Mass Tort Litigation Blog

Ted Frank on Exxon v. Baker

Ted Frank, director of the AEI Legal Center for the Public Interest, discusses the recent punitive-damages Supreme Court decision, Exxon v. Baker, as part of a Federalist Society SCOTUScast.

BGS

Lead Pain Reversal in RI

The Supreme Court of Rhode Island reversed in State of Rhode Island v. Lead Industries Association.  The opinion below had imposed liability on lead paint manufacturers under a public nuisance theory.  The RI Supreme Court rejected that theory of liability.  I heard  the story on NPR's Marketplace.  You can find the RI Supreme Court opinion here.  Some commentary from the folks at the Drug and Device Law Blog (who, given that one of them represents defendants in lead paint cases, are very pleased) here. 

The problem with cases against lead paint manufacturers is that its impossible to prove that the lead paint present in buildings today comes from a particular company.  The problem from the defendant's perspective is that perhaps their lead paint didn't cause this damage.  The problem from the plaintiff's perspective is that they were damaged by some lead paint, they just can't prove whose lead paint.  Its really an issue of cost shifting in instances of uncertainty - who should pay for the cost of widespread distribution of substances like lead paint that cause damage, individuals or manufacturers?   The system generally imposes those costs on individuals because our system of torts is particularistic and doesn't recognize the concept of risk very well.  So as a general matter, a tort plaintiff has to prove that this defendant caused this particular harm, rather than this defendant participated in increasing the risk of the harm occuring.

I think the only state that imposes this type of global liability on lead paint manufacturers is Wisconsin, which as I recall was based on a slightly different theory.   There are cases pending in California and Ohio.

ADL 

Continuing Salmonella Investigation Moves Beyond Tomatoes

Article in the Wall Street Journal -- Salmonella Probe Looks Beyond Tomatoes, by Jane Zhang and Julie Jargon.  Here's an excerpt:

With the number of salmonella victims still climbing, federal regulators are widening their investigation to include other fresh produce commonly consumed with tomatoes.

David Acheson, the Food and Drug Administration's associate commissioner for foods, said the agency is enlisting help from state and local labs to test a wider range of foods for the rare, virulent salmonella strain dubbed Saintpaul. He declined to specify which new products the FDA is focusing on.

The agency's move comes as the FDA is under growing pressure to step up efforts to trace the source of the contamination. Last week, the agency said it might not be able to pinpoint the source given the complexity of the nation's food-supply chain, frustrating industry groups representing the produce, supermarket and restaurant industries.

BGS

Melbourn Mills Cleared in Kentucky Fen-Phen Settlement

Yesterday a federal jury acquitted Melbourne Mills, one of the three attorneys accused of defrauding clients in the Kentucky fen-phen settlement. The Associated Press story can be found here.

ECB

Sebok on the Exxon Punitive Damages Case

Anthony Sebok (Cardozo) has an excellent Findlaw colum (click here) on Exxon v. Baker.  There are lots of interesting points in this column.  Sebok's discussion of the history -- and of the importance of the theory of punitive damages in light of that history -- is very illuminating.

ADL

Drug Companies Lament Stricter FDA Scrutiny

An article in this morning's Wall Street Journal by Avery Johnson and Ron Winslow details the flip-side of increased FDA scrutiny: fewer new drugs in the pipeline. Drug companies such as Eli Lilly & Co, Japan's Daiichi Sankyo Co. and Merck believe that the FDA has become too careful while consumer advocates welcome the FDA's increased warnings and drug withdrawals. Here's an excerpt of the article:

Grousing by drug-industry executives about the FDA is nothing new. It's a product of the perennial tension between regulators and the companies they oversee.

But the Vioxx debacle, which sparked harsh criticism of both drug companies and their chief regulator, appears to have led to a climate shift. The drug industry largely has itself to blame for allegedly manipulating clinical data, concealing dangerous side effects and aggressively promoting risky products, which created widespread mistrust. The FDA, for its part, was harshly criticized for its decisions on Vioxx and in a litany of subsequent drug scares.

Outspoken scientists, watchdog groups, medical-journal editors and politicians have fanned worries about safety. The wave of post-Vioxx drug scares included concerns that GlaxoSmithKline PLC's widely used diabetes drug, Avandia, could raise heart-attack risk, and that Pfizer Inc.'s smoking-cessation drug, Chantix, may be connected to suicides. More than 80 U.S. deaths linked to contaminated heparin from China have further ratcheted up public anxiety. The FDA has been battered by criticism that it wasn't vigilant enough, including from Cleveland Clinic cardiologist Steven Nissen, Sen. Chuck Grassley of Iowa and Rep. John Dingell of Michigan.

ECB

What's So Weird About the Exxon Decision?

I just finished reading the decision in Exxon v. Baker and have a few preliminary thoughts.  As most of our readers are aware from Byron's post, the decision reconsidered the punitive damages in the case arising out of the Exxon Valdez disaster.  The court held that punitive damages are available under maritime law, that this is a federal common law question, and that the appropriate punitive damages award for the type of reckless conduct found in this case was a 1:1 ratio to the compensatory damages awarded in the case.  For those wanting more commentary, you might check Scotusblog commentaries here.   

So what's so weird about the decision? 

1. Its a punitive damages class action! Forgive me for not noticing this before, but that is a rare bird indeed. 

2. The Court's main concern is that punitive damages are inconsistent.  But that assertion, if true, doesn't at all support the idea that punitive damages should be pegged in a 1:1 ratio to compensatory damages.  We need to ask why they are inconsistent and what that means.  For example, assume there are two trials arising out of the same conduct.  In one trial there is a punitive damages award of $8 million and in another trial a punitive damages award of $0.  Does this mean that $0 punitive damages is the right answer? No.  There are three possible answers: $8, $0 and $4.  Which is right? I don't know. But none of them bear any relationship to the compensatory damages in the hypothetical case (which is why, you may have noticed, I did not mention the compensatory damages).  What inconsistent punitive damages tell us is that the whole concept of punitive damages is contested, and people can't agree on whether and how much we should punish wrongdoers through the civil justice system.   Some juries think we should, some think we shouldn't.  Imposing a randomly selected ratio does not solve the underlying policy question.  In any event, here the punitives across cases are consistent because all the cases arising out of this conduct were included in this class action!  Furthermore, we tolerate inconsistent verdicts all the time in personal injury cases.  This is part of life, because the process of valuing cases is one of the social construction of damages.  And it is contested. 

2a.  And on that ratio, the idea that the appropriate measure of punitive damages is the same as the mean ratio is absurd.  The court did not even consider comparable cases (because there aren't any, perhaps).  Can you imagine what my students would say if I told them that I am not reading their exams and grading them individually, but instead giving them a B, because we have a B median requirement at the law school where I teach?   That would be incredibly unfair, regardless of what I think about grading as a policy matter.

3. The Court stands the economic theory of punitive damages on its head.  The majority quite clearly states that the purpose of punitive damages is retribution and deterrence.  But if deterrence is your goal, pegging punitive damages (in any multiplier) to compensatory damages makes no sense.  The theory of deterrence requires that the wrongdoer pay something more than the cost of preventing the accident/bad act.  That cost has no relationship to compensatory damages.  If the cost of preventing the the wrongful act is the same as the damages that act cost, that is pure luck.   For example, maybe a test to find out if ship's captains are relapsed alcoholics only costs $100 per captain per year.  Then the punitive damages need to be something more than that amount.   Not $2.5 billion.  Not $20 million either. 

3a. To the extent that its not about deterrence but about retribution, pegging the punitive damages to compensation still doesn't make sense.  If you want to hurt the defendant, you have to look at the defendant's wealth and figure out what amount will hurt him.   Knowing how much the defendant hurt the plaintiff will not help because there is, again, no relationship between the marginal value of a dollar to the plaintiff and to the defendant.  For an article on the retribution theory of punitive damages see Anthony Sebok, Punitive Damages: From Myth to Theory on SSRN and Iowa L. Rev. 

3b.  The only way that pegging compensatory damages to punitive damages makes sense is to say that punitive damages are a part of compensatory damages - they compensate for other things, say harm to third parties.  This is a theory, but its one the court has rejected as far as I can tell in
Philip Morris v. Williams as well as in Exxon.  For an article on this theory see Catherine Sharkey, Punitive Damages as Societal Damages abstract on SSRN , published in the Yale L. J.

ADL 

SCOTUS Reduces Exxon Oil Spill Punitive Damages to Match Compensatory Damages

Article on cnn.com -- High court reduces Exxon oil spill damages.  Here's an excerpt:

The Supreme Court has reduced a $2.5 billion punitive damages award against energy giant Exxon for its role in an infamous 1989 maritime oil spill.

The high court concluded, 8-0, that punitive damages should roughly match actual damages from the environmental disaster, which were roughly $507 million. Justice Samuel Alito took no part in the case because he owns Exxon stock.

The court ruled that victims of the worst oil spill in U.S. history may collect punitive damages from Exxon Mobil Corp, but not as much as a federal appeals court determined.

BGS

Viewing the Battle Over Tort Reform

Interesting, expansive article in the New York Times -- To the Trenches: The Tort War Is Raging On, by Jonathan Glater.  Thanks to Evan Anziska for emailing it to me.  Here's an excerpt:

In a Washington ballroom bedecked with flags honoring explorers who overcame oceans and mountains to pursue international trade, Thomas J. Donohue congratulated the assembled modern merchants — a group of executives, lobbyists and lawyers — for challenging a more mundane adversary.

“It took guts, bravery and vision to get behind what must have seemed like an insurmountable task — taking on the powerful trial bar,” said Mr. Donohue, the chief executive of the United States Chamber of Commerce. “We have succeeded beyond our expectations.”

There were plenty of reasons for self-congratulation at the dinner, held earlier this month to commemorate the 10th anniversary of the chamber’s Institute for Legal Reform. Some of the best-known plaintiff-side lawyers in the country — Richard F. Scruggs, Melvyn I. Weiss and William S. Lerach — have all pleaded guilty to charges that they tried to manipulate the justice system. The very phrase “trial lawyer” has become associated with unadulterated greed; the Association of Trial Lawyers of America now calls itself the American Association for Justice.

But it is still too early to declare an end to the so-called tort wars, a decades-old conflict over the rules governing civil lawsuits. Corporate interests have won several potent victories, but trial lawyers continue to try to undo legislation restricting litigation and are pursuing new strategies of their own.

BGS

Scruggs To Receive Sentence

Article in the Wall Street Journal -- Sentencing Doesn't End Scruggs's Legal Woes, by Ashby Jones.  Here's an excerpt:

Richard "Dickie" Scruggs, the high-profile plaintiffs lawyer who pleaded guilty in March to conspiring to bribe a Mississippi judge, will likely learn his fate Friday, when he is scheduled to be sentenced for his crime.

But the sentencing won't necessarily put an end to the legal woes of Mr. Scruggs, 62 years old, who gained wealth and notoriety in the 1980s and 1990s in massive litigation against the tobacco and asbestos industries.

Mr. Scruggs and several colleagues, including his son, Zach Scruggs, were indicted last November for participating in a scheme to pay a state judge $40,000 in exchange for a favorable ruling in a $26.5 million legal-fee dispute. All five of the defendants ultimately pleaded guilty to various charges. None have been sentenced, though a former colleague of Mr. Scruggs, Sidney Backstrom, is also scheduled to be sentenced Friday. Zach Scruggs is slated to be sentenced on July 2.

BGS

Neurologist Requested Additional Warnings for Neurontin

A U.S. District Court in Boston and New York state court held joint hearings on whether lawsuits against Pfizer, Inc. based on Neurontin could continue. Plaintiffs allege that the drug lead to suicides. Here's an excerpt of Jeremy Singer-Vine's Wall Street Journal report:

A British neurologist who analyzed effects of the drug Neurontin told a court hearing Thursday that he advised its maker -- now a unit of Pfizer Inc. -- to include a warning on the drug's label for potential side effects of depression and aggression, but his advice wasn't followed.

The University of London neurologist, Michael R. Trimble, was testifying at a hearing to decide whether civil cases brought against Pfizer alleging suicides linked to Neurontin can proceed. . . .

Dr. Trimble described what he said was a "plausible biological pathway" that could lead from the compound gabapentin -- the chemical name for Neurontin -- to suicidal behavior, hostility, and aggression. Dr. Trimble said that in 1995 and 1996, he was hired to write two confidential reports for Parke-Davis -- now a unit of Pfizer -- because the company "was concerned about psychosis in relation to their drug." Dr. Trimble said he was unable to find a link to psychosis, but noted effects of depression and aggression.

Lawyers for Pfizer argued at the hearing that the evidence linking the drug to suicidal side effects wasn't scientifically sound. Under cross-examination, they challenged his description of a pathway as a patchwork of studies that didn't prove a biological connection. Neurontin and generic forms of gabapentin are approved for treating epileptic convulsions, but have also been prescribed widely "off label" for other conditions.

ECB

Scheuerman on the Relationship Between Punitive Damages & Class Actions

Sheila Scheuerman (Charleston) just posted an article entitled "Two World Collide: How the Supreme Court's Recent Punitive Damages Jurisprudence Affects Class Actions" on SSRN.  Here is the abstract:

This article examines the intersection between two controversial areas of the law - punitive damages and class actions - and argues that the Supreme Court's recent jurisprudence clarifying the due process limits on punitive damages has broad implications on the procedural laws governing the types of cases that can properly be certified as a class action. Specifically, the article discusses the Supreme Court's evolving approach to punitive damages from one that considered the harm a defendant's conduct caused to society as a whole to one that now focuses almost exclusively on the harm to the specific individual bringing the lawsuit. This shift, which recently culminated in the Court's 2007 decision in Philip Morris USA v. Williams, constitutionally requires that the amount of a punitive damages award relate to the amount of harm suffered by the party bringing the suit. That requirement is at odds with class action practices that treat punitive damages as a common, class-wide issue and that have allowed juries to assess a punitive damages award before evaluating the harm to the individual class members. The article argues, therefore, that where injuries are not uniform among class members, punitive damages cannot be pursued as a class-wide remedy.

ADL