ArvinMeritor knew in the 1960s that exposure to asbestos was dangerous and even complained about the issue in the early and mid-1970s to its suppliers of asbestos brake linings. Still, the company failed to warn at all until the mid-1980s and did not warn of the known cancer risks of its products until 1987. The company didn't stop selling asbestos containing brake shoes until the 1990s and only then when it exhausted its stockpile of the dangerous product.
The jury found ArvinMeritor liable to Mr. Bankhead and his wife for compensatory and punitive damages. The compensatory award included economic damages of $1.47 million and noneconomic damages of $2.5 million. The jury allocated 15 percent fault to the defendant, which under California law, left the defendant jointly and severally liable for the entire award of economic damages, and severally liable for 15 percent of the noneconomic damages, for a total of $1.845 million.
In a separate trial on the amount of punitive damages, the jury heard testimony from the plaintiff's expert concerning the defendant's economic condition and then returned a verdict of $4.5 million against ArvinMeritor, 2.4 times the amount of the compensatory award. The trial court entered judgment on the full amount of the jury's awards and the defendant appealed solely on the issue of the court's refusal to reduce the amount of the punitive award.
The California Court of Appeals affirmed the judgment in its entirety.
The court rejected the defendant's first complaint that the punitive award was excessive per se because it exceeded ten percent of the company's net worth, which was negative. Rather, the court observed that several California courts, when considering punitive damages, have cautioned against a strict reliance solely on net worth given how easily that figure can be manipulated. In particular, the court noted the evidence that in spite of its net worth, the defendant paid its CEO much more in 2010 than the amount of the jury's punitive award. In addition, the award was only 1.3 percent of the defendant's immediately available funds at the end of that year. Further, the defendant introduced no evidence that the award would prove financially disastrous.
Given the totality of the evidence regarding the defendant's financial condition, the court found that it could not conclude that the punitive award was the result of passion or prejudice or exceeded “the level necessary to properly punish and deter.”
The court also was unpersuaded by the defendant's second argument – that the ratio of punitive to compensatory damages was so high that it violated the Fourteenth Amendment's due process clause under the guidelines for evaluating punitive awards adopted by the United States Supreme Court. In considering the most important of the Supreme Court's “three guideposts,” the court focused in particular on the reprehensibility of the defendant's conduct: “In the present case, Bankhead contracted a painful cancer, and ultimately died, due to ArvinMeritor’s (and the other defendants’) failure to ensure that people like Bankhead who used or worked with asbestos-containing products were not exposed to lethal asbestos dust. ArvinMeritor’s conduct continued over many years, and evinced an indifference to or reckless disregard of the health and safety of Bankhead and those similarly situated.”
The court then turned to an analysis of the 2.4 to 1 ratio between the punitive and compensatory damages awards to determine whether the “punitive damages [bore] a 'reasonable relationship' to compensatory damages or to the actual or potential harm to the plaintiff.” Noting that California courts have “adopted a broad range of permissible ratios—from as low as one to one to as high as 16 to one—depending on the specific facts of each case,” the court reviewed the evidence of the very real harm to the plaintiff dying of mesothelioma and the “highly reprehensible” nature of the defendant's conduct. The court concluded: “This single-digit ratio is well within the range for comparable cases, and is not extraordinarily high. Accordingly, we are not persuaded that the award exceeded the constitutionally permissible limits.”
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