Article: October 2014 Product Liability Update

Some Courts Loosening Restrictions on Punitive Damages. The 1990s and 2000s saw many developments 9 restricting the frequency and size of punitive damages awards in tort litigation, including both state tort-reform legislation capping the size of awards and the procedures for imposing them, as well as court decisions limiting awards as a matter of substantive due process. Those decisions included the U.S. Supreme Court’s landmark opinion in State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003), which generally held that a punitive damages award more than nine times the compensatory award will rarely survive due process. Within the last year, however, several large, high-profile punitive verdicts and other state law developments have prompted a renewed focus on punitive damages awards in tort litigation.

First, in April 2014, a federal jury in the Actos MDL in the Western District of Louisiana awarded $1.5 million in compensatory damages and $9 billion in punitive damages against Eli Lilly and Takeda in a case in which the plaintiff alleged his bladder cancer was caused by the prescription medication Actos. Daniel Siegal, Takeda, Eli Lilly Stuck with $9B Actos Verdict, Law360 (Aug. 28, 2014), http://www.law360.com/articles/572238/takeda-eli-lilly-stuck-with-9b-actos-verdict. The case was the first bellwether to be tried from the Actos MDL, and over 2,900 such suits remain pending against Takeda and Eli Lilly. See Anjali Rao Koppala & Chang-Ran Kim, Takeda, Lilly Lose Bid To Overturn $9 Billion Award for Hiding Cancer Risk, Reuters (Aug. 30, 2014), http://uk.reuters.com/article/2014/08/30/uk-takeda-pharma-actos-idUKKBN0GT05320140830. The MDL court denied the defendants’ post-trial motion for judgment as a matter of law seeking to set aside the verdict on grounds of federal preemption and evidentiary insufficiency, leaving in place the $9 billion punitive damages judgment. Allen, No. 6:12-cv-00064-RFD-PJH, at 2-3, 101. The parties now await determination of a motion for a new trial in which the defendants primarily argue that the punitive damages award must be reduced under Campbell, given the 6000-to-1 ratio. Memorandum of Law in Support of Defendants’ Rule 59 Motion for a New Trial, at 2-8, 12, Allen v. Takeda Pharms. N. Am., Inc., No. 6:12-cv-00064 (W.D. La. Sept. 5, 2014).

Second, on July 18 of this year, a Florida jury awarded a plaintiff $17 million in compensatory damages and $23 billion in punitive damages in Robinson v. R J. Reynolds Tobacco Co., a wrongful death action brought by an individual smoker’s spouse, against R. J. Reynolds Tobacco Co. and other tobacco companies. See Jennifer Kay, RJ Reynolds Vows To Fight $23.6B in Damages, AP (July 20, 2014 3:04 AM), http://bigstory.ap.org/article/fla-jury-slams-rj-reynolds-236b-damages. Robinson was part of the so-called Engle progeny litigation, which is comprised of thousands of individual lawsuits filed against tobacco companies in Florida courts after the Florida Supreme Court’s decision in Engle v. Liggett Group, Inc. (Engle III), 945 So. 2d 1246 (Fla. 2006), which decertified and vacated a $145 billion class action award and held that key trial findings on liability would be issue preclusive in follow-on litigation brought by the individual plaintiffs. Although the Robinson verdict is subject to pending motions for post-trial reduction, as well as potential appeal—indeed, it presents a punitive-to-compensatory ratio of more than 1300 to 1 and is 950 times bigger than the largest Engle progeny punitive damages award upheld on appeal—it nevertheless has been widely reported and may have a significant impact on other Engle progeny cases.

Third, on September 9 the Supreme Court of Missouri struck down the state’s statutory cap on punitive damages as violating the Missouri state constitutional right to a trial by jury. Lewellen v. Franklin, No. SC 92871, 2014 WL 4425202, *4-6 (Mo. Sept. 9, 2014). Lewellen involved a verdict of $25,000 in compensatory damages and $1 million in punitive damages against the owner of a car dealership for defrauding the plaintiff and violating state commercial practices law, which was reduced to $500,000 pursuant to Missouri’s cap on punitive damages. Id. at *3. On appeal, the supreme court held that “[u]nder the common law as it existed at the time the Missouri Constitution was adopted, imposing punitive damages was a peculiar function of the jury,” and thus the statutory cap infringed on the plaintiff’s right to jury trial by “chang[ing] the right to a jury determination of punitive damages as it existed in 1820.” Id. at *5. The court further concluded that the award was not grossly excessive under Campbell, given the reported reprehensibility of the defendants’ conduct. Id. at *4-5. Following Lewellen, the Supreme Court of Montana is also poised to rule on the constitutionality of its state’s punitive damages cap, after hearing arguments in late September. See Order of August 27, 2014, Masters Grp. Int’l, Inc. v. Comerica Bank, No. DA 14-0113 (Mont. Aug. 27, 2014).

Since each of the foregoing decisions is subject to further potential review or interpretation, it is difficult to determine whether they represent significant trends or simply one-time aberrations. Significantly, the U.S. Supreme Court may further address punitive damages awards this Term through a pending petition for certiorari to resolve a split of authority on whether due process requires the court to review such verdicts de novo or with deference to what “a rational jury could have awarded.” Stevenson v. First Am. Title Ins. Co., 845 N.W.2d 395 (Wis. 2014), petition for cert. filed (U.S. July 30, 2014) (No. 14-106). Notwithstanding the recognized restrictions on punitive damages, corporations should be mindful of these recent developments in defending themselves in products liability and mass tort cases.