On November 4, 2022, the New York  City Asbestos Litigation (NYCAL) coordinating Judge Adam Silvera issued a long-awaited decision denying defendants’ motion to sever punitive damages in asbestos claims filed in NYCAL. Defendants had urged the Court to amend NYCAL’s current Case Management Order (CMO) to indefinitely postpone plaintiffs’ ability to seek punitive damages against defendants, as was the case in the original NYCAL CMO and a procedure that had been in place for over 2 decades up until 2017.

NYCAL’s Punitive Damage History

Whether a defendant could be subject to an award of punitive damages has long been a battle between plaintiffs and defendants in NYCAL. Beginning in 1996, the NYCAL CMO stated that punitive damages were “deferred until such time as the Court deems otherwise . . . .”  This prohibited plaintiffs from seeking punitive damages against NYCAL defendants for the foreseeable future. The asbestos coordinating Judge at the time made this decision for several reasons, including the following:  (i) charging companies with punitive damages for wrongs committed 20-30 years ago served no “corrective purpose”; (ii) as infrequent as punitive damages are, they only serve to deplete resources better used to compensate injured parties; (iii) since some states do not permit punitive damages, including the federal multi-district litigation, disparate treatment among plaintiffs would result, as there were some states and districts that did not permit punitive damages; and (iv) no company should be punished repeatedly for the same wrong. [Freedman, Helen E.], Selected Ethical Issues in Asbestos Litigation, Southwestern University Law Review, Vol. 37, pp. 527-528 (2008).https://lawprofessors.typepad.com/mass_tort_litigation/files/freedman_article_final_pdf_121808.pdf

In 2013, plaintiffs’ counsel moved to lift the CMO’s indefinite deferral. Judge Sherry Heitler granted plaintiffs’ application and allowed plaintiffs to begin to seek punitive damages on a case-by-case basis. 

Defendants appealed the decision, arguing that the judge lacked authority to unilaterally amend the CMO without the parties’ consent. Defendants’ appeal was partially granted, but the Appellate Division ultimately confirmed that the asbestos-coordinating judge had authority to unilaterally amend the CMO.

In 2017, following the Appellate Division’s holding, coordinating Judge Peter Moulton promulgated a new CMO that reinstated punitive damages in the litigation. The CMO required a meet and confer between the parties where, if no agreement was reached, additional discovery relating to punitive damages was to be allowed. Following the discovery phase, the trial judge would make the determination as to whether the question of punitive damages should go to a jury.

2021 Effort to Defer Punitive Damages

In 2021, Defendants again sought to indefinitely defer punitive damages. They primarily argued that filing punitive damage claims in NYCAL has prolonged the already lengthy litigation. Without the possibility of using punitive damages as leverage, Plaintiffs’ would be encouraged to seek reasonable settlement values.  Defendants argued that this would result in more settlements and, in turn, fewer backlogged cases on the docket.  Defendants also noted that NYCAL’s backlog has been exacerbated by the Covid-19 pandemic and that by deferring punitive damages, the Court would eliminate the routine discovery disputes and the use of judicial resources accompanying the issues that arise when litigating punitive damages.

Defendants also argued that since the Court lifted the deferral of punitive damage claims in 2014, numerous defendant companies have been forced into bankruptcy.  Defendants explain that litigating punitive damages is both costly, timely, and an unnecessary drain on the finite resources available to process the thousands of outstanding cases on the NYCAL docket. Defendants further explain that punitive damages are meant to serve as a punishment, and that by allowing punitive damages in a case prior to determining the merits of the compensatory claim serves as a premature punishment for all defendants. Further, punitive damages are meant to serve as a deterrent, but in asbestos litigation, the defendants stopped using asbestos decades ago. 

Defendants highlighted that plaintiffs must first prove the merits of their compensatory claims prior to being awarded punitive damages at trial; so, accordingly, the CMO should preserve judicial resources associated with punitive damage claims until a determination is made on the merits of the accompanying compensatory claims.  Once all meritorious claimants were allowed to collect compensatory damages, then plaintiffs would be entitled to seek punitive damages. The Defendants argue that the CMO was originally created to encourage the “speedy and efficient settlement of compensatory claims,” but the litigants are prohibited from doing so because of the additional time and expense associated with the thousands of intermingled punitive damage claims.

In response, plaintiffs point out that the CMO has a section specifically allowing the pleading of punitive damages and providing guidelines for efficient and constitutional discovery on the related issues. Plaintiffs further note that the CMO was created based on years of motion practice, negotiation, and conferencing.  Plaintiffs highlight that the CMO providing for punitive damage claims is an attempt to balance the rights of the plaintiffs and the defendants in NYCAL litigation.   

Plaintiffs’ also assert that defendants’ argument that the punitive damage litigation is timely and costly is unsupported. As evidence, plaintiffs point out that there has only been one verdict including punitive damages in NYCAL since 2017, and therefore, punitive damages are not the reason for the defendants’ bankruptcy.   

Plaintiffs go on to argue that the Covid-19 pandemic did not affect the docket in a way that would justify the severance of punitive damages.  Plaintiffs explain that trials have already been going forward for several months following the Covid-19 pandemic.  They point out that the Court is consistently sending cases out for jury selection and moving cases through the docket to resolution. It’s also noted that during the Covid-19 pandemic the Court continued to schedule in-person and remote settlement conferences to ensure that NYCAL cases continued to resolve.

Judge Silvera’s Ruling

After reviewing the arguments, Judge Silvera determined that the Defendants failed to provide sufficient support to establish that the current CMO should be amended.  Judge Silvera held that amending the CMO would essentially strip NYCAL plaintiffs of the right to pursue punitive damages, since deferring such claims until meritorious plaintiffs have been compensated would essentially deny plaintiffs their day in court.  He noted that all other plaintiffs in other litigation in New York are entitled to seek punitive damages.  As explanation, Judge Silvera cited the New York Court of Appeals, explaining that failure to warn claims inherently involve conduct that a jury may find sufficiently wanton or reckless as to award punitive damages. Finally, he notes that there was nothing in defendants’ Motion indicating that the procedural protocols set forth in the current CMO were insufficient to address any alleged abuse regarding punitive damages.