Opinion ID: 2546274
Heading Depth: 2
Heading Rank: 2

Heading: Excessive Punitive Damage Award

Text: This Court reviews constitutional challenges de novo. Hodges, 217 S.W.3d at 279. A statute is presumed to be valid and will not be declared unconstitutional unless it clearly contravenes some constitutional provision. Franklin Cnty. ex rel. Parks v. Franklin Cnty. Comm'n, 269 S.W.3d 26, 29 (Mo. banc 2008). The challenger has the burden of proving the [statute] clearly and undoubtedly violates the constitutional limitations. Id. Here, Mr. Franklin contends that the entry of a $500,000 judgment for punitive damages violated his due process rights because this award is grossly excessive in light of the nature of his conduct, even though reduced from the $1 million jury verdict. The 14th Amendment to the United States Constitution prevents a state from depriving any person of life, liberty, or property, without due process of law. Article I, section 10 of the Missouri Constitution is essentially identical, stating that no person shall be deprived of life, liberty or property without due process of law. Mo. Const. art. I, § 10. In State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 417, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003), the Supreme Court held that due process prohibits the imposition of grossly excessive or arbitrary punishments on a tortfeasor because [t]o the extent an award is grossly excessive, it furthers no legitimate purpose and constitutes an arbitrary deprivation of property. Id. In applying these principles to determine whether the award of punitive damages was excessive based on State Farm's improper refusal to settle or later pay a claim, the Supreme Court said it would consider: (1) the degree of reprehensibility of the defendant's conduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases. Id. at 418, 123 S.Ct. 1513. Pursuant to these principles, it said, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process. Id. at 425, 123 S.Ct. 1513. In the case before it, in particular, the Supreme Court found that the Utah Supreme Court had erred in approving a punitive damage award of $145 million, based on an actual damage award of $2.6 million, as the punitive damages had been based not on State Farm's conduct regarding the individual plaintiff but rather on its unrelated conduct toward its customers across the nation. Id. at 419-23, 123 S.Ct. 1513. Due process does not permit courts, in the calculation of punitive damages, to adjudicate the merits of other parties' hypothetical claims against a defendant under the guise of the reprehensibility analysis. Id. at 423, 123 S.Ct. 1513. But due process does permit considering the wrongfulness of the conduct and whether it is part of a pattern and practice of misconduct. Accordingly, State Farm also held that far greater ratios may comport with due process where `a particularly egregious act has resulted in only a small amount of economic damages.' Id. at 423, 123 S.Ct. 1513, quoting BMW of North America, Inc. v. Gore, 517 U.S. 559, 582, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996). Ultimately, State Farm concluded, [t]he precise award in any case ... must be based upon the facts and circumstances of the defendant's conduct and the harm to the plaintiff. Id. at 425, 123 S.Ct. 1513, quoting Gore, 517 U.S. at 582, 116 S.Ct. 1589. In considering those circumstances, the most important factor is the degree of reprehensibility of the misconduct, including: the harm caused was physical as opposed to economic; the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; the target of the conduct had financial vulnerability; the conduct involved repeated actions or was an insolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident. Id. at 419, 123 S.Ct. 1513 (emphasis added). In State Farm, the Supreme Court found that the defendant's conduct was not very reprehensible, for it caused limited economic harm, did not threaten health or safety, there was scant evidence of repeated misconduct, and unrelated conduct as to other insureds could not be considered. Id. at 419-23, 123 S.Ct. 1513. By contrast, here, consideration of these factors supports the large ratio between actual and punitive damages. The actual damage award of $4,500 was small, in contrast to the large actual damage award in State Farm of $2.6 million, so that a single-digit ratio would be insufficient to punish and deter the defendant properly. Id. This reasoning is supported by the language of section 510.265 itself, in which the legislature provided that the ratio of punitive damages should not be more than five times actual damages in cases with damages of more than $100,000, but if the amount of actual damages was less than $100,000, then it authorized an award of up to $500,000 regardless of the size of the actual damage verdict. § 510.265. While this statutory framework of course cannot permit a punitive damage award larger than due process would allow, it is an additional indication that, in the case of small awards, due process does not prevent large ratios if necessary, given particular facts, to impose punishment and deter future misconduct. Here, while the harm caused was economic rather than a threat to health or safety, the target was financially vulnerable, the misconduct was part of a plan or scheme through which at least 35 people have alleged they were injured, and the harm was the result of intentional malice, trickery or deceit. Unlike in State Farm, Mr. Franklin did not appear or testify at the trial or otherwise express remorse, nor did he make his victims whole, but instead he continued to deny his fault through his counsel, who appeared for him at trial. A jury would be within its discretion in determining that, in these circumstances, in which a particularly egregious act has resulted in only a small amount of economic damages, the usual single-digit ratio may not be an appropriate measure of the limits of due process. Id. at 419, 123 S.Ct. 1513. Other cases from Missouri and elsewhere have approved ratios of the size awarded here when the actual damage award was small and the conduct was egregious. See, e.g., Smith v. New Plaza Pontiac Co., 677 S.W.2d 941 (Mo.App.1984) ($400 in actual and $30,000 in punitive damages, a 75-to-1 ratio, for making misrepresentations about the condition of a used car); TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443, 113 S.Ct. 2711, 125 L.Ed.2d 366 (1993) ($19,000 in actual damages and $10 million in punitive damages, a 526-to-1 ratio, for slander of title); Kemp v. Am. Tel. & Tel. Co., 393 F.3d 1354 (11th Cir.2004) ($115 in compensatory damages and $250,000 in punitive damages, a 2,172-to-1 ratio, for fraudulent billing practices); Parrott v. Carr Chevrolet, Inc., 331 Or. 537, 17 P.3d 473 (2001) ($11,496 in compensatory damages and $1 million in punitive damages, an 86-to-1 ratio, for misrepresentations related to the sale of a vehicle). Here, as in these cases, this Court holds that, on these facts, the amount of punitive damages was reasonable and proportionate to the harm inflicted by Mr. Franklin and did not violate due process.