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Court Finds No Malpractice in Case Where Client Was Hit With $20 Million in Punitives
The National Law Journal
March 23, 2009
An appeals court ruled Thursday that a major Washington, D.C., law firm did not commit malpractice when it represented a client found liable for $20 million in punitive damages -- and just $520 in actual damages.
The District of Columbia Court of Appeals determined that Finnegan, Henderson, Farabow, Garrett & Dunner's decision not to initially appeal the punitive damages award was a reasonable, tactical litigation strategy involving an unsettled point of law.
As a result, the appeals court affirmed a lower court's grant of summary judgment to the 350-attorney intellectual property law firm. The three-judge panel's decision stems from an underlying patent infringement and fraud lawsuit against Biomet Inc. involving the company's manufacture of orthopedic devices. Following a 1996 jury verdict, a trial court found Biomet liable for $7.1 million in compensatory damages and $20 million in punitive damages. After the trial, Biomet hired Finnegan Henderson to handle post-trial motions and the appeal.
On appeal, the law firm did not challenge the punitive damages award as unconstitutional because the ratio of punitive to compensatory damages was only three-to-one, and because rearguing the issue would have required another examination of Biomet's conduct, which the lower court found was particularly reprehensible, the March 19 decision said.
The appeals court in the underlying case eventually reversed the lower court's finding of infringement against Biomet and remanded the case for recalculation.
On remand, the lower court held that Biomet was liable only for $520 in compensatory damages. At that point, Finnegan Henderson challenged the punitive damages award as excessive. It asserted that the 38,000:1 ratio of punitive to compensatory damages violated of due process. The lower court agreed, and reduced the punitive amount to $52,000.
But the appeals court determined that because Biomet had not initially appealed the punitive damages, it had waived its right to seek relief from the $20 million award.
Biomet then filed a malpractice action against Finnegan Henderson. Biomet v. Finnegan Henderson, No. 07-CV-813.
The March 19 decision affirming summary judgment in the law firm's favor noted that the law was unsettled regarding the timing of a challenge to the constitutionality of punitive damages when a court reduces the initial amount of a compensatory damages award.
"[I]t was reasonable for Finnegan to believe that, because of the original, low 3:1 ratio of punitive to compensatory damages awarded by the judge after the trial and jury's finding of Biomet's reprehensible conduct, Biomet did not have a viable constitutional challenge to the punitive damage award at the time of the initial appeal," the decision said.
Representing Biomet was John W. Karr, a partner with Karr & Allison in Washington. He could not be reached for comment.
Williams & Connolly partner John K. Villa represented Finnegan Henderson.
"The decision endorses the vitality of the attorney judgment rule, which protects informed exercise of an attorney's judgment even if the court or jury subsequently disagrees," Villa said in a written statement.
