Opinion ID: 1244024
Heading Depth: 1
Heading Rank: 5

Heading: retroactivity of clear and convincing burden of proof

Text: Here, the jury was instructed that it could award punitive damages in its discretion if a preponderance of the evidence established conduct by Allstate that warranted such damages. Because we decline to consider whether the clear and convincing burden of proof is constitutionally required, the question we must address is whether the clear and convincing burden of proof for punitive damages announced in Linthicum applies retroactively to the dispute sub judice. In Arizona, a civil opinion is presumed to operate retroactively, as well as prospectively, unless otherwise stated. Brannigan v. Raybuck, 136 Ariz. 513, 520, 667 P.2d 213, 220 (1983) (citing Chevron Chemical Co. v. Superior Court, 131 Ariz. 431, 435, 641 P.2d 1275, 1279 (1982)). To overcome this presumption of retroactive application, Arizona utilizes the three factors set forth by the United States Supreme Court in Chevron Oil Co. v. Huson, 404 U.S. 97, 106-07, 92 S.Ct. 349, 355, 30 L.Ed.2d 296, 305-06, (1971): (1) Whether the decision establishes a new legal principle by either overruling clear and reliable precedent or deciding an issue whose resolution was not clearly foreshadowed; (2) Whether retroactive application will further or retard operation of the rule, considering its prior history, purpose and effect; and (3) Whether retroactive application will produce substantial inequitable results. See Brannigan v. Raybuck, 136 Ariz. at 520, 667 P.2d at 220; Chevron Chemical Co. v. Superior Court, 131 Ariz. at 436, 641 P.2d at 1280; Peagler v. Phoenix Newspapers, Inc., 114 Ariz. 309, 313, 560 P.2d 1216, 1220 (1977). These factors are sometimes referred to as the reliance, purpose, and inequity factors, respectively. The reliance factor strongly favors prospective-only application. Linthicum announced a new principle of law that overruled clear and reliable precedent. Proof by a preponderance of the evidence is the traditional measure of proof for most civil cases. See Schwalbach v. Jones, 27 Ariz. 260, 232 P. 558 (1925); E. Cleary, McCormick on Evidence § 339, at 956 (3d ed. 1984). Our research reveals no reported Arizona decisions foreshadowing this change; indeed, none even broaches the subject of a higher burden of proof for punitive damages. Regarding the purpose factor, retroactive application of the new clear and convincing burden of proof standard would not affect adversely the purpose behind the new rule. See Chevron Chemical Co. v. Superior Court, 131 Ariz. at 436, 641 P.2d at 1280 (restating Chevron Oil Co. v. Huson 's second factor). An important purpose of the more stringent burden of proof is to assure that punitive damages are properly awarded. The higher burden of proof underscores that punitive damages are an extraordinary remedy, to be assessed only in the most egregious of cases. Linthicum, 150 Ariz. at 332, 723 P.2d at 681. The effect of the Linthicum rule is to allow the trier of fact to impose punitive damages only where he is convinced to a higher degree of probability that the defendant possessed the requisite evil mind. Applying this new rule retroactively obviously would not impair the purpose of the rule; however, neither would retroactive application significantly further its purpose. Current practice provides several avenues of review to assure that an award of punitive damages is justified: the plaintiff must get past a motion for a directed verdict, the jury must exercise its discretion to award punitive damages, the verdict is subject to post-trial motions and review by the trial judge, and the judgment is subject to appeal. All of these procedures are designed to assure that the award is justified and not the result of the jury's passion or prejudice. The inequity factor also neither strongly favors nor disfavors prospective-only application of the change in law. This factor is closely related to the reliance factor and focuses on the injustice or hardship resulting from retroactive application of the new rule. See Peagler v. Phoenix Newspapers, 114 Ariz. at 313, 560 P.2d at 1220. Retroactive application of the new burden of proof would force further litigation in this and other lawsuits similarly situated, where the parties have prepared and presented their cases in reliance upon clear precedent and with adequate protection against an improper award of punitive damages. Requiring plaintiffs to retry cases under a higher burden of proof where the passage of time will have impaired considerably their ability to discover evidence and prove their case certainly works an injustice. On the other hand, plaintiffs are not entitled to punitive damages as a matter of right; and, theoretically, they are fully compensated for their actual injury by the compensatory damage award. Arguably then, retroactive application creates only a minor hardship and goes one step further in assuring properly awarded punitive damages. Whether retroactive application is inappropriate if a single factor favors prospective application, or whether all factors must favor prospective application, is unclear. See Brannigan v. Raybuck, 136 Ariz. at 521, 667 P.2d at 221 ([E]ven if three-part test of Chevron Oil Co. v. Huson is interpreted liberally, so that the proponent of prospective application is not required to satisfy all three elements, ....); Chevron Chemical Co. v. Superior Court, 131 Ariz. at 436-37, 641 P.2d at 1280-81 (decision given retroactive application where all three factors were satisfied); Peagler v. Phoenix Newspapers, Inc., 114 Ariz. 309, 560 P.2d 1216 (looked only to lack of substantial inequitable results to conclude retroactive application proper). See generally Note, Confusion in Federal Courts: Application of the Chevron Test in Retroactive-Prospective Decisions, 1985 U.Ill.L.Rev. 117. However, we need not establish a precise formula for applying these factors. Whether a judicial holding will be given only prospective application is a question of policy. See Lemieux v. Superior Court, 132 Ariz. 214, 644 P.2d 1300 (1982) (United States Constitution does not restrict retrospective-prospective decision of state courts). In this case, we are faced with a judicial decision announcing an unforeshadowed departure from clear and reliable precedent. We are concerned with the potential burden on the judicial system from further litigation where claims have been disposed of by prior litigation or settlement. See Harmann v. Hadley, 128 Wis.2d 371, 380, 382 N.W.2d 673, 677 (1986). Under these circumstances, we hold that the new burden of proof shall be given only prospective application. After September 15, 1986, the date Linthicum was mandated, punitive damages are recoverable only upon clear and convincing evidence of a defendant's evil mind. The new burden of proof shall not apply where a verdict or judgment based upon proof by a preponderance of the evidence has been entered and where there is no reason to require a new trial other than application of the new burden of proof. See Wangen v. Ford Motor Co., 97 Wis.2d 260, 300, 294 N.W.2d 437, 458 (1980). Cf. Tuttle v. Raymond, 494 A.2d 1353 (Me. 1985) (higher standard of proof given retroactive application where prior case law gave notice of intent to reexamine burden of proof). The decision of the court of appeals is vacated. The verdict for compensatory and punitive damages is affirmed and the matter is remanded for reinstatement of the original judgment dated August 3, 1982. FELDMAN, V.C.J., and BRUCE MEYERSON J. Pro Tem., Court of Appeals, Division One, concur. CAMERON, J., recused himself and did not participate in the determination of this matter, and BRUCE MEYERSON, J. Pro Tem., Court of Appeals, Division One, sat in his place and stead.