Cal Biz Lit

Cal Supremes Dismiss Review in Buell-Wilson Mega-Dollars Case Against Ford

    CalBizLit has followed this long strange trip here, here and, for a long summary of the procedural history,  here.

    Short version:  jury awards $122M in compensatories and $246M in punitives.  Courts chip away at the verdict as it bounces up and down through the appellate process, until finally there's nothing left but a scant $27M in compensatories and $55M in punitives.  Cal Supremes grant review on Philip Morris USA v. Williams, but put the case on hold pending SCOTUS action on Williams II.

    SCOTUS dismisses certiorari in Williams II.  Plaintiff in Buell-Wilson moves to dismiss review.  And yesterday, Cal Supremes rule as follows:

The United States Supreme Court having dismissed the writ of certiorari in Philip Morris USA Inc. v. Williams (No. 07-1216) on March 31, 2009, plaintiffs' motion to dismiss review in this matter is granted.

    Meaning: nothing left for Ford but one more shot at SCOTUS (which seems like a long-shot).  Meanwhile, the very plaintiff-friendly Court of Appeal decision in Buell-Wilson remains unpublished and unciteable by any other party in any other case. 

Market Share Liability and Punitive Damages

    In Sindell v. Abbott Laboratories (1980) 26 Cal.3d 588, the California Supremes pioneered the "market share" liability theory for plaintiffs alleging injury caused by generic, fungible products whose producers could not be identified.  The ruling allowed plaintiffs who claimed injury from such products, but were not able to identify the exact manufacturer, to nonetheless recover without linking a particular manufacturer to their exposure, so long as they brought to court the defendants responsible for a "substantial share" of the relevant market.

    Then, in Magallanes v. Superior Court (1985) 167 Cal.App.3d 878, the Court of Appeal held that if the plaintiff's route to liability was market share theory, he or she couldn't recover punitive damages.  The few other cases to address this issue nationwide have generally agreed.  As a result, market share theory isn't all that popular among plaintiff attorneys who think they may have a shot at punitive damages.

    Now comes the Columbia Journal of Law and Social Problems, in its Winter, 2008 edition, with the article "Market Share Liability & Punitive Damages:  The Case for Evolution in Tort Law."  The note promises, but does not deliver, a "compelling argument that [Magallanes and the other cases] were decided incorrectly, and that market share liability should, in fact, be allowed to support punitive damages."  In other words, the concept is that a plaintiff should, under some circumstances, be allowed to recover not just compensatory damages against a manufacturer whose product he never encountered, but punitive damages as well.

    As the author points out, nobody in the United States has bought into this theory so far.  And I'll stick my neck out and guess this expansion of the law isn't high on the priority list of many Courts of Appeal in California, either.

    Hat tip to California Punitive Damages, An Exemplary Blog, for catching this, and for noting that perhaps next time, the Columbia Journal of Law and Social Problems may want to cite check the cases:  Magallanes, one of the primary cases discussed in the note, is misspelled throughout.

   

   

   

Runaway Verdicts Just Aren't What They Used To Be

    Bloomberg reports that "the billion dollar verdict has disappeared from U.S. courtrooms."  Biggest reason seems to be State Farm v. Cambpell and its progeny.  Says Bloomberg "For the second time in the past three years, juries in 2008 issued no awards " of a billion or more.

In 2007, there was one such verdict, for $1.5 billion. In the previous 14 years there was at least one billion-dollar verdict a year and a total of 26. Six cases produced awards of more than $5 billion each.

    The largest verdict of the year did -- surprise! -- come from California.  It was the ICO v. Lockheed case CalBizLit blogged about late last year here, and a few days ago here.  A mere $606 million, or $630 million depending on the report you read. 

Los Angeles Jury Awards Piddling $7.5 Million For Punitive Damages In Employment Case Against Kaiser

    I've been following with interest the case of Radiologist Dr. Martin Martinucci, who contended that Kaiser Hospital forced him to quit because he complained about the quality of its care.  As reported in the San Francisco Chronicle, Martinucci was hired in 2003 and resigned three years later after his supervisor and a human resources staffer accused him of being racist and making sexual advances toward a male technologist.  His suit was a "constructive termination case," a difficult form of employment case in which the employee who resigns must prove that the resignation was essentially a firing because working conditions were so intolerable that no reasonable employee would have stayed.  This was established by the California Supremes in Turner v. Anheuser-Busch, Inc. (1994) 7 Cal.4th 1238.

    As California Punitive Damages, an Exemplary Blog has reported, the jury found for Martinucci last Monday and awarded compensatory damages of $3.9 million.  Under California law, the question of whether the defendant has acted with malice, fraud or oppression (the prerequisites for a punitive damage award) are decided at the same time the jury decides liability and compensatory damages.  But the defendant is entitled to have bifurcation -- i.e., a second phase of trial -- on the question of whether punitive damages should be awarded and how much.  Most defendants exercise this right to a two-phase trial, and Kaiser did here.

    Here's where it gets interesting.  In phase two, Martinucci asked the jury for $1 billion in punitive damages.  Most of us would think that's a little on the aggessive side.  Conventional defense lawyer wisdom would have it that a request this high risks turning off the jury.  But I'm not so sure.  There's a very good, albeit rather ponderous study of punitive damages called "Punitive Damages, How Juries Decide," by Cass Sunstein and others.  I've read it, so you don't have to.  Sunstein and company found that the most significant predictor for a large punitive damages award is a large request.  And in fact, there is no limit -- it's like the more the plaintiff attorney asks for, the more he gets.  So by asking the jury for a billion bucks, the plaintiff attorney doesn't get a billion bucks.  But he gets more, all other things being equal, than he would if he asked for a mere, say $700 million. 

    And sure enough, Dr. Martinucci was not awarded $1 billion.  Only $7.5 million.  A verdict, as California Punitive Damages points out, that has a much better chance of sticking on appeal than one for a billion.

Clouded Crystal Ball Department

Yesterday, I spoke on the telephone with a lawyer I know in Indiana.  He went to law school about the same time I did (back when the earth was cooling) and he was commenting that when he was in law school, they'd read the cases on a particular issue, he'd think he understood the applicable law, and then they'd get to the case on California, where things were always, ah, well,  different . . . .

And in that regard, let us review the long and winding road of Barry and Benetta Buell-Wilson's litigation against Ford Motor Company, arising out of her 2002 catastrophic rollover accident in January, 2002:

June, 2004:  San Diego Superior Court jury awards the Buell-Wilsons  $122.6 million in compensatory damages and $246 million in punitive damages.

On post-trial motions, the trial court reduces this to a mere $75 million in compensatory damages and $75 million in punitive damages.

In July, 2006, the Court of Appeal affirms the finding of liability, but reduces compensatory damages to approximately $27.6 million and punitive damages to $55 million.  Buell Wilson v. Ford Motor Co., Inc. (2006) 141 Cal.App.4th 525.   In August, that court denies rehearing.  Buell Wilson v. Ford Motor Co., Inc. (2006) 141 Cal.App.4th 1421b.

Ford petitions the California Supreme Court for review, and this petition is denied in November, 2006.  Ford petitioned the U.S. Supreme Court for certiorari.  The U.S. Supreme Court issued a "GVR" order, granting certiorari, vacating the judgment, and remanding the case for reconsideration in light of Phillip Morris USA v. Williams (2007) 549 US ___ (127 S.Ct. 1057) (now known as "Williams I," as "Williams II" is presently before that court).

As discussed in CalBizLit here, and a whole bunch of other places, the Court of Appeal said "reconsider?  sure, we'll reconsider, and we'll come right back with exactly the same decision."  Buell-Wilson v. Ford Motor Company (2008) ___ Cal.App.4th___ (Fourth App. Dist. D045154, D045579).

    That astute observer of the legal scene Bruce Nye at CalBizLIt commented at the time: 

"This may be the end of the road for Ford.  The Court of Appeal seems to have set up enough procedural obstacles that the Supremes won’t get involved unless they really, really, really are determined to slap down excessive punitive damages awards."

Well, nice prognosticating.  Except it's 180 degrees wrong.  The Cal Supremes have granted review, and here's the statement of issues for decision:

(1) What procedural protections are required by Philip Morris USA v. Williams (2007) 549 U.S. __, 127 S.Ct. 1057, which held that due process requires that a jury not award punitive damages to punish for harm to third parties; and under what circumstances can those constitutional rights be deemed forfeited? (2) Are punitive damages prohibited in product liability cases where the manufacturer's design conforms to governmental safety standards and industry standards and custom, and there is a "genuine debate" about what the law requires? (2) Is the amount of the punitive damage award in this case unconstitutionally excessive and arbitrary?

The Supremes have put the case on hold pending the U.S. Supreme Court's decision in Williams II.

Ford's Petition for Review in Buell-Wilson Punitive Damages Case

I blogged in March, here, on the Court of Appeals' decision in Buell-Wilson v. Ford (2008) ___ Cal.App.4th ___ (Fourth Dist., D045154).  There, after the Cal Supremes remanded so the court could take another look at the $55 million punitive damage award, the court of appeals did.  And affirmed it again.  I looked in my crystal ball at the time, and wrote that this might be the end of the road for Ford, because "[t]he Court of Appeal seems to have set up enough procedural obstacles that the Supremes won’t get involved unless they really, really, really are determined to slap down excessive punitive damages awards."

Well, we'll find out.  Not unexpectedly, Ford has petitioned the California Supreme Court yet again.  The California Supremes do not accept cases to correct error:  instead, under California Rules of Court, rule 8.500(b)(1), that court generally grants review in civil cases "When necessary to secure uniformity of decision or to settle an important question of law."

Ford is contending that both reasons are present here.  Interestingly, its third basis for requesting review has to do with proffered evidence of government and industry standards and custom and practice in this product liability suit.  While Ford's immediate quarrel is that the trial court excluded this evidence as irrelevant to the punitive damage claim, Ford seems to go farther, suggesting that if it conformed to such standards, customs and practices, punitive damages would be barred as a matter of law.  The chances of ever establishing that proposition seem pretty slim, but if Ford ever carried this off, it would be about the biggest event in the California history of punitive damages / product liability jurisprudence.

Anyway, the Supreme Court has sixty days from April 28 in which to grant review, or ninety days if it grants itself an extension, so we'll know by this summer what the Court has in mind.
 

Cal Court of Appeal to US Supremes: Here’s a Thumb In Your Eye

    Today we discuss punitive damages.  But this post is not about your routine, garden variety, might I say even conservative $1 million or $5 million punitive damages award.  Rather, this is about mega-punitive damages, as in Buell-Wilson v. Ford Motor Company (March 10, 2008) ___ Cal.App.4th___ (Fourth App. Dist. D045154, D045579) (Buell-Wilson II).   Specifically, the question is, what does the Court of Appeal do when the US Supremes tells it to re-analyze a $55 million punitive damages award, already reduced twice, in light of Philip-Morris USA v. Williams (2006) 549 US ___?   The short answer:  spend some forty pages re-analyzing it and reach exactly the same result it did before.  And, more importantly, build a legal wall designed to keep the Supremes from touching the decision.

More after the jump.

Further Commentary on Unocal Punitive Damages Decision

Yesterday CalBizLit posted on Holdgrafer v. Unocal, wherein the Court of Appeal for the second district applied State Farm v. Campbell in reversing a punitive damages award.  The trial court had allowed evidence of other bad acts, which the Court of Appeal ruled were too dissimilar.

The appellate firm of Horvitz & Levy represented Unocal in the case, and is certainly entitled to plaudits.  Last night, in that firm's punitive damages blog California Punitive Damages - An Exemplary Blog,  Horwitz's Jeremy Rosen quibbled with my characterization of the San Luis Obispo County judge as "conservative" for reducing the jury's punitive verdict from $10,000,000.76 (a cute nod to Unocal's former name, Union 76) to $5,000,000. 

I guess I'm jaded by practicing in California's big cities, where we've seen a $50 million punitive damage award against UPS, a $28 billion punitive award against  Phillip Morris and a $50 million punitive award against DaimlerChrysler.  Pretty sad when a $5 million punitive judgment becomes, if not conservative, at least ho hum.

Punitive Damage Award Reversed Based on Erroneous Admission of Other Dissimilar Instances

Interesting application of State Farm Mutual Automobile Insurance Company v. Campbell (2003) 538 U.S. 408 in the California context in yesterday's decision in Holdgrafer v. Unocal Corp. (2008) ___ Cal.App. 4th ___ (2d Civil No. B175953). 

Unocal (now owned by Chevron) owned and operated oil wells, a refinery, and hundreds of miles of underground petroleum pipeline in Central California in general and San Luis Obispo County in particular.  The company replaced two of the pipelines in 1952, installed cathodic protection (which guards against corrosion) in 1957 and hired a full-time manager to monitor the cathodic protection system starting in 1984.  Alas, there were still some 426 leaks from 1972 to 1992, and most of these were related to corrosion.

In 1988, substantial contamination from the pipes was found on the plaintiffs' property.  After a rapid-fire negotiation session lasting a mere 13 years, negotiations broke down and the plaintiffs sued Unocal.  The jury awarded them $564,348 in damages for past economic loss and $2 million for diminished value of the property.

Civil Code section 3294 permits a jury to award punitive damages if it finds by clear and convincing evidence that the defendant has been guilty of "malice, fraud or oppression."  Section 3295(d) (scroll down) provides that on  application of the defendant,  evidence of the defendant's financial condition shall not be admissible until such time as the jury has found malice, fraud or oppression. 

What this means in most instances is that punitive damage cases are bifurcated.  In phase I, the jury decides all of the compensatory damage issues, and also decides whether there is malice, fraud or oppression.  If it so finds, then in phase II, it looks at evidence concerning what punitive award is appropriate, including the defendant's financial condition.  This bifurcation is the right of the defendant, who can also waive it.

Well, Unocal had other leak and petroleum release problems besides this one.  It spilled, and then cleaned up, 400,000 gallons of oil at Avila Beach.  It leaked about 8.5 million gallons of a diesel-like substance at its Guadalupe field.

And the trial court admitted evidence of both of these mishaps in connection with the plaintiff's punitive damage claims, both as evidence of malice and as evidence of the amount of punitive damages that were appropriate.  The evidence was admitted only in Phase II.  But the trial court bifurcated in an unusual way:  both the malice issue and the amount of punitive damages issue were decided in Phase II.  Only compensatory issues were decided in Phase I.  In order to prevent evidence of the other spills from being admitted in the liability phase, Unocal waived its right to a section 3295 bifurcation.

The jury somewhat whimsically awarded $10,000,000.76 in punitive damages (Unocal, of course, was previously known as Union 76).  Confirming my analysis that San Luis Obispo Superior Court is a pretty conservative place, the trial court reduced the number to an even $5 million, even taking away the seventy-six cents.

The Court of Appeal took away the rest, on the ground that Avila and Guadalupe were dissimilar incidents.  State Farm held that dissimilar incidents were not admissible to prove the amount of punitive damages.  The California court held that dissimilar incidents are inadmissible to prove the entitlement to punitive damages.

Of course, the case was remanded for JUST a trial on the punitive part of the case -- probably not a happy scenario for Unocal.  One questions how well it will do trying ONLY punitive damages, with the jury being instructed that the company has already been found liable, and the only thing they need to do is look at all the similar evidence and determine whether there is malice and how much is appropriate to punish the company.