Two New Punitive Damages Cases

The California Supreme Court has handed down two puntive damages cases that interpret State Farm v. Campbell.

One case is Johnson v. Ford Motor Corp., a case in which the plaintiff purchasers of a used vehicle proved that Ford had concealed a history of repairs to the vehicle. They also proved that Ford routinely committed such acts of fraud and earned significant profit from the conduct. The jury awarded $17,000+ in comnpensatory damages and $10 Million in punitive damages. The intermediate court cut the punitive award to $53,000+, saying that Ford could only be punished for what it did to the plaintiffs.

The Cal. Supreme Court reversed and remanded, saying that “California law has long endorsed the use of punitive damages to deter continuation or imitation of a corporation’s course of wrongful conduct, and hence allowed consideration of that conduct’s scale and profitability in determining the size of award that will vindicate the state’s legitimate interests (footnote omitted). We do not read the high court’s decisions, which specifically acknowledge that states may use punitive damages for punishment and deterrence, as mandating the abandonment of that principle.” The Court also said that “[t]o the extent the evidence shows the defendant had a practice of engaging in, and profiting from, wrongful conduct similar to that which injured the plaintiff, such evidence may be considered on the question of how large a punitive damages award due process permits. Although the lower court discussed Ford’s policies in addressing reprehensibility ‚Äï noting “it is reprehensible for a regulated manufacturer to implement a scheme that intentionally undermines the protections granted consumers by state law” ‚Äï the court gave no express weight, in its assessment of the constitutional maximum, to the profitability of that scheme to Ford or the scale at which Ford pursued it.” On remand, the court of appeals was directed to weigh these and other factors.

Read about the the second case by clicking below.

The second case is Simon v. San Paolo U.S. Holding Co.. In this case Plaintiff proved promissory fraud on the defendant. The Defendant was ordered to pay compensatory damages of $5,000 and punitive damages of over $1.7M. The California Supreme Court cut the punitive damages to $50,000. In doing so, it held that a defendant’s wealth was a relevant factor in determining the amount of punitive damages but reprehensiblity of the defendant’s conduct was a greater factor. Read the opinion here.

What does this mean for punitive damages cases in Tennessee? My guess is that Tennessee law, which does permit evidence of wealth of the wrongdoer on the issue of punitives, will be a factor for consideration by the jury, as will similar conduct that impacts those other than the plaintiff. I am not aware of any Tennessee appellate decision to date where State Farm has been interpreted by a state appellate court.

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