Recent Supreme Court Ruling Shows Concept Of Punitive Damages Still Alive And Well In Tort Law

The awarding of punitive damages has been under attack for almost two decades, both by business interests and by those who argue for tort reform and a smaller role of courts in our society. The Supreme Court of the United States appeared to have put the clamp on punitive damages in 1996 when it ruled in the famous repainted car case, BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 116 S. Ct. 1589, 1599, 134 L. Ed. 2d 809 (1996), and reversed an award of punitive damages on due process grounds.
 
In 2003, the Supreme Court examined the ratio that could permissibly exist between an award of punitive damages and the underlying compensatory damages. The Supreme Court in State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 123 S. Ct. 1513, 155 L. Ed. 2d 585 (2003), opined that seldom should the ratio between punitive damages and compensatory damages exceed a single digit. Then in 2007, the Supreme Court reversed an award of punitive damages in a tobacco case, Philip Morris USA v. Williams, 549 U.S. 346, 127 S. Ct. 1057, 166 L. Ed. 2d 940 (2007), holding that an award of punitive damages was an unconstitutional taking of property without due process if the purpose of the award was to punish a defendant for injuries that had been sustained by nonparties, such as other smokers.
 
The reported death of punitive damages by some commentators, though, is premature. Juries in many parts of the country do not hesitate to award punitive damages, and many such awards are continuing to be upheld by appellate courts. In a recent case in Tennessee, Flax v. DaimlerChrysler Corp., 272 S.W.3d 521 (Tenn. 2008), a substantial award of punitive damages was upheld by the Tennessee Supreme Court in a very long and detailed opinion, and the U.S. Supreme Court recently denied the defendant’s petition for a writ of certiorari, DaimlerChrysler Corp. v. Flax, 129 S. Ct. 2433, 174 L. Ed. 2d 227 (U.S. 2009).
 
The facts of the case were tragic. Joshua Flax, an 8-month-old infant, was riding in a child’s safety seat in the right rear passenger seat of a 1998 Dodge Caravan in Davidson County, Tennessee, with his mother in the left rear passenger seat. The infant’s grandfather was driving the van, and another passenger was seated in the right front seat. The van was struck in the rear by a pickup truck that was traveling at an excessive speed. The velocity of the collision caused the backs of the seats of the mother, the grandfather, and the front seat passenger to yield rearward in a reclining position. The back of the head of the front seat passenger struck the forehead of Joshua Flax, fracturing Joshua’s skull and causing severe brain damage. Joshua died the next day.
 
During the trial, the experts for both parties testified that Joshua would not have been seriously injured if the seat in front of him had not yielded rearward. DaimlerChrysler (DCC) asserted at the trial that the rearward yielding of the seats protected the occupants of the seats, that the seats exceeded government safety regulations, and that other automobile manufacturers utilized similar seats. The plaintiffs produced a former DCC employee who testified that he was fired as a whistleblower because he investigated minivan seat safety problems in the mid-1990s.
 
A Nashville jury found that DCC was liable for $2.5 million in compensatory damages and $98 million in punitive damages. The trial court reduced the punitive damages to $13,367,345 in punitive damages for the wrongful death of Joshua Flax and $6,632,655 in punitive damages to the mother on her negligent infliction of emotional distress (NIED) claim. The Court of Appeals of Tennessee in Flax v. DaimlerChrysler Corp., 2006 Tenn. App. LEXIS 822 (Tenn. Ct. App. Dec. 27, 2006), reversed both punitive damages awards. The Tennessee Supreme Court affirmed the denial of punitive damages for the NIED claim, but upheld the award of punitive damages on the wrongful death claim. Justice Holder in her majority opinion noted twice that DCC had marketed the Dodge Caravan as a vehicle that placed safety first. “Not only did DCC fail to warn customers or redesign its product, DCC hid the evidence and continued to market the Caravan as a vehicle that put safety first. Because the jury's verdict is supported by clear and convincing material evidence, we must affirm the jury's finding of recklessness. . . . In addition, DCC deceitfully covered up evidence of the deficiencies of its seat design while simultaneously advertising the Caravan as a vehicle that put children's safety first.”
 
DCC argued to the Supreme Court that the award of punitive damages on the wrongful death claim was excessive in violation of the due process standards of Gore and Campbell, that the trial court violated the due process requirements of Williams by allowing the jury to consider harm to nonparties, and that the award was not justified because the evidence did not support a finding of recklessness by DCC.
 
The Supreme Court held that the 1-to-5.35 ratio was acceptable in this case. “We believe that a ratio of 1-to-5.35 would be warranted in this case. Although the United State Supreme Court has made no effort to demonstrate when damages are ‘substantial,’ we do not believe that an award of $2,500,000 is so large as to require a ratio of 1-to-1. Furthermore, a punitive damage award of $13,367,345 is consistent with the concept that the reprehensibility of a defendant's conduct is the most important of the due process guideposts and is justified by DCC's long-term pattern of conduct that resulted in severe injuries to the plaintiffs and showed a conscious disregard for the safety of Tennessee citizens. Accordingly, in light of the first two guideposts we would hold that a punitive damage award approaching the maximum ratio permitted by the due process clause is appropriate.”
 
The Supreme Court was more concerned with the fact that the maximum fine that could be assessed against a corporation for reckless homicide under Tennessee law was only $125,000, but upheld the award because there was no authority to invalidate it even though it was substantially more than the maximum criminal penalty. “We are unaware of any state or federal case that has invalidated a punitive damage award solely because the award was greater than that contemplated by statutory penalties. In addition, the trial court's award in this case is far less drastic than the awards rejected in Gore and Campbell, which were 1,000 and 14,500 times greater, respectively, than the maximum civil or criminal penalty. See Campbell, 538 U.S. at 428; Gore, 517 U.S. at 584. Finally, we do not believe that a punitive damage award of $125,000 would adequately punish DCC or deter future instances of similar conduct. For these reasons, we conclude that a punitive damage award of $13,367,345 is constitutionally permissible in this case.”
 
The Supreme Court declined to rule on the Williams due process requirement, finding that it had not been preserved for appeal. The trial court had rejected DCC’s request that the jury be instructed that it could not punish DCC for harm suffered by nonparties. DCC then failed to raise this issue before the Court of Appeals.
 
Flax does not appear to be contrary to the basic guidelines on punitive damages as set forth by the U.S. Supreme Court, which may be why certiorari was denied. At the same time, though, Flax cannot be viewed with pleasure by those in the business and legal community who have worked to limit punitive damages. What Flax does do is demonstrate that the concept of punitive damages is still alive and well in tort law.
 
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