Opinion ID: 2045157
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Heading: Amount of Punitive Damage Award and New Trial Order

Text: Both parties raise issues stemming from the trial court's order granting a new trial. Plaintiff argues for a reinstatement of the jury verdict or a remittitur that properly reflects IBP's degree of culpability. Defendants ask for a judgment notwithstanding the verdict on punitive damages, a new trial on all issues, or an affirmance of the trial court's order granting a new trial on punitive damage claims. Our resolution in this division will answer these questions.
The new trial ordered by the trial court in the instant case was based on the court's inherent power to grant a new trial where the verdict fails to administer substantial justice between the parties. In Lehigh Clay Products v. Iowa Department of Transportation, 512 N.W.2d 541, 543-44 (Iowa 1994), we said: Iowa has long recognized the trial court's inherent power to grant a new trial where the verdict fails to administer substantial justice. The trial court is not limited to the grounds for granting a new trial specified in Iowa Rule of Civil Procedure 244. Our scope of review of this issue is for correction of errors at law. Iowa R.App.P. 4. Although the trial court has discretion in ruling on a motion for new trial, that discretion is not unlimited. Ladeburg v. Ray, 508 N.W.2d 694, 696 (Iowa 1993). On appeal, we review this issue on the standard of abuse of discretion. Iowa R.App.P. 14(f)(3). The trial court's discretion can be exercised only for sound judicial reasons. Jacobsen v. Gamber, 249 Iowa 99, 102, 86 N.W.2d 147, 149 (1957); Ferguson-Diehl Constr. Co. v. Langloss, 239 Iowa 346, 355, 30 N.W.2d 320, 324 (1948). It must not be exercised arbitrarily. Riley v. Wilson Concrete Co., 184 N.W.2d 689, 690 (Iowa 1971). For a trial court to grant a new trial in the interest of justice, it must have some support in the record for doing so. Kaiser v. Stathas, 263 N.W.2d 522, 525 (Iowa 1978). Courts have no right to set aside a jury verdict through mere caprice or whim, or to reweigh the evidence submitted, or to sit in judgment on the credibility of witnesses. Ferguson-Diehl, 239 Iowa at 355, 30 N.W.2d at 324. We are obligated to view the evidence in the light most favorable to the jury verdict. Hall v. Montgomery Ward & Co., 252 N.W.2d 421, 422 (Iowa 1977).
Although neither party mounts a constitutional challenge to the award, we are now obligated as a matter of constitutional law to assume the responsibility for reviewing the appropriateness of the size of punitive damage awards. Ezzone v. Riccardi, 525 N.W.2d 388, 398-99 (Iowa 1994). Citing Honda Motor Co., we took as a directive in Ezzone to order a remittitur if appropriate. Id. at 399 (citing Honda Motor Co. v. Oberg, 512 U.S. 415, ___ _ ___, 114 S.Ct. 2331, 2338-41, 129 L.Ed.2d 336, 346-51 (1994)); see also Atlas Food Sys. & Servs., Inc. v. Crane Nat'l Vendors, Inc., 99 F.3d 587, 593 (4th Cir.1996). In recent years the United States Supreme Court has decided several cases giving guidance to the courts on punitive damage issues. In Pacific Mutual Life Insurance Co. v. Haslip, 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991), insureds brought an action against a life insurance company and its agent for fraud. The Supreme Court affirmed a judgment against the agent and company for $200,000 in compensatory and over $840,000 in punitive damages. The Court held that imposing liability on the insurer based on the doctrine of respondeat superior did not violate the insurer's due process rights under the Fourteenth Amendment to the United States Constitution. The Court noted that punitive damages have long been a part of traditional state tort law. Blackstone noted their use in 3W. Blackstone, Commentaries 137-138. See also Wilkes v. Wood, Lofft 1, 98 Eng. Rep. 489 (C.P.1763) (the Lord Chief Justice validating exemplary damages as compensation, punishment and deterrence). In determining that the common law method of assessing punitive damages met constitutional muster, the Court said: If a thing has been practiced for two hundred years by common consent, it will need a strong case for the Fourteenth Amendment to affect it. Haslip, 499 U.S. at 17, 111 S.Ct. at 1043, 113 L.Ed.2d at 19. Nevertheless, the Court warned that unlimited jury or judicial discretion in fixing punitive damages may invite extreme results that jar one's constitutional sensibilities. Id. No mathematical bright line can be drawn between the constitutionally acceptable and the constitutionally unacceptable that would fit every case. Id. General concerns of reasonableness and adequate guidance from the court when a case is tried to a jury, however, do enter into the constitutional calculus. Id. A jury must take into consideration the character and the degree of the wrong as shown by the evidence and necessity of preventing similar wrong. Id. at 19, 111 S.Ct. at 1044, 113 L.Ed.2d at 21. As long as the discretion is exercised within reasonable constraints, due process is satisfied. Id. Answering the charge that too little structure is given by a trial court to a jury in these general maxims, the Supreme Court said: The discretion allowed under Alabama law in determining punitive damages is no greater than that preserved in many familiar areas of the law as for example, deciding best interests of the child, or reasonable care, or due diligence, or appropriate compensation for pain and suffering or mental anguish. Id. The Supreme Court also requires additional checks by an appellate court. Id. These were satisfied by the Alabama Supreme Court that undertook comparative analysis, applied detailed substantive standards and ensured that the award does not exceed an amount that will accomplish society's goal of punishment and deterrence. Id. Constitutional impropriety was held not to have been crossed in Haslip, though the punitive award was four times the amount of compensatory damages, 200 times more than the insured's out-of-pocket expenses, and much in excess of any fine for insurance fraud that could be imposed. A $19,000 actual damage and $10 million punitive award was affirmed by the Supreme Court in TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 113 S.Ct. 2711, 125 L.Ed.2d 366 (1993). The lawsuit was based on a common law action for slander of title. Quoting the Haslip guides, the Court concluded that the punitive damage award was not so grossly excessive as to be beyond the power of West Virginia and was consistent with the Due Process Clause. Id. at 462, 113 S.Ct. at 2722, 125 L.Ed.2d at 382. On the disparity between the actual and punitive damages, the Court observed that both state supreme courts and the United States Supreme Court have eschewed an approach that concentrates entirely on the relationship between them. Id. at 460, 113 S.Ct. at 2721, 125 L.Ed.2d at 380-81. The Supreme Court also observed that in calculating punitive damages it is appropriate to consider whether there is a reasonable relationship between the punitive damages award and the harm likely to result from defendant's conduct as well as the harm that actually has occurred. Id. at 460, 113 S.Ct. at 2721, 125 L.Ed.2d at 381. See also BMW of North America, Inc. v. Gore, ___ U.S. ___, ___, 116 S.Ct. 1589, 1602, 134 L.Ed.2d 809, 830 (1996). Reiterating that meaningful judicial review of punitive damage awards is required by the Due Process Clause, the Supreme Court reversed an award as unconstitutionally obtained in Honda Motor Co. v. Oberg, 512 U.S. 415, 114 S.Ct. 2331, 129 L.Ed.2d 336 (1994). There, the Court held an amendment to the Oregon constitution that limited judicial review violated the Due Process Clause of the Fourteenth Amendment. Honda Motor Co., 512 U.S. at 434-36, 114 S.Ct. at 2342-43, 129 L.Ed.2d at 350-53. In BMW, a punitive damage award of $2 million was reversed as violative of the Due Process Clause because of the low level of reprehensibility of conduct and a 500:1 ratio between the award and actual harm done to the purchaser. BMW, ___ U.S. at ___, 116 S.Ct. at 1598-99, 134 L.Ed.2d at 825-27. The actual harm arose from the purchase of a new BMW car that had been repainted without the knowledge of the purchaser. The Court noted that none of the aggravating factors associated with particularly reprehensible conduct was present. Id. at ___, 116 S.Ct. at 1599, 134 L.Ed.2d at 826. The harm done to plaintiff Gore was purely economic in nature. Stressing the degree of reprehensibility the Court said: Perhaps the most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant's conduct. As the Court stated nearly 150 years ago, exemplary damages imposed on a defendant should reflect the enormity of the offense. Id. at ___, 116 S.Ct. at 1599, 134 L.Ed.2d at 826. Comparing this ratio of actual damages to punitive damages, the Court found the disparity to be dramatically greater in BMW than in the Haslip and TXO cases. Expanding on this factor, the Court said: Indeed, low awards of compensatory damages may properly support a higher ratio than high compensatory awards, if, for example, a particularly egregious act has resulted in only a small amount of economic damages. A higher ratio may also be justified in cases in which the injury is hard to detect or the monetary value of noneconomic harm might have been difficult to determine. Id. at ___, 116 S.Ct. at 1602, 134 L.Ed.2d at 831. In a case decided while BMW was pending, the Eighth Circuit found that a 250,000:1 ratio between punitive and actual damages was excessive and violative of due process. Pulla v. Amoco Oil Co., 72 F.3d 648 (8th Cir.1995). The case involved Amoco's intrusion on the privacy of its employees by accessing their credit card records to check on use of sick leave. The $500,000 punitive damage award was reversed, the court viewing the event as a one-time occurrence that justified a limited award of punitive damages. The touchstone, the court emphasized, is the potential harm that would have likely resulted from the dangerousness inherent in defendant's actual conduct. Id. at 659. A federal district court has since followed the rationale of BMW in Schimizzi v. Illinois Farmers Insurance Co., 928 F.Supp. 760 (N.D.Ind.1996). It found a punitive award of $600,000 was excessive where the actual damages were $45,000 and that Farmer's conduct did not rank high on the reprehensibility scale. Even so, the court found that the jury intended to award a significant amount in punitive damages, and fixed punitive damages at $135,000. Recently, the United States Court of Appeals, Fourth Circuit, commented on the relationship between the jury's verdict and the trial court's judgment in assessing punitive damages. See Atlas Food Sys. & Servs., Inc., 99 F.3d at 595. In the first trial, the jury's award of $3 million in punitive damages was reduced by the trial judge to $1 million by a remittitur order or a new trial would be granted. Id. at 591. On rejection by the plaintiff, a second trial was ordered which resulted in a jury verdict of $4 million in punitive damages, which was again reduced by the trial judge who entered a remittitur order setting the punitive damages award at $1 million or a new trial would be granted. Id. The federal circuit court held that the trial court had not abused its discretion, stating: The court's review of the amount of a punitive damages award should involve comparison of the court's independent judgment on the appropriate amount with the jury's award to determine whether the jury's award is so excessive as to work an injustice. Id. at 595.
Our court has a long history of considering punitive damage cases. Recent cases have set out principles that track with the pronouncements of the Supreme Court, discussed in this opinion. In Ryan v. Arneson, 422 N.W.2d 491 (Iowa 1988), we compared an actual award of $120 to a punitive damage award of $18,600. Holding the punitive award was not excessive, we said: We have stated that punitive damages must be reasonably related to actual damages. Recent cases, however, have held that punitive damages may be awarded even if actual damages were shown but never awarded. These cases show that our primary focus in review of a punitive damage award is the relationship between the punitive damage award and the wrongful conduct of the offending party. .... Although Iowa cases have discussed a relationship between actual and punitive damages, this court has expressly rejected the use of a mathematical ratio in examining punitive damages. Furthermore, Iowa cases have stated that legal precedent is of limited value in evaluating the damage award of a specific case. In determining whether punitive damages are so excessive that they demonstrate passion and prejudice on the part of the jury, we will consider whether the punitive damage award is reasonably related to the malicious conduct of the defendant which resulted in actual injury or damage to the plaintiff. Ryan, 422 N.W.2d at 496. In 1994, we decided Spaur v. Owens-Corning Fiberglas Corp., 510 N.W.2d 854 (Iowa 1994). In this case we approved a punitive award as not being violative of due process protections, double jeopardy, or excessive fines charges. Spaur, 510 N.W.2d at 866-69. The awards for injuries from asbestos-containing products were $1.4 million in compensatory and $1.5 million in punitive damages. We quoted the standards of Haslip and applied them on the posttrial review process. Id. at 867. Also in 1994, we had occasion to again consider a punitive damage award in Ezzone, 525 N.W.2d at 398-99. The suit involved an action against a bank for interference with shareholders' rights. Citing the Supreme Court case of Honda Motor Co. as establishing due process requirements, we structured our review process as follows: This and future reviews will be conducted on the basis of principles previously announced in punitive damages cases. Awards will be tested with a view of the extent and nature of the outrageous conduct, the amount necessary for future deterrence, and with deference to the relationship between the punitive award and plaintiff's injury, as reflected in any award for compensatory damages. In addition to these traditional factors, we shall consider all circumstances surrounding the conduct and relationship between the parties. Any provocation of the conduct by plaintiff will be a factor. We take the provocation to include participation in the conduct complained of. Ezzone, 525 N.W.2d at 399 (citing Restatement (Second) Torts § 908 cmt. e (1979)). Accordingly, the aforementioned cases provide us with guidance in reviewing the appropriateness of Wilson's punitive damage award.
Applying these tests to the facts and the jury findings in the case at bar convinces us that an award of substantial punitive damages against IBP is warranted and is supported by the evidence and the law. Arndt knowingly engaged in a malicious course of conduct that was in line with the climate established by IBP concerning its injured workers. Her conduct was an attempt to manipulate and interfere with the medical treatment received by Wilson and other injured workers. She was aware of and fostered this treatment of injured workers, knowing that a financial gain came to her and other management personnel thereby through IBP's safety award system. As part of this purpose, she participated in manipulating work records of injured employees which may have resulted in falsification of OSHA records. The extent and nature of the outrageous conduct is considerable when compared with other cases that have assessed the reprehensibility of defendants' acts. The evidence indicated that Wilson's treatment as an injured worker was not a one-time or isolated instance. The interference with the diagnosis and treatment of his injury could have resulted in a pronounced worsening of an already serious condition. Other workers with injuries could be profoundly affected as a result of the policy actions carried out by Arndt and IBP. For these reasons, we find the future deterrence aspect of our reviewing principles to be of great importance. Of minor significance is the ratio between the compensatory and punitive damages assessed. One of the factors approved by the Supreme Court and our court for assessing the imposition of punitive damages is the financial position of the defendant. This bears on the factor of deterring like conduct in the future, also accepted by both courts. See Haslip, 499 U.S. at 21, 111 S.Ct. at 1045, 113 L.Ed.2d at 22; Spaur, 510 N.W.2d at 867 (factors 5 and 7). IBP is the largest producer of fresh beef and pork in the world. It operates eighteen separate beef or pork plants in nine states, as well as nineteen other plants, warehouses, tanneries and refineries. The company has a sales network of ten regional and international service centers in the United States, Europe, and Asia. IBP employs 29,000 people, had net sales in 1993 of $11.6 billion and had a net worth in 1993 of $600 million. Applying, for our posttrial review process, all of the factors listed as appropriate in BMW, Haslip, Spaur, Ryan, and Ezzone, we hold that the amount of punitive damages against IBP as found by the trial jury is excessive. Nevertheless, the assessment of substantial punitive damages against IBP is supported by this record. Accordingly, we hold that the judgment for plaintiff against defendants for $4000 in compensatory damages is affirmed; judgment for punitive damages in favor of plaintiff against defendant IBP is affirmed in the amount of $2 million if plaintiff agrees to a remittitur of all punitive damages exceeding that amount. Consistent with the statutory directive of Iowa Code section 668A.1(2)(b), as interpreted by Fernandez v. Curley, 463 N.W.2d 5 (Iowa 1990), this amount shall be apportioned by judgment entries as follows: (1) For payment of applicable fees and costs, including plaintiff's reasonable attorney fees applicable to the recovery of the $2 million award, from the gross punitive damage award of $2 million. (2) For twenty-five percent of the $2 million award in favor of plaintiff ($500,000). (3) For the remainder of the $2 million award after satisfying (1) and (2) apportionments to the Civil Reparations Trust Fund. The judgments shall also include interest as provided by law. If plaintiff rejects these remittitur conditions, a new trial shall be ordered by the trial court under the conditions determined in the trial court's order of March 23, 1995, which we have described in this opinion. On the cross-appeal, we affirm except as modified by our disposition on the appeal. We have reviewed all the issues raised by both parties and find that they are disposed of by this determination or are without merit. Costs are assessed against defendant IBP. AFFIRMED AS MODIFIED ON APPEAL AND REMANDED; AFFIRMED ON CROSS-APPEAL.