Federal District Court Sets the Stage for Review of Punitive Damages Constitutional Ceiling

Case: Allen v. Takeda Pharms. North Am., Inc. (In re Actos® (Pioglitazone) Prods. Liab. Litig.)
Federal District Court, Western District of Louisiana, Lafayette Div.
2014 U.S. Dist. LEXIS 152066 (10/27/14)

In an exhaustive opinion penned by Judge Rebecca Doherty of the United States Western District of Louisiana, plaintiffs’ cataclysmic punitive award was slashed, but perhaps not far enough. The case was noted as a bellwether case in multi-district litigation encompassing some 4000 cases. The court noted that this result represents only one case out of almost 8,000 in the United States.

The Lafayette, Louisiana jury had awarded $1.15 million to plaintiff Terence Allen and $325,000 to Susan Allen as compensatory damages resulting from Mr. Allen’s contraction of bladder cancer related to his use and the defendants’ alleged marketing and sales of the drug Actos. Essentially, the plaintiffs claimed that the drug manufacturers intentionally misrepresented Actos to the public as well as to the medical community, thus realizing huge profits while exposing patients to potential bladder cancer. The jury returned punitive awards of $6 billion and $3 billion, respectively, resulting in punitive to compensatory ratios of 5424 to 1 and 8136 to 1, respectively.

Under just about anyone’s analysis, these punitive awards “shocked the conscious” and far exceeded those suggested allowable under the Supreme Court’s most recent cases addressing substantive due process in BMW of North America v. Gore, 517 U.S. 559 (U.S. 1996), and State Farm Mutual Automobile Insurance Company v. Campbell, 538 U.S. 408 (U.S. 2003), which most litigators had suggested would limit punitive awards to no more than a single digit factor of the compensatory award.

The scholarly opinion in Allen canvases Supreme Court jurisprudence and cases from lower appellate court and clearly invited the upper courts’ review and guidance, suggesting that the guideposts provided to date have left the lower courts to navigate for themselves. Judge Doherty recounted the many issues the jury and she had with the defendant’s conduct, noting the conduct was particularly reprehensible, as well as the significant profits and wealth of the involved companies.

Acknowledging the tension between what appears to have been the high court’s suggestion that rarely will anything more than a single digit multiplier of a punitive damage pass constitutional muster and Judge Doherty’s concern that such an award might not deter the defendant’s conduct, but instead might encourage it given the substantial profits realized, she eventually settled on the 25 to 1 ratio as sufficient to get the defendants’ attention. Thus, the punitive awards were reduced to roughly $26.7 million and $9.2 million, respectively. These awards reflect ratios still far above that previously approved by the United States Supreme Court, and thus are expected to receive further judicial scrutiny.

As an interesting note, the court stated the punitive awards to these 2 plaintiffs amounts to only 1/1, 120 of the 2013 stipulated net worth of the two defendants combined. What would be the result for these companies if each of the 8,000 plaintiffs recovered similar amounts?