May It Please The Court

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May It Please The Court
by Leonard Rivkin
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Quote of the Day - Logic is like the sword: those who appeal to it shall perish by it. - Samuel Butler
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The Theory Of Punitive Damages Gets A Christmas Facelift

You may be sitting back in the quiet ease of the holidays, thinking about heading back to work next week, but as you are, cases continue to be decided and there are a few out there that may have major impact next year.  As just one example, we've become somewhat comfortable with the concept that punitive damages can't be more than nine times compensatory damages, and in most instances restricted to three times compensatories.  That changed just before Christmas Eve, and along with the Fifth Appellate District, you may be surprised to learn that the California Supreme Court doesn't think the theory of punitive damages is so restricted any longer.

They believe instead that punitive damages can reflect an award that includes punishment for the damages other Californians suffered as a consequence of the practice that resulted in damage to the particular plaintiff.  In other words, we may be much closer to life as it existed before the U.S. Supreme Court issued its restrictive punitive damages guidelines in State Farm and BMW v. Gore

A lot closer it appears.  When the heading to a section is entitled, "The Weight of 'Scope and Profitability' In Determining Reprehensibility" appear in an opinion (scroll down to page 10), you sit up and notice.

In our case, Ford apparently established and regularly used fairly restrictive interpretations of California's Lemon Law in order to save approximately $10,000 per vehicle on cars that would otherwise qualify as a lemon, as the Plaintiff's Ford Taurus did.  In its prior life with the previous owner, it suffered numerous problems with its transmission, including locking in low gear on the freeway. 

Just as a side note here, given the average speed on a California freeway, low gear might not be as much of a problem as you would imagine.  But I jest about a situation that was likely very dangerous, and as you read the opinion linked above, was not disclosed to the subsequent owner, Plaintiff in this case.  In the trial court, the jury awarded just over $17K for the Plaintiff's damages from the lemon, and $10 million - some 560 times the compensatory award - to punish Ford.  Not surprisingly, Ford appealed and got the damages reduced to $53,435.00.

Then also not surprisingly, Plaintiff appealed, but most surprising of all, the California Supreme Court reversed with instructions to modify upward the punitive damages award from the lowered amount, based on Ford's reprehensible conduct in developing a scheme to avoid California's lemon law.  The court of appeals did, and awarded $175,000, or 10 times the original compensatory award.

While not particularly riveting compared to the $10 million punitive verdict, there's a lesson here.  The appellate court said there wasn't enough of a record establishing Ford's pattern of conduct to award more.  Careful plaintiff's attorneys will read this opinion and work to establish such a record in future cases.  Trial judges will evaluate those records and may be forced to allow them into evidence.  Defense attorneys, on the other hand, will have to be on the lookout.  Companies may want to consider publishing such restrictive guidelines in manuals, as Ford did here.

Now you can flip the TV back to the "Grinch Stole Christmas," (link has sound) or just read a few more court opinions.

Posted by J. Craig Williams on Friday, December 23, 2005 at 10:35 Comments (0)


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