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The Oregon Supreme Court recently interpreted Oregon’s punitive damages statute in a way that will affect parties in civil lawsuits. This statute allocates 60% of any punitive damages award to the State of Oregon.The problem is, the language of the statute is confusing. The statute makes the state a judgment creditor with rights to collect on a punitive damages judgment. But it says that the states interest in the 60% arises when the jury returns its verdict. That doesn’t make sense because a “judgment creditor” cannot exist until the judgment is entered, which does not happen until some time after the verdict is given.In a lawsuit called Patton v. Target, filed in federal court in Oregon, a jury awarded $900,000 in punitive damages. After this verdict, but before the judgment was entered, the parties settled their dispute without including the state in their negotiations and without agreeing to pay the state any portion of the settlement amount.The state moved to intervene in the case, arguing that it had a right to a share of the settlement money because it had a right to 60% of punitive damages. The state also argued that the parties could not settle without its consent. Federal District Court Judge Anna Brown allowed the state to intervene but then granted the original parties’ motion to dismiss the case. The state appealed to the Ninth Circuit Court of Appeals.On appeal, the Ninth Circuit decided that Oregon’s punitive damages statute is ambiguous because it does not explain what rights the state has as a “judgment creditor” before the judgment is entered. The Ninth Circuit asked the Oregon Supreme Court to interpret the Oregon statute by “certifying” this question to the Oregon court:When a jury has returned a verdict that includes an award of punitive damages under Oregon law, is the State of Oregon’s consent necessary before a court may enter a judgment giving effect to any settlement between the parties that would result in a reduction or elimination of the punitive damages to which the State would otherwise be entitled under Oregon Revised Statutes § 31.735?The Oregon Supreme Court answered the question in an opinion issued on November 12, 2010. by ruling that the state has no right to share in a punitive damages verdict before the judgment is entered. The court decided that language in the punitive damages statute about the state being a “judgment creditor” at the time of the verdict has no meaning and is not enforceable.This ruling means that parties in a case in which a jury awards punitive damages are free to reach a settlement without the state's consent, and without giving the state any share of the settlement, up until the judgment is entered. Both parties would have a huge incentive to do so in order to avoid having to pay the government a share of the settlement money.