California Punitive Damages

Oregon jury awards $25 million to smoker in retrial; original award was $150 million

2012-02-17T22:24:00.000-08:00

Oregonlive is reporting that an Oregon jury has awarded $25 million in punitive damages to the family of a smoker in a lawsuit against Philip Morris. This was a partial retrial of a case in which the original jury awarded $169,000 in compensatory damages and $150 million in punitive damages. As we reported in June 2010, the Oregon Supreme Court reversed that award because the trial court had given a jury instruction that improperly allowed the jury to punish Philip Morris for injuries to nonparties. Although the second jury's award of $25 million is much less than the original award, it still represents a ratio of 148 to one, and Philip Morris says it plans to appeal again on the grounds that the award is excessive. The case is Schwarz v. Philip Morris.

California's special pleading requirements for punitive damages claims against healthcare providers don't apply to health care service plans (Kaiser Foundation Health Plan v. Superior Court)

2012-02-17T14:25:00.000-08:00

Under California law, plaintiffs seeking punitive damages from a healthcare provider must satisfy special pleading requirements. Specifically, California Code of Civil Procedure section 425.13 requires plaintiffs to submit evidence demonstrating a substantial probability of success before they can plead a claim for punitive damages in an "action for damages arising out of the professional negligence of a health care provider."

The question in this case is whether section 425.12 applies to a lawsuit against an HMO or other health care plan, alleging that it devised a compensation scheme that induced the participating health care providers to deny costly medical services to plan members. In a published opinion, the California Court of Appeal (Second District, Division Seven) held that a plaintiff does not have to comply with section 425.13 in an action brought against a health care service plan because such a plan "does not directly provide medical care to its subscribers. Instead, the Health Plan contracts with other entities to deliver medical care to subscribers who enroll in its plans."

Florida appellate court reverses $40 million punitive damages award in tobacco case

2012-02-15T11:07:00.000-08:00

Yesterday an intermediate appellate court in Florida (First District Court of Appeal) reversed $40.8 million in punitive damages awarded to a smoker's family in a lawsuit against RJ Reynolds. A jury award had awarded $10.8 million in compensatory damages and $80 million in punitive damages, but the trial court reduced those amounts under state law to $5.5 million and $40.8 million, to reflect the jury's finding that the smoker was 51% responsible for his own death. Ordinarily punitive damages awards are not reduced to reflect a finding of comparative fault, but the plaintiffs in this case consented to the trial court's reduction of the punitive damages on that basis. (See footnote 2 on page 2.)

The appellate court affirmed the compensatory award, but concluded that the punitive damages award was excessive. When calculating the ratio between punitive damages and compensatory damages, the court compared the reduced amount of the punitive damages award ($40.8 million) to the unreduced compensatory damages ($10.8 million), resulting in a ratio of 3.7 to one. If the court had used the reduced amount of compensatory damages (as it did in this opinion), the ratio would have been 7.58 to one. Even though this method of calculation favored the plaintiff by generating a lower ratio, the court still concluded that the punitive damages award was unconstitutionally excessive in light of the "substantial" compensatory damages award. Unlike the California Court of Appeal in Bullock, the court did not compare the compensatory damages award to the defendant's wealth in order to determine whether the award was substantial. The court simply concluded that the award was "substantial by any measure."

Strangely, after concluding that the award was excessive, the court remanded the case to the trial court to give the plaintiff the option of choosing a new trial on punitive damages or accepting a reduced amount of punitive damages. As many other courts have explained (including the California Supreme Court), that sort of disposition doesn't really make sense when a court determines that a punitive damages award is constitutionally excessive. Once a court determines the maximum award permissible, there is no reason to allow the plaintiff to reject that amount and choose a new trial, because the plaintiff would never be permitted to obtain anything more than the constitutional maximum.