Court Opinion

ID: 2680599
Source: CourtListenerOpinion
Date Created: 2014-06-26 15:03:03.207323+00
Date Added: 2024-06-11T11:15:58.397662
License: Public Domain

ATTORNEY FOR APPELLANT                                ATTORNEYS FOR APPELLEE
Robert T. Sanders III                                 Glenn L. Duncan
Elkhart, Indiana                                      Lisa Gilkey Schoetzow
                                                      Elkhart, Indiana
__________________________________________________________________________________

                                            In the
                        Indiana Supreme Court                                 Jun 19 2014, 2:21 pm
                             _________________________________

                                     No. 20S04-1406-PL-399

RALPH ANDREWS,
                                                                               Appellant (Plaintiff),

                                                 v.

MOR/RYDE INTERNATIONAL, INC.,
                                                                             Appellee (Defendant).
                             _________________________________

                 Appeal from the Elkhart Superior Court, No. 20D03-0908-PL-55
                          The Honorable George W. Biddlecome, Judge
                            _________________________________

       On Petition to Transfer from the Indiana Court of Appeals, No. 20A04-1303-PL-141
                             _________________________________

                                          June 19, 2014

Rush, Justice.

       Indiana significantly restricts recovery of common-law punitive damages, including a height-
ened burden of proof, a cap on their amount, and diverting 75% of such awards to the State. But we
have held those restrictions do not reach statutory treble-damage awards under the Crime Victims
Relief Act—and today, we reach the same conclusion as to mandatory “exemplary damage” awards
under the Indiana Sales Representative Act. We therefore grant transfer and reverse the trial court.

                                           Background

       From 1996 until 2008, Ralph Andrews was an independent commissioned sales representa-
tive for Mor/Ryde International, Inc. After Mor/Ryde terminated Andrews’s contract, he sued,
alleging that Mor/Ryde owed him unpaid commissions.
          One count of Andrews’s complaint sought recovery under the Indiana Sales Representative
Act. Ind. Code 24-4-7 (2007). The Sales Representative Act requires certain businesses to pay their
commissioned wholesale sales agents all accrued commissions within fourteen days of terminating
the principal-agent relationship. I.C. § 24-4-7-5(a). “A principal who in bad faith fails to comply”
with that requirement “shall be liable, in a civil action brought by the sales representative, for
exemplary damages in an amount no more than three (3) times the sum of the commissions owed
to the sales representative.” I.C. § 24-4-7-5(b).

          On cross-motions for summary judgment that are not challenged here, the trial court ruled
that Mor/Ryde had complied with the termination provisions of Andrews’s contract, and that the
Sales Representative Act applied to its contract with Andrews. Mor/Ryde then moved the trial
court to determine whether “exemplary damages” under the Sales Representative Act are subject
to Indiana’s statutory restrictions on awards of “punitive damages,” including proof by “clear and
convincing evidence” and diversion of three-quarters of the award to the State. I.C. §§ 34-51-3-2,
-6 (2008) (generally, the “Punitive Damages Act” or just “the Act”). The trial court agreed with
Mor/Ryde that the punitive-damage restrictions do apply, but granted leave for an interlocutory
appeal.

          The Court of Appeals accepted the interlocutory appeal, and a divided panel affirmed the
trial court. The majority accepted Mor/Ryde’s reasoning that the terms “exemplary” and “punitive”
are often used interchangeably to denote damages awarded not to compensate the claimant, but to
punish the defendant—and that because exemplary damages under the Sales Representative Act
meet that definition, they must be subject to the Punitive Damages Act. Judge Barnes dissented,
agreeing with Andrews that the Act applies only to discretionary common-law punitive damage
awards, not statutory damage awards like the Sales Representative Act—relying on our holding in
Obremski v. Henderson that similar treble-damage awards as a civil remedy for certain crime
victims are “regarded as distinct from recovery of common law punitive damages,” and thus not
limited by the Act. 497 N.E.2d 909, 911 (Ind. 1986). We agree with Judge Barnes, and therefore
grant transfer and reverse the trial court.

                                         Standard of Review

          Because statutory interpretation is a question of law, we review such issues de novo, and do
not defer to a trial court’s interpretation of the statute’s meaning. State v. Int’l Bus. Machines Corp.,

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964 N.E.2d 206, 209 (Ind. 2012). That is, we “independently review the statute’s meaning and apply
it to the facts of the case under review.” Id. (quoting Elmer Buchta Trucking, Inc. v. Stanley, 744
N.E.2d 939, 942 (Ind. 2001)) (internal quotation marks omitted). Accordingly, we consider de novo
whether the Punitive Damages Act’s restrictions apply to treble damages under the Sales Repre-
sentative Act.

                                       Discussion and Decision

         Indiana first restricted common-law punitive damage awards in 1984, when it required them
to be proved by “clear and convincing evidence.” I.C. §§ 34-4-34-1, -2 (Supp. 1984). But the current
Punitive Damages Act’s sweeping limitations were enacted in 1995, “as part of a comprehensive
tort-reform package” aimed at “the tort and products liability fields.” Weinberger v. Estate of Barnes,
2 N.E.3d 43, 48–49 (Ind. Ct. App. 2013), trans. denied (quoting Andrew P. Wirick & Ann Marie
Waldron Piscione, Tort Law Reform (?) and Other Developments in Indiana Tort Law, 29 Ind. L.
Rev. 1097, 1097 (1996)) (internal quotation marks omitted). The Act’s goals were to “discourage
plaintiffs from bringing punitive damages claims,” to “decrease the plaintiff’s windfall recovery”
and “protect defendants from excessive punitive damage awards,” and generally to “combat per-
ceived ills associated with the rising number of punitive damage awards.” Id. (citations omitted).
And it used three mechanisms to accomplish those objectives: requiring proof by “clear and convin-
cing evidence,” I.C. § 34-51-3-2 (2008); capping awards at the greater of three times compensatory
damages or $50,000, I.C. § 34-51-3-4; and diverting three-fourths of the punitive damage award
to the State, I.C. § 34-51-3-6. In each regard, the Act—both in its goals and its mechanisms—were
targeted at the type of discretionary, open-ended punitive damage awards available at common
law, which the Legislature had concluded were being sought and awarded too liberally.1 Since
punitive damages are a creation of common law, limiting (or even prohibiting) their recoverability
is within the Legislature’s discretion. Cheatham v. Pohle, 789 N.E.2d 467, 471–72 (Ind. 2003).

         By contrast, other causes of action and corresponding remedies are purely the Legislature’s
own creation. One such example is the Crime Victims Relief Act, which permits the victims of
certain crimes to bring an action for up to three times their pecuniary losses plus attorney fees. I.C.

1
    Such public policy determinations are the Legislature’s prerogative, and we do not judge the wisdom or
    suitability of the laws it enacts to those ends. State v. Doe, 987 N.E.2d 1066, 1070 (Ind. 2013).

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§ 34-24-3-1 (2008 & Supp. 2011). To the extent those awards exceed the victim’s actual damages,
their purpose is no less “punitive” or “exemplary” than their common-law counterparts. Yet we held
that such actions were not subject to proof by “clear and convincing evidence,” as the first version
of the Punitive Damages Act required, because “recovery of treble damages under this section is
regarded as distinct from recovery of common law punitive damages.” Obremski, 497 N.E.2d at
911. We agree with Judge Barnes that Obremski’s distinction between common-law punitive
damages and statutory exemplary damages is controlling here. While the Punitive Damages Act
was enacted to drastically restrict recovery in light of perceived abuses at common law generally,
the Sales Representative Act’s treble-damage provisions at issue here—like the similar Crime
Victims Relief Act provisions in Obremski—were enacted to increase recovery from what the
common law would otherwise permit. We think it highly unlikely that the Legislature would
expand a remedy with one hand (the Sales Representative Act or the Crime Victims Relief Act),
while restricting it with the other (the Punitive Damages Act).

       Moreover, there is a substantive distinction between statutory treble damages under the Sales
Representative Act and common-law punitive damages. A claim for unpaid commissions sounds in
contract. But Indiana follows “the rule of no punitive damages in contract cases,” Erie Ins. Co. v.
Hickman, 622 N.E.2d 515, 519 (Ind. 1993), unless the claimant “plead[s] and prove[s] the existence
of an independent tort of the kind for which Indiana law recognizes that punitive damages may be
awarded,” Miller Brewing Co. v. Best Beers of Bloomington, Inc., 608 N.E.2d 975, 984 (Ind.
1993) (emphasis added). “Bad faith” breach of a contract will not support punitive damages unless
there is a “special relationship” between the parties (such as the sometimes arms-length, sometimes-
fiduciary relationship between an insurer and its insured) “to support imposition of a tort duty.”
Hickman, 622 N.E.2d at 518. But the Sales Representative Act deviates from those common-law
principles by permitting treble damages for a principal’s “bad faith” failure to pay commissions
within the specified time. I.C. § 24-4-7-5(b). Since such a damage award would not have been
available at common law, it cannot be the type of “common law punitive damages” that Obremski
holds are restricted by the Punitive Damages Act.

       Finally, the Legislature could readily have abolished Obremski’s distinction between com-
mon law and statutory punitive damages as part of the major 1995 amendments to the Punitive
Damages Act, but it chose not to do so. While a single decision of this court may not be enough to
establish “legislative acquiescence,” see Durham ex rel. Estate of Wade v. U-Haul Int’l, 745

                                                 4
N.E.2d 755, 768 (Ind. 2001) (Rucker, J., dissenting), we find it instructive that an amendment that
dramatically increased the reach of the Punitive Damages Act nevertheless did not include a change
extending it to encompass statutory treble damages.

                                           Conclusion

        Like Judge Barnes, we “cannot discern why a different rule should apply to an award of
treble damages under the [Sales Representative Act]” than the rule Obremski applied to such
damages under the Crime Victims Relief Act. We therefore grant transfer, hold that treble damages
under the Sales Representative Act are not subject to the Punitive Damages Act, and accordingly
reverse the trial court.

Dickson, C.J., and Rucker, David, and Massa, JJ., concur.

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