Month: April 2012

In Owens-Illinois, Inc., et al., v. Zenobia, et al.,  325 Md. 420 (1992), the Maryland Court of Appeals enunciated a “malice” standard for punitive damages in Maryland.

Plaintiffs Zenobia and Dickerson in the original cases were victims of asbestos exposure and sued several defendants who produced, supplied or installed products containing asbestos.  At trial, the only theory of liability was strict liability. The jury awarded both compensatory damages against five defendants for Dickerson and four defendants for Zenobia and awarded further punitive damages against three defendants in favor of Dickerson and against two Defendants in favor of Zenobia. Pursuant to a stipulation, all defendants were considered to have cross-claimed against each other,  and one defendant with whom Plaintiffs had struck a settlement found itself in bankruptcy.  The procedural posture of these cross-claim awards is relevant to the case but not to the ultimate precedential value of this case as a major Maryland case.

On appeal by the five of the Defendants to the Court of Special Appeals, that Court upheld all of the compensatory damage awards but did reverse the punitive damages against one defendant only, Porter-Hayden Co.  Zenobia and Dickerson cross-appealed

Owens-Illinois, Inc, Porter-Hayden Co. and defendant MCIC petitioned the Court of Appeals for certiorari on several issues involving improper jury instructions on duties to warn, improper admission of deposition evidence and, in the case of Owens-Illinois, the propriety the punitive damage award.  Zenobia and Dickerson filed conditional cross-petitions for certiorari on the issues of contribution and indemnification among the Defendants, issues that they had raised before the Court of Special Appeals; the petitions were conditional upon the granting of the prior certiorari petitions.  In response to Zenobia’s and Dickerson’s conditional cross-petitions, Anchor Packing Co. then filed a petition for certiorari on four issues.

Confused yet?  The Court of Appeals granted all petitions for certiorari.

The Court’s opinion addressed issues involving the admission of deposition testimony and the denial of a motion for a new trial in its first three sections, but those issues do not constitute the primary precedential value of the case i.e. what makes this case a “Important Maryland Case.”  In section IV of the opinion, the Court engaged in a lengthy discussion of the standards for punitive damages in a strict liability products liability case, with the intent to examine the characterization of a trial defendant’s conduct in such cases, define precisely the standard which in a non-intentional tort case may give rise to punitive damages and in fact to heighten that standard.

The court discussed and, for non-intentional tort purpose, ultimately dismissed the “Testerman-Wedeman” standard, named after two prior cases.  In those cases, the Court of Appeals had ruled that in the context of a contractual relationship, conduct occurring before the formation of a contractual relationship could give rise to punitive damages on a finding of “implied malice”, i.e. wanton or reckless disregard, whereas under that prior standard punitive damages for conduct occurring after the formation of a contractual relationship could lie only on a showing of “actual malice,” that is, “evil motive, intent to injure, fraud, or actual knowledge of the defective nature of the products coupled with a deliberate disregard of the consequences.”  The Court of Appeals explicitly abandoned that rule in this case because the purpose of punitive damages is to punish heinous conduct by a defendant, regardless of when that heinous conduct occurred.

The Court proceeded to examine the historical standard of “actual malice” for punitive damages, noting that in one 1972 case involving a motor vehicle accident the Court had allowed punitive damages upon a showing of mere implied malice, i.e. gross negligence, but warned in that case against the broader application of a more liberal standard.  Notwithstanding the limitation warning, a number of subsequent cases in Maryland relied on Smith v. Gray Concrete Pipe Co., 267 Md. 149 (1972), more liberal standard outside of motor vehicle cases.  The Court proceeded explicitly to overrule Smith upon a review of the policy arguments against the inconsistent results that had occurred in facts with similar cases and after examining how Maine’s Supreme Court had recently modified its implied malice standard in similar cases.

The Court proceeded to note that in a products liability case, it is difficult to show “actual malice” by a manufactureras previously defined as evil intent, intent to injure, ill will, or fraud.  The Court then stated that actual knowledge of a defect and associated danger connected therewith, and a conscious or deliberate disregard of that danger to consumers, together constituted the product liability standard for “actual malice.” The Court emphasized that mere constructive knowledge or “substantial knowledge” are not enough to meet this standard.  The Court stated further that a punitive damages claim was possible from a strict liability or negligence-based tort theory, if the facts otherwise met the punitive damages standard.  Perhaps most significantly, the Court followed the reasoning of several other U.S. courts in applying a heightened standard of “clear and convincing evidence” to any tort claim for punitive damages, reflecting their penal nature and potential for debilitating harm.

The Court noted that its change of the evidentiary standard for punitive damages was a change to the common law within the Court’s constitutional jurisdiction, and would apply prospectively to all trial started from that day forward.  On the other hand, the Court deemed its overturning of Smith and the Testerman-Wedeman standard not to be a change to the common law but rather an overruling of decisions that were decided erroneously, and therefore the law would apply retroactively to any case where the issue had been properly preserved for appeal.  The Court remanded the plaintiffs’ claims back for a new trial under the narrowed legal standard and the heightened evidentiary burden, to the extent applicable under the evidence presented by all parties that the new trial.

Judges McAuliffe and Bell (the latter later Chief Judge) issued separate opinions.  Judge McAuliffe concurred in the result of the majority opinion but urged that in cases where a defendant met a standard of depraved indifference short of “intent” which could satisfy the “malice” standard for common-law murder, punitive damages should be at least theoretically available since in both cases the intent of the law was to punish.  Judge Bell concurred with the majority in the overruling of Smith and the Testerman-Wedeman doctrine but dissented strongly as to the raising of the standard for punitive damages to “actual malice”:

“In cases where there is no actual malice, the totality of the circumstances may reveal conduct on the part of a defendant that is just as heinous as the conduct motivated by that actual malice and, so, for all intents and purposes is the same.”

Zenobia‘s influence on tort law in Maryland has been rather strong.  One year after Zenobia, the Court of Appeals went on to hold in Komornik v. Sparks (which this Important Maryland Cases series will cover at a later date) that even in cases involving drunk driving – which criminal courts can punish with incarceration – punitive damages cannot lie in the absence of a finding of actual malice.  A cautious person may ask: if a court can punish a wrongdoer with punitive jail to prevent a harm, why not with punitive civil damages that go to an actual human victim of the conduct which the criminal statute seeks to deter, restrain and punish?  Regardless of one’s opinion of the opinion, Zenobia is a mandatory read for any Maryland tort litigator and definitely qualifies as one of the most Important Maryland Cases.