Opinion ID: 624286
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Heading Rank: 3

Heading: Jury to Determine Amount of Punitive Damages

Text: UPS argues the district court erred in permitting the jury to determine the appropriate amount of punitive damages because Kansas law requires the court to make this determination. Under Kan. Stat. Ann. § 60-3702(a), if a civil jury determines that punitive damages shall be allowed, the state court must conduct a separate proceeding ... to determine the amount of ... damages to be awarded. The district court held that § 60-3702(a) was procedural in nature, applied federal law regarding punitive damages, and submitted this issue to the jury. See Pac. Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 16, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991) (holding that under federal common law, juries determined issues relating to punitive damages). Because this issue involves only questions of law, we review the district court's decision de novo. Wolfgang v. Mid-Am. Motorsports, Inc., 111 F.3d 1515, 1524 (10th Cir.1997). When a situation is covered by one of the Federal Rules ... the court has been instructed to apply the Federal Rule, and can refuse to do so only if the Advisory Committee, this Court, and Congress erred in their prima facie judgment that the Rule in question transgresses neither the terms of the Enabling Act nor constitutional restrictions. Hanna v. Plumer, 380 U.S. 460, 471, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965). Absent any conflicting constitutional requirements, federal statutes or Federal Rules of Civil Procedure, a federal district court sitting in diversity applies federal procedural law and state substantive law. Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427, 428 n. 7, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996). Applying the Erie doctrine, the district court held that § 60-3702(a) was not substantive, but rather procedural in nature. The court reasoned that applying federal procedural law and submitting the punitive damages issue to the jury would not cause future plaintiffs to bring their claims in federal court instead of state court. The district court further held that while many believe that juries are far more likely than judges to go overboard and render `big' punitive damage awards, it had not seen any persuasive evidence in support of this theory. App. Vol. 2, at 615. After determining that § 60-3702(a) was procedural, the district court followed Erie and applied federal procedural law by instructing the jury to determine the appropriate amount of punitive damages. Rule 38 of the Federal Rules of Civil Procedure addresses the right to a trial by jury, and that Rule controls here. Rule 38 states: The right of trial by jury as declared by the Seventh Amendment to the Constitution ... is preserved to the parties inviolate. Fed.R.Civ.P. 38(a). The Seventh Amendment provides that [i]n Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved. U.S. Const. amend. VII. The Seventh Amendment governs proceedings in federal court, but not in state court. Gasperini, 518 U.S. at 418, 116 S.Ct. 2211. In Shady Grove, the Supreme Court set out a framework for determining when to apply a federal rule that appears to conflict with state law. The framework for our decision is familiar. We must first determine whether [the rule] answers the question in dispute. If it does, it governs[state] law notwithstandingunless it exceeds statutory authorization or Congress's rulemaking power. We do not wade into Erie's [ v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938)] murky waters unless the federal rule is inapplicable or invalid. Shady Grove Orthopedic Assoc., P.A. v. Allstate, ___ U.S. ___, 130 S.Ct. 1431, 1437, 176 L.Ed.2d 311 (2010). If a federal rule applies, we need not embark upon an analysis of the state's purpose in passing the conflicting state law. Id. at 1441-42. Whether Rule 38 meets the first requirement of Shady Grove, that the Rule answers the question in dispute, depends on the scope of the Seventh Amendment. Shady Grove, 130 S.Ct. at 1437. The Seventh Amendment is silent on the question whether a jury must determine the remedy in a trial in which it must determine liability. Tull v. United States, 481 U.S. 412, 425-26, 107 S.Ct. 1831, 95 L.Ed.2d 365 (1987). Therefore, in determining whether the Amendment requires a jury to decide the amount of punitive damages (or for that matter, if a jury must decide any issue), courts must determine whether the jury must shoulder this responsibility as necessary to preserve the substance of the common-law right of trial by jury. Id. at 426, 107 S.Ct. 1831 (quoting Colgrove v. Battin, 413 U.S. 149, 157, 93 S.Ct. 2448, 37 L.Ed.2d 522 (1973) (internal quotation marks omitted)). The Supreme Court has indicated that litigants have a Seventh Amendment right to have federal juries determine whether punitive damages should be awarded. In Curtis v. Loether, for example, the Court held it was improper under the Seventh Amendment for a district court to award punitive damages to a plaintiff asserting a claim under the Civil Rights Act. 415 U.S. 189, 191, 94 S.Ct. 1005, 39 L.Ed.2d 260 (1974). The Court held that a jury should have made this determination because lawsuits seeking actual and punitive damages... are traditional form[s] of relief offered in the courts of law. Id. at 196, 94 S.Ct. 1005. We note that the Court did not specifically hold that a jury must determine the amount of a punitive damage award; instead, it held that plaintiffs have a Seventh Amendment right to a jury trial when they seek punitive damages. See id. Nonetheless, given the Court's clear holding that there exists a common law right to a jury determination regarding punitive damages, Curtis suggests that juries must also determine the amount of punitive damage awards. See Capital Solutions, LLC v. Konica Minolta Bus. Solutions U.S.A., Inc., 695 F.Supp.2d 1149, 1153 (D.Kan.2010) (holding that  Curtis suggests that the amount of punitive damages is a question for the jury under the Seventh Amendment). The Supreme Court's decision in Pacific Mutual Life Insurance Co. v. Haslip compels a similar conclusion. In that case, the Supreme Court upheld a large punitive damage verdict against an insurance company for acting in bad faith. 499 U.S. 1, 15-16, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991). In doing so, the Court noted that [u]nder the traditional common law approach, the amount of the punitive damage award is initially determined by a jury instructed to consider the gravity of the wrong and the need to deter similar wrongful conduct. Id. at 15, 111 S.Ct. 1032. Emphasizing the historical underpinnings of this right, the Court further held that decisions regarding the amount of punitive damages ha[ve] been always left to the discretion of the jury and that it more than once has approved the common-law method for assessing punitive damages. Id. at 16, 111 S.Ct. 1032 (citation omitted). In addition to this Supreme Court precedent, this court has previously held that the Seventh Amendment protects a federal plaintiff's right to have a jury determine the amount of a punitive damage award. In O'Gilvie v. International Playtex, Inc., the district court reduced a punitive damage verdict, awarded by a jury, from $10 million to under $1.5 million. 821 F.2d 1438, 1440 (10th Cir.1987). We held that the district court erred in doing so because it did not obtain the plaintiff's consent prior to the remittitur. Id. at 1447. We observed that in an ordinary remittitur case, the plaintiff must be offered a choice between a new trial and accepting a remittitur to avoid a serious problem under the Seventh Amendment, which reserves to the jury the determination of damages. Id. (citations omitted); see also Defender Indus., Inc. v. Nw. Mut. Life Ins. Co., 938 F.2d 502, 506-07 (4th Cir.1991). Despite Supreme Court precedent and our ruling in O'Gilvie, UPS argues that the Seventh Amendment permits courts to determine punitive damage awards. UPS first directs our attention to Cooper Industries, Inc. v. Leatherman Tool Group, Inc., in which the Supreme Court held that appellate courts reviewing district court rulings regarding punitive damage awards must do so under a de novo standard. 532 U.S. 424, 436, 121 S.Ct. 1678, 149 L.Ed.2d 674 (2001). The Court noted that this holding does not implicate the Seventh Amendment because a jury's award of punitive damages is not really a fact that is tried by the jury. Id. at 437, 121 S.Ct. 1678. Moreover, the Court observed, appellate review of punitive damage awards focuses on due process concerns, not the right to a trial by a jury. Id. UPS argues that because the Cooper Court held that the amount of a punitive damage award is not a factual determination, this issue is beyond the scope of the Seventh Amendment and may be decided by a court. Not only do we disagree with this argument, but also we conclude that Cooper actually supports Jones's position regarding the unconstitutionality of § 60-3702(a) when applied in federal court. UPS's reliance on Cooper is misplaced because the Court's decision was based on the re-examination clause of the Seventh Amendment, not the trial by jury clause. 532 U.S. at 437 n. 11, 121 S.Ct. 1678. In Cooper, the Court noted that while it had previously held that `it is the peculiar function of the jury to' set the amount of punitive damages, id. (quoting Barry v. Edmunds, 116 U.S. 550, 565, 6 S.Ct. 501, 29 L.Ed. 729 (1886) (emphasis added)), this did not mean that the amount of punitive damages imposed by the jury is itself a fact within the meaning of the Seventh Amendment's Reexamination Clause. Id. UPS also claims the Court's decision in Tull v. United States supports its argument. In Tull, a real estate developer alleged that the district court violated his Seventh Amendment rights when it denied his request for a jury trial in a claim for civil penalties brought against him by the government under the Clean Water Act. 481 U.S. 412, 415-16, 107 S.Ct. 1831, 95 L.Ed.2d 365 (1987). The Court disagreed and held that the Seventh Amendment does not entitle defendants to jury trials in claims for civil penalties brought against them under the Clean Water Act. Id. at 426, 107 S.Ct. 1831. The Court reasoned that because an action to recover civil penalties usually seeks the amount fixed by Congress, it is not necessary to have a jury determine the assessment of a civil penalty in order to preserve the substance of the common-law right of trial by jury. Id. (quotation and citation omitted). The Court further observed that [s]ince Congress itself may fix the civil penalties, it may delegate that determination to trial judges. Id. at 427, 107 S.Ct. 1831. We disagree with UPS's assertion that Tull stands for the proposition that courts are permitted to determine the amount of punitive damage awards in cases like the one presently presented. In Feltner v. Columbia Pictures Television, Inc., the Court clarified any potential uncertainty created by Tull. In Feltner, the Court held that a claim for statutory damages under the Copyright Act carried with it a right to a jury trial because there [was] historical evidence that cases involving discretionary monetary relief were tried before juries. 523 U.S. 340, 353, 118 S.Ct. 1279, 140 L.Ed.2d 438 (1998). The Court further held that [t]he right to a jury trial includes the right to have a jury determine the amount of statutory damages, if any, awarded to the copyright owner. Id. (emphasis in original). In so holding, the Court rejected the argument that Tull required courts to determine statutory damage awards. The Court noted that in Tull, it was presented with no evidence that juries historically had determined the amount of civil penalties to be paid to the [g]overnment, while in Feltner there was clear and direct historical evidence that juries, both as a general matter and in copyright cases, set the amount of damages awarded to a successful plaintiff. Id. at 354-55, 118 S.Ct. 1279. The Supreme Court has repeatedly affirmed the historical nature of the Seventh Amendment right to a trial by jury in federal cases involving punitive damages. Its decisions, taken together, indicate that this right includes the right to a jury determination regarding the amount of punitive damages. See Capital Solutions, 695 F.Supp.2d at 1152 (holding that the Seventh Amendment does require that the jury also be allowed to determine the amount of any punitive damages awarded). Rule 38, by preserving the right to a trial by jury as declared by the Seventh Amendment, answers the question in dispute and requires that the jury determine the amount of the punitive damage award in federal court, despite conflicting state law. Thus, Rule 38 satisfies the first part of the Shady Grove test. Rule 38 also satisfies the second Shady Grove requirement, that it not, exceed[] statutory authorization or Congress's rulemaking power. Shady Grove, 130 S.Ct. at 1437. The Rule, which in relevant part merely incorporates an amendment to the Constitution, does not exceed Congress's rulemaking power. In testing whether Rule 38 exceeds statutory authorization, we measure it against the Rules Enabling Act. In the Rules Enabling Act, Congress authorized the Supreme Court to promulgate rules of procedure subject to its review, with the limitation that those rules shall not abridge, enlarge or modify any substantive right. 28 U.S.C. § 2072(a). The test must be whether a rule really regulates procedure,the judicial process for enforcing rights and duties recognized by substantive law and for justly administering remedy and redress for disregard or infraction of them. Sibbach v. Wilson & Co., 312 U.S. 1, 14, 61 S.Ct. 422, 85 L.Ed. 479 (1941); see also Shady Grove, 130 S.Ct. at 1442. We do not look to the purpose of the conflicting state law, but rather we look to Rule 38 itself; the purpose of the state law, even if substantive, is immaterial to our analysis. Shady Grove, 130 S.Ct. at 1441-42. Rule 38 governs procedure. It determines only who will serve as fact finder in federal cases, not what law will apply to those facts. While application of Rule 38 may affect, to some degree, the outcome of this litigation, that possibility does not preclude the Rule's application. To hold that a Federal Rule of Civil Procedure must cease to function whenever it alters the mode of enforcing state-created rights would be to disembowel either the Constitution's grant of power over federal procedure or Congress' attempt to exercise that power in the Enabling Act. Hanna, 380 U.S. at 473-474, 85 S.Ct. 1136. Here, Rule 38 regulates only the procedure used to enforce a state-created right, and thus it is a procedural rule, authorized by the Rules Enabling Act. Thus, because the Rule answers the question in dispute, and because it does not exceed the Rule Enabling Act's authorization or Congress's rulemaking power, Rule 38 controls. Shady Grove, 130 S.Ct. at 1437. We therefore affirm the district court's denial of UPS's motion for a new trial on this ground. [7]