George Bellows, Dempsey v. Firpo, 1924
Update (March 28, 2016): Very often cases end in ambiguous “mixed decisions” but apparently not Alotech v. North Star Imaging (“NSI”). Congratulations to Nilan Johnson Lewis (“NJL”) lawyers Scott Rusert and Ben Johnson for a decisive summary judgment knock-out in which NJL fought on behalf of defendant/counterclaim plaintiff NSI.
The facts of the case, as set out by Sr. U.S. District Court Judge Richard H. Kyle (D. Minn.), look straightforward. NSI sold Alotech a machine that can x-ray “ablated metal” to find otherwise invisible, internal metallurgical defects in the metal. Alotech made 90% of the payments on the machine but stiffed NSI on the last 10% payment of about $54,000. Instead, Alotech argued that the machine did not perform as promised. Alotech demanded that NSI take it back and refund the nearly $500,000 already paid. Alotech sued NSI and NSI counterclaimed for the unpaid 10%.
In retrospect, it is hard to imagine that Alotech moved for punitive damages against NSI, as discussed in the previous post, below. Indeed, if the facts really are as set out in Judge Kyle’s memorandum opinion and order, then Alotech’s whole case appears to be a stratagem to get out of paying the last 10% on a $540,000 machine. If that’s the case, maybe NSI’s challenge has only just begun — getting money from an adversary which has none? (Otherwise, what a lapse in judgment by Alotech, which likely paid more than $54,000 to fight a $54,000 bill.)
I direct civil litigators’ attention to footnote #2 (admissibility of hand-written meeting notes) and footnote #9 (untimely expert evidence). Reliance on hearsay to defeat a summary judgment motion or too-late expert evidence are painful lessons best learned vicariously….
Dive Bar Image, Flickr Creative Commons License, http://goo.gl/c2gV1r
Update (March 30, 2015) (under headline: What’s a Gal Got to Do To Get Punitive Damages in This Joint?): Getting permission to make a claim for punitive damages is difficult under Minnesota law. In my opinion, it is too difficult.
If a buyer of expensive and sophisticated machinery makes clear to the seller that it requires Features A, B, C, D, if seller assures buyer that the expensive machine will have Features A, B, C, D, if seller delivers the product and it does not have Features A, B, C, D, and, finally, if there is sufficient evidence from which a jury could conclude that seller knowingly misstated the nature and quality of the product and knowingly sold the product without Features A, B, C, D, which seller knew that buyer felt were critical and material needs, in my view, seller should be financially punished. Such a narrative should, in my view, support a claim for punitive damages.
Plaintiff Alotech, Ltd. and its lawyers agree. Of course, defendant Northstar Imaging emphatically disagrees. In fact, Northstar Imaging argues that it provided exactly what it promised to provide so, Northstar argues, Alotech’s claim is simply and completely factually unsupported. U.S. Mag. Judge Tony Leung (D. Minn.) agreed last month with the Defendant’s opposition to the motion to amend.
Maybe Judge Leung properly applied the law. Let’s assume so. But if that is the law, I think it is wrong. Keep in mind that this is a threshold or preliminary issue, a request to make a punitive damages claim, not a request for a finding that punitive damages are warranted. Keep in mind that the legal standard is whether, looking at all of the evidence in favor of the movant (and not even looking at any evidence submitted by the non-movant) there is a “prima facie” case for punitive damages.
We are in a world these days where it seems many sellers over-promise. We are in a world where many sellers agree to provide a product with Features A, B, C, D and then provide paperwork in connection with the sale that describes a product WITHOUT Features A, B, C, D. When the disappointed buyer raises a ruckus, he is directed back to “the contract” with terms that are flat out inconsistent with the deal that buyer thought it was getting. In my view, our legal system should deter such conduct.
I understand and can identify with the defendants’ concern of the open-endedness of the threat of punitive damages. I understand that over-reaching plaintiffs will exploit the threat of punitive damages to extort higher settlements from innocent defendants. In other words, there are clearly arguments on both sides. But I think there are imbalances and unfairness in the law today and this is one example.
Original post (November 2, 2011): The challenge of being granted permission by Minnesota courts to bring a claim for punitive damages has been the subject of previous Minnesota Litigator posts.
The alleged despicable conduct of a defendant in the Zuniga Escamilla v SMS case rose to the level of allowing for punitive damages claim going forward against Defendant Gonzalez but not his employer, SMS, which has also already been covered.
Now plaintiff’s counsel is taking another run for punitives, objecting to Mag. Judge Janie S. Mayeron’s denial of punitives against SMS by appeal to U.S. District Court Judge Ann D. Montgomer (D. Minn.).
The legal standard for granting leave to amend to add a claim for punitive damages under Minnesota law is one of those tangled puzzles that legislatures and courts tend to generate, particularly for thorny and polarizing questions such as when punitive damages are warranted and, if so, to what extent. (The U.S. Supreme Court’s jurisprudence on the latter question is widely recognized as complicated, at best, and incoherent, at worst.)
plaintiff’s motion to amend and supporting affidavits must include prima facie evidence that reasonably allow a conclusion that clear and convincing evidence will establish the defendant acted with willful indifference…
Prima facie evidence “is that evidence which, if unrebutted, would support a judgment in that party’s favor.”
Minnesota law splits hairs quite finely, it seems to me, when it requires plaintiffs to come forward with evidence justifying punitive damages, forbids the opponents from offering rebuttal evidence, but requires plaintiffs’ evidence to be sufficient to meet a “clear and convincing” standard of proof. Add to this construct that fact that it is the judge who decides the motion but, often, a jury who would actually hear the evidence at trial.
So in a sense, the Court has to accept what plaintiffs say as true (so long as they offer any actual evidence, which, of course, can include or be wholly composed of “self-serving testimony”), has to ignore defendants’ evidence to the contrary (which, in some cases, could be extremely persuasive (and stronger than plaintiff’s evidence to the contrary), and then has to imagine whether a jury would find plaintiff’s evidence to be “clear and convincing evidence” of defendants’ acts showed “deliberate disregard for the rights or safety of others.”)
With so many layers of counter-factual hypotheticals, some of which are inherently counter-factual and some just potentially, the question should not be, “Why is the law in this area unclear and hard to predict?” The question is, “How could it not be?”