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LOS ANGELES — Just two days before Thanksgiving, a California appeal court gave all defendants who are prey to punitive damages more than turkey and trimmings to chew. The Fifth District Court of Appeal in Fresno reduced a jury’s $290 million punitive damages verdict against Ford Motor Co. to $27.3 million. The reduction came after an arduous series of appellate battles that may not be over yet. It is the latest and most dramatic proof that courts are recognizing they must employ a radical new approach to dealing with high punitive verdicts on appeal. ( Romo v. Ford Motor Co. ( Romo II), 03 C.D.O.S. 10150.) Little more than a year ago, the very same appeal court had reinstated the jury’s $290 million punitive damages verdict case after the trial court had ordered a new trial for jury misconduct in Romo v. Ford, 99 Cal.App.4th 1115 ( Romo I). In this death and injury products liability case, Ford, supported by an avalanche of amicus letters, sought review by the California Supreme Court. It lost by a single vote. As a result, Romo I broke, indeed it absolutely shattered, the record for the single largest punitive verdict ever upheld on appeal in a published California decision. Fast-forward to April 2003: The U.S. Supreme Court issued a radical new opinion sending a clear message to lower courts that it is time to put the brakes on monster punitive awards. In State Farm v. Campbell, 123 S.Ct. 1513, the high court used sweeping language about the need to restrain punitive damages verdicts, limiting a state’s power to punish a corporation for conduct outside that state, and even restricting what types of evidence may be used to prove when and how much punishment is constitutionally permissible. Campbell noted that punitive damages are being assessed indiscriminately, recognized the danger that juries use such verdicts to express their bias against big business, and wrote that juries are given little if any guidance on when and how to punish. It struck down a $145 million punitive damage verdict in a Utah insurance bad faith case as constitutionally excessive. Soon after issuing its Campbell decision, the court sent a plainer-still message that punitive verdicts are too high. Proving the maxim that actions speak louder than words, the high court remanded 10 cases back to the lower courts to reconsider the verdicts in light of its watershed Campbell opinion. (See the Supreme Court order list for May 19: Ford Motor Co. v. Romo, 02-1097; Ford Motor Co. v. Estate of Tommy Smith, 02-1097; Cass v. Stephens, 71 USLW 3734; Rhone-Poulenc ( Aventis), 2003 U.S. Lexis 2929; Supreme Court order list for April 21: Textron, 123 S.Ct. 1783, 02-966; Sao Paolo v. Simon, 71 USLW 3665; 01-1722; Key Pharmaceuticals ( Edwards/ Bocci), 02-342; Waddill, 02-370; Supreme Court order list for Oct. 6: Philip Morris v. Mayola Williams, 02-1553; Chrysler Corp. v. Dorothy Clark, 01-1748.) With a few strokes of a pen, the court thereby wiped out more than half a billion dollars in punitive damages. Romo was one of them; it was not only the single largest verdict, but the first to wend its way back through the local court of appeal. This second time around, the same appellate court that had given short shrift to Ford’s excessiveness arguments now read the handwriting on the wall, cutting the verdict to $27 million. In the process, the opinion offered some noteworthy comments and predictions about Campbell‘spotential impact on the future of California punitive damages litigation. Sharper focus on the defendant’s conduct in the individual case. Romo II observed that, in the past, some courts used punitive damages to punish the defendant for a general course of conduct. The court read Campbell as meaning the punishment must be tailored to fit the defendant’s individual act in the plaintiff’s case. In other words, the punishment focus should shift from the defendant’s “general incorrigibility” or wealth. Character assassination and pleas to send a nationwide message or to punish on a national basis appear out of bounds even to a court willing to reinstate a $290 million verdict a little more than a year before, pre- Campbell. Romo II found BAJI 14.71, which tells the jury to consider the defendant’s financial condition, constitutionally incomplete: The instruction highlights the role of wealth evidence without telling the jury to tailor the punishment to the defendant’s particular act. BAJI 14.71 strongly suggests wealth should be used to enhance the award amount, rather than to establish the outer limit of a constitutionally permissive (i.e., non-excessive) award. Use of a quantifiable ratio test. Campbell contains strong language establishing a quantifiable test for when a punitive verdict is constitutionally excessive and a benchmark telling reviewing courts how much is enough: A 4-to-1 ratio of punitive to compensatory damages is “close to the line,” and, where the compensatory damages are themselves substantial, then perhaps only a 1-to-1 ratio is permissible. Confronted with this plain, quantifiable bright line, Romo II cut the punitives to $27.3 million — three times the compensatory damages awarded to the individual plaintiffs ($17.3 million total punitives) and $10 million to the heirs of two people who died in the crash. Here, Romo II seems to have applied Campbell‘s letter, but not its spirit. The $10 million punitive component was not tied to any compensatory damage or harm. At the very least, the Fresno court’s response is a strong indication that Campbell‘s message — that the entire system for reviewing excessive punitive damages must be rethought — is getting through. Indeed, other California appellate districts that, like Fresno, had ignored prior Supreme Court directives to review and reduce punitive damages, now are readily towing the line, reducing verdicts without being told. (See, e.g., Diamond Woodworks v. Argonaut, (2003) 109 Cal.App.4th 1020.) However, not every court is falling into step. The most notable holdout is the Second District Court of Appeal, Division Four. The U.S. Supreme Court has twice ordered Division Four to reconsider whether a $2 million punitive award is constitutionally excessive. The first time, the division reviewed and reaffirmed without touching the award. On Dec. 2, after a second order to reconsider — this time in light of Campbell — the division again reconsidered and reaffirmed the punitive verdict in Simon v. Sao Paolo U.S. Holding Co., 03 C.D.O.S. 10376. It is anyone’s guess whether the third time will be the charm for the Simon defendant, but one issue is not subject to debate. Campbell has revolutionized the law of punitive damages. Christina J. Imre, a nationally recognized punitive damages expert and appellate lawyer, is a partner with the Los Angeles office of Sedgwick, Detert, Moran & Arnold. E-mail Imre at christina.imre@ sdma.

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