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San Francisco�A California appellate court has stunned the state’s plaintiffs’ lawyers by issuing a ruling that alters the long-established process that judges and juries have used to determine punitive damages. Lawyers on both sides of the issue say the ruling�which reduced the largest punitive damages judgment ever upheld by a California appellate court from $290 million to about $23.7 million�could eliminate most multimillion-dollar punitive awards. “It’s a huge loss for the people of California,” said Erwin Chemerinsky, the University of Southern California Law School professor who argued the plaintiffs’ appeal, “because it’s going to allow companies that intentionally market products, knowing they will kill, to avoid liability and responsibility.” The 30-page opinion by California’s 5th District Court of Appeal in Fresno interpreted State Farm Mut. Auto. Ins. Co. v. Campbell, in which the U.S. Supreme Court earlier this year narrowed the scope of punitive damages stating that punitives must bear some reasonable relationship to the individual injury at issue and the compensatory damages awarded. The appellate court said that punitive damages can be awarded only in relation to the harm to the plaintiffs in a particular case-not as a bludgeon to deter similar acts in the future. The court also said a defendant’s general wealth can be taken into account only to determine the appropriate punishment for any particular malicious conduct, not for across-the-board problems. “As we read State Farm . . . the legitimate state goal that punitive damages may seek to achieve is the ‘condemnation of such conduct’ as has resulted in ‘outrage and humiliation’ to the plaintiffs before the court,” Justice Steven Vartabedian wrote for the court. “It is not a permissible goal to punish a defendant for everything it may have done wrong.” Vartabedian noted that this marks a substantial change in California punitive damages law as set out in the 1981 ruling Grimshaw v. Ford Motor Co., 119 Cal. App. 3d 757. Justices Timothy Buckley and Dennis Cornell concurred. In Romo v. Ford Motor Co., No. 03 C.D.O.S. 10150, Juan, Evangelina and Maria Romo sued Ford after they were injured-and their parents and one brother died-in a car crash in 1993. They claimed that their father’s used 1978 Ford Bronco, with a roof that was two-thirds fiberglass, was defectively designed. Stanislaus County Superior Court jurors awarded $6.2 million in compensatory damages in 1999, as well as $290 million in punitive damages, after finding that Ford executives had acted with malice, in part, by not warning buyers about the lack of rollover protection. The 5th District, in an opinion highly critical of Ford, upheld the punitive damages award last year. The state Supreme Court subsequently denied review, but earlier this year the U.S. Supreme Court sent the case back for further review in light of its ruling in State Farm. Following an extensive review of the analysis in State Farm and a look at the history of punitive damages, the 5th District Court of Appeal held that the high court had “impliedly disapproved” of the broad view “of the goal and measure of punitive damages” as accepted in California, and instead adopted the constitutional view that the permissible punishment is restricted to “the harm inflicted on the present plaintiffs.” It also said that deterrence under this standard “arises as a natural result of imposing damages over and above traditional compensatory damages, not from the imposition of sanctions in an individual case that are actually disabling to the defendant.” The appeal court noted the Supreme Court’s view that most punitive awards should be limited to single-digit multipliers of compensatory damages. It made an exception for wrongful death causes of action, where the decedent can’t be awarded damages for pain and suffering.

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