Punitive Damages Theory

Application of the Supreme Court’s excessiveness guideposts to cases involving multiple defendants is one of the more confounding problems that arises in punitive damages jurisprudence. The Supreme Court of Texas got the issue right in Horizon Health Corp. v. Acadia Healthcare Co., a case in which several defendants were jointly liable for compensatory damages but individually liable for separate punitive awards.
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Just about a week after suffering its third punitive award in pelvic-mesh litigation, Johnson & Johnson found itself on the wrong end of a $105 million punitive award—close to 20 times the $5.4 million compensatory award—in litigation alleging that its iconic talcum powder causes ovarian cancer in women.
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800px-Judge_Henry_FriendlyAs early as 1967, Judge Friendly worried about the phenomenon of punitive damages overkill in mass tort litigation. Fifty years later, the problem persists.

Last week, a Philadelphia, Pennsylvania, jury awarded a plaintiff $2.5 million in compensatory damages and $17.5 million in punitive damages—seven times the compensatory damages—in the latest of a large series of cases alleging that Johnson & Johnson subsidiary Ethicon had failed to warn about the risks of its pelvic-mesh device. In previous cases, juries had imposed punitive awards of $5 million, $7 million, and $10 million.
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A bankruptcy judge in the Eastern District of California recently issued a decision that is sure to raise appellate eyebrows.

Concluding in In re Sundquist that the defendant bank had violated the automatic stay by foreclosing on the home of a bankrupt mortgagor and enraged by what it perceived to be heavy-handed behavior both before and after the stay violation, the court awarded the plaintiffs $1,074,581.50 in compensatory damages and ordered the defendant to pay a whopping $45 million in punitive damages—i.e., nearly 42 times the quite substantial compensatory award.

But concerned that such a massive amount of punitive damages would be a windfall to the plaintiffs, the judge ordered the plaintiffs to pay $40 million, minus applicable taxes, to two non-profit organizations whose stated mission is to advance the interests of consumers in litigation and bankruptcy proceedings—the National Consumer Law Center and the National Consumer Bankruptcy Rights Center—and the five California state law schools. Specifically, the judge decided to bestow $10 million each (before taxes) on the two consumer law centers and $4 million each (before taxes) on the five law schools.
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Car insuranceSeemingly minor legal issues sometimes can have a surprisingly significant effect. That is particularly true with the ratio guidepost because the effect of any dispute about the guidepost’s application is literally multiplied. We recently filed an amicus brief on behalf of a group of organizations in an Eighth Circuit appeal that proves the point: Dziadek v. The Charter Oak Fire Insurance Company, No. 16-4070.
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Hot, burning tunnel & light. Way to another worldIn recent years, St. Louis has done much to earn a place on the American Tort Reform Association’s list of judicial hell holes.  Not content to rest on its laurels, the St. Louis circuit court grabbed the headlines again last week with a draw-dropping $70 million verdict against Johnson & Johnson ($67.25 million, including $65 million in punitive damages) and Imerys Talc America ($2.75 million, including $2.5 million in punitive damages) in a case alleging that J&J talcum powder caused the plaintiff’s ovarian cancer.
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License Plate1Tomorrow marks the twentieth anniversary of the Supreme Court’s decision in BMW of North America. Inc. v. Gore, the first time the Court had ever held that a punitive damages award was unconstitutionally excessive under the Due Process Clause.

In the ensuing 20 years, the decision has proved to be a foundational case in punitive damages jurisprudence.  It has been cited in hundreds, if not thousands, of lower court decisions; it has been the subject of dozens of scholarly articles; and it is featured in virtually every tort and remedies case book used in law schools.

Far from being “a road to nowhere,” as Justice Scalia charged in his dissenting opinion, BMW has served as a constraining force on punitive damages from the moment it was issued.  Before BMW, no court anywhere had held that a punitive award was unconstitutionally excessive.  After BMW, hundreds of punitive awards have been reduced after being found excessive under the “guideposts” announced in that decision.

Having been fortunate enough to have represented BMW in that historical case, we thought it appropriate to provide some reflections on the occasion of the decision’s twentieth anniversary.
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Carbon-monoxide-3D-ballsLately, we have had many occasions to criticize courts’ analysis of punitive damages issues, so it is nice for a change to be able to report on the Tenth Circuit’s insightful decision in Lompe v. Sunridge Partners.  Readers may recall that we published a post about our amicus brief for the Chamber of Commerce in this case about a year ago.  I am pleased to report that the court adopted virtually all of the argument and analysis set forth in the amicus brief.
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