed by some defense lawyers that jurors in a bifurcated trial might bake punitive damages into their compensatory award because they are unaware that they will be able to impose punitive damages in a second phase. We expressed the view that this concern can be readily addressed by instructing the jury before it deliberates in the first phase that, if it finds that the defendant acted with the requisite mental state, a second phase will commence to address the amount of punitive damages (if any).
The Missouri Court of Appeals’ decision last week in Advantage Buildings & Exteriors, Inc. v. Mid-Continent Casualty Co. confirms both that the concern about inflation of the compensatory damages is a real one and that the solution is proper instruction of the jury.
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.
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.
My colleagues and I generally recommend that clients confronted with claims for punitive damages seek bifurcation—so long as they can adduce evidence in the second phase to support a low award (such as evidence of post-injury remedial efforts) and not effectively cede that phase to the plaintiff, who generally is happy to harp on the defendants’ net worth and contend that a high award is necessary to get the attention of management. Occasionally, trial counsel resist this advice out of concern that giving the jury a second chance to award damages will result in a higher total award than if the jury were required to award both compensatory and punitive damages at the same time.
The parties in Kuchwara v. Williams, a personal-injury case decided by the Pennsylvania Superior Court on May 12, took this tactical debate to a new level.