product liability · product liability sealing settlement agreements concerning public hazards in...
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NEWSLETTERJune 2013
For more information about Wilson Elser’s Product Liability practice, visit our website.
Contacts:
Frank Manchisi Partner & Practice Chair [email protected]
Product LiabiLity
Sealing Settlement Agreements Concerning Public Hazards in New York CourtsArguments relying on the chilling effect unsealed settlement agreements will have on future settlement negotiations, the potential that a defendant could become a target for nuisance suits, and prevention of adverse publicity that might cause juries to be biased against the defendant in future cases will likely not convince New York courts to maintain settlement agreements under seal. Read More
Preclusion of Warnings Experts in Federal CourtTo support failure to warn claims, plaintiffs often attempt to introduce reports and testimony of “warnings experts,” many of whom simply rely on their own beliefs regarding a warning instead of being able to identify a reliable scientific basis for an opinion regarding a particular warning. Read More
Punitive Damages Based on Gross Negligence
Will Massachusetts Follow the Pack or Buck the Trend?
While the U.S. Supreme Court has not yet established a bright-line rule with respect to the awarding of punitive damages, it has established three guideposts in determining the constitutionality of punitive damages awards. The most important guidepost is the “degree of reprehensibility of the conduct,” with gross negligence at one end of the spectrum and malice at the far opposite end. The Supreme Court subsequently established “gross negligence” as “the least blameworthy conduct triggering punitive liability.” Read More
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NEWSLETTERJune 2013
Product LiabiLity
Sealing Settlement Agreements Concerning Public Hazards in New York Courts
When defending cases in New York state courts, parties must be prepared for the probability that their settlement agreements, even if intended to be kept confidential, could be revealed to the public.
New York adopted a rule relating to the sealing of court records in 1991.1 Reflecting a clear policy preference against sealed settlement agreements, the rule provides that a court shall not enter an order in a civil action sealing court records, in whole or in part, “except upon a written finding of good cause, which shall specify the grounds thereof.” 2 It was adopted at a time when various entities (plaintiff’s bar, consumers groups, public figures, etc.) were raising concerns that sealing orders was preventing the public from learning about hazards arising from unsafe products or environmental toxins. The rule requires the courts to carefully set forth the reasons for sealing in writing, limit the sealing to only those particular documents or groups of documents that require it, and refrain from sealing entire files unless absolutely necessary.3
There are some common arguments defendants make in favor of sealing settlement agreements that require judicial approval and are thus filed with the court.4 For instance, defendants frequently argue (1) that such agreements are necessary to facilitate settlements, protect trade secrets and other proprietary information, and prevent adverse publicity that might cause juries to be biased against the defendant in future cases and (2) that disclosure would prompt additional litigation and make the defendant a target for nuisance suits. Other arguments contend that a publicly disclosed settlement agreement becomes a floor for all future negotiations and that sealing the amount of settlement as opposed to evidence of wrongdoing does not hinder the public’s ability to learn of hazards to public health or safety. However, New York courts have been generally unsympathetic to the defendants’ arguments.
RELatEd CasEsOne of the more publicized settlements came out of the In Re September 11 Litigation,5 which arose out of a claim by certain insurers and property owners that a group comprising airlines, airport security companies, an aircraft manufacturer and the municipal owner of a departure airport was responsible for the property destruction that occurred as a result of the 9/11 terrorist attacks.
Most of the plaintiffs settled with some of the defendants, and the New York Southern District Court granted the parties’ motion to seal information relating to the settlement amount. However, the court reserved its right to revisit the ruling should a motion for reconsideration be presented. Thereafter, the New York Times moved to unseal the (Continued)
1 The New York Rule became effective on March 1, 1991. 22 NYCRR § 216.1 (2013).2 22 NYCRR § 216.1 (2013).3 See Danco Lab., Ltd. v. Chemical Works of Gedeon Richter, Ltd., 274 A.D.2d 1 (1st Dept. 2000).4 In New York, if the action is settled, the only document that needs to be filed by the court is a standard stipulation of discontinuance. See 22 NYCRR § 202.28. The more
elaborate agreements embodying the terms of the settlement need not be filed. However, settlement agreements are occasionally filed if the parties seek court approval of the settlement and wish to have the settlement embodied in a court order. This occurs most typically in cases involving infant plaintiffs. See, N.Y. C.P.L.R. §§ 1207-08 (requiring a motion to be made to the court for approval of a settlement involving an infant, which must include an affidavit setting forth the terms of the settlement).
5 In Re September 11 Litigation, 723 F.Supp.2d 526 (S.D.N.Y. 2010).
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NEWSLETTERJune 2013
Product LiabiLity
settlement information. Responding to the defendants’ arguments, the court found that the defendants could not have reasonably relied on the sealing order because the court reserved its right to reconsider its decision. The court also found that the parties intended to go forward with their settlement agreement regardless of how the court resolved the motion to unseal and that the unsealing of the settlement information would therefore not have a chilling effect on the defendants’ attempt to settle unresolved property damage cases. The court did however leave the amount each settling plaintiff was to receive under seal.
Similarly, in Matter of East 51st St. Crane Collapse Litigation, 2012 N.Y. Slip Op. 02433 (App. Div. 1st Dep’t Apr. 3, 2012), the First Department of the New York Appellate Division affirmed the unsealing of seven wrongful death settlements arising out of a crane collapse in Manhattan. The March 2008 accident killed the seven people and damaged nearby buildings. The settlements that resulted from the ensuing wrongful death suits were originally sealed by the trial judge. The judge ordered a temporary sealing so that the previous judgments would not impact the pending cases.
In December 2011, the plaintiff and third-party defendant from the only remaining wrongful death case filed a motion to unseal the settlements from the resolved wrongful death cases. With only one of the suits still pending, and citing 22 NYCRR § 216.1(a), the trial judge found that there had been no showing of good cause for the continued sealing of the settlement documents and granted the motion.
The defendants appealed and argued that maintaining the records under seal would prevent parties from using information about prior settlements to establish “an artificial threshold” in evaluating their own cases. The Appellate Division rejected the argument. The court held that there is a strong presumption favoring public legal proceedings and against sealing files without good cause shown. The court cited one of its prior decisions, saying that “[t]he presumption of the benefit of public access to court proceedings takes precedence, and sealing of court papers is permitted only to serve compelling objectives, such as when the need for secrecy outweighs the public’s right to access, e.g., in the case of trade secrets.”6
The court held that the “plaintiffs made a better argument that the unsealing of the settlement documents was
necessary to enable them to ascertain the amount of available insurance coverage and thus make informed decisions as to the relative benefits and drawbacks of settling their own claims. Records should not be sealed to enable one party to have an advantage over another ‘when such sealing prevents counsel from fully discussing with their clients all of the relevant information in the case.’” 7
anaLysis
New York case law indicates that it is unlikely that settlement agreements will be kept under seal, particularly in high-profile cases that involve a public hazard. Arguments relying on (1) the chilling effect unsealed settlement agreements will have on future settlement negotiations, (2) the potential that a defendant could become a target for nuisance suits and (3) prevention of adverse publicity that might cause juries to be biased against the defendant in future cases will likely be insufficient to convince courts to maintain settlement agreements under seal. In an effort to convince the court that the sealing of the settlement agreement would serve a compelling objective, defendants will probably have to refer the court to specific prejudice or harm that one or both parties will suffer through disclosure.
For additional information, contact: Petar Vanjak Associate (White Plains) 914.872.7361 [email protected]
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6 Matter of East 51st St. Crane Collapse Litigation, citing Applehead Pictures LLC v Perelman, 80 AD3d 181, 191-192 (1st Dept. 2010).7 Matter of East 51st St. Crane Collapse Litigation, citing Gryphon Dom. VI, LLC v. APP Intl. Fin. Co., B.V., 28 A.D.3d 322 (1st Dep’t 2006).
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NEWSLETTERJune 2013
Product LiabiLity
Preclusion of Warnings Experts in Federal Court
Many products liability actions contain a failure to warn claim, i.e., an allegation that the manufacturer did not provide adequate warnings regarding the proper use of a particular product. To support failure to warn claims, plaintiffs often attempt to introduce reports and testimony of “warnings experts.” Even the idea that there are warnings “experts” is an area of contention.
This is an especially important point for product manufacturers because of the disproportionate weight some juries afford experts. It is also a critically important area because many warnings experts simply rely on their own beliefs regarding a warning instead of being able to identify a reliable scientific basis for an opinion regarding a particular warning. However, manufacturers have a remedy available by being able to file in limine motions to preclude reports and/or testimony of a plaintiff’s warnings expert for a variety of reasons.
The United States Supreme Court delineated the standard for admissibility of expert opinions in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993) and its progeny.1 Although Daubert was limited to the admissibility of scientific testimony, the court in Kumho Tire Company, Ltd. v. Carmichael, 526 U.S. 137, 119 S.Ct. 1167, 143 L. Ed. 2d 238 (1999) extended this gatekeeping function to expert testimony of any nature.
Federal Rule of Evidence 702 was amended to embody the principles set forth in Daubert and Kumho: “If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training or education, may
testify thereto in a form of an opinion or otherwise, if (i) the testimony is based upon sufficient facts or data, (ii) the testimony is the product of reliable principles and methods, and (iii) the witness has applied the principles and methods reliably to the facts of the case.”
Federal Rule of Evidence 702 has three fundamental requirements for the general admissibility of expert testimony: (1) the proffered witness must qualify as an expert by knowledge, skill, experience, training or education; (2) the expert must testify to scientific, technical or other specialized knowledge; and (3) the expert’s testimony must assist the trier of fact.2 Since Daubert and (Continued)
1 The notion that it is the obligation of a trial court to act as a “gatekeeper” to ensure that expert testimony is reliable, relevant and helpful to the jury was formalized in Daubert. In Daubert, the Supreme Court of the United States held that the Federal Rules of Evidence “assign to the trial judge the task of ensuring that an expert’s testimony both rests on a reliable foundation and is relevant to the task at hand,” Daubert at 2786. According to the court: “The trial judge must determine at the outset, pursuant to Rule 104(a), whether the expert is proposing to testify to: (1) scientific knowledge that (2) will assist the trier of fact to understand or determine a fact in issue.”
2 See Hoffman v. Ford Motor Company, 2012 U.S. App. LEXIS 17215 (10th Cir. August 16, 2012) (excluding testimony because the proffered expert did not present a scientific connection between the laboratory test settings and what may have occurred in the subject case); see also Carlucci v. CNH Am. LLC, 2012 U.S. Dist. LEXIS 131405, 10-cv-12205 (D. Mass. Sept. 14, 2012); Bourelle v. Crown Equip. Corp., 220 F.3d 532 (7th Cir. 2000); and Jaurequi v. Carter Mfg. Co., Inc., 173 F.3d 1076 (8th Cir. 1999).
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Product LiabiLity
Kumho, federal courts have consistently maintained valid reasoning and reliable methodology as critical requisites in the court’s analysis of proposed expert testimony.3
After the enactment of Federal Rule of Evidence 702, several federal courts have held that expert testimony shall only be permitted if (1) the testimony is based on sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.4
Several federal courts have concluded that four factors are relevant to whether an expert’s reasoning or methodology is valid: “(1) whether the opinion or theory is susceptible to testing and has been subjected to such testing; (2) whether the opinion or theory has been subjected to peer review; (3) whether there is a known or potential rate of error associated with the methodology used and whether there are standards controlling the technique’s operation; and (4) whether the theory has been generally accepted in the scientific community.” 5
Based on these factors, various federal courts have reasoned that the opinions of plaintiffs’ warnings experts do not meet the standards for admissibility under the law and therefore should be excluded.6
Absence of a proposed alternative warning drafted by the plaintiff’s warnings expert is one of the easiest ways to preclude a plaintiff’s warnings expert. Courts have routinely held that the testimony of a warnings expert who has not drafted a proposed alternative warning is unreliable.7 Experts who have not drafted proposed alternative warnings are deemed to be “talking off the cuff” as courts have emphasized that the opinions of experts are only admissible to the extent that they are reasoned, employ the methods of the discipline and are founded on data.8 Even if the plaintiff’s warnings expert has drafted a proposed alternative warning for the product at issue, that warning is still subject to peer review and acceptance in the relevant scientific community, or a court will preclude the proffered warnings expert’s opinion.9 (Continued)
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3 See Hoffman v. Ford Motor Company, 2012 U.S. App. LEXIS 17215 (10th Cir. August 16, 2012); see also Graves v. Mazda Motor Corp., 405 Fed. Appx. 296, 2010 U.S. App. LEXIS 25562 (10th Cir. 2010) (holding that expert opinion evidence should not be admitted based on only the ipse dixit of the expert, regardless of how qualified the proffered expert may be); Bourelle v. Crown Equip. Corp., 220 F.3d 532 (7th Cir. 2000); Jaurequi v. Carter Mfg. Co., Inc., 173 F.3d 1076 (8th Cir. 1999); Wagner v. Hesston Corp., et al., 2005 U.S. Dist. LEXIS 13567, 03-cv-4244 (D. Minn. June 30, 2005), aff’d 2006 U.S. App. LEXIS 14033 (8th Cir. June 8, 2006) (holding that even though the plaintiff’s expert proposed an alternative warning, there is no evidence that the proffered expert’s proposed alternative warning was submitted for peer review and accordingly it has not obtained general acceptance in the scientific community); and Freitas v. Michelin Tire Corp., 2000 U.S. Dist. LEXIS 22719, 94-cv-1812 (D. Conn. February 29, 2000).
4 See Hoffman v. Ford Motor Company, 2012 U.S. App. LEXIS 17215 (10th Cir. August 16, 2012); see also Graves v. Mazda Motor Corp., 405 Fed. Appx. 296, 2010 U.S. App. LEXIS 25562 (10th Cir. 2010); see Bourelle v. Crown Equip. Corp., 220 F.3d 532 (7th Cir. 2000); and Jaurequi v. Carter Mfg. Co., Inc., 173 F.3d 1076 (8th Cir. 1999).
5 See Bourelle v. Crown Equip. Corp., 220 F.3d 532 (7th Cir. 2000); Jaurequi v. Carter Mfg. Co., Inc., 173 F.3d 1076 (8th Cir. 1999); Patterson v. Cent. Mills, Inc., 64 Fed. Appx. 457 (6th Cir. 2003); Calhoun, et al., v. Yamaha Motor Corp., et al., 350 F.3d 316 (3rd Cir. 2003); and Hoffman v. Ford Motor Company, 2012 U.S. App. LEXIS 17215 (10th Cir. August 16, 2012).
6 See Bourelle v. Crown Equip. Corp., 220 F.3d 532 (7th Cir. 2000); Jaurequi v. Carter Mfg. Co., Inc., 173 F.3d 1076 (8th Cir. 1999) (precluding the opinion of plaintiff’s proffered expert because he did not provide an alternative design, did not test an alternative warning and did not even read the warning on the product at issue); Carlucci v. CNH Am. LLC, 2012 U.S. Dist. LEXIS 131405, 10-cv-12205 (D. Mass. Sept. 14, 2012) (precluding the report and testimony of plaintiff’s warnings expert because the expert did not disclose the methodology used to opine that the warning was inadequate and he did not provide a foundation for his opinion in the form of standards or regulations in the industry, safety studies, or other facts necessary to distinguish his opinion from speculation. Plaintiff’s proffered warnings expert also failed to draft an alternative warning that would have been effective or appropriate in the circumstances); Patterson v. Cent. Mills, Inc., 64 Fed. Appx. 457 (6th Cir. 2003) (holding that the plaintiff’s proffered warnings expert had never written warnings for the product, had no specific education on warnings, had no specific training with respect to warnings on the product and had never had an article regarding the product subjected to peer review.); Bourelle v. Crown Equip. Corp., 220 F.3d 532 (7th Cir. 2000); Jaurequi v. Carter Mfg. Co., Inc., 173 F.3d 1076 (8th Cir. 1999); Freitas v. Michelin Tire Corp., 2000 U.S. Dist. LEXIS 22719, 94-cv-1812 (D. Conn. February 29, 2000); and St. Laurent, et al. v. Metso Minerals Indus., Inc., et al., 2005 U.S. Dist. LEXIS 20436, 04-cv-14 (September 13, 2005).
7 See Bourelle v. Crown Equip. Corp., 220 F.3d 532 (7th Cir. 2000); Jaurequi v. Carter Mfg. Co., Inc., 173 F.3d 1076 (8th Cir. 1999); see also Carlucci v. CNH Am. LLC, 2012 U.S. Dist. LEXIS 131405, 10-cv-12205 (D. Mass. Sept. 14, 2012); Freitas v. Michelin Tire Corp., 2000 U.S. Dist. LEXIS 22719, 94-cv-1812 (D. Conn. February 29, 2000) (precluding plaintiff’s warnings expert because the evidentiary basis for his opinion was not sufficiently reliable because of insufficient empirical testing); St. Laurent, et al. v. Metso Minerals Indus., Inc., et al., 2005 U.S. Dist. LEXIS 20436, 04-cv-14 (September 13, 2005) (precluding the opinion of the plaintiff’s warnings expert because he did not propose an alternative warnings, test any proposed warnings or demonstrate any other indicia of reliability).
8 Bourelle v. Crown Equip. Corp., 220 F.3d 532 (7th Cir. 2000); see also Cummins v. Lyle Indus., 93 F.3d 362 (7th Cir. 1996).9 See Wagner v. Hesston Corp., et al., 2005 U.S. Dist. LEXIS 13567, 03-cv-4244 (D. Minn. June 30, 2005), aff’d 2006 U.S. App. LEXIS 14033 (8th Cir. June 8, 2006) (holding
that even though the plaintiff’s expert proposed an alternative warning, there is no evidence that the proffered expert’s proposed alternative warning was submitted for peer review and accordingly it has not obtained general acceptance in the scientific community).
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NEWSLETTERJune 2013
Product LiabiLity
Another strong factor in support of precluding the opinion of a plaintiff’s warnings expert is the absence of testing the subject product’s warning.10 Moreover, even if the proffered expert has conducted some testing of the subject warning and/or a proposed alternative, that testing must still be deemed reliable by the court in order to be admissible.11 Courts have also precluded warnings experts when those experts do not have any experience with the product at issue and when the experts have no specific warnings education and/or training.12
Accordingly, while a product manufacturer may be understandably concerned about the possibility of a federal
court jury hearing and lending credence to the unreliable subjective opinion of a plaintiff’s warnings expert that is not based on sufficient testing, or even any testing, a manufacturer can use the Federal Rules of Evidence and aforementioned cases as possible recourse in an effort to ensure that the jury never hears those opinions.
For additional information, contact:
Ernest Goodwin Associate (White Plains) 914.872.7279 [email protected]
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10 Bourelle v. Crown Equip. Corp., 220 F.3d 532 (7th Cir. 2000); Cummins v. Lyle Indus., 93 F.3d 362 (7th Cir. 1996); and Carlucci v. CNH Am. LLC, 2012 U.S. Dist. LEXIS 131405, 10-cv-12205 (D. Mass. Sept. 14, 2012).
11 Freitas v. Michelin Tire Corp., 2000 U.S. Dist. LEXIS 22719, 94-cv-1812 (D. Conn. February 29, 2000) (precluding plaintiff’s warnings expert because the evidentiary basis for his opinion was not sufficiently reliable because of insufficient empirical testing.); see also Hoffman v. Ford Motor Company, 2012 U.S. App. LEXIS 17215 (10th Cir. August 16, 2012) (excluding testimony because the proffered expert did not present a scientific connection between the laboratory test settings and what may have occurred in the subject case).
12 Patterson v. Cent. Mills, Inc., 64 Fed. Appx. 457 (6th Cir. 2003) (holding that the plaintiff’s proffered warnings expert had never written warnings for the product, had no specific education on warnings, had no specific training with respect to warnings on the product and had never had an article regarding the product subjected to peer review); see also Robertson v. Norton Co., 148 F.3d 905 (8th Cir. 1998) (precluding the opinion of plaintiff’s warnings expert regarding the adequacy of a product’s warnings because the expert had not even reviewed the product’s warnings.); and Calhoun, et al., v. Yamaha Motor Corp., et al., 350 F.3d 316 (3rd Cir. 2003) (precluding plaintiff’s warnings expert from offering an opinion regarding the product’s warnings because he had no expertise with regard to warning design).
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NEWSLETTERJune 2013
Product LiabiLity
Punitive Damages Based on Gross Negligence
Will Massachusetts Follow the Pack or Buck the Trend?
On October 13, 2011, a jury in Essex County, Massachusetts, awarded $20.6 million to the estate of a woman who broke her neck and died after going down an inflatable pool slide head first, an award that included $18 million in punitive damages based on the alleged gross negligence of the defendant toy retailer. The plaintiff in that case alleged that the defendant failed to test to ensure that the slide complied with a Consumer Product Safety Commission regulation applicable to pool slides. The defendant denied that the regulation applied to inflatable pool slides, and argued that it in good faith relied on a reputable agency, which certified that the slide complied with all applicable regulations. The jury found that the defendant was grossly negligent and subsequently levied a punitive damages award more than seven times the amount of the compensatory damages that it awarded.
More than 18 months later, the Massachusetts Supreme Judicial Court, on May 6, 2013, heard oral arguments on whether the $18 million punitive damages award withstood constitutional muster, including whether punitive damages based on gross negligence should be evaluated differently from punitive damages based on willful, wanton and reckless conduct as articulated by the United States Supreme Court (Supreme Court). Massachusetts is in the small minority of states that permits punitive damages based on gross negligence, and further has not enacted statutory restrictions or court-mandated limitations on such awards.
While the Supreme Court has not yet established a bright-line rule with respect to the awarding of punitive damages, it has established three guideposts in determining the constitutionality of punitive damages awards: (1) “the degree of reprehensibility of the defendant’s conduct,” (2) the ratio of the punitive damages award to the “actual harm inflicted on the plaintiff” and (3) a comparison of “the punitive damages award and the civil or criminal penalties that could be imposed for comparable misconduct.” BMW of N. America, Inc. vs. Gore, 517 U.S. 559, 575, 580, 583 (1996). The most important guidepost is the “degree of
reprehensibility of the conduct,” with gross negligence at one end of the spectrum and malice at the far opposite end. Id. at 575-576. The Supreme Court subsequently established “gross negligence” as “the least blameworthy conduct triggering punitive liability.” Exxon Shipping Co. v. Baker, 554 U.S. 471, 512 (2008).
The seven states in addition to Massachusetts that permit punitive damages awards based on gross negligence place heightened standards on such awards consistent with the Supreme Court’s increasingly stringent guidelines. For example, in Florida, punitive damages are permitted when a “defendant engages in conduct … with such gross negligence as to indicate a wanton disregard for the rights of others.” W.R. Grace & Co.-Conn. v. Waters, 638 So. 2d 502, 503 (Fla. 1994) (emphasis added). (Continued)
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Product LiabiLity
The Florida Supreme Court has articulated that the character of negligence necessary to sustain an award of punitive damages must be of “a gross and flagrant character, evincing reckless disregard of human life, or of the safety of persons exposed to its dangerous effects … or that reckless indifference to the rights of others which is equivalent to an intentional violation of them.” Id. (emphasis added).
The Florida Supreme Court recognized that the above definition “appears to be in line with the weight of authority as to the character of negligence necessary to be shown to sustain criminal liability.” Carraway v. Revell, 116 So. 2d 16, 20 (1959) citing Mr. Chief Justice Brown in Cannon v. State, 107 So. 360, 363 (1926). The court went on to recognize that “conduct can exist which is termed gross negligence which will not justify the imposition of punitive damages.” Carraway, 116 So. 2d at 21. In other words, gross negligence and “culpable negligence giving rise to punitive damages are not necessarily synonymous.” Carraway, 116 So. 2d at 21.
In Kentucky, while gross negligence is the least culpable conduct used as the basis for punitive damages, such conduct must have “the same character of outrage justifying punitive damages as willful and malicious misconduct in torts where the injury is intentionally inflicted.” Peoples Bank of N. Ky., Inc. v. Crowe Chizek & Co. LLC, 277 S.W.3d 255, 268 (Ky. Ct. App. 2008). Additionally, in Mississippi, punitive damages are permitted if the plaintiff proves that the defendant acted with “gross negligence which evidences a willful, wanton or reckless disregard for the safety of others.” Miss. Code Ann. § 11-1-65(3)(a). The Mississippi Supreme Court has articulated that “[p]unitive damages may be recovered for a willful and intentional wrong, or for such gross negligence and reckless negligence as is equivalent to such a wrong.” Seals v. St. Regis Paper Co., 236 So. 2d 388, 392 (1970) (emphasis added).
New Mexico allows a plaintiff to recover punitive damages so long as the wrongdoer’s conduct is willful, wanton, malicious, reckless, oppressive, grossly negligent, or fraudulent and in bad faith. Madrid v. Marquez, 131 N.M. 132, 135 (N.M. Ct. App. 2001) citing Sanchez v. Clayton, 877 P.2d 567, 573 (1994). Recognizing that punitive damages are in the nature of punishment, New Mexico courts recognize that “it is necessary that there be some
evidence of a culpable mental state, whether recklessness or ‘utter indifference.’” Gonzales v. Sansoy, 103 N.M. 127, 130 (N.M. Ct. App. 1984).
In North Carolina, punitive damages may be awarded in negligence cases for “wanton or gross acts”; however, such “outrageous behavior” requires “evidence of ‘insult, indignity, malice, oppression or bad motive.’” Rogers v. T.J.X. Cos., 329 N.C. 226, 230 (N.C. 1991); Mazza v. Medical Mut. Ins. Co., 311 N.C. 621, 626 (N.C. 1984). In Texas, the Texas Supreme Court recognized the “constitutional fence around exemplary damages” constructed by the Supreme Court, and understood that they “must police [the fence] to prevent the ‘acute danger of arbitrary deprivation of property.’” Bennett v. Reynolds, 315 S.W.3d 867, 885 (2010). The Texas Supreme Court further accepted the Supreme Court’s disapproval “of awards ‘that dwarf the corresponding compensatories.’” Id.
The second Gore guidepost is the ratio between compensatory and punitive damages awards. The Supreme Court has held that a punitive damages award four times the amount of compensatory damages is “close to the line [of] constitutional impropriety.” Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 23-24 (1991). Subsequently, the Supreme Court reasoned that “when compensatory
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Product LiabiLity
damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee.” State Farm, 538 U.S. at 424-425.
Additionally, in Exxon Shipping Co. v. Baker, the Supreme Court held that an “acceptable standard can be found in the studies [that] reflect the judgments of juries and judges in thousands of cases as to what punitive awards were appropriate in circumstances reflecting the most down to the least blameworthy conduct, from malice and avarice to recklessness to gross negligence.” 554 U.S. at 512 (2008). The “data in question put the median ratio for the entire gamut at less than 1:1, meaning that the compensatory award exceeds the punitive award in most cases.” Id.
The Supreme Court further determined that “few awards exceeding a single-digit ratio [9:1] between punitive and compensatory damages, to a significant degree, will satisfy due process.” Exxon, 554 U.S. at 501 citing State Farm, 538 U.S. at 425. “When compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee.” Id.
In a well-functioning system, [the Supreme Court] would expect that awards at the median or lower [levels] would roughly express jurors’ sense of reasonable penalties in
cases with no earmarks of exceptional blameworthiness within the punishable spectrum [such as cases] without intentional or malicious conduct.” 554 U.S. at 512-513.
The Supreme Court has warned against “judicially derived standards [that] leave the door open to outlier punitive-damages awards,” and has stressed that “the judiciary [cannot] wash its hands of a problem it created, simply by calling quantified standards legislative.” Exxon, 554 U.S. at 507-508. Consistent with the above reasoning, states that permit punitive damages based on gross negligence have legislatively and judicially limited such awards to the lowest end of the spectrum.
For example, in Florida, punitive damages are capped at three times the amount of compensatory damages for the most egregious conduct, and plaintiffs must proffer “clear and convincing evidence” to support same. Fla. State. Ann. § 768.73(1)(a); In re Std. Jury Instructions in Civil Cases – Report No. 09-01 (Reorganization of the Civil Jury Instructions). Additionally, the Illinois Supreme Court has articulated that when “there is no evidence that the defendant had an intentional, premeditated scheme to harm [the plaintiff[ … this places defendant’s conduct on the low end of the scale for punitive damages, far below those cases involving a defendant’s deliberate attempt to harm another person.” Lawlor, 2012 IL 112530, P62 (Ill. 2012) (emphasis added); Slovinski v. Elliot, 237 Ill. 2d 51, 64 (2010).
Kentucky has established an “upper limit [for] a punitive damage[s] award equal to four times the compensatory damages,” for the most egregious conduct. McDonald’s Corp. v. Ogborn, 309 S.W.3d 274, 301-302 (Ky. Ct. App. 2009). Additionally, plaintiffs may recover punitive damages only with proof of clear and convincing evidence of the conduct giving rise to such damages. Ky. Rev. State. § 411.184(2).
The North Carolina Supreme Court held that the North Carolina statute limiting punitive damages to three times the compensatory damages or $250,000, whichever is greater, was in line with the Supreme Court limitations on awards of punitive damages. Rhyne v. K-Mart Corp., 358 N.C. 160, 184-185 (2004) citing N.C. Gen. Stat. § 1D-25. Citing the Supreme Court’s recognition that “there was a long legislative history of ‘providing for sanctions of double,
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NEWSLETTERJune 2013
Product LiabiLity
treble, or quadruple damages to deter and punish,’” the North Carolina Supreme Court found that “limiting the punitive award [to] three times the compensatory award is in line with the standards suggested by the Supreme Court to prevent grossly excessive awards.” Rhyne, 358 N.C. at 184-185 citing State Farm, 538 U.S. at 425.
In Texas, punitive damages may not exceed an amount equal to the greater of (1) two times the amount of economic damages, plus an amount equal to any non-economic damages found by the jury, not to exceed $750,000, or (2) $200,000. Tex. Civ. Prac. & Rem. Code § 41.008. Additionally, punitive damages are permitted only if the plaintiff proves by clear and convincing evidence that the harm complained of resulted from fraud, malice or gross negligence. Tex. Civ. Prac. & Rem. Code § 41.003.
Of the states that permit punitive damages based on gross negligence, Massachusetts is the only one that has not yet enacted statutory restrictions or court-mandated limitations as articulated by the Supreme Court in BMW v. Gore and its progeny. From capping damages at three
times the exemplary damages for the most egregious conduct, to requiring clear and convincing evidence for the awarding of such damages, to restricting damages based on the least culpable conduct to a ratio of 1:1 or less with compensatory damages, other states have set strict parameters for punitive damages based on gross negligence. The Massachusetts Supreme Judicial Court’s decision whether to limit punitive damages based on gross negligence, expected in summer or early fall 2013, will have a significant effect on potential liability exposure in the Commonwealth for all defendants.
For additional information, contact:
Christopher P. Flanagan Partner (Boston) 617.422.5306 [email protected]
Christopher J. Seusing Associate (Boston) 617.422.5312 [email protected]
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