How to Defend Punitive Damages Claims Effectively—and ...

1 If a man steals an ox or a sheep, and killsit or sells it, he shall pay five oxen for an ox,and four sheep for a sheep. He shall make res-titution; if he has nothing, then he shall be soldfor his theft. If the stolen beast is found alivein his possession, whether it is an ox or an assor a sheep, he shall pay double. EXODUS 22:1By C. Barry Montgomery andBradley C. NahrstadtA Punitive damage award in a high-profile case is a corporate defense coun-sel s worst nightmare. Consider, as ex-amples, $ million Punitive Damages againstMcDonald s Corp. for burns a customersuffered from a coffee spill; $ million for a secretary who pre-vailed in a sexual harassment case; $101 million against General Motorsin a design defect case; $125 million against a pharmaceuticalcompany; and $3 billion against Exxon Corp.

2 Relatedto the Exxon Valdez oil Punitive Damages often are re-duced by the trial court or on appellate re-view, the original awards usually generatefierce debate and media hype, as well asinjury to the defendant corporation s today s climate of intensified ac-countability and safety consciousness, ju-ries expect manufacturers, professionalsand other providers of products and ser-vices to account for the safety of their re-spective endeavors. When a plaintiff suc-cessfully proves liability against a highlyvisible defendant on the theory that the de-fendant failed to provide a safe product orHow to Defend Punitive Damages ClaimsEffectively and Maybe SuccessfullyIADC member C.

3 Barry Montgomery isa member of Williams & Montgomery,Chicago. He is a graduate of MuskingumCollege ( 1959) and the University ofMichigan ( 1962) and a member ofthe International Academy of C. Nahrstadt is an associate inthe same firm. He has a fromMonmouth College (1989) and a the University of Illinois (1992). Punitive Damages cases present difficult challenges to defense counsel,but attention to a lot of details may produce successservice, the threat of a substantial punitivedamages award must be taken seriously. Inaddition to the award itself, the corporationcan anticipate the cost of litigating the is-sue to final appeal and of dealing with hos-tile media exposure and private order to avoid this catastrophe, de-fense counsel must focus on the punitiveaspect of the case from the day the fileis opened.

4 All too often, the punitivedamages claim is one of the last thingsconsidered, when it should be one of are risks associated with claimsfor Punitive Damages , and there are differ-ent methods that may be employed to pro-tect a corporate defendant from thoseclaims. It is important to remember that thelaw of Punitive Damages Claims variesfrom jurisdiction to jurisdiction and mustalways be carefully researched and LITTLE HISTORYP unitive Damages in civil actions are de-fined in Section 908 of the Restatement(Second) of Torts as those damagesPage 348 DEFENSE COUNSEL JOURNAL July 1999awarded against a person to punish himfor his outrageous conduct and to deterhim and others like him from similar con-duct in the future.

5 They have been charac-terized as exemplary, because they makean example of a defendant; Punitive , be-cause they punish a defendant; vindic-tive, because they exact revenge on a de-fendant; and smart money, because theymake a defendant smart with pain, not concept of Punitive Damages datesback more 2,000 years before the birth ofChrist to the Code of Hammurabi, underwhich a judge who altered a judgment pre-viously rendered was required to pay atwelve-fold penalty. In 1400 , Hittitelaw, according to Exodus 22:9, requiredthe thief of a great bull or horse to repaythe owner with 15 bulls or horses.

6 Exodusalso refers to exemplary Damages for thecommission of other egregious acts. Thesebiblical references to exemplary damagesappear to be the first indication that puni-tive Damages should bear a multiple, albeitarguably reasonable, relationship to thecompensatory first recorded Punitive damageaward in a civil case appears in an18th century case in England, Huckle Lord Camden found that the au-thority for Punitive Damages awards is in-herent in the jury s exercise of uncon-trolled discretion in arriving at enough, he also found thatthe amount of Punitive Damages may war-rant a new trial when it is so outrageous that all mankind at first blush must thinkso.

7 In the United States, Punitive damageshave existed in one form or another sinceearly days. In 1791, in Coryell v. Col-baugh,4 a New Jersey court held that puni-tive Damages may be appropriate forexample s sake, to prevent such offensesin the future .. [and] as would mark [thejury s] disapprobation. By 1851, the Court noted in Day v. Wood-worth5 that the doctrine of Punitive dam-ages was firmly entrenched in the Ameri-can legal system. Justice Grier stated that ajury may inflict what are called exem-plary, Punitive , or vindictive damagesupon a defendant, having in view the enor-mity of his offense rather than the measureof compensation to the plaintiff.

8 Although the theoretical correctness of the Punitive Damages doctrine was de-bated as late as the 1880s and 1890s,nearly all American courts had acceptedthe concept by the turn of the century. Inthe last 30 years, thanks in large part to aspread of consumerism and extensivemedia attention on defective products, con-sumer goods and services, Claims for puni-tive Damages have become almost According to a pair of recentcommentators, the doctrine of punitivedamages survives [to this day] because itcontinues to serve the useful purposes ofexpressing society s disapproval of intoler-able conduct and deterring such conductwhere no other remedy would suffice.

9 7 PINPOINTING APPLICABLE LAWA. Choice of LawBecause the law affecting Punitive dam-ages varies from jurisdiction to jurisdic-tion, defense counsel may need to analyzechoice of law issues, if appropriate, basedon the facts of the case. Courts typicallyconsider these factors in determiningchoice of law for Punitive Damages : (1) thestate of the plaintiff s residence; (2) thestate where the wrongful conduct oc-curred; and (3) competing states inter-1. John D. Kitch, Proving and Disproving Puni-tive Damages , 21 LITIG. 13-14 (Winter 1995).2. Gary T. Walker & Kenneth E. Keller, Puni-tive damage Claims in Products Liability Actions,FOR THE DEFENSE 25 (Oct.)

10 1988).3. 95 Eng. Rep. 768 ( 1763).4. 1 77 (1791).5. 54 363 (1851).6. Walker & Keller, supra note 2, at 25-26. Seealso Smith v. Wade, 461 30, 35 (1983).7. Jane Mallor & Barry Roberts, Punitive Dam-ages: Toward a Principled Approach, 31 639 (1980).Page 349 How to Defend Punitive Damages Claims Also worth noting is that in certainjurisdictions, the law applied to punitivedamages may differ from the law appliedto other issues in the same Punitive Damages LawIt is important to note that there is nocause of action for Punitive damagesalone. Nearly all jurisdictions require en-titlement to compensatory Damages beforepunitive Damages may be awarded, al-though some permit them if injunctive re-lief is granted.