The California Court of Appeal affirmed a $55 million punitive damages award against Ford in a product liability case resulting from a rollover of its Explorer SUV. California law allows punitive damages to be awarded upon a showing of malice, and the court held that Ford acted with malice in choosing its design for the Ford Explorer. Ford had argued that there were several objective factors relevant to whether punitive damages were proper, including its conformity with industry customs, compliance with stringent federal regulations, and the fact that the design resulted from a good-faith debate among engineers during the design process. Nonetheless, the Court of Appeal decided that those objective indicators were “irrelevant” to the question of whether punitive damages were permissible, approving the award.
The NAM joined with the Alliance of Automobile Manufacturers in seeking U.S. Supreme Court review, arguing that the Court of Appeal’s application of California punitive damages law violates due process because it deprives Ford of fair notice sufficient to allow it to design its products to avoid punishment. Ford’s good-faith design choice was objectively reasonable because it was consistent with industry standards and federal regulations. We are concerned that manufacturers will simply have no way of knowing whether their reasonable design decisions may be subject to punishment years later. Every product will inevitably fail in certain circumstances, regardless of how high a manufacturer sets the design safety standard. Yet, without clear and objective standards to determine whether a manufacturer acted with the requisite degree of reprehensibility, juries will be left with standardless discretion to award punitive damages in product liability cases.
On May 14, 2007, the Court accepted the case for review, then immediately vacated the lower court's decision and sent the case back for reconsideration in light of the Supreme Court's February decision in Philip Morris USA v. Williams.