Opinion ID: 853019
Heading Depth: 2
Heading Rank: 2

Heading: Claims Under State and Federal Taking Clauses

Text: Article I, Section 21 of the Indiana Constitution includes a prohibition against the taking of property without just compensation. The Fifth Amendment to the United States Constitution includes the same proscription, and applies to the states through the Fourteenth Amendment. Chicago, Burlington & Quincy RR. Co. v. City of Chicago, 166 U.S. 226, 238-39, 17 S.Ct. 581, 41 L.Ed. 979 (1897). This Court ordinarily resolves questions that arise under the Indiana Constitution by examining the language of the text in the context of the history surrounding its drafting and ratification, the purpose and structure of our constitution, and case law interpreting the specific provisions. Richardson v. State, 717 N.E.2d 32, 38 (Ind.1999) (quoting Ind. Gaming Comm'n v. Moseley, 643 N.E.2d 296, 298 (Ind. 1994)). We look initially to the language of the Constitution. McIntosh, 729 N.E.2d at 983. Insofar as the Takings Clauses are concerned, the federal and state constitutions are textually indistinguishable. The federal Takings Clause of the Fifth Amendment reads nor shall private property be taken for public use, without just compensation, and the Article I, Section 21 of the state constitution reads no person's property shall be taken by law, without just compensation. There are subjects, notably double jeopardy and search and seizure, where the two constitutions have similar or identical language but have received different treatment by the courts. [4] Here, however, there is no difference in the terms taken or property found in both constitutions, and the courts have treated these issues as identical. B & M Coal Corporation v. United Mine Workers of America, 501 N.E.2d 401, 406 (Ind.1986) (deciding, under both Article I, Section 21 and the Fifth Amendment simultaneously, that a taking had occurred). Accordingly, the following discussion addresses both the state and federal Takings Clauses. Both Article I, Section 21 of the Indiana Constitution and the federal Takings Clause provide that no person's property shall be taken by law, without just compensation. Only property is protected from taking under either clause. It has long been recognized that an accrued cause of action may be a property right. Dague v. Piper Aircraft Corp., 275 Ind. 520, 529, 418 N.E.2d 207, 213 (Ind. 1981); Gnerlich v. Gnerlich, 538 N.E.2d 285, 288 (Ind.Ct.App.1989). If the law recognizes a wrong, an injured person has the right to be compensated for an injury. But it is equally well settled in Indiana and elsewhere that no one has a right to recover punitive damages, however outrageous the conduct of the offender. Durham v. U-Haul Int'l, 745 N.E.2d 755, 764 (Ind. 2001); Orkin Exterminating Co. v. Traina, 486 N.E.2d 1019, 1022 (Ind.1986); see also Gordon v. State, 608 So.2d 800, 801 (Fla.1992); State v. Moseley, 263 Ga. 680, 436 S.E.2d 632, 634 (1993); Shepherd Components, Inc. v. Brice Petrides-Donohue & Assoc., Inc., 473 N.W.2d 612, 619 (Iowa 1991). Specifically, any interest the plaintiff has in a punitive damages award is a creation of state law. The plaintiff has no property to be taken except to the extent state law creates a property right. Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972). The Indiana legislature has chosen to define the plaintiff's interest in a punitive damages award as only twenty-five percent of any award, and the remainder is to go to the Violent Crime Victims' Compensation Fund. The award to the Fund is not the property of the plaintiff. Nor is her prejudgment claim a property interest. Rather, the claim she had before satisfaction was, pursuant to statute, a claim to only one fourth of any award of punitive damages. As a result, there is no taking of any property by the statutory directive that the clerk transfer a percentage of the punitive damages award to the Fund. A claim for punitive damages can be sustained only if it is accompanied by a viable claim for compensatory damages. Sullivan v. Am. Cas. Co., 605 N.E.2d 134, 140 (Ind.1992); Allstate Ins. Co. v. Axsom, 696 N.E.2d 482, 485 (Ind.Ct.App.1998); Bright v. Kuehl, 650 N.E.2d 311, 317 (Ind. Ct.App.1995). Cheatham thus claims that an award for punitive damages is connected to a claim for actual damages. From this, Cheatham reasons that because she has a right to compensatory damages, she must have a right to punitive damages as well. This confuses necessary preconditions with sufficient ones. To be sure, a claim for compensatory damages is a prerequisite to a claim for punitive damages, but it does not follow that it is adequate to confer a right to that claim. Several states have statutes that allocate punitive damages to the state in some form similar to the Indiana version. BMW of N. Am., Inc., 517 U.S. at 616, 116 S.Ct. 1589, App. to Opinion of Ginsburg, J. (Ginsburg, J., dissenting); Charles F.G. Parkinson, Note: A Shift in the Windfall: An Analysis of Indiana's Punitive Damages Allocation Statute and the Recovery of Attorney's Fees Under the Particular Services Clause, 32 Val. U. L.Rev. 923, 928 (1998). Of the state courts that have addressed the issue, only the Colorado Supreme Court has found an unconstitutional taking of property, while statutes in Alaska, Oregon, Georgia, Florida and Iowa have been upheld. Evans v. State, 56 P.3d 1046, 1058 (Alaska 2002), held that Alaska Statute section 09.17.020(j) (2002), which allocates fifty percent of a punitive damages award to the state general fund, does not effect a taking because it amounts to a cap on the amount of punitive damages that may be awarded before any award is rendered to a plaintiff. The Alaska Supreme Court determined that such a cap is consistent with the legislature's power to limit or abolish punitive damages. In DeMendoza v. Huffman, 334 Or. 425, 51 P.3d 1232, 1247 (2002), the Oregon Supreme Court found that Oregon Revised Statute section 18.540 (2001), which allocates sixty percent of punitive damages awards to the state, also does not effect a taking because a party has no prejudgment property interest in a punitive damages award. Mack Trucks v. Conkle, 263 Ga. 539, 436 S.E.2d 635, 639 (1993), also found that Georgia Code Annotated section 52-12-5.1(e)(2) (1989), allocating seventy-five percent of punitive damages in a product liability case to the state, does not amount to a taking because the societal interest in deterrence of wrongful conduct is better served this way and the benefit belongs to society as a whole. In Gordon v. State and State v. Moseley , the Florida and Georgia Supreme Courts both found as we do that there is no vested property right in an award of punitive damages. The Florida court found Florida Statute Annotated section 768.73(2)(b) (Supp.1986) to be constitutional. Gordon, 608 So.2d at 802. It also upheld subsection 768.73(4), providing that attorney's fees, if payable from the judgment, shall, to the extent that they are based on the punitive damages, be calculated based only on the portion of the judgment payable to the claimant. Id. In Shepherd Components, the Iowa Supreme Court held that under Iowa Code section 668.1(2)(b) (1989), there is no vested right to an award of punitive damages. Id. at 619. Cheatham relies on Kirk v. Denver Pub. Co., 818 P.2d 262 (Colo.1991), for the proposition that the statutory requirement that a portion of the punitive damages judgment be paid to the state victims' fund constitutes an unconstitutional taking. We do not agree with the rationale in Kirk, and also conclude that the Colorado statute addressed in that case is materially different from the Indiana version. The Colorado statute required that the plaintiff, after having received the full judgment from the defendant, pay thirty percent of the proceeds into a general state fund. Id. at 263. The statute at issue in Kirk thus purported to vest the state's interest in the award only after the judgment had been paid to the plaintiff. Id. at 266. The Colorado Supreme Court took the view that the state therefore had no interest in the award before it was paid to the plaintiff and the award became vested property of the plaintiff. The effect of the statute was thus viewed as a taking of property received by the plaintiff. To avoid this issue, the Indiana statute provides that the defendant pays the entire amount of the punitive damages award to the clerk of the court who then distributes twenty-five percent of the award to the plaintiff. Until this occurs, the plaintiff receives nothing from the judgment of punitive damages. We also disagree with the underlying rationale of Kirk, which cited Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 101 S.Ct. 446, 66 L.Ed.2d 358 (1980), for its conclusion that the Colorado statute amounted to a taking of the plaintiff's private property. In Beckwith, the U.S. Supreme Court held that because interest earned on an interpleader fund was incidental to the claimant's ownership in that account, the government could not deprive the claimant of that interest without initiating an unconstitutional taking in violation of the Fifth Amendment. Id. at 162, 101 S.Ct. 446. The case stands for the proposition that the right to receive interest on one's property is one's property. But for the reasons already discussed, under either the federal or the Indiana Takings Clause, there is no property right in a claim for punitive damages. Rather, consistent with their punitive nature, punitive damages are akin to a fine exacted by the government of Indiana to deter and punish wrongdoers. Requiring payment of this fine to a victim compensation fund rather than awarding it to a private citizen is well within the state legislature's authority. Finally, Cheatham contends that the statute has the following deficiencies and therefore constitutes a taking for four different reasons: (1) the statute does not expressly address the issue of whether or how a punitive damages award may be compromised; (2) it does not address how payments of a judgment in installments are to be allocated between compensatory and punitive damages; (3) it does not address whether the plaintiff is the only mechanism to enforce a judgment, and if that occurs, whether or how the plaintiff is to be compensated; and, (4) it encourages an attorney to break obligations to the client by reducing the fee incentive. The first three of these are answered by the absence of any property right in the judgment. If there is none, there is no unconstitutional taking, irrespective of the resolution of these other issues. The last contention presents no issue of substance. Many legal doctrines serve to reduce the potential recovery by a civil plaintiff. The lawyer and the client get to play the hand the legislature deals them, no more and no less. If the claim is for compensatory damages plus one fourth of any punitive damages award, the fee agreement and the expectations of both lawyer and client must adjust accordingly.