Initiative Targets Punitive Awards

An initiative proposed for the November ballot would curb the abilities of plaintiffs to collect punitive damages in many product-liability cases.

Supporters of the state measure, which include oil giant Chevron Corp. and the business-funded Civil Justice Assn. of California have launched a signature-gathering campaign to put the issue before voters.

If approved, the proposal would bar state courts from assessing punitive damages if a company’s product and warning labels had been approved by state or federal regulators. The immunity would be lost only if plaintiffs could prove that a manufacturer, distributor or seller intentionally withheld or misrepresented information specifically required by a government agency.

Punitive damages typically are used by juries in civil cases to penalize the guilty party and send a warning to potential wrongdoers. They can amount to hundreds of millions of dollars and occasionally result in calls for limits on “frivolous” lawsuits and outsized jury awards.

The measure is sounding alarm bells among consumer activists who view punitive damages as an effective way to punish corporate wrongdoing.

“This measure removes a major check on outrageous behavior,” said Robert Fellmeth, a former district attorney and executive director of the Center for Public Interest Law at the University of San Diego.

“Somebody could be grossly negligent and escape having to pay punitive damages, provided they didn’t deliberately withhold information from any governmental body,” said John Nockleby, a law professor and director of the Civil Justice Program at Loyola Law School in Los Angeles.

The initiative’s supporters said they didn’t want to let companies off the hook if they had committed fraud to get a product on the market. But “if you’ve already gone through some government approval process, why should you get hammered?” said Jack Coffey, Chevron’s government affairs manager for California.

The proposal would not affect the victims’ right to collect compensatory damages for economic losses or their pain and suffering, Coffey said. “Nobody is talking about anybody who gets hurt not being compensated,” he said.

The measure could affect a number of pending cases in California, including suits against Chevron and other companies that produced MTBE, a chemical compound used to reduce auto exhaust emissions.

Other high-profile California cases that could fall under the initiative’s sway include suits involving drug maker Merck & Co.’s pain reliever Vioxx, implanted heart defibrillators developed by Guidant Corp. and Ford Motor Co.’s Explorer sport utility vehicle.

About 20 public water agencies in California are suing oil and petrochemical companies over groundwater pollution caused by MTBE. Coffey said passage of the initiative could shield Chevron from punitive damages in such lawsuits.

He noted that the California Air Resources Board approved the use of methyl tertiary-butyl ether -- in the early 1990s as a way to meet the state’s tough clean-air standards. A few years later, then-Gov. Gray Davis ordered the phasing out of MTBE after water agencies discovered that the additive had leaked into groundwater from thousands of service station tanks.

MTBE manufacturers are the target of more than 200 lawsuits that have been consolidated before a U.S. district judge in New York. Last year, Republicans in the House unsuccessfully tried to protect MTBE makers from environmental lawsuits as part of President Bush’s energy bill. Bush is a longtime proponent of changes in the law to make it more difficult for consumers to sue businesses.

Private polling financed by $55,600 in early contributions from Chevron shows the initiative might appeal to voters’ “sense of fairness,” said John H. Sullivan, president of the Civil Justice Assn., which lobbies for limits on lawsuits and jury awards. It sponsored Proposition 64, the successful 2004 initiative that restricted the ability of consumers to sue under the state’s Unfair Competition Law.

Political analysts said Sullivan should have no trouble raising the $2 million or so needed to collect the approximately 500,000 voter signatures to qualify for the November ballot.

Many of the proposal’s other financial backers won’t become known until disclosure statements are filed by July 31.