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Media Coverage

In Reversal, Tenth Circuit Slashes Punitives to One-to-One Ratio

4 April 2016
The National Law Journal

In a case closely watched by tort reformers, a federal appeals court has whittled a $25.5 million punitive damages award to $1.95 million in a carbon monoxide poisoning lawsuit out of Wyoming.

Reversing much of the lower court’s decision, the U.S. Court of Appeals for the Tenth Circuit on April 1 found that punitive damages in the case were “excessive and arbitrary” in violation of the Fourteenth Amendment’s due process clause.

The panel vacated punitive damages as to one defendant and reduced the award against the other so that the ratio of to punitive damages was 1:1.

The ruling is a victory for the U.S. Chamber of Commerce, which has been pushing for a 1:1 ratio in cases involving punitive damages since the U.S. Supreme Court’s 2003 opinion in State Farm v. Campbell, which provided general guideposts for apportioning punitive damages.

“The Chamber has been arguing that 1:1 should be the presumptive maximum,” said Evan Tager, a partner at Mayer Brown in Washington who filed the Chamber’s brief in the case. “That was the centerpiece of our amicus brief in State Farm, and we have continued to bang that drum ever since.”

Other business groups including the American Tort Reform Association had filed an amicus brief in the case.

Plaintiff lawyer Tyson Logan, a partner at The Spence Law Firm in Jackson, Wyoming, did not return a call for comment, and Amy Sorenson, a partner at Snell & Wilmer in Salt Lake City, who represented both defendants, declined to comment.

The plaintiff, Amber Lompe, filed the suit in 2012, claiming she suffered carbon monoxide poisoning in her apartment in Casper, Wyoming. The jury awarded $1.95 million against the property manager, Apartment Management Consultants LLC (AMC), which was 65 percent at fault, and $750,000 against the owner, Sunridge Partners LLC, found to be 25 percent. In a second phase of trial, the jury awarded the punitive damages.

Despite acknowledging that the award was “far greater than usually seen in this district,” U.S. District Judge Alan Johnson in 2014 refused to second guess the jury’s decision. He denied the defendants’ motion for judgment as a matter of law, prompting the appeal.

In its 2-1 opinion, the Tenth Circuit, echoing concerns raised by the Chamber and the defendants, found that Johnson inaccurately relied on the overall $3 million compensatory award in drawing comparisons to punitive damages. Johnson should have used a reduced $2.7 million against both defendants, which accounted for the jury’s finding Lompe 10 percent at fault, and compared punitive damages to the separate compensatory damages awards against each of them.

Such a calculation would have resulted in a “constitutionally suspect” 11.5:1 ratio against AMC, which was responsible for $22.5 million of the punitive amount even though its conduct wasn’t “particularly reprehensible,” wrote Circuit Judge Carolyn McHugh for the majority opinion.

In a dissent, Circuit Judge Robert Bacharach said the reduced amount against AMC was “too far below the constitutional amount.” He suggested $7.8 million, a ratio of 4:1.
“In my view, AMC’s conduct was worse than trickery or deceit—AMC recklessly risked the life of every tenant in the entire apartment complex,” he wrote.

Reprinted with permission from the April 4 edition of The National Law Journal © 2016 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.

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