Wilfredo Acosta, and Cross-Appellee v. Honda Motor Company, Ltd., and Cross-Appellant. Wilfredo Acosta, and Cross-Appellee v. American Honda Motor Company, Inc. And Daido Kogyo Company, Ltd., and Cross-Appellants

In the absence of contrary authority and coupled with the common law, the restatements of law approved by the American Law Institute provide the rules of decision in the Virgin Islands. V.I.Code Ann. tit. 1, Sec. 4 (1967). This case presents the important question whether Virgin Islands law permits the award of punitive damages against defendants who have been found strictly liable under section 402A of the Restatement (Second) of Torts for having marketed defective products. We hold that punitive damages may be awarded against such defendants, but only when the plaintiff proves the requisite outrageous conduct by clear and convincing evidence. Because we find that plaintiff did not adduce such proof as to the conduct of any of the defendants, we will affirm the district court's order granting the motion of American Honda Motor Co., Inc. ("American Honda") for judgment n.o.v. on that issue, and we will reverse the denial of similar motions on behalf of defendants Honda Motor Co., Ltd. ("Honda") and Daido Kogyo, Co., Ltd. We find no merit, however, in defendants' challenges to the award of compensatory damages, and we will affirm that aspect of the judgment. Finally, in light of our disposition of the punitive damages claim, we will remand for reconsideration the district court's order awarding attorneys fees pursuant to Virgin Islands law.

In early 1976, plaintiff purchased a used Honda CB750 motorcycle. At that time the motorcycle was six years old; plaintiff was its third owner. Approximately two months after he bought the motorcycle, plaintiff was injured when he was thrown from the motorcycle while riding at night on a lighted road in St. Thomas. According to his testimony, he was driving at approximately 30-35 miles per hour when he saw in the road a repair ditch approximately four inches deep and ten feet long. He testified that he slowed down, retained control of the motorcycle, and maneuvered it straight through the ditch. As he was exiting the ditch, however, the motorcycle's rear wheel hit the back edge of the ditch and collapsed. Despite plaintiff's efforts to maintain control, the collapsed rear of the motorcycle jerked into the air, tossing him to the ground. Plaintiff sustained multiple injuries, including four fractured vertebrae, a broken femur, and a punctured liver.

Plaintiff subsequently brought this action in the District Court for the District of the Virgin Islands against defendants Honda, the manufacturer of the motorcycle; Daido Kogyo, the company responsible for manufacturing and assembling the rear wheel; and American Honda (a wholly-owned subsidiary of Honda), the motorcycle's distributor. The complaint, which stated causes of action in negligence, strict product liability under section 402A of the Restatement (Second) of Torts, and breach of implied warranty of merchantability, see V.I.Code Ann. tit. 11A, Sec. 2-314 (1965), alleged defective design and manufacture of the rear wheel, as well as a failure to warn that the wheel was too weak to withstand contact with the rim of the ditch.

At the conclusion of the trial, the court instructed the jury on negligence and strict liability,1 as well as on the availability of punitive damages. Pursuant to an agreement between counsel, the jury was given lengthy special interrogatories which, among other things, directed it to consider the strict liability count first and, if it found the defendants liable thereon, to disregard the negligence count.

The jury found the defendants liable on the strict liability count and awarded the plaintiff $175,000 in compensatory damages. The jury also assessed punitive damages of $210,000 against each defendant. Defendants subsequently moved for judgment notwithstanding the verdict on the ground that there was insufficient evidence to support either compensatory or punitive damages. Noting that it was "taken aback, slightly, that the award was in such a modest amount," the court affirmed the award of compensatory damages. The court also stated, without elaboration, that the evidence disclosed sufficiently "outrageous or reckless conduct" on the part of Honda and Daido to warrant sustaining the punitive damages against them. The court confessed error, however, in having allowed the jury to consider punitive damages against American Honda and granted the judgment n.o.v. motion as to that aspect of the verdict. The court also awarded Acosta costs and attorneys fees pursuant to 5 V.I.C. Sec. 541 (1967). Plaintiff then appealed from the grant of judgment n.o.v. for American Honda; defendants Honda and Daido Kogyo cross-appealed from the court's denial of their motions for judgment n.o.v. and attorney's fees.

The first issue that we must address is plaintiff's contention that, under Fed.R.Civ.P. 50, defendants' failure to make a sufficiently specific motion for a directed verdict at the close of all the evidence foreclosed the district court from considering, much less granting, a motion for judgment n.o.v. Plaintiff points to two rules. Rule 50(a) requires that a "motion for a directed verdict shall state the grounds therefor." Rule 50(b) allows only a party who has moved for a directed verdict to move after an adverse jury verdict to have "the judgment entered in accordance with his motion for a directed verdict." Although a liberal (and perhaps literal) reading of Rule 50(b) could imply that any motion for a directed verdict, no matter how vague, could satisfy the Rule 50(b) prerequisite provision, an understanding of the purpose behind the specificity requirements of Rule 50 shows the impropriety of such a construction. See Huddell v. Levin, 395 F.Supp. 64, 80-81 (D.N.J.1975); vacated on other grounds, 537 F.2d 726, 741 (3d Cir.1976).

Rule 50(b) is essentially a notice provision that, among other functions, protects the important seventh amendment right of trial by jury. A motion for a judgment n.o.v. must be preceded by a motion for a directed verdict sufficiently specific to afford the party against whom the motion is directed an opportunity

to cure possibly technical defects in proof which might otherwise make his case legally insufficient. A motion for judgment notwithstanding the verdict made after trial, in the absence of prior notice of the alleged defect, comes too late for possibly curative action, short of a completely new trial. Thus, whether or not the Constitution compels the rule forbidding a party to advance by judgment notwithstanding the verdict motion a ground not first advanced in a motion for directed verdict, the rule is certainly consistent with the general spirit animating the Federal Rules of Civil Procedure. That spirit suggests avoidance of surprises and tactical victories at the expense of substantive interests.

Wall v. United States, 592 F.2d 154 (3d Cir.1979); accord 5A J. Moore, Moore's Federal Practice, p 50.08 (2d ed. 1982).

We agree with plaintiff's observation that defendants' counsel could (and should) have stated the basis of their motion for a directed verdict with considerably greater specificity. The sole statement made by defendants' counsel in this regard was less than illuminating:

I move for a directed verdict on Counts I and the remaining counts, ... under 402(1) [sic] theory which is ... strict liability ... and the negligence count which I believe are the only remaining counts in all of the complaints....2

Ordinarily, and standing alone, this motion might not have served as a valid prerequisite to a motion for judgment n.o.v. as to punitive damages. But the communicative content, "specificity" and notice-giving function of an assertion should be judged in context. See Hubbell v. Levin, 395 F.Supp. at 80, vacated on other grounds, 537 F.2d 726 (3d Cir.1976). In this case, a close examination of the record shows that, despite the imprecision of the sentences uttered by defendants' counsel at the time of his Rule 50(a) motion for a directed verdict, plaintiff's counsel and the court understood and responded to defendants' counsel as well as if he had been more specific at the time.3 Immediately after defendants' counsel made the motion, plaintiff's counsel described the counts to which his adversary had referred. The court then stated that [the defendants have], in effect, moved for a directed verdict as to Counts I [negligence], II [strict liability], and IV [punitive damages]; plaintiff's attorney responded, "I think we proved all the elements of both [the strict liability and negligence] counts." Specifically, plaintiff's counsel contended that the record contained evidence sufficient to sustain a finding that defendants were negligent because of inadequate testing of the rear wheel. This colloquy, coupled with the rest of the exchange that preceded the denial of the motion, leads us to conclude that, taken in context, defendants' motion was sufficiently specific to satisfy Rule 50.4III.

Defendants' principal contention on appeal is that the evidence was insufficient as a matter of law to sustain the award of punitive damages and that the district court erred in submitting the issue to the jury in the first place.5 Before turning to that question, however, we first must address their argument that punitive damages are unavailable in this case because, no matter what the evidence, punitive damages are fundamentally inconsistent with a regime of strict products liability in general, and with section 402A in particular.

A. The Availability of Punitive Damages in the Strict Liability Context

Although this question is one of first impression in the Virgin Islands, we do not lack guidance. Many courts, both state and federal, have already considered the issue, and the overwhelming majority have concluded

that there is no theoretical problem in a jury finding that a defendant is liable because of the defectiveness of a product and then judging the conduct of the defendant in order to determine whether punitive damages should be awarded on the basis of 'outrageous conduct' in light of the injuries sustained by the plaintiff. Hoffman v. Sterling Drug, Inc., 485 F.2d 132, 144-47 (3d Cir.1973); Thomas v. American Cystoscope Makers, Inc., 414 F.Supp. 255, 263-267 (E.D.Pa.1976). Punitive damage awards provide a useful function in punishing the wrongdoer and deterring product suppliers from making economic decisions not to remedy the defects of the product.

Neal v. Carey Canadian Mines, Ltd., 548 F.Supp. 357 (E.D.Pa.1982) (Bechtle, J.) (construing Pennsylvania law).6

In addition, this court already has held that the existence of strict products liability in the Virgin Islands does not preclude all examination of fault in the formulation of tort doctrine. In Murray v. Fairbanks Morse, 610 F.2d 149, 158 (3d Cir.1979), we considered whether "comparative fault principles can be applied effectively" in "strict products liability actions, where the focus is on the product defect and not on the defendant's personal misconduct." Although defendants in that case argued that the two notions were fundamentally incompatible, we held that "[a] system of comparative fault which proceeds to apportion damages on the basis of causation in no way disturbs the plaintiff's burden of proof. The plaintiff still need only prove the existence of a defect causally linked to the injury." Id. at 161. The same rationale applies here: as long as a plaintiff can carry his burden of proof under section 402A, there is no inconsistency in his also being permitted to offer proof regarding the nature of the manufacturer's conduct.

The Restatement (Second) of Torts does include a generally applicable provision regarding punitive damages. Section 908(2) declares:

Punitive damages may be awarded for conduct that is outrageous, because of the defendant's evil motive or his reckless indifference to the rights of others. In assessing punitive 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 that the defendant caused or intended to cause and the wealth of the defendant.

Nowhere in that section or the comments did the drafters suggest that these principles should not apply to strict products liability,7 and we concur with the considered opinion of the Court of Appeals for the Fifth Circuit that "[p]unishment and deterrence, the basis for punitive damages ..., are no less appropriate with respect to a product manufacturer who knowingly ignores safety deficiencies in its product that may endanger human life" than in other cases in which "the defendant's conduct shows wantonness or recklessness or reckless indifference to the rights of others." Dorsey v. Honda Motor Co., 655 F.2d 650, 658 (5th Cir.1981) (construing Florida law), opinion modified on rehearing, 670 F.2d 21 (5th Cir.), cert. denied, --- U.S. ----, 103 S.Ct. 177, 74 L.Ed.2d 145 (1982).8

Some courts and commentators, however, have suggested that the policies underlying punitive damages are so incompatible with those animating strict products liability that punitive damage awards should not be permitted against defendants found liable under 402A.9 These arguments essentially break down into three groups: contentions that punitive damages will upset the delicate balance struck in the creation of a strict products liability regime, assertions that the goals of punitive damages are unachievable in the strict products liability context, and arguments that the imposition of punitive damages in 402A cases will have extremely undesirable economic and social consequences. We disagree that these considerations warrant our precluding the award of punitive damages, and we discuss each in turn.

1. Would the Availability of Punitive Damages Disrupt the Regime of Strict Products Liability?

Defendants' first argument is that punitive damages are inherently inconsistent with a theory of strict products liability. Punitive damages, defendants note, " 'evolved in the context of a one-on-one relationship and were viewed as a form of punishment--a deterrent for intentional and outrageous conduct.' " Br. at 25 (quoting Ghiardi & Koehn, Punitive Damages in Strict Liability Cases, 61 Marq.L.Rev. 245, 248 (1977)). The touchstone of section 402A, by contrast, is that the character of the manufacturer's conduct is essentially irrelevant to its liability--only the condition of the product is to be considered by the trier of fact. See Murray v. Fairbanks Morse, 610 F.2d 149, 157 (3d Cir.1979). Thus, defendants assert, the two claims should not be joined "[b]ecause the strict liability claim expressly relaxes the proof requirements concerning the conduct of the defendant [while] the claim for punitive damages refocuses attention to the conduct of the defendant...." Id.

We reject the notion that punitive damages are theoretically inconsistent with strict products liability. While it is true that section 402A eschews the culpability of defendants' conduct as a factor in determining liability, it does not do so because focusing on culpability is always inappropriate. Indeed the drafters of the Restatement explicitly noted that 402A "does not preclude liability based upon the alternative ground of negligence of the seller, where such negligence can be proved." Comment a. Rather, the rule is intended to expand recovery by circumventing the restrictions imposed by fault-based standards. See Murray v. Fairbanks Morse, supra, 610 F.2d at 158. The fact that some sellers therefore will be found liable in the absence of fault does not mean that those who are at fault--and outrageously so--should not be punished.10 Accord Neal v. Carey Canadian Mines, Ltd., 548 F.Supp. 357, 378 (E.D.Pa.1982); Thomas v. American Cystoscope Makers, Inc., 414 F.Supp. 255, 264 n. 13 (E.D.Pa.1976) (dictum) ("this Court knows of no sound reason" why punitive damages should be precluded when liability is predicated on 402A); Wangen v. Ford Motor Co., 97 Wis.2d 260, 294 N.W.2d 437, 446 (1980).

One court, however, recently has advanced an economics-based objection to allowing punitive damages in a 402A action:

[T]he allowance of punitive damages would warp the valuation process which is implicit in the litigation process. That is, the product's price should reflect the cost of accidents or the cost of accident avoidance mechanisms in order that the market may assess the usefulness of the product.... The assessment of punitive damages upon the manufacturer and distributors can be analyzed as the imposition of costs for poor managerial decisions. These costs should not be spread to the buying public through an adjustment of the product's price. To do so will deflate the usefulness of the product on the basis of facts which do not relate to the product itself.

Gold v. Johns-Manville Sales Corp., 553 F.Supp. 482, 484 (D.N.J.1983) (citations omitted). Although the argument is attractive, it is predicated on a questionable premise, for it is not necessarily true that an award of punitive damages will be spread to the public through an adjustment of the price. In order for such spreading to occur, not only would a manufacturer have to be able to forecast punitive damages awards against him, but the market structure also would have to be such that he had sufficient unutilized market power to pass on the increased costs. Unless an entire competitive industry was behaving similarly (i.e., engaging in the same kind of opprobrious conduct and forecasting), a manufacturer would seem to be unable to afford to pass on the costs.11 Accord Wangen v. Ford Motor Co., 97 Wis.2d 260, 294 N.W.2d 437, 452 (1980).

2. Does the Strict Liability Context Limit the Effectiveness of Punitive Damages?

Section 908(1) of the Restatement (Second) of Torts makes clear that

[p]unitive damages are damages, other than compensatory or nominal damages, awarded against a person to punish him for his outrageous conduct and to deter him and others like him from similar conduct in the future.

(Emphasis added.); see Herman v. Hess Oil Virgin Island Corp., 524 F.2d 767, 772 (3d Cir.1975) ("[I]t is proper to assess punitive damages as a deterrent and an example to the community."). While few, if any courts, have challenged these goals, some courts and commentators have suggested that the connection between punitive damages and the goals of punishment and deterrence will be attenuated in the strict products liability context.

Proponents of this argument point out that the magnitude of recent jury verdicts, coupled with the potential for a single design defect to serve as the template for hundreds or thousands of defective, injury-causing products, means that a manufacturer may be liable for many millions of dollars merely as compensation to injured victims. See 3 L. Frumer & M. Friedman, Products Liability Sec. 33.01. Thus, the argument runs, compensatory damages have reached such a level in products-liability litigation that, despite their more limited purpose, they have begun to perform the functions heretofore performed by punitive damages. Manufacturers, the argument concludes, therefore already have every incentive to insure that their products are as safe as possible. Indeed the Court of Appeals for the Second Circuit observed as early as 1967:

Many awards of compensatory damages doubtless contain something of a punitive element, and more would do so if a separate award for exemplary damages were eliminated. Even though products liability insurance blunts the deterrent effect of compensatory awards to a considerable extent, the total coverage under such policies is often limited, bad experience is usually reflected in future rates, and insurance affords no protection to the damage to reputation among [users, consumers, and distributors] which an instance like the present must inevitably produce.

Roginsky v. Richardson-Merrell, Inc., 378 F.2d 832, 841 (2d Cir.1967). Thus the Roginsky court concluded that punitive damages were unnecessary to punish and deter the reckless marketing of defective products.12

We are not persuaded that limiting recovery to compensatory damages will, in all cases, provide an effective deterrent against the type of wrongful conduct for which punitive damages are usually available. For example, the cost of litigation relative to the likely recovery may deter victims of product defects from suing the manufacturer, even under a regime of strict liability, where products causing numerous minor injuries are involved. The availability of punitive damages to those who do sue may offset the decreased deterrence attributable to those who thus could but do not. Similarly, consumers will not always be aware of the source of an injury caused by a product defect, see Sturm, Ruger & Co. v. Day, 594 P.2d 38, modified, 615 P.2d 621 (1980) on rehearing, 627 P.2d 204 (Alaska), cert. denied, 454 U.S. 894, 102 S.Ct. 391, 70 L.Ed.2d 209 (1981); Owen, Punitive Damages in Products Liability Litigation, 74 Mich.L.Rev. 1258, 1287-95 (1976) (also noting the expense of litigation), or they may wrongfully attribute the accident to their own clumsiness; the manufacturer's reprieve in such cases will be offset by the availability of punitive damages in other cases. Finally, under existing doctrine, compensatory damages may prove an inadequate deterrent even when victims do bring suit. Current doctrine does not, for example, allow the estate of a decedent killed by a defective product to recover the value of life to the decedent himself; recovery is instead limited to the pecuniary loss to those immediately surrounding the decedent. In many instances, this doctrine may lead to inadequate compensation. In addition, those peripherally injured by accidents to another generally are not allowed to bring suit, yet their loss may be, in moral or practical terms, extremely substantial. See Owen, Civil Punishment and the Public Good, 56 So.Cal.L.Rev. 103, 113 (1982). While punitive damages may not be a logically perfect method of remedying these perhaps unavoidable flaws in our system of justice, they are a useful surrogate not necessarily precluded by a strict products liability regime.

3. Will Punitive Damages Have Undesirable Economic and Social Consequences?

Perhaps recognizing that mere redundancy would not be sufficient to supersede considerations in favor of allowing punitive damages, the Roginsky court predicted that the availability of such damages would have unfortunate results. The court noted that there are frequently numerous potential plaintiffs with claims arising from the same defect in design or manufacture; if each such plaintiff can recover punitive damages, the court warned, the aggregate recovery could be "catastrophic."

If liability policies can protect against this risk as several courts have held, the cost of providing this probably needless deterrence, not only to the few manufacturers from whom punitive damages for highly negligent conduct are sought but to the thousands from whom it never will be, is passed on to the consuming public; if they cannot, as is held by other courts and recommended by most commentators, a sufficiently egregious error to one product can end the business life of a concern that has wrought much good in the past and might otherwise have continued to do so in the future, with many innocent stockholders suffering extinction of their investments for a single management sin.

Although we recognize that the effect of punitive damages may be harsh, we find somewhat excessive the Roginsky court's dire predictions about the consequences of allowing punitive damages. First, even assuming that policy considerations would permit manufacturers to insure against punitive damages,14 it is not clear that such insurance would necessarily emasculate the effectiveness of the remedy or result in "needless deterrence." Rather, a 1976 study by the Department of Commerce noted that recent increases in the number of products liability claims, policy cancellations, insurance premiums, and average loss per claim have contributed to a situation in which manufacturers are finding it more and more difficult to obtain adequate coverage. See Bureau of Domestic Commerce, U.S. Department of Commerce, Product Liability Insurance--Assessment of Related Problems and Issues (1976). The upshot is that many manufacturers are making stronger efforts to improve design and quality control. Id. at 9. As one commentator has noted, "these developments compel the conclusion that products liability litigation is increasingly forcing manufacturers to improve product safety even when they are insured against claims for product injuries." Owen, supra, 74 Mich.L.Rev. at 1310.

More importantly, we do not share Roginsky's in terrorem vision of the consequences of punitive damages for which insurance is unavailable. It is, of course, possible that "a sufficiently egregious error as to one product" could result in the demise of its manufacturer, but such a result is not inevitable.15 Comment e to section 908 of the Restatement makes clear that one factor to be taken into account in calculating punitive damages

is the existence of multiple claims by numerous persons affected by the wrongdoer's conduct. It seems appropriate to take into consideration both the punitive damages that have been awarded in prior suits and those that may be granted in the future, with greater weight being given to the prior awards. In a class action involving all claims, full assessment of the punitive damages can be made.16

Moreover, this court has previously recognized that both the wealth of the defendant, see Herman v. Hess Oil, supra,17 and the size of compensatory damages, see Chuy v. Philadelphia Eagles Football Club, 595 F.2d 1265, 1279 (3d Cir.1979) (in banc), should be taken into account in assessing punitive damages. "Thus, corporate defendants are protected from excessive punitive damage awards through judicial control both at the district court and appellate levels." Neal v. Carey Canadian Mines, supra, 548 F.Supp. at 377.

Although we reject each of the various arguments against awarding punitive damages in the strict liability context, we agree with Judge Friendly's observation in Roginsky, supra, that "the consequences of imposing punitive damages in a case like the present are so serious" that "particularly careful scrutiny" is warranted. 378 F.2d at 852 (denying petition for rehearing); cf. Comment, Criminal Safeguards and the Punitive Damages Defendant, 34 U.Chi.L.Rev. 408, 417 (1967) ("If one accepts the proposition that the consequences of punitive damages can be 'momentous and serious,' then justice requires increasing the burden of persuasion of the plaintiff in a punitive damages action.") We therefore hold under Virgin Islands law that a plaintiff seeking punitive damages, at least in an action in which liability is predicated on section 402A, must prove the requisite "outrageous" conduct by clear and convincing proof.18 Accord Wangen v. Ford Motor Co., supra; Model Uniform Product Liability Act Sec. 120(A), 44 Fed.Reg. 62748 (1979).19

Applying the "clear and convincing" standard to the facts of this case, we conclude that the district court should have entered judgments n.o.v. on the punitive damages issue for all three defendants, and not just for American Honda. We recognize, of course, that we are bound to "view all the evidence and the inferences reasonably drawn therefrom" in plaintiff's favor, see Chuy v. Philadelphia Eagles Football Club, 595 F.2d 1265, 1273 (3d Cir.1979) (in banc), and that "[o]ur limited function at this point is to ascertain from a review of the record whether there is sufficient evidence to sustain the verdict of the jury on this issue," id. It nevertheless appears to us that the record "is critically deficient of that minimum quantum of evidence from which a jury might reasonably afford relief." Denneny v. Siegel, 407 F.2d 433, 439 (3d Cir.1969).

Plaintiff's evidence allegedly supporting his claim for punitive damages essentially consisted of the following:

1. The rear wheel of his motorcycle collapsed from a thirty-five mile per hour impact with a ditch four inches deep;

2. The particular wheel of plaintiff's motorcycle suffered from an inherent lack of strength as evidenced by the fact that it weighed sixteen percent less than several other randomly sampled rear wheels of motorcycles of the same model;

3. The owner's manual represented the CB750 as a high-speed touring motorcycle but provided no warning that the rear wheel might collapse upon the type of impact that occurred in this case;

4. Although the owner's manual instructed users to set and maintain the tension of the motorcycle's shock absorbers and wheel spokes, the manual did not warn that the failure to do so might result in the collapse of the wheel;

5. Defendants merely spot-checked rear wheels during the assembly process and did not crush test or weigh each wheel;

6. Plaintiff's expert witness testified that the above evidence constituted defective manufacture and a failure adequately to inspect or to warn; and

7. Plaintiff's expert concluded that defendant's conduct manifested a "colossal disregard for the safety of the users of the motor vehicle," App. II at 125-26.20

Plaintiff contends that the jury was entitled to infer from this evidence that defendants recklessly disregarded his rights and safety as a user of the motorcycle. We cannot agree. As we have suggested above, section 908 of the Restatement declares that reckless or outrageous conduct on the part of the defendant is the touchstone of punitive damages. See Berroyer v. Hertz, 672 F.2d 334 (3d Cir.1982); Chuy v. Philadelphia Eagles, supra, 595 F.2d at 1277. Although section 908 does not elaborate on the kind of conduct for which punitive damages are appropriate, comment b refers to section 500, which in turn provides:

The actor's conduct is in reckless disregard of the safety of another if he does an act or intentionally fails to do an act which it is his duty to the other to do, knowing or having reason to know of facts which would lead a reasonable man to realize, not only that his conduct creates an unreasonable risk of physical harm to another but also that such risk is substantially greater than that which is necessary to make his conduct negligent.

The commentary accompanying section 500 explains further:

Recklessness may consist of either of two different types of conduct. In one the actor knows, or has reason to know ... of facts which create a high degree of risk of physical harm to another, and deliberately proceeds to act, or to fail to act, in conscious disregard of, or indifference to, that risk. In the other the actor has such knowledge, or reason to know, of the facts, but does not realize or appreciate the high degree of risk involved, although a reasonable man in his position would do so. An objective standard is applied to him and he is held to the realization of the aggravated risk which a reasonable man in his place would have, although he does not himself have it.

....

For either type of conduct, to be reckless it must be unreasonable; but to be reckless, it must be something more than negligent. It must not only be unreasonable, but it must involve a risk of harm to others substantially in excess of that necessary to make the conduct negligent. It must involve an easily perceptible danger of death or substantial physical harm, and the probability that it will so result must be substantially greater than is required for ordinary negligence.

We have examined the evidence; viewed in the light most favorable to plaintiff, it does not show that the conduct of any defendant was outrageous or reckless. Indeed we discern no basis upon which the jury could have concluded that defendants knew or had reason to know that the rear wheel of Acosta's motorcycle was defective in design or manufacture and that they decided not to remedy the defect in conscious disregard of or indifference to the risk thereby created. Although the wheel had been used in over 275,000 motorcycles, and the model first offered in 1970 (six years before plaintiff's accident), there was no evidence of previous consumer complaints or lawsuits that might have called to defendants' attention that there might be a problem. Moreover, plaintiff offered no proof that defendants developed or failed to modify the engineering designs for the rear wheel of the CB750 with any knowledge or reason to know of its alleged lack of safety.21 Such matters would have been admissible on the punitive damages issues.

In short, a jury could not have reasonably concluded that the evidence by the clear and convincing standard showed defendants to have acted with reckless disregard for the safety of users of the CB750.22 Accordingly, we hold that the district court should have granted defendants' motions for directed verdicts on the punitive damage claim and that it was error to deny the subsequent motions for judgment n.o.v. on behalf of Honda and Daido Kogyo.23

IV. Defendants' Objections to the Cour