CHAPTER 6 DEFENDING PUNITIVE DAMAGE CASES

• Jurisdiction: United States
• Publication year: 2018

The work for defense counsel begins immediately after litigation is filed and is of vital importance to avoid punitive damages.

Although punitive damages often are reduced by the trial court or on appellate review, the original awards usually generate fierce debate and media hype, as well as injury to the defendant corporation's reputation. ^{[ 1 ]}

It is preferable to defense counsel that an award of punitive damages be completely avoided.

In order to avoid [a catastrophic punitive damages verdict,] defense counsel must focus on the punitive aspect of the case from the day the file is opened. All too often, the punitive damages claim is one of the last things considered, when it should be one of the first.

Defending a punitive damages claim requires particular care and preparation since most of the evidence used to prove the claim is initially under the control of the defendant, and the risk of incurring a substantial verdict is ever present. Before responding to discovery, defense counsel should aggressively seek out the facts and formulate a precise defense strategy. During the proceedings, counsel should pursue the issue, continually challenging the basis of the claim and seeking to limit its scope.

At trial, the competent and well-prepared defense counsel will bring to the jury's attention the plaintiff's conduct. The defendant corporation's own conduct should be explained accurately within its historical context, without apology. What the jury seeks is a logical explanation for what occurred. They will forgive mistakes in judgment, but they will not forgive—or forget—evasiveness, dishonesty, or disinterest by defense witnesses or counsel.

Defense counsel must clearly explain the purpose and legal limits of the punitive damages remedy and demonstrate why punitive damages should not be awarded. To ignore the punitive damages issue, or to fail to draw out the particulars of the defendant's conduct and the applicable law, is to court disaster.

There are risks associated with claims for punitive damages, and there are different methods that may be employed to protect a corporate defendant from those claims. It is important to remember that the law of punitive damages claims varies from jurisdiction to jurisdiction and must always be carefully researched and analyzed.

The burden of proof for punitive damages differs among jurisdictions. For example, the Indiana Supreme Court has held that the standard in that state is proof of the misconduct by "clear and convincing evidence." Orkin Exterminating Co. v. Traina, 486 N.E.2d 1019 (Ind. 1986).

Clearly, the general rule regarding punitive damages and a plaintiff's burden of proof is that there is no general rule. Defense counsel must carefully research the plaintiff's burden of proof when a punitive damages claim is made. ^{[ 2 ]}

Immediately upon being retained, defense counsel must be ready and willing to prepare the case for trial and take it to trial. Therefore, once counsel is retained, preparation is necessary and should be performed in a clear and organized manner.

The task of the defendant's attorney is more difficult. The [defense] attorney typically faces a hostile jury whose collective head is spinning with the huge numbers of the defendant's finances.

Before trial, defendant's counsel may attempt to keep out the most potentially harmful evidence and arguments regarding punitive damages through a motion in limine. The most harmful evidence is evidence of wealth and arguments seeking to base punishment affirmatively on the defendant's finances. Also, because it is difficult to stand up and object during opposing counsel's closing argument, it is advisable to move the court to bar plaintiff's counsel from making arguments that seek to capitalize on the defendant's corporate status or on local bias against outsiders.

The most challenging aspect of punitive damages defense is the development of an effective evidentiary presentation in opposition to large punitive damages. The second challenge is to provide the jury with a numerical frame of reference that, unlike corporate financials, produces a moderate range within which punishment can be set. ^{[ 3 ]}

A. Initial Actions

1. Focus on the Pleadings

When a lawsuit is served and presented to the defense lawyer, he or she is obligated to determine the applicable law in the jurisdiction where the suit was filed.

"After determining the applicable law, defense counsel must examine and dissect the punitive damages claim in the pleadings."^[4] There is no specific cause of action allowed for punitive damages; it is, rather, a prayer for a particular kind of damages. Defense counsel must "defin[e] and [limit] the plaintiff's underlying theory and facts."

To the extent the defense allows, the plaintiff's attorney will resist disclosure of the specifics of the punitive damages case. [Often the counsel's resistance to disclosure of specifics] is a strategic move. ^{[ 5 ]}

However, just as often, counsel resists because the plaintiff's attorney "has not formulated a coherent basis for the claim [for punitive damages]."^[6] For example, whenever an insurer is sued for bad faith, the standard complaint will always seek punitive damages and will be used by every plaintiff's counsel, without even considering what is needed to prove both the bad faith allegation and the request for proof of an entitlement to punitive damages.

"Whatever the case, defense counsel must compel disclosure of the theory and the evidence supporting the claim as early as possible"^[7] by means of an interrogatory, multiple requests for admission, and by deposition of the plaintiff if available.

Depending on the jurisdiction, pleading of punitive damages is controlled by statute.

2. Investigate the Claim

Defense lawyers sometime forget that they must investigate every claim alleged against the client. It is often best that the defense lawyer does the investigation. If that is difficult, defense counsel should be able to work closely with a private investigator who understands the law and issues raised by the case.

The defense of a punitive damages claim involves a race for the facts. Defense counsel should realize that they start this race at a disadvantage. Not only does the plaintiff's attorney have a substantial lead in the investigation of the particular events that give rise to the claim, but in most cases the attorney also will be drawing on the experience of the plaintiffs' bar in similar cases.

With this in mind, defense counsel must investigate the claim for punitive damages thoroughly at the earliest possible stage[, with the assistance of an able investigator if necessary]. ^{[ 8 ]}

Meeting with Defendant and Interviewing Defendant's Employees

A lawyer should be an effective investigator and should interview, in detail, the client who has been accused of tortious conduct that seeks both compensatory and punitive damages. To effectively produce a viable defense, the lawyer must get answers from the defendant concerning the who, what, why, when, where and how of the event about which the plaintiff complains.

While the applicable law is being determined, and the pleadings are being put in order, the very first thing that defense counsel should do is to meet with corporate representatives or the individual defendant, who should be expected to justify the alleged conduct giving rise to the punitive damages claim. ^{[ 9 ]}

In these early stages, counsel can begin to determine that the corporate employees or the friends, relatives, and neighbors of the individual defendant have consistent stories that may provide a defense to the claims of punitive damages. The investigation "involves informing the corporation or individual defendant of the nature of the punitive damages claim, as well as the seriousness of the claim, even if the plaintiff's theory has not yet been delineated in the pleadings."^[10]

Counsel, immediately upon being retained to defend, must begin by commencing the investigation, to "build a working rapport with corporate officers who may serve as witnesses at the trial and who invariably can aid counsel in the investigation of the claim."^[11] Similarly, if representing an individual defendant, counsel, by investigation, builds a working rapport with the defendant and independent witnesses who are needed to properly defend the defendant and avoid a punitive damages award.

It is critical at this juncture that defense counsel stress to the corporate or individual defendant the importance of presenting a unified front through to the conclusion of the litigation.

In fortifying this unified front, defense counsel must stress to personnel from management on down the corporate ladder that there will be no passing of the buck, pointing of fingers at other employees, or any discussion of the case outside the corporate environment.

Counsel should work hand-in-hand with corporate management at the earliest stages of preparation in order to create an impression of corporate harmony and to avoid damaging statements from any level of the corporation. ^{[ 12 ]}

Although defense fees and costs may be substantial, the defendant should be made to understand that "defense dollars are well spent on early and thorough efforts to undermine punitive damages claims. Counsel should also be sure to discuss with the defendant the costs involved in defending the punitive damages claim"^[13] even if all or part of defense costs are paid by an insurer, since those expenditures will affect the future costs of insurance. If an insurer is involved, counsel should also make clear to the insurer that defense costs will be large and assist the insurer in setting aside reserves for defense and the potential of an adverse verdict.

Investigation in preparing a defense to a punitive damages claim should never be limited to counsel. Private investigators can be retained to investigate all of the facts of the incident, visit the scene...