It’s difficult to find many people who will argue that the litigious atmosphere in the U.S. has helped increase the competitiveness of our nation’s job creators. “Jackpot Justice” has created a feeding frenzy and it’s critical that the judicial system refocuses on proportionate response. An opportunity to do so has presented itself in an important case for manufacturers doing business in California. The California Supreme Court agreed to review a case concerning the state’s maximum punitive damages ratio and will determine whether attorney’s fees can be included in compensatory damages when they are awarded by the trial court after the jury has rendered its verdict.
In Nickerson v. Stonebridge Life Insurance Co. (Case No. S213873), the trial court applied a 10:1 punitive damage ratio, reflecting the great reprehensibility of the conduct, and the Court of Appeal upheld the ratio with some of California’s strongest language yet on the topic, concluding that “10:1 is the maximum constitutionally defensible ratio.” (Opinion at p.27) Additionally, the trial court did not include the attorney’s fees in the compensatory damages—including the fees would have increased the punitive damages award by 36%—and Court of Appeal again upheld the trial court on this issue. The plaintiff appealed the case to the California Supreme Court.
The NAM addressed what can be included via compensatory damages when applying a punitive damages ratio in Shell Oil Co. v. Hebble (cert. denied, 131 S.Ct. 822 (Mem.) (U.S. 2010)), where we submitted an amicus curiae brief urging the U.S. Supreme Court to review an Oklahoma Court of Civil Appeals decision. In that case, the Oklahoma court granted over $53 million in punitive damages based on $750,708 in actual damages and skewed the punitive damages ratio by including prejudgment interest as part of compensatory damages. The Court failed to give clear guidance on this important due process issue, leaving state courts to establish a patchwork of precedent.
It’s critical that there be a clearly established precedent that will administer a fair and judicious application of damages – and the Manufacturers’ Center for Legal Action will be on hand at all times to ensure that happens.
Thomas C. Kirby is a Legal Fellow for the Manufacturers’ Center for Legal Action, the leading voice of manufacturers in the courts. To read more about the Manufacturers’ Center for Legal Action, please click here.
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