A Sea Change in Punitive Damages: Court of Appeal Reduces Punitive Award By 90%+ on Remand from U.S. Supreme Court

In a further consideration of the impact of the U.S. Supreme Court’s decision in State Farm v. Campbell (April 2003), a California Court of Appeal has concluded that the fundamental underpinnings of California punitive damage law must be reconsidered.  As a result of such a reconsideration, the court has directed the reduction of a punitive damage award against the Ford Motor Company from $290 Million to $23,723,287.

Three members of the Romo family were killed and three others were seriously injured when their 1978 Ford Bronco rolled over while trying to avoid another vehicle.  The Bronco’s metal roof structures collapsed and its fiberglass structures shattered.  In the original trial, the jury awarded the various family members and the estates of the deceased victims compensatory damages of approximately $5 Million and punitive damages of $290 Million.  In a prior appeal, the Court of Appeal affirmed that verdict. Following its decision in Campbell, the U.S. Supreme Court granted review; it then remanded the case to the state Court of Appeal to reconsider the punitive damage award in light of Campbell.  (Our report on a prior California consideration of the impact of Campbell can be found here.)

Although the Court of Appeal disclaims any intent to “write a treatise on the subject of punitive damages,” the Court’s 30-page decision does essentially that.  The Court first looks to the historical development of punitive damage law in California.  Initially, the rationale underlying punitive damages was to impose additional punishment for private wrongs, i.e., the particular wrongdoing that had harmed the plaintiff(s) in a particular case.  That philosophy changed “in the era of products liability litigation.”

In cases of mass-produced consumer goods or company-wide practices of large insurers, outrageous or malicious wrongdoing was no longer simply an affront to the dignity of a single victim. Instead, the affront was to all affected by the goods or services or, given the reach of the misconduct, the affront was viewed as one to society as a whole.  In this view, because the ‘wrong’ was directed beyond the immediate plaintiff, punitive damages awards needed to be based on the overall scope of the wrong in order to deter the mass torts.

This is the approach that the court determines was rejected by the Supreme Court in Campbell.  “[A]s a matter of due process under the federal Constitution, the court adopted the more limited, historically based view of punitive damages.”  As a result,

the legitimate state goal that punitive damages may seek to achieve is the ‘condemnation of such conduct’ as has resulted in ‘outrage and humiliation’ to the plaintiffs before the court; it is not a permissible goal to punish a defendant for everything else it may have done wrong.

Because the $290 Million punitive award could be explained only as a means of punishing Ford for its entire course of conduct in connection with Bronco rollover risks -- the plaintiffs' attorney had argued memorably at trial that the jury should return an award “large enough to force Ford to recall all remaining 1978-1979 Broncos still on the road and ‘crush them to dust’” -- the Court of Appeal conditionally reduced the punitive damage award to $23,723,287.  If the plaintiffs do not accept that reduction, the case is remanded for a new trial strictly on the punitive damages issue.

The opinion in Romo v. Ford Motor Company (November 25, 2003), Case No. F034241 can be found at these links in PDF and Word formats.

In calculating an appropriate punitive award, the Court of Appeal engages in a two part analysis.  First, it concludes that an award of three times the actual compensatory damages is appropriate. That amount comes to $13,723,287.  The court then notes that while the heirs of the deceased victims have a claim for the loss of their relatives and the estates of the deceased victims have a claim for damages sustained by the deceased prior to death, those victims have no claim in their own right for the ultimate insult of having been killed.  It would be anomalous, in the Court’s view, not to punish Ford for those victims’ own loss of their lives.

[T]he state has an extremely strong interest in being able to impose sufficiently high punitive damages in malicious-conduct wrongful death actions to deter a ‘cheaper to kill them’ mindset, while still maintaining limits on wrongful death compensation in cases of ordinary negligence.

Consistent with that logic, the Court concludes that nothing in Campbell precludes imposition of an additional $10 Million penalty.