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Tuesday, March 03, 2009

Ind. Decisions - Marion County Judge rules cap on punitive damages is unconstitutional [Updated]

Note this is about the punitive damages cap itself, not the allocation requirement. Jon Murray reports today in the Indianapolis Star in a lengthy story. Here are a few quotes:

A Marion County judge has ruled that state lawmakers violated the Indiana Constitution when they set a limit on monetary damages juries could impose to punish defendants in lawsuits.

For now, Marion Superior Court Judge David Dreyer's ruling won't directly affect other cases. Limits on punitive damages -- to three times the compensatory damages or $50,000, whichever is greater -- likely will stand until Indiana's appeals court weighs in.

Some legal experts think the ruling will be overturned. They say lawmakers exercised a valid power when they restricted punitive damages and did not infringe on the authority of the courts. While Indiana law restricts punitive damages, it doesn't limit damage awards that compensate a plaintiff for actual losses or pain and suffering.

The ruling came Friday in case where a jury had awarded a Greene County man $5,000 in compensatory damages in his sexual abuse lawsuit against a priest. Jurors also added $150,000 in punitive damages, which would have to be reduced under the cap to $50,000.

But when the priest's attorneys asked Dreyer to reduce the award, he ruled the limits were unconstitutional. * * *

As his rationale, Dreyer cited the separation of powers between the legislative and judicial branches as well as the right to a trial by jury that is among the core values of the state constitution.

"The Statute's two provisions . . . interpose the will of the General Assembly to supersede otherwise valid jury verdicts," Dreyer wrote in the decision. * * *

The Indiana Supreme Court hasn't ruled directly on the punitive damage limits the General Assembly approved in 1995. But it has addressed another part of the law, upholding in a 3-2 ruling in 2003 a provision requiring successful plaintiffs to cede 75 percent of punitive damage awards to the state. The Indiana Violent Crime Victim Compensation Fund gets those funds.

The 2003 Indiana Supreme Court decision referenced in the story is Cheatham v. Pohle. Here is what the ILB wrote at the end of a 5/15/2004 entry:
And what of Indiana? Indiana's punitive damages allocation statute, IC 34-51-3 [Sec. 4 is the cap; Sec. 6 is the allocation] , provides that an award of punitive damages is to be paid to the clerk of the court, who is then to pay 75% to the State's Violent Crime Victims' Compensation Fund and 25% to the plaintiff. This law was enacted in 1998. The law was challenged and upheld by the Indiana Supreme court in the case of Cheatham v. Pohle (5/30/03). Access the ILB coverage of the opinion here. The 7th Circuit recently relied on Cheatham in its opinion in Juarez v. Menard, Inc. (April 2004). See ILB coverage here. A quote from the 7th Circuit opinion:
Punitive damages, however, go beyond compensating a tort victim for a cognizable wrong. They are designed to deter and punish wrongful activity, and as such, are quasi-criminal in nature. Cheatham v. Pohle, 789 N.E.2d 467, 471 (Ind. 2003). Under Indiana law, which we must apply in this diversity action, (see Erie R.R. Co. v. Tompkins, 304 U.S 64, 78 (1938)) civil plaintiffs have no right to receive punitive damages. Cheatham, 789 N.E.2d at 472. And, in fact, the Indiana General Assembly has demonstrated a disinclination toward allowing unchecked punitive damages awards by enacting legislation that limits the amount of money a plaintiff may receive from a punitive damages award (IC 34-51-3-6) and by requiring that a plaintiff establish the facts warranting an award of punitive damages by clear and convincing evidence rather than the usual preponderance of the evidence standard. IC 34-51-3-2. Thus in Indiana, before a court may award punitive damages, a plaintiff must demonstrate by clear and convincing evidence that the defendant acted with malice, fraud, gross negligence or oppressiveness that was not the result of mistake of fact or law, honest error of judgment, overzealousness, mere negligence, or other human failing. [cites deleted] Moreover, a trier of fact is not required to award punitive damages even after finding all of the facts necessary to justify the award. Cheatham, 789 N.E.2d at 472. The requirements for an award of punitive damages, therefore, go far above and beyond those required for a finding of negligence.
The Indiana Supreme Court also ruled, in the case of Stroud v. Lints (6/25/03), issued a few weeks after Cheatham, that "the amount of punitive damages awarded by a trial court is subject to appellate review de novo." In Stroud the Court remanded "so that the trial court may enter an award of punitive damages in an amount reflecting proper consideration of the defendant's financial status." [ILB - The IC 34-51-3-4 limit is not addressed.]
In an Oct. 16, 2005 ILB entry, a Court of Appeals Sept. 14, 2005 decision, Ricky Westray, et al v. Delores Wright, et al., is discussed. The COA addressed a trial court ruling reducing the punitive damages award from $15,000,000 to $3,435,000. The trial court reduced the punitive damages award based on IC 34-51-3-4. See p. 8 and ftnote 4. The COA, however, does not further address the statute. Instead it concludes:
Ultimately, therefore, the punitive damages award was inappropriate insofar as it was designed to punish Bekins directly. * * *

In sum, we conclude as follows: (1) the jury’s finding of negligence with respect to appellants and its corresponding award of compensatory damages are appropriate; and (2) the jury’s award of punitive damages was inappropriate inasmuch as there was not clear and convincing evidence that Westray or Bekins acted with the mental state sufficient to sustain such an award.

The judgment of the trial court is affirmed in part, reversed in part, and remanded for proceedings consistent with this opinion.

[Updated] Here is a copy of Judge Dreyer's order in the case, John Doe v. Father Jonathan Lovill Stewart.

Posted by Marcia Oddi on March 3, 2009 06:35 AM
Posted to Ind. Trial Ct. Decisions