Opinion ID: 345769
Heading Depth: 2
Heading Rank: 2

Heading: Mental Suffering and Punitive Damages

Text: 21 Defendants argue that it was error for the trial court to submit to the jury the plaintiffs' claim for mental suffering and punitive damages. Both sides agree that only actual damages can be recovered under the Securities Acts. See 15 U.S.C. § 78bb(a). Actual damages mean some form of economic loss. See Blackie v. Barrack, 524 F.2d 891, 909 (9th Cir. 1975), cert. denied, 429 U.S. 816, 97 S.Ct. 57, 50 L.Ed.2d 75 (1976). 22 However, the record shows that the jury awarded mental-suffering and punitive damages under the common-law claims submitted to the jury. Section 28(a) of the Securities Exchange Act, 15 U.S.C. § 78bb(a), preserves common-law remedies for common-law counts which are pendent to Securities Act claims. Flaks v. Koegel, 504 F.2d 702 (2d Cir. 1974); Coffee v. Permian Corp., 474 F.2d 1040 (5th Cir.), cert. denied, 412 U.S. 920, 93 S.Ct. 2736, 37 L.Ed.2d 146 (1973); Young v. Taylor, 466 F.2d 1329 (10th Cir. 1972); Burkhart v. Allson Realty Trust, 363 F.Supp. 1286 (N.D.Ill.1973); In re Caesar's Palace Securities Litigation, 360 F.Supp. 366 (S.D.N.Y.1973); Hecht v. Harris, Upham & Co., 283 F.Supp. 417 (N.D.Cal.1968), modified on other grounds, 430 F.2d 1202 (9th Cir. 1970). Although these authorities deal specifically with punitive damages, we believe they stand for the broader proposition that remedies for pendent state law claims have not been circumscribed by the Federal Securities Acts. Thus, they apply with equal force to a claim for damages for mental suffering. We must therefore consider these damage claims under applicable state law. 23 (1) Mental Suffering 24 If Ryan was too stupefied by alcohol to know what he was doing, as the evidence tended to prove, then his mental suffering when the investment went sour was de minimis. We can find no fault with the trial court's conclusion that there was insufficient evidence to support the conservator's claim of mental suffering on the part of Thomas Ryan or of his guardianship estate. That part of the decision is affirmed. 25 Defendants argue that the award of damages based upon mental suffering on the part of the wife and son also must be set aside as a matter of state law. Under Oregon law, when mental suffering is a direct result of another tort, it can be an element of damage if genuine emotional suffering is produced by aggravated conduct on the part of the defendant. Fredeen v. Stride, 269 Or. 369, 525 P.2d 166 (1974); Douglas v. Humble Oil & Refining Co., 251 Or. 310, 445 P.2d 590 (1968); Hovis v. City of Burns, 243 Or. 607, 415 P.2d 29 (1966); Hinish v. Meier & Frank Co., 166 Or. 482, 113 P.2d 438 (1941). 26 The jury found the defendant grossly negligent. Gross negligence in Oregon is characterized by conscious indifference to or reckless disregard of the rights of others. Thus, the defendant's conduct was sufficiently aggravated to support an award of damages for mental suffering as to the wife. The jury verdict for $7,700.00 for her mental suffering must be reinstated. 27 The son, however, cannot recover for his mental distress, if any. He suffered no actual loss. An actor who negligently causes emotional distress to another is liable only if that distress is the direct and natural result of another compensable tort or if that distress leads to physical injury. See Douglas v. Humble Oil, supra ; Prosser, Law of Torts § 54, at 328 (4th ed. 1971); Restatement (Second) of Torts § 436a. See also Pakos v. Clark, 253 Or. 113, 453 P.2d 682 (1969). 28 There was no evidence that Tomas' emotional suffering led to any physical injury. As he suffered no actual loss, his alleged emotional distress is not, therefore, the direct result of another compensable tort. It was error to submit this item of damages to the jury. 29 (2) Punitive Damages 30 The submission of punitive damages to the jury was permissible under state law. While not every act of gross negligence in Oregon will open the defendant's purse to punitive damages, the defendants' conduct in this case was sufficiently aggravated to permit the award. 31 The rationale for punitive damages is one of deterrence. Lewis v. Devils Lake Rock Crushing Co., 274 Or. 293, 545 P.2d 1374 (1976). Punitive damages are recoverable when the violation of societal interests is sufficiently great and the conduct involved is of a kind that punitive damages would tend to prevent. McGill v. Huling Buick, 259 Or. 413, 487 P.2d 656 (1971); see also Stroud v. Denny's Restaurant, 271 Or. 430, 532 P.2d 790 (1975); Starkweather v. Shaffer, 262 Or. 198, 497 P.2d 358 (1972); Noe v. Kaiser Foundation Hospitals, 248 Or. 420, 435 P.2d 306 (1967). In the case at bar, the broker was found to have taken unconscionable advantage of a mental cripple for gain. Punitive damages are not unreasonable to deter such conduct. 32 The award of punitive damages to Ryan in the amount of $21,401.74 is affirmed and the award of punitive damages to his wife in the amount of $11,679.39 is reinstated. Because the son suffered no actual loss, he cannot recover punitive damages. Lewis v. Devils Lake Rock Crushing Co., supra; Belleville v. Davis, 262 Or. 387, 498 P.2d 744 (1972). The judgment n. o. v. against the son on his claim for punitive damages is affirmed.