Opinion ID: 2441435
Heading Depth: 3
Heading Rank: 1

Heading: Admissibility of Evidence in Mitigation of Punitive Damages

Text: Punitive damages are not designed or intended to compensate or enrich individual victims. See Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 16 (Tex.1994); see also BMW of North America, Inc. v. Gore, 517 U.S. 559, 568, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996). Instead, the purpose of punitive damages is to punish a party for its outrageous, malicious, or otherwise morally culpable conduct and to deter it and others from committing the same or similar acts in the future. See Moriel, 879 S.W.2d at 16-17; Lunsford v. Morris, 746 S.W.2d 471, 471-72 (Tex.1988). We have approved the Kraus factors as instructions for juries about punitive damages. See George Grubbs Enters., Inc. v. Bien, 900 S.W.2d 337, 338 (Tex.1995). Moreover, although we have never considered what type of evidence is admissible to mitigate punitive damages, we have recognized that a defendant's `ability to pay' bears directly on the question of adequate punishment and deterrence. See Lunsford, 746 S.W.2d at 472; see also Wal-Mart Stores, Inc. v. Alexander, 868 S.W.2d 322, 329 (Tex.1993)(Gonzalez, J., concurring)(contending that jury should hear net worth evidence plus any other evidence relevant to the amount of punitive damages). Other courts have held that factors about a party's financial situation beyond net worth are relevant to the punitive damages amount necessary to satisfy the purposes of punitive damages. See, e.g., Viking Ins. Co. v. Jester, 310 Ark. 317, 836 S.W.2d 371, 379 (1992)(holding that jury may consider defendant's financial condition when assessing punitive damages); Stevens v. Owens-Corning Fiberglas Corp., 49 Cal.App.4th 1645, 57 Cal.Rptr.2d 525, 536-37 (1996)(holding that defendant may inform the jury about other punitive damages awards for the same conduct, but the impact of those awards can only be measured if the awards have actually been paid); W.R. Grace & Co.Conn. v. Waters, 638 So.2d 502, 506 (Fla.1994)(allowing defendant to introduce evidence about previous punitive damage awards in second stage of bifurcated trial); Spaur v. Owens-Corning Fiberglas Corp., 510 N.W.2d 854, 868 (Iowa 1994)(allowing for consideration of past awards actually paid by defendant for the same course of conduct); Tetuan v. A.H. Robins Co., 241 Kan. 441, 738 P.2d 1210, 1241 (1987)(allowing evidence of other punitive damage awards); Bennett v. Owens-Corning Fiberglas Corp., 896 S.W.2d 464, 468 (Mo.1995)(holding that the defendant's specific financial condition is admissible in mitigation of punitive damages); Fischer v. Johns-Manville Corp., 103 N.J. 643, 512 A.2d 466, 480 (1986)(allowing defendants to offer evidence of previously paid punitive damage awards for jury to consider whether the defendant has been sufficiently punished); Wangen v. Ford Motor Co., 97 Wis.2d 260, 294 N.W.2d 437, 459-60 (1980)(holding that the jury may consider punitive damages, fines, and forfeitures already imposed on the defendant); Sears v. Summit, Inc., 616 P.2d 765, 772 (Wyo. 1980)(Not only may the plaintiff introduce evidence as to the wealth of the defendant, but the defendant may also introduce evidence of impecunity in order to mitigate the award of punitive damages.); see also Seltzer, Punitive Damages in Mass Tort Litigation: Addressing the Problems of Fairness, Efficiency and Control, 52 Fordham L.Rev. 37, 59 (1983)(By considering other punishment for the same conduct, along with evidence of the defendant's current financial status, a jury should be able to make a more informed judgment of the amount necessary for punishment and deterrence.). We are persuaded that Texas law should allow defendants to introduce some evidence to mitigate punitive damages. Accordingly, we hold that evidence about the profitability of a defendant's misconduct and about any settlement amounts for punitive damages or prior punitive damages awards that the defendant has actually paid for the same course of conduct is admissible when the defendant offers it in mitigation of punitive damages. [3] Such evidence is relevant because it better informs the fact finder about the parties' situation and the amount of punitive damages necessary to fairly punish a party and to deter the conduct in question. See Lunsford, 746 S.W.2d at 472; Kraus, 616 S.W.2d at 910. Allowing such evidence also provides an important safeguard[] to minimize the risk of unjust punishment. Moriel, 879 S.W.2d at 17. Of course, this evidence is only relevant and admissible at trial about the amount of punitive damagesusually in the second part of a bifurcated trial. See TEX. CIV. PRAC. & REM.CODE § 41.009. Evidence that is not relevant, or is unduly prejudicial, and thus, not admissible to mitigate punitive damages, includes actual damage amounts paid by settlements or by judgments; the number of pending claims filed against a defendant for the same conduct; the number of anticipated claims for the same conduct; insurance coverage; unpaid punitive damages awards for the same course of conduct; and evidence of punitive damages that may be levied in the future. See TEX.R. EVID. 403; Dunn v. HOVIC, 1 F.3d 1371, 1389-90 (3d Cir.)(en banc), modified in part, 13 F.3d 58 (3d Cir.1993)(OCF's failure to designate particular amounts of the settlements as representing punitive damages makes inclusion of these amounts problematic ... [thus] OCF has failed to prove that the aggregate award of punitive damages against it has been sufficient to meet the twin goals of punishment and deterrence underlying such awards.); Simpson v. Pittsburgh Corning Corp., 901 F.2d 277, 281-82 (2d Cir.1990)(rejecting argument that actual damage awards and settlements can be aggregated to establish that successive punitive damages awards are unconstitutional); Roginsky v. Richardson-Merrell, Inc., 378 F.2d 832, 839 (2d Cir.1967)([I]t is hard to see what even the most intelligent jury would do with this [evidence about the potential number of similar actions], being inherently unable to know what punitive damages, if any, other juries in other states may award other plaintiffs in actions yet untried.); Baker v. Armstrong, 106 N.M. 395, 744 P.2d 170, 173 (1987)([P]unitive damages liability coverage is not an asset which can be used to measure true punishment and ... therefore, it should not be considered by the jury in assessing a defendant's financial standing.); see also Rojas v. Vuocolo, 142 Tex. 152, 177 S.W.2d 962, 964 (1944)(holding that proof of insurance for the defendant in connection with issues of liability or damages should not be introduced to the jury). OCF cites comment e of the Restatement (Second) of torts § 908 (1979) to support its argument that the fact finder should be allowed to consider unpaid punitive damage awards including those awarded in the past and those that might be awarded in the many pending claims against OCF. See Restatement (Second) of torts § 908 cmt. e (1979). Section 908 provides: (1) Punitive damages are damages, other than compensatory or nominal damages, awarded against a person to punish him for his outrageous conduct and to deter him and others like him from similar conduct in the future. (2) Punitive damages may be awarded for conduct that is outrageous, because of the defendant's evil motive or his reckless indifference to the rights of others. In assessing punitive damages, the trier of fact can properly consider the character of the defendant's act, the nature and extent of the harm to the plaintiff that the defendant caused or intended to cause and the wealth of the defendant. RESTATEMENT (SECOND) OF TORTS § 908 (1979). Comment e discusses what evidence the fact finder should properly consider to determine whether punitive damages are appropriate, and if so, the proper award. Comment e lists factors such as the defendant's conduct and motives, the plaintiff's harm, and the defendant's wealth. See Restatement (Second) of torts § 908 cmt. e (1979). OCF relies on a part of comment e that suggests that it may also be appropriate to take into consideration both the punitive damages that have been awarded in prior suits and those that may be granted in the future.... RESTATEMENT (SECOND) OF TORTS § 908 cmt. e (1979). While we agree with section 908, we do not subscribe to comment e's suggestion that in considering the amount of punitive damages necessary to satisfy the goals of punishment and deterrence, the fact finder should be allowed to consider unpaid punitive damages. See RESTATEMENT (SECOND) OF TORTS § 908 cmt. e (1979). As comment e also explains, the greater weight should be placed on prior awards. RESTATEMENT (SECOND) OF TORTS § 908 cmt. e (1979). Moreover, as we have concluded, only prior paid awards and settlements for punitive damages should be considered by the fact finder. To hold otherwise risks unfair prejudice and jury confusion. See TEX.R. EVID. 403; Roginsky, 378 F.2d at 839. As commentators have recognized, many punitive damage awards are reduced after trial, reversed on appeal, or settled at a discount. See WILLIAM M. LANDES & RICHARD A. POSNER, THE ECONOMIC STRUCTURE OF TORT LAW 302-307 (1987) (observing that in product liability cases, punitive damage awards are more likely to be reversed than are other outcomes and otherwise noting that many awards are reduced by the trial judge or on appeal); Owen, Punitive Damages in Products Liability Litigation, 74 Mich. L.Rev. 1258, 1324 (1976) (Owen I) (noting that at the conclusion of the MER/29 mass tort litigation, the only mass disaster products liability litigation that has run its course, only three verdicts included punitive damages and that of those, one was reversed and the other two were substantially reduced on appeal). Studies also confirm that punitive damage awards are likely to be greatly reduced by posttrial actions. MICHAEL G. SHANLEY & MARK A. PETERSON, THE INSTITUTE FOR CIVIL JUSTICE, POSTTRIAL ADJUSTMENTS TO JURY AWARDS 36 (1987); see also LANDES & POSNER, supra, at 304; Galanter, Real World Torts: An Antidote To Anecdote, 55 Md. L.Rev. 1093, 1115-1130 (1996) (citing several studies about reduction and payment of punitive damages); Milo Geyelin, Product Suits Yield Few Punitive Awards, WALL ST. J., Jan. 6, 1992, at B1 (discussing study that revealed that punitive damages are rarely paid and otherwise frequently reduced after trial). We also agree with courts that have recognized that the impact of other punitive damages awards can only be measured if they have actually been paid. See, e.g., Stevens, 57 Cal.Rptr.2d at 536-37; Spaur, 510 N.W.2d at 868; Fischer, 512 A.2d at 480; see also Dunn, 1 F.3d at 1389-90 (requiring proof of punitive damages actually paid in the past and rejecting consideration of non-final awards of punitive damages and of settlements where OCF did not segregate settlement amounts paid as punitive damages); Johnson v. Celotex Corp., 899 F.2d 1281, 1287-88 (2d Cir.1990) (rejecting defendant's request that appellate court take judicial notice of other punitive damage awards because defendant did not provide any documentation about exactly how much money they have actually paid in punitive damages). At oral argument, Malone asserted that, if evidence to mitigate punitive damages is relevant, the trial court should consider it as a legal issue rather than submit it to the fact finder. However, we believe that the fact finder will better perform its role as the community's conscience in determining the proper punitive damages award by considering such evidence. See TEX. CIV. PRAC. & REM.CODE § 41.010(b) (The determination of whether to award exemplary damages and the amount of exemplary damages to be awarded is within the discretion of the trier of fact.) and § 41.011 (providing that in determining exemplary damages, the fact finder shall consider evidence about the parties' situation); Moriel, 879 S.W.2d at 30 (leaving question of punitive damages to the jury); see also Jackson v. Johns-Manville Sales Corp., 781 F.2d 394, 408-09 (5th Cir. 1986) (holding that punitive damage award in asbestos case should be left to the jury to decide in the first instance); Hodges v. S.C. Toof & Co., 833 S.W.2d 896, 901-02 (Tenn. 1992) (establishing criteria for the fact finder to consider during second phase of Moriel style bifurcated trial); Seltzer, supra, at 41, 60-61 (recognizing jury's role as the conscience of the community in assessing an amount of punitive damages that reflects the degree of the defendant's culpability). Consequently, we hold that the fact finder, in the first instance, should consider properly admitted evidence in mitigation of punitive damages in deciding the amount of punitive damages, if any, to award. Whether a punitive damage award violates state common law or is grossly excessive in violation of a party's due process rights remains for the courts to decide when properly preserved. See BMW, 517 U.S. at 568, 116 S.Ct. 1589 (setting constitutional limits on the size of punitive damages awards); see also Owen, A Punitive Damages Overview: Functions, Problems, and Reform, 39 VILL. L.REV. 363, 384-85 (1994)(Owen II)(recognizing that adequate jury instructions and appellate review of punitive damages verdicts helps assure that the standards ... are applied in a manner that is as fair and accurate as possible); Seltzer, supra, at 41(noting that using a bifurcated trial procedure and appellate review helps assure that juries have a continuing voice in the amount of punishment while providing the safeguards necessary to prevent unfairness to defendants). Indeed, Texas law requires careful appellate scrutiny of punitive damage awards. See TEX. CIV. PRAC. & REM.CODE § 41.013 (regarding judicial review of punitive damage awards); Ellis County State Bank v. Keever, 915 S.W.2d 478, 479 (Tex.1995)(same). Thus, while the fact finder decides whether to award punitive damages, and if so, how much, in the first instance, courts maintain an important role in reviewing such awards.