U.S. Supreme Court Upholds Over $15 Million Product Liability Verdict

May 26, 2009

On May 26, 2009, the United States Supreme Court refused to modify a $15,8677,345.00 product liability verdict in a case tried in state court in Nashville, Tennessee. The denial of certiorari ended the saga that began on June 30, 2001, when the Chrysler minivan young Joshua Flax was riding in was struck from behind. In the end, Chrysler was found liable for the death of young Joshua in the amount of $2,500,000 for his wrongful death and for $13,367,345 in punitive damages. Only the punitive damages award was appealed to the U.S. Supreme Court. The Court denied certiorari without an opinion. DaimlerChrysler Corp. v. Flax, 129 S.Ct. 2433 (2009)

In 2005, the Nashville, Tennessee, jury found that the Chrysler minivan’s design was defective and unreasonably dangerous in that the yielding minivan seats were unreasonably dangerous to front occupants in the vehicle, and young children placed behind these seats. In this case, when the minivan was rear ended, the front seat collapsed in such a way that it struck young Joshua in the head. He eventually died from the head injuries suffered in the crash. Flax v. DaimlerChrysler Corp., 2005 WL 1768725 (Tenn. Cir. Ct. June 20, 2005). Chrysler argued that a different design would have caused different injuries. However, Chrysler’s own design documents did not support the consideration of other designs for the seatbacks in this vehicle.

The jury awarded $5M for the wrongful death of Joshua, allocating 50% fault to the driver who struck the vehicle in which Joshua was riding and 50% to Chrysler. (The jury also awarded $2.5 million dollars in compensatory damages to Joshua’s mother, but that verdict was reversed on appeal.) Id. Punitive damages of $98,000,000.00 were awarded against Chrysler, $65,500,000 for the wrongful death of Joshua and $32,500,000 for his mother’s emotional injuries. The jury verdict was the highest in Tennessee history ($105,500,000.00). The trial judge initially remitted the $98M punitive award down to $20 million, $13,367,345.00 for Joshua’s death and $6,632,655 for his mother. The compensatory damages awarded for young Joshua’s death and the punitive damages award related to that verdict were affirmed by the Tennessee Supreme Court on appeal. (The compensatory and punitive awards for his mother were both reversed.) The final tally against Chrysler was $15,867,345, consisting of $2,500,000.00 compensatory and $13,367,345 punitive damages. [1] Flax v. Daimler-Chrysler Corp., 272 S.W.3d 521 (Tenn. 2008).

Underlying the award in the Flax case was certain concealing and retaliatory conduct that must have influenced the jury when it considered the punitive damages award. A former Chrysler employee who served as the chair of the Minivan Safety Leadership Team testified that his team challenged the safety of the design in the early 1990s and that he was instructed to destroy their recommendation. He further testified that in 1994 he told his supervisor that he was going to go to regulators with safety concerns about the minivan seats. Soon thereafter, the Minivan Safety team was disbanded at the direction of Chrysler executives and the concerned employee was fired on December 27, 1994. In connection with his firing, the documents supporting the employee’s allegations were confiscated from his office.

Chrysler’s certiorari petition was joined by an amicus curiae brief from the Product Liability Advisory Council. Chrysler and the PLAC challenged the punitive damages award. Given the Court’s scrutiny of punitive damage awards, the ratio in this case was modest, a mere 5.35 to 1. Accordingly, the Association attacked the process for arriving at jury awards in punitive damages cases:

Much of the recent constitutional jurisprudence has focused on the amount of such awards. This case provides an opportunity to clarify the due process standards applicable to the imposition of punitive damages in the first place. Due process constraints apply both to the imposition of punishment and its excessiveness. Indeed, it is no less important that citizens have fair notice of the conduct that will expose them to punishment than it is that they know how harsh the punishment may be.

Brief of Product Liability Advisory Counsel, Inc. as Amicus Curiae, March 16, 2009.

It was difficult to challenge the underlying trial in this case as lacking due process. In Tennessee, a bifurcated trial is held in all punitive damages cases. The jury is asked in the initial trial to determine liability, damages, and whether the conduct was sufficient to give rise to an award of punitive damages. Only after making these determinations is a trial held on the amount of punitive damages. Tennessee substantive law of punitive damages is likewise full of restraints. Under the leading Tennessee case, the parties are entitled to put on evidence in the second part of the bifurcated trial regarding the following issues:

1) The defendant's financial affairs, financial condition, and net worth;

2) The nature and reprehensibility of defendant's wrongdoing;

3) The defendant's awareness of the amount of harm being caused and defendant's motivation in causing the harm;

4) The duration of defendant's misconduct and whether defendant attempted to conceal the conduct;

5) The expense plaintiff has borne in the attempt to recover the losses;

6) Whether defendant profited from the activity, and if defendant did profit, whether the punitive award should be in excess of the profit in order to deter similar future behavior;

7) Whether, and the extent to which, defendant has been subjected to previous punitive damage awards based upon the same wrongful act;

8) Whether, once the misconduct became known to defendant, defendant took remedial action or attempted to make amends by offering a prompt and fair settlement for actual harm caused; and

9) Any other circumstances shown by the evidence that bear on determining the proper amount of the punitive award.

Hodges v. S.C. Toof & Co., 833 S.W.2d 896, 901 (1992).

After a full blown trial on liability, compensatory damages, and whether punitive damages were available and a second trial on the amount of punitive damages, the trial court issued a lengthy opinion reducing the punitive damages by $78,000,000.00. Two appeals followed. Thus, it is understandable that the Court was not persuaded by the lack of due process in this case.

The lasting impression from Flax as to punitive damages is that the appellate courts remain reluctant to reverse punitive damages awards that are reasonably close in amount to the compensatory damage award.

[1] The total affirmed award was $18,367,345, but half of the compensatory damage award of $5,000,000 – or $2,500,000 -- was against Chrysler’s co-defendant who owned the truck that hit the Flax minivan.