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Depecage, Punitive Damages, and Mass Torts

By James M. Beck and Mark Herrmann

Plaintiffs usually allege that decisions regarding marketing, distributing and selling a drug or device - as well as interactions with the FDA - were made by the manufacturer at the corporate level. Of course, they argue that these corporate decisions then impacted the prescribers and plaintiffs at their home locales.  As lawyers who defend mass torts, including putative class actions, we are used to litigating choice-of-law issues - and using the heavily lex loci-oriented outcome (no matter what rule applies, tort cases heavily lean toward having plaintiff's home jurisdiction's law apply) -- to disaggregate cases, defeat class actions, or even return cases to their proper fora.  Will wonders never cease.

But one size does not necessarily fit all ? especially in the law. Punitive damages can be one example of this point. "The law governing the right to [punitive] damages need not necessarily be the same as the law governing the measure of compensatory damages," because one state may have ?the dominant interest with respect to the issue of compensatory damages and another state ha[ve] the dominant interest with respect to the issue of [punitive] damages.? Restatement (Second) of Conflict of Laws § 171 comment d. There are also territorial aspects of due process that restrict states' ability to punish out of state conduct, something we addressed here. These are similar to the due process issues we've discussed before that (we think) also preclude use of class actions in the punitive damages context - regardless of any choice-of-law considerations.

But back to the point.  When different parts of a case are controlled by different states' law we lawyers call this "depecage." That's more jargon, so we looked it up. It's legal French (and you thought we only dealt with legal Latin) and comes from some art form involving layering - like ogres, we guess.  Actually, that's not particularly bad etymology - even though our French is pitiful - since mass torts certainly lend themselves to layering, and to the consequent need to parse claims and choice of law inquiries.

Because punitive damages are designed to deter and punish improper conduct, rather than to compensate an injured plaintiff, there are arguments to support application of the law of the defendant's principal place of business to punitive damages issues. One of them is that, since the imposition of punitive damages is meant to alter a defendant's expectations, rather than the plaintiffs', applying the defendant's home state's law may better serve the parties. See Restatement (Second) of Conflict of Laws § 145 comment c (?If the primary purpose of the tort rule involved is to deter or punish misconduct. . .the state where the conduct took place may be the state of dominant interest and thus that of most significant relationship?). At least the defendant has some reason to expect that its conduct - which eminates from its home state - will be held to the punitive standards of its home state. Plaintiffs, on the other hand, don't expect anything along these lines, assuming they expect anything at all.

Interestingly, Indiana rejected the use of depecage. In 2004, answering a certified question from the U.S. Court of Appeals for the Third Circuit (it was an air crash case) as to whether Indiana law permits depecage, the Indiana Supreme Court stated that depecage "may also produce unfair results because the hybrid law may be more favorable to one party than another, allowing a result that could not be reached if the laws of any one state were applied. As Brainerd Currie said, a party 'should not be allowed to put ?together half a donkey and half a camel, and then ride to victory on the synthetic hybrid.?? Simon v. U.S., 805 N.E.2d 798, 802-03 (Ind. 2004) (citations omitted).

We like the donkey and camel line, and wish we came up with it. But the analysis arguably starts to break down in the context of a complex mass tort where caravans of plaintiffs come plodding in from almost every state this side of Timbuktu and choose to file in defendant's home state in order to stay out of federal court. In response to such blatant forum-shopping, some courts have seen fit to readjust the balance by applying more sophisticated choice of law concepts, including depecage.

While the injuries are alleged to span multiple states, the alleged misconduct allegedly occurred in the defendant's home state. That can become important, especially when the defendant is located in a state with exceptionally favorable (yay, depecage!) or exceptionally unfavorable (forget depecage) punitive damages law ? exactly why we're not going to be pinned down to a particular position

But it can be argued that the relationship between the parties centers on defendant's home jurisdiction - even though the place of injury may properly lay claim to the compensatory damage claims - and applying the defendant's home jurisdiction's law violates neither the interests of the states nor the hypothetical expectations of the parties. Practical notions come into play as well. Utilizing a single state's punitive damages rules within a mass tort allows court (or courts) applying a single state's punitive damages law to better ensure that punitive awards do not overlap - preventing a defendant from getting hit over and over with awards where the first was already deemed sufficient to deter under that state's law. Then there's Lexecon?. Which is probably a good place to stop.

Full post as published by Drug and Device Law on December 29, 2009 (boomark / email).