Seventh Circuit Affirms Large Punitive Award After State Farm

Although the Supreme Court limited punitive damages in State Farm Mut. Automobile Ins. Co. v. Campbell, 123 S. Ct. 1513 (2003), and has vacated numerous cases in light of State Farm (as discussed here), the Seventh Circuit has affirmed a punitive damages award representing over 37 times the compensatory damages awarded, finding that the language in State Farm regarding single-digit ratios was discretionary.

In Mathias v. Accor Economy Lodging, Inc., No. 03-1010, 2003 WL 22389863 (7th Cir. Oct. 21, 2003), the jury awarded plaintiff $10,000 in compensatory damages and $372,000 in punitive damages, where a hotel deliberately assigned plaintiffs a room it knew was infested with bedbugs. Defendant appealed, in part arguing that the amount of punitive damages was unconstitutionally excessive under State Farm. However, the court stated that State Farm "did not lay down a . . . single-digit ratio rule – it said merely that 'there is a presumption against an award that has a 145-to-1 ratio' – and it would be unreasonable to do so." Applying various other factors from State Farm and other recent Supreme Court precedent on punitive damages, the court upheld the full award.

Federal Agency's Choice Of Forum Entitled To Same Weight As Non-Government Plaintiff

Under traditional forum non conveniens analysis, a plaintiff's choice of forum will rarely be disturbed unless the balance is strongly in favor of the defendant. However, the Seventh Circuit recently considered a matter of first impression: when the plaintiff is a federal agency, how much weight should be given to its choice of forum. In re Nat'l Presto Industries, Inc., No. 03-1873, 2003 WL 22389815 (Oct. 21, 2003).

The SEC sued National Presto Industries in federal court in Chicago, although defendant was based in Eau Claire, Wisconsin. Defendant moved for transfer of venue, but the district court denied the motion in an interlocutory order not ordinarily appealable. Defendant sought mandamus in the Seventh Circuit. In considering the case, the Seventh Circuit rejected as "unrealistic" the argument that the federal government has such vast resources that no venue could ever be thought to be inconvenient. "Federal agencies have limited resources, and the SEC in particular is often outgunned by the affluent defendants that it sues." The court credited the SEC with choosing to bring the case in a federal district in which the SEC's closest regional office resided.

Having said that, the court concluded that the balance of conveniences in this particular case was a close call that might actually favor defendant. Nevertheless, noting the heavy burden on mandamus, the appellate court held that even though defendant might be able to satisfy the irreparable harm requirement in a denial of a forum non conveniens motion, and even though the balance actually might favor defendant, the balance was not sufficiently "askew as to justify the extraordinary relief" sought through the writ of mandamus.

State Prior Pending Action Statute Unavailable In Federal Cases

The State of Illinois enacted a statute that allows a defendant to move to dismiss if another action involving the same parties was filed first and is pending elsewhere. In AXA Corporate Solutions v. Underwriters Reinsurance Corp., No. 02-3795, 2003 WL 22359249 (7th Cir. Oct. 17, 2003), the district court applied that statute in a diversity case where the same parties were pursuing litigation in Texas state court, and dismissed the federal case.

However, clarifying a matter over which its district courts have split, the Seventh Circuit held that Illinois' statute is not available in federal court. Instead, federal courts rely on federally-developed abstention doctrines, such as the Colorado River doctrine, to determine whether it is appropriate to reject jurisdiction over matters filed before it. Here, the Seventh Circuit concluded that Colorado River abstention, which the U.S. Supreme Court cautions must be used only in "exceptional circumstances," would not be appropriate, and it reinstated the case.

Supreme Court Vacates California Case Allowing Class-Wide Arbitration

In Garcia v. DirecTV, Inc., No. B158570, 2002 WL 31769224 (Cal. App. (2d Dist) Dec. 11, 2002) (unpublished), independent dealers commenced an arbitration, and also filed a class action, alleging that DirecTV had failed to pay them certain compensation. The trial court ordered arbitration on a class-wide basis as permitted under state law.

DirectTV appealed, arguing that the parties agreed to be governed only by federal law, which bars class-wide arbitration; however, the Court of Appeals affirmed. The U.S. Supreme Court summarily vacated the case and remanded "for further consideration in light of Green Tree Financial Corp. v. Bazzle [123 S. Ct. 2402 (2003)]." Hughes Elect. Corp. v. Garcia, No. 02-1752, 2003 WL 21313782 (U.S. Oct. 6, 2003). In Green Tree, the Court held that the arbitrator, not the court, decides whether an arbitration contract forbids class arbitration.