Friday, May 11, 2012 - 20:18: Defendant's negative net worth does not render punitive damage award reversibleBetween 2006 and 2010, ArvinMeritor, Inc., attained $3 billion in sales revenue each year and had an annual cash-flow profit of $111 million, a primary business being manufacturing brake shoes. Its lowest annual profit during this period was $95 million. However, as of 2010, it reported a negative "net worth" of $1.023 billion; the company's losses resulted primarily from significant capital expenditures and development expenses.
Gordon Bankhead contracted mesothelioma as a result of 30 years of exposure to asbestos dust while working in automobile maintenance facilities. Brake shoes for which ArvinMeritor is in part responsible caused the deleterious asbestos dust. Bankhead sued a number of defendants including ArvinMeritor. After trial in Alameda Superior Court, a jury awarded a verdict in favor of Bankhead including a 15% share of the fault against ArvinMeritor which resulted in joint and several liability in the sum of $1.47 million in economic damages, and several liability of $375,000 in noneconomic damages. In addition to this total compensatory award of $1.845 million, the jury later awarded punitive damages against this defendant in the sum of $4.5 million.
In Bankhead v. ArvinMeritor, Inc. (filed April 19, 2012) 2012 DJDAR 5011), ArvinMeritor disputed the punitive damage award on two grounds: 1) the award is excessive because ArvinMeritor proved its negative net worth, and 2) the 2.4 to 1 ratio of punitive damages to compensatory damages is constitutionally excessive. The Court of Appeal, First Appellate District, Division Four, disagreed and affirmed the judgment. In particular, the appellate court held there is no legal requirement that punitive damages must be measured against a defendant's net worth.