Mass Tort Litigation Blog

Exxon to Bear Its Own Costs in Punitive Damages Case

BNA Law Week reports that the 9th Circuit has held that each party must bear its own costs in the Exxon punitive damages litigation. (Baker v. Exxon Mobil Corp. (In re Exxon Valdez), 9th Cir., No. 04-35182, 6/15/09).  The costs were substantial -- approximately $70 million -- mostly attributable to the bond the company had to put up.  The original award was $5 billion and it was reduced to approximately $500 million.  While the reduction was substantial, the 9th Circuit held that the results were sufficiently mixed that Exxon was not the "prevailing party" such that costs could be shifted under Fed. R. App. P. 39(a)(4) (stating that "if a judgment is affirmed in part, reversed in part, modified, or vacated, costs are taxed only as the court orders.")

ADL

Sheila Scheuerman on Statutory Damages and Class Actions

Professor Sheila Scheuerman (Charleston; picture, left) has posted on SSRN her article, Due Process Forgotten: The Problem of Statutory Damages and Class Actions, Mo. L. Rev. (forthcoming 2009).  Here's the abstract:

This article analyzes the due process problem that arises when two litigation mechanisms converge: statutory damages and class actions. Individually, the class action device and statutory damages serve a similar function: encouraging litigation by offsetting disincentives to suit where the alleged wrongdoing involves nominal financial harm. When combined, however, they create the potential for unintended bet-the-company liability. Courts have struggled with how to address these statutory damages class actions because the prevailing legal framework is jurisprudentially flawed and ignores the realities of modern class action litigation. This article assesses the current due process jurisprudence in this area, and proposes an analytical framework drawn from the Supreme Court's punitive damages jurisprudence. Indeed, the article shows that the modern due process standard for punitive damages - known as the BMW guideposts - in fact evolved from a test developed in early Supreme Court precedent analyzing the constitutional limits on statutory damages. Thus, the article argues that the BMW guideposts should apply to aggregate statutory damages awards, and furthermore should be considered before, not after, class certification.

BGS

Philip Morris Cert Dismissed as Improvidently Granted

As per Scotusblog:

The Court has released the opinion in Philip Morris USA, Inc. v. Williams (07-1216),  on tobacco punitive damages. In a per curiam opinion, available here,  the writ of certiorari is dismissed as improvidently granted.

ADL

$8 Million Verdict in First Post-Engle Florida Tobacco Trial

A Florida jury yesterday awarded $8,000,000 ($3 million compensatory plus $5 million punitive damages) to the family of a smoker who died of lung cancer.  The case, Hess v. Philip Morris, was the first of 8,000 individual cases that may go to trial in Florida in the wake of the Florida Supreme Court's 2006 rejection of a statewide class action in Engle v. Liggett Group.

In the Engle class action, a jury had found the defendant tobacco companies liable for $145 billion in punitive damages.  The Florida Supreme Court (here's that court's decision) found that the class action should not have been certified on punitive damages, but held that certain factual findings on liability would be given issue preclusive effect in subsequent individual trials against the defendants.  I believe Florida remains one of the few states that clings to the traditional requirement of mutuality for issue preclusion, but the Engle decision did not actually condone nonmutual use of the trial findings.  Rather, it concluded that although certain issues were so individualized that they required decertification of the class on remand, the common liability issues were suitable for classwide determination and thus could stand. The Florida Supreme Court put it this way:  "Individual plaintiffs within the class will be permitted to proceed individually with the findings set forth above given res judicata effect in any subsequent trial between individual class members and the defendants, provided such action is filed within one year of the mandate in this case."  In other words, despite the decertification of the class, the individual class members would be treated as parties entitled to use the favorable findings on liability.

If yesterday's verdict is any indication of how the remaining trials will go, the defendants' appellate "victory" in Engle offers them scant protection from the prospect of multi-billion dollar liability in Florida.  The irony is that after defeating class cert in Engle, the defendants may eventually find themselves wishing to negotiate a settlement class action to resolve the remaining claims.

Here's an excerpt from yesterday's Bloomberg.com report by Jef Feeley and Mort Lucoff:

Altria Group Inc., the biggest U.S. cigarette maker, must pay $8 million to the family of a smoker who died of lung cancer, a Florida jury ruled in the first of 8,000 individual cases to go to trial in the state. A state court jury in Fort Lauderdale ruled today Altria’s Philip Morris USA unit is liable for $3 million in compensatory damages and $5 million in punitive damages over Stuart Hess’s 1997 death. ...

The verdict is the first in thousands of lawsuits filed after the Florida Supreme Court refused to reinstate a $145 billion punitive-damages verdict awarded by a Miami jury to a statewide class of smokers in 2006. Florida’s high court, which ruled the smokers can’t sue as a group, extended the time for individual smokers to sue and allowed them to rely in their individual cases on factual findings by the Miami jury, including that cigarettes are addictive and cause cancer. ...

The 8,000 cases pending in the state are split up among cigarette makers including Altria, Reynolds American Inc. and Vector Group Ltd. The cases are slated to be tried in courthouses across the state in coming months and years.

HME

South Carolina Senate Considers Tort Reform Bill

The Charleston Regional Business Journal reports the bill includes limits on punitive and noneconomic damages, class-action reform, and limits bond requirements to appeal extremely large verdicts. (H/t to Torts Prof Blog.)

BGS

Analysis of the Latest Williams Tobacco Appeal to the Supreme Court

Adam Liptak of the New York Times breaks down the issues in Justices Look Anew at Case in Which Oregon Court Has Twice Rebuffed Them.  Here's an excerpt:

The United States Supreme Court takes its name seriously, and it expects lower courts to follow its instructions. But the Oregon Supreme Court has twice refused to reduce a $79.5 million punitive damages award in the face of increasingly blunt directions from the nation's highest court.

When the United States Supreme Court agreed to hear the Oregon case for a third time in June, many legal experts assumed it did so to teach the lower court a lesson about which court has the last word.

''The Oregon Supreme Court really has continued to be defiant in this case,'' Benjamin C. Zipursky, a Fordham law professor, said.

BGS

Exxon Makes First Payments to Valdez Spill Plaintiffs

Article in the L.A. Times -- Exxon Valdez victims receive first payments, by Kim Murphy.  (H/t to Torts Prof Blog.)  Here's an excerpt:

Reporting from Cordova, Alaska -- A little less than 20 years ago, Mike Webber was king of his own watery world. He was 28 years old, with three herring fishing boats. He leased another long-line boat for halibut, and gill-netted the fat salmon that made Prince William Sound one of the most legendary fisheries in the world.

Then came the 1989 Exxon Valdez oil spill. Overnight, it was all gone: Fish prices plummeted. People started selling their fishing permits to pay their mortgages, and then lost their houses anyway. Salmon rebounded, but the $12-million-a-year herring fishery all but disappeared.

On Friday, Webber and more than 200 other residents of this rain-soaked fishing town began getting the first round of punitive damage payments from ExxonMobil, closing the book on one of the nation's most epic battles over environmental destruction and corporate responsibility.

BGS

Williams Tobacco Case Back at U.S. Supreme Court

Article on Bloomberg.com -- Altria Punitive-Damages Case Divides U.S. High Court, by Greg Stohr.  Here's an excerpt:

A divided U.S. Supreme Court wrestled with a $79.5 million award against Altria Group Inc.’s Philip Morris USA unit in an Oregon smoker lawsuit and discussed the possibility of broadening the scope of the case.

In a case now before the justices for the third time, Philip Morris is seeking a new trial and a reprieve from what would be a record payment in a smoker suit. The cigarette maker says the Oregon Supreme Court improperly circumvented a 5-4 ruling the company won at the U.S. Supreme Court last year. The Oregon court then reaffirmed the award, saying the company violated a state procedural requirement.

Comments during today’s argument suggested that several justices may switch sides, putting the outcome in doubt. Antonin Scalia, who dissented in 2007, today said the Oregon court had disobeyed the high court’s instructions. At the same time, Stephen Breyer and David Souter, who previously sided with Philip Morris, hinted they might vote against the company this time.

BGS
 

Markel on Punitive Damages

Dan Markel (Florida State) has two new articles that may be of interest: "How Should Punitive Damages Work?" and Retributive Damages: A Theory of Punitive Damages As Intermediate Sanction.

Here is the abstract of the first piece:

What are punitive damages for? In a companion article, I argued that states should re-conceive and restructure punitive damages to advance, in part, the public's interest in retributive justice. I called such damages "retributive damages." Although that article provided the rationale and basic structure for retributive damages as an expressly "intermediate sanction," and explained why society should want retributive damages independent of other remedial or penal options, the theoretical nature of the proposal only scratched the surface of how they would operate in practice.  This Article addresses the next critical question: how should punitive damages work? This question is especially timely in light of the Supreme Court's recent decision in Philip Morris v. Williams, which held that juries may not consider the harms to non-parties in determining the amount of punitive damages a defendant must pay.  To make punitive damages work, we must first separate retributive damages from damages meant either to achieve optimal deterrence (to the extent permitted by Philip Morris) or to vindicate the victim's dignity interests. Because these purposes are distinct, a jurisdiction that conflates them risks both under- and over-protection of various defendants. Once we correctly understand these distinct purposes, our institutional design for civil damages should map these values appropriately.

This Article begins that important task, first by explaining why and how defendants should enjoy certain procedural protections depending on which purpose the damages vindicate, and second, by addressing the critical implementation issues associated with this pluralistic scheme of extra-compensatory damages: insurance, settlement, and taxation.

 

ADL

California Supreme Court to Review Punitive Damages Award in Ford Rollover Case

Article in Bloomberg.com -- Ford Gets California Review of $82.6 Million Rollover Verdict, by Edvard Pettersson. (H/t to AmLaw Litigation Daily.)  Here's an excerpt:

Ford Motor Co., the second-biggest U.S.-based automaker, will get a review from California's highest court of an $82.6 million verdict stemming from a 2002 rollover crash that left a woman paralyzed.

The California Supreme Court, in a notice posted today on its Web site, granted Ford's petition for review of a California appeals panel's decision not to reduce the $55 million punitive damages part of the verdict or to grant a new trial.

The U.S. Supreme Court last year ordered the appeals court in San Diego to reconsider the punitive damages in light of a decision in a smoker's lawsuit against Altria Group Inc.'s Philip Morris unit that said punitive damages couldn't be based on harm to people not involved in the court case. The appeals court said March 10 there was no evidence the Ford jury based its award on harm to people who weren't part of the lawsuit.

BGS

Ted Frank on Exxon v. Baker

Ted Frank, director of the AEI Legal Center for the Public Interest, discusses the recent punitive-damages Supreme Court decision, Exxon v. Baker, as part of a Federalist Society SCOTUScast.

BGS

Sebok on the Exxon Punitive Damages Case

Anthony Sebok (Cardozo) has an excellent Findlaw colum (click here) on Exxon v. Baker.  There are lots of interesting points in this column.  Sebok's discussion of the history -- and of the importance of the theory of punitive damages in light of that history -- is very illuminating.

ADL

What's So Weird About the Exxon Decision?

I just finished reading the decision in Exxon v. Baker and have a few preliminary thoughts.  As most of our readers are aware from Byron's post, the decision reconsidered the punitive damages in the case arising out of the Exxon Valdez disaster.  The court held that punitive damages are available under maritime law, that this is a federal common law question, and that the appropriate punitive damages award for the type of reckless conduct found in this case was a 1:1 ratio to the compensatory damages awarded in the case.  For those wanting more commentary, you might check Scotusblog commentaries here.   

So what's so weird about the decision? 

1. Its a punitive damages class action! Forgive me for not noticing this before, but that is a rare bird indeed. 

2. The Court's main concern is that punitive damages are inconsistent.  But that assertion, if true, doesn't at all support the idea that punitive damages should be pegged in a 1:1 ratio to compensatory damages.  We need to ask why they are inconsistent and what that means.  For example, assume there are two trials arising out of the same conduct.  In one trial there is a punitive damages award of $8 million and in another trial a punitive damages award of $0.  Does this mean that $0 punitive damages is the right answer? No.  There are three possible answers: $8, $0 and $4.  Which is right? I don't know. But none of them bear any relationship to the compensatory damages in the hypothetical case (which is why, you may have noticed, I did not mention the compensatory damages).  What inconsistent punitive damages tell us is that the whole concept of punitive damages is contested, and people can't agree on whether and how much we should punish wrongdoers through the civil justice system.   Some juries think we should, some think we shouldn't.  Imposing a randomly selected ratio does not solve the underlying policy question.  In any event, here the punitives across cases are consistent because all the cases arising out of this conduct were included in this class action!  Furthermore, we tolerate inconsistent verdicts all the time in personal injury cases.  This is part of life, because the process of valuing cases is one of the social construction of damages.  And it is contested. 

2a.  And on that ratio, the idea that the appropriate measure of punitive damages is the same as the mean ratio is absurd.  The court did not even consider comparable cases (because there aren't any, perhaps).  Can you imagine what my students would say if I told them that I am not reading their exams and grading them individually, but instead giving them a B, because we have a B median requirement at the law school where I teach?   That would be incredibly unfair, regardless of what I think about grading as a policy matter.

3. The Court stands the economic theory of punitive damages on its head.  The majority quite clearly states that the purpose of punitive damages is retribution and deterrence.  But if deterrence is your goal, pegging punitive damages (in any multiplier) to compensatory damages makes no sense.  The theory of deterrence requires that the wrongdoer pay something more than the cost of preventing the accident/bad act.  That cost has no relationship to compensatory damages.  If the cost of preventing the the wrongful act is the same as the damages that act cost, that is pure luck.   For example, maybe a test to find out if ship's captains are relapsed alcoholics only costs $100 per captain per year.  Then the punitive damages need to be something more than that amount.   Not $2.5 billion.  Not $20 million either. 

3a. To the extent that its not about deterrence but about retribution, pegging the punitive damages to compensation still doesn't make sense.  If you want to hurt the defendant, you have to look at the defendant's wealth and figure out what amount will hurt him.   Knowing how much the defendant hurt the plaintiff will not help because there is, again, no relationship between the marginal value of a dollar to the plaintiff and to the defendant.  For an article on the retribution theory of punitive damages see Anthony Sebok, Punitive Damages: From Myth to Theory on SSRN and Iowa L. Rev. 

3b.  The only way that pegging compensatory damages to punitive damages makes sense is to say that punitive damages are a part of compensatory damages - they compensate for other things, say harm to third parties.  This is a theory, but its one the court has rejected as far as I can tell in
Philip Morris v. Williams as well as in Exxon.  For an article on this theory see Catherine Sharkey, Punitive Damages as Societal Damages abstract on SSRN , published in the Yale L. J.

ADL 

SCOTUS Reduces Exxon Oil Spill Punitive Damages to Match Compensatory Damages

Article on cnn.com -- High court reduces Exxon oil spill damages.  Here's an excerpt:

The Supreme Court has reduced a $2.5 billion punitive damages award against energy giant Exxon for its role in an infamous 1989 maritime oil spill.

The high court concluded, 8-0, that punitive damages should roughly match actual damages from the environmental disaster, which were roughly $507 million. Justice Samuel Alito took no part in the case because he owns Exxon stock.

The court ruled that victims of the worst oil spill in U.S. history may collect punitive damages from Exxon Mobil Corp, but not as much as a federal appeals court determined.

BGS

Widener Law Journal's Crimtorts Symposium Issue

The Widener Law Journal has published its issues in connection with its February 2008 symposium, Crimtorts.  Torts Prof Blog has links to all the articles, which include the following:

Christopher J. Robinette, Introduction

Kenneth W. Simons, The Crime/Tort Distinction:  Legal Doctrine and Normative Perspectives

Thomas H. Koenig, Crimtorts:  A Cure for Hardening of the Categories 

Michael L. Rustad, The Supreme Court and Me:  Trapped in Time with Punitive Damages 

Jeffrey O'Connell, The Large Cost Savings and Other Advantages of an Early Offers "Crimtorts" Approach to Medical Malpractice Claims 

Frank J. Vandall, Should Manufacturers and Sellers of Lethal Products Be Subject to Criminal Prosecution? 

Byron G. Stier, Crimtorts, Class Actions, and the Emerging Mass Torts Method 

Keith N. Hylton, A Theory of Wealth and Punitive Damages

Sheila B. Scheuerman, The Road Not Taken:  Would Application of the Excessive Fines Clause to Punitive Damages have Made a Difference?

BGS

Supreme Court grants cert in Williams v. Philip Morris (again)

The Supreme Court today granted certiorari to hear another appeal concerning punitive damages in Williams v. Philip Morris, this time to decide whether the Oregon courts complied with the U.S. Supreme Court's earlier ruling in the case.  Here's a link to the Oregon Supreme Court opinion in question, and an excerpt from the NY Times article by David Stout: 

The United States Supreme Court will review a $79.5 million punitive-damages award against Philip Morris in the latest back-and-forth between the justices and the high court of Oregon. The last time the case was before the United States Supreme Court, the justices overturned the award by an Oregon jury on the ground that jurors might have improperly calculated the monetary figure to punish the cigarette maker, by weighing the harm the company caused to smokers other than Mr. Williams.

That ruling, on Feb. 20, 2007, sent the case back to the Oregon Supreme Court, which concluded in January that the award against Philip Morris could stand because the United States Supreme Court had acknowledged that harm to people not involved in the lawsuit could still play a role in the punitive-damages calculation “in the sense that it is relevant to showing the degree of reprehensibility of a defendant’s conduct.”

In announcing on Monday that it would look at the Williams case once again, the United States Supreme Court said it would not consider whether the amount of the judgment was constitutionally permissible. Rather, it would decide if the Oregon court’s January action was taken in defiance of the February 2007 ruling.

For earlier accounts of the Williams case on this blog, see here (on the Supreme Court's opinion and a related editorial), here (on a subsequent law review symposium), and for earlier accounts with links to articles, audio, and more, see here, here, here, here, here, here, and here.

HME

Charleston Law Review Symposium Issue on Punitive Damages After Philip Morris v. Williams

Last September, Charleston Law School hosted a symposium entitled, Punitive Damages, Due Process, and Deterrence: The Debate After Philip Morris v. Williams.  (See prior posts here and here.)  The resulting symposium issue of the Charleston Law Review has just been published.  Articles in the issue include the following:

Anthony Sebok, After Philip Morris v. Williams: What is Left of the "Single-Digit" Ratio?, 2 Chas. L. Rev. 287 (2008)

Anthony J. Franze, Clinging to Federalism: How Reluctance to Amend State Law-Based Punitive Damages Procedures Impedes Due Process, 2 Chas. L. Rev. 297 (2008).

Neil Vidmar & Matthew Wolfe, Fairness Through Guidance: Jury Instruction on Punitive Damages After Philip Morris v. Williams, 2 Chas. L. Rev. 307 (2008)

Christopher J. Robinette, Peace: A Public Purpose for Punitive Damages?, 2 Chas. L. Rev. 327 (2008).

Keith N. Hylton, Due Process and Punitive Damages: An Economic Approach, 2 Chas. L. Rev. 345 (2008)

Victor E. Schwartz & Christoper E. Appel, Putting the Cart Before the Horse: The Prejudicial Practice of A "Reverse Bifurcation" Approach to Punitive Damages, 2 Chas. L. Rev. 375 (2008)

Elizabeth J. Cabraser & Robert J. Nelson, Class Action Treatment of Punitive Damages Issues After Philip Morris v. Williams: We Can Get There From Here, 2 Chas. L. Rev. 407 (2008)

Byron G. Stier, Now It's Personal: Punishment and Mass Tort Litigation After Philip Morris v. Williams, 2 Chas. L. Rev. 433 (2008).

Michael L. Rustad, The Uncert-Worthiness of the Court's Unmaking of Punitive Damages, 2 Chas. L. Rev. 459 (2008)

Downloads of the articles via .pdf files are available at TortsProf Blog.

BGS

Foreign Courts Wary of Punitive Damages

The New York Times has an interesting story on Italians’ view of punitive damages. Apparently they are "so offensive to Italian notions of justice" that Italy refuses to enforce judgements containing punitive damages. Here’s an excerpt of the full article, which begins by highlighting an Alabama woman who sued when her 15-year old’s motorcycle helmet failed:

Most of the rest of the world views the idea of punitive damages with alarm. As the Italian court explained, private lawsuits brought by injured people should have only one goal — compensation for a loss. Allowing separate awards meant to punish the defendant, foreign courts say, is a terrible idea.

Punishments, they say, should be meted out only by the criminal justice system, with its elaborate due process protections and disinterested prosecutors. It is not fair, they add, to give plaintiffs a windfall beyond what they have lost. And the ad hoc opinions of a jury, they say, are a poor substitute for the considered judgments of government safety regulators.

Some common-law countries do allow punitive damages, though in limited circumstances and modest amounts. In the United States, by contrast, enormous punitive awards are relatively common, although they are often reduced or eliminated on appeal. Last month, for instance, the United States Supreme Court heard arguments in the Exxon Valdez case, where a jury’s initial award of $5 billion was later reduced to $2.5 billion.

Still, such awards terrify foreign courts.

"The U.S. practice of permitting a lay jury to exercise largely discretionary judgment with limited constraints in awarding punitive damages is regarded almost universally outside the U.S. with a high degree of disfavor," said Gary Born, an American lawyer who works in London.

Foreign lawyers and judges are quick to cite particularly large American awards. Julian Lew, a barrister in London, recalled a Mississippi court’s $400 million punitive award against a Canadian company in 1995 with scorn. "It did bring America into total and utter contempt around the world," Mr. Lew said.

Yet there are signs that the gap between the United States and the rest of the world is narrowing, as American courts and legislatures start to limit punitive awards and other countries start to experiment with them.

Punitive damages have deep roots in American and English common law, but their nature has changed here over time. "Until well into the 19th century," Justice John Paul Stevens of the Supreme Court wrote in 2001, "punitive damages frequently operated to compensate for intangible injuries" like pain and suffering or emotional distress.

These days, driven by the structure of the American civil justice system, entrepreneurial plaintiffs’ lawyers and the populism they embrace, punitive damages are used to send messages to large corporations, to fill gaps in regulation and to reward successful plaintiffs with multiples of what they have lost. Distinctive features of the American legal system — civil juries, class actions, contingency fees and the requirement that each side bear its own lawyers’ fees — all play a role in amplifying punitive damages.

ECB

Punitive Damages and the World

Interesting article by Adam Liptak in tomorrow's New York Times -- Foreign Courts Wary of U.S. Punitive Damages -- as part of the series on the American legal system in comparative perspective.  The main point of the story is the uniqueness of U.S. punitive damages and the reluctance of some foreign courts to enforce U.S. punitive damage awards, but the story also suggests "that the gap between the United States and the rest of the world is narrowing, as American courts and legislatures start to limit punitive awards and other countries start to experiment with them."

HME

Ted Frank Commentary on Exxon Valdez Oral Argument in U.S. Supreme Court

Ted Frank of the American Enterprise Institute comments in a Federalist Society SCOTUScast on oral argument in Exxon v. Baker.

BGS