Opinion ID: 610843
Heading Depth: 2
Heading Rank: 2

Heading: Punitive Damage Awards

Text: 46 In challenging the punitive damages in this case, defendants advance two arguments. First, they contend that the award amounts were excessive and violative of due process. Second, they argue the jury and trial court were required under California law to consider Officer Searle's financial worth in deciding the amount of the state law punitive damages. We look first to the defendants' contentions under federal law and then under state law.
47 As Part III.B. sets forth, the jury in the second trial awarded Mr. Morgan $300,000 in punitive damages on his section 1983 claims against Officer Searle. It is well established that a jury may award punitive damages under section 1983 either when a defendant's conduct was driven by evil motive or intent, or when it involved a reckless or callous indifference to the constitutional rights of others. Davis v. Mason County, 927 F.2d 1473, 1485 (9th Cir.1991) (citing Smith v. Wade, 461 U.S. 30, 56, 103 S.Ct. 1625, 1640, 75 L.Ed.2d 632 (1982)). There is no problem with the imposition of some punitive damages in this case. We must decide, however, whether the amount of the imposition in this case comports with the Due Process Clause. 48
49 The Supreme Court recently considered, in Pacific Mutual Life Insurance Co. v. Haslip, 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991), the effect of the Due Process Clause on the award of punitive damages. After noting the growing concern with excessive awards, the Court said that unlimited jury discretion--or unlimited judicial discretion for that matter--in the fixing of punitive damages may invite extreme results that jar one's constitutional sensibilities. Id. at 15, 111 S.Ct. at 1043. The Court there applied a Due Process analysis, which is described below, to the fairly elaborate Alabama system for imposing and reviewing punitive damages, and found that it comported with Due Process. 50 The Due Process Clause is a federal constitutional standard to be applied in the case of federal as well as state punitive damage awards. Although the Court in Haslip discussed the Due Process Clause of the Fourteenth Amendment, the Court's analysis applies equally under the Fifth Amendment. The two Clauses should be applied in the same manner when two situations present identical questions differing only in that one involves a proscription against the federal government and the other a proscription against the States. 7 If state punitive damage awards are subject to the strictures of the Constitution, there is no reason that the standards employed by federal courts to review federal punitive damage awards should escape the scrutiny of the Due Process Clause. It should make no difference whether the imposition of such damages was by a federal or state court or whether on federal or state claims. For this purpose there is only one Due Process Clause. The principles of Haslip are applicable, therefore, to punitive damages imposed by federal courts for violations of federal law. 8 51 The Court in Haslip did not mandate a single standard, applied at a single level, for reviewing punitive damages. Instead, the Court held that the three-stage Alabama punitive damage system comported with the Due Process Clause. Id. at 16-18, 111 S.Ct. at 1044-46. In the Alabama system, the first stage is jury instructions crafted to describe the proper purpose of punitive damages. 9 The next stage is the trial court's review of the jury award for excessiveness. 10 The third stage is appellate court review. 11 A three-stage approach is appropriate in the context of the punitive damage issues in this case as well. 52
53 The Supreme Court did not find that the elements of the Alabama system were necessary to comport with due process, but merely sufficient. 12 Although we adopt a three-stage approach similar to Alabama's, we need not look solely to the substance of its Hammond factors. Instead, we note that the general concerns of reasonableness and adequate guidance from the court when the case is tried to a jury properly enter into the constitutional calculus. Haslip, 499 U.S. at 15, 111 S.Ct. at 1043. 1. Jury Instructions by the Trial Court 54 As the first stage of scrutiny, a trial court should instruct the jury on the proper role of punitive damages. Haslip said that instructions should be fashioned to describe the proper purposes of punitive damages, so that the jury understands that punitive damages are not to compensate the plaintiff, but to punish the defendant and to deter the defendant and others from such conduct in the future. Id. at 16, 111 S.Ct. at 1044. In the case before us, the trial court performed this task by use of an instruction that focused upon the discretionary nature of the award, the need to punish the defendant, and the need to deter repetition of such conduct. Specifically, the instruction focused on (1) the reprehensibility of the conduct of the defendant, and (2) the amount of punitive damages which will have a deterrent effect on the defendant in light of the defendant's financial condition. 13 Although the court could have included instructions detailing that punitive damages are not to be used to compensate the plaintiff, the instructions on compensatory damages made this clear. The instructions in this case were adequate. 55
56 As the second stage of scrutiny, a trial court should review the punitive award and record its reasons for upholding or altering it. The trial court can look to the Hammond factors 14 or other general elements of reasonableness to determine whether a punitive damage award should be upheld. The broader picture must not be lost. The task of the court is a comparison between the amount of punitive damages actually assessed and a figure derived from the facts of the case at hand. To arrive at this figure, the court should look to awards in similar cases and to its own experience. If the district court rejects the jury award, it should give the plaintiff the option of a remittitur or a new trial on the punitive damage issue. 15 57 Here, the district court failed to record its reasons for finding the punitive award proper. Several courts dealing with punitives based on state law violations have remanded cases to the district court when they had failed to state the reasons for rejecting a challenge to the award. American Employers Ins. Co., v. Southern Seeding Services, Inc., 931 F.2d 1453, 1458 (11th Cir.1991) (remanding case because district court failed to apply the Hammond criteria and reflect its reasoning for the denial of the motions to alter punitive award); Cole v. Control Data Corp., 947 F.2d 313, 320 (8th Cir.1991) (remanding so the district court could review under the standard articulated in Haslip). 58 Following the lead of these cases, we think it best to remand the punitive award in this case to the district court to analyze it in light of this opinion and to record its reasons for its conclusion. This remand assures that the defendant will have the three stages of Due Process scrutiny endorsed by the Supreme Court in Haslip. 59
60 As the third stage of scrutiny, an appellate court should undertake two distinct inquiries. First, it must satisfy itself that the defendant was afforded the two prior stages of scrutiny, i.e., proper instructions and a recording of reasons for upholding or altering the award. If the district court failed to give proper instructions, a new trial is in order on that issue. If the district court failed to record its reasons for upholding or altering the award, as is the case here, the circuit court should remand the case so that the district court may make its analysis and record its conclusions. If either of the two prior stages is lacking, the circuit court should reverse and remand; it should not undertake the substantive review of the award. 61 The appellate court's second inquiry is a substantive review of the amount of the award. Appellate review, as the Supreme Court pointed out in Haslip, is necessary 62 to ensure that the award does not exceed an amount that will accomplish society's goals of punishment and deterrence. ... This appellate review makes certain that the punitive damages are reasonable in their amount and rational in light of their purpose to punish what has occurred and to deter its repetition. Id. at 17, 111 S.Ct. at 1045 (citations omitted). 63 The Ninth Circuit's standard states that [u]nless the amount of damages is grossly excessive, unsupported by the evidence, or based solely on speculation, the reviewing court must uphold the jury's determination of the amount. Davis, 927 F.2d at 1485 (citing Los Angeles Memorial Coliseum Comm'n v. Nat'l Football League, 791 F.2d 1356, 1360 (9th Cir.1986)). In Haslip, the Court suggested that a manifestly and grossly excessive standard, such as the one used by this circuit, does not comport with Due Process. Haslip, 499 U.S. at 17 n. 10, 111 S.Ct. at 1045 n. 10. 64 Following this lead, the Fourth Circuit found in Mattison v. Dallas Carrier Corp., 947 F.2d 95, 105 (4th Cir.1991), that Virginia's excessiveness standard for reviewing punitive damages was lacking. The substantive content of the Ninth Circuit's grossly excessive standard is now refashioned to give it a definite shape and texture and to avoid any conflict with the Due Process Clause. 16 A circuit court should determine whether a punitive damage award exceeds the amount necessary to accomplish the goals of punishment and deterrence in deciding whether it is grossly excessive. 65 c. The Seventh Amendment's Guarantee to Trial by Jury 66 The Seventh Amendment's guarantee to a trial by jury may require a court reviewing an award of punitive damages to give a plaintiff the option of a new trial on punitive damages if it finds an award grossly excessive and otherwise would order a remittitur. The Supreme Court, it appears, has never given its blessing to an appellate court reducing an award without affording the plaintiff an opportunity to retry that issue. See Browning-Ferris Industries, 492 U.S. at 279 n. 25, 109 S.Ct. at 2922 n. 25. 67 Several circuits, however, have reduced the amount of punitive damages awarded without giving the plaintiff a choice of a new trial on that issue. See, e.g., Rowlett v. Anheuser-Busch, Inc., 832 F.2d 194, 207 (1st Cir.1987); Shimman v. Frank, 625 F.2d 80, 102-04 (6th Cir.1980); Bell v. City of Milwaukee, 746 F.2d 1205, 1279 (7th Cir.1984); Douglas v. Metro Rental Services, Inc., 827 F.2d 252, 257 (7th Cir.1987); Guzman v. Western State Bank of Devils Lake, 540 F.2d 948, 954 (8th Cir.1976). However, none of these cases considered the Seventh Amendment, and we do not think it wise to follow this course of action. 68 Two cases already have held that a remittitur without the option of a new trial is a violation of the Seventh Amendment. In McKinnon v. City of Berwyn, 750 F.2d 1383 (7th Cir.1984), the court reversed the district court's remittitur of punitive damages, without option of a new trial, against police officers in a section 1983 case. The court said, the Seventh Amendment reserves the determination of damages, in jury trials within its scope, to the jury.... The proper corrective is to give McKinnon the choice he was improperly denied, between accepting the remittitur and having a new trial on damages. Id. 750 F.2d at 1392. The Fourth Circuit also held that the Seventh Amendment guarantees a right to a jury determination of the amount of punitive damages. Defender Indust., Inc. v. Northwestern Mut. Life Ins. Co., 938 F.2d 502, 507 (4th Cir.1991) (en banc). 69 To avoid any conflict with the Seventh Amendment, the preferable course is to afford the party awarded the grossly excessive punitive damages, whether that is determined by a trial or appellate court, the option of either accepting the remittitur of the punitive damage award or a new trial on that issue. See, e.g., Ramsey v. American Air Filter Co., 772 F.2d 1303, 1314 (7th Cir.1985); Hollins v. Powell, 773 F.2d 191, 198 (8th Cir.1985), cert. denied, 475 U.S. 1119, 106 S.Ct. 1635, 90 L.Ed.2d 181 (1986); Mason v. Texaco, 948 F.2d 1546, 1561 (10th Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 1941, 118 L.Ed.2d 547 (1992). 2. Punitive Damages Based on State Claims 70 The award of $150,000 on the state law claims presents a different problem. As was said above, the Due Process analysis is the same whether the punitive damages are based on federal or state law. The state punitive damages are treated separately here only because of the additional issue of evidence of financial worth. In reviewing a punitive damage award based on state law, the district court has an additional duty; it must make sure that the award is within the confines set by state law. Browning-Ferris Industries, 492 U.S. at 279, 109 S.Ct. at 2922. Recently, in Adams v. Murakami, 54 Cal.3d 105, 284 Cal.Rptr. 318, 813 P.2d 1348 (1991), the California Supreme Court held that an award of punitive damages cannot be properly reviewed unless the record contains evidence of a defendant's financial worth. The Murakami court held that such evidence must be presented to the jury, and that the burden of presentation lies with the plaintiff. Thus, defendants' contention that Murakami requires the trier of fact to consider evidence of defendants' financial worth in considering the appropriateness of punitive awards under California state law claims is accurate. 71 Therefore, we remand the state law portion of the damages award to the district court for the dual purposes of reconsidering that award in light of Murakami and Haslip. On remand, the district court shall consider evidence as to Officer Searle's financial worth, determine whether or not a remittitur is appropriate, and record the reasons for its conclusions.