Opinion ID: 1420265
Heading Depth: 4
Heading Rank: 2

Heading: Excessiveness of the punitive damages award

Text: Norcon argues that the $3,770,260.63 award of punitive damages is excessive. Norcon contends that the ratio of punitive to compensatory damages, 361.12 to 1, is so disproportionate as to require reduction. Further, Norcon argues that its wealth and earnings do not warrant the punitive damages award. Norcon argues that the punitive award essentially deprived it of all of its earnings for the past three years and more than half of the stockholder's equity as of 1993. [20] Kotowski responds by arguing that at most the ratio of compensatory to punitive damages is one among many factors which a reviewing court should consider in determining whether an award of punitive damages is excessive. Kotowski also contends Norcon's argument that its wealth and earnings do not justify the award lacks merit since it ignores the profits Norcon made on the oil spill reflected in 1990. Further, she argues that there are no set rules of proportionality between punitive damages and earnings or equity. This court reviews jury awards of punitive damages for excessiveness. Alaskan Village, Inc. v. Smalley, 720 P.2d 945, 949 (Alaska 1986). A punitive damage award is excessive if it is manifestly unreasonable. Id. Where we find an award to be excessive we will vacate the award and may order a remittitur. See Sturm, Ruger & Co. v. Day, 615 P.2d 621, 624 (Alaska 1980). The amount on remittitur should be the maximum amount which the jury could have awarded which would not be excessive. See Exxon Corp. v. Alvey, 690 P.2d 733, 742 (Alaska 1984) ([M]aximum possible recovery approach is more appropriate in a remittitur context, because it comes closer to approximating the decision made by the jury.). Factors relevant in determining whether a punitive award is excessive include the compensatory damage amount, magnitude of the offense, importance of the policy violated, and the defendant's wealth. Alaskan Village, 720 P.2d at 949. [21] Kotowski correctly suggests that there is no definitive ratio between compensatory and punitive damages which establishes excessiveness. In Cameron v. Beard, 864 P.2d 538, 544 (Alaska 1993), a compensatory damage award for IIED of $1,000 was assessed against individual defendants. A punitive damage award of $70,000 was assessed against one of the defendants. See id. This was attacked as excessive and the suggestion was made that the punitive award should be reduced to a three to one ratio. See id. at 550. We rejected the argument, stating that we have refused to prescribe a definite ratio between compensatory and punitive damages. Though comparing punitive and actual damage awards is one way to determine if punitive damages are excessive, other factors, such as the magnitude and flagrancy of the offense, the importance of the policy violated, and the defendant's wealth, are equally important to the determination. Id. at 551 (citations omitted). In Sturm, Ruger, 615 P.2d at 624 n. 3, we noted that the relationship between punitive and compensatory damages was a factor but there may be cases in which it is only of slight value or is totally inapplicable. In this case we consider the high ratio between punitive and compensatory damages as one indicator that the award was excessive. But it is not, by itself, dispositive. With respect to the magnitude factor, the following observations seem pertinent. The sexual harassment to which Kotowski was subjected occurred on only two days, June 29 and June 30, 1989. It was thus of short duration. [22] Although it was serious, frightening, and resulted in great emotional distress, it was not of disastrous proportions. However, given the evidence that the harassment of Kotowski was only one in a series of sexual harassment incidents, the seriousness of the conduct for which Norcon is responsible is somewhat increased. Concerning the importance of the policy violated, there is a strong public policy against sexual harassment in the work place. With respect to the wealth of the defendant, Norcon apparently had a pre-tax net profit of more than $19,000,000 in fiscal year 1990. This was doubtless related to the oil spill cleanup as profits were much less in the following years. The $3,700,000 award in this case would not necessarily bankrupt Norcon, but it is more than is necessary to drive home the message to Norcon that it should not tolerate sexual harassment and that it should take affirmative steps to guard against such conduct. Other possible factors are suggested by the Model Punitive Damages Act promulgated by the Uniform Law Commissioners. The model act lists nine relevant factors: (1) the nature of defendant's wrongful conduct and its effect on the claimant and others; (2) the amount of compensatory damages; (3) any fines, penalties, damages, or restitution paid or to be paid by the defendant arising from the wrongful conduct; (4) the defendant's present and future financial condition and the effect of an award on each condition; (5) any profit or gain, obtained by the defendant through the wrongful conduct, in excess of that likely to be divested by this and any other actions against the defendant for compensatory damages or restitution; (6) any adverse effect of the award on innocent persons; (7) any remedial measures taken or not taken by the defendant since the wrongful conduct; (8) compliance or noncompliance with any applicable standard promulgated by a governmental or other generally recognized agency or organization whose function is to establish standards; and (9) any other aggravating or mitigating factors relevant to the amount of the award Model Punitive Damages Act (U.L.A.) § 7(a). Factors (1), (2) and (4) are similar to those we have previously identified as relevant. We discussed them above. Factor (5), any profit or gain through the wrongful conduct, is apparently not an element in this case as there is no evidence concerning it. Factor (3) requires consideration of fines, penalties, damages, or restitution. It does not appear that Norcon has been made to pay any fines, penalties, or restitution. Thus, except by this litigation, Norcon has not been punished. No evidence was presented concerning Factor (6) (adverse effect of award on innocent persons), Factor (7) (remedial measures taken or not taken), or Factor (8) (compliance or noncompliance with any applicable standard). Factor (9) requires consideration of any potentially relevant aggravating or mitigating factors. One aggravating factor here is that the jury could have found two serious wrongs in this case, sexual harassment and punishment of the person who reported wrongful conduct. In light of the foregoing considerations, we find the award of punitive damages excessive, but that a substantial award is justified. We recognize that the process by which a maximum justifiable award is decided cannot be explained in comprehensive detail. Such decisions thus may seem in part arbitrary. It is, nonetheless, our ineluctable duty to reach a decision. Our decision is that the maximum justifiable punitive damage award on this record is $500,000. We thus order a remittitur to this amount. Should Kotowski choose not to accept this remittitur, she is entitled to a new trial on punitive damages issues.