The Eighth Circuit’s recent overturning (technically, affirming the district court’s blow out) of a large punitive damages award in a hormone replacement therapy case got us thinking about punitive damages again. See In re Prempro Products Liability Litigation, ___ F.3d ___, 2009 WL 3518245 (8th Cir. Nov. 2, 2009).

Thinking, but not necessarily talking about that case, that is. Herrmann represents Wyeth (which won’t be just Wyeth much longer) in a lot of things. Bexis has been involved in HRT litigation (for somebody else), so neither of us can say anything substantive in public about that particular case – sorry.

Nor are we addressing constitutional aspects of punitive damages today. For those topics, readers can go here and here (punitive damages class actions), here and here (territoriality – one state can’t impose punitives for conduct in different states), here (ratio), and here (conduct directed against nonparties).

But what role should punitive damages play in prescription medical product liability litigation anyway?

Should there be any?

Even we’re not willing to go as far as saying there should never be any role for punitive damages. If some drug or device company actually were to authorize and finance the sort of conduct at issue in the so-called “Body Snatchers” litigation (see our post here) – deliberately and illegally (indeed, criminally) harvesting body parts from corpses without anybody’s consent and without testing for certain diseases – and somebody got infected from a product as a result, well that seems to us to be sufficiently malicious, in conscious disregard, whatever, to justify punitive damages.

But that’s about as far as we’ll go. We don’t think, for instance, that there’s any room for punitive damages where, instead of some Chinese pig farm operating in an essentially unregulated environment, the relevant aspects of a product are regulated and approved by the FDA’s detailed regulatory scheme. Compliance with such standards is incompatible with the “actual malice” standard ordinarily applicable to punitive damages. Sloman v. Tambrands, Inc., 841 F. Supp. 699, 703 n.8 (D. Md. 1993). That’s why a lot of states either preclude punitive damages altogether, or provide a strong presumption against punitive damages where there’s been regulatory compliance. See Ariz. Rev. Stat §12-701, Fla Stat. §768.1256; Ind. Code §34-20-5-1), Kan. Stat. §60-3304(a), Mich. Comp. L. §600.2946(4), N.J. Stat. §2A:58C-4, N.C. Gen. Stat. §99B-6(b)(4), N.D. Cent. Code §28-01.3-09); Tenn. Code §29-28-104, Tex. Rev. Civ. Prac. & Rem. C. §82.007), Utah Code §78-15-6.

It’s not just statutes. A lot of courts have also held that regulatory compliance logically precludes imposition of punitive damages. The reasoning is simple. Governmental regulation sets a standard that is objectively reasonable. A company that conducts itself in accordance with that standard cannot have acted with sufficient reprehensibility to warrant the exaction of punitive damages. And most of these cases aren’t even drug cases. Instead, they involve other regulatory schemes that aren’t nearly as comprehensive and onerous as what the FDA imposes.

The Supreme Court took a look at this question in the civil rights context in Kolstad v. American Dental Ass’n, 527 U.S. 526 (1999). The punitive damages standard for Title VII isn’t much different from common-law tort actions – “with malice or with reckless indifference” to protected civil rights. See 42 U.S.C. §1981a(b)(1); Kolstad, 527 U.S. at 537 (“[w]e assume that Congress, in legislating on punitive awards, imported common law principles”). The Court held that “good faith” efforts to comply with the law would defeat punitive damages.

Holding employers liable for punitive damages when they engage in good faith efforts to comply with Title VII, however, is in some tension with the very principles underlying common law limitations . . . . Where an employer has undertaken such good faith efforts at Title VII compliance, it demonstrates that it never acted in reckless disregard of federally protected rights.

527 U.S. at 544 (citation and quotation marks omitted).

Back to product liability. In Clark v. Chrysler Corp., 436 F.3d 594, 603 (6th Cir. 2006) (Kentucky law), the court found a “good faith dispute” whether certain tests should have been done, and described how the relevant governmental agency evaluated the test and decided not to require it. Id. at 603.

[B]ecause the test was neither required by the government nor used by other manufacturers, we cannot conclude that [defendant’s] failure to adopt the test indicates a level of indifference to or reckless disregard for the safety of others sufficient to weigh in favor of reprehensibility.

Id. Because of the “good faith dispute,” the state of mind necessary to support a punitive damages award did not exist. Id.

Other courts have done the same thing. In Satcher v. Honda Motor Co., 52 F.3d 1311, 1316-1317 (5th Cir. 1995), the court vacated a punitive damages award under Mississippi law, inter alia, because the government did not require the safety device advocated by the plaintiffs. Then there’s Miles v. Ford Motor Co., 922 S.W.2d 572 (Tex. App. 1996), rev’d in part on other grounds, 967 S.W.2d 377 (Tex. 1998), where the court held that “[w]hen a seller relies in good faith on. . . conclusions by the governmental agencies charged with administering safety regulations in the area of its product. . ., it cannot be said to have acted with an entire want of care showing conscious indifference” so as to justify punitive damages. Id. at 589.

The issue has come up a lot in Georgia since that state’s Supreme Court held that “[w]hile compliance with the law will not preclude a finding [of liability]. . .such compliance does tend to show that there is no clear and convincing evidence of” a state of mind permitting an award of punitive damages. Stone Man, Inc. v. Green, 435 S.E.2d 205, 206 (Ga. 1993); accord Barger v. Garden Way, Inc., 499 S.E.2d 737, 743 (Ga. App. 1998); In re Stand ‘N Seal, Products Liability Litigation, 2009 WL 2145911, at *9 (N.D. Ga. July 15, 2009); Welch v. General Motors Corp., 949 F. Supp. 843, 845 (N.D. Ga. 1996). Thus the older, contrary decision, Watkins v. Ford Motor Co., 190 F.3d 1213, 1216-18 (11th Cir. 1999), is no longer a valid prediction of Georgia law.

The same is true in Florida. In Chrysler Corp. v. Wolmer, 499 So.2d 823 (Fla. 1986), the defendant’s compliance with federal motor vehicle standards hat “an award of punitive damages in this case not only is unjust, but also ignores the threshold requirements for such an award.” Id. at 826. Again, a state supreme court put the kebosh on the contrary federal prediction, Dorsey v. Honda Motor Co., 655 F.2d 650, 656-657 (11th Cir. 1981), which erroneously interpreted Florida law the other way.

More stuff along the same lines. In Phillips v. Cricket Lighters, 883 A.2d 439 (Pa. 2005), one factors leading to a holding that “as a matter of law” there was insufficient evidence of “outrageous” conduct permitting punitive damages was that “at the time this [product] was sold, it complied with all safety standards.” Id. at 447. “Evidence of [a defendant’s] good faith effort to comply with all government regulations. . .would be evidence of conduct inconsistent with the mental state requisite for punitive damages.” Malcolm v. Evenflo Co., 217 P.3d 514 ¶99 (Mont. 2009). Similar evidence – that the defendants’ “system [] met and exceeded federal safety standards” – led the court in Brand v. Mazda Motor Corp., 978 F. Supp. 1382, 1393-1394 (D. Kan. 1997), to conclude that “no reasonable jury could find that the defendants deliberately or recklessly failed to either correct a defect or prevent an injury. In Richards v. Michelin Tire Corp., 21 F.3d 1048, 1059 (11th Cir. 1994) (Alabama law), compliance with government warning requirements precluded a finding of “wantonness” necessary to support punitive damages. See also Alcorn v. Union Pacific Railroad Co., 50 S.W.3d 226, 249 (Mo. 2001); Lopez v. Three Rivers Electrical Cooperative, Inc., 26 S.W.3d 151, 160 (Mo. 2000); McWilliams v. S.E. Inc., 2009 WL 3625173, at *8 (N.D. Ohio Oct. 29, 2009); Boyette v. L.W. Looney & Son, 932 F. Supp. 1344, 1348 (D. Utah 1996).

There are even some courts that go further and refuse to permit punitive damages where a particular product was designed in conformity with expert safety consensus at the time of manufacture, even if there were other “experts” at the time who disagreed. This happens most frequently in Iowa: Mercer v. Pittway Corp., 616 N.W.2d 602, 618 (Iowa 2000) (reasonable disagreement among experts insufficient to hold defendant liable for punitive damages); Hillrichs v. Avco Corp., 514 N.W.2d 94, 100 (Iowa 1994) (“an award of punitive damages is inappropriate where room exists for reasonable disagreement over the relative risks and utilities of the conduct and device at issue”); Burke v. Deere & Co., 6 F.3d 497, 511 (8th Cir. 1993) (Iowa law) (entering judgment n.o.v. because “[a]n award of punitive damages is not appropriate when room exists for reasonable disagreement over the relative risks and utilities of the conduct at issue”). But similar law exists in some other juristictions. Loitz v. Remington Arms Co., 563 N.E.2d 397, 407 (Ill. 1990) (punitive award reversed in light of good-faith metallurgical disagreement among experts); Owens Corning Fiberglas Corp. v. Garrett, 682 A.2d 1143, 1163-68 (Md. 1996) (punitive award reversed where there was a genuine scientific safety-related dispute); Satcher v. Honda Motor Co., 52 F.3d 1311, 1317 (5th Cir. 1995) (Mississippi law) (punitive award vacated; “there is a genuine dispute in the scientific community as to whether leg guards do more harm than good”).

Compliance as a defense to punitive damages may also relate to a jurisdiction’s basic standard for punitive damages. Not all punitive damages are awarded equally. Some states require a stronger finding of intent than others. Or, to put it another way, what’s reprehensible enough to support punitive damages in one jurisdiction, may not fly in another. Some states allow punitive damages for what sounds a lot like negligence. The Arkansas statute cited in Prempro is one of those. Ark. Code. §16-55-206 (liability for punitives where defendant “knew or ought to have known” that what it was doing “would naturally and probably” cause harm). Other states, like Pennsylvania, make it clear that no form of negligence, however gross, supports punitive damages. Phillips, 883 A.2d at 445 (“a showing of mere negligence, or even gross negligence, will not suffice to establish that punitive damages should be imposed”).

This distinction is manifested in the Restatement Second of Torts. The Restatement defines “recklessness” in §500, and that definition is incorporated into Restatement §908, concerning punitive damages. Comment a to §500 defines two distinct types of reckless conduct which represent very different mental states. The first definition requires conscious knowledge throughout: “(1) where the ‘actor knows, or has reason to know,. . .of facts which create a high degree of risk of physical harm to another, and deliberately proceeds to act, or to fail to act, in conscious disregard of, or indifference to, that risk.’” Restatement §500, comment a. The second, less restrictive definition does not require conscious knowledge: “(2) where the ‘actor has such knowledge, or reason to know, of the facts, but does not realize or appreciate the high degree of risk involved, although a reasonable man in his position would do so.’” Id. (emphasis added).

States that disfavor punitive damages adopt the Restatement’s first definition of recklessness:

The first type of reckless conduct described in §500 demonstrates a higher degree of culpability than the second on the continuum of mental states which range from specific intent to ordinary negligence. An “indifference” to a known risk under Section 500 is closer to an intentional act than the failure to appreciate the degree of risk from a known danger. . . . Under Pennsylvania law, only the first type of reckless conduct described in comment a to Section 500, is sufficient to create a jury question on the issue of punitive damages. Thus, punitive damages are awarded only for outrageous conduct, that is, for acts done with a bad motive or with a reckless indifference to the interests of others.

SHV Coal, Inc. v. Continental Grain Co., 587 A.2d 702, 704-05 (Pa. 1991) (various citations and internal quotation marks omitted); accord Hutchison v. Luddy, 870 A.2d 766, 771-72 (Pa. 2005). “It is not sufficient that the defendant failed to appreciate a risk; rather, there must be indifference to a known risk.” In re One Meridian Plaza Fire Litigation, 820 F. Supp. 1460, 1488 (E.D. Pa. 1993). To be assessed punitive damages, a defendant must have “created an unreasonable risk of physical harm that was substantially greater than that which is necessary to make its conduct negligent.” Steffy v. Home Depot, Inc., 2009 WL 904966, at *21 (M.D. Pa. March 31, 2009).

What can this heightened standard for punitive damages mean for defendants? A lot actually. It gets rid of one of the plaintiffs’ favorite refrains – for only a “few [cents/dollars] more, the defendant could have designed a ‘safer’ product.” Look what happened in the Phillips case:

[W]e flatly reject [plaintiff’s] assertion that [defendants’] weighing of financial concerns in determining whether to incorporate additional safety features into its product on a unilateral basis establishes that Appellants acted wantonly. Rather, it shows simply that [defendants] were considering all of the myriad elements that affect decisions a for-profit entity must make in manufacturing and marketing commercial products.

883 A.2d at 447.

Tougher scienter aspects for punitive damages have other favorable consequences for defendants faced with such clams. Failure to conduct tests not mandated by government regulators is not sufficiently malicious to warrant punitive damages. Montgomery v. Mitsubishi Motors Corp., 2006 WL 1030272, at *4 (E.D. Pa. Apr. 19, 2006); Olsen v. Ford Motor Co., 521 F. Supp. 59, 70 (E.D. Pa. 1981). Warnings are not evidence of some sort of guilty knowledge – rather, they “indicate that Defendant was, if anything, attempting to minimize the risk of accidents through th[e] warning language,” which “cannot be considered recklessly indifferent.” Richetta v. Stanley Fastening Sytems, L.P., ___ F. Supp.2d ___, 2009 WL 2707549, at *10 (E.D. Pa. Aug. 21, 2009). A defendant may choose to warn rather than redesign a product. Id.

Thus, at least in Pennsylvania, punitive damages claims have been rejected as a matter of law in a number of cases involving FDA compliant drugs and medical devices. See Soufflas v. Zimmer, Inc., 474 F.Supp.2d 737, 756 (E.D. Pa. 2007); Nelson v. Wyeth, 2007 WL 4261046 (C.P. Philadelphia Co. Dec. 5, 2007); Daniel v. Wyeth, 2007 WL 5528724 (C.P. Philadelphia Co. Apr. 23, 2007). Litigators in states that allow punitive damages on less proof should factor that into account in their trial and appellate strategy – especially since “reprehensibility” now has constitutional overtones – especially as to the amount of punitive damages that a jury can award.