Supreme Court Vacates $290M Punitives; Case Reconsidered In Light Of State Farm Washington

Insurance and business groups are lauding a decision by the U.S. Supreme Court to vacate a $290 million product liability punitive damage award.

In the case of Ford Motor Co. v. Romo, the high court ordered the Supreme Court of California to reconsider the punitive damage award in light of the recent decision in the case of State Farm v. Campbell.

In the State Farm case, the U.S. Supreme Court overturned a $145 million punitive damage award against the Bloomington, Ill.-based company, saying it was unfairly punished for actions that were legal in the jurisdictions where they occurred and for conduct that was unrelated to issues on which it was being sued.

The high court also said that the $145 million punitive damage award unfairly exceeded the compensatory award of about $1 million. In general, the Supreme Court said, punitive damages should exceed the compensatory award by a multiple that is in the single digits.

In the Ford v. Romo case, the $290 million punitive damage award was 58 times higher than the $5 million compensatory judgment.

“The courts action shows that the plaintiffs lawyers golden goose for punitive damages is now dead,” said Victor Schwartz, general counsel for the Washington-based American Tort Reform Association.

“Plaintiffs lawyers cannot longer try a corporation for its general bad behavior,” he added.

“They have to focus on what happened to the clients in the case, which is the fair way to proceed,” he said.

David Snyder, assistant general counsel with the Washington-based American Insurance Association, said the recent Supreme Court decisions will make the civil justice system more fair, rational and predictable.

The decisions, he said, take the “jackpot potential” out of small cases, which now must rise or fall on their own merits.

“The public is the real winner because legitimate cases can still go forward with the possibility of significant damage awards, but nuisance and nonsensical cases may not,” Mr. Snyder said.

Ken Schloman, Washington counsel for the Downers Grove, Ill.-based Alliance of American Insurers, called the decision a “step forward to bringing common sense to the civil justice system.”

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, May 26, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.

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Supreme Court Vacates $290M Punitives; Case Reconsidered In Light Of State Farm

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