Unfortunately, lawyers and clients sometimes ignore or miscalculate a punitive damage claim — often because the claims seem outlandish — and are taken by surprise when a jury returns a verdict for the plaintiff. Although it is not an everyday concern, corporate managers can take steps to minimize or prevent such unwelcome punitive damage surprises.
The first step is to understand the nature of punitive damages, which are usually defined by what they are not. They are not intended to compensate the plaintiff, but are instead meant to punish the defendant for ourageous or malicious conduct. They also are assessed according to the wealth of the defendant, not the actual damages the plaintiff suffered. Because they are not related to actual losses, punitive damages are often viewed as actually a windfall to the plaintiff.
Courts justify the imposition of punitive damages by stating that they deter the wrongdoer and others from engaging in similar malicious conduct. In this way, the law provides a learning experience so that others can avoid similar conduct in the future. By examining a typical case, managements of ski areas can become familiar with the types of conduct that have warranted punitive damages in the past and direct future conduct accordingly.
Recently, the federal district court in New Jersey considered two companion cases involving ski accidents in which punitive damages were sought against a defendant ski area. These cases are instructive in understanding the type of conduct that plaintiffs and their expert witnesses might attack as malicious and the type of evidence that plaintiffs may attempt to marshall against ski areas in order to build a case.
The cases involved skiers of opposite abilities; one was advanced-to-expert, the other a beginner. Both were injured on the same intermediate level trail in 1984 at an “elbow” or “switchback” near the top of the trail. Both skied off the trail and incurred serious physical injuries. The lawyer for both skiers set forth identical punitive damages theories and relied upon the same evidence and expert witnesses in both cases.
The plaintiffs tried to show that the ski area knew the elbow was dangerous and had deliberately failed to make it safe. Through expert testimony, they tried to establish that the ski area was aware of a high number of accidents on the trail over the preceding years. The plaintiffs claimed that netting used at the elbow as a warning fence should have been in place to restrain skiers from going off the edge of the trail. They also argued that the night lighting was inadequate and the grade of the slope was too steep at the elbow.
The plaintiffs built their case around hundreds of accident reports which the ski area was required to produce in discovery. These were routine forms completed by ski area personnel whenever a skier was injured in any way and covered a gamut of injuries, including bruised knees.
The plaintiffs’ expert witnesses utilized the accident reports to argue that the ski area knew since the early 1980’s that many accidents had occurred on the trail, particularly at the elbow. They focused on the fact that the ski area had experimented over the years with different types of fencing at the elbow. They also claimed that a barrier made of hay and used in the 1960’s was designed to stop skiers who were out of control from going off the edge of the trail. In fact, the ski area had removed the hay barrier because it posed a danger to skiers. The barrier was replaced with a fence intended only to visually warn skiers of the edge of the trail, but not to restrain them. This warning fence was in place at the time of the plaintiffs’ accidents.
In 1986 — two years after the accidents — the ski area’s mountain crew invented a cantilever design for a fence in which the fence poles were positioned away from the edge of the trail where skiers would be most likely to impact first. It was hoped that the cantilever fence would restrain out-of-control skiers without the poles posing a danger. The plaintiffs’ experts used this new fence design against the ski area claiming that it could and should have used such a fence at the time of the plaintiffs’ accidents.
In a pre-trial decision, the court ruled in favor of the ski area, dismissing the punitive damage claims. The court ruled that the number of accidents on the slope, without distinguishing between types of accidents, was not enough to show that the ski area knew of the presence of a significant risk of death or substantial physical harm. The court based this conclusion on the fact that 15.5 percent of the total number of accidents at the ski area took place on the trail where the plaintiffs were injured. This percentage was not so outrageous as to warrant punitive damages. The ruling was limited by noting that there could come a point when the total number of accidents on a trail would be so high that a percentage analysis would not insulate the defendant from liability.
The court rejected the argument that the replacement of the hay barrier with the warning-type fence constituted a malicious act. There was no connection between the information gained from the accident reports in the 1980’s and the replacement of the fence in the 1960’s.
The court rejected other arguments by the plaintiffs that the ski area knew the lighting (for night skiing) of the elbow was inadequate and the grade too steep for an intermediate trail, but failed to take any corrective measures. The court ruled that none of the plaintiffs’ evidence was sufficient for the jury to conclude that the ski area acted maliciously.
Several lessons can be taken from these cases. First, nothing should be left to chance. It is absolutely essential to address a punitive damage claim as early as possible in the litigation, preferably during pre-trial discovery. Management must be willing to assist its defense counsel in reviewing documents and talking to present and past employees. It is common that corporate conduct from the past can be at issue, so patience is required in reconstructing past actions and understanding them in context. The punitive damage claim must be confronted head on, not avoided until the jury returns a surprise verdict.
Also, it is critical to pin down the source of the plaintiff’s punitive damage theory. In most cases, a plaintiff will not develop a theory until after the defendant has produced internal documents and had witnesses testify at depositions. Then he will hire an expert to evaluate the information obtained in discovery. The ski area cannot prevent broad discovery of documents and witnesses because that is the policy of the courts. It certainly cannot change the past or the record of the past. It can, however, monitor discovery very closely and be aware of the significance of the information disclosed. Corporate documents that may be harmful or simply ambiguous often do more damage because they are misunderstood or misconstrued. The ski area attorney must work very closely with defense experts to comprehend and attack the theories of the plaintiff’s expert as soon as possible.
The most important work is preventive and is done before there is litigation. A ski area that observes standards for self-improvement and pursues safety programs should be able to avert frivolous punitive damage claims. Management must always be attentive to safety problems and diligent in pursuing remedies. One of the most damaging forms of evidence is a safety suggestion that has gone ignored. If a suggestion was made in written form, the response must also appear in written form. The written word speaks louder to a jury than a belated explanation or excuse. Dialogue and a spirit of cooperation for a common good in management can convince a jury that the corporation was not malicious and its conduct was not outrageous.
