Supreme Court Limits Admission of 'Similar Incident' Evidence - International Law Office

Plaintiffs in product liability cases commonly claim that a product harmed them because it was defectively designed, improperly marketed or had inadequate warnings. Plaintiffs making these claims typically seek to introduce evidence that a product malfunctioned or harmed other people to show that the product they used had a defect, that the defect caused their injury or that the manufacturer was on notice of the defect. In the damages phase of a trial plaintiffs may also seek to introduce 'similar incident' evidence to show that the manufacturer acted egregiously in placing the defective product on the market.

The ultimate resolution of these evidentiary issues in any product liability case will always involve a fact-specific evaluation of the evidence in the case. Moreover, as a general matter, courts vary widely in determining whether evidence of this type should or should not be admitted. One prominent treatise surveyed the law on the admissibility of 'similar incident' evidence and pronounced that the results of these cases "are in a state of hopeless disorder".(1)

An April 2003 decision of the US Supreme Court has established clearer standards for the admission of this type of 'similar incident' evidence. In State Farm Mutual Automobile Insurance Company v Campbell(2) the court found that a trial court had improperly admitted evidence of State Farm's national practices in handling insurance claims where those practices had no direct relationship to the specific plaintiff's harm in the case. While the case itself did not involve a product liability claim, the decision will likely have a significant impact on the types of evidence that may be admitted in product liability cases.

This update explores the rules governing the admissibility of 'similar incident' evidence and discusses the State Farm decision.

Standards for the Admissibility of Evidence

Under the Federal Rules of Evidence, 'relevant evidence' is that which has "any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence".(3)

Courts have found that for 'similar incident' evidence to be relevant, the incidents must have "occurred under circumstances substantially similar to those at issue in the case at bar".(4) Thus, before introducing 'similar incident' evidence, plaintiffs have the burden to show that the other incidents are sufficiently similar to the facts at issue in the case.(5)

In addition, even if the court determines that the 'similar incident' evidence is relevant, the court must also determine whether the evidence is more probative than prejudicial. Federal Rule of Evidence 403 provides:

"Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues or misleading the jury, or by considerations of undue delay, waste of time or needless presentation of cumulative evidence."

Thus, evidence of some relevance to a case should be excluded if it might confuse the jurors or if the jurors might place undue significance on the evidence.

Examples of Evidentiary Rulings

'Similarity' requirements not met
Following these guidelines, many courts in product liability cases have excluded evidence of other incidents where plaintiffs sought to admit the evidence to prove that the product was defective and caused harm, because the plaintiffs had not shown that the circumstances of those prior incidents were sufficiently similar to those of their own case. For example:

• in McKinnon,(6) where the plaintiff claimed that the defective design of an electric saw caused his injury, the trial court correctly excluded evidence of six other injuries from the same type of saw because the record was "totally devoid" of the circumstances under which the other incidents occurred;
  
  
• in Peterson v Auto Wash Manufacturing & Supply Co,(7) where the plaintiff claimed injury from a defective high-pressure hose at a car wash, evidence of another injury at the same car wash was properly excluded because of lack of proof that the other incident was at all similar to that at issue in the case;
  
  
• in Kontz v K-Mart Corp,(8) where the plaintiff claimed a defective folding lawn chair injured her, evidence of 8,000 other injuries involving all types of folding and lawn chairs was properly excluded because the plaintiff failed to show that there was any similarity between those other incidents and her cause of action; and
  
  
• in Thomas v Chrysler,(9) where the plaintiffs claimed a defectively designed van door suddenly opened and caused injuries, evidence that two other vans had similar occurrences was properly excluded because the plaintiffs "[d]id not demonstrate a sufficient similarity of the conditions of the vans or the circumstances of the accidents".

Proof of 'notice' to defendant
In some cases plaintiffs claim that evidence of other incidents is relevant to show that the manufacturer was 'on notice' of the product defect that allegedly harmed them. In such cases the courts scrutinize the proposed evidence to see whether and when the defendant actually was aware of those other incidents. For example, in Julander,(10) where the plaintiffs claimed that a defective steering system was the cause of an automobile accident, a jury verdict in favour of the plaintiffs was reversed in part because the trial court improperly admitted evidence of other accidents involving the same cars where the company was not proven to have been aware of those accidents prior to the accident in the plaintiffs' case.

Similarly, in Kinser v Gehl Co,(11) where a farmer died as a result of an accident with a hay feeder, the court properly excluded evidence of another accident with a hay feeder that had occurred a year earlier, because the company was not shown to have been on notice of the prior accident before the accident at issue.

Similar evidence, but irrelevant
In some instances the facts of the case may simply render evidence of similar incidents irrelevant. For example, in Campbell v Nordco Products(12) the decedent died when, standing on a platform to make repairs on an aircraft, he was raised over 28 feet in the air and the platform subsequently swayed and fell. The court properly excluded evidence that similar platforms had caused accidents when also raised over 12 feet in the air. The defendant conceded that the product was not designed for use at that height without additional support, and the only issue in contention was whether the decedent was aware of, and had assumed the risks of, standing on the platform at that height.

Punitive Damages Evidence

In product liability trials juries are sometimes asked first to determine whether the defendant is liable for the plaintiff's harm, and, if so, to determine in a separate phase of the trial what damages should be assessed. At this second phase of the proceedings, jurors may additionally be asked to consider whether punitive damages should be assessed against the defendant. Punitive damages - sometime referred to as 'exemplary' damages - are those in excess of compensatory damages and are designed to punish the defendant's "outrageous conduct" and to "deter" the defendant (or other entities like the defendant) from similar conduct in the future.(13)

In the damages phase of trials plaintiffs have often sought to introduce 'other incident' evidence to put the defendant's conduct in the context of other outrageous acts, as a basis to seek a punitive damages award. Once again, however, evidence of 'other incidents' must be relevant in order to be admissible, even in the damages phase of a trial. Thus, evidence introduced during the damages phase must have some direct relationship to the defendant's specific conduct at issue in the first stage of the trial. Where the 'other incident' evidence was not relevant to prove any fact during the liability phase of the trial, it would likely not be relevant in determining liability.

State Farm v Campbell

Facts
State Farm had its origins over 30 years prior to the Supreme Court's decision, when, in 1981, Curtis Campbell was driving with his wife on a Utah highway and attempted to pass cars in front of him by entering the lane on the wrong side of the highway. One driver, travelling in the opposite direction, swerved his car to avoid hitting Campbell, lost control and hit a third car, causing one death and one permanent disability. The Campbells escaped unscathed.(14)

The Campbells were insured by State Farm. When the victims of the accident sued the Campbells, State Farm decided to contest liability and declined a settlement offer of $50,000, the policy's limit. The State Farm attorney also assured the Campbells that "their assets were safe and they had no liability for the accident", and that State Farm "would represent their interests, and that they did not need to procure separate counsel".(15)

At trial, the jury found Campbell 100% at fault and ordered judgment for $185,849. State Farm initially refused to cover any amount over the initial $50,000 liability coverage.(16)

The Campbells then obtained their own attorney and sued State Farm for its handling of their claim, arguing that the company had acted in bad faith and was liable to them for the intentional infliction of emotional distress. That trial was split into two phases; in the first, the jury determined that State Farm's decision not to settle the original case was unreasonable because there was a substantial likelihood of an excess verdict.

At the damages phase of the trial, the Campbells, over State Farm's objection, introduced evidence that State Farm's decision to reject settlement and take the case to trial was "a result of a national scheme to meet corporate fiscal goals by capping payouts on claims company wide". Plaintiffs' counsel told the jury that the case "transcends the Campbell file" and was merely an example of State Farm's "nationwide practice". The counsel told the jury in its opening statement: "You, here, are going to be evaluating and assessing, and hopefully requiring State Farm to stand accountable for what it's doing across the country, which is the purpose of punitive damages." To prove the existence of the alleged scheme, the Campbells' attorney, again over State Farm's objection, introduced expert testimony regarding State Farm's nationwide practices in handling claims, claiming that the company had handled other claims in a reprehensible manner.(17)

The jury awarded the Campbells $2.6 million in compensatory damages - later reduced to $1 million by the trial court - and $145 million in punitive damages. State Farm appealed.(18)

Supreme Court decision
The Supreme Court ruled that evidence of State Farm's handling of other claims across the country had been improperly presented to the jury. The court reasoned that evidence of the company's conduct in handling other liability claims could be admissible if the evidence demonstrated "the deliberateness and culpability of the defendant's action" in the case, but only if the conduct had "a nexus to the specific harm suffered by the plaintiff".(19) "Because the Campbells have shown no conduct by State Farm similar to that which harmed them", the Supreme Court concluded that "the conduct that harmed them is the only conduct relevant to the reprehensibility analysis".(20)

In particular, the court noted that the case "was used as a platform to expose, and punish, the perceived deficiencies of State Farm's operations throughout the country", and found that State Farm "was being condemned for its nationwide policies rather than for the conduct directed toward the Campbells".(21) However, the court also found that evidence of State Farm's nationwide practices "bore no relation" to the type of claim underlying the Campbells' complaint.(22) The court further reasoned:

"A defendant's dissimilar acts, independent from the acts upon which liability was premised, may not serve as the basis for punitive damages. A defendant should be punished for the conduct that harmed the plaintiff, not for being an unsavoury individual or business. Due process does not permit courts, in the calculation of punitive damages, to adjudicate the merits of other parties' hypothetical claims against a defendant under the guise of the reprehensibility analysis."(23)

The court also found fault in the admission of the evidence for a second reason: allowing the jury to hear evidence of a company's out-of-state conduct that has no connection to the case at hand "creates the possibility of multiple punitive damages awards for the same conduct", since non-parties to the case "are not bound by the judgment some other plaintiff obtains".(24) Lastly, the court ruled that a jury "may not use evidence of out-of-state conduct to punish a defendant for action that was lawful in the jurisdiction where it occurred", providing yet another test for evaluating whether evidence should be admitted during the damages phase of a trial.(25)

Impact of the State Farm Decision

The Supreme Court's decision in State Farm provides considerable guidance to lower courts on the types of admissible evidence of 'other incident' conduct that may be introduced at trials. The decision had an immediate impact on one prominent product liability case and will likely have a broader impact on such cases nationwide.

In May 2003 a Florida appellate court overturned a jury verdict of $145 billion in punitive damages in a class action suit brought against a cigarette company for smoking-related injuries.(26) In that case, during the damages phase of the trial, a jury heard evidence regarding three specific plaintiffs who were members of the class, as well as general evidence about the company's statewide conduct and the general health effects of smoking on all smokers in Florida. The jury issued a verdict for compensatory damages for the three plaintiffs (totalling $12.7 million), and punitive damages to compensate the entire class (smokers in Florida). Citing State Farm, the appellate court overturned the verdict in part because the punitive damages verdict was based on evidence of the company's conduct that bore no direct relation to the three identified plaintiffs.(27)

Comment

The decision in State Farm should serve to impose strict limitations on the types of evidence introduced at trial in product liability cases. Evidence at trial should focus only on the defendant's conduct that had a specific impact on the plaintiff and not on conduct that bore no direct connection to the claimed harm of the plaintiff.

For further information on this topic please contact Mary T Yelenick or Kenneth Levine at Chadbourne & Parke LLP by telephone (+1 212 408 5100) or by fax (+1 212 541 5369) or by email (myelenick@chadbourne.com or klevine@chadbourne.com).

Endnotes

(1) 22 Wright & Graham, Federal Practice and Procedure, Evidence, Section 5170, at 112 (1978 and Supp 2003).

(2) 123 S Ct 1513 (2003).

(3) Fed R Evid 401.

(4) McKinnon v Skil Corp, 638 F 2d 270, 277 (1st Cir 1981); see also Julander v Ford Motor Co, 488 F 2d 839, 846-47 (10th Cir 1973).

(5) See Hale v Firestone Tire & Rubber Co, 756 F 2d 1322, 1332 (8th Cir 1985) (burden should not have been on the defendants to show at trial that the prior incidents were not similar).

(6) 638 F 2d at 277.

(7) 676 F 2d 949, 953 (8th Cir 1982).

(8) 712 F 2d 1302, 1304 (8th Cir 1983).

(9) 717 F 2d 1223, 1224 (8th Cir 1983).

(10) 488 F 2d at 846.

(11) 184 F 3d 1259, 1274 (10th Cir 1999).

(12) 629 F 2d 1258, 1264 (7th Cir 1980).

(13) See Restatement (Torts) 2d, Section 908 (Punitive Damages) (1977).

(14) 123 S Ct at 1517.

(15) Id at 1518.

(16) Id.

(17) Id at 1521-22.

(18) Id.

(19) Id at 1523.

(20) Id at 1524.

(21) Id at 1521.

(22) Id at 1519.

(23) Id at 1523.

(24) Id.

(25) Id at 1522-23.

(26) Liggett Group Inc v Engle, 853 So 2d 434 (Fla App 3 Dist 2003).

(27) Id at 456.