Opinion ID: 3049939
Heading Depth: 3
Heading Rank: 3

Heading: Punitive Damages Jury Instruction

Text: Merrick’s bad faith and punitive damages claims turned upon linking Paul Revere’s handling of Merrick’s claim to a decade of allegedly improper claims handling practices at Provident. Prater testified regarding Provident’s practices in substantial detail. Concerned that the jury would punish them for Provident’s history of improper behavior, the insurers requested the following instruction, which the district court denied: In deciding whether or in what amount to award punitive damages, you may consider only the spe- cific conduct by Defendants that injured Plaintiff. You may not punish Defendants for conduct or prac- tices that did not affect Plaintiff, even if you believe that such conduct or practices were wrongful or deserving of punishment. The law provides other means to punish wrongdoing unrelated to Plaintiff. 5 One was an e-mail from Dr. Cusher to in-house counsel and therefore could have been considered privileged, as defendants noted in their disclosure. 11124 MERRICK v. PAUL REVERE LIFE INSURANCE CO. The insurers claim that this denial abridged their Due Process rights by exposing them to unconstitutionally excessive punitive liability. Initially, Merrick asserts that the insurers have waived the jury instruction issue. Voohries-Larson v. Cessna Aircraft Co., 241 F.3d 707, 713 (9th Cir. 2001). We disagree. Although the Ninth Circuit is “the strictest enforcer of Rule 51,” the record here shows that the insurers “objected at the time of trial on grounds that were sufficiently precise to alert the district court” to the specific nature of the defect. Id. at 713-14 (citation omitted). The insurers explicitly objected to the court’s punitive damages instructions without “some limiting . . . instructions relative to the Campbell decision [State Farm v. Campbell, 538 U.S. 408 (2003)] in terms of what the jury can look at and not look at,” and set forth five specific limiting instructions on those points. This objection is sufficiently precise to “bring into focus the precise nature of the alleged error” as being inconsistent with Campbell. VoorhiesLarson, 241 F.3d at 714. [6] The Due Process Clause “forbids a State to use a punitive damages award to punish a defendant for injury that it inflicts upon nonparties.” Philip Morris USA v. Williams, 127 S. Ct. 1057, 1063 (2007). As the Supreme Court has recently explained, such punishment runs afoul of the maxim that a state must afford a defendant an opportunity to present every available defense. Id. (citing Lindsey v. Normer, 405 U.S. 56, 66 (1972)). A defendant “threatened with punishment for injuring a nonparty victim” may be unable to present defenses applicable to the nonparty victim, if those defenses do not also coincide with those relevant to the plaintiff’s claim. Id. In addition, punishment for nonparty injury adds “a near standardless dimension to the punitive damages equation,” as jury speculation regarding the number of nonparties injured and the extent of their injuries magnifies traditional due process concerns regarding the arbitrariness, uncertainty, and lack of notice afflicting a punitive award. MERRICK v. PAUL REVERE LIFE INSURANCE CO. 11125 [7] Williams clarified that a plaintiff may offer evidence of “harm to other victims” to show the reprehensibility of a defendant’s conduct in this case. Id. at 1063-64. “Evidence of actual harm to nonparties can help to show that the conduct that harmed the plaintiff also posed a substantial risk of harm to the general public, and so was particularly reprehensible.” Williams, 127 S. Ct at 1064. But “a jury may not go further than this and use a punitive damages verdict to punish a defendant directly on account of harms it is alleged to have visited on nonparties.” Id. (emphasis added). Where there is a “significant” risk that the jury might do so—a risk generated, for example, by “the sort of evidence that was introduced at trial or the kinds of argument the plaintiff made to the jury”—a court, upon request, must “provide some form of protection” to assure that juries “are not asking the wrong question.” Id. at 1064, 1065. [8] In this case, the evidence that was introduced at trial created a significant risk that the jury would punish the defendants for Provident’s history of improper behavior and the damages this behavior caused to victims other than Merrick. Prater testified at length regarding Provident’s practices based on his analysis of “over a hundred thousand” internal Provident documents written throughout the 1990s, many of which were entered into evidence. Prater and the memos describe Provident’s decade-long scheme in great detail, highlighting unethical behavior by Provident that was unrelated to Paul Revere’s handling of Merrick’s claim.6 For example, Provident held round-table discussions to terminate expensive policies, destroyed all records of the meetings and labeled them as “legal” solely to shield them by privilege. But Merrick offered no evidence that his claim was improperly “roundtabled.” Prater also explained that Provident cultivated biased 6 As noted above, Merrick showed that Paul Revere’s handling of his claim displayed some of Provident’s allegedly unethical practices, such as pressuring claimants to settle and insisting upon objective medical evidence of a claim. 11126 MERRICK v. PAUL REVERE LIFE INSURANCE CO. independent medical examiners to support termination decisions, although Merrick seemingly did not allege that Dr. Donaldson’s examination of him was biased. In his closing argument, Merrick’s attorney repeatedly referenced Provident’s pattern of allegedly unethical behavior, including practices not alleged to have occurred in Merrick’s case. He also asked, in the context of punitive damages, “[h]ow do you punish a corporation that’s making on the order of $132 million a quarter in terminations? That’s what you have to decide.” We conclude that the evidence offered here creates a “significant risk” that the jury would assess punitive damages to punish this pattern of unethical behavior rather than the conduct that affected Merrick specifically.7 [9] Merrick argues that, taken as a whole, the instructions adopted by the court adequately protected the insurers’ due process rights. We disagree. The punitive damages instruction stated that “[y]ou may in your discretion award such damages, if, but only if, you find by a clear & convincing evidence that said defendant was guilty of oppression fraud or malice in the conduct upon which you base your finding of liability.” The verdict form further asked whether the insurer “act[ed] with oppression, fraud, or mailice [sic], express or implied, in its dealings with plaintiff such to justify an award of punitive damages.” At most, these instructions address liability for punitive damages but do not prevent the jury from setting an amount of damages that includes direct punishment for harm to others. Williams states clearly that “a jury may not . . . use a punitive damages verdict to punish a defendant directly on account of harms it is alleged to have visited on nonparties.” Id. at 1064. A jury instruction, like that presented here, that allows (or does not preclude) direct punishment for nonparty 7 As the insurers note, the fact that the jury assessed $2 million in punitive damages against Paul Revere and $8 million against Unum/Provident —which did not handle Merrick’s claim but was the primary focus of Prater’s testimony—suggests that the jury did assess damages to punish Provident’s conduct against nonparties. MERRICK v. PAUL REVERE LIFE INSURANCE CO. 11127 harm runs afoul of this prohibition and invites precisely the improper jury speculation—as to, for example, the number of nonparty victims or the extent of their injury—that Williams sought to avoid. Id. at 1063; see also Campbell, 538 U.S. at 423 (“Due process does not permit courts, in the calculation of punitive damages, to adjudicate the merits of other parties’ hypothetical claims against a defendant.”). [10] More important, the instructions given did not provide the jury with clear direction regarding the proper and improper uses of Merrick’s “bad company” evidence. As noted above, the jury was permitted to consider this evidence when determining the reprehensibility of the insurers’ actions toward Merrick, but it could not directly punish the defendants for harm to victims other than Merrick. When evidence is admissible for a limited purpose, the opponent is entitled to a limiting instruction admonishing the jury not to use the evidence for a forbidden purpose. Fed. R. Evid. 105; see Borunda v. Richmond, 885 F.2d 1384, 1388 (9th Cir. 1988). No such instruction issued here. In light of Williams’ statement that it is “constitutionally important for a court to provide assurance that the jury will ask the right question, not the wrong one,” 127 S. Ct. at 1064 (emphasis added), we conclude that the instruction issued in this case was inadequate. Merrick also argues that the court properly denied the proposed instruction because the insurers’ instruction was misleading. Mitchell v. Keith, 752 F.2d 385, 388 (9th Cir. 1985). Merrick is correct that the first sentence of the proposed instruction is misleading because it fails to indicate that the jury may consider harm to others as part of its reprehensibility analysis. Williams, 127 S. Ct. at 1063-64. But the fact that the proposed instruction was misleading does not alone permit the district judge to summarily refuse to give any instruction on the topic. In Mitchell, the primary case upon which Merrick relies, the court affirmed the district court’s denial because the proposed instruction was misleading and the existing instruction adequately addressed the movant’s concern. Mitchell, 11128 MERRICK v. PAUL REVERE LIFE INSURANCE CO. 752 F.2d at 389. Where a proposed instruction is supported by law and not adequately covered by other instructions, the court should give a non-misleading instruction that captures the substance of the proposed instruction. See Ragsdell v. Southern Pac. Transp. Co., 688 F.2d 1281, 1283 (9th Cir. 1982). [11] We therefore conclude that the district court erred in failing to instruct the jury that it could not punish the defendants for conduct that harmed only nonparties. Williams suggests in passing that a panel may remedy this error either by granting a new trial or reducing the amount of punitive damages. Williams, 127 S. Ct. at 1065. While remittitur may remedy a jury award deemed unconstitutionally excessive, see Planned Parenthood of Columbia/Willamette Inc. v. Am. Coalition of Life Activists, 422 F.3d 949, 963 (9th Cir. 2005), it seems less appropriate where the constitutional error stems from misguidance regarding the way the jury may use evidence in setting an amount. We therefore vacate the punitive damages verdict and remand the case for a new trial on punitive damages. Larez v. Holcomb, 16 F.3d 1513, 1520 (9th Cir. 1994). In light of this holding, we decline to reach the insurers’ challenge that the punitive award was unconstitutionally excessive. See Williams, 127 S. Ct. at 1065.