Opinion ID: 2119633
Heading Depth: 1
Heading Rank: 3

Heading: whether the grosheks may recover punitive damages

Text: ¶ 22 The Grosheks argue that punitive damages are necessary in this case because the remedy of rescission is insufficient to deter Trewin or others like him from predatory conduct with respect to vulnerable clients. Trewin counters that punitive damages are by law unavailable in actions in equity; he argues besides that the record does not contain evidence of the kind of conduct for which punitive damages would be appropriate. ¶ 23 We first review the kinds of cases in which courts have found punitive damage awards appropriate, then examine statutory and common law governing such awards, and then turn to the application of the law to this case. In a case last term that affirmed the availability of punitive damages in an injured seaman's claim against his employer for willful failure to pay for his food, lodging and medical care as required under maritime law, the United States Supreme Court observed that [p]unitive damages have long been an available remedy at common law for wanton, willful, or outrageous conduct. Atlantic Sounding Co., Inc. v. Townsend, ___ U.S. ___, ___, 129 S.Ct. 2561, 2566, 174 L.Ed.2d 382 (2009). Writing for the Court, Justice Thomas briefly outlined the common law roots and noted American courts' approval of punitive damages in appropriate cases since at least 1784 [15] : This Court has also found the award of punitive damages to be authorized as a matter of common-law doctrine. In Day v. Woodworth, 13 How. 363, 14 L.Ed. 181 (1852), for example, the Court recognized the well-established principle of the common law, that in actions of trespass and all actions on the case for torts, a jury may inflict what are called exemplary, punitive, or vindictive damages upon a defendant.... Id. at 371; see also Philadelphia, W., & B.R. Co. v. Quigley, 21 How. 202, 214, 16 L.Ed. 73 (1859) (Whenever the injury complained of has been inflicted maliciously or wantonly, and with circumstances of contumely or indignity, the jury are not limited to the ascertainment of a simple compensation for the wrong committed against the aggrieved person); Barry v. Edmunds, 116 U.S. 550, 562, 6 S.Ct. 501, 29 L.Ed. 729 (1886) ([A]ccording to the settled law of this court, [a plaintiff] might show himself, by proof of the circumstances, to be entitled to exemplary damages calculated to vindicate his right and protect it against future similar invasions). Id. at 2566-67. ¶ 24 It may be true that it is often recite[d] that punitive damages are not favored by the law [16] ; nevertheless, where cases involve conduct with a high degree of grievousness or reprehensibility [17] punitive damage awards are routinely held to be appropriate. Invoking a case by the United States Supreme Court, this court noted in Trinity Evangelical Lutheran Church v. Tower Insurance Co., [18] Punitive damages may properly be imposed to further a state's legitimate interests in punishing unlawful conduct and deterring its repetition. As early as 1914, this court made clear that it was not inclined to second-guess a circuit court's $1,500 punitory damages award to the father of Elsie Luther, ... [who sought] such damages as are at common law recoverable in an action nominally for loss of services of a daughter caused by her seduction and consequent sickness, etc. [19] ¶ 25 The availability of punitive damages is governed in Wisconsin, as in many states, in various respects by constitutional, statutory, and common law. The statute on punitive damages defines the evidence required to support an award of punitive damages, setting a high standard: Standard of conduct. The plaintiff may receive punitive damages if evidence is submitted showing that the defendant acted maliciously toward the plaintiff or in an intentional disregard of the rights of the plaintiff. Wis. Stat. § 895.043(3). In Berner Cheese Corp. v. Krug, [20] this court discussed the statute's revision by the legislature: The legislature enacted Wis. Stat. § 895.043(3) in 1995, thereby altering Wisconsin's common law standard for punitive damages. Strenke, 279 Wis.2d 52, ¶ 19, 694 N.W.2d 296. In doing so, it heightened the state of mind required of a defendant from a wanton, willful and reckless disregard for rights of another to an intentional disregard for rights of another. Id. A defendant acts with intentional disregard if he or she: (1) acts with a purpose to cause the result or consequence, or (2) is aware that the result or consequence is substantially certain to occur from the person's conduct. Accordingly, in order to fall within Wis. Stat. § 895.043(3), a defendant's conduct must be (1) deliberate, (2) in actual disregard of the rights of another, and (3) sufficiently aggravated to warrant punishment by punitive damages. We explained in Strenke that under this heightened threshold for punitive damages, we expect circuit courts to serve as gatekeepers before sending a question on punitive damages to the jury. Id. (citations omitted). ¶ 26 There are other principles that govern the availability of punitive damages and are potentially relevant to this case. For example, we have held that where there exists a `cause of action,' but the action is not one for which the recovery of compensatory damages is justified, punitive damages cannot be awarded. Tucker, 142 Wis.2d at 440-41, 418 N.W.2d 818. And in Karns, [21] a case more than a hundred years old, this court held that [t]he damages which may be recovered in an equitable action under our decisions are compensatory, and not exemplary, damages. [22] ¶ 27 Additionally, the United States Supreme Court has stated that there are constitutional limits to consider in some punitive damage awards: when a[] [punitive damage] award can fairly be categorized as `grossly excessive' ... it enter[s] the zone of arbitrariness that violates the Due Process Clause of the Fourteenth Amendment. BMW of North America, Inc. v. Gore, 517 U.S. 559, 569, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996). In that instance, the Court based its analysis on the ratio between the compensatory damage and punitive damage awards, and concluded that the constitution did not permit a ratio of a breathtaking 500 to 1 (where compensatory damages were $4,000 and punitive damages were $2 million). Id. at 583, 116 S.Ct. 1589. In another case reviewing a punitive damage award in the context of maritime law, the court summed up its recent decisions on constitutional requirements of punitive damages: The Court's response to outlier punitive damages awards has thus far been confined by claims at the constitutional level, and our cases have announced due process standards that every award must pass. Although we have consistently rejected the notion that the constitutional line is marked by a simple mathematical formula, we have determined that few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process[]; [w]hen compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee[.] Exxon Shipping Co. v. Baker, ___ U.S. ___, ___, 128 S.Ct. 2605, 2626, 171 L.Ed.2d 570 (2008) (citations omitted). [23] ¶ 28 Of the constitutional, statutory, and common-law boundaries related to punitive damages, it was the common-law rule prohibiting punitive damages in equitable actions, from Karns, that the court of appeals considered to be dispositive of this case. However, it is the rule from Tucker, concerning the requirement of compensatory damages, that we consider to be the threshold question. Tucker is of fairly recent vintage, and even though its focus is on a somewhat ancillary question, [24] it recognized the general and perhaps almost universally accepted rule ... that punitive damages cannot be awarded in the absence of actual damage and further notes that [t]his holding is firmly rooted in longstanding principles of Wisconsin law. [25] The court went on to say [W]hile not exact, the relationship between punitive and exemplary damages has been previously recognized as sufficiently similar to justify consistency in decisions regarding both types of damages. Consequently, to the extent that both treble damages and punitive damages operate as an enhancement of compensatory damages, recovery of compensatory damages should be similarly required for punitive damages.... Similar results have been reached in other jurisdictions. It is widely recognized that despite the unambiguous presence of actual harm, punitive damages are not available absent an award of compensatory damages. [26] ¶ 29 In this case, no compensatory damages were sought or awarded. The Grosheks argue that Tucker and Karns should not bar recovery of punitive damages because in an equitable action a court can use its equitable powers to fashion an appropriate remedy and because Trewin acted maliciously toward the plaintiff or in an intentional disregard of the rights of the plaintiff, and thus falls within the ambit of Wis. Stat. § 895.043(3) for purposes of a punitive damage award. However, as noted above, the court has construed Wis. Stat. § 895.043(3) as setting the bar higher for the kind of evidence required to support a punitive damage award, rather than as expanding the category of cases where punitive damages may be awarded. In other words, within the category of cases where punitive damages may be appropriately awardedthose where compensatory damage awards have been made, for examplethe legislature created a heightened standard as to the defendant's state of mind, requiring a showing of intentional disregard of the plaintiff's rights or a showing that the defendant acted maliciously toward the plaintiff. In cases where punitive damages are barred in the first instance, the standard for conduct simply does not come into play. Therefore, our holding in Tucker forecloses recovery of punitive damages in a case where there is no award of compensatory damages. ¶ 30 Because there was no compensatory damage award here, we do not reach the question raised concerning the principle articulated in Karns, above: whether, in an equitable action where a court awards compensatory damages, [27] the fact that the action is an equitable action would then bar recovery of punitive damages. It is true, as the Grosheks point out, that the historical distinction between courts of law and courts of equity, and the differing treatment of equitable and legal actions have faded over time. [28] The Grosheks rightly note that many jurisdictions [29] have rejected the rule that was generally accepted at the time of Karns, and have declined to bar punitive damages in an action merely on the grounds that it seeks equitable relief. Whether Wisconsin should likewise abandon that principle and overrule Karns, however, is a question for another day. The case before us is one in which no punitive damages can be awarded because there are no compensatory damages, and we decline to reach out to resolve the question presented by Karns.