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August 29, 2004

Kentucky high court vacates $15M punitive award

The Kentucky Supreme Court last week vacated a $15 million punitive damages award against Ford Motor Company and sent the wrongful-death case back for a new trial on the punitive award only. See AP, Kentucky High Court Throws Out $15M Damage Award Vs Ford, via, Aug. 27; State Supreme Court orders new trial on damages in Ford suit, Business First, Aug. 27; opinion in Sand Hill Energy, Inc. v. Smith, 1999-SC-1028-DG (Ky., Aug. 26, 2004) available via searchable court website. Ford already has paid $5.6 million in compensatory damages to the family of a Kentucky man who was fatally struck when a parked Ford pickup truck inadvertently went into reverse. The Kentucky Supreme Court's decision, issued on remand from the U.S. Supreme Court, was the most recent decision by a state high court interpreting limits on punitive damages awards set by the U.S. Supreme Court in State Farm v. Campbell.

In a 5-2 decision, the Kentucky court said it was "clear" that the jury was improperly encouraged to "punish Ford for its [alleged] conduct throughout the country." The jury had heard testimony about nationwide sales of vehicles with the allegedly defective transmission, the number of reports nationwide of vehicles slipping from "park" into "reverse," and deaths from those incidents. In closing arguments, plaintiffs' counsel told the jury "we have to make them pay" and discussed the number of "defective" Ford transmissions that were "on the road."

Instead, the court said, the jury should have been instructed not to consider extraterritorial conduct when it determined punitive damages. Just in case the issue of use of evidence of Ford's net worth to set punitive damages arises at the new trial, the majority noted that the United States Supreme Court and the Kentucky Supreme Court have frowned on the practice because it focuses attention on the defendant's financial condition instead of the injury and allows jurors to express bias against big business.

The dissent opined that both "excessive punitive verdicts are a serious problem, but equally serious is the unreasoned fear of the application of such verdicts to well-meaning professionals and organizations. Both conditions contribute significantly to excessive insurance rates for many businesses and professionals. The answer is not to unduly or unconstitutionally limit the right of recovery, but rather for an improvement of the regulation of the insurance industry such as has been accomplished in California."

Posted by Leah Lorber at 03:56 PM | TrackBack (1)

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