January 26th, 2018

A NY Court’s Thin Reasoning on Punitive Damages

Yesterday I covered the extraordinary case of a New York appellate court upholding a punitive damage award against a doctor. The doctor, it seems, thought it would be a great idea to destroy evidence after a six-year-child she was caring for died.

This was extraordinary because it was the first time we allowed punitive damages for the spoliation of evidence that was designed to evade liability — as opposed to punitive damages for the conduct that actually caused the injury.

But in doing the analysis of “how much is too much” that comes with punitive damage awards, the Appellate Division (Second Department) cited some dicta from a United States Supreme Court decision that doesn’t actually stand for the proposition for which the New York court was using it.

In the case I wrote about yesterday, Gomez v. Cabatic, there was a punitive damage award of $7.5M. The trial court reduced this as excessive to $1.2M. (New York courts don’t actually reduce big awards or increase small awards, but rather, orders new trials unless the party will accept $x instead.)

From there the appellate court further reduced the award to $500K. (The underlying verdict for medical malpractice and wrongful death was $400,000 in pain and suffering and $100,000 in monetary loss.) The court used a 1:1 ratio of punitive:compensatory.

There were three guideposts that the US Supreme Court used to evaluate the question of how much is constitutional from a due process perspective (from BMW v. Gore), which our was used in Gomez:

The degree of reprehensibility of the conduct;
The ratio between punitive award and plaintiff’s actual harm, and
The legislative sanctions provided for comparable misconduct.

Essentially, the New York court simply doubled the compensatory damages to find a decent number for punitive.

But in doing so, it cited to State Farm v. Campbell, in which Justice Kennedy gave three different views of the formula to use. The New York court simply plucked out this one:

“[I]n practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process”

The problem with that plucking is that both State Farm v. Campbell and Gore v. BMW were commercial cases. Gore dealt with punitive damages against a car dealer that repainted a new car that had been damaged, but had failed to disclose it. The compensatory damages were just $4,000 and the punitive damages were $4M. And State Farm dealt with Campbell causing a terrible auto collision, and State Farm acting in bad faith in defending its insured. The personal injuries of the victims were not at issue, but rather, the contract between State Farm and Campbell.

The Gomez case, by sharp contrast, dealt with the child that died and is therefore most definitely a personal injury case, of the medical malpractice variety.

And Justice Kennedy noted that, in determining State Farm, “The harm arose from a transaction in the economic realm, not from some physical assault or trauma; there were no physical injuries…”

The problem inherent in the Second Department’s decision in Gomez is that it it simply cited the single-digit ratio formula and seemed to set down a benchmark by citing to State Farm, whereas State Farm was clear that no benchmark was possible.

Justice Kennedy had discussed the amorphous nature of the standard:

Nonetheless, because there are no rigid benchmarks that a punitive damages award may not surpass, ratios greater than those we have previously upheld may comport with due process where “a particularly egregious act has resulted in only a small amount of economic damages.” Ibid.; see also ibid. (positing that a higher ratio might be necessary where “the injury is hard to detect or the monetary value of noneconomic harm might have been difficult to determine”). The converse is also true, however. When compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee. The precise award in any case, of course, must be based upon the facts and circumstances of the defendant’s conduct and the harm to the plaintiff.

Now it might be perfectly rational for New York’s court to look at the three BMW guideposts and conclude that a 1:1 ratio is sufficient because the underlying damages were $500K. Even using the single-digit ratio formula would have permitted the court to go as high as $4.5M.

But setting that “single-digit ratio” down as a marker is a mistake, I think, as that is most certainly not what the Supreme Court intended.

It’s worth noting two additional points:

First is that the U.S. Supreme Court ultimately let stand a 97:1 ratio for punitive:compensatory damages in Philip Morris v. Williams, and that was after the State Farm decision; and

Second, if the defendant asks to appeal this to New York’s top court (she does not do so as of right, but needs permission) she may face a cross-appeal by the plaintiff seeking to reinstate a higher punitive damage award.

January 25th, 2018

Doctor Hit for Punitive Damages After Destroying Records in Child’s Death

Six-year-old Claudialee Gomez Nicanor died. And when her family’s lawyer asked the child’s doctor for her medical records, she destroyed the originals. That’s a problem.

Last week in a case of first impression in New York, our Appellate Division (Second Department) upheld an award of punitive damages in a medical malpractice case — not for the conduct that led to the death, but rather, for the effort to evade liability.

Little Chaudialee had Type 1 Diabetes and died from diabetic ketoacidosis, which results when the body can’t produce enough insulin. (It is Type 2 diabetes that’s often related to excess weight.)

The underlying medical malpractice case dealt with Dr. Arlene B. Mercado‘s failure to diagnose and treat the diabetes. The doctor is a pediatric endocrinologist and the child had arrived in her office via her pediatrician.

Mercado saw Claudialee three times, October 31, 2009, November 14, 2009, and December 12, 2009. Meanwhile, the pediatrician saw Claudialee in late November 2009, and on January 9, 2010. But:

“On January 21, 2010, Claudialee returned home from school complaining that she was tired and did not feel well, and brought with her a note from the school nurse describing her symptoms. The child vomited that evening and said that she had a stomach ache. The next day, after having tried, unsuccessfully, to have Claudialee seen by Cabatic, the child’s mother took Claudialee to a hospital. Claudialee remained hospitalized until her death on January 24, 2010.”

After the child died, and after the lawyers asked for the records, the good doctor thought it would be a great idea to type up the scribbled notes she originally made and destroy the originals for the November and December visits.

The problem is that on the last visit to Mercado on December 12th, the family was told to bring her back on February 13th. And they had the appointment card showing it.

The typed notes, however, claimed something else: That the child was to come back in just four weeks (before the child was ultimately hospitalized). Those are the same notes that were typed up after the child had died and after the lawyers asked for the records:

“Q. Now, you told us that you created the typed written part for the Halloween, the 10/31 visit after you got the letter from my office, did you do all three of them at the same time?

“A. Yes.

“Q. So this one was done without the help of any squiggly notes; is that right?

“A. No.

“Q. No?

“THE COURT: You had notes?

“THE WITNESS: I have like piece of paper, but after typing—

“THE COURT: Where is it[?]

“THE WITNESS:—I throw them out. After typing I will throw them out.

“THE COURT: Four months later you throw them out?

“THE WITNESS: Yes.”

The doctor also gave conflicting claims as to when she typed up the first set of notes, which was important because the typed version included information not reflected in the handwritten record of that visit.

The underlying malpractice claim was that the doctor committed malpractice by “not teaching the child’s family about symptoms of diabetes—such as weight loss, tiredness, lightheadedness, excessive thirst, and excessive urination—and by not recommending that Claudialee’s family perform home testing to measure the child’s blood sugar and ketones.”

The doctor was also faulted for assuming that the child was developing type 2 diabetes and not even considering that the child was developing type 1 diabetes.

The jury found that Mercado was negligent, that the negligence caused injury and death, and awarded $400,000 in pain and suffering and $100,000 in monetary loss. (New York is one of only a few states that does not allow an award to grieving families for the loss of a family member.)

But this was the kicker: $7.5M in punitive damages. While that award was reduced by the trial court to $1.2M, and further reduced by the Appellate Division to $500K, it was the very issue of punitive damages for the destruction of evidence in order to evade liability that lit up the decision.

The court was firm (and unanimous) in stating — and this is the entire point of this post — that punitive damages serve to deter the wrongful conduct of destroying records to evade liability.

[W]e now hold that where, as here, a plaintiff recovers compensatory damages for a medical professional’s malpractice, a plaintiff may also recover punitive damages for that medical professional’s act of altering or destroying medical records in an effort to evade potential medical malpractice liability. Allowing an award of punitive damages for a medical professional’s act of altering or destroying medical records in an effort to evade potential medical malpractice liability will serve to deter medical professionals from engaging in such wrongful conduct, punish medical professionals who engage in such conduct, and express public condemnation of such conduct.

And the fact that there might be also be disciplinary action should not deter a court from submitting this to the jury. As the court noted:

However, the possibility of other consequences, such as professional disciplinary action or spoliation sanctions, should not preclude medical professionals from being subject to punitive damages for altering or destroying medical records in an effort to evade potential medical malpractice liability. … the present case illustrates that the availability of disciplinary proceedings is not sufficient to protect plaintiffs from such conduct, since Mercado was clearly not deterred by the possibility of such disciplinary action.

Finally, the court rejected the argument that there was no damage from the destruction of the records, since the plaintiff was able to prevail despite it. In other words, the defendant argued that there should be no penalty for her action. The court was not amused at this request for immunity from wrongful conduct:

We also reject Mercado’s contention that punitive damages cannot be recovered because her destruction of original records did not prevent the plaintiff from successfully prosecuting this action. The fact that the plaintiff was able to prove the medical malpractice cause of action against Mercado, despite Mercado’s destruction of original records, should not insulate Mercado from liability for punitive damages. Undesirable results likely would flow from a conclusion that punitive damages cannot be awarded for the destruction of medical records in an effort to evade liability where a plaintiff is able to establish liability nonetheless; specifically, medical professionals fearing malpractice liability might feel emboldened to alter or destroy medical records, knowing that they will face no added liability in tort. Indeed, it has been observed that “[i]f the act of altering and destroying records to avoid liability is to be tolerated in our society, we can think of no better way to encourage it than to hold that punitive damages are not available” in such circumstances.”

Going forward, this case won’t be limited to medical malpractice cases. I foresee this case being used and cited in any kind of case dealing with spoliation of evidence. For such cases all deal with the same concept of punishing a party for trying to evade liability by destroying evidence.

While one tool in the judge’s toolbox is simply to strike the answer of a defendant for having engaged in such practices, that merely puts plaintiffs where they otherwise would have been anyway had the malfeasance not taken place. There was no downside. Now there is.

The case is Gomez v. Cabatic

See follow-up (1/26/18): A NY Court’s Thin Reasoning on Punitive Damages

December 1st, 2016

Is Uber Trying to Kill You?

An Uber drone advertises uberPOOL above traffic on a highway in Mexico City on June 17. Photographer: Brett Gundlock/Bloomberg

I bet it sounded like a great idea in the boardroom: Hey, let’s find a nasty traffic jam, with lots of stop-and-go traffic and fly some drones over it with advertising!

Wow! Great idea! Captive audience! Stuck in their cars!

And they will just look up in the air at our drones while in this stop-and-go traffic and read our advertisements about car-pooling!

What could possibly go wrong?

I once ripped on Geico and the Port Authority, for stupidly planning to put Geico ads in a crowded toll booth plaza. The signs would have touted “safety” while diverting the attention of drivers to read the signs in that crowded plaza. Genius.

Human error from distracted driving is the leading form of injury from vehicle collisions. Advertising schemes that distract drivers on crowded roadways can only makes things worse.

So Uber is taking things to the next level past Geico and the Port Authority, cranking stupidity up to 12, because the eventual injuries that would most certainly happen from the continuation of such a program shouldn’t be joked about by saying the stupidity merely goes to 11.

The activity is taking place in Latin America, where Uber hopes to increase their market share.

But can this Latin American experiment be replicated on New York’s roadways? Well, even if they could somehow get FAA approval to do it, my guess is that the company would get sued out of existence for the very predictable, and quite inevitable, injuries that such distractions would be a cause of.

This wouldn’t simply be negligence, but in my view, recklessness, that would subject the company to punitive damages.

And you thought that Uber drivers merely being distracted themselves by looking at their devices was bad.

(hat tip Kashmir Hill via Twitter)

May 23rd, 2016

Uber Cars are Uber Dangerous (The high cost of cheap taxis)

My dad told me a short story this winter, when three grandkids flew down to Florida to see him. When ready to go to the airport, he offered to call them a taxi. Not needed, they said, we’ll just Uber!

The cars arrived quickly. They were cheaper than taxis. Dad was amazed.

So what is the cost? No, I don’t mean the cost of the airport trip; I mean the cost to society.

The cost is this: Far more people are likely to be injured and killed by companies such as Uber that rely on apps and speed than by regular taxis or car services. And the worst part is, it’s part of the business model.

Uber drivers, you see, must respond quickly to the incoming notification on their smart phones — reportedly within 15 seconds. Otherwise, they lose that fare. Repeatedly make the mistake of failing to quickly respond? Then you lose your ability to work for Uber.

This means that Uber drivers must be diddling with their dinging smart phones while driving and responding. Instead of looking at the road. The Uber business model not only encourages dangerous distracted driving, but actually thrives and profits because of it.

How dangerous is distracted driving? It’s three times more dangerous than paying full attention. From the Viriginia Tech Transportation Institute:

The study, entitled The Impact of Hand-Held and Hands-Free Cell Phone Use on Driving Performance and Safety Critical Event Risk, shows that engaging in visual-manual subtasks (such as reaching for a phone, dialing and texting) associated with the use of hand-held phones and other portable devices increased the risk of getting into a crash by three times.

Car and Driver did a test for texting/reading while driving, and compared drunks with a .08 blood alcohol level with those who are sober. Time and again, those who were texting, or merely reading their texts, took longer to hit the brakes and stop their cars. And when I say longer, I mean the drunks were quicker to the brakes than the text readers. And these were people on a straight road track who knew they were being tested.

Let’s repeat that: Driving while reading texts is more dangerous than driving while drunk.

The conclusion is inescapable: Uber cars are uber dangerous.

There is a deadly cost to getting Uber drivers to their customers so quickly. And this is a cost not only to passengers, but also to others on the road — most significantly of all, to pedestrians who are not enveloped in that big metal cocoon with seatbelts.

Now take those distracted Uber drivers and put them in New York City, where such vehicles are currently allowed (though they are not yet allowed elsewhere in the state). Our street life hums and thrives on pedestrian traffic.

Uber is significantly more dangerous when people are walking about. The injuries such drivers inflict on pedestrians will likely be far more catastrophic than others, due to the delays in responding to danger by distracted drivers. In other words, an uber accident. (Though collision is the proper word.)

The first lawsuits against Uber drivers are now percolating through the system. They will raise many issues, a few of which are:

Are the drivers employees of Uber or independent contractors? You can be sure Uber wants to call them independent to shield itself from liability as being responsible for their employees’ actions. But just because they want it doesn’t mean they will get it.

Is the Uber app a defectively designed product, as it actively encourages distracted driving? Is it inherently dangerous?

Can Uber be held liable for simply sending messages to people that they know are behind the wheel and moving? I covered this subject last month, with respect to potential liability for friends sending texts to people they know are driving.

Knowing full well the danger, will juries decide that such conduct is reckless, and therefore subject Uber to punitive damages?

Are the issues interesting? You bet they are. For a lawyer. Not so much when you are splayed out on the blacktop waiting for the ambulance.

But perhaps more importantly, Uber will likely go running to the Legislature complaining about its insurance rates — as it’s inevitable that their drivers will get in more accidents, that the injuries will be more severe, and their insurance will obviously go up as a result. Insurance goes up for drunks, doesn’t it?

Did I say “will” be running to the Legislature? As it happens, they are running there now. A piece in Politico/New York discusses extensive lobbying efforts going on now for them to expand outside New York City. And the bill must go before the insurance committee.

One hopes that, if such bill does appear, and does go before the insurance committee, that legislators pay particular attention to the fact that Uber’s business model is exceptionally dangerous, and that the injuries they inflict to others will be far more catastrophic due to the delays in responding by distracted drivers.

The most dangerous drivers are probably those cruising for fares and waiting for the phone to ding.

If the technology is not going to be outlawed because it’s just too damn dangerous, then Uber (and Lyft and others of their ilk) should be made to carry significantly more insurance than others to cover the costs that they will inflict.

It isn’t enough for Uber to say, “let the injured and killed be damned so that we can make more profit.” And it isn’t enough for the victims and taxpayers to be left paying for the damage that the distracted drivers inflict.

April 9th, 2014

A $9 Billion Punitive Damages Verdict in Actos Drug Trial (How much is too much?)

We once again see a whopping punitive damages verdict and need to discuss: Just how much is too much? For the reasons that follow, I think that a ratio of punitive:compensatory damages of 100:1 or greater are sustainable based on current opinions from the Supreme Court.

At issue for the moment is a $9 Billion punitive damage award against Japan’s Takeda Pharmaceutical and Eli Lilly this week. The case concerned the diabetes drug Actos, and the manufacturer’s failure to warn that it increases the chances of bladder cancer. There was also a $1.5M compensatory damage award.

The punitive award spanking was no doubt influenced by the defendants’ destruction of documents. Juries tend to hate it when people destroy important documents.

It isn’t my objective to analyze the details of the trial, which I did not follow, only to go back and try to forecast what the judge might do with the punitive damage award, and more importantly, what the appellate judges will do if the matter doesn’t settle.

But there really isn’t a straight answer. In the most significant Supreme Court ruling on the subject, State Farm v. Campbell, the majority opinion by Justice Kennedy gave three conflicting statements on the subject. He cited first, for instance, to the older case of BMW v. Gore, that:

[W]e concluded that an award of more than four times the amount of compensatory damages might be close to the line of constitutional impropriety.

For reference, BMW v.Gore dealt with punitive damages against a car dealer that repainted a new car that had been damaged, but had failed to disclose it. The verdict was $4,000 in compensatory damages. But the jury also awarded $4,000,000 in punitive damages as it was the policy of BMW to do this.

For this purely commercial transaction, the Supreme Court felt that due process was not served by such a large award, as the defendant didn’t have notice of this potentiality. And with that, the court established three guideposts to determine if a punitive award was constitutional or not:

The degree of reprehensibility of the conduct;
The ratio between punitive award and plaintiff’s actual harm, and
The legislative sanctions provided for comparable misconduct.

Now lets return to the court’s State Farm decision, because, as I noted before, there were three seemingly contradictory statements. Having first quoted the 4x amount as being reasonable, Justice Kennedy then went on to write:

[F]ew awards exceeding a single-digit ratio between punitive and compensatory damages will satisfy due process.

So now Kennedy is at at a 9:1 ratio. But just as Gore was a commercial transaction, so too was State Farm v. Campbell. In that case Campbell caused a terrible auto collision, and State Farm acted in bad faith in defending its insured. At issue was not the personal injuries of the victims, but the contract between State Farm and Campbell.

Perhaps, since a physical injury was not truly at stake in State Farm, or perhaps just to cobble together a majority, Justice Kennedy then went on to make a third comment on the permissible extent of a punitive damage award, knocking out both the 4x and 9x ratios he had previously described:

Nonetheless, because there are no rigid benchmarks that a punitive damages award may not surpass, ratios greater than those we have previously upheld may comport with due process where “a particularly egregious act has resulted in only a small amount of economic damages.”

Following State Farm, it had become accepted wisdom among many that the Supreme Court would only allow a single digit multiplier, notwithstanding that last quote, or perhaps a bigger multiplier in only the smallest of cases.

But I never believed that the “single-digit ratio” was a real line in the sand. One reason is that the Supremes eventually let stand a 97:1 ratio in Philip Morris v. Williams, a cigarette case with an $821,000 compensatory award and a 97.5M punitive award that went up to the Supreme Court on multiple occasions.

Now some would argue that letting something stand without deciding the issue (SCOTUS granted cert on the case’s third and final trip to the high court and then later dismissed it as improvidently taken) is not the same as affirming a lower court decision.

But here is something else: That 9:1 ratio nonsense from State Farm is confirmed as nonsense by looking at the conduct of two members of the 6-3 State Farm “single-digit” majority. First, a review of the oral argument the second time Philip Morris v. Williams came before SCOTUS (p. 30, line 5) finds this statement by Justice Breyer:

…the more severely awful the conduct, the higher the ratio between the damage award and the injury suffered by this victim in court. And if it’s really bad, you’re going to maybe have a hundred times this compensation instead of only ten times or five times. So — we take it into account, the extent of the harm that could be suffered, in deciding what that ratio should be. That means it goes to the evilness of the conduct.

So Justice Breyer seems not to think too much of that 9x single-digit formulation.

And then there is Justice Stevens, also in the 6-3 State Farm majority. When SCOTUS sent Philip Morris back to Oregon for a redetermination of punitive damages based on jury instructions, Justice Stevens dissented. He was also OK letting that 97:1 ratio stand.

Since both Stevens and Breyer were part of the 6-3 State Farm majority, it is clear that there was most definitely not a majority of justices willing to stick to single digit multipliers for a personal injury case.

So what will happen in the Actos litigation? I think that a punitive damage award of 100x or greater is in the cards if the plaintiffs satisfy the court that the conduct was reprehensible (the second guidepost in the BMW v. Gore). And I also think, given the significant document destruction that led to that whopper of an award, that satisfying that element won’t be too difficult.

Assuming that the $1.5M in compensatory damages aren’t touched, I think that ultimately a punitive award of $150M+ is sustainable under current law.

Allen v. Takeda Pharmaceuticals North America Inc., 12-cv-00064.