HLD, v. 31, n. 12 (December 2003)
Oregon Appeals Court Says Some Punitive Damages Appropriate In
Negligent Misrepresentation Verdict
In October 1990, Paul R. Bocci went to an urgent care clinic
where he was treated by Dr. Frederick D. Edwards after being diagnosed with
gastroenteritis. Bocci was a long-time user of the asthma medication Theo-Dur,
which is manufactured by Key Pharmaceuticals, Inc. (Key) and contains
theophylline. Bocci was also taking the antibiotic cirprofloxacin, but had not
told the prescribing physician he was taking Theo-Dur. Edwards knew Bocci was
taking Theo-Dur but he did not believe a patient could develop a toxicity
problem from taking the drug. Shortly after he was sent home by Edwards, Bocci
was admitted to the emergency room with theophylline toxicity and he suffered
seizures resulting in permanent brain damage. Bocci sued Key and Edwards in
state trial court. Edwards cross-claimed against Key, claiming Key had
fraudulently misrepresented information about theophylline toxicity. On a
special verdict, the jury found Key was negligent in its misrepresentations
that had resulted in damage to Edwards and awarded him $500,000 in compensatory
damages and $22.5 million in punitive damages. Bocci was awarded $5 million in
compensatory damages and $35 million in punitive damages.
Key moved for judgment notwithstanding the verdict, or in the
alternative for a new trial. Key argued the combined damages for both parties
was excessive and unconstitutional. Key contended the trial court should apply Or. Rev. Stat. � 30.925(2) in examining
the punitive damages award. Edwards and Bocci argued the awards were
constitutional. The trial court applied the criteria in � 30.925(2) and upheld
the awards. Key settled with Bocci, and appealed the awards to Edwards. The
appeals court affirmed the judgment. Key petitioned for review and the Oregon
Supreme Court remanded in light of its decision in Parrott v. Carr
Chevrolet, Inc., 17 P.3d 473 (Or. 2001.) On remand, the appeals court held
the awards were not excessive, and that Key's request that the punitive damages
awards be evaluated in their entirety waived any argument that they be
evaluated separately. The Oregon Supreme Court denied review, and Key
petitioned for a writ of certiorari to the U.S. Supreme Court. During that
time, the U.S. Supreme Court decided State Farm v. Campbell, 123 S.Ct.
1513 (2003), in which it evaluated a punitive damages award, and then granted
Key's petition. The U.S. Supreme Court vacated the appeals court's judgment and
remanded the case for reconsideration in light of State Farm.
The Oregon Court of Appeals vacated the punitive damages award
and held that the appropriate amount was seven times the compensatory damages
or $3.5 million. In State Farm, the High Court used a three-factor test
from BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996), to
evaluate a punitive damages award. The three Gore factors are: "(1) the
degree of reprehensibility of the defendant's misconduct; (2) the disparity
between the actual or potential harm suffered by the plaintiff and the punitive
damages award; and (3) the difference between the punitive damages awarded by
the jury and the civil penalties authorized or imposed in comparable cases."
The appeals court addressed the first Gore factor, "the
degree of reprehensibility," and determined the evidence supported the
conclusion that Key had indifferently and recklessly disregarded the health and
safety of others, had falsely promoted its product's safety, and had engaged in
nationwide misconduct in disseminating false and misleading information to the
Food and Drug Administration and to physicians about the safety of Theo-Dur.
The appeals court held there was substantial evidence that Key's conduct was
The appeals court then considered the second Gore factor,
which is an evaluation of the ratio of harm to the plaintiff and the punitive
damages award. In State Farm, the High Court looked to whether awards
have single-digit ratios or double-digit ratios, and suggested single-digit
ratios are constitutional. Key argued the punitive damages to compensatory
damages ratio of 45 to 1 was too high and presumptively invalid. The appeals
court noted the Supreme Court had determined any ratio higher than 4 to 1 would
have to involve conduct that was "particularly egregious." Key's conduct, said
the appeals court, was deceitful but did not rise to the level of being
"particularly egregious," and therefore the ratio of damages was excessive.
The third and final Gore factor compares the difference
between the jury award and civil penalties in similar cases. Rejecting Edwards'
argument that Key's misconduct could have led to a criminal prosecution, the
appeals court observed that the Court in State Farm found that criminal
prosecutions provide for higher standards of proof and the possibility of a
Therefore, the appeals court concluded the 45 to 1 ratio was too
high but a 7 to 1 ratio was constitutional. Accordingly, the appeals court
reversed the award of punitive damages and remanded for a new trial unless
Edwards agreed to remittitur of punitive damages of $3.5 million.
Bocci v. Key Pharm., Inc., No. A9210-07050 and A86556,
2003 WL 22097104 (Or. Ct. App. Sept. 10, 2003).