Sunday, September 20, 2009

South Carolina Supreme Court Issues New Punitive Damages Decision: Mitchell v. Fortis Insurance Company, 2009 WL 2948558 (Sept. 14, 2009)

In Mitchell v. Fortis Insurance Company, 2009 WL 2948558 (Sept. 14, 2009), a policyholder brought causes of action for breach of contract and bad faith rescission against his insurance company, and sought actual and punitive damages for the company’s termination of his health care insurance from original issuance on the grounds of a purported misrepresentation. With regard to the bad faith claim, the policyholder asserted the insurance company had wrongfully rescinded his health insurance coverage and then worked to conceal evidence of its bad faith.

The jury awarded the policyholder $36,000 in actual damages on the breach of contract claim, $150,000 in actual damages on the bad faith rescission claim, and $15 million in punitive damages deriving from the bad faith cause of action. The punitive damages award exceeded a single-digit ratio between punitive and compensatory damages

On appeal, the carrier argued the $15 million punitive damages award was so excessive as to violate its constitutional right to due process under the standards set forth in Gamble v. Stevenson, 305 S.C. 104, 406 S.E.2d 350 (1991) and BMW of North America v. Gore, 517 U.S. 559 (1996). The Court agreed with this conclusion, although its analysis differed substantially from that urged by the defendant.

In South Carolina, our jurisprudence has largely tracked the United States Supreme Court’s constitutional pronouncements, beginning with the Gamble opinion. In Gamble, the Court identified eight considerations that trial courts should apply in conducting a post-judgment due process review of any punitive damages award. These considerations are: (1) the defendant’s degree of culpability; (2) the duration of the conduct; (3) the defendant’s awareness or concealment; (4) the existence of similar past conduct; (5) the likelihood the award will deter the defendant or others from like conduct; (6) whether the award is reasonably related to the harm likely to result from such conduct; (7) the defendant’s ability to pay; and (8) any other factors deemed appropriate.

The South Carolina Supreme Court has said in past cases that trial courts must consider both the Gamble and the Gore factors. However, in the case at bar, the Court recognized “the considerations of judicial economy weigh in favor of a less burdensome and duplicative analysis.” Accordingly, the Court held that Gamble remains relevant to the post-judgment due process analysis, but only insofar as it adds substance to the Gore guideposts. The Gore guideposts require a reviewing court to consider: (1) the degree of reprehensibility of the defendant’s conduct; (2) the disparity between the actual and potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.

Applying Gore, the Court determined the insurance company’s conduct in this bad faith claim was “highly reprehensible and that the imposition of punitive damages was appropriate.” Therefore, the award of punitive damages stood as to the carrier.

However, with regard to the punitive damages award amount, the Court determined it was too high: “We find that a 13.9 to 1 ratio, in this particular case, exceeds due process limits.” The Court then set out to examine punitives awarded in comparable cases.

Examining South Carolina cases involving insurance company bad faith, as well as applying the tenets of State Farm v. Campbell, 538 U.S. 408, 416 (2003). (“Although the [United States] Supreme Court has “been reluctant to identify concrete constitutional limits on the ratio between harm, or potential harm, to the plaintiff and the punitive damages award,” and has consistently declined to adopt a bright line ratio or simple mathematical test, the Court has remarked that “in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.”), the Court concluded “the conduct in this case was reprehensible enough to merit an award towards the outer limits of the single-digit ratio.” Consequently, the Court remitted the punitive damages award to $10 million, resulting in a ratio of 9.2 to 1. In so doing, the Court observed: “We believe a $10 million award in this case satisfies due process and comports with South Carolina law. We are also certain that a $10 million award will adequately vindicate the twin purposes of punishment and deterrence that support the imposition of punitive damages.”

The Supreme Court’s decision in Mitchell is significant because: (1) while it recognizes that Gamble remains good law in South Carolina, the federally-enunciated Gore analysis now appears to take priority in post-judgment punitive damages review in our state courts; and (2) our appellate entities have elected to not adopt a bright line ratio or simple mathematical test with regard to punitive damages awards.  While the Supreme Court acknowledges the Campbell precept that few awards permit the exceeding of a single-digit ratio between punitive and compensatory damages, its explicit decision not to adopt a ratio or mathematical formula appears to connote that in circumstance where sufficient reprehensibility and comparable awards exist to support such an award, a reviewing court in South Carolina could uphold a double-digit award between punitive and compensatory damages.

Saturday, September 19, 2009

The 50 Best Things to Eat in the World and Where to Eat Them

From the Guardian News (UK), a listing of the 50 best dishes in the world and where to eat them. After reading this article, my next trip to Manhattan will definitely include a trip to Little Owl in Greenwich Village, home of the world's best hamburger.

Click here for a list of the 50 best things to eat and where to eat them:

From The New York Times: Can Amazon Become the Wal-Mart of the Web?

From the September 20 edition of The New York Times, an interesting article on Amazon's foray into becoming a larger presence on the internet in terms of general merchandise. Amazon is soon expected to sell more general merchandise than media products like books and DVDs.

Click here for the full story:

Friday, September 18, 2009

Navigating the Pitfalls Connected with Retail & Hospitality-Related Litigation

American Hotel & Lodging Association to Host Webinar on Handling H1N1-Related Issues

AH&LA Webinar: H1N1 101 - September 29, 2009
2:00 p.m. - 3:30 p.m. (EDT)

With the lingering threat of H1N1, make sure you’re prepared to minimize occurrences, address crisis communications, and handle personnel issues according to HIPPA regulations. Join us for a 90-minute webinar to learn practical tactics and tips to effectively combat flu season.

Sponsored by EcoLab, the Webinar is free to the first 300 AH&LA members who register; nonmember price is $99. Registration deadline is September 25.

Panelists include:

Tom PolskiVice President, Global Communications/External Relations Carlson Hotels Worldwide

Nina FairweatherSenior Manager, Environmental Health & Safety, Europe, Africa, Middle East Starwood Hotels & Resorts

Katie Swanson, Ph.D.Vice President, Food SafetyEcoLab

AH&LA Webinar Series presented by American Express

Monday, September 14, 2009

From Nation's Restaurant News: Restaurants Fight "Brandjacking" Threat Online

Just as the restaurant industry found during the tech boom of the late 1990s, the Internet continues to bring as much peril as it does promise.

While the current growth of social media has provided companies large and small with cheap, effective marketing, it also has exposed them to a new kind of fraud: “brandjacking.”

A company can be brandjacked if a scammer—or in some cases, a competitor—creates a false social-media profile on outlets such as Facebook and Twitter and misrepresents that company online, said Susan Neuberger Weller, a trademark attorney with the Washington, D.C., office of Mintz Levin.

In response to this new threat, many restaurant concepts have gotten tough with "brandjackers," including seeking redress from the courts.

Read more:

Sunday, September 13, 2009

From Nation's Restaurant News: How to Prepare Your Restaurant for the Swine Flu

Christian Stegmaier

With summer coming to a close and autumn just around the corner, public health officials are forecasting the arrival of flu season together with the more serious return of the H1N1 pandemic virus, more commonly known as the swine flu.

While the nation largely dodged the worst of the pandemic during its first appearance earlier this year, many experts are predicting that H1N1 will return this season even stronger than before.

In anticipation, the National Restaurant Association together with the Centers for Disease Control and Prevention and Ecolab are recommending steps that foodservice operators can take to help control the viruses' spread

Click on this link for the complete steps of how to prepare your restaurant for the Swine Flu:

For more information on the seasonal flu and H1N1, visit the National Restaurant Association websites: and

Back in Action

by Christian Stegmaier

After seemingly taking a good portion of the summer off from blogging, the South Carolina Retail & Hospitality Law Blog is back in action. Be sure to check back often for posts regarding new case law, best practices, and other items of interest concerning retail & hospitality-related issues.