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HOFFMAN v. STERLING DRUG

April 19, 1974

CLIFTON F. HOFFMAN
v.
STERLING DRUG, INC. and WINTHROP LABORATORIES, INC. 1



The opinion of the court was delivered by: HERMAN

 This case arises out of a products liability claim brought by the plaintiff seeking compensation for the blindness the defendants' drug Aralen allegedly caused him. A very lengthy trial was conducted which resulted in a jury verdict for the plaintiff in the sum of $437,000. This court denied the defendants' motion for a new trial and the plaintiff's motion for a re-trial on the issue of punitive damages. On cross appeals the circuit reversed and remanded for a new trial on the issues of compensatory and punitive damages. Hoffman v. Sterling Drug, Inc., 485 F.2d 132 (3d Cir. 1973).

 On remand oral argument was had and briefs submitted on numerous crucial and controlling issues which require resolution before the parties undergo a second prolonged trial. The court also heard argument on the question of whether the issues at hand should be certified as controlling questions of law pursuant to 28 U.S.C. § 1292(b) and thereby submitted to the Court of Appeals for pre-trial resolution.

 INFLATION AND FUTURE EARNINGS

 The resolution of the matter is rendered more complex due to an imprecision of terms. Frequently the expressions "earnings increase factor" and "economic trends" (inflation/deflation) are used interchangeably by the courts. The distinction, as this court views it, is that the former constitutes merit raises predicted over the plaintiff's life expectancy, while the latter reflects economic trends separate from any individual's employment situation.

 The testimony at issue, whatever its label, involves regular annual increases based on general economic conditions (primarily inflation) as the circuit noted in Hoffman:

 "Although offered in terms of continuing increases in wage rates, as opposed to a continuing decline in the value of the dollar, the testimony in question reflects a continuing inflationary spiral. . . ." 485 F.2d at 143.

 If this court concludes that future economic trends are a permissible part of future earnings we must first determine how such trends are to be proved. One method, in effect, averages the rate of inflation/deflation over a substantial period from the past, then extrapolates that annual average over the plaintiff's life expectancy. The other requires a projection into the future economic trends not necessarily controlled by past indicators.

 In Hoffman the circuit said: "We note that inflationary considerations have been almost universally rejected as a factor in computing future losses." 485 F.2d at 143-44.

 It bears note that the circuit cited Sleeman v. Chesapeake and Ohio Ry. Co., 414 F.2d 305 (6th Cir. 1969) for the proposition that future inflation is speculative per se. It was the Sleeman court which aptly described the quagmire:

 
"[The] inflation versus deflation debate rages inconclusively at the highest policy levels of our government, in national electoral campaigns, in learned economic journals and is exemplified in the daily gyrations of the stock markets. The debate seems unlikely to be resolved satisfactorily in one personal injury trial. And if testimonial resolution of this factor bearing on the future is attempted, the door is opened to similarly speculative and debatable offsets tending in other directions." *fn2" 414 F.2d at 308.
 
"Similarly in the case at bar, we do not think there was a substantial factual basis for the assumption that salaries of architectural draftsmen in the York area would increase at 6% per year for the next 26 years. Both the present case and Magill are marked by the total absence of any evidence of probable future salary or economic trends. . . . In short, the projected 6% per year earnings increase in the present case is speculation, requiring a new trial on the question of damages." 485 F.2d at 144.

 Plaintiff's counsel attempts to use cases and arguments supportive of projected future incomes in support of his contention that future economic trends affecting that income are similarly admissible.

 In this court's view the plaintiff misreads the Hoffman decision's reliance on Magill. The circuit found Magill to govern as a result of this court's refusal to allow the plaintiff's economist to project his opinion on the declining value of the dollar, thus leaving the sole issue of an earnings increase factor for consideration by the jury.

 
"[No] evidence was introduced in the case at bar as to the probability or magnitude of future inflationary trends and there was no evidence projecting inflation over a long period of time. . . .
 
* * *
 
"The propriety of Schoenwald's [the plaintiff's actuary/economist] use of the 6% 'earnings increase factor is thereby governed by our recent decision in Magill." 485 F.2d at 144.

 This court's error in the original trial was not our refusal to allow evidence on future economic trends, but rather our admission into the record of an earnings increase factor based on insufficient evidence. A close reading of Magill bears this out. Judge Adams' opinion in Magill carefully distinguishes between future earning power and future inflation. Quoting from Pilipovich v. Pittsburgh Coal Co., 314 Pa. 585, 172 A. 136 (1934), the court made clear that future earning power is determined by looking to the plaintiff's peculiar individual abilities:

 
" it is the duty of the plaintiff to show the earning power of the deceased, or give such evidence in regard to his business, business habits, and past earnings, as may afford some basis from which earning capacity may be fairly estimated (Citation omitted) . . . [The] pecuniary loss is what the deceased would probably have earned by his labor, physical or intellectual, in his business or profession . . .. In fixing this amount, consideration should be given to the age of the deceased, his health, his ability and disposition to labor, his habits of living, and his expenditures. " 464 F.2d at 300.

 Drawing on the Pilipovich ruling, the Magill court thereafter concluded that "had the administrator introduced well-founded evidence that Mr. Magill would have received certain promotions or pay raises in the future, such evidence might not have been objectionable. However, the Pennsylvania Supreme Court has held repeatedly that a claim for damages must be supported by a reasonable basis for calculation; mere guess or speculation is not enough. " (Id.)

 At the original trial of the instant case the plaintiff introduced testimony regarding architects' salaries generally rising between 6 and 10% annually. Such testimony is no more than a backhanded mode of injecting inflation into future earnings and is directly contra to the Pilipovich holding that future earnings must be tailored to the particular plaintiff. As if to dispel any doubt the Magill court allowed that:

 The Hoffman court also relied upon Frankel v. United States, 321 F. Supp. 1331 (E.D. Pa. 1970), aff'd, 466 F.2d 1226 (3d Cir. 1972). The trial court in Frankel refused to admit evidence that the cost of institutional care was increasing due to inflation. Chief Judge Sheridan of the Middle District (sitting by designation), declared:

 
"Economists differ on their predictions. Moreover, plaintiff will have money that can be invested and if inflation continues, the return on the money will be greater, and this would have an offsetting effect." 321 F. Supp., at 1346.

 Taken together, this court does not read Magill and Frankel as being equivocal on the issue of economic trends in computing loss of future earnings. The Hoffman decision prefaced its discussion of this issue by citing Russell v. City of Wildwood, 428 F.2d 1176 (3d Cir. 1970) for the proposition that "reasonable certainty" is needed in computing future earnings despite the "host of uncertain contingencies." 485 F.2d at 143.

 Harper & James, cited with approval in Sleeman, supra, at 308, and Frankel, supra, at 1346, accurately sum up the uncertainty of predicting economic trends which Hoffman decried:

 
" Future trends in the value of money are necessarily unknown and so always render such damages speculative in a way we cannot escape. If the estimates represent a straight-line projection of present living costs, they will be frustrated by fluctuations either way. If prophecy of change is heeded, frustration will follow if no change, or the opposite change, occurs. When courts have consciously grappled with the problem they have either found all prophecy too speculative and so, perforce, have taken the equally speculative course of betting on a continuance of the status quo; or they have made intuitive and not always very wise judgments that present conditions represent a departure from some imaginary norm to which they think we shall rapidly return. . . ." 414 F.2d at 308.
 
" Though some courts have sanctioned instructions permitting the jury to take into account inflation between the injury and the trial, there is little or no authority in favor of charging the jury to take future inflation into account, see 2 Harper and James, The Law of Torts § 25.11 (1956) . . .." 321 F. Supp., at 1346.

 As difficult as it might be to separate (in the actuarial sense) the earnings increase factor of a particular plaintiff from future economic trends, separate they must be. Therefore, this court concludes that at the upcoming re-trial on the merits, the plaintiff will be allowed to argue the earnings increase factor to the jury only insofar as the evidence applies to the plaintiff Clifton Hoffman. This court will not allow into evidence any testimony regarding future inflation or deflation, regardless of the foundation laid for it.

 PUNITIVE DAMAGES

 Next, the court directs its attention to the issue of punitive damages. The circuit court remanded for a new trial the issue of punitive damages, concluding that this court erred in not allowing the plaintiff's eleventh-hour amendment to the complaint. The essence of the plaintiff's prayer for punitive damages is his contention that Sterling Drug, Inc. marketed Aralen (Chloroquine Phosphate) with actual knowledge of, or with wanton disregard as to whether it had seriously harmful side effects, particularly in causing chloroquine retinopathy.

 As support for this position, plaintiff proffers the Restatement of Torts § 908(2):

 
"Where punitive damages are permissible, their allowance and amount are within the discretion of the trier of fact. In assessing such damages, the trier of fact can properly consider the character of the defendant's act, the nature and extent of the harm to the plaintiff which the defendant caused or intended to cause, and the wealth of the defendant."

 Section 908 has been cited as authority in Pennsylvania, *fn3" see, Chambers v. Montgomery, 411 Pa. 339, 344, 192 A.2d 355 (1963). However, Pennsylvania has consistently required that the plaintiff secure a verdict for compensatory damages as a prerequisite to punitive damages. Hilbert v. Roth, 395 Pa. 270, 276, 149 A.2d 648 (1959); Certified Laboratories of Texas, Inc. v. Rubinson, 303 F. Supp. 1014, 1029 (E.D. Pa. 1969); Weider v. Hoffman, 238 F. Supp. 437 (M.D. Pa. 1965). Moreover, Pennsylvania requires a reasonable relationship between compensatory and punitive damages. Rubinson, supra ; Suflas v. Cleveland ...


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