Our friends at the California Punitive Damages Blog recently issued this post on a decision of the West Virginia Supreme Court of Appeals reducing an $80 million punitive award against a nursing home to $32 million. The post focuses on the court’s conclusion that a reduction of the compensatory damages from $11.5 million to $4.6 million necessitated a proportionate reduction in the punitive damages. The post points out that courts in California have been divided as to whether that kind of automatic proportionate reduction is appropriate.
The issue on which the California Punitive Damage Blog focuses is an interesting one that we will try to address in a future post. Our first reaction is “it depends.” The first question to ask is whether the jury was instructed that its award of punitive damages should bear a reasonable relationship to the compensatory damages. If so, that factor favors a proportionate reduction. Other considerations as well may make it probable that the jury intended its punitive damages award to bear a specific relationship to the compensatory damages, in which case maintaining that relationship when there is a reduction in the compensatory damages makes sense. Indeed, when the punitive damages bear a generally reasonable relationship to the compensatory damages, a presumption in favor of a proportionate reduction seems reasonable.
On the other hand, if the award is relatively small in relation to the punitive damages, it is likely that the jury did not base it on the amount of compensatory damages, and a proportionate reduction would seem unwarranted. Conversely, if the punitive damages are large and disproportionate to the compensatory damages, for instance, when it is likely that the amount was driven by a factor such as a percentage of the defendant’s net worth or some other measure of its financial condition—something we have long argued is inappropriate in cases involving organizational (as opposed to individual) defendants—there would seem to be less justification for simply reducing the punitive damages by the same proportion as the compensatory damages.
In such cases, the court would still need to review the punitive damages for excessiveness. In the West Virginia case, $32 million remains a shockingly high amount of money, and a ratio of 7:1 is a gross outlier for cases in which the compensatory damages are in the millions of dollars—especially when the defendant was not engaged in intentional misconduct. Our colleagues Miriam Nemetz and Breanne Gilpatrick will be doing a more detailed post addressing this and other aspects of the West Virginia case in the near future, so stay tuned for that.