Judicial Call for More Guidance on Punitive Damages Awards

Earlier this year, in a bellwether trial in the Actos multidistrict litigation, a Louisiana federal court jury awarded $9 billion  in punitive damages to plaintiffs who claimed that the use of the diabetes drug Actos caused bladder cancer. Not surprisingly, post-trial challenges followed. In particular, while the defendants did not challenge the amount of compensatory damages ($1,475,000), they argued that the award of punitive damages had to be reduced in order to comply with previous United States Supreme Court rulings that established limits on punitive damages pursuant to the Due Process Clause of the United States Constitution.

Recently, Judge Rebecca Doherty, the federal judge who presided over the trial, issued her decision regarding the post-trial motions that were filed by the defense. To view Judge Doherty’s order, click here; and her 101-page memorandum is available, here. Although she denied a request for a new trial, her decision is notable because it  reduced that jury award to $38.1 million.

In so ruling, Judge Doherty found that there was sufficient evidence to support the jury’s award of punitive damages. However, she noted that while there are limitations to such awards,  the lower courts had not received instruction on how punitive damages in a case such as this should be determined.

Judge Doherty analyzed the award using the three guideposts referenced by the United States Supreme Court when determining the reasonableness of punitive damages: (1) degree of reprehensibility; (2) ratio; and (3) statutory penalties. Her decision reviewed the award under the excessiveness analysis suggested by the Supreme Court and discussed the reasonableness and the proportionality of the award based upon the evidence presented at trial. She cited previous United States Supreme Court decisions that established that a ratio between compensatory and punitive damages of 1 to 4 is close to being excessive. As a result, she determined that the ratio used by the jury of 1 to 5,424 against one of the defendants, and 1 to 8,136 against another defendant, would not stand up to judicial review on appeal.

As a result, she reduced the $9 billion punitive damages award to $37 million. She also invited the Court of Appeals, and perhaps the United States Supreme Court, to provide more particularized guidance with regard to awards of punitive damages.

While this decision obviously represents a partial victory for these defendants, we understand that they intend to further appeal based on their belief that any award of damages was not justified based on the evidence presented at trial.  While Judge Doherty’s  decision is important because it comes in  one of the first cases to proceed to verdict in the 4,000-plus case multidistrict litigation involving this particular medication, any further review of her actions by the Fifth Circuit – or ultimately by the Supreme Court – could provide even more useful guidance to practioners on the thorny issue of how to calculate punitive damages appropriately.

For more information from The Wall Street Journal, click here. (subscription required)

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