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This may be a first in the area of court orders regarding punitive damages: In December 2002, the Ohio Supreme Court ordered the creation of a charity named for the plaintiff and funded with $20 million in punitive damages. The case was brought by Robert Dardinger, who sued on behalf of his wife, Esther, who had died of brain cancer in 1997 at age 49. Dardinger sued Anthem Blue Cross and Blue Shield and its parent company, Anthem Insurance, for breach of contract and other charges. The insurer had denied treatment for Esther Dardinger’s cancer, insisting that the recommended procedure — intra-arterial chemotherapy, which injects medications directly into the artery feeding the brain tumor — was experimental. In its 4-to-3 decision, the court agreed with the plaintiff that Anthem had “purposely delayed” the sick woman’s access to treatment. The company, in a statement, claimed no wrongdoing. The court then upheld $2.5 million in compensatory damages for Robert Dardinger, plus $30 million in punitive damages of an original $49 million award. This reduced portion included $10 million for Dardinger and $20 million for attorneys’ fees plus a memorial cancer research fund. Dardinger can reject the decision. While legal observers support the spirit of the charitable directive, they take exception to its legal rationale. Ohio, they note, is not one of the eight states that have “split recovery” statutes. Those statutes allow courts to divert punitive awards from plaintiffs to state treasuries or court-administered entities assisting, for example, victims of crimes. In this context, the Ohio court’s lack of legislative authorization makes its order a maverick one, argues American Tort Reform Association president Sherman Joyce. “Regardless of whether one thinks this is or isn’t a good purpose, it’s a clear case of changing the rules of the game in midstream, which I think presents clear constitutional problems,” Joyce says. “What clearly was not on notice was that there was a new potential recipient of the resources of the defendant,” Joyce adds. “There are states that require a percentage of punitive damages awards to go to a third party or government fund, but those are on the books. This [Ohio ruling] raises so many questions: Why to that charity? Why not an existing one? Why only to one? Twenty million dollars is a lot of money to give to a charity.” Catherine Sharkey, a fellow at Columbia Law School researching the societal application of punitive damages, agrees. “What the Ohio court did, namely setting up a fund — sort of playing Lady Bountiful without legislative direction — raises a lot of concerns,” she says. Courts have shared those concerns, Sharkey notes, describing how “taking” statutes have been upheld in all challenges so far except for one in Colorado. Still, Sharkey says, she disagrees with those who would question the right of courts to divert punitive damages to social ills. Judges have a common-law remedial authority in the realm of punitive damages, she points out. And, that she says, comes from the fact that “State law judges do common-law decision making all the time without legislative direction.” — Peter Page and Joan Oleck A version of this story appeared in The National Law Journal, a sibling publication of Corporate Counsel and a part of American Lawyer Media.

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