Punitive damages ruling's impact murky: effect on pending California cases remains unclear.

Punitive damages ruling's impact murky

Attorneys throughout the Southland are pondering the local impact of a U.S. Supreme Court ruling last week that refused to set a national standard limiting large punitive damages awarded by juries.

Plaintiff and defense attorneys both said they are not sure what effect the decision will have on pending California cases in which attorneys are attempting to overturn large punitive damage awards. In a 7-1 decision last week, the high court ruled the Constitution doesn't require establishing a national standard to limit the size of jury awards.

In refusing to overturn a $1.1 million verdict against Pacific Mutual Life Insurance Co., the high court rejected the arguments of a broad range of business and industry groups seeking to limit punitive damage awards. Punitive damages are awarded by juries in civil cases as punishment or to deter a defendant's conduct. They are separate from compensatory damages, which are meant to reimburse a plaintiff's loss or injury.

Attorney and author William Shernoff said the decision makes no change in how juries set punitive damages: "The Supreme Court ruled that individual states must set the criteria for punitive damage awards, which is basically the same system we have had for 200 years."

But he said he hopes the decision will ensure that corporations "will be more careful and insurance companies won't intentionally screw their customers."

Shernoff added that many companies are "happy that the law is there," when suing insurance companies over large, unreimbursed claims.

However, attorney Ted J. Boutrous of the Washington, D.C. office of Los Angeles-based Gibson, Dunn & Crutcher, said the decision still leaves open the opportunity for attorneys to challenge the State of California's method of setting punitive damage awards by using the due process provision of the U.S. Constitution.

The due process clause may forbid a state to permit juries to award grossly excessive awards, he noted.

Boutrous, who co-authored a friend of the court brief in support of Pacific Mutual Life, said the ruling was closely tied to how Alabama courts set punitive damages. But, he added, it does not prevent legal challenges to California's "liberal and hands-off policy" that allows juries to award what many lawyers consider to be excessive and unfair punitive damages.

He also said there are several pending California cases in which lawyers are trying to overturn punitive damages of $2 million of more. These cases may be heard in the California Supreme Court or even the U.S. Supreme Court, Boutrous said.

Los Angeles attorney Frank Gooch, with the Santa Monica law firm of Gilcrist & Rutter, said the opinion did state that "there has to be guidelines on punitive damages for the jury will not give an award without discretion."

He added that in California there have been recent reforms of the punitive damage awards statute. As a result, juries are not to award those damages unless the plaintiff attorney can prove that the defendant has committed an act of "fraud, oppression or malice," he said.