Rel: 08/29/2014

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SUPREME COURT OF ALABAMA

 SPECIAL TERM, 2014

_________________________

1091758

_________________________

Target Media Partners Operating Company, LLC,

and Ed Leader

v.

Specialty Marketing Corporation d/b/a Truck Market News

Appeal from Calhoun Circuit Court

(CV-07-900201)

On Return to Remand

PER CURIAM.

The defendants, Target Media Partners Operating Company,

LLC ("Target Media"), and Ed Leader, appealed from a judgment

entered in favor of the plaintiff, Specialty Marketing
1091758

Corporation d/b/a Truck Market News ("Specialty Marketing").

Specialty Marketing had sued Target Media and Leader, alleging

breach-of-contract claims against Target Media and fraudulentmisrepresentation and promissory-fraud claims against Target

Media and Leader. Target Media had filed a counterclaim

alleging breach-of-contract claims against Specialty

Marketing. A jury returned verdicts in favor of Specialty

Marketing on its breach-of-contract claim, awarding

compensatory damages of $851,552; in favor of Target Media on

its breach-of-contract counterclaim, awarding compensatory

damages of $48,800; in favor of Specialty Marketing and

against Target Media on Specialty Marketing's promissory-fraud

claim, awarding compensatory damages of $210,000 and punitive

damages of $630,000; in favor of Leader on Specialty

Marketing's promissory-fraud claim; and in favor of Specialty

Marketing and against Target Media and Leader on Specialty

Marketing's fraudulent-misrepresentation claim, awarding

compensatory damages of $167,800 and punitive damages of

$503,400. The trial court entered a judgment on that verdict.

This Court affirmed the judgment as to the compensatorydamages awards but remanded the cause with instructions for

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the trial court to hold a hearing on the question whether the

punitive-damages awards are excessive. See Target Media

Partners Operating Co. v. Specialty Marketing Corp., [Ms.

1091758, September 6, 2013] ___ So. 3d ___ (Ala. 2013) (Parker

and Wise, JJ., concurred; Moore, C.J., and Shaw and Bryan,

JJ., concurred in the result; Murdock, J., concurred in the

rationale in part and concurred in the result; and Stuart,

Bolin, and Main, JJ., concurred in part and dissented in

part). Pursuant to our instructions, the trial court, on

January 17, 2014, held a hearing pursuant to Hammond v. City

of Gadsden, 493 So. 2d 1374 (Ala. 1986), and Green Oil Co. v.

Hornsby, 539 So. 2d 218 (Ala. 1989), at the conclusion of

which the trial court reaffirmed the punitive-damages awards. 

The trial court made its return to this Court on March 24,

2014. The only issue now before this Court is whether the

punitive-damages awards are, as Target Media and Leader

contend, excessive.

The trial court entered the following thorough and well

reasoned order on remand:

"This matter comes before the court on remand

from the Supreme Court of Alabama. Pursuant to the

Court's opinion of September 6, 2013, a

Hammond/Green Oil hearing was held on January 17,

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2014, to review the punitive damages awarded by the

jury in this cause and to consider the arguments

made by defendant Target Media Partners Operating

Company, LLC (hereinafter 'Target [Media]'), and

defendant Ed Leader in their motions for remittitur. 

The punitive damages were returned by the jury on

[Specialty Marketing]'s claims of fraudulent

misrepresentation as to Target [Media] and Leader

and on [Specialty Marketing]'s promissory-fraud

claim as to defendant Target [Media]. Specifically,

the jury returned a verdict against defendant Target

[Media] on the claim for promissory fraud in the

amount of $210,000 in compensatory damages and

$630,000 in punitive damages. The jury returned a

verdict against defendant Target [Media] and

defendant Leader on the claim for fraud[ulent]

misrepresentation in the amount of $167,800 in

compensatory damages and $503,400 in punitive

damages.

"This was a well-tried case on behalf of all

parties. The court has carefully considered the

briefs and arguments submitted by the parties as

well as the evidence presented at the Hammond/Green

Oil hearing held on January 17, 2014. This court

has thoughtfully considered the testimony of each

and every witness who testified during this almost

two-week trial as well as the attentive jury who

decided the case. With regard to [Target Media's

and Leader's] motions for remittitur, the court has

analyzed the Hammond/Green Oil factors, which the

court is duty-bound to consider. The court, after

careful consideration of all the Hammond/Green Oil

factors, finds that there is no legal basis

justifying remittitur of the punitive damages

verdict returned by the jury in this case. The

court finds that there was substantial evidence

justifying and supporting the verdict as to all of

the named defendants. There is no compelling

justification for this court to remit the award in

this case. The jury's award in this case is

consistent with, and in line with, judgments that

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have been affirmed by the Alabama Supreme Court in

recent years.

"In assessing the appropriateness of the amount

of a punitive damages verdict and judgment, the

Alabama Supreme Court and the United States Supreme

Court have provided certain guidelines or factors

for a trial court to consider. In BMW of North

America, Inc. v. Gore, 517 U.S. 559 (1996), and

Green Oil Co. v. Hornsby, 539 So. 2d 218 (Ala.

1989), most of these guidelines are set forth. The

factors to be considered under Green Oil and the

associated case of Hammond v. City of Gadsden, 493

So. 2d 1374 (Ala. 1986), as stated in Green Oil, are

as follows:

"'(1) Punitive damages should bear a

reasonable relationship to the harm that is

likely to occur from the defendant's

conduct as well as to the harm that

actually has occurred. If the actual or

likely harm is slight, the damages should

be relatively small; if grievous, the

damages should be much greater.

"'(2) The degree of reprehensibility

of the defendant's conduct should be

considered. The duration of this conduct,

the degree of the defendant's awareness of

any hazard which his conduct has caused or

is likely to cause, and any concealment or

"cover-up" of that hazard, and the

existence and frequency of similar past

conduct should all be relevant in

d e t e r m i n i n g t h i s d e g r e e o f

reprehensibility.

"'(3) If the wrongful conduct was

profitable to the defendant, the punitive

damages should remove the profit and should

be in excess of the profit, so that the

defendant recognizes a loss.

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"'(4) The financial position of the

defendant would be relevant.

"'(5) All the costs of litigation

should be included, so as to encourage

plaintiffs to bring wrongdoers to trial.

"'(6) If criminal sanctions have been

imposed on the defendant for his conduct,

this should be taken into account in

mitigation of the punitive damages award.

"'(7) If there have been other civil

actions against the same defendant, based

on the same conduct, this should be taken

into account in mitigation of the punitive

damages award.'

"Green Oil, 539 So. 2d at 223-24.

"The three BMW 'guideposts' are here numbered as

factors (8), (9), and (10):

"(8) Reprehensibility. The U.S. Supreme Court

majority stated that the most important factor in

the analysis is 'the degree of reprehensibility of

the defendant's conduct.' BMW, [517 U.S. at 575].

"(9) Ratio. The second 'guidepost' is the

relationship between compensatory and punitive

damages. Id. at [580]. 

"(10) Legislative Penalties. The third 'guidepost'

is a comparison to comparable legislative fines and

penalties for comparable misconduct. Id. at [583-

84]. 

"At the hearing on January 17, 2014, [Target

Media and Leader] presented evidence almost

exclusively in regard to their respective financial

positions. However, in their brief, [Target Media

and Leader] argued other factors which they felt

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were relevant. The court has given de novo review

to each of the factors, and herein states the

court's conclusions:

"1. Punitive damages should bear a reasonable

relationship to the harm that is likely to occur

from the defendants' conduct as well as to the harm

that actually has occurred. The evidence presented

at trial made clear that [Specialty Marketing] was

significantly injured as a result of [Target Media

and Leader's] conduct. As stated by the Supreme

Court in its opinion, 'the jury heard ample evidence

from which it could have found harm' to [Specialty

Marketing] as a result of [Target Media and

Leader's] conduct. Target Media Partners Operating

Co. v. Specialty Marketing Corp., [Ms. 1091758,

September 6, 2013] ___ So. 3d ___, ___ (Ala. 2013). 

The Court went on to say that the evidence before

the jurors in this case was sufficient to find that

[Specialty Marketing] 'lost business and profits.' 

Id. [at ___]. In addition to the $400,000 paid to

Target [Media], the evidence indicated that

[Specialty Marketing]'s expenses were in excess of

$1,500,000 in printing and shipping costs, much of

which was lost due to [Target Media and Leader's] 

fraudulent conduct. This factor weighs in favor of

[Specialty Marketing].

"2. The degree of reprehensibility of the

defendants' conduct should be considered. The

relation of this conduct, the degree of the

defendants' awareness of any such conduct and any

concealment or cover-up, and the existence and

frequency of similar past conduct should all be

relevant in determining this degree of

reprehensibility. The degree of reprehensibility

here is extremely high in that the evidence

established that [Target Media and Leader] entered

into their relationship with [Specialty Marketing]

and continued that relationship for over four (4)

years--all the while knowing they never intended to

perform the services which had been promised.

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"The most important factor the Court should

consider in determining whether a remittitur is

warranted is the relative degree of the defendants'

culpability. 'Perhaps the most important indicium

of the reasonableness of a punitive damages award is

the degree of reprehensibility of the defendants'

conduct.' BMW v. Gore, 517 U.S. at 575. Given the

facts presented in this case, it is clear that the

evidence supported a finding by the jury that

[Target Media and Leader's] conduct was highly

reprehensible.

"In its opinion, the Supreme Court found: 

"'It cannot be disputed in this case that

the jurors reasonably could have found that

Target Media and its principals made

fraudulent misrepresentations, that those

misrepresentations involved material facts,

and that those misrepresentations damaged

Speciality Marketing.' 

"Target Media, [___ So. 3d at ___].

"Mobile Infirmary Association v. Tyler, 981 So.

2d 1077 (Ala. 2007), makes it clear that

reprehensibility is not a mathematical formula based

on a number of wrongful acts. However, the number

of wrongful acts can aggravate the reprehensibility

factor. The evidence here is that [Target Media]

engaged in this same conduct prior to entering into

the relationship with [Specialty Marketing] as well

as at the time it was negotiating to distribute

[Specialty Marketing]'s magazines.

"The evidence shows that [Target Media] never

intended to fulfill the promises that it made to

[Specialty Marketing]. The evidence here

established that in addition to the $400,000 paid

directly to [Target Media], [Specialty Marketing]

paid approximately $900,000 in printing costs,

approximately $200,000 of which the jury could have

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found was attributed solely to magazines that were

thrown away in Oxford, Alabama, and that [Specialty

Marketing] lost business and profits as a result of

[Target Media and Leader's] conduct. This court

agrees with the statement made by [Specialty

Marketing] in its brief that 'in the context of the

relationship between [Specialty Marketing] and

[Target Media] in this case, there can be no more

reprehensible conduct than to lie and defraud the

other party and to utterly fail--intentionally--to

perform the duties promised.' The evidence here was

clear and convincing that [Target Media and

Leader's] conduct was consistent and continuous

throughout the relationship between the parties. 

This factor weighs heavily in favor of [Specialty

Marketing].

"3. If the wrongful conduct is profitable to the

defendant, the punitive damages should remove the

profit and should be in excess of the profit so that

the defendant recognizes a loss. Ex parte Vulcan

Materials Co., 992 So. 2d 1252 (Ala. 2008). In this

case, the total amount of punitive damages given by

the jury was $1,133,400. The evidence was that

[Specialty Marketing] paid [Target Media] $400,000

for services that were not performed. [Target Media

and Leader] committed themselves to defrauding

[Specialty Marketing] and coerced employees to

ensure that the fraud was accomplished. The

evidence clearly established that [Target Media and

Leader] did so to create a profit by placing Target

[Media]'s own books ahead of [Specialty

Marketing]'s, by destroying [Specialty Marketing]'s

books, and by pocketing $400,000 in contract

proceeds without working for that money. Moreover,

as noted by the Supreme Court, [Target Media and

Leader] did this never intending to fulfill the

promises made to [Specialty Marketing].

"This Court believes that the jury provided

punitive damages in excess of the profits gained by

[Target Media and Leader] so that [Target Media and

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Leader have] recognized a loss which is reasonable

in the context of [their] conduct.

"[Target Media and Leader argue] that there is

no evidence that defendant Leader profited from the

conduct underlying the punitive damages in this

case. Evidence at the hearing established that

Leader earned between $100,000 and $150,000 each of

the years of the contractual relationship between

Target [Media] and [Specialty Marketing]. This

would total between $400,000 and $600,000 during the

time frame that [Specialty Marketing] was actively

being defrauded. The Court finds that profit gained

by Target [Media] should be imputed, at least in

part, to defendant Leader, an officer of the

company. This is true not only with regard to

moneys paid by [Specialty Marketing] directly to

[Target Media], but also by distributing and

displaying [Target Media]'s books in place of

[Specialty Marketing]'s books. This is especially

true since Leader was established to be one of the

point men in accomplishing the fraud. This factor

weighs against remittitur.

"4. The financial position of the defendant

would be relevant. This is the factor argued most

vehemently by [Target Media and Leader]. The

evidence presented at the Hammond/Green Oil hearing

was almost exclusively with regard to this factor. 

[Target Media] presented financial statements/audits

showing that Target Media lost tens of millions of

dollars between the years 2008 and 2012, and that

Target Media currently has a negative net worth of

millions of dollars. Similarly, [Target Media and

Leader] offered evidence at the hearing that Ed

Leader has made between $100,000 and $150,000 per

year in his employment with Target [Media] since

2001; that Leader is 'underwater' in his home and

has a 'modest retirement plan.' The evidence at the

hearing was that his retirement plan has a few

hundred thousand dollars in it.

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"[Target Media and Leader] argued that the

imposition of $1,133,400 against Target [Media] 'may

very well destroy it.' [Target Media and Leader]

further argued that the imposition of any punitive

damages against Leader will have the effect of

destroying him.

"The Alabama Supreme Court has stated that

'punitive damages should sting, but should not

destroy a defendant.' Green Oil [539 So. 2d] at

222. The court has performed its own de novo

examination of the amount of the verdict, and the

court can find no valid basis for any remittitur. 

A review of [Target Media's] financial statements

reveals that the financial health of Target Media is

not likely to depend or be largely affected by the

relatively small punitive damages award from this

case. The company continues to generate several

million dollars in revenue each year. In fact, the

only witness who testified on behalf of Target Media

at the Hammond/Green Oil hearing was the individual

defendant and officer of the corporation, Ed Leader. 

When asked directly whether this punitive damages

award would cripple or destroy Target Media, Leader

testified that he had no information that that would

be true, and further testified that he doubted the

size of this verdict would have much of an effect in

the context of the company's current financial

condition. From the evidence before this court, it

is evident that the jury award, while inflicting a

sting on Target Media, is not significant in terms

of that company's size and operations.

"[Target Media and Leader's] argument with

regard to Leader is effectively that the punitive

damages award against him should be reduced to

'zero.' This position shocks the conscience of the

court. All of the evidence regarding the deceptive

and fraudulent conduct of [Target Media] as it

relates to the fraud/misrepresentation claim is also

applicable to Ed Leader. While the evidence showed

that the conduct was carried out by many of [Target

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Media's] employees, that conduct was ordered and

overseen by Ed Leader. The court finds that a

remittitur (especially to zero) would fail to do

justice and would fail to serve the law's twin aims

of specific and general deterrence. Contrary to

[Target Media and Leader's] argument, a judgment

lien, no matter how large, is not a financial death

penalty. Present Alabama law limits the percentage

of wage garnishment and limits the effective range

of a judgment to a maximum of 20 years.

"With regard to both Target Media and Leader,

the court notes that collectibility of this judgment

is not the sole issue in a punitive damages case.

The fact that this judgment may be difficult to

collect is not the sole interest or relevant factor. 

An equally central purpose of punitive damages is

general deterrence--the amount of the verdict is

intended as a warning to all potential corporate and

individual defendants not to engage in intentional,

fraudulent behavior. A remittitur in this case

would mitigate the efficacy of this verdict's value

to general deterrence. A remittitur would also

disrespect this jury's work. This factor weighs

against remittitur.

"5. All the costs of litigation should be

included, so as to encourage plaintiffs to bring

wrongdoers to trial. This factor has not been

argued by the parties herein, so the court finds

that this is a neutral factor in this case.

"6. If criminal sanctions had been imposed on

[Target Media or Leader] for [their] conduct, this

should be taken into account in litigation of the

punitive damages award. This factor is not

applicable.

"7. If there had been other civil actions

against the same defendants, based on the same

conduct, this should be taken into account in

litigation of the punitive damages award. There is

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no evidence before this court of any actions based

on the same conduct. ... This factor weighs in favor

of [Specialty Marketing].

"8. Reprehensibility. This United States

Supreme Court BMW 'guidepost' is already discussed

in No. 2 above.

"9. Ratio. The second BMW 'guidepost' is the

relationship between compensatory and punitive

damages. In this case, the jury returned a verdict

for compensatory damages in the amount of $377,800

in the fraud and promissory-fraud claims. The

punitive damages given were in the amount of

$1,133,400. The ratio of punitive to compensatory

damages here is 3:1.

"The Alabama Supreme Court has approved a 3:1

ratio 'benchmark.' The 3:1 'benchmark' approved by

the Alabama Supreme Court has been held to be

'presumptively reasonable.' Prudential Ballard

Realty Co. v. Weatherly, 792 So. 2d 1045 (Ala.

2000). The Supreme Court has further held that a

ratio of 3:1 weighs against a remittitur, without

some special justification. 'Only in the most

extraordinary situations would the award be deemed

excessive when the [punitive damages award] is at or

below the benchmark.' Weatherly [792 So. 2d] at

1053; see also Southern Pine Electric Cooperative v.

Burch, 878 So. 2d 1120 (Ala. 2003). The Court finds

that this case does not present a 'most

extraordinary' situation that would dictate reducing

the punitive damages in this case. This factor

weighs heavily in favor of [Specialty Marketing].

"10. Legislative penalties. The third BMW

'guidepost' is a comparison to comparable

legislative fines and penalties for comparable

misconduct. Here, the jurors awarded punitive

damages that do not exceed three times the amount of

the compensatory damages awarded. These punitive

damages are no more than the monetary penalties

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[Target Media and Leader] could suffer under the

Alabama Deceptive Trade Practices Act, Ala. Code

1975 § 8-19-1 et seq. That act prescribes (1)

fines, (2) treble compensatory damages, and (3) an

award of costs and attorney fees. The comparable

legislative penalty is virtually equivalent to the

jury's verdict in this case. This factor weighs in

[Specialty Marketing]'s favor and against

remittitur.

"Therefore, for all these reasons, the request

for remittitur by defendant Target Media Partners

Operating Company, LLC, and defendant Ed Leader is

denied. The court finds that the jury's punitive

damages verdict against Target Media Partners

Operating Company, LLC, in the amount of $630,000 on

[Specialty Marketing]'s claim of promissory fraud

and the jury's verdict for punitive damages against

defendant Target Media Partners Operating Company,

LLC, and defendant Ed Leader on [Specialty

Marketing]'s claim of fraud[ulent misrepresentation]

in the amount of $503,400 [were] fair, reasonable

and justified."

We need add nothing to the trial court's detailed

analysis of the BMW of North America, Inc. v. Gore, 517 U.S.

559 (1996), and Hammond/Green Oil factors in this case. After

reviewing that analysis, we agree that, based on the level of

reprehensibility of the misconduct evidenced in this case, a

$630,000 punitive-damages award against Target Media on the

promissory-fraud claim and a $503,400 punitive-damages award

against Target Media and Leader on the fraudulentmisrepresentation claim are sufficient to punish Target Media

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and Leader and to deter them from further misconduct, without

compromising their due-process rights. The judgment entered

on the punitive-damages awards of $630,000 and $503,400 is

hereby affirmed.

AFFIRMED.

Moore, C.J., and Parker, Murdock, Shaw, Wise, and Bryan,

JJ., concur. 

Stuart, Bolin, and Main, JJ., dissent.

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