Damages – Compensatory & Punitive Damages in Products Liability Case

The Massachusetts Supreme Judicial Court has upheld a $20 million verdict awarded after a 29 year old woman died as a result of sliding down a defective swimming pool slide which collapsed, causing her to strike the concrete deck of a swimming pool fracturing two vertebrae.

Toys R Us, which imported and sold the product appealed the judgment claiming among other grounds, that $18 million in punitive damages was so excessive it violated constitutional due process requirements.  The jury also awarded $2.6 million in compensatory damages.

Facts

Robin Aleo was visiting relatives in Andover, Massachusetts in 2006.  She went down the swimming pool slide head-first, at which point it collapsed and her head struck the concrete deck of the pool through the fabric of the slide.  Two upper cervical vertebrae fractured, causing quadriplegia.  She died the next day after her family, in accordance with her wishes, allowed disconnection of life support.

Toys R Us purchased the Banzai Falls In-Ground Pool Slide from a Chinese company.  Made of a tent-like fabric, the slide has a rubber-coated sliding surface and comes with an electric fan used to inflate it.  The slide is intended for installation adjacent to in-ground pools, so swimmers can ride the slide down into the pool.

Before the slide was imported into the United States an independent testing laboratory was retained by Toys R Us.  Various tests requested by Toys R Us and the Chinese company yielded certificates indicating compliance with United States Federal regulations and toy industry standards.

But there was never a test under a Federal standard applicable to all swimming pool slides “regardless of the materials of manufacture or structural characteristics of the slides.”  16 C.F.R. § 1207 requires that all pool slides be capable of supporting 350 pounds, and that they be tested for head-first sliding.  The court deemed it admitted that the Chinese manufactured slide was not tested or certified under this law.

Negligence and Breach of Warranty

In Massachusetts, violation of a statute, although not conclusive, is evidence of negligence.  The regulation, § 1207, requires pool slides be capable of supporting three hundred fifty pounds, and that they be tested for head-first sliding.  But the instruction manual that came with the imported Chinese pool slide and a warning label cautioned that the slide could support only 250 pounds and that head-first sliding may result in serious injury or death.  This and other evidence on appeal was found to support not only a finding of negligence, but also breach of warranty.

Gross Negligence

Violation of that statute also supported a finding of gross negligence, defined as indifference, a heedless and palpable violation of legal duty respecting the rights of others.

Gross negligence was also supported by an indemnity provision.  This meant that if Toys R Us lost money due to a product defect, it could try to recover the money from the Chinese vendor. The jury could have determined, the court found, that the toy supplier showed “want of even scant care” for the safety of its customers.  Further, the jury could have found that the company had no financial incentive to ensure that the slide was safe.

Damages Analysis: Compensatory & Punitive

Compensatory damages are intended to redress specific loss that the plaintiff has suffered by reason of the defendant’s wrongful conduct.  Court consideration of the Toys R Us challenge to the final award started with a review of the basic law of damages.

Punitive damages serve a broader function, aimed at deterrence and retribution.  Punitive damages in Massachusetts may be awarded only where authorized by statute. The Massachusetts wrongful death statute permits an award of punitive damages where the death was caused by malicious, willful, wanton or reckless conduct of the defendant or by gross negligence.  The statute sets a minimum award of $5,000, but does not set a maximum award.

The due process clause of the Fourteenth Amendment to the United States Constitution, however, prohibits grossly excessive punishment in civil cases.  Fundamental notions of fairness, the court pointed out, require fair notice not only of conduct that will bring punishment, but also of the severity of the penalty.  To the extent an award is grossly excessive it serves no legitimate purpose and constitutes an arbitrary deprivation of property.

The United States Supreme Court established three factors to review in determining whether a punitive damages award is excessive.  All three supported the punitive damage award in the case; (1) the degree of reprehensibility of the defendant’s conduct, (2) the ratio of the punitive award to the actual harm inflicted and (3) a comparison of the punitive damages award and the civil or criminal penalties that could be imposed for comparable misconduct:

In this case the $18 million punitive damage award is just under seven times the $2.6 million compensatory damage award.  Being within the single digit range, the court held the award does not, on its face, appear grossly excessive.  Measured against many other cases reviewed in comparison, the court found the award did not raise a suspicious judicial eyebrow.

Heavy civil penalties of $5,000 per violation, the court noted, could have been assessed for disregard of the federal safety regulation.  Where 4,000 of the Chinese pool slides were imported the court found comparing punitive damages to possible civil penalties merited a conclusion that the punitive damage award is not so excessive as to exceed constitutional bounds.

In Aleo v. SLB Toys USA, Inc., decided September 13, 2013 by the Massachusetts Supreme Judicial Court the punitive damage award was noted as perhaps higher than many such awards.  But, the award was upheld as not grossly excessive and fully consistent with notions of due process.

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