Law

Ever since that post we’ve been meaning to come back and examine that punitive damages issue in greater detail.  Today we finally get around to it.  Because doing the job right would require research well beyond prescription medical products, we looked for research help, and enterprising (pun intended) Reed Smith associate Kevin Hara stepped up to handle the initial spadework.  To put the question in the affirmative, can we defeat punitive damages, even where a relative increase in serious risk is high, where the absolute increase in risk remains minuscule?  What increase in the risk of injury enough to warrant sending punitive damages to the jury?  Is a one in 10,000, one in 5000 risk significant enough?  How about one in 1000?  One in 100?

Surprise, surprise, and as with so many other difficult questions, courts have not provided a definitive answer. In considering this question, we are reminded of some of the earlier Star Trek episodes, which explored not just the outer limits of the universe (and our minds), but also posed many interesting practical questions, particularly by Mr. Spock, the late Leonard Nimoy’s iconic Vulcan.  In particular, “Logic clearly dictates that the needs of the many outweigh the needs of the few.”

Although emanating from the Final Frontier, Spock’s pronouncement can make The Voyage Home to earthly product liability and punitive damages.  In fact, product liability law often follows a “needs of the many” approach that supports research, development, and limitation of liability for prescription medical products, where large damage awards can occur in the Wink of an Eye and can result in The Doomsday Machine for such products.  For instance, notwithstanding its eventual total victory, the maker of Accutane was forced to withdraw that drug from the market in 2009 due to the litigation cost of defending claims over purported side effects that either didn’t exist or were adequately warned about.  Don’t get us started on older examples like Bendectin ... or vaccines.

We’ll start where we left off in our earlier post – with the Restatement.  Restatement §500 is one of ALI’s more popular offerings, having been followed by quite a few courts.  It’s two-pronged, offering one definition of “recklessness” with scienter and one without.  The former requires conscious knowledge: “(1) where the ‘actor knows, or has reason to know,. . .of facts which create a high degree of risk of physical harm to another, and deliberately proceeds to act, or to fail to act, in conscious disregard of, or indifference to, that risk.”  Restatement. §500, comment a (emphasis added).  The second, more permissive, definition eschews actual awareness, but still demands a “high degree” of risk: “(2) where the ‘actor has such knowledge, or reason to know, of the facts, but does not realize or appreciate the high degree of risk involved, although a reasonable man in his position would do so.’” Id. (emphasis added).

Section 500 works in tandem with Restatement (Second) of Torts §908 (1977), which addresses the “reckless indifference” standard for punitive damages.  Here’s how they work together:

Another equivalent standard for punitive damages is that the plaintiff is “substantially certain” to be injured.  That comes from the Restatement’s definition of “intent.”  “If the actor knows that the consequences are certain, or substantially certain, to result from his act, and still goes ahead, he is treated by the law as if he had in fact desired to produce the result.”  Restatement (Second) of Torts §8A (1965).  Here’s one example:

So, in order for an argument against punitive damages based on the low incidence of the particular risk involved to have a good chance of prevailing, the jurisdiction would have to make this consideration an element (or at least a factor) in its legal standard for the award of punitive damages.  How many states have done that?  We took a look, but first we had to eliminate those states that, for one reason or another, generally preclude punitive damages, allowing drug and device manufacturers to enjoy The Day of the Dove in common-law cases.  According to a Supreme Court case we read (which we didn’t bother to verify), those states are:  Connecticut, Louisiana, Michigan, Massachusetts, Nebraska, New Hampshire, and Washington.  See Exxon Shipping Co. v. Baker, 554 U.S. 471, 495-96 (2008).  As for the rest, here’s a list of those with punitive damages formulations that provide support for a limit on such damages based on statistical likelihood of risk.  Not all of these states have actually accepted such an argument, but they could.

Alabama:  The wantonness statute in Alabama requires that “injury will likely or probably result” from the defendant’s act or omission.  Wal-Mart Stores, Inc. v. Thompson, 726 So.2d 651, 654 (Ala. 1998).  Unlike the restatement, here the operative risk quantification is “likely” and “probably.”

Alaska: In Hayes v. Xerox Corp., 718 P.2d 929 (Alaska 1986), the court was “persuaded by the comments to the Restatement (Second) of Torts §500, which define reckless disregard of safety.”  Id. at 935.

Arizona:  The Arizona Supreme Court in Rawlings v. Apodaca, 726 P.2d 565 (Ariz. 1986), did “not believe that the concept of punitive damages should be stretched.”  Id. at 578.  It therefore followed Restatement §908, although it described the standard as “a substantial risk of significant harm” and “a substantial and unjustifiable risk.”  Id.  See Mein v. Cook, 193 P.3d 790, 795 (Ariz. App. 2008) (applying “substantially certain” standard of Restatement §8A).

Arkansas:  Arkansas has a punitive damages statute requiring that the defendant ‘knew or ought to have known . . .  that his or her conduct would naturally and probably result in injury or damage.”  Ark. Code. §16-55-206.  As in Alabama, the legislature used a standard somewhat different from the Restatement formulations, but the idea is the same.

California:  See Schroeder v. Auto Driveaway Co., 523 P.2d 662, 671 (Cal. 1974) (describing standard as conduct “substantially certain to . . . injure plaintiffs”); Lackner v. North, 135 Cal. App. 4th 1188, 1200 (Cal. App. 2006) (approving jury instruction based on Restatement §908).

District of Columbia:  Destefano v. Children's National Medical Center, 121 A.3d 59, 66 (D.C. 2015) (adopting Restatement §500 “high degree of risk of harm” standard).

Florida:  Dyals v. Hodges, 659 So.2d 482, 485 (Fla. App. 1995) (approving Restatement §500 as standard applicable to punitive damages); cf. Eastern Airlines, Inc. v. King, 557 So.2d 574, 576 (Fla. 1990) (adopting Restatement §500 in non-punitive damages context).

Georgia:  Action Marine, Inc. v. Continental Carbon Inc., 481 F.3d 1302, 1313 (11th Cir. 2007) (“where the actor believes that the consequences of his act are substantially certain to result from [it]”) (following Restatement §8A standard) (applying Georgia law); J.B. Hunt Transportation, Inc. v. Bentley, 427 S.E.2d 499, 504 (Ga. App. 1992) (same); Viau v. Fred Dean, Inc., 418 S.E.2d 604, 608 (Ga. App. 1992) (same).

Illinois:  In Ziarko v. Soo Line Railroad Co., 641 N.E.2d 402, 407 (Ill. 1994), the court applied “the definition of ‘reckless’ under the Restatement.”  Id. at 407 (citing §500).  Accord Loitz v. Remington Arms Co., 563 N.E. 2d 397, 403 (Ill. 1990) (adopting Restatement §908/§500 punitive damages formulation); Mathias v. Accor Economy Lodging, Inc., 347 F.3d 672, 675 (7th Cir. 2003) (“substantial certainty” of injury was “sufficient evidence of ‘willful and wanton conduct’ within the meaning that the Illinois courts assign to the term to permit an award of punitive damages”).

Kentucky:  In Horton v. Union Light, Heat & Power Co., 690 S.W.2d 382 (Ky. 1985), the court applied Restatement §908, but without mention of Restatement §500, holding that that “evil motive” and “reckless indifference to the rights of others” are considered synonymous under Kentucky law, and that “[t]he distinguishing characteristic in cases where punitive damages are authorized has not been whether the injury was intentional but whether the misconduct ‘has the character of outrage.’”  Id. at 389.

Maine:  Maine has adopted a “narrower view” of recklessness that that employed in Restatement §908.  Tuttle v. Raymond, 494 A.2d 1353, 1362 (Me. 1985).  How that “narrow” approach translates into degree of risk is uncertain.

Maryland:  Richardson v. McGriff, 762 A.2d 48, 94 (Md. 2000) (applying Restatement “substantial certainty” standard).

Minnesota:  Kaluza v. Home Insurance Co., 403 N.W.2d 230, 233 (Minn. 1987) (following “substantial certainty” standard for punitive damages under Restatement §8A); see Gabrielson v. Nelson, 1994 WL 694863, at *2 (Minn. App. Dec. 13, 1994) (citing standard jury instruction incorporating “high degree of risk” standard for punitive damages).

Mississippi:  Thomas v. State Farm Fire & Casualty Co., 856 So.2d 646, 649 (Miss. App. 2003) (applying “substantial certainty” standard).

Missouri:  In Burnett v. Griffith, 769 S.W.2d 780 (Mo. 1989), the court adopted Restatement §908, holding that “the Restatement properly sets out the law in language readily understood by lawyers and lay people alike.”  Id. at 789.  See also Haynam v. Laclede Electric Co-operative, Inc., 889 S.W.2d 148, 152 (Mo. App. 1994) (collecting cases applying Restatement §500 as an adjunct to Burnett’s adoption of §908).

Montana:  Owens v. Parker Drilling Co., 676 P.2d 162, 165 (Mont. 1984) (adopting Restatement §500, comment a; “a jury question of punitive damages is raised” where an enactment involving protection “of a person from a high degree of risk . . . is violated either intentionally or recklessly”).

New Jersey:  New Jersey was an early adopter of the “high degree of probability of harm” standard for punitive damages.  Berg v. Reaction Motors Division, 181 A.2d 487, 496 (N.J. 1962) (preceding adoption of Restatement §500).  In Fischer v. Johns-Manville Corp., 512 A.2d 466, 480-81 (N.J. 1986), the court found that standard met by asbestos workers’ risks of chronic exposure to asbestos.

New Mexico:  New Mexico follows the “substantially certain” formulation of Restatement §8A.  Hartford Fire Insurance Co. v. Gandy Dancer, LLC, 2011 WL 1336523, at *13 (D.N.M. March 30, 2011).

New York:  New York law requires conduct “in disregard of a known or obvious risk that was so great as to make it highly probable that harm would follow.”  Saarinen v. Kerr, 644 N.E.2d 988, 991 (N.Y. 1994) (citing, inter alia, Restatement §500).

North Carolina:  The North Carolina punitive damages statute sets the quantum of risk needed to support such damages at “reasonably likely to result in injury.”  N.C. Gen. Stat. §1D-5.

Ohio:  The standard for punitive damages in Ohio is whether the conduct amounts to “a conscious disregard for the rights and safety of other persons that has a great probability of causing substantial harm.”  Calmes v. Goodyear Tire & Rubber Co., 575 N.E.2d 416, 419 (Ohio 1991).  See also Anderson v. Massillon, 983 N.E.2d 266, 273 (Ohio 2012) (following Restatement §500 as to recklessness).

Pennsylvania:  The Pennsylvania Supreme Court has expressly adopted the “high degree of risk” standard from Restatement §500.  SHV Coal, supra (quoting Martin v. Johns-Manville Corp., 494 A.2d 1088, 1097 (Pa. 1985) (plurality opinion)).  See also Evans v. Philadelphia Transportation Co., 212 A.2d 440, 443 (1965) (punitive damages requires “that the actor . . . at least . . . was aware that [the harm] was substantially certain to ensue”).

Rhode Island:  A Rhode Island trial court applied a punitive damages standard of “knowing and deliberate disregard of the objectively substantial certainty of those consequences,” that is, the risks at issue.  Manocchia v. Narragansett Television, 1996 WL 937020, at *3 (R.I. Super. Dec. 12, 1996).

South Carolina:  Addy’s Harbor Dodge, LLC v. Global Vehicles U.S.A. Inc., 2014 WL 4929335, at *10 (D.S.C. Sept. 30, 2014) (defining “malice as “[s]ubstantially certain to cause injury”).

South Dakota  South Dakota has applied a “substantial certainty” of risk standard to punitive damages.  Olson-Roti v. Kilcoin, 653 N.W.2d 254, 260 (S.D. 2002); Berry v. Risdall, 576 N.W.2d 1, 9 (S.D. 1998).

Tennessee:  In Tennessee punitive damages require a “substantial and unjustifiable risk.”  Flax v. DaimlerChrysler Corp., 272 S.W.3d 521, 535 (Tenn. 2008) (award allowable based on “consistent” adverse test results).

Texas:  In Texas, corporate liability for punitive damages requires proof of “malice.”  Tex. Civ. Prac. & Rem. C. §41.005(c)(2).  “Malice” has been interpreted to include the “substantial certainty” standard.  E.g., Vernon v. Perrien, 390 S.W.3d 47, 62 (Tex. App. 2012); (the defendant “believes the consequences are substantially certain to result from” its acts); Seber v. Union Pacific Railroad Co., 350 S.W.3d 640, 6540 (Tex. App. 2011) (same).  This is not that different from the prior common-law standard.  “[V]iewed objectively from the standpoint of the actor, the act or omission must involve an extreme degree of risk, considering the probability and magnitude of the potential harm to others.”  Transportation Insurance Co. v. Moriel, 879 S.W.2d 10, 23 (Tex. 1994).

Utah:  Utah has a punitive damages statute that codifies a “knowing and reckless indifference” standard.  Utah C. §78B-8-201(1)(a).  The Utah Supreme Court has applied the Restatement §500 “high degree of risk” standard to the statute.  Daniels v. Gamma W. Brachytherapy, LLC, 221 P.3d 256, 269 (Utah 2009).

Vermont:  The Vermont standard for probability of risk in punitive damages cases requires “that the defendant acted, or failed to act, in conscious and deliberate disregard of a known, substantial and intolerable risk of harm to the plaintiff, with the knowledge that the acts or omissions were substantially certain to result in the threatened harm.”  Fly Fish Vermont, Inc. v. Chapin Hill Estates, Inc., 996 A.2d 1167, 1176 (Vt. 2010).

Wisconsin:  Wisconsin has a punitive damages statute requiring “an intentional disregard of the rights of the plaintiff.”  Wis. Stat. §895.85(3).  The statute requires “substantially certain” harm to permit punitive damages.  Strenke, supra.  See also Henrikson v. Strapon, 758 N.W.2d 205, 213-14 (Wis. 2008).

We have found a number of courts, such as those examined below, that have actually given meaning to the terms “substantial” or “high degree,” in cases involving plaintiffs seeking punitive damages despite the increased risk of actual injury being only slight, such as 1% − which we submit should not support punitive damages in prescription product liability actions.  Perhaps the leading case is Toole v. McClintock, which reversed punitive damages verdict against a breast implant manufacturer, holding that the evidence of an actual incidence of 1% was insufficient to show that the manufacturer “had knowledge that the implants were likely to rupture when [the surgery] were performed.”  999 F.2d 1430, 1435-1436 (11th Cir. 1993).  The court found that the plaintiff failed to meet the burden under Alabama law for “wanton” conduct (a basis for punitive damages) because the relevant consideration for the wantonness is the likelihood of the actual injury suffered by the plaintiff, ruling that “[t]he evidence in this case showed that the actual incidence of implant ruptures . . . is probably slightly less than one percent.”  Id. (emphasis added).

Toole was applied in Scharff v. Wyeth, 2011 WL 4361634 (M.D. Ala. Sept. 19, 2011), holding that the plaintiff’s “evidence [was] insufficient to create a genuine issue of material fact that breast cancer is a likely or probable event for those consuming” the drug because the “actual [increased] incidence of invasive breast cancer attributable to [the drug] was .42%,” – meaning less than one half of 1%, thereby justifying summary judgment against punitive damages.  Id. at *17:

The New York Court of Appeals unanimously affirmed the setting aside of a punitive damages award in an asbestos case, where the plaintiffs had “mesothelioma, a rare form of cancer.”  In re New York City Asbestos Litigation, 678 N.E.2d 467, 468 (N.Y. 1997).  Applying the New York requirement of a “risk that was so great as to make it highly probable that harm would follow,” the court held that “no valid line of reasoning and permissible inferences could possibly lead rational people to the conclusion reached by the jury.”   Id.

In Calmes the Ohio Supreme Court held as a matter of law that the risk of harm from mismatching of multi-piece tire rim components could not support punitive damages under Ohio’s “great probability of substantial harm” standard.  That standard required a heck of a lot more than mere “foreseeability” of injury:

In a situation with one-in-a-million odds, the court in Richards v. Michelin Tire Corp., 21 F.3d 1048 (11th Cir. 1994), determined That Which Survives did not include punitive damages, where the plaintiff was injured by mismatched multi-piece tire rim pieces.  The court required entry of judgment n.o.v., because “the evidence demonstrated that the actual incidence of mismatches was roughly one in millions and that [defendant] knew of only four other mismatch incidents.”  Id. at 1058.  A mere four mismatches didn’t cut it where “thirteen to fifteen million’ units of the product had been manufactured.”  Such a low incidence meant the manufacturer could not have known mismatches “[were] likely or that the failure to warn [plaintiff] of the risks of mismatches made such explosions likely.” Id.

In another case with a risk of harm as remote as The City on The Edge of Forever, the court found that an incidence of product failure of one in 1 million failures warranted entry of judgment for the defendant under Virginia law.  Dudley v. Bungee International Manufacturing Corp., 76 F.3d 372, 1996 WL 36977 (4th Cir. Jan. 31, 1996) (table opinion).  There was no evidence of “wanton negligence,” defined as “conscious disregard of another person’s rights” arising from a defendant’s “knowledge of existing circumstances and conditions, that his conduct probably would cause injury to another.”  Id. at *2.  This standard could not possibly be met “[s]ince the evidence in this case shows the incidence of . . . failure was literally one in millions.”  Thus, the defendant “could not have known from claims in two lawsuits that the design of its cords probably would cause injury to another.  Id. at *4.

The Tennessee “substantial and unjustifiable risk” standard for recklessness precluded an award of punitive damages against a pharmacist for alleged misfilling of drug prescriptions in Beal v. Walgreen Co., 408 F. Appx. 898, 905 (6th Cir. 2010).  The defendant’s “act of dispensing the drugs while it was cognizant of the general fact that mis-filled prescriptions could cause harm” was “not sufficient” in the absence of actual knowledge of the errors.  Id.  Tennessee law “rejected the argument that improperly dispensing pharmaceuticals” could “giv[e] rise to punitive damages on the basis that it ‘involved a dangerous or lethal instrumentality.’”  Id. at 906.

Additional courts holding that punitive damages are precluded as a matter of law due to a probability of actual injury include:

Despite logic indicating that punitive damages should be analyzed through a thorough consideration of the incidence of actual injury (a sentiment Spock would echo), all too many courts continue to allow punitive damages despite minuscule increases in absolute risk, certainly not The Way to Eden for responsible prescription product manufacturers.  You know who these courts are, so a couple of examples will suffice.  High on the list is In re Prempro Products Liability Litigation, 586 F.3d 547 (8th Cir. 2009), where the court affirmed sending punitive damages to the jury on the same evidence as in Scharff – a less than one half of 1% increase in risk.  Id. at 573.  Not without reason, Scharff noted that “the Eighth Circuit's analysis of the relevant evidence and Arkansas law ignored the probability of injury and defendant's knowledge of probable risk requirements in the plain language of the Arkansas statute.”  2011 WL 4361634, at *18 n.24.  Fortunately, By Any Other Name, Prempro is at least in some sense dictum on this issue, since the punitive damages award in that case was thrown out on other grounds − the inadmissibility of prejudicial “expert” testimony offered by Dr. Susan Parisian, whose penchant for opining without foundation or expertise has been discussed here and here and here.  586 F.3d at 571-72.  For this (and other) reasons, the Prempro decision richly deserved its ranking as the #3 worst drug/device decision of 2009.

Perhaps even more egregious is Drake v. Allergan, Inc., ___ F. Supp.3d ___, 2015 WL 2452947 (D. Vt. May 22, 2015).  As we mentioned already, the Vermont standard for punitive damages requires “disregard of a known, substantial and intolerable risk” with “knowledge that the acts or omissions were substantially certain to result in the threatened harm.”  Thus the result in Drake is ridiculous, as illogical as thinking that Tomorrow is Yesterday.  The risk was never even quantified.  Rather, the court gave the plaintiffs a complete pass, because of alleged off-label promotion:

As our readers can tell, there are not a large number of drug/device cases explicitly rejecting punitive damages claims for statistical assessment of increased risk.  In seeking to preclude punitive damages based in insufficient “high degree”/”certainty” of risk, defendants will need to scour the punitive damages precedents of their jurisdiction to find other precedents for dismissing such claims on low quantification of risk, because every plaintiff’s attorney wants A Piece  of the Action with respect to punitive damages.

We can’t do so for every state, but we did take look for other favorable precedent in Pennsylvania, which required examining over 120 decisions.  The only Pennsylvania Supreme Court case dealing with the degree of certainty of the risk for recklessness isn’t a punitive damages case at all – but a criminal case.  In Commonwealth v. Young, 431 A.2d 230 (Pa. 1981), the court found the requisite high degree of risk present where the defendant “intentionally aim[ed] a gun at [a person] without knowing for a certainty that it was not loaded.”  Id. at 232 (emphasis added).  More recently, in Phillips v. Cricket Lighters, 883 A.2d 439 (Pa. 2005), evidence that “children playing with butane lighters resulted in the deaths of 120 people per year, with an additional 750 people being injured in these fires” was insufficient as a matter of law to establish a claim for punitive damages.  Id. at 446.

Other Pennsylvania courts have used statistics, or the equivalent, to preclude punitive damages in Pennsylvania.  In Acosta v. Honda Motor Co., 717 F.2d 828 (3d Cir. 1983), punitive damages were barred as a matter of law where the alleged design flaw existed in 270,000 product units for six years without prior incident.  Id. at 841.  In Pullaro v. Ricciardi, 2002 WL 31261102 (E.D. Pa. Oct. 10, 2002), “[k]nowledge of a previous [dog] bite [was]s not enough to establish a conscious disregard of a known risk.”  Id. at *2.  Finally, still other Pennsylvania courts have also rejected punitive damages claims as a matter of law because, for one reason or another, the increase in risk attributable to the defendant’s conduct wasn’t large enough.  See Richetta v. Stanley Fastening Systems, L.P., 661 F. Supp.2d 500, 514, (E.D. Pa. 2009) (“that Defendant had notice of injuries resulting from its [product’s use], yet Defendant did not redesign its [product]” insufficient for punitive damages); Jones v. McDonald’s Corp., 958 F. Supp. 234, 236 (E.D. Pa. 1997) (no evidence that the place where plaintiff slipped was any more “prone to a heavy build-up of oil and grease” than any other part of defendant’s parking lot); Dillow v. Myers, 78 Pa. D. & C.4th 225, 240 (Pa. C.P. 2005) (“failure to check the driving record of a prospective employee or to conduct a driver background check does not create such a sufficiently high degree of risk of harm to others as to warrant punitive damages”), aff’d mem., 916 A.2d 698 (Pa. Super. 2007).

Given the state of the law, in most jurisdictions, successful assertion of lack of sufficient increased risk as a defense to punitive damages will require searching the law of that state in the manner we just did for Pennsylvania.  Though the exact degree of increased risk is subject to debate, low absolute additional risk, as in the cases we’ve discussed should not, as a matter of law support an award of punitive damage.  As the Scharff court aptly stated, courts should examine the probability or likelihood of the risk of actual injury (which is similar to the punitive damages standards in many states) before a prescription drug or device manufacturer is acquired to pay punitive damages.  Otherwise, as in the case of the Accutane litigation, potentially life-altering and life-saving products which represent The Needs of The Many may be severely curtailed or even eliminated by unjustified damages awards, and preventing A Return to Tomorrow.