Confusing, unresolved and unexplored issues: Punitive damages in NJ

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1 The magazine from NEW JERSEY LAWYER BUSINESS LAW The Lawyer s Source Confusing, unresolved and unexplored issues: Punitive damages in NJ New Jersey s Punitive Damages Act was designed to add clarity to the award of same. And it has. And it hasn t. By Steven J. Fram and Richard Grungo Jr. procedures and that a number of important issues relating to the interpretation and application of the PDA remain unresolved or unexplored. This article will discuss certain issues that have created difficulties for counsel and the courts in applying the PDA and will identify outstanding issues the courts are likely to be called upon to address as litigation continues over the meaning of the PDA. Bifurcation Introduction The New Jersey Punitive Damages Act, N.J.S.A. 2A: to 5.17 (PDA), was enacted in 1995 to narrow the circumstances in which punitive damages can be awarded and to clarify trial procedures for the consideration of such awards. See Pavlova v. Mint Management Corp., 375 N.J. Super. 397 (App. Div.), cert. den., 184 N.J. 211 (2005). The premise of this article is that the PDA has been less than fully successful in its goal of clarifying trial One of the key innovations of the PDA was its requirement that cases involving punitive damages be bifurcated. The bifurcation provisions of the PDA have proven confusing in practice in two reports. First, the PDA provides actions involving punitive damages shall, if requested by any defendant, be conducted in a bifurcated trial. N.J.S.A. 2A: (a). This language seems to suggest that only a defendant, and not a plaintiff, can request bifurcation and that bifurcation is optional, so July 28, 2008 that a defendant can waive bifurcation and have punitive damages considered as part of the single trial. In fact, Model Civil Charge 8.60 states that bifurcation is mandatory, regardless of whether requested by any party. See Model Civil Jury Charge 8.60 (citing Herman v. Sunshine Chemical Specialties, 133 N.J. 328, 342 (1993)). As a consequence, counsel are well advised to point out to the trial judge that bifurcation is mandatory or risk having to retry aspects of the case. Second, the way in which issues are bifurcated under the PDA is counterintuitive. Many attorneys and trial judges assume the first trial deals with liability, compensatory damages and entitlement to punitive damages, and that the second trial focuses on the defendant s financial condition for the purposes of determining the amount of punitive damages. Having the jury determine the issue of entitlement in the first trial seems to make sense; the jurors are already focused on the defendant s conduct for the purposes of liability and it seems logical for them to decide in the same hearing whether the defendant s conduct was sufficiently egregious to warrant an award of punitive damages, with the amount to be determined at a second hearing. In fact, this is the approach taken by most state statutes requiring bifurcation. See Linda L. Schleuter, Punitive Damages (5th ed. 2005), 4.2(B)(3) at page 168; Cass R. Sunstein, et. al., Punitive Damages: How Juries Decide (ABA 2002), at page 11. The PDA does not allow this approach; instead, it requires deferral of the issue of entitlement to punitive damages until the second trial. Under the PDA, the first trial must be limited to the issues of liability for compensatory damages and the amount of compensatory damages or nominal

2 damages. N.J.S.A. 2A: (b). The second trial addresses both the issue of whether punitive damages should be awarded and their amount. Thus, N.J.S.A. 2A: (d), states that in the second stage of a bifurcated trial, the trier-of-fact shall determine if a defendant is liable for punitive damages. A number of cases have reversed where trial judges allowed the jury to consider entitlement to punitive damages as part of the first trial phase. See, e.g., Baglini v. Lauletta, 338 N.J. Super. 282, (App. Div 2001) (holding that it was reversible error for the trial court, as part of its instructions in the first phase of the case, to ask the jury to decide whether punitive damages should be awarded and, in the second phase of the trial, to determine the amount of punitive damages to be awarded); Bell Atlantic Network Services, Inc. v. P.N. Video Corp., 322 N.J. Super. 74, (App. Div. 1999) (trial court erroneously assumed that a retrial on the issue of punitive damages could be limited to consideration of the amount of damages; under PDA, all issues related to punitive damages should have been addressed in bifurcated proceeding). See also Herman v. Sunshine Chem. Specialties, Inc., 133 N.J. 329, 342 (1993) (holding, even before enactment of the PDA, that a separate proceeding should be used to determine both whether punitive damages are to be awarded and the amount). When should courts consider the dismissal of claims for punitive damages and what evidence should they consider? The nature of bifurcation required by the PDA raises some interesting practical issues about the role trial courts are called upon to play in determining whether a case will be permitted to proceed to a trial on the issue of punitive damages. The PDA makes clear an award of punitive damages is not necessarily appropriate simply because a defendant has been held liable for tortious conduct. Instead, under the PDA punitive damages are only permissible if the plaintiff proves, by clear and convincing evidence, the defendant s conduct was actuated by actual malice or accompanied by a wanton and willful disregard of persons who foreseeably might be harmed by those acts or omissions. N.J.S.A. 2A: (a). As an example, because a finding of liability for breach of fiduciary duty will be by a preponderance of the evidence, an award of punitive damages will not necessarily be appropriate; the plaintiff will still be required to prove actual malice by the more demanding standard of clear and convincing evidence. After the trial on liability and compensatory damages, the defendant will often move to dismiss the claim for punitive damages, arguing the evidence In determining the amount of punitive damages to be awarded, the trier-offact shall consider all relevant evidence, including the financial condition of the defendant. is not sufficient to allow the jury to proceed to consider an award of punitive damages. Because some evidence relevant only to the award of punitive damages may not have been presented in the first phase of trial, trial courts must be careful to refrain from dismissing a plaintiff s punitive claim prematurely. For example, a prior conviction for drunk driving may be ruled inadmissible as unduly prejudicial under Evidence Rule 403 in the first phase of a trial against a defendant who caused injuries while driving drunk, but appropriately admitted in the second phase to demonstrate reckless conduct relevant to the issue of punitive damages. A trial court should consider the potential importance of such evidence during the second trial before ruling that no reasonable jury could impose punitive damages. In other cases the trial court should probably proceed with the second phase on punitive damages based upon the jury s findings during the first phase. In fraud cases, for example, the burden of proof on liability is clear and convincing. Liberty Mutual Ins. Co. v. Land, 186 N.J. 163, 174 (2006). As a consequence, if the jury finds liability for fraud and awards compensatory damages, it has already found wrongful conduct by the standard necessary to award punitive damages. In fraud cases, therefore, a motion to dismiss a claim for punitive damages after a finding of liability and damages should generally be rejected and the case should proceed to the second trial. In some cases, the issue of whether the facts are sufficient to allow the jury to consider an award of punitive damages can be addressed in pre-trial proceedings through a motion for summary judgment. For example, in Pancrazio v. Greyhound Lines, Inc., No (D.N.J. April 25, 2009), Magistrate Judge Joel Schneider granted a defense motion for partial summary judgment to dismiss a claim for punitive damages in a case arising out of a bus accident. After a thorough review of the facts and a thoughtful discussion of the standards set forth in the PDA, Judge Schneider held the plaintiff s proofs could not establish, by clear and convincing evidence, that that the defendant acted with wanton and willful disregard within the meaning of Section 2A: (a) of the PDA. What evidence is relevant to the defendant s financial condition? Much confusion has existed and may continue to exist concerning the nature of the financial information concerning the defendant that is relevant in the second trial. The PDA provides that in determining the amount of punitive damages to be awarded, the trier-of-fact shall consider all relevant evidence, including the financial condition of the defendant. N.J.S.A. 2A: (c). In Herman v. Sunshine Chem. Specialties, Inc., 133 N.J. 329, 345 (1993), a case decided before the enactment of the PDA, the New Jersey Supreme Court held the defendant s financial condition for the purposes of deciding an award of punitive damages roughly means the ability to pay. This seemed to indicate the defendant s financial condition should be

3 measured as of the time of trial. In Baker v. The National State Bank, 161 N.J. 220 (1999), in contrast, the Supreme Court held that in calculating punitive damages, fairness requires that a defendant s financial condition should be measured at the time of the wrongful conduct. Given the amount of time that can pass between acts of wrongful conduct and a trial, a defendant s financial condition can obviously change significantly between those two points in time. In its recent decision in Tarr v. Bob Ciasulli s Mack Auto Mall, Inc., 194 N.J. 212 (2008), the New Jersey Supreme Court resolved the seeming inconsistency between the holdings of Herman and Baker by ruling a defendant s financial condition is a fact-sensitive determination that can include consideration of the financial condition of the defendant at the time of the wrongdoing as well as at the time of the judgment. In some cases a plaintiff may desire to argue a defendant s financial condition as of the time of trial has been artificially suppressed in order to present a smaller target for an award of punitive damages. Tarr holds that this argument, if factually supported, is appropriate for the punitive phase, noting that [a] relevant consideration also will be whether defendant purposefully was stripped of assets to avoid a judgment. In light of Tarr, an inquiry into a defendant s financial condition for the purposes of punitive damages can reach expansively not only to the defendant s financial condition at the time of the misconduct and at the time of trial, but to the reasons why its financial circumstances changed between those points. Given that it can be many years between an act of misconduct and the time of trial, the scope of relevant financial information may become broad indeed. What can counsel argue for in seeking punitive damages? Tarr also held that in fixing the amount of a punitive damages award, a jury only may aim for deterrence directed at the specific defendants. As a consequence, counsel cannot argue punitive damages for an award in order to enhance the general deterrence of others. Because of this ruling, counsel seeking punitive damages must be careful to refrain from arguing they should be awarded to send a message to a wider audience, such as an entire industry. Another advocacy issue is whether counsel can argue for a specific amount of punitive damages, such as an award based upon a multiple of the compensatory damages (an approach focusing on the harm suffered by the plaintiff), the profits derived by the defendant from the wrongful conduct (an approach focusing on the profitability of the misconduct) or a percentage of the defendant s revenues or annual profits (an approach focusing on the defendant s size and the need to get its attention ). Research into how juries award punitive damages indicates that requests for specific amounts can be highly persuasive. See Punitive Damages: How Juries Decide, supra at 62 ( The dollar amounts that are requested by plaintiffs in their closing arguments to a jury have a dramatic effect on the size of the punitive damages award: the higher the request, the higher the awards. ) In some circumstances counsel are prohibited from requesting a specific amount of damages, such as where counsel are seeking an amount of noneconomic unliquidated damages. See Botta v. Brunner, 26 N.J. 82 (1958). Although no published New Jersey decision has addressed the issue of whether a specific amount of punitive damages can be requested, other jurisdictions considering this issue have not ruled it is impermissible for the plaintiff to suggest a specific amount of punitive damages. See Hawkins v. Allstate Ins. Co., 152 Ariz. 490, 733 P. 2d 1073 (Ariz. 1987) (affirming award of $3.5 million in punitive damages when plaintiffs counsel suggested specific amount.) Counsel seeking punitive damages should therefore consider requesting a specific amount. Defense counsel may also wish to argue for specific but smaller amounts. Problems in the post-trial review of punitive awards. The PDA requires a post-trial review by the trial court of any award of punitive damages and, if an award is upheld by the court, application of the PDA s cap. That cap, which is set forth in N.J.S.A. 2A: and which is not disclosed to the jury, limits an award of punitive damages to five times the amount of the compensatory damages or $350,000, whichever is greater, except for awards under the Law Against Discrimination. This cap must be read in conjunction with federal constitutional limits on punitive damages. See Lockley v. State of New Jersey Dept. Of Corrections, 177 N.J. 413 (2003) ( reviewing courts should consider the reasonableness of any award of punitive damages within the constitutional framework established by the United States Supreme Court). In a series of cases that include BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996) and State Farm Mut. Auto Ins. Co. v. Campbell, 538 U.S. 408 (2003), the Supreme Court has held the Due Process Clause of the Fourteenth Amendment prohibits the imposition of punitive damage awards that can be considered grossly excessive or arbitrary in nature. An appellate court s review of whether punitive damages are so excessive that they violate the Fourteenth Amendment is de novo. In these cases, the Supreme Court has ruled that in determining whether a punitive damage award comports with due process, courts must consider three guideposts: (1) the degree of reprehensibility of the defendant s misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases. Campbell, 538 U.S. at 418 (citing Gore, 517 U.S. at 575). In applying those factors, the Supreme Court and other courts have found a key consideration is the ratio between the award of punitive damages and the actual damages inflicted on the plaintiff. Although the Supreme Court has been reluctant to identify concrete constitutional limits on the ratio, it has cautioned that in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process. Campbell, 538 U.S. at 425. The Third Circuit recently applied this single digit principle in significantly reducing an award of punitive

4 damages. In CGB Occupational Therapy, Inc. v. RHA Health Services, Inc., 499 F.3d 184, 193, 195 (3d Cir. 2007) the court held that a punitive damages award of $750,000 based on a compensatory damages award of $109,000 a ratio of 7 to 1 was the constitutional upper limit, despite the presence of a number of aggravating circumstances, including abusive litigation tactics on the part of the defendant. What this means is that if the compensatory damages awarded are $10,000 and the jury awards $350,000 in punitive damages, the award of punitive damages will be within the PDA s cap but will probably not comply with federal constitutional standards. A trial court would likely be required to reduce such an award of punitive damages to less than $100,000. Further complications arise under the PDA in cases where the plaintiff also seeks relief under a statute that provides for an award of treble damages. Can the plaintiff recover both treble damages and attorney s fees under a statute and punitive damages with respect to a common law claim? The federal courts have struggled with this issue in a variety of contexts. Some antitrust cases have held a successful plaintiff must elect between an award of treble damages and attorney s fees under the antitrust laws and an award of compensatory damages and punitive damages under a common law claim. In Fineman v. Armstrong World Industries, Inc., 980 F.2d 171, 218 (3d Cir. 1992), the Third Circuit held that a plaintiff was required to elect between recovering under either tort law with any punitive damages or under [a federal] claim with its treble damages. The court reasoned that a plaintiff whose case concerns a single course of conduct and a single injury [cannot] recover those profits twice or thrice over for each legal theory advanced in favor of liability. This would yield an unwarranted windfall recovery. See also SuperTurf, Inc. v. Monsanto Co., 660 F.2d 1275, 1283 (8 th Cir. 1981) (also holding that a plaintiff cannot receive both treble damages under the antitrust laws and state punitive damages based upon the same course of conduct ). Other federal courts have held that a plaintiff who prevails both on a federal RICO claim and on a common law claim for fraud may recover state law punitive damages in addition to an award of treble damages and attorney s fees under federal RICO. In Neibel v. Transworld Assurance Co., 108 F.3d 1123 (9 th Cir. 1997), the Ninth Circuit rejected the Third Circuit s decision in Fineman and the Eighth Circuit s decision in SuperTurf. Based on the text of the RICO statute and the policies behind it, the Ninth Circuit distinguished these antitrust precedents and held a plaintiff may receive both treble damages under RICO and state law punitive damages for the same course of conduct. Since Neibel was decided, a number of other courts have adopted its reasoning, including the Sixth and Eleventh Circuits. See Avery Dennison Corp. v. Four Pillars Enterprise Co., 45 Fed. Appx. 479, RICO Bus. Disp. Guide 10, 324, 60 Fed. R. Evid. Serv. 353 (6 th Cir. 2002) (unpublished); Kemp v. AT&T, 393 F.3d 1354, 1357 (11 th Cir. 2004) (permitting an award of punitive damages where treble damages were also awarded). See also City of Huntsville v. Proliance Energy, LLC, 2005 WL (N.D. Ala. 2005) (following Neibel and Kemp; holding that plaintiff could recover both treble damages under RICO and punitive damages under state law based upon the same facts). The Appellate Division took a slightly different approach in St. James v. Future Finance, 342 N.J. Super. 310 (App. Div. 2001), cert. den., 170 N.J. 388 (2002), a case involving an award of treble damages and litigation fees under the New Jersey Racketeering Act (NJRICO) and punitive damages for a state breach of fiduciary duty claim. St. James staked out a middle ground between Fineman and Neibel by ruling the plaintiff could recover both treble damages and attorneys fees under NJRICO and punitive damages for breach of fiduciary duty, but that the award of punitive damages had to be reduced by the punitive component of the treble damages award, or two-thirds of that award. This ruling was consistent with an earlier decision by Appellate Division in a case dealing with the Consumer Fraud Act and an award of punitive damages for common law fraud. See 49 Prospect Street Tenants Ass n v. Sheva Gardens, Inc., 227 N.J. Super. 449, 482 (App. Div. 1988) ( In our view, any punitive damages awarded should be reduced to the extent of the Steven J. Fram is chairman of the Commercial Litigation Practice Group at Archer & Greiner in Haddonfield. Reach him at (856) ; sfram@archerlaw.com. Richard Grungo Jr. is a partner in the Litigation Department at the firm in Princeton. Reach him at (609) ; rgrungo@archerlaw.com.

5 trebled portion, i.e., two-thirds of the ascertainable compensatory loss suffered by the plaintiffs. Since recovery on the various counts is based upon the same conduct by the defendants, there should be no double recoveries for economic loss. ) Can punitive damages be awarded in the Chancery Division? One interesting and as of yet unexplored issue since the PDA was enacted in New Jersey is whether the Chancery Division has the ability to award punitive damages. Most jurisdictions historically recognizing a distinction between law courts and equity courts do not permit their equity courts to award punitive damages. 1 Dobbs, Law of Remedies, (2d Ed. 1993), 2.1(1), at Instead, at the time these court systems were established, punitive damages could only be awarded in a court of law. See Recent Developments Punitive Damages Held Recoverable in Action for Equitable Relief, 63 Colum. L. Rev. 175, 176 (1963). As noted by a leading treatise on remedies: The traditional rule is that equity would not award punitive damages, either because equity s sole province was to provide complete relief, and compensatory damages marked the limit of that relief, or because punishment or vengeance seemed vaguely inappropriate to a benignant equity. 1 Dobbs, supra, 3.11(1) at 460. Over time, as court structures evolved and separate court systems for law and equity were merged in many jurisdictions, a split of authority developed over the issue of whether punitive damages could be awarded in equity. Some jurisdictions abandoned the prohibition, seeing it as antiquated in light of the merger of law and equity courts. The majority of jurisdictions, however, continue to hold that punitive damages are not recoverable in courts of equity. See, e.g., Charles L. Knapp, Editor, Commercial Damages: A Guide to Remedies in Business Litigation (Lexis Nexis 2007) at 8.410[2] (noting the majority rule still provides that punitive damages are not recoverable in equity); see also Annot., Punitive Damages: Power of Equity Court to Award, 58 ALR 4 th 844 (1987 and Supp.) (discussing cases from all jurisdictions on this issue). For example, in Beals v. Washington International, Inc., 386 A.2d 1156 (Del. Ch. 1978), the Delaware Chancery Court after citing a number of federal cases ruled that punitive damages are not recoverable in Chancery matters. Traditionally and historically, the court noted, the Court of Chancery as the Equity Court is a court of conscience and will permit only what is just and right with no element of vengeance and therefore will enforce no penalties or forfeitures. New Jersey, like Delaware, has not merged its law and equity courts and has instead retained Chancery Courts with limited and specialized jurisdiction. In Fleischer v. James Drug Stores, 1 N.J. 138 (1948), the New Jersey Supreme Court, after discussing the scope of equitable relief available in the courts of New Jersey, appears to have held the New Jersey courts of equity lack authority to award punitive damages. The plaintiff in Fleischer, claiming breach of contract and unfair competition, had sued for specific performance as well as damages, both compensatory and punitive. Fleischer held that equity had jurisdiction to adjudicate all of the claims as between the parties but not to award punitive damages: Equity has a general jurisdiction to adjudicate ancillary and incidental matters. This jurisdiction is coextensive with the rights of the parties in the subject matter of the suit It may, in the exercise of a sound discretion, do whatever is necessary to a final adjudication of the entire controversy between the parties, whether it encompasses an action ex delicto or one ex contracto There may be a recovery of the damages ensuing from the wrong which calls for equitable relief.... But the damages awarded in equity are ordinarily compensatory and not punitive. Id. at (emphasis added). Despite the holding in Fleisher, a number of more recent New Jersey cases without discussing Fleischer or the common law principle upon which it relies appear to have assumed that New Jersey Chancery courts do the have power to award punitive damages. Indeed, in Balsamides v. Perle, 313 N.J. Super. 7, 31 (App. Div. 1998), aff d in part, rev d in part, 160 N.J. 352 (1999), the Appellate Division noted punitive damages are recoverable in shareholder disputes involving fiduciary breaches and affirmed a Chancery Court award of punitive damages in such a dispute. See also Maul v. Kirkman, 270 N.J. Super. 596 (App. Div. 1994) (affirming award of punitive damages by Chancery Court in shareholder dispute where controlling shareholder breached fiduciary duties); Del Mastro v. Grimado, 2005 WL (N.J. Ch. Div. 2005) (unpublished) (awarding punitive damages where ex-boyfriend distributed embarrassing photographs of woman). These and other cases to consider discuss punitive damage awards in the Chancery Division did so without considering the holding in Fleischer. It appears Fleischer remains good law. Indeed, Fleischer has been cited favorably by the New Jersey Supreme Court for its discussion of the scope of equity jurisdiction. See, e.g., In re Environmental Insurance Declaratory Judgment Actions, 149 N.J. 278, (1997); Brennan v. Orban, 145 N.J. 282, (1996). Fleischer has also been cited by treatises and other courts in other jurisdictions for the punitive damages aspect of its holding. See, e.g., Madrid v. Marquez, 131 N.M. 132, 33 P.3d 683, 686 (2001); Annot., 58 ALR 4 th at 853. The PDA expressly states it is not to be construed as creating any claim for punitive damages which is not now available under the law of this State. N.J.S.A. 2A: This provision makes clear that PDA was not intended to over-rule Fleisher. In light of Fleischer and the intent of the PDA to narrow the availability of punitive damage amounts, defendants in Chancery Division cases should challenge the propriety of punitive damage claims against them and plaintiffs in such cases should consider the possibility such claims may be barred if they elect to proceed in Chancery and remain there to litigate damage claims. The PDA in federal court Another largely unexplored issue is the degree to which the provisions of the PDA apply to cases tried in federal court where the substantive law of New Jersey applies. There appears to be little question the substantive standards set forth in the PDA including the clear

6 and convincing standard and the factors to be considered must be followed by the federal courts in considering claims governed by New Jersey law. See Inter Medical Supplies Limited v. EBI Medical Systems, 975 F. Supp. 681, 698 (D.N.J. 1997), aff d, 181 F.3d 446 (3d Cir. 1999) (applying clear and convincing clear and convincing standard, following statutory factors and ruling that post-trial review of award under the PDA, conducted under the legal standard mandated in the Act, forms a part of the substantive law of New Jersey, whose law provided the rule of decision on plaintiffs tort damages. ) It is less clear that federal courts are required to follow certain procedural aspects of the PDA. For example, although the PDA requires bifurcation of punitive damage issues, most federal courts have held the issue of bifurcation is a procedural matter governed by Fed. R. Civ. P. 42 and, under Erie, that the bifurcation provisions of state punitive damages statutes are not binding on the federal courts. See, e.g., American Computech, Inc v. National Medical Care, Inc., 959 F.2d 239, 1992 WL (9 th Cir. 1992) (unpublished, holding that trial court properly disregarded state statute which required bifurcation of punitive damages because bifurcation is procedural as governed by Fed. R. Civ. P. 42(b)); Holland v. Harmon, 1999 WL (N.D. Tex. 1999) (bifurcation is a matter of procedure to be decided by the court under Fed. R. Civ. P. 42(b); rejecting argument that federal court was required to bifurcate state law punitive damage claim under Texas statute); Hamm v. American Home Products Corp., 888 F. Supp. 1037, 1038 (E.D. Cal. 1995) (bifurcation is a procedural issue for the purposes of Erie so that a California state statute concerning the timing of disclosure of evidence about a defendant s wealth does not apply in federal court; declining to bifurcate the issue of defendants wealth from the remaining issues for trial). In the experience of these authors, some federal judges in this District do not feel bound by the bifurcation provisions of the PDA and bifurcate only the issue of the amount of punitive damages; i.e., they permit the jury to decide in the first trial whether to award punitive damages but reserve the presentation of financial information and consideration of the amount of punitive damages for a separate proceeding. In cases pending in federal court, therefore, plaintiffs should consider arguing that punitive damage claims should not be bifurcated at all. Federal judges have the ability to exercise their discretion in determining whether to bifurcate and if so, how to bifurcate in a particular case. Similarly, the federal courts have held state statutes or practices concerning the timing of disclosure of evidence about defendant s financial worth do not apply in federal court. See Hamm, supra; CEH, Inc. v. FV Seafarer, 153 F.R.D. 491, (D.R.I. 1994) (state discovery practices concerning the disclosure of financial information for the purposes of punitive damages do not control in federal court). Thus, federal judges can either follow the practice of many state court judges requiring the production of financial information only after the first phase or can require such information to be provided as part of the pre-trial discovery process. Conclusion This non-exhaustive list of confusing and unresolved issues under the PDA makes clear not only that it contains some traps for the unwary but also that important issues relating to the award of punitive damages will continue to challenge the courts and litigants for many years to come.