Owens-Illinois, Inc. v. Zenobia

ROBERT M. BELL, Judge,

concurring and dissenting.

As relevant to this opinion, 1 the Court’s opinion today effects a significant, if not, revolutionary, change in Maryland law respecting punitive damages. In one fell swoop, we have modified the law of punitive damages in three respects. First, we have abolished the distinction held to exist, for purposes of determining whether punitive damages may be awarded, between torts “arising out of contract” and those that do not, overruling in the process H & R Block v. Testerman, 275 Md. 36 , 338 A.2d 48 (1975) and Wedeman v. City Chevrolet, 278 Md. 524 , 366 A.2d 7 (1976). In an even greater step, we have followed the trend and held that a new, higher burden of proof henceforth will apply when a party seeks punitive damages. Thus, we have joined the trend of permitting awards of punitive damages only upon greater proof than usually required in civil cases. We made this change in an effort “to insure that punitive damages are properly awarded.”

Finally, we reformulated the test for determining whether, in a given case, punitive damages may be awarded. A casualty of that formulation is Smith v. Gray Concrete Pipe Co., 267 Md. 149 , 297 A.2d 721 (1972), the case in which “implied malice” was first recognized to be a predicate for the award of punitive damages. Stating the reason *479 a new standard is necessary, the majority notes that, when decided, Smith v. Gray Concrete Pipe Co., supra, was inconsistent with this Court’s precedents and did not attempt to analyze how a “gross negligence” standard promoted the objectives of punitive damages. Furthermore, it says that the Smith standard produced “inconsistent results and frustration of the purposes of punitive damages in non-intentional tort cases.” The majority asserts that the standard “provides little guidance for individuals and companies to enable them to predict behavior that will either trigger or avoid punitive damages liability, and it undermines the deterrent effect of these awards.” (footnote omitted)

In its place, relying on Davis v. Gordon, 183 Md. 129, 133 , 36 A.2d 699, 701 (1944), the Court adopts, in non-intentional tort cases, a standard of “actual malice,” i.e. “evil motive,” “intent to injure,” “ill-will,” or “fraud.” Because, however, in the usual products liability case, whether proceeding on negligence or strict liability, the sale of the product, defective by virtue of a failure to warn or otherwise, ordinarily will not involve evil motive, conscious intent to injure any particular person, ill will or fraud, we also adopt a variation on the “actual malice” theme: actual knowledge of the defect and conscious or deliberate disregard of the consequences. The majority deems that standard to be the equivalent of “actual malice.” But the first prong of that equivalent, the majority is emphatic, must be strictly limited; it means that nothing less than “actual knowledge” will suffice. That there is available evidence about which a defendant “should have known” will not be sufficient to support an award of punitive damages. The most the majority will concede is that, where a “willful refusal to know” — i.e., “where a person believes that it is probable that something is a fact, but deliberately shuts his or her eyes or avoids making reasonable inquiry with a conscious purpose to avoid learning the truth,” see concurring opinion (Chasanow, J.) in State v. McCallum, 321 Md. 451, 458 , 583 A.2d 250, 253 (1991), is proven, the person so refusing will be charged with actual knowledge of the product’s defect.

*480 Because I share some of the majority’s concerns regarding the proliferation of punitive damages claims and their amounts, I join, enthusiastically, with it in adopting two of the changes. I can see no reason for maintaining a distinction, for punitive damages purposes, between torts arising out of a contract and those that do not. Similarly, I believe that requiring proof of punitive damages by clear and convincing evidence is fair and just. Allowing punitive damages to be assessed against a defendant is serious business; it is right that we take steps to insure that it is not viewed lightly. Enhancing the burden of proof to a level commensurate with the seriousness of the matter to be decided is appropriate. I agree with the majority that, because the purpose of punitive damages is, at least in part, to punish, requiring a lower burden of proof for its award is inconsistent with the way we treat other serious cases.

I part company with the majority on the question of what is the appropriate standard for determining the cases in which punitive damages are appropriate. While I have no quarrel with requiring that, in some cases, “actual malice,” characterized as “evil motive,” “intent to injure”, “ill will”, “fraud”, or, in the case of products liability actions, “actual knowledge of the defective nature of the product, coupled with a deliberate disregard of the consequences”, be shown, I am opposed to excising from the standard the concept adopted by Smith v. Gray Concrete Pipe Company ( 267 Md. at 167 , 297 A.2d at 731 ): “wanton or reckless disregard for human life,” sometimes characterized as “gross negligence”. That standard, now the old one, is a floor, not a ceiling; it sets a minimum requirement, not a maximum. Therefore, if a defendant acts with “actual malice,” however, characterized, he or she will be subject to an award of punitive damages under the old standard. On the other hand, by adopting the “actual malice” standard, the majority does much more than excise a useless phrase, it places outside the scope of punitive damages eligibility numerous deserving cases, differing from cases that remain punitive *481 damages eligible only in the subjective element. That change simply goes too far.

The perception is that more claims for punitive damages, involving conduct so diverse that predictability and, therefore, the ability to choose the proper conduct and avoid being culpable, than were justified, were being brought and allowed with the result that the purposes of punitive damages were being undermined. The changes proposed are for the purpose of making the awards more uniform and consistent with the historical bases for punitive damages awards: punishment and deterrence. The purposes of punitive damages are better served, it has been determined, by requiring a more stringent standard for assessing punitive damages and by requiring a greater burden of proof. To be sure, one of the goals of today’s decision is to set a higher threshold for punitive damages eligibility. That is accomplished by changing the burden of proof, that clearly will exclude some undeserving cases, no doubt, a large number, even applying the old standard. But, by both changing the burden of proof and the standard, an even greater percentage of deserving cases, heretofore eligible for punitive damages awards, is affected. Indeed, by so doing, not only is the threshold raised, but excluded is an entire category of cases, non-intentional torts, involving, in many instances, injuries of greater severity than in cases that still qualify and, thus, not necessarily those least deserving of an award of punitive damages. And the distinction causing the exclusion is the subjective intent of the defendant. While I can agree, as I have previously indicated, to raising the threshold by raising the level of the proof required, I cannot agree that punitive damages should be awarded only in cases of “actual malice,” where there is a subjective intent element. In cases where there is no actual malice, the totality of the circumstances may reveal conduct on the part of a defendant that is just as heinous as the conduct motivated by that actual malice and, so, for all intents and purposes is the same.

*482 Although not intentional, i.e., willful, conduct, nevertheless, may be outrageousness and extreme in the context in which it occurs, and may produce injuries commensurate with those caused by intentional conduct. In other words, conduct may be so reckless and outrageous as to be the equivalent of intentional conduct. That is precisely what Smith v. Gray Concrete Pipe Co., supra, held and the facts as reported in that case justified that pronouncement. It was because the facts were so egregious that the Court was motivated to opine:

We regard a “wanton or reckless disregard for the human life” in the operation of a motor vehicle, with the known dangers and risks attendant to such conduct, as the legal equivalent of malice. It is a standard which, although stopping short of wilful or intentional injury, contemplates conduct which is of an extraordinary or outrageous character. Yet, it is both a functional and definitive test which, as we have noted, enjoys the virtue of having been frequently applied in this state. And if, as a test, it has been regarded as adequately stringent to serve as a basis for possible imprisonment, then, surely, there appears to be no valid reason for deeming it too liberal for imposing simple sanctions.

267 Md. at 167 , 297 A.2d at 731-32 . 2

Permitting punitive damages when one acts with actual malice, but not when, given the totality of the circumstances, that same person acts in total disregard for the safety of others has no reasoned basis.

Consider the following example. A hot water pipe bursts in a crowded apartment complex quite near an open area upon which young people are playing baseball. A repair *483 team dispatched to make repairs observes young people playing baseball nearby. It also sees that the area of the affected pipe is in easy reach of a baseball hit to the outfield. Nevertheless, they dig a hole, but, being unable to proceed due to the temperature of the water, suspend operations. Although aware of the young people playing in the area, they leave without warning them of the hole or its contents or in any way marking or obstructing the hole. One of the outfielders, having chased and caught a ball hit to the outfield, falls into the hole and is severely injured.

Under the new standard, if it could be proved that a member of the repair team harbored ill will toward the outfielder and, in the back of his mind, entertained a hope that the outfielder, or one of the other players, would fall in the unattended hole, then, in addition to compensable damages, the outfielder could recover punitive damages. On the other hand, if none of the members of the repair team knew any of the ball players and, in fact, harbored no evil motive at all, no punitive damages could be recovered, notwithstanding that they acted, given the circumstances, in total disregard of the safety of the ballplayers. I can see no reasoned difference between these scenarios. 3 The state of mind of the individual simply is not so important a factor as to permit recovery in one case and not in the other.

I am satisfied that allowing punitive damages for “wanton and reckless conduct,” the test enunciated in Smith , serves the purposes of punishment and deterrence. Gross negligence, outrageous conduct, etc. cannot be defined in a vacuum. To have meaning, the terms must be viewed in a factual context. The conduct described in the example is not only outrageous and extraordinary, it is the sine qua non of reckless conduct. Such conduct should be punished. And that scenario presents a striking example of the kind of conduct a defendant must not engage in if he or she is to avoid paying punitive damages. The example I have prof *484 fered is not the only one that can be posited. There are hundreds of such cases. The long and short of it is that changing the standard for punitive damages will eliminate numbers of cases, in which, heretofore, punitive damages would have been appropriate and those cases now are eliminated not because their facts are not egregious enough to justify such an award but because other, less serious, and perhaps, undeserving, cases may also qualify for such damages. 4 With all due respect, that is not a sufficiently good reason to change the rules of the game. 5

Insulating a defendant from an award of punitive damages except when he or she acts with actual malice, meaning with an evil intent, ill will, with intent to injure, or to defraud, provides a disincentive for that defendant to act reasonably. Since, from the standpoint of a defendant’s pocketbook, it makes no difference in the award of damages, whether he or she is negligent or grossly negligent, that is, his or her conduct is extreme to a point just short of being intentional, requiring that defendant to pay compensatory damages for the victims’s injuries is not likely to *485 have a deterrent effect; it is not likely to cause him or her to consider, not to mention, change, his or her conduct.

Requiring a high threshold before a products liability case becomes punitive damages eligible presents other problems. Where a prerequisite to being assessed punitive damages is actual knowledge, i.e., whether the defendant actually knows about the product’s defect, there is the danger that a defendant will avoid knowledge of that defect rather than keep abreast of developments regarding the product; he or she may decide that the less he or she knows about the product, the better off he or she is. That is particularly true given the strictness of the “actual knowledge” test the Court has formulated.

Notwithstanding the characterization by the majority of the standard applicable to products liability cases as involving “actual malice”, even a cursory review of the standard adopted indicates that that simply is not the case. Requiring actual knowledge of the product’s defect is but one prong of the test. The other prong, that there be a conscious or deliberate disregard of the foreseeable harm resulting from the defect presents a different situation altogether. That concept is reminiscent of “implied malice” and, more to the point, like “gross negligence” requires definition on a case by case basis. It goes without saying that when an issue is a question for the factfinder, different factfinders will invariably reach different results from the same, or similar, evidence. Consequently, when different factfinders are presented with the same, or similar, evidence, we can anticipate that different results are likely to be reached.

Thus, although couched in terms of a unitary standard, what we really have adopted is a two-prong standard, one applicable to non-intentional torts and the other, containing an aspect quite similar to the standard we have just discarded, applicable to products liability cases. If we can tolerate case by case judicial definition of the requisite conduct in products liability cases, I can see no reason why we cannot continue to do so in non-intentional tort cases. After all, it *486 is the application of the test, not its formulation, that is critical. Perhaps we should busy ourselves in developing more effective review mechanisms rather than attempting to redefine the conduct that will support punitive damages.

. I agree with the Court's opinion except for portions of part IV B. and C., which this opinion addresses.

. The majority makes an extraordinary observation — it suggests that implied malice “provides little guidance for individuals and companies to enable them to predict behavior____” If that is correct, then it is difficult to understand how, for example, manslaughter by motor vehicle, and other, similar crimes, can be upheld since among the purposes of the criminal law, like punitive damages, are punishment and deterrence.

. Were the products liability formulation of the standard applied, the case would clearly be a punitive damages eligible case.

. To be sure, in Davis v. Gordon, supra, this Court did reject an invitation to assess punitive damages in negligence actions on an implied malice standard; however, in that case, punitive damages would not have been appropriate under any standard. The invitation was accepted in Smith v. Gray Concrete Pipe Co., supra. In that case, unlike in Davis , rather than deferring to the punitive and deterrent effect of the rules of the road, as opposed to a verdict in a civil case for damages, the Court, in fashioning a standard for the award of such damages, looked to the “usual precedent ... of manslaughter by motor vehicle.” 267 Md. at 167 , 297 A.2d at 731 , “requiring proof of gross negligence, which has been defined in this context as ‘a wanton and reckless disregard for human life’." 267 Md. at 167-168 , 297 A.2d at 731 .

. Just last week, we issued the opinion in the non-economic damages cap case, Murphy v. Edmonds, 325 Md. 342 , 601 A.2d 102 (1992). The effect of the ruling in that case is to burden the most severely injured victims of accidents, those whose non-economic damages exceed $350,000. See dissenting opinion, Chasanow, J., 325 Md. at 378 , 601 A.2d at 120 . Coming as it does on the heels of that opinion, this opinion, by excluding non-intentional torts from the list of punitive damages eligible cases, continues that trend.