Missouri Supreme Court Invalidates State’s Legislative Cap on Punitive Damages

Behrens_MGuest Commentary

by Mark A. Behrens, Shook, Hardy & Bacon L.L.P.*

On September 9, the Supreme Court of Missouri struck down the state’s legislative limit on the amount of punitive damages that can be imposed on defendants. Under the cap, punitive damages could not exceed the greater of $500,000 or five times the net amount of the judgment. Lewellen v. Franklin arose from an unremarkable fraudulent misrepresentation and unlawful merchandising suit. In finding that the statutory damages cap violated Lewellen’s right to a jury trial, the Court followed a 2012 decision invalidating the state’s cap on non-economic damages in medical liability cases, Watts v. Lester E. Cox Medical Centers.

This holding is an extreme outlier.  Virtually every other state court that has considered the constitutionality of punitive damages caps has held that such laws do not violate the jury trial right because the jury’s fact-finding function is preserved.  The jury continues to resolve disputed facts with respect to liability and assessment of legally available remedies.  Once the jury has decided these issues, the constitutional mandate is met—or at least is virtually every other state in the country.  Nationally, both state and federal courts consistently have upheld the constitutionality of punitive damages caps. Continue reading

A Swing and a Miss by the Missouri Supreme Court

Tortfeasor?

Tortfeasor?

Have you ever been to a sporting event where the mascot and other cheerleaders shoot t-shirts and toss hot dogs into the crowd during lulls in the action? Fun for the whole family, right? Well thanks to a ruling from the Missouri Supreme Court, don’t be surprised if this tradition becomes a thing of the past.

In a unanimous ruling last month overturning a local jury’s verdict in favor of my hometown Kansas City Royals, Judge Paul C. Wilson and his Missouri Supreme Court colleagues decided, as a matter of law, that the risk of being injured by a hot dog toss is not one of the risks inherent in watching a Royals home game at Kauffman Stadium. John Coomer v. Kansas City Royals Baseball Corporation.

You’ve got to be kidding me. Baseball and hot dogs go together like mom and apple pie. At a professional baseball game where balls, broken bats, and even fielders fly into the stands, and patrons must be alert at all times to avoid injury, the risk of being injured by a flying hot dog is somehow excluded?   That decision defies logic and common sense.

A baseball game is not merely about what happens during the contest. It is a full-scale entertainment experience. For the prices that major league teams charge for games these days, they have to offer more entertainment than just the action between the lines—however thrilling this season is for long-suffering Royals fans. In the (hot) dog days of summer, baseball fans assume the risk of the sideshow right along with the main event.

Frequent spectator John Coomer allegedly suffered a detached retina when he failed to see a free hot dog coming his way. That is no laughing matter. And so he sued. But the antics of Sluggerrr, the adorable lion mascot who was not around when I was a kid—including his tossing free hot dogs to fans in the stands—is very much a part of today’s entertainment package. Continue reading

The Supreme Court’s NOT Top 10: October 2013 Term Cases the Justices Wrongly Passed Over

supreme courtThe Supreme Court press and other court observers have spilled a lot of ink this past month discussing the cases the Supreme Court took and decided during October Term 2013. Relatively little was said about the cases the court chose not to decide—and it passed over some doozies. But as Rush drummer and lyricist Neil Peart put it so eloquently, “If you choose not to decide, you still have made a choice.”

Pro-Business? Journalists like to portray the Roberts Court as particularly business friendly (see, e.g., here , here, and here; but see here), but businesses asked the Court to take plenty of cases this past term that it instead declined. When the Court denies cert in cases of such importance to business at the same time that it has a historically light docket, it can hardly be said to be pro-business. Companies crave legal certainty, so even if the Court took these cases and decided them against business interests, many times simply settling contested questions would be better than leaving them up in the air.

Wanted: More Business Cases. The Court needs to hear more business cases than it currently is, for at least two reasons. First, the unprecedented proliferation of new regulations by this administration has given rise to many more conflicts of the kind that produce Supreme Court cases. Second, to the extent the Clinton-and-Obama-appointee-dominated lower courts are predisposed against business litigants (or, more charitably, deciding close questions consistently against them), businesses will appeal more cases to the Supreme Court when they believe a lower court has denied them justice. Of course the Supreme Court justices take neither of these criteria into consideration when assessing individual cases, but surely these factors matter when assessing whether the Court leans in favor of business in forming its docket. Continue reading

Move by Biotech Company Tees Up Court Consideration of Attorneys’-Fee Clause in Corporate Bylaws

DelawareThe Wall Street Journal Law Blog reported today that Philadelphia-based (but Delaware-incorporated) biotechnology company Hemispherx BioPharm Inc. has injected itself into the middle of a growing dispute over attorneys’ fees in shareholder class action lawsuits. (A hat-tip to the Institute for Legal Reform, whose must-read daily email referenced the WSJ Law Blog piece) Prompted by a May 14 Delaware Supreme Court decision, ATP Tour, Inc. v. Deutscher Tennis Bund, et al., Hemispherx earlier this month adopted a provision in its corporate bylaws that shareholder plaintiffs must pay the company’s legal fees if Hemispherx prevails in a shareholder-initiated lawsuit. The provision applies retroactively to pending suits, and lawyers for shareholders in a class action against Hemispherx have asked the Delaware Chancery Court to invalidate the bylaws.

A July 11 Washington Legal Foundation Legal Backgrounder, Is Delaware High Court Ruling an Ace for Merging Companies Served with Shareholder Suits?, discussed the ATP Tour decision and assessed how it could be applied to deter frivolous shareholder class actions. Authored by Snell & Wilmer LLP attorneys Greg Brower and Casey Perkins, the paper explains that ATP Tour involved not a public company, but a private membership corporation which included in its bylaws a fee-shifting provision. The Delaware Supreme Court, answering a question certified to it by the U.S. Court of Appeals for the Third Circuit, held that the fee-shifting provision was a matter of private contract, and nothing in the state’s corporate law prohibited its inclusion in ATP’s bylaws.

The authors went on to examine whether Delaware statutory or common law would permit public companies to include such a fee-shifting mechanism in their bylaws. They found that a recent Delaware Chancery Court case, Boilermakers Local 154 Retirement Fund, et al. v. Chevron Corporation, et al., strongly supported the legality of fee-shifting through bylaws.  Brower and Perkins concluded:

Chevron and ATP Tour together make it clear that Delaware law is intended to give broad leeway to corporations, private and public, to adopt bylaws not otherwise prohibited by law, and that duly adopted bylaws are presumed to be part of the contract between the company and the member or shareholder. This means that publicly-traded companies and their shareholders ought to be able to freely contract for the details of their relationship, including details such as where disputes between them will be litigated, and whether the losing party in such litigation should have to pay the legal fees of the prevailing party. Such contracts are part of the fundamental structure of the corporate law of Delaware—or, it seems, of any other state for that matter.

Given the financial implications for the securities fraud class action bar and the promise such provisions hold for public companies, the Hemispherx case is likely just the first skirmish in what will be a drawn-out, intense battle over fee-shifting through corporate bylaws.

Class Actions Alleging Injuries from Data Breaches Continue to Wither in Face of Standing Challenges

securityGuest Commentary

by Jennifer Wissinger, a 2014 Judge K.K. Legett Fellow at the Washington Legal Foundation and a student at Texas Tech School of Law.

Data-breach cases were supposed to be a new, lucrative litigation frontier for plaintiffs’ attorneys. Some experts speculated a wave of class-action suits would emerge against companies victimized by unauthorized access of customer data. Media reports of lawsuits filed in the immediate aftermath of high-profile data breaches, like the one that befell Target last December, have created the impression that these cases are proliferating rapidly. Reality belies such perceptions of success, however. Trial courts in fact have routinely dismissed data-breach lawsuits because plaintiffs cannot answer the American legal system’s most fundamental threshold question: have you actually been harmed? As a series of U.S. Supreme Court cases construing the constitutional standing-to-sue requirement dictate, mere fear of possible future harm does not suffice. In many data-breach cases, fear of future harm is the most plaintiffs can prove.

As The Legal Pulse has discussed, the Supreme Court most recently addressed standing two years ago in Clapper v. Amnesty International. Since 2012, federal and state trial courts have consistently applied Clapper’s reasoning to dismiss data-breach cases for lack of standing. In the last two months, three more courts have thrown out data-breach cases because the plaintiffs failed to show that the expected injury was at least “certainly impending.”

Galaria v. Nationwide Mutual Insurance Co. After Nationwide’s computer systems were hacked, the company notified its customers and advised them to safeguard their personally identifiable information (PII). Even though Nationwide offered its customers free credit monitoring for a year, the plaintiff in Galaria sued alleging violations of the federal Fair Credit Reporting Act (FCRA) and unlawful invasion of privacy under Ohio common law. Continue reading

There’s Nothing “New” about “Lone Pine” Orders for Active Case Management

faulkFeatured Expert Column − Complex Serial and Mass Tort Litigation

by Richard O. Faulk, Hollingsworth LLP*

To listen to the plaintiffs’ bar, you’d think that “Lone Pine” orders were a novelty recently conjured out of “thin air” by creative defense lawyers—or a device unsupported by any significant precedents. But although those orders may seem new to the uninitiated, they have deep roots in the history of active case management.

Many lawyers know—or have learned the hard way—why these case management tools are called “Lone Pine” orders, and what they are intended to accomplish. In Lore v. Lone Pine Corporation, No. L-03306-85, 1986 WL 637507 (N.J. Sup.Ct. Nov. 18, 1986), the plaintiffs claimed injuries resulting from contamination allegedly coming from a landfill. When the defendants presented a government investigation that found no offsite contamination, the court required the plaintiffs to make a preliminary showing of exposure, injury, and causation before allowing full discovery to proceed. This ruling led to other cases which recognized the propriety of “Lone Pine” orders when doubt existed “over what medical condition or disease, if any, can be causally related to the toxic agent exposure alleged by each plaintiff.”2 Lawrence G. Cetrulo, Toxic Torts Litigation Guide § 13:49 (2013). Since then, “Lone Pine” order have proliferated, not only in toxic tort litigation, but also in other types of cases.See generally, David B. Weinstein and Christopher Torres, Managing the Complex: A Brief Survey of Lone Pine Orders, 34 Westlaw Envt’l J. 1 (Aug. 21, 2013) (providing extensive list of categorized cases). Continue reading

The California Supreme Court’s Iskanian Opinion: Two Steps Forward, One Step Back

jenkinsGuest Commentary

by Kirk C. Jenkins, Sedgwick LLP*

On June 26, 2014, the California Supreme Court issued its long-awaited opinion in Iskanian v. CLS Transportation Los Angeles LLC. The decision was something of a mixed bag for the defense bar: two major steps forward in the California Supreme Court’s class action jurisprudence, but one step back of uncertain significance.

The plaintiff in Iskanian worked as a driver for the defendant in 2004 and 2005. Halfway through his employment, he signed an agreement providing that “any and all claims” arising out of his employment would be submitted to binding arbitration before a neutral arbitrator. The plaintiff agreed not to bring a representative action either in court or before the arbitrator.

A year after leaving his employment, the plaintiff filed a putative class action complaint, alleging failure to pay overtime, provide meal and rest breaks, reimburse business expenses and various other violations of the Labor Code. The defendant moved to compel arbitration and the trial court granted the motion. But while the matter was pending before the Court of Appeal, the California Supreme Court decided Gentry v. Superior Court, holding that most class action waivers were unenforceable in employment cases. The defendant dropped its motion to compel. Continue reading