Cases in which an appellate court holds that a state's standard for punitive liability was not satisfied even though there was sufficient evidence to support liability for the underlying causes of action are regrettably rare. However, in Nissan Motor Co v Maddox, the Kentucky Supreme Court has done just that and, in the process, set out some principles which might be helpful to defendants in future cases.

Facts

The case arose out of a head-on collision between a car driven by a drunk driver and a 2001 Nissan Pathfinder in which plaintiff Amanda Maddox was a passenger. Maddox, who weighed 240 pounds at the time of the accident, suffered serious injuries. She filed suit against Nissan, alleging that her injuries were caused by a defectively designed restraint system and Nissan's failure to warn about the system's alleged limitations.

Maddox's theory of the case was that the seatbelt system was defective because it was designed to protect only occupants whose weight was at or near the weight used in the testing protocol dictated by federal regulations. The jury found in Maddox's favour and awarded her $2.6 million in compensatory damages and $2.5 million in punitive damages.

The Kentucky Court of Appeals unanimously upheld the liability verdict and, by a two-to-one vote, upheld the finding of punitive liability. However, the Kentucky Supreme Court granted review to consider the sufficiency of the evidence supporting punitive liability and, by a five-to-two vote, held that the evidence was insufficient to permit an award of punitive damages.

Decision

In Kentucky, punitive damages may be imposed in a negligence case if the jury finds by clear and convincing evidence that the defendant's "negligence was accompanied by wanton or reckless disregard for the lives, safety or property of others". In concluding that Maddox's evidence was insufficient to satisfy this standard, the Kentucky Supreme Court found it critical that the 2001 Pathfinder's restraint system complied with all relevant government testing standards.

Specifically, the Federal Motor Vehicle Safety Standards applicable when Nissan designed the 2001 Pathfinder mandated that all new vehicles successfully complete a frontal crash test at 30 miles per hour using unbelted crash dummies weighing 171 pounds, the median weight of adult males at that time. In addition, a voluntary new car asessment programme used belted dummies weighing 171 pounds in frontal crashes at a speed of 35 miles per hour. The Pathfinder successfully completed both tests.

The Kentucky Supreme Court explained that "[s]uccessful completion of regulatory product testing weighs against a finding of gross negligence", which is defined in Kentucky as wanton or reckless disregard for safety, because it is "facial evidence of exercising slight care". While allowing that a manufacturer which has complied with regulatory duties can still be held liable for negligence – breaching a duty of ordinary care – the court held that "there is typically no breach under the common law for failure to exercise slight care where the undisputed evidence indicates that relevant regulatory duties have been satisfied".

The court added a caveat that "mere compliance with regulatory products standards, either mandatory or voluntary, does not automatically foreclose" punitive damages when "additional evidence is presented that tends to prove reckless or wanton conduct". As examples, it cited cases in which manufacturers knew that their products were dangerous even though they satisfied regulatory standards or knew that the regulatory testing standards were invalid. However, in this case Maddox "failed to introduce any evidence that should have put Nissan on notice that either its seatbelt or seat system was unsound, or that the requisite regulatory testing was irrelevant or invalid".

Crucially, the court made clear that the exception it had recognised is a narrow one by explaining that Maddox's evidence of allegedly safer alternative designs was insufficient to overcome the general rule that compliance with regulatory standards precludes punitive damages: "The existence of a better design may indicate that an inferior design was unreasonably dangerous applying the reasonably prudent manufacturer standard. However, a better design does not automatically indicate that an inferior design was recklessly or wantonly dangerous."

The court concluded by invoking Kentucky's heightened standard of proof, stating that "[a]ny evidence that could reasonably be construed in [Maddox's] favor on this issue was neither clear nor convincing". This statement is crucial because there is a good deal of confusion among state appellate courts as to whether courts must view the sufficiency of the evidence through the lens of the standard of proof.

Comment

Many courts, such as the Kentucky Supreme Court in this case, take the standard of proof into account when reviewing the sufficiency of the evidence. However, others – including the Montana Supreme Court and some panels of the California Court of Appeal – have held that the standard of proof comes into play solely when the jury is instructed and not when courts evaluate the sufficiency of the evidence. The latter approach appears misguided; on this occasion, the Kentucky Supreme Court has got it right.

For further information on this topic please contact Evan M Tager at Mayer Brown LLP by telephone (+1 202 263 3000) or email (etager@mayerbrown.com). The Mayer Brown International LLP website can be accessed at www.mayerbrown.com.

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