U.S. Billion-Dollar Verdicts - A Vanishing Breed

(…That Never Existed in New Hampshire)

          According to the January 8, 2009 article written for Bloomberg News by Margaret Cronin Fisk, the U.S. Supreme Court has revised the law regarding punitive damages over the last several years, most recently with its June 2008 decision in the Exxon Valdez oil spill case where it recalculated a $2.5 billion punitive award to a $507 million award. According to Fisk’s research, legal observers believe that last year’s Exxon Valdez ruling moved the punitive-to-actual damages ratio from ten to one to a new ratio target that is now generally one to one, with few higher than three to one. As a result, the billion dollar jury verdict has essentially disappeared from U.S. courtrooms.

          Fisk states in her article that, “[f]or the second time in the past three years, juries in 2008 issued no awards above that amount, according to data compiled by Bloomberg News.” In 2007, there was one such verdict, for $1.5 billion. In the previous 14 years there was at least one billion-dollar verdict a year and a grand total of 26. Six cases rendered during that time period produced awards of more than $5 billion each. The primary reason for the drop, according to Fisk’s analysis, is that these large verdicts were primarily caused by punitive damages awards and because of new legal rulings, punitive damage verdicts are reversed on appeal if they far exceed actual damages. The top 10 punitive awards against companies in 2008 were down 30 percent from 2007 and 63 percent from 2006. The top verdict overall in 2008 was a contract case against Boeing Co. and a subsidiary, where the award was just over $600 million. According to Fisk, it was the lowest top verdict of the year in dollar terms since 1991.  

          However, even winning a large verdict does not guarantee the ultimate size of the victory. In 2003, the State of Alabama was awarded $11.9 billion against Exxon Mobil Corporation in a suit claiming fraud in the underpayment of natural-gas royalties. (This was also the most recent U.S. verdict for more than $2 billion.) But according to Exxon Mobil’s attorney in the case, the $11.8 billion punitive portion of the verdict was eliminated in post-verdict proceedings and Alabama ultimately was only awarded $120 million. Similarly, the only billion-dollar verdict in the past three years came in 2007 in a patent suit against Microsoft Corporation. However, the Microsoft verdict was reversed on appeal and settled before being retried. More pointedly, ten of the 12 all-time biggest awards were cut or reversed. Of the two remaining, one was uncollectible and the other ended up settling post-verdict for $2 million in available insurance.

          Of course, all of this is “observing from afar” as here in New Hampshire the law does not allow for punitive damages. Punitive damages were determined to be unlawful under our state constitution by the New Hampshire Supreme Court back in 1873. Just to make sure that remained the case, our Legislature took a “belt and suspenders” approach and statutorily outlawed punitive damages in 1986 with the enactment of RSA 507:16.

Timothy G. Kerrigan is a director at Hamblett & Kerrigan, P.A. His present practice focuses on complex legal situations both in the litigation and in the ADR context. He is available as a litigator, client advocate or as an ADR neutral. Mr. Kerrigan is certified by the State Office of Mediation and Arbitration both as a mediator and as an arbitrator. You can reach Attorney Kerrigan by e-mail at tkerrigan@nashualaw.com.

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