Wednesday, February 13, 2019

Airbus v Bell Punitive Damages Award Upheld

Airbus Helicopters S.A.S. v. Bell Helicopter Textron Canada Limited 2019 FCA 29 de Montigny JA: Pelletier, Boivin JJA aff’g 2017 FC 170 Martineau J
            2,207,787 / helicopter landing gear

In Eurocopter v. Bell Helicopter Textron Canada Limitée 2012 FC 113 aff’d 2013 FCA 219 Martineau J held that one of the claims of the 787 patent, owned by Eurocopter (now the helicopter division of Airbus), to be valid and infringed. The patent covers sleigh type skid landing gear for helicopters [8]. In the subsequent Airbus Damages decision, Martineau J awarded $500,000 in compensatory damages (see here and here) and $1,000,000 in punitive damages, plus pre-judgment and post-judgment interest. (I wrote far to much on the punitive damages aspect of the trial decision, trying to analyze the relevant principles. I won’t repeat that here, but for those who are interested the posts are here, here, and here.) Airbus appealed, arguing that the award of punitive damages should have been higher, alleging a variety of errors [29]. Bell cross-appealed on the basis that the award of punitive damages was too high [71]. A few general principles arise from the FCA decision.

The standard of review is deferential

The Court noted that:

[30] It is now well established that appellate intervention with respect to an award of punitive damages will only be warranted where the trial court made an error of law or a “wholly erroneous assessment” of the quantum of damages (Richard v. Time Inc., 2012 SCC 8, [2012] 1 S.C.R. 265 at para. 190 (Time)). In Cinar Corporation v. Robinson, 2013 SCC 73, [2013] 3 S.C.R. 1168 (Cinar), the Supreme Court summarized the applicable standard of review in the following way:
In [Time], this Court held that an appellate court may only interfere with a trial judge’s assessment of punitive damages (1) if there is an error of law; or (2) if the amount is not rationally connected to the purposes for which the damages are awarded, namely prevention, deterrence (both specific and general), and denunciation …
                                    Cinar at para. 134.

Airbus argued that Martineau J had not attached sufficient importance to various factors, such as the blameworthiness of the respondent’s conduct, and the financial means of the defendant [39]. However, Martineau J “correctly identified the factors going to the proportionality of a permissible quantum of punitive damages, and properly applied them to the facts of this case” [50]. So long as that is done, the FCA will not be inclined to reweigh the relevant factors itself [39], [45]-[52], [57].

Prior awards may be used as guideposts

Airbus argued that “the judge’s determination of the quantum of punitive damages was based on his erroneous belief in the existence of a $2,000,000 ceiling” on punitive damages awards [34]. The FCA concluded that Martineau J had not in fact felt himself limited by any such ceiling [36], [38]. Rather, “he saw this scale simply as a helpful indication of the range of punitive damages previously awarded” [36]. Moreover (emphasis added):

[37] In my view, there is nothing untoward or inappropriate in using a range of previous awards, as guideposts, in assessing the quantum of punitive damages. Even the Supreme Court, in Whiten, took such a range into account, when it concluded that the award was “certainly at the upper end of a sustainable award on these facts but not beyond it” (at para. 4). It is, in fact, a very common practice, and a sound one for that matter, to consider previous awards in assessing the quantum of punitive damages in a particular case.

Lubrizol is of limited precedential value

In Lubrizol 58 CPR(3d) 167 (FCTD) rev’d 67 CPR(3d) 1 (FCA) the FC had initially awarded $15,000,000 in punitive damages. This was overturned on appeal because the quantum of the compensatory damages had not been considered in the analysis [40] and they had not yet even been assessed. As the FCA stated in Lubrizol, “the Court cannot decide whether exemplary damages are required until after it decides whether the general damages were insufficient for punishment and deterrent purposes.” Airbus argued that nonetheless the FCA in Lubrizol had “implicitly agreed” that $15,000,000 was appropriate [41]. The FCA in this case rejected that reading of Lubrizol [41], and went on to state that

[43] Lubrizol was decided almost 25 years ago and does not seem to have been given much precedential value. I have been unable to find any other case where such a large award of punitive damages has been made, and counsel has not drawn our attention to any such case. [On review of other awards] Lubrizol would therefore appear to be the outlier in terms of the significance of the award in punitive damages, and the judge was certainly entitled to distinguish that decision from the present case.

Post infringement mitigating conduct should be considered

Bell had originally used the infringing gear, known as the “Legacy” gear, but after an infringement action was brought in Canada and other jurisdictions (including the US and France), had switched to non-infringing Production gear [10]. Martineau J had taken this into account as a mitigating factor in assessing punitive damages. Airbus argued that doing so was an error of law. It argued, based on the discussion of “potential harm” in Whiten 2002 SCC 18 [117], that “the seriousness of the prejudice must be assessed at the time of the wrongful behaviour, whether or not actual prejudice ensued” [60]. This FCA rejected this, pointing out that it was clear from the SCC discussion in Whiten that “what the Court really wanted to prevent was for bare luck to be considered as a mitigating factor” [61].

Further, the FCA held that “it was open to the judge to regard the steps taken by the respondent after the infringement as a mitigating factor” [62], and indeed,“[n]ot taking into account the conduct of the respondent after being notified of the violation would be antithetical to [the holistic and balancing approach endorsed in Whiten]” [63, my emphasis]: and see [64].

Sanctions for the same infringement in other jurisdictions may be taken into account

Airbus argued that Martineau J had erred in law in considering other penalties, in particular the likelihood of damages for infringement in parallel US and French proceedings [65],[66]. (And see [FC 435], [FC 440]. The FCA held that this may be taken into account, at least so long as the proceedings related to the same infringement [66] and are actually likely to result in a sanction [67]. (Though in any event, on the facts Martineau J appears to have considered this factor to be neutral [69].)

Finally, Bell cross-appealed on the basis that the award of $1,000,000 was more than the minimum necessary to meet the purposes of punitive damages [71]. The FCA rejected this argument, holding that on the facts, it was open to Martineau J to conclude that substantial punitive damages were warranted [75].

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