Opinion ID: 3090861
Heading Depth: 1
Heading Rank: 3

Heading: The Punitive Damages Award

Text: 1. Malice “When reviewing a district court’s refusal to set aside an award of punitive damages, we will reverse only upon determining that ‘no legally sufficient evidentiary basis’ exists for making such an award, the same standard applied by the district court in the first instance.” Watson v. Johnson Mobile Homes, 284 F.3d 568, 571 (5th Cir. 2002) (quoting FED. R. CIV. P. 50(a)(1)). A legally sufficient evidentiary basis exists if “the plaintiff proves by clear and convincing evidence that harm resulted from ‘malice.’” Bennett v. Reynolds, 315 S.W.3d 867, 871 (Tex. 2010); see TEX. CIV. PRAC. & REM. CODE ANN. § 41.003(a)(2). “Malice” exists if there is “‘a specific intent by the defendant to cause substantial injury [or harm] to the claimant.’” Bennett, 315 S.W.3d at 872 (quoting TEX. CIV. PRAC. 20 Case: 11-20816 Document: 00512502053 Page: 21 Date Filed: 01/15/2014 No. 11-20816 & REM. CODE ANN. § 41.001(7)). “[S]pecific intent,” in turn, exists if “the actor desires to cause the consequences of his act, or he believes the consequences are substantially certain to result from it.” Marrs & Smith P’ship v. D.K. Boyd Oil & Gas Co., 223 S.W.3d 1, 22 (Tex. App. 2005) (citing Reed Tool Co. v. Copelin, 689 S.W.2d 404, 406 (Tex. 1985)). “Malice may be proven by direct or circumstantial evidence.” Marrs & Smith, 223 S.W.3d at 22 (citing Mobil Oil Corp. v. Ellender, 968 S.W.2d 917, 921 (Tex.1998)). Here, Wellogix introduced sufficient evidence and testimony to support the jury’s finding that Accenture acted with malice. Wellogix showed: that Accenture stated that it could “easily replicate[ ]” and “[l]ift” Wellogix technology; that Accenture “harvest[ed]” Wellogix technology while engaged in confidential partnerships with Wellogix; that Accenture CEO Peggy Kostial wrote in a May 2006 email that “[o]ne can only hope” that SAP would no long “sponsor” Wellogix; that Accenture, in an apparent attempt to interfere with Wellogix’s business relationship with SAP, warned Wellogix of SAP’s “bleed the knowledge tactics”; that Accenture “acknowledge[d] its responsibility for patent infringement caused by products created by Accenture during those previous phases of the [P2P] project”; and that Accenture recognized that “[w]e may be at risk if Wellogix claims that we used knowledge of their product through involvement with eTrans to design and develop a solution for BP.” Against the backdrop discussed above—Accenture’s decision to develop the P2P pilot without Wellogix, and then apparently to “[u]se Wellogix content” for the “creation of . . . complex services” templates for the pilot—this evidence and testimony was sufficient to support the jury’s malice finding. See Marrs & Smith, 223 S.W. 3d at 22-23 (finding that the defendant’s attempts to interfere with the plaintiff’s business relationships supported the jury’s malice finding); Nova Consulting Grp., Inc. v. Eng’g Consulting Servs., Ltd., 290 F. App’x 727, 741 (5th Cir. 2008) 21 Case: 11-20816 Document: 00512502053 Page: 22 Date Filed: 01/15/2014 No. 11-20816 (finding that “vulgarity about [the plaintiff] in [the defendant’s] email . . . was evidence a reasonable jury could consider regarding malice”). Accenture argues that Wellogix did not show malice because Wellogix did not introduce clear and convincing evidence that Accenture intended to cause substantial injury to Wellogix. Accenture notes that Wellogix CEO Epley testified that he had “many positive relationships with Accenture personnel,” that “Accenture was helpful” to Wellogix, that Accenture tried to warn Wellogix to protect its intellectual property from SAP, and that Accenture CEO Kostial was a “good friend.” Accenture adds that Kostial wrote that she was “supportive” of Wellogix in a January 2006 email. However, Accenture does not cite, nor could we find, case law to support the proposition that a defendant’s supportive comments about a plaintiff, or, conversely, a plaintiff’s supportive comments about a defendant, preclude a jury’s finding of malice. Rather, the jury was able to weigh Epley’s comments, and Kostial’s “support[ ],” against the evidence, discussed above, that Accenture “harvested” Wellogix technology. See Reeves, 530 U.S. at 150. “As an appellate court reviewing a cold record long after the jury has evaluated the evidence,” Richardson v. State, 879 S.W.2d 874, 879 (Tex. Crim. App. 1993) (en banc), we decline to “reweigh th[is] evidence.” Carey v. Apfel, 230 F.3d 131, 135 (5th Cir. 2000) (internal quotation marks omitted). 2. Due Process “[W]e review [a] constitutional challenge to the size of the punitive damages award de novo.” Lincoln v. Case, 340 F.3d 283, 290 (5th Cir. 2003) (citing Cooper Indus., Inc. v. Leatherman Tool Grp., Inc., 532 U.S. 424, 436 (2001)). “The Due Process Clause of the Fourteenth Amendment prohibits the imposition of grossly excessive or arbitrary punishments on a tortfeasor.” State Farm, 538 U.S. at 416; see TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443, 446 (1993). The Supreme Court has established “three guideposts courts should consider in determining whether a punitive damages award is unconstitutionally 22 Case: 11-20816 Document: 00512502053 Page: 23 Date Filed: 01/15/2014 No. 11-20816 excessive: the degree of the defendant’s reprehensibility or culpability; the disparity between the harm or potential harm suffered by the victim and the punitive damages award; and the sanctions authorized or imposed in other cases for comparable misconduct.” Lincoln v. Case, 340 F.3d 283, 292 (5th Cir. 2003) (citing BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 574-75 (1996)). “[T]he most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant’s conduct.” State Farm, 538 U.S. at 419 (quoting Gore, 517 U.S. at 575). “Reprehensibility” factors include whether the harm caused was physical as opposed to economic; the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; the target of the conduct had financial vulnerability; the conduct involved repeated actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident State Farm, 538 U.S. at 419 (citing Gore, 517 U.S. at 576-77). “The existence of any one of these factors weighing in favor of a plaintiff may not be sufficient to sustain a punitive damages award; and the absence of all of them renders any award suspect.” State Farm, 538 U.S. at 419. “[T]he potential relevance of the ratio between compensatory and punitive damages is indisputable, being a central feature in our due process analysis.” Exxon Shipping Co. v. Baker, 554 U.S. 471, 507 (2008); see Gore, 517 U.S. at 58082 (“The principle that exemplary damages must bear a ‘reasonable relationship’ to compensatory damages has a long pedigree.”). Although “we have consistently rejected the notion that the constitutional line is marked by a simple mathematical formula, we have determined that few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.” Baker, 554 U.S. at 501 (internal citations and quotation marks omitted); see State Farm, 538 U.S. at 425 (“Single-digit multipliers are more likely to comport with due process[.]”); Pacific Mut. Life Ins. 23 Case: 11-20816 Document: 00512502053 Page: 24 Date Filed: 01/15/2014 No. 11-20816 Co. v. Haslip, 499 U.S. 1, 23-24 (1991) (upholding as constitutional a punitive damages award “more than 4 times the amount of compensatory damages”). Here, the Gore guideposts at issue in this case—reprehensibility and the ratio between punitive and compensatory damages—do not require us to find that the punitive damages award was grossly excessive. The “reprehensibility” guidepost is neutral. Some factors favor Accenture. For example, Wellogix does not dispute that “the harm caused was . . . economic,” and that Accenture’s conduct did not “evince[ ] an indifference to or a reckless disregard of the health or safety of others.” State Farm, 538 U.S. at 419. Other factors favors Wellogix. For example, the jury’s “malice” finding, discussed above, supports that “the harm was the result of intentional malice.” State Farm, 538 U.S. at 419. Other factors are ambiguous. For example, the evidence that Wellogix’s value derived from its complex services technology, and that this value plummeted when Accenture misappropriated the technology, suggests that Wellogix was “financial[ly] vulnerab[le].” State Farm, 538 U.S. at 419. However, the Supreme Court neither has defined “financial vulnerability,” nor has addressed whether a corporation can be financially vulnerable in this context. Cf. State Farm, 528 U.S. at 433-34 (finding that an elderly couple was “economically vulnerable”). As a result, we cannot say that the “financial vulnerability” factor favors either party. The “ratio” guidepost strongly favors Wellogix. The ratio of punitive to compensatory damages in this case is $18.2 million to $26.2 million, or about 0.7:1. Although we decline to “draw a mathematical bright line between the constitutionally acceptable and the constitutionally unacceptable.” Gore, 582, 517 U.S. at 583 (quoting TXO, 509 U.S. at 458), this 0.7:1 ratio is within the “[s]ingle-digit [ratio] likely to comport with the due process.” State Farm, 538 U.S. at 425; see Haslip, 499 U.S. at 23-24. 24 Case: 11-20816 Document: 00512502053 Page: 25 Date Filed: 01/15/2014 No. 11-20816 Accenture argues that “[o]ther courts have reduced punitive damages awards to far less than 1:1 ratios because the awards were not necessary to punish or deter.” However, the cases Accenture cites—Chi. Title Ins. Corp. v. Magnuson, 487 F.3d 985, 990, 998-1001 (6th Cir. 2007); Inter Med. Supplies, Ltd. v. EBI Med. Sys., Inc., 181 F.3d 446, 463-70 (3d Cir. 1990)—are distinguishable. The punitive damages award in Magnuson was three times the amount of the compensatory damages award, see 487 F.3d at 990; the punitive damages award in EBI was $2 million more than the compensatory damages award, see 181 F.3d at 450. By contrast, the punitive award in this case is $8 million less than the compensatory award. Accenture does not identify, nor could we find, a case in which an appellate court vacated or reduced a punitive award that was less than the compensatory award. Given that the reprehensibility guidepost was neutral, we decline to do so in this case. In sum, there was sufficient evidence and testimony to support the jury’s “malice” finding. In addition, the amount of the punitive damages award was not grossly excessive. As a result, the district court did not err by refusing to set aside the punitive award.