Opinion ID: 853010
Heading Depth: 2
Heading Rank: 2

Heading: Considering the Defendant's Wealth

Text: Given Stroud's financial circumstances, we conclude that the $500,000 award is far beyond the appropriate amount. We base that conclusion largely on what the law is trying to do in allowing punitive damages awards. First, and most importantly, it is not to compensate the victim or the victim's attorney. Neither the plaintiff nor the plaintiff's counsel has a right to an award of punitive damages in addition to compensatory damages. Cheatham v. Pohle, 789 N.E.2d 467 (Ind. 2003); Durham v. U-Haul Int'l, 745 N.E.2d 755, 762 (Ind.2001); Reed v. Central Soya Co., 621 N.E.2d 1069, 1076 (Ind. 1993); Miller Brewing Co. v. Best Beers of Bloomington, Inc., 608 N.E.2d 975, 983 (Ind.1993); Travelers Indem. Co. v. Armstrong, 442 N.E.2d 349, 362-63 (Ind.1982). Only in recent times have requests for punitive damages become commonplace. Indeed, until 1988 Indiana common law precluded punitive damages under a theory, now rejected by statute, that the threat of criminal prosecution for the same acts barred punitive action by the State. Eddy v. McGinnis, 523 N.E.2d 737, 741 (Ind.1988). Current law recognizes that punitive damages may serve the societal objective of deterring similar conduct by the defendant or others by way of example. For that reason, if punitive damages are appropriate, the wealth of the defendant has for many years been held relevant to a determination of the appropriate amount. Hibschman, 266 Ind. at 317, 362 N.E.2d at 849. As the Supreme Court recently noted, a defendant's wealth cannot justify an otherwise unconstitutional punitive damages award. State Farm, 123 S.Ct. at 1525. But it is nevertheless appropriate consideration. Id. (quoting BMW, 517 U.S. at 591, 116 S.Ct. 1589 (Breyer, J. concurring)). Ten thousand dollars is a significant sum to some and a trivial amount to others. Because one legislative goal is deterring others as well as the defendant, an assessment of the group of likely similar offenders is appropriate. This in turn depends on the nature of the conduct to be deterred. Thus, the perpetrator of a financial crime or a mass tort will usually be a person of substantial resources, and a sizeable award may be the only meaningful penalty. This wrong, however, required only an automobile. Stroud, and others whom we might seek to deter, frequently have no meaningful economic resources. Under these circumstances, ignoring the defendant's financial condition is error. Stroud is a 17-year-old sentenced to eight years in prison for the criminal charges stemming from this case. His sole source of income at the time of trial was as a participant in the Elkhart County work release program. He plainly has no ability to pay now or in the short to intermediate future. Interest compounded at eight percent per annum on one-half million dollars will dig him into an increasingly deeper hole. Most significantly, he will be unable to discharge this liability through bankruptcy. 11 U.S.C. § 523(a)(9) (2000); In re Reese, 91 F.3d 37, 38 (7th Cir.1996). The defendant's wealth is ordinarily cited as a reason to escalate a punitive award, and that is consistent with the goal of deterrence. But that door swings both ways. An award that not only hurts but permanently cripples the defendant goes too far. [2] A life of financial hopelessness may be an invitation to a life of crime. Perpetual inability to get the financial burden of a judgment off his back leaves a defendant with few alternatives. The wisdom of rendering an award of punitive damages undischargeable is for the Congress. But given that that decision has been made, courts of our state should consider punitive awards with that legal fact in mind. Stroud has no significant assets today and will have none for some time. Although some portion of Stroud's future wages may be exempt from execution, this award is of dubious benefit to the plaintiff and its present value in dollars is close to zero. But a staggering punitive damages award is not merely a useless act. It also traps the plaintiff and defendant forever in a creditor-debtor relationship that offers little if any financial reward to the plaintiff and seems far more likely to lead to nothing but travail for both. The trial court provided no findings of fact to indicate, first, why a punitive damages award was appropriate, and second, why that award should be set at $500,000. In reviewing the award, the Court of Appeals considered helpful the factors first articulated in BMW, and recently reaffirmed in State Farm, 123 S.Ct. at 1520. Those factors are: the reprehensibility of conduct; the disparity between the harm suffered and the punitive damages awarded; and the difference between the punitive damages awarded and the civil and criminal penalties authorized or imposed in comparable cases. BMW, 517 U.S. at 575, 116 S.Ct. 1589. As the Court of Appeals noted, the BMW factors are persuasive, but not dispositive, indicia of whether a particular award is appropriate under Indiana common law. Stroud, 760 N.E.2d at 1181. This is so because BMW concerned a due process challenge to an award and did not address whether the award violated any common law theory of excessiveness. In addition, the factors were used to review a trial court's decision as to the constitutionality of a jury award, not to review an award made by a court following a bench trial. In any case, the Court of Appeals also acknowledged that Indiana common law has historically regarded the defendant's wealth as an important factor in determining whether a punitive damages award is excessive. Stroud, 760 N.E.2d at 1181; see also Hibschman, 266 Ind. at 317, 362 N.E.2d at 849; Executive Builders, Inc. v. Trisler, 741 N.E.2d 351, 360 (Ind. Ct.App.2000); Ford Motor Co. v. Ammerman, 705 N.E.2d 539, 561 (Ind.Ct.App. 1999); Bright v. Kuehl, 650 N.E.2d 311, 316 (Ind.Ct.App.1995); Archem, Inc. v. Simo, 549 N.E.2d 1054, 1061 (Ind.Ct.App. 1990); Ind. & Mich. Elec. Co. v. Stevenson, 173 Ind.App. 329, 341, 363 N.E.2d 1254, 1263 (1977). Stroud is incorrect to suggest that the plaintiff is required to offer proof of the defendant's ability to pay a punitive damages award. That point was settled by Hibschman. 266 Ind. at 317, 362 N.E.2d at 849. However, if there is evidence bearing on ability to pay, we disagree with the view of the Court of Appeals that Stroud's inability to pay this award is inconsequential. We do not doubt the severity of the injuries caused by Stroud. But the judge awarded Lints compensation for his injuries in the amount of $1,381,500.00 after allowing for comparative fault. We agree that punitive damages are intended both to deter others and to punish the wrongdoer. However, the common law has long held that the ability of a defendant to pay a punitive damages award is an important consideration. This doctrine is grounded in sound policy. It not only justifies upholding high awards when the defendant's resources render a lesser amount inconsequential, it also means that in cases such as this, where the defendant is a teenager with no assets and no apparent ability to pay in the future, an award this substantial must be modified. As the Court of Appeals put it in Ramada Hotel Operating Co. v. Shaffer, 576 N.E.2d 1264, 1267-68 (Ind.Ct.App.1991): Inasmuch as this Court should review the defendant's economic wealth in the situation where punishment and deterrence are the stated purposes, the economic wealth of the defendant is material to the issue of punitive damages so that these objectives will be fulfilled. The economic wealth of a defendant tends to show ... the point at which an award of punitive damages becomes an amount which will deter and punish the defendant. In Stroud's case, the punitive damages award passed the point of deterrence and punishment long before it reached the $500,000 mark.