## Facts

- Wilfredo Acosta bought a used Honda CB750 motorcycle in the U.S. Virgin Islands in 1976.
- While riding, the rear wheel collapsed after striking the edge of a road-repair ditch, throwing Acosta and causing serious injuries.
- Acosta sued Honda Motor Co., Ltd. (manufacturer), Daido Kogyo Co., Ltd. (rear wheel manufacturer/assembler), and American Honda Motor Co., Inc. (U.S. distributor).
- Claims included negligence, strict products liability under Restatement (Second) of Torts § 402A, and breach of the implied warranty of merchantability, largely based on alleged defective design and failure to warn.
- The record contained no evidence of prior similar incidents, complaints, or lawsuits involving the same wheel design.
- A jury found defendants strictly liable and awarded $175,000 compensatory damages and $210,000 punitive damages against each defendant.
- The district court granted judgment notwithstanding the verdict (JNOV) to American Honda on punitive damages but denied JNOV as to Honda and Daido.
- Honda and Daido appealed the punitive damages; Acosta cross-appealed the JNOV for American Honda and raised attorney’s-fee issues.

## Issues

1. Whether Virgin Islands law permits punitive damages in strict products liability actions.
2. What mental-state and proof standard applies to punitive damages in such cases.
3. Whether the evidence supported punitive damages against any defendant, including whether JNOV should have been entered for Honda and Daido (and whether American Honda’s JNOV should be affirmed).

## Decision

- The Third Circuit held punitive damages are legally available in strict products liability actions under Virgin Islands law.
- The court required “outrageous” conduct (evil motive or reckless indifference) proven by clear and convincing evidence to support punitive damages.
- The court concluded the evidence was insufficient to show culpable, outrageous conduct by any defendant, given the absence of notice (no prior incidents) and lack of proof of conscious disregard.
- The court affirmed JNOV for American Honda on punitive damages and reversed the denial of JNOV for Honda and Daido, vacating punitive damages as to all defendants.
- The court remanded for reconsideration of attorney’s fees in light of the elimination of punitive damages.

## Legal Principles

- Virgin Islands law permits punitive damages in strict products liability when the plaintiff proves, by clear and convincing evidence, that the defendant acted with outrageous conduct (evil motive or reckless indifference to the rights of others).
- Punitive damages are not categorically incompatible with strict products liability, but they require proof of a culpable mental state beyond mere product defect.
- Evidence that supports compensatory strict liability (defect and causation) does not, without additional proof of knowledge or reckless disregard, support punitive damages.
- Absence of prior complaints or other notice of a defect may defeat a claim that defendants acted with reckless indifference sufficient for punitive damages.

## Conclusion

Punitive damages may be awarded in Virgin Islands strict products liability cases, but only on clear and convincing proof of outrageous, recklessly indifferent conduct; because the record showed no notice or conscious disregard by any defendant, the punitive awards were set aside and the matter was remanded to revisit attorney’s fees.


Acosta v. Honda Motor Co., Ltd., 717 F.2d 828 (3d Cir. 1983)