Litigation- Italy

Facts

In September 1985 a US teenager died in Opelika, Alabama when his motorcycle was hit by a car whose driver failed to give way. The victim's mother sued the driver and the US distributor of the helmet worn by the victim, as well as other defendants, before the district court of Jefferson County, Alabama, claiming $3 million in damages. In a separate complaint the plaintiff also joined to the action the Italian manufacturer of the helmet, Fimez SpA.

During the proceedings the original litigants reached a settlement (the terms of which were not subsequently disclosed to the Italian court) and the action proceeded against Fimez alone.

The US court eventually issued two judgments, the first on January 1 1991 and the second on September 14 1994. The defendant was found liable for the negligent manufacture of the helmet on the basis of technical evidence provided by expert witnesses. However, no information was given to justify the quantum of damages awarded by the court - a total of $1 million.

On January 14 1995 the victim's mother filed a complaint with the Venice Court of Appeals, seeking recognition and enforcement of the US judgment. In its decision of October 15 2001 the court refused to recognize or enforce the judgment (for further details please see "Foreign Punitive Damages Awards Conflict with Italian Public Order").

In essence, the court of appeals, having been given no information about the US court's justification of the damages, considered them to be punitive. Therefore, recognition of the judgment was denied on the grounds that punitive damages conflict with Italian public order.

The claimant appealed to the Supreme Court on the grounds that: (i) the court of appeals had erred in finding that the US court had awarded punitive damages; and (ii) punitive awards do not conflict with Italian public order, as provisions of a comparably punitive nature, such as liquidated damages clauses and compensation for non-pecuniary damages (ie, moral damages) are permitted in the Italian legal system.

Decision

In Decision 1183/2007, issued on January 19 2007, the Supreme Court rejected the appeal and upheld the court of appeals decision.

On the first ground of appeal, the Supreme Court held that the question of whether punitive damages had been awarded was an issue of fact and was therefore a matter for the court of appeals.

On the second ground of appeal, the Supreme Court held that, in the Italian legal system, damages are unrelated to the concept of punishment or to the wrongdoer's conduct. Rather, they are intended to compensate an innocent party to a contract or the victim of a tort for a loss. The Italian legal rules on liquidated damages and compensation for moral damages are not of the same nature as punitive damages because the latter relate to the defendant's conduct, not to the loss suffered by the plaintiff. Moreover, they are characterized by a disproportion between the compensation granted and the loss suffered by the victim.

In considering liquidated damages in particular, the court observed that if an amount agreed on by the parties is found to be manifestly excessive, it can be equitably reduced by the judge. As to moral damages, the court noted that the system of tortious liability is intended to compensate the victim of a wrongdoing for a loss - not to punish the tortfeasor - by the payment of a sum of money that is intended to remedy the tort. Therefore, a connection must exist between the actual harm suffered by the plaintiff and the amount awarded in damages.

Thus, the court found no analogy in either case with the concept of punishment inherent in punitive damages. It concluded that punitive damages have no equivalent in the Italian legal system and confirmed the view that foreign punitive damages awards conflict with public order and may not be recognized or enforced in Italy.

International Law Office