Gilmore Law Office

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Many Alabamans apparently were caught off guard when the state Supreme Court completed its review of a $12.5 million punitive damage award to an elderly woman who had been sold a worthless insurance policy.

It wasn't the fact the court in its Nov. 17 ruling, slashed the amount of the award to $5 million. Many punitive awards are reduced or overturned on review. And in fact, the trial judge in the case already had cut the jury's $15 million verdict to $12.5 million.

What took so many by surprise was the fact that the court used the occasion to announce it was implanting a new procedure for trying punitive damage claims. And it did so virtually on the eve of the governors widely anticipated call for a special legislative session of tort reform and without prompting from either side.

Attorneys Still Get Full Fees

Under the procedure outlined by the six-judge majority in Life Insurance Co. of Georgia v Johnson 1995 WL 683857, all cases in which punitive damages are sought from now on will be bifurcated. Half of any punitive award, following the distribution of attorney fees, will go to the state.

The Alabama court has long been a battleground between plaintiffs' lawyers and the defense bar. And Alabama juries are notorious for handing out large punitive damage verdicts. But the breadth of the court's decision, together with it's timing left many people on both sides of the issue dumbfounded.

David Carr, the Mobile lawyer who represents the defendant Life Insurance Co. of Georgia, says he, like everybody else connected with the case, was "absolutely shocked and surprised" by the ruling. "To say it was a bombshell is putting it mildly." He says.

Carr wouldn't say so, but other defense lawyers have suggested that the decision represents a last ditch attempt, by the plaintiffs-oriented wing of the court to head off the adoption of more sweeping reforms by the legislature.

"I'm not going to speculate on their timing or their motives, but it sure strikes me as unusual that neither party asked for the relief they awarded." Champ Lyons Jr., a Mobile lawyer and the governor's special counsel on tort reform, says of the court.

The legislative package-the subject of a special session began in January-effectively would render the court's decision moot.

Among other things, the legislation would: prevent the recovery of punitive damages in cases where the defendant acknowledges liability and provides full compensation to the plaintiff; replace the concept of joint and several liability with an apportionment of damages based on fault; and cap punitive damages for wanton or reckless conduct at $1 million or 15% of the defendants net worth.

Both sides have asked the court for a rehearing. Yet plaintiffs' lawyers appear considerably less bothered by the decision than some of their opponents.

Sid Jackson of Mobile who represents the 84-year-old plaintiff, Daisey Johnson, together with co-counsel Wyman O. Gilmore Jr. of Grove hill, says he couldn't argue with the essential fairness of the decision.

"I wish my client could keep all of the money, but I can't say it's unfair," he says.

Defense Leverage

Many plaintiffs' lawyers agree with Jackson, though some say reserving half of any punitive awards for the state will give the defense an unfair advantage in post-trial settlement negotiations.

"The more the case is worth, the more the defense will pressure the plaintiff to settle for a lesser amount" to avoid losing money to the state, says trial lawyer Jere Beasley of Montgomery.

With the ruling, Alabama became the tenth state to impose such an award-sharing requirement on a plaintiff who wins punitive damages, according to Suffolk University Law School professor Michael Rustad. (Colorado and Florida repealed their laws last year.)

Yet Alabama is the first state to adopt such a requirement by court order, rather than by statute, Rustad says. He believes there are several grounds for a constitutional challenge to the ruling's scheme for dividing up the punitive payments.

Carr also sees constitutional infirmities in the ruling. If the Alabama court rejects the request for a rehearing, he'll ask the U.S. Supreme Court to review the decision on the grounds that the award is excessive and a violation of the defendant's due process rights.

BY MARK HANSEN

ABA JOURNAL

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