A federal appeals court has asked the Oregon Supreme Court to rule on whether the state must approve any settlement of punitive damages awarded by a jury.
Under current law, Oregon gets 60 percent of those punitive damages — an amount that can be huge, depending on the case.
Last April, Oregon Attorney General John Kroger dropped a lawsuit seeking its $220 million share of $350 million in punitive damages that a state jury awarded against heavy truck manufacturer Freightliner.
The state agreed to take less than $500,000 — the company paid $150,000 into a fund for Oregon crime victims with an additional $300,000 promised if the company pulls its headquarters out of Portland within three years.
Freightliner was founded in Oregon but was purchased by German automotive giant Daimler AG in 1981 and is now a brand name for Daimler Trucks North America, which is based in Portland.
The complex international lawsuit resulted in a settlement in a British court that eliminated the punitive damages in Oregon — without state consent to the settlement.
The 9th U.S. Circuit Court of Appeals, in a different Oregon case involving punitive damages, decided earlier this month to ask the Oregon Supreme Court to rule on whether consent is required so that attorneys and trial courts “will have the benefit of an authoritative decision on this issue.”
The Oregon law setting aside a share of punitive damages is called a “split recovery statute,” and also applies to cases decided under Oregon law in federal court.
The 9th Circuit noted the original Oregon law was enacted in 1987 but was amended in 1995 because parties could settle a case by agreeing to drop any punitive damages and “the state, of course, would be left holding an empty bag.”
The appeals court said the amended law made the state a “judgment creditor” entitled to its share of punitive damages after a verdict has been entered in a lawsuit. But the court said the role of such a creditor has not been clearly defined.
The appeals court also noted that not all settlements that do away with punitive damage awards “represent cynical attempts to carve up the state’s portion of an award.”
But it said that, “rather than attempt to resolve this conundrum ourselves, we believe it is the more prudent course” to ask the Oregon Supreme Court to decide.
Tony Green, a spokesman for Kroger, said the state has always been flexible and willing to negotiate on punitive damage awards, but it will argue that settlements after verdicts should be subject to state approval.
“It’s clear the state didn’t intend to create this loophole,” Green said.
The state’s share of punitive damages goes to the Oregon Crime Victims Compensation Program. Last year, the fund collected more than $5.3 million from punitive damages, according to the attorney general’s Web site.
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