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Business and Commercial Litigation in Federal Courts

by Andrew L. Frey and Evan M. Tager (1)

Table of Sections

42.1 Scope Note.

42.2 Tactical Issues in Punitive Damages Litigation.

(a) The Complaint.

(b) The Answer.

(c) Discovery.

(1) Financial Condition.

(2) "Other Acts" Evidence.

(3) Expert Testimony on the Proper Level of Punitive Damages.

(d) Procedural Motions.

(1) Choice of Law.

(2) Bifurcation or Trifurcation of Trial.

(3) Addressing the Problem of Multiple Punitive Awards for the Same Conduct.

(4) Standard of Proof.

(e) Evidentiary In Limine Motions.

(1) Financial Condition.

(2) Evidence of the Defendant's Corporate Status or Out of State Residence.

(3) "Other Acts" Evidence.

(f) Developing the Plaintiffs Affirmative Case.

(g) Developing a Punitive Damages Defense.

(1) Federal or State Regulation.

(2) Compliance with Industry Custom or Standards.

(3) Noninvolvement of Management.

(4) Subsequent Remedial Measures.

(5) Fines for Comparable Misconduct.

(6) The Real-World Consequences of High Punitive Exactions.

(7) Expert Economic Testimony.

(8) Other Judgments, Settlements, and Lawsuits.

(9) Profits.

(10) Character Evidence.

(h) Summations

(i) Jury Instructions.

(j) Verdict Forms/Special Interrogatories.

(k) Motions for Judgment as a Matter of Law.

(l) Pre and Post-Judgment Interest.

(m) Bonding/Stays.

(n) Insurance Coverage for Punitive Awards.

42.3 Punitive Damages Case Law .

(a) Early Punitive Damages Law.

(b) The Modern Expansion of Punitive Damages.

(c) Supreme Court Punitive Damages Jurisprudence.

(1) Browning-Ferris Indus., Inc. v. Kelco Disposal Inc.

(2) Pacific Mutual Life Ins. Co. v. Haslip.

(3) TXO Prod. Corp. v. Alliance Resources Corp.

(4) Honda Motor Co. v. Oberg.

(5) BMW of North America, Inc. v. Gore.

(d) The Impact of BMW In the Lower Courts.

(1) Survey of Post-BMW Excessiveness Decisions.

(2) The Reprehensibility Guidepost in the Lower Courts.

(3) The Ratio Guidepost in the Lower Courts.

(4) The Comparative Fines Guidepost in the Lower Courts.

(5) The Role of Corporate Financial Condition Post-BMW.

42.4 Checklist of Essential Allegations and Defenses in Punitive Damages Cases.

42.5 Checklist of Sources of Proof of Essential Allegations and Defenses.

42.6 Jury Instructions.

42.1 Scope Note

For better or for worse, punitive damages have become a fixture of tort litigation. Whereas cases seeking punitive damages used to be the exception, they now are commonplace. In today's legal world, it is hard to imagine any lawyer pleading an intentional tort and not seeking punitive damages (unless, of course, the state whose law governs the claim does not permit punitive damages). It is thus important for lawyers representing both defendants and plaintiffs to be familiar with the legal and tactical issues that arise in punitive damages cases. This chapter will provide practical guidance to practitioners pursuing and defending punitive damages claims. The chapter attempts to identify key tactical issues relating to punitive damages at each stage of a litigated case. Consistent with other chapters in this publication, this chapter begins with the strategic points and discusses relevant substantive law thereafter. Practitioners who are not conversant with developments in punitive damages law, particularly the Supreme Court's decisions in the area, may find it useful to read the substantive sections before reading the sections relating to trial tactics.

One caveat is necessary at the outset. The authors generally represent businesses against whom punitive damages have been sought or obtained. Although we have attempted to provide advice that will be useful to practitioners representing plaintiffs as well as defendants, our perspective remains that of defense lawyers who feel that punitive damages are awarded too often and in amounts that are frequently excessive.

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42.2 Tactical Issues in Punitive Damages Litigation

This section will attempt to provide practitioners with a road map for litigating punitive damages cases that begins with the complaint and ends with issues relating to the bonding of a punitive award. Because the law relating to punitive damages varies dramatically from state to state, we do not purport to provide advice that is specific to any particular jurisdiction. As with any claim, it is absolutely critical for practitioners to familiarize themselves with the punitive damages regime of the state whose law governs the claim. Obviously, state substantive punitive damages law governs in federal diversity cases.1 It is less clear to what extent federal courts will apply state procedures governing claims for punitive damages. Some procedures--such as limitations on pleading of punitive damages claims--generally have been regarded as part and parcel of the state punitive damages regime and therefore have been liberally utilized by federal courts in diversity cases.2 Other state procedures--such as bifurcation--have been deemed procedural and not adopted wholesale by federal courts.3

* * *

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42.3 Punitive Damages Case Law

In this section, we provide an overview of the development of punitive damages law from its early incarnations to its current state. We focus in particular on the constitutional limits on punitive damages articulated by the Supreme Court and on lower court cases applying the Supreme Court's most recent and far-reaching ruling. An understanding of this background is important to effective advocacy in this fast-evolving area of the law.

* * *


1. Punitive damages also are available under a variety of federal statutes. Where appropriate, practitioners should familiarize themselves with potentially applicable federal standards as well.

2. See, e.g., Wilson v. Edenfield, 968 F. Supp. 681, 683-684 (M.D. Fla. 1997) (holding that Florida's limitation on the pleading of punitive damages is "substantive" and that it therefore applies in federal court); College Craft Cos. v. Perry, No. 3-95-583, 1995 WL 783612, at *6-*7 (D.Minn. 1995) (applying Minnesota's limitation on pleading of punitive damages); Ulrich v. City of Crosby, 848 F. Supp. 861 (D.Minn. 1994) (same). But see Sosa v. Dryclean-USA, No. 96-3717-Civ., 1997 WL 580600, at *2 (S.D. Fla. 1997) (ruling that pleading limitations are procedural and accordingly declining to apply Florida's limitation on the pleading of punitive damages); Tutor Time Child Care Sys., Inc. v. Franks Inv. Group, Inc., 966 F. Supp. 1188 (S.D. Fla. 1997) (same).

3. See, e.g., Hayes v. Arthur Young & Co., 34 F.3d 1072 (9th Cir. 1994) (bifurcation is procedural; accordingly state bifurcation requirements do not apply in federal court); Simpson v. Pittsburgh Corning Corp., 901 F.2d 277, 283 (2d Cir. 1990) (same).

1. * The assistance of Eileen Penner in the preparation of this chapter is gratefully acknowledged.

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