The Appellate Strategist

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Will Justice Stevens’ Retirement Make A Difference In The Supreme Court’s Approach To Punitive Damages?

By on Posted in Federal, Punitive Damages, Supreme Court Vacancy

Justice John Paul Stevens has been tagged by many as a “liberal.” Appellate Strategist does not propose to debate that general proposition here. Rather, it’s time to begin assessing what effect his absence might have on the growing body of Supreme Court jurisprudence that has been cutting back, a little at a time, on the blockbuster punitive damages awards that so commonly make the headlines. Or at least used to make the headlines.

Here are a few thought-provoking tidbits concerning his role in the development of this important body of law: 

  • Justice Stevens pioneered the recent punitive damages jurisprudence, authoring two of the Court’s first forays into the constitutionality of the award amounts. The first was the “granddaddy” of them all, BMW, which blazed the trail. (BMW of No. Amer. v. Gore (1996) 517 U.S. 559.)  After that came Cooper, which created an unprecedented de novo standard of review of punitive awards for constitutional excessiveness. Appellate courts were no longer constrained by the trial judges’ decision re the propriety/excessiveness of the amount. Cooper gave courts of appeal a free hand to bring the excessive “outlier” verdicts into line. (Cooper Industries, Inc. v. Leatherman Tool Group, Inc. (2001) 532 U.S. 424.)
     
  • He joined in the Campbell majority opinion, the behemoth that expanded the defendant’s constitutional rights beyond a mere review for excessiveness of the amount. (State Farm Mut. Auto. Ins. Co. v. Campbell (2003) 538 U.S. 408.)
     
  • He dissented in Williams. He still believed that due process imposes both substantive and procedural constraints on State power to impose punitive damages, but Williams presented a different issue. The majority held the State may not punish the defendant with punitive damages for harming other victims who were not plaintiffs and not before the jury. (Philip Morris USA v. Williams (2007) 549 U.S. 346.) Justice Stevens saw “no reason why an interest in punishing a wrongdoer ‛for harming persons who are not before the court,’ should not be taken into consideration when assessing the appropriate sanction for reprehensible conduct.” (Citation omitted.)
     
  • We discount the Court’s most recent decision, Exxon Shipping Co. v. Baker (2008) 128 S.Ct. 2605, which presented unique issues of punitive damages under federal maritime law, and anyway, there are so many separate opinions and joinders, it would take a computer program to keep the justices’ various positions straight.

These cases have revolutionized the law of punitive damages, helped level the once-tilted playing field, and afforded them relief – in the form of reduced awards – awards that a few years ago were often rubberstamped on appeal as within the jury’s discretion. Countless billions – literally – “billions” with a “b” – have been saved thanks to these legal developments. He clearly made an important contribution.

Now the burning question is: where will the successor stand? In a series of future posts, Appellate Strategist will try to explore that question, and perhaps even offer some answers.

The Supreme Court Short List Is Expanding

By Kirk Jenkins on Posted in Federal, Supreme Court Vacancy

As Appellate Strategist reported a week ago, when Justice John Paul Stevens announced his retirement, most Supreme Court observers believed that the "short list" contained three names: Solicitor General Elena Kagan, Judge Diane Wood and Judge Merrick Garland. But even as the White House is suggesting that a nominee will be named in early May, it appears that the "short list" is growing longer.

CNN reports that Judge Sidney Thomas of the Ninth Circuit is under consideration as a possible nominee.  Judge Thomas was in private practice in his native Montana before he was nominated to the Ninth Circuit by President Clinton. He has served on the Ninth Circuit since 1996.

According to ABC News, Leah Ward Sears, former Chief Justice of the Georgia Supreme Court,  is on the President’s short list as well. Justice Sears was appointed to the Georgia Supreme Court in 1992, and was sworn in as Chief Justice in 2005.  She retired from the court in 2009, and is now in private practice.

The Boston Globe is reporting that Professor Martha Minow, the Dean of Harvard Law School, is another possible nominee. Professor Minow has written extensively on human rights law.  She has taught at Harvard Law School since 1981.

Illinois Supreme Court Reaffirms Strong Federal Policy in Favor of Arbitration

By Kirk Jenkins on Posted in Illinois

Many states have enacted statutes automatically invalidating, under one set of circumstances or another, contracts which seem to require mandatory arbitration of disputes. In a 5-0 decision today (with two justices not participating), the Illinois Supreme Court cast such statutes in doubt, holding that two clauses of the Illinois Nursing Home Care Act were preempted by the Federal Arbitration Act. Carter v. SSC Odin Operating Company.

Plaintiff’s decedent and plaintiff herself, as special administrator, executed contracts providing that disputes over decedent’s care while she lived in the defendant’s nursing home would be decided in arbitration. After decedent’s death, plaintiff sued for wrongful death and violations of the Nursing Home Care Act. The defendant moved to compel arbitration, relying upon section 2 of the Federal Arbitration Act.

At first glance, the Illinois Nursing Home Care Act would seem to have required the Circuit Court to deny defendant’s motion. The Act invalidates any waiver by a resident or his or her legal representative of the right to sue under the Act, and also invalidates any waiver of the right to trial by jury for an action under the Act. But not so fast: according to the Federal FAA, mandatory arbitration terms are valid "save upon such grounds as exist at law or in equity for the revocation of any contract."

So was the Nursing Home Care Act’s language grounds equally applicable to revocation of any contract? No, according to the Illinois Supreme Court.

The sort of defense Congress had in mind, the Court wrote, was fraud or lack of consideration — general defenses that had nothing specifically to do with arbitration. But the FAA strips the states of any power to invalidate arbitration clauses per se. According to the unanimous Court, that national policy is to be applied in broad terms: any statute requiring that a dispute be resolved in court is invalid if the underlying contract had a mandatory arbitration clause.

The lesson for defense counsel is clear. If a statute forbids waiver of a cause of action, or requires a jury trial, and the contract at issue contains an arbitration clause, the underlying statute is probably preempted. Under the Court’s reasoning, a statute apparently aimed at protecting a certain class of plaintiffs — whether nursing home residents, or seniors, or consumers — from mandatory arbitration clauses will almost never prevail against the FAA. 

Texas Supreme Court Grants Review in Six Cases

By on Posted in Employment, Insurance, Texas

On April 9, the Texas Supreme Court granted petitions for review in the following cases:

  • Offshore Specialty Fabricators v. Wellington Underwriting Associates. The case addresses whether an all-risk insurance policy covers weather stand-by charges incurred by the insured.
  • XTO Energy Inc. v. Smith Production Inc. The case will determine whether joint operating agreements for oil and gas drilling operations are construed according to their language only or whether industry custom should also be considered.  A possibly fundamental case in the oil and gas field.  
  • Haygood v. de Escabedo. This case turns on whether the statute limiting recovery of medical damages to those “actually incurred” permits recovery of amounts charged but later written off by the provider.  The courts of appeals are divided on the issue, which arises in many personal injury cases.
  • Reid Road Municipal Utility Dist. No. 2 v. Speedy Stop Food Stores Inc. The case will determine whether the “property owner rule” which permits property owners who are not qualified as experts to testify as to the market value of the property applies to corporate property owners.
  • Andrade v. NAACP of Austin.  The underlying case is a challenge to the Secretary of State’s certification of certain paperless voting machines.  The case addresses whether voters have standing to challenge the Secretary’s certification and whether the Secretary enjoys sovereign immunity from such a suit.
  • Marsh USA Inc. v. Cook. The case turns on the enforceability of non-solicitation agreements upon a former employee and whether the agreement was supported by independent consideration.

Oral argument has not yet been set for any of these cases.

Illinois Supreme Court’s New Punitive Damages Opinion Signals Trial Judges on When and How to Cut Such Awards Under State Law

By on Posted in Illinois, Punitive Damages

Today, the Illinois Supreme Court affirmed a punitive damage award that had been drastically reduced by the trial judge, and cut still more by the intermediate appellate court, to slightly over $80,000, or 1:1.  The State high court affirmed the punitives as reduced to 1:1.  This may sound like just another case applying the Campbell federal due process guidelines regarding excessive awards.  It isn’t. 

In Slovinski v. Elliott (pdf), plaintiff sued his former employer for defamation.  The jury awarded him $81,600 in emotional distress damages and $2 million in punitives.  The trial judge cut that number to $1 million; the appellate court chopped it down still more,  to 1:1.  The Illinois Supreme Court, with one dissenter, affirmed the reduction to $81,600.  In the process it provided some insight into Illinois procedure for “remitting” –  that’s appellate-speak for cutting –  punitive awards, and the propriety of the amount under Illinois state law.

Procedural challenges. Plaintiff argued that the reductions by the trial and appellate courts were procedurally improper for a number of reasons, e.g., that “specific findings” were required in order to cut, and the failure to make findings meant plaintiff should get his $2 million reinstated.  The answer to that one was “no.”  Courts are simply required to explain why a reduction is necessary, and why they think the trial judge or jury got it wrong, not to jump through meaningless hoops.  A refreshing, common sense approach.

Substantive challenge.   The Supreme Court began by noting that a punitive damage award never compensates the plaintiff, who has been made whole by the compensatory award.  Thus, the focus should be on whether the defendant’s conduct justifies the award.  After that, the court had no trouble concluding that $81,600 in punitives was ample punishment, noting:

  • Defendant’s intent.  The jury heard no evidence that defendant had an intentional, premeditated scheme to harm the plaintiff.  At most, defendant consciously disregarded its employee’s rights. “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.”
  • No recidivism.  Defendant did not repeat the defamatory statements, but made them only once, and only those present at the meeting heard them.
  • Minimal harm to plaintiff.  The jury’s compensatory damages verdict showed “limited harm to plaintiff.”  There was no damage award for loss of reputation or lost wages.  And on the emotional distress award, there was no evidence of any physical harm to plaintiff, no visits to a doctor or therapist, no evidence that plaintiff missed work, no evidence of any alteration in his daily work activities.

This is Illinois State law we’re talking about.  All of this analysis sounds reminiscent of the federal guidepost considerations used to determine when a punitive award is excessive under the due process clause.  But this court was not using a Campbell-BMW analysis.  Slovenski decided this as a matter of Illinois State law.  

This reduced verdict was affirmed because under Illinois law, “an award of punitive damages must be remitted to the extent that there is no material evidence to support it.”  Even in cases of defamation per se, the  malicious conduct necessary to support an award of punitive damages may not be presumed, but must be proved by competent evidence.”  (Emphasis added.)  The trial court thus abused its discretion is remitting the award to only $1 million because there is no basis in the record to support such an award. 

Trial judges take note: whether you cut or not, abuse of discretion won’t necessarily be a shield.

California Supreme Court 4/14/10 Conference

By on Posted in California

In conference today (see list of actions), the Court granted review in Brown v. Mortensen, in which the Court of Appeal found that the Fair Credit Reporting Act preempted the restrictions imposed by the Confidentiality of Medical Information Act.  See B & P 17200/Class Actions/Commercial update page.  In addition, the Court also requested supplemental briefing in Murray v. Alaska Airlines, Inc. regarding the application, if any, its decision in McDonald v. Antelope Valley Community College Dist. (2008) 45 Cal.4th 88. See Civil Procedure/Evidence/Discovery update page.

Supreme Court to Hear Hastings First Amendment Case on Monday

By Angelo Carosio on Posted in Constitutional Law

On April 19, the United States Supreme Court will hear argument in Christian Legal Society v. Martinez, the third constitutional law case involving a law school – this time UC Hastings – that has found its way onto the High Court’s docket in less than a decade. 

The root of the controversy is the law school’s refusal to recognize the CLS as a registered student organization (and its accompanying denial of University subsidization).  CLS requires its members to sign an affirmation of adherence to CLS’s Statement of Faith “indicating the member holds certain Christian viewpoints commonly regarded in both the Roman Catholic and Protestant evangelical traditions as orthodox[,] . . . including the Bible’s prohibition of sexual conduct between persons of the same sex..”   Hastings justifies its position because this CLS bylaw contravenes the University’s nondiscrimination compliance code prohibiting student organizations from discriminating on the basis of sexual orientation.  Hastings insists that “under federal and state mandates,” the College is “precluded from utilizing student fees to fund [CLS]’s activities until CLS bylaws comport with the Hastings nondiscrimination compliance code.”  CLS argues this condition of receiving and maintaining registered status imposed on CLS violates the organization’s First Amendment rights of expressive association, free speech, free exercise of religion, as well as the organization’s right of equal protection.

Punctuating the significance of this case are a staggering thirty-nine amicus briefs submitted to the Court by amici including the ACLU, the Anti-Defamation League, the American Bar Association, and State Attorneys General from Massachusetts, Maryland, New Jersey, and Vermont (in support of Hastings), and the Boy Scouts of America, the Cato Institute, and State Attorneys General from Michigan, Alabama, Colorado, Florida, Idaho, Louisiana, Nebraska, New Mexico, Pennsylvania, South Carolina, South Dakota, Utah, Virginia, and West Virginia (in support of CLS).

Former Solicitor General Gregory Garre will argue on behalf of Hastings, while former Tenth Circuit appellate court judge and current Stanford Law Professor Michael McConnell will represent the Christian Legal Society. 

New California Bill Would Cap Punitive Damages at Three Times Compensatories, Outright Bar Punitives Retroactively in Product-Warning Cases

By on Posted in California, Punitive Damages

CAPPING AT THREE.  AB2740, a new version of an old bill pending in the California State Legislature, would cap the amount of punitive damages available in California to a flat three times the jury’s award of compensatory damages. AB2740 The previous version died in Committee.  The new iteration (tacked onto a National Guard bill, of all things) was alive and well as of late March, 2010.
 

  • Should the measure pass, California would fall in step with many other States that impose some type of ceiling on punitive damages, whether flat-out monetary caps, caps keyed to a multiple of compensatory damages, caps based on defendant’s wealth or the nature of the act, the type of action (e.g., medical malpractice) or some combination, including: Alaska, Arkansas, Alabama, Colorado, Florida, Georgia, Idaho, Indiana, Kansas, Mississippi, Montana, North Carolina, North Dakota, New Jersey, Nevada, Oklahoma, and Texas.  That isn’t a comprehensive list, nor can AppellateStrategist list all the wrinkles and permutations in this post.  But the point is clear.  There’s a growing movement afoot to impose a bright line on the imposition of punitives, thereby streamlining or eliminating the current multipart constitutionality analysis mandated by State Farm Mut. Auto. Ins. Co. v. Campbell (2003) 538 U.S. 408, and BMW of North America, Inc. v. Gore (1996) 517 U.S. 559.

PRODUCT WARNING CASES.  AB2740 would also bar punitive damages in products cases if the warning accompanying the product was “either approved by, or in material compliance with,” a statute, or the standards, rules, regulations or requirements of the federal or state agency responsible for “regulating, evaluating, or approving the product.”  Should the bill pass, it would apply to every products-warning “case pending on or after the date of enactment regardless of when the case was filed.”

The sole exception is that the bar would not apply if plaintiff proves by clear and convincing evidence that defendant intentionally withheld or intentionally misrepresented information it was required to submit to the agency at any time, and the withholding or misrepresentation of that information was causally related to the injury or harm alleged.

AppellateStrategist will monitor the bill, and provide regular updates.  Stay tuned.

“Cutting-Edge” Law: Another California Court Trims a 7-Figure Punitive Damages Award Down to Size

By on Posted in California, Insurance, Punitive Damages

Add yet another appellate opinion to the growing list of California courts that have cut punitive damage awards on constitutional excessiveness grounds. In this one, Amerigraphics, the jury awarded $3 million in punitive damages in an insurance bad faith case.  The trial court cut that number  to $1.7 million, but according to the California Court of Appeal (Second District, Division 2), that was not enough.  The constitutionally-permissible maximum was $500,000. 

At the risk of looking a gift horse in the mouth, the case is a mixed bag for insurer defendants.

One of the principal questions in deciding excessiveness is how bad – “reprehensible” –  the defendant’s conduct was.  That is determined under a scale of relative reprehensibility.  The theory is simple: relatively speaking, some acts and harms are worse, and therefore more deserving of punishment, than others.  For example:

1. Defendants who are repeat offenders – who have committed the act before – need a bigger punishment to discourage them from repetition, to get the message across.

Amerigraphics rejected the notion that an insurer which commits multiple acts in the handling of a single claim for benefits can be viewed as a “repeat offender.”  Though the insurer’s

“conduct could  be characterized as more than a single isolated incident, as the evidence showed several discrete acts of misconduct involving Amerigraphics’s claim for coverage under various policy provisions, the conduct at issue ultimately involved only one insured and one claim. There was no evidence presented that [the insurer] acted similarly toward other insureds in similar circumstances.”   (Emphasis added.)

More authority for the “one claim, one punishment rule.”  That’s as it should be.  Any act – such as the denial of a single claim for benefits – could theoretically be broken down into a series of smaller “sub-acts.” That doesn’t mean the punishment should be multiplied by the number of sub-acts.  (See also Walker v. Farmers Ins. Exch. (2007) 153 Cal.App.4th 965, 975; 63 Cal. Rptr. 3d 507)  Courts should not be in the business of finding ways to maximize a plaintiff’s punitive award.  By definition, in the constitutionality jurisprudence, the plaintiff is made whole by the compensatory award;  the punitive award punishes the defendant; it does not compensate the plaintiff for the injury.

2. Physical harm is worse than economic harm, but, relatively speaking, a defendant who causes economic injury to a financially vulnerable plaintiff deserves more punishment.  

Amerigraphics suggested that the very nature of the insurance relationship means that insureds will qualify as “financially vulnerable.”  The court relied on the “unique” nature of the relationship: insureds purchase policies “precisely to buy peace of mind and security.” Therefore, an insured is “not on equal footing . . . .” with its insurer.  That may have been true in the Amerigraphics case, which involved a small insured put out of business by the carrier’s claims handling, but it does not apply across the board, nor should it.  When, e.g., the insured is a large corporation with an insurance claim, the parties are on relatively equal footing.  The concept of financial vulnerability is not automatically satisfied merely because this is an insurance relationship.  Example in point: Slottow v. Amer. Cas. Co. of Reading, Pa. (9th Cir. 1993) 10 F.3d 1355, 1362 (applying Calif. law.)

Illinois Supreme Court Will Release Two New Civil Opinions on Thursday

By Kirk Jenkins on Posted in Illinois, Punitive Damages

The Illinois Supreme Court announced this afternoon that it will release seven opinions [pdf] on the morning of Thursday, April 15th, including two civil cases:

  • No. 106511, Carter v. SSC Odin Operating Company, LLC, which presents the issue of whether the clauses of the Illinois Nursing Home Care Act invalidating any contractual provision limiting a resident’s cause of action under the Act, or waiving jury trial, are preempted by the Federal Arbitration Act?
     
  • No. 107146, Slovinski v. Elliott, which presents the following issues: (1) Must a Circuit Court make findings of fact and conclusions of law before it may set aside a jury’s award of punitive damages?  (2) What standard of review applies to an Appellate Court’s power to review a punitive damages award? and (3) May a party attack a punitive damages award based on lack of evidence, when the party declined to produce that evidence in discovery? 

For full details on these cases, click our Illinois Supreme Court Update.  These cases can be found under the links for Arbitration, Punitive Damages, and Civil Procedure, respectively.

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