In a surprising and somewhat questionable decision, the U.S. District Court for the Northern District of Ohio recently upheld a jury verdict awarding punitive damages with a ratio of more than 6-1 between punitive and compensatory damages. Cooley v. Lincoln Electric Co., No. 1:2005-cv-17734 (N.D. Ohio, 3/7/11).
The case was part of the welding fumes mass tort. Plaintiff Curt Cooley used welding rods at work and home for about 40 years. After being diagnosed with a form of manganese poisoning, Cooley sued several welding rod manufacturers, alleging that defendants knew that inhaling welding fumes presented a risk of irreversible neurological injury but failed to adequately warn of the risk.
The overwhelming majority of welding rod verdicts have been for defendants, but here a jury returned a verdict for plaintiffs, awarding $787,000 in compensatory damages, after reduction for the allocated plaintiff's comparative fault of 37%, and $5 million in punitive damages.
In post-trial motions, defendants moved, inter alia, for reduction of the punitive damages. In BMW of North America, Inc. v. Gore, the Supreme Court articulated three guideposts for lower courts to use in evaluating whether a punitive damages award is excessive. These guideposts are: (1) “the degree of reprehensibility” of defendants’ conduct; (2) “the disparity between the harm or potential harm suffered by [Cooley] and his punitive damages award;” and (3) “the difference between this remedy and the civil penalties authorized or imposed in comparable cases.” The court here seemed overwhelmed by the first factor and gave insufficient weight to the second and third.
In State Farm Mutual Automobile Ins. Co. v. Campbell, the Supreme Court articulated five criteria for evaluating the degree of reprehensibility: (1) “the harm caused was physical as opposed to economic;” (2) “the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others;” (3) “the target of the conduct had financial vulnerability;” (4) “the conduct involved repeated actions or was an isolated incident;” and (5) “the harm was the result of intentional malice, trickery, or deceit, or mere accident.”
The trial court found that the first two criteria allowed the jury to find a high degree of reprehensibility. Here, the harm to Cooley was physical, but not fatal. Yet, the court rejected defendants' argument that this factor is not as strong as it is in cases where a person died as a result of a defendant's conduct. The court concluded that the jury was entitled to conclude defendants knew manganese in welding fumes could cause permanent neurological injury, but chose to give an inadequate warning.
The second guidepost looks to the mathematical relationship between compensatory and punitive damages. The trial court stressed that the Supreme Court has avoided imposing a bright-line ratio between compensatory and punitive damages, and ignored the numerous cases questioning high single-digit multipliers, which are less likely to comport with due process. The trial court rejected the observation that for some defendants the ratio was close to 9-1. The jury awarded $1.25 million in compensatory damages, but assigned 37% fault to Cooley, reducing the compensatory award to $787,500. It awarded punitive damages in the total amount of $5 million, allocated among the defendants as: ESAB, $1.75 million; Hobart, $1.75 million; Lincoln, $750,000; and BOC, $750,000. Using a logical approach, the ratios are as follows: ESAB, 8.9:1; Hobart, 8.9:1; Lincoln, 3.8:1; and BOC, 3.8:1. But, if, instead, the ratio is not calculated for each individual defendant, the overall ratio is still $5 million divided by $787,500, or 6.3:1. The court was persuaded by the fact that all of these ratios, using either of these different approaches, are single-digit. The court also found that the reprehensible conduct supported a higher ratio.
The court went on to twist the next factor - the comparison of punitives to compensatories- right around. It noted that whether viewed as $1.25 million or $787,500, the compensatories were "not large considering Cooley’s circumstances." For example, Cooley testified he is depressed and impotent, which are symptoms of manganese poisoning. All things considered, the jury’s award of compensatory damages was "relatively conservative, making for a low denominator in the ratio." And since the denominator was "conservative" and "low," the higher ratio when compared to punitives was permitted. However, the same jury that found punitive damages level conduct, found plaintiff 37% at fault, and awarded all of the damages it thought were appropriate to fully compensate the plaintiff. This is not a case where the multiplier was high because the compensatory damages are merely a nominal sum in recognition of an injury difficult to quantify in monetary terms. As the court noted, this case involves a significant injury, and the jury awarded what it awarded. The court seemed to be approaching the line of substituting its assessment of damages for the jury's, and upholding the punitive award because the compensatory award was too "conservative."
Defendants also argued that the punitive damages award was excessive because, using the factor of comparison to other fines and penalties, civil penalties under OSHA would be limited to approximately $70,000, the maximum fine per violation. The court rejected this because OSHA has never found a violation or fined defendants, and thus "analysis of this issue is necessarily speculative." In fact, the comparison is not just to actual fines assessed, but to potential fines in order to give the court an idea of how the legislature and society would assess a penalty for the conduct alleged. If it was is unclear whether OSHA would treat the conduct in plaintiff's workplace as a single violation subject to a maximum fine of $70,000, as defendants argued, or impose a fine separately for pieces of the conduct, as plaintiff argued, the issue should have been decided, not pushed aside.
Finally the court rejected any relevance to any aspect of the punitive damages ratio analysis of the fact that Cooley's injury might have been avoided had he read a warning or a Material Safety Data Sheet, particularly those sent in the last decade of his career. This was only relevant to comparative fault for compensatory damages, said the court. But, in reality, it should have been considered a major factor in the reprehensibility analysis.