Tuesday, December 27, 2005
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Punitive Damages in Auto Repair Case Upped to $175,000
Panel That Cut $10 Million Award to $53,000 Raises It After S.C. Sends Case Back
By a MetNews Staff Writer
A couple that successfully sued Ford Motor Company after discovering that their used Ford Taurus had a history of transmission problems that the company knew about but did not disclose is entitled to $175,000 in punitive damages, or about nine times their out-of-pocket losses, the Fifth District Court of Appeal ruled Friday.
The decision represents the court’s latest effort to reign in punitive damage awards under State Farm Mut. Auto Ins. Co. v. Campbell (2003) 538 U.S. 408.
The Campbell court said that a punitive damage award violates the Excessive Fines Clause if is disproportionate to the award of compensatory damages, the reprehensibility of the defendant’s conduct, and the amount of civil penalties authorized for similar conduct.
Justice Anthony Kennedy, writing for the court in that case, explained that while the Constitution does not “impose a bright-line ratio which a punitive damages award cannot exceed,” awards should generally be limited to four times compensatory damages and that there would be few situations in which “awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.”
In the Taurus case, a Fresno Superior Court jury returned $17,800 in compensatory damages to Greg and Jo Ann Johnson. The jury awarded $10 million in punitive damages, which the plaintiff’s lawyers said was the amount by which Ford annually profited by reselling cars that had been returned as “lemons.”
In Ford’s first appeal, the Fifth District reduced the award to three times the punitive damages, $53,435, citing Campbell. The California Supreme Court, however, said the panel should have considered a higher award in order to punish Ford for “a practice of engaging in, and profiting from, wrongful conduct similar to that which injured the plaintiff.”
The high court explained in its opinion that while the Fifth District had discussed the punitive damage “guideposts” identified by the U.S. Supreme Court, the lower panel “gave no express weight” to the “scale and profitability” of defendant’s scheme to defraud consumers in its discussion of reprehensibility, that its discussion of compensatory damage/punitive damage ratios did not “explain the drastic reduction ordered,” and that it failed to consider the deterrence factor.
Friday, Justice Steve Vartabedian, writing for the Court of Appeal, said that a $175,000 award was sufficient to recognize that Ford’s conduct involved a “high,” but not an “extraordinary,” degree of reprehensibility and would adequately punish the company and deter it and other manufacturers from engaging in similar concealment in the future. He noted that had the state brought an action against Ford for violation of consumer protection statutes, the penalty could not have exceeded twice the Johnsons’ damages.
The case is Johnson v. Ford Motor Co., 05 S.O.S. 5800.
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