### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

ON REMAND

NO. 03-05-00034- CV

Thomas O. Bennett, Jr . and Jame s B. Bon ham Corporat ion, App ellants

v. Randy Reynold s, Appellee

F ROM TH E DISTRI CT COURT O F SAN SAB A COUNTY , 33r d JUDICI AL DISTRICT NO. 802 7, H ONO RAB LE V. M URRAY J ORDAN, J UDGE P RESIDING

M E M O R A N D U M O P I N I O N

I n this proce eding following rema nd from the Texas Supreme Court, we rec onsider the amounts of exemplary damag es that due proce ss will permit on th i s re cord. The underlying fac ts and proce dural history are detailed in this Court’s prior opinion, 242 S

. W

. 3 d 8 66, and that of the supreme court. 315 S.W .3d 867. A jury found appellants Thomas O. Be nnett, J r. and
J ames B. Bonha

m Corporation jointly and sever ally liab l e fo r conver sion of cattle belong ing
to Randy Rey

nolds and awarde d Rey

nolds $5,327.11 in actua l damag es, plus exemplary damag es of $250,000 from Be nnett and $1 milli on from Bonha m Corporation. The district court rende red judgme nt based on the jury ’s finding s. Be nnett and Bonha m C o rp o ra t i o n eac h appea led to this Court, c halleng ing, among other things, whether the evidenc e was leg ally or fac tually sufficie nt tosupport the actua l damag e awa rds or the malice fin d i n gs t h at wer e the predic ate for exemplary damag es, whether the siz e of the exemplary damag es awa rds exceede d due-pr ocess limit ations, and whether Bonha

m Corporation could be held liable for actua l or ex emplary damag es base d on acts by Be nnett. 242 S.W .3d at 876. We a ffirme d the district c ourt’s judgme nt in full. Id. at 876-907.
Be nnett and Bonha

m Corporation then ap p ea led to the Texas Supreme Court, challeng ing the exemplary damag es awa rds on the g rounds that (1) there was leg ally insufficient evidenc e of malice; (2) any acts by Be nnett that wer e the basis for exemplary damag es could not be imputed to Bonh am Corporation; and (3) the awa rds exceede d due-pr ocess limit ations. The supreme court aff irmed this Court with respe ct to the predic ate malice finding and Bonha m Corporation’s liability for exemplary damag es, see 315 S.W .3d at 871-72, but held that the siz e of the awa rds exceede d the out ermost l imits of due pr ocess. See id. at 873-83. The supreme court rema nded the cause to

u s with instructions to “re consider exemplary damag es in line with this opinion and preva ilin g ratio ana ly sis.” Id. at 885.

We have done s o , an d co nclude that due proce ss permits an exemplary damag es

awa rd ag ainst Be nnett and B onham Corpora tion of not more than $10,000 ea ch.

THE S UP REME COURT’S OP INION AND P REVAILING R ATIO ANALYSIS Three fac tors g uide co u rt s in deter mining whether an exemplary damag es awa rd exceeds the bounds of due proce ss: (1) the deg ree of “re prehe nsibili ty ” of the defe ndant’s conduct; (2) the disparity or ratio betwee n the actua l or potential harm suffe red by the plaintif f an d t h e exemplary dam ag es awa rd; and (3) the differ ence betwee n the exemplary damag es and the

2civil penalties authorized or impos ed in compar able case s. See State Farm Mut. Auto. Ins. Co.

v. Campbel l , 5 3 8 U.S. 408, 418 (2003) (citing BMW of N. Am., Inc. v. Gore , 517 U.S. 559, 575 (1996))

.
Repre hensib ility

The first fac tor, the deg ree of repr ehensibility of the defe ndant’s conduct, is the “most important indicium of the rea sonablene ss of a punitive damag es awa rd.” Gore , 517 U.S. at 575. The
U.S. Supreme Court has cautioned that “punitive damag es should only be awa rded if the defe ndant’s culpability , afte r having paid compensa tory damag es, is so repr ehensible as to war ra n t th e im p osition of further sanctions to achie ve p u n i s hment or deter renc e.” State Farm , 538 U.S. at 419. Where
“a more modest punishment for this repr ehensible conduct could have satisfied the State’s leg itimate objectives,” the Supreme Court has further indicated, courts should g o no further

. Id

. at 419-20.

Courts ev a lu a

te r epre hensibility by considering five nonexclusive fac tors—whether :

1. “the ha

rm ca used wa s phy sical as oppose d to economic;”
2. “the tortious conduct evince d an indiffer ence to or a rec kless disreg ard of

the hea lth or safe ty

of others;”
3. “the tar g et of the c onduct had f inancial vulner ability ;”
4. “the conduct involved repe ated actions or was an isolated incident;”
5. “and the harm was the result of intentional malice, tricker y , or dece it, or mere a ccide nt.”

Id. at 419 (citing Gore , 517 U.S. at 576-77). I n this ca s e, t h e supreme court conclude d that the
repr ehensibility inquiry could consider not only Be nnett’s conver sion of the cattle—the underlying
3tort—but cer tain other conduct by Be nnett that “re late[d] back to the underly ing theft and soug ht to extend and exacer

bate harm to Rey

nolds,” beca

use it “may g o to motive, undersc ore t h e p ar t ies’ animosity , shed l i gh t on provoca tion, demonstrate delibera teness and culpability , and otherwise show heig htened re p rehensibilit y .” 315 S.W .3d at 874-75. The court identified the following evidenc e of alleg ed extra-conve rsion acts that “may proper ly inform the repr ehensibility analy sis:”

Br ibing A Witness and Ur g ing H im to L ie. Rey nolds offer ed evide nce tha t wh en Be nnett lear

ned that former ranc h hand L arr y Gra nt had taken incriminating photogr aphs of the stolen cattle, Be nnett urg ed Gra nt to lie about what he had seen. Be nnett then offe red Gra

nt a lucra tive job and later some money under the g uise of helping Gra

nt’s family

afte r a c ar a ccide nt. Threatening a Wit ness. Rey nolds points to testimony th at a former Corporation ranc h hand attempted to threa ten bodily harm to Gra nt. Alleg edly , this former employ ee tried to call and threa ten Gra nt, but instead re ac h ed Gra nt’s brother- in-law, thinking that person wa s Grant.

. . . it seems sensible that harm inflicted or threa t ened on third parties can be part of the repr ehensibility equation when such harm actua lly targ ets the plaintiff and the instant litigation. Her e, though, t he allege d threa t went off course , and the rec ord does not show it was ever communicated to Gra nt; in rea lity no one wa s actua lly endang ere d. Nonethele ss, while this misdirected threa t threa tened nobody , it attempted to cover Be nnett’s trac ks and foil eff orts—not just by

Rey nolds but by the leg al sy stem itself—to unearth the tr uth. Photogra ph Tamper ing. The evidence at both the civil and criminal trials included some of the photogr aphs taken by ranc h hand Gra nt, who suspected that the trailere d cattle wer e not Be nnett’s. Rey nolds alleg es that Be nnett doctore d some of Gra nt’s photogr aphs to bolster his criminal def ense a nd offe red perjure d testimony in that trial. Moreove r, Rey nolds a sserted in the civil suit that the photog raphs ha d been a ltered to c oncea l evidence of B ennett’s c onversion.
L itigation Ag ainst Gra

nt. Be nnett filed a $50,000 slander suit ag ainst ranc h hand Gra nt. Rey nolds say s these “intimidation techniques” showed “that Be nnett intended to inflict as much financ ial pain on Gra nt a s possible.” Her e, too, the jury could reasonably have deemed this slander suit, though filed ag ainst Gra nt , p art of a pattern of intentional malice, tricker y , and dece it to cover up Be nnett’s wrong doing and subver

t Rey nolds’s lawsuit.
4Meddling Wit h Rey nolds’s Br and. The County and District Clerk of San Saba County testified that Be nnett once attempted to reg ister Rey nolds’s brand as his own. This cover -up evide n ce shows “deliber atene ss and culpability ” and can enhanc e exemplary damag es g iven its “nexu s to the specific harm suffe red by the p l ai n tiff.” We have previously held that cer tain cover -up eff

orts can show repr ehensibility , as when a manufa cture r of asbestos-c ontaining products continues selling w hat it knows is dang erous.

Id. at 875-77 (f

ootnotes omitt ed).
On the other hand, the s u preme court conclude d that “[a]t hear t

. . . this is an economic- injury , actua l-harm case seeking re covery for the conver sion of thirteen head of cattle

. . . .” Id. at 877. I t reje cted Rey nolds’s view of “a broade r ‘cr iminal esca pade’ that aimed to ruin him,” stating that “the theore tical possibili ties of g rea ter harm strike us as marg inally rele vant
at best in assessing exemplary damag es, ab s en t proof of the likelihood of such harms.” Id. The
court further rea soned that “B ennett’s tort was not part of a wi d er p lan to steal Rey nolds’s entire herd or to bankrupt him. Nor is there evidenc e that Be nnett was a rec idivist cattle thief rathe r than a first-time offe nder.” Id. I nstead, accor ding to the s upreme court, “[t ]hi s lawsuit has a narr ower focus, a nd the jury ’s finding s focus on c onversion.” Id. The supre me cour

t concluded tha t “Rey

nolds’s evidenc e of a malicious cattle theft and various furtive acts to conce al it satisfies one of the five State Farm repr ehensibility fac tors: the harm resulted from intentional malice, tricker y , or dece it,” but that “the other fac tors are essentially absent.” Id.

Ratio between exe m plary and com pensatory dam ages

The s econd fac tor in our due-pr ocess analy sis considers the disparity betwee n the actua l or potential harm suffe red by the plaintiff and the exemplary damag es awa rd. Although
5the high courts have not imposed a ri g id, brig ht-line ratio that is to be universally applied,

the U.S. Supreme Court nonetheless has stated that “in prac tice, few awa rds exceeding a single -dig it ratio betwee n punitive damag es and com p en satory damag es, to a signific ant deg ree , will satisfy due proce ss.” State Farm , 538 U.S. at 425 (der iving a 4:1 ratio from longsta nding Ang lo-Americ an tradition of imposing “double, treble, o r q u ad ru p le damag es to deter and punish”). The
Texas Supreme Court has simil arly observe d that “any ratio above 4:1 ‘mig ht be close to the line of constit utional impropriety .’” 315 S.W .3d at 878 (quoti ng Tony Gullo Motors I, L .P. v. C hapa , 212 S.W .3d 299, 308 (Tex. 2006) (quoting State Farm , 538 U.S. at 425)). An awa rd above the 4:1 ratio ty pically will comport with due proce ss only wher e a “ particula

rly eg reg ious act has r esulted in only a small amount of economic damag es.” Gore , 517 U.S. at 582. Dra wing on its analy sis of the repr ehensibility fac tor, the Texas Supreme Court held that the fac ts in this case do not fall within the “par t i cular ly eg reg ious” exception so as to war rant an upwar d depar

ture from the ty

pical 4:1 ratio. 315 S.W .3d at 879-80. To the contra ry , in the supreme court’s view, the fac ts of this case “ar e not meaning fully

distinguishable f

rom those in Gullo Motors. ” Id. at 878.
I n Gullo Motors , Nury Chapa claimed that Gullo Motors, a car deale rship, had committed fra

ud b y p ro m i sing to deliver a “L imited” model of Toy ota and delivering instead a base model. Gu l l o Motors , 212 S.W .3d at 303. There was evidenc e of dece itful conduct by the deale rship, including adding the VI N of the base model to the sales contra ct afte r Chapa had alre ady signe d it and forg ing signa tures, id. at 305-06, including the signa ture of Chapa’s dece ased husband

on a delivery form showing acc eptanc e of the vehicle, id. at 317 (O’N eill, J ., dissenting)

. When Chapa soug ht to return the unwanted vehicle for a ref und, the deale rship ref

used, stating falsely that the car had alre ady been titled. Id. at 306. Additionally , there was evidenc e that the sales manag er 6had made abusive comments to Chapa, i n cluding telling her that “[y ]ou are a nobody

. I t’s y our

word ag ainst me, ag ainst us,” and that he would have the car towed awa y at her expense. Id. at 317 (O’N eill, J ., dissenting)

. Chapa sued Gullo Motors, and a jury awa rded her $7,213 in economic damag es, $21,639 in mental-a ng uish damag es (cor

responding to three times economic damag es), plus exemplary damag es of $250,000, which the court of appea ls reduc ed to $125,000. Id. at 306-07. The $125,000 exemplary damag es awa rd was roug hly 4.33 times the amount of actua l damag es. The
Texas Supreme Court held that this awa rd violated d u e p ro ce s s . Id. at 310. I t rea soned that the deale rship’s conduct implicated only one of the five repr ehensibility fac tors—“intentional malice, tricker y , or dec eit, [not ] m ere acc ident” and tha t:
Pushing exemplary damag es to the absolute constitut i o n al limit in a case like this leave s no room for g rea

ter punishment in case s involving death, g rievous phy sical injury , financ ial ruin, or actions that endang er a larg e seg ment of the public. On this rec ord, Gullo Motors’ conduct merited exemplary damag es, but the amount assessed by the cour t of appe als exceeds c onstitut ional limit s.

Id. The Texas Su p r e me Co u

r t c o n c lu d e d th a

t B e nn e tt a

n d B o nh a m Co r p o r a tion’ s conduct

was not “qualitatively or quantitatively more egr egious ” than that of Gullo Motors. 315 S.W .3d
at 879. L ike Gullo Motors, Be nnett and Bonha m Corporation had intentionally inflicted economic damag e on the plaintiff, but, the court rea s o n ed , their conduct implicated only one of the five
repr ehensibility fac tor s : i t wa s t h e result of intentional malice, tricker y , or dece it. I n light of the
perc eived similarities betwe en Gullo Motors and this case , the Texas Supre me Court held that the exemplary damag es awa rds here , which signific antly exceede d a 4.33 ratio, likewise violated due proc ess. Id. at 878, 880.
7Legislative penalties for similar m iscondu ct The third fac tor in our due-pr ocess analy sis considers the di ff er en ce betwee n the exemplary -dama g es awa

rd and the civil penalties leg islatively authorized or imposed in compar able

case s. State Farm , 538 U.S. at 418. Although it observe d that “we need not discuss the ‘compa rable sanctions’ g uidepost at all, as unconst i t utional excessiveness is aptly demonstrated under the ratio g uidepost,” the Texas Supreme Court no n et h el ess took pains to add some observa tions
reg arding the use of civil or criminal penalties as a g uidepost for evalua ting the constitutional permissibilit y of exemplary damag es awa rds. The court emphasized that beca use “leg islatures make policy and are well positioned to define and deter undesired behavior , . . . . revie wing courts ‘should

acc ord substantial defe renc e to leg islative judgme nts conce rning appropr iate sanctions for the conduct at issue.’” 315 S.W .3d at 880-81 (quoting Gore , 517 U.S. at 583). Thus, “[i] n case s wher e applicable civil pe nalties exis t, this g uidepost g ives bad actor s fair notice of what is f orbidden and of potential penalties.” Id. at 881. Howeve r, the supreme court ultimately conclude d this g uidepost offe red “ littl e guidance ” bec ause the re w ere no compar able c ivil penalties. Id. at 881, 882. 1

The supreme court d id e mp h a s ize, howeve r, that the leg islature had imposed criminal penalties for cattle theft and that, i n fa ct , the jury had made a cap- buster finding that Be nnett and Bonha m Corporation had committed theft of ten or more he ad of c attle having an ag g reg ate va lue of less than $ 1 0 0,000, an act that constituted third-deg ree felony theft. Id. at 881-82. Although maintaining that the potential criminal penalty of incar cer ation “does not translate meaning fully to

Nor, the supreme court rea soned, was it instructive that t h e leg islature had exempted 1 cer tain conduct from the ex empl ar y damag es caps of civil prac tice and reme dies code chapter 41. 315 S.W .3d at 882. 8a dollar-f

igur e fine,” the court did intimate that the criminal fine for such conduct—$10,000—mig ht provide a potential objective basis for setting a co n s t i t utionally permissible exemplary damag es

awa rd. Id. at 882 (“ peg g ing punitives to the $10,000 c riminal fine would produc e a 1.877 r atio”).

CONCLUSION On rema nd, we are left with the task of deter mining “a more modest punishment” in exemplary damag es that would g ive eff ect to th i s S t at e’s leg itimate interest in deter ring and punishing Be nnett and Bonha m Corporation’s repr ehensible conduct wi t h o u t b eing g ratuitously excessive and amounting to an arbitra ry depriva tion of proper

ty

. See id. at 880 (quoting State Farm , 538 U.S. at 419-20). The Tex as S upreme Court has further indi cate d t h at t h es e amounts must be sufficie ntly benea

th the ty pical 4:1 r atio so as to “ leave []

. . . room for g rea ter punishment in case s involving death, g rievous phy sical injury , financ ial ruin, or actions that endang er a larg e seg ment of the public.” Id. at 878 (quoting Gullo Motors , 212 S.W .3d at 310). As for what the prec ise amounts might be, this Court sho u l d not reme dy the arbitra riness of excessive exemplary damag e awa rds

mere ly by arbitra

rily pick i ng its own numbers out of the air. Objective criter ia are essential in evalua ting the rea sonablene ss of exemplary damag es, see TXO Prod. Corp. v. Alliance Res. Corp. , 509 U.S. 443, 480-81 (1993) (“ W i thout objective criter ia on which to rely , almost any decision
reg arding proportionality will be a matter of persona l pref ere nce.” ) (O’Connor, J ., dissenting) , and
among these are the policy judgme nts ref lected in the financ ial penalties the leg islature has imposed for cattle theft. Although these penalties may not be instructive in ever y case wher e exemplary damag es have been imposed for c o n d u ct co n s t ituting t heft, see 315 S.W .3d at 881 n.82, we think they can provide g uidance reg arding appropr iate sanctions for Be nnett and Bonha m Corpor ation’s

9conduct here

. See id. at 881. Def err ing to these leg islative judgme nts, we hold that due proce ss permits exemplary damag es awa rds ag ainst Be nnett and Bonha m Corporation of not g rea ter than $10,000 eac h.
Acc ording ly , we aff irm the district court’s judgme nt conditioned on the remittitur by Rey nolds of $240,000 as to Be nnett (re ducing the exemplary damag es awa rd agai n s t h i m from $250,000 to $10,000) , and $990,000 as to B onham Corpora tion ( reduc ing the exemplary damag es

awa rd ag ainst it from $1 milli on to $10,000). S ee T ex . R

. Ap p . P

. 46.3. I f Rey nolds files these

re m i t t i t u rs with the cler

k of the district court within thirty day s of this opinion and judgme nt an d notifies this Court of such, we will ref orm the district court’s j u d g ment and, as ref ormed, aff

irm. Otherw ise, we w ill reverse the district court’s judg ment and re mand the ca use for a new trial.

__________________________________________ Bob Pembe rton, J ustice
Be fore J ustices Patterson, Pember ton and Henson Affir med Conditioned on Remitt itur Filed: Nove mber 18, 2010

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