Court Opinion

ID: 2731288
Source: CourtListenerOpinion
Date Created: 2014-09-09 18:04:54.28584+00
Date Added: 2024-06-11T10:01:19.333916
License: Public Domain

SUPREME COURT OF MISSOURI
                                        en banc
LILLIAN M. LEWELLEN,                              )
                                                  )
                Appellant/Cross-Respondent,       )
                                                  )
v.                                                )      No. SC92871
                                                  )
CHAD FRANKLIN and CHAD FRANKLIN                   )
NATIONAL AUTO SALES NORTH, LLC,                   )
                                                  )
                Respondents/Cross-Appellants.     )

               APPEAL FROM THE CIRCUIT COURT OF CLAY COUNTY
                        The Honorable Larry D. Harman, Judge

                             Opinion issued September 9, 2014

         This appeal arises from an action brought by Lillian Lewellen against Chad

Franklin and Chad Franklin National Auto Sales North, LLC (National), for fraudulent

misrepresentation     and   unlawful    merchandising    practices   under   the   Missouri

Merchandising Practice Act (MMPA), section 407.010, et seq., RSMo. A jury awarded

Ms. Lewellen actual damages of $25,000 and punitive damages of $1 million against

Mr. Franklin and National on both counts. She took judgment against Mr. Franklin under

her fraudulent misrepresentation claim and take judgment against National under the

MMPA claim.        Pursuant to section 510.265,1 the circuit court reduced the punitive

damages awards against Mr. Franklin and National to $500,000 and $539,050,

1
    All statutory references are to RSMo Supp. 2013, unless otherwise indicated.
respectively. Ms. Lewellen appeals her punitive damages award against Mr. Franklin,

claiming section 510.265 violates her rights to a jury trial, equal protection, and due

process and violates the separation of powers doctrine. Mr. Franklin and National cross-

appeal, claiming the circuit court abused its discretion by imposing discovery sanctions in

a vague and ambiguous order and by overruling their motion to reduce the punitive

damages awards as a violation of their due process rights.          Because Ms. Lewellen

challenges the validity of a statute, this Court has exclusive jurisdiction over this appeal.

Mo. Const. art. V, sec. 3.

       In accordance with Watts v. Lester E. Cox Medical Centers, 376 S.W.3d 633, 638

(Mo. banc 2012), this Court holds that the mandatory reduction of Ms. Lewellen‟s

punitive damages award against Mr. Franklin under section 510.265 violates

Ms. Lewellen‟s right to a trial by jury as guaranteed by article I, section 22(a) of the

Missouri Constitution. This Court rejects Mr. Franklin and National‟s claims that the

amount of the punitive damages awards violates their due process rights and that the

circuit court abused its discretion in ordering discovery sanctions. Because there is no

need for further proceedings in the circuit court, this Court may enter judgment as the

circuit court ought to have entered to reflect the punitive damages award against

Mr. Franklin assessed by the jury. Rule 84.14; DeBaliviere Place Ass’n v. Veal, 337

S.W.3d 670, 679 (Mo. banc 2011). Accordingly, this Court affirms the circuit court‟s

judgment except for the portion reducing the punitive damages award assessed against

Mr. Franklin pursuant to section 510.265. That portion of the judgment is vacated, and
this Court enters judgment awarding Ms. Lewellen $1 million in punitive damages

against Mr. Franklin for fraudulent misrepresentation.

                          Factual and Procedural Background

       At all relevant times, Mr. Franklin was the owner of National, a motor vehicle

dealership in Kansas City, Missouri. Mr. Franklin became frustrated by the low number

of sales at National and at another dealership he owns. To bring more customers into the

dealership, Mr. Franklin sought to use aggressive and creative print and television

advertisements. Some of these advertisements promoted a program in which customers

could purchase a vehicle for only $49, $69, or $89 per month.

       When Ms. Lewellen, a 77-year old widow, needed a new vehicle after the

transmission on her van went out, she visited National because she had seen several of

National‟s advertisements for vehicles with a $49-per-month payment plan.             Upon

arriving at the dealership, Ms. Lewellen told one of National‟s employees that she was

interested in the $49-per-month payment plan, and she picked out a 2002 Lincoln that

qualified for the program.2 Throughout her visit, Ms. Lewellen repeated that she could

afford to pay only $49 per month for a vehicle.

       A salesperson at National explained to Ms. Lewellen that the $49-a-month

program was a five-year plan in which National would send her a check for the difference

between her monthly payment and her $49-per-month obligation. At the end of each

2
  The lot was divided into sections for the $49-per-month vehicles, the $69-per-month
vehicles, and the $89-per-month vehicles. The Lincoln Ms. Lewellen selected was
located in a section of the lot specifically for the vehicles eligible for the $49-per-month
program.
year, Ms. Lewellen would trade in her vehicle for a different vehicle for the same $49

monthly payment.3 Ms. Lewellen agreed to buy the Lincoln through the $49-per-month

program in part because she felt pressure by the salesman to purchase a vehicle during

that visit.

        The total sales price of the Lincoln was $19,940.45, including $2,500 for a service

contract fee and $599 for gap insurance. The salesperson did not discuss these additional

fees in the contract with Ms. Lewellen, nor was she aware of them. The contract also

listed the trade-in value for Ms. Lewellen‟s van as $1,365. While the figure was in the

contract, Ms. Lewellen was not otherwise made aware of that trade-in value. One of the

documents presented to Ms. Lewellen by the employee stated, “No investment, $49 first

six months.”

        Ms. Lewellen met with another National employee who helped her fill out a credit

application, which required Ms. Lewellen to state her monthly income. The National

employee wrote down Ms. Lewellen‟s monthly income as $920, which Ms. Lewellen

testified was the correct income at that time. Another document labeled “Applicant‟s

Credit Statement” was also filled out by a National employee, and this document listed

Ms. Lewellen‟s monthly income as $18,000.           Based on the information provided,

Ms. Lewellen‟s monthly payment was $387.45.           Like the salesman, this employee

assured Ms. Lewellen that she would be obligated to pay only $49 per month.

3
  Ms. Lewellen was told that when she traded-in her Lincoln, she would have to pick a
different vehicle because she could not have the same vehicle twice.
      When Ms. Lewellen did not receive a check from National soon after the sale, she

contacted National multiple times to inquire about payment. She eventually received a

check from National for $3,287.30, which was intended to cover the difference between

the monthly payment listed on Ms. Lewellen‟s credit application and $49 per month.

Ms. Lewellen used that money and her own $49 to make the $387.45 payments to Harris

Bank, the lender holding Ms. Lewellen‟s loan. The check from National, however, only

covered the difference for nine months, and National never sent Ms. Lewellen another

check for the remaining months. When the money from National was expended and

Ms. Lewellen became unable to make her payments in full, she contacted Harris Bank to

explain the situation and continued to make the $49 monthly payments. Harris Bank

eventually repossessed Ms. Lewellen‟s vehicle and sued her for breach of contract.

Ms. Lewellen continued to make $49 monthly payments for a while but later reduced her

monthly payments to $25.

      Ms. Lewellen filed a petition against Mr. Franklin and National for common law

fraudulent misrepresentation and unlawful merchandising practices under the MMPA.4

Prior to trial, Ms. Lewellen moved for an entry of sanctions against Mr. Franklin and

National for Mr. Franklin‟s repeated failure to appear for depositions personally or as a

representative of National. The circuit court sustained the motion, ordering that the

pleadings of Mr. Franklin and National be struck and that any documents produced by

Mr. Franklin or National through discovery could be admitted in evidence against them.

4
 Ms. Lewellen also named Harris Bank as a defendant in the action. Her claims against
Harris Bank were severed and later dismissed by the parties.
The court stated it would provide further guidance as to how Mr. Franklin and National

would be allowed to participate in the trial. At a subsequent pretrial conference, the court

explained that its order striking the pleadings caused Mr. Franklin and National to be in

default. They would be permitted to participate in voir dire “to the extent that an

appropriate voir dire question had not been asked by any of the remaining non-sanctioned

and not in default parties.” Further, cross-examination of witnesses would be limited to

the issue of damages.

       At the trial, Ms. Lewellen testified about her dealings with National. She also

presented testimony from two other persons who were similarly misled by employees of

National or Mr. Franklin‟s other dealership after seeing the advertisements.

Ms. Lewellen presented evidence of 73 complaints against National and Mr. Franklin‟s

other dealership filed with the Missouri attorney general and numerous similar

complaints filed with the Kansas attorney general. There was also evidence of National‟s

print and television advertisements promoting the $49-per-month program and of

Mr. Franklin‟s advertising strategy.

       The jury awarded Ms. Lewellen $25,000 in actual damages for her fraudulent

misrepresentation claims against Mr. Franklin and National and $25,000 in actual

damages for her MMPA against Mr. Franklin and National.5 It also found Mr. Franklin

and National liable for punitive damages and awarded Ms. Lewellen $1 million in

5
  Only the issue of damages was submitted to the jury. Mr. Franklin‟s and National‟s
liability on Ms. Lewellen‟s claims was not before the jury.
punitive damages for each claim.6 Ms. Lewellen elected to take judgment for actual and

punitive damages for fraudulent misrepresentation against Mr. Franklin and judgment for

actual and punitive damages for the MMPA violation against National.7 Having found

Ms. Lewellen‟s actual damages for her fraudulent misrepresentation claim are the same

as her actual damages for her MMPA claim, the circuit court ordered that Ms. Lewellen

would receive only $25,000 in actual damages, assessed jointly and severally against

Mr. Franklin and National. Ms. Lewellen was also awarded $82,810 in attorneys‟ fees on

her MMPA claim against National.

      The circuit court overruled Mr. Franklin and National‟s motion for a new trial for

the court‟s failure to provide adequate notice of the discovery sanctions. It sustained

their motion to reduce the punitive damages awards pursuant to section 510.265, reducing

the punitive damages awards against Mr. Franklin and National to $500,000 and

$539,050, respectively. In reducing the awards, the court rejected Mr. Franklin and

National‟s claim that the punitive damages awards violated their due process rights and

Ms. Lewellen‟s claims that the cap on punitive damages violates her rights to a trial by

6
  The trial was bifurcated. In the first phase, the jury determined the amount of
compensatory damages and whether Mr. Franklin and National were liable for punitive
damages. In the second phase, the jury determined the amount of punitive damages for
which they were liable.
7
  Because Ms. Lewellen‟s claims for fraudulent misrepresentation and an MMPA
violation are not inconsistent, both counts were submitted to the jury. See Scott v. Blue
Springs Ford Sales, Inc., 176 S.W.3d 140, 142-43 (Mo. banc 2005). Under the merger of
damages doctrine, however, a plaintiff cannot recover more than one full recovery for the
same harm. Trimble v. Pracna, 167 S.W.3d 706, 711 (Mo. banc 2005). Because the
harm suffered by fraudulent misrepresentation was the same as the harm caused by the
MMPA violation, Ms. Lewellen had to elect under what theory to take judgments against
Mr. Franklin and National.
jury, due process, equal protection, and open courts, and violates the separation of powers

doctrine and the prohibition against special legislation.

       Ms. Lewellen, Mr. Franklin and National all appeal the circuit court‟s judgment.

Ms. Lewellen asserts that reduction of punitive damages pursuant to section 510.265

violates her rights to a jury trial, equal protection, and due process and violates the

separation of powers doctrine. In their cross-appeal, Mr. Franklin and National assert

that the circuit court abused its discretion by imposing discovery sanctions in a vague and

ambiguous order and by overruling their motion to further reduce the punitive damages

awards as a violation of their due process rights.8

                    Section 510.265 Violates Right to Trial by Jury

       Ms. Lewellen claims her constitutional right to trial by jury was violated when the

trial court applied section 510.265 to reduce the punitive damages the jury awarded on

her fraudulent misrepresentation claim against Mr. Franklin.9 Section 510.265 provides,

“No award of punitive damages against any defendant shall exceed the greater of: (1)

Five hundred thousand dollars; or (2) Five times the net amount of the judgment awarded

to the plaintiff against the defendant.” Ms. Lewellen asserts that the application of this

statute to her fraudulent misrepresentation claim divests the jury of its function in

8
  As Mr. Franklin and National‟s appeal does not involve issues reserved for the
exclusive jurisdiction of this Court, it was filed originally in the court of appeals. This
Court transferred the appeal to this Court pursuant to Rule 83.01.
9
  Ms. Lewellen does not challenge on appeal the application of section 510.265 to reduce
her punitive damages award against National on her MMPA claim. Likely, she did not
raise such a claim because this Court has already held that application of section 510.265
to statutory claims under the MMPA is constitutionally valid because MMPA claims did
not exist in 1820. See Estate of Overbey v. Chad Franklin Nat’l Auto Sales N., LLC, 361
S.W.3d 364, 375-81 (Mo. banc 2012).
determining damages and, thereby, deprives her of a right to a trial by jury guaranteed by

article I, section 22(a) of the Missouri Constitution.

          This Court reviews constitutional challenges de novo. Estate of Overbey v. Chad

Franklin Nat’l Auto Sales N., LLC, 361 S.W.3d 364, 372 (Mo. banc 2012). A statute is

presumed valid and will be declared unconstitutional only if the challenger proves the

statute “clearly and undoubtedly violates the constitutional limitations.” Id. As the

challenger, Ms. Lewellen has the burden of proving section 510.265 is unconstitutional.

See id.

          In Watts, this Court held applying a similar statutory cap on noneconomic

damages violated Missouri‟s constitutional right to a jury trial. 376 S.W.3d at 638.

Though Watts struck down a cap on noneconomic damages in a medical negligence case,

it is controlling on the issue of whether application of the statutory cap on punitive

damages in section 510.265 in a cause of action that existed in 1820 violates the right to a

jury trial. As noted in Watts, the phrase “shall remain inviolate” in article I, section 22(a)

means that any change in the right to a jury determination of damages as it existed in

1820 is unconstitutional. Id. at 638. The Court in Watts recognized that, in 1820, the

jury determined the amount of damages at common law and there were no legislative

limits on damages. Id. at 639-40. The Court, therefore, concluded that application of a

statutory cap to damages awarded by a jury in a cause of action that existed in 1820

“necessarily changes and impairs the right of a trial by jury „as heretofore enjoyed.‟” Id.

at 640.
      As in Watts, there existed a right to a jury determination of the amount of punitive

damages in a fraud cause of action in 1820. Actions for fraud in which only damages

were sought were tried by juries in 1820.10 See State ex rel. Diehl v. O’Malley, 95

S.W.3d 82, 85-87 (Mo. banc 2003).        Additionally, determination of the amount of

punitive damages was a function for the jury in 1820. Punitive damages were recognized

in 1820 as a way to punish the guilty and deter future misconduct. See Amiable Nancy,

16 U.S. 546, 558 (1818); see also Barry v. Edmunds, 116 U.S. 550, 562-63 (1886); Lake

Shore & M.S. Ry. Co. v. Prentice, 147 U.S. 101, 106-07 (1893). Under the common law

as it existed at the time the Missouri Constitution was adopted, imposing punitive

damages was a peculiar function of the jury. Day v. Woodworth, 54 U.S. 363, 371 (1851)

(noting that assessing damages by way of punishment “has been always left to the

discretion of the jury”); Churchill v. Watson, 5 Day 140, 144 (Con. 1811); Carey v.

Robbins, 2 Del. Cas. 24, 26 (Del. 1808); see also Overbey, 361 S.W.3d at 375; Scott v.

Blue Springs Ford Sales, Inc., 176 S.W.3d 140, 142 (Mo. banc 2005); Goetz v. Ambs, 27

Mo. 28, 33-34 (1858); Walker v. Borland, 21 Mo. 289, 291-92 (1855).

      In Blue Springs Ford, this Court held that a claimant seeking damages on a claim

brought pursuant to the Missouri Human Rights Act had a right to have a jury determine

10
   Fraud does not appear as a separate cause of action in Missouri cases until the mid-
nineteenth century. See Rutherford v. Williams, 42 Mo. 18, 24-25 (1867). Nonetheless,
“Missouri‟s common law is based on the common law of England as of 1607.” Watts,
376 S.W.3d at 638; see section 1.010. Fraud claims were historically encompassed in
trespass claims, as English common law recognized actions for trespass as a means to
recover for deceit. The Forms of Action at Common-Law, A Course of Lectures by F.W.
Maitland (Cambridge Univ. Press 1936), Lecture VI. See also BLACK‟S LAW
DICTIONARY 1643 (9th ed. 2009).
punitive damages. 176 S.W.3d at 142. The guarantee of a jury trial in the Missouri

Constitution was violated by a statute providing for punitive damages but precluding a

jury from determining punitive damages. Id. The Court, again, in Overbey, iterated its

holding in Blue Springs Ford that there is a right to a jury trial on punitive damages. 361

S.W.3d at 375. 11

       Therefore, under Watts, Blue Springs Ford, and Overbey, the punitive damages

cap imposed by section 510.265 “necessarily changes and impairs the right of a trial by

jury „as heretofore enjoyed.‟” Watts, 376 S.W.3d at 640. Because section 510.265

changes the right to a jury determination of punitive damages as it existed in 1820, it

unconstitutionally infringes on Ms. Lewellen‟s right to a trial by jury protected by article

I, section 22(a) of the Missouri Constitution.

       Mr. Franklin seeks to distinguish this case from Watts because, unlike

noneconomic damages, punitive damages are subject to due process limitations. The

Supreme Court has ruled that due process rights guaranteed by the United States

Constitution “prohibit[] the imposition of grossly excessive or arbitrary punishments on a

tortfeasor.” State Farm Mut. Auto. Ins. Co. v. Cambell, 538 U.S. 408, 409 (2003).

Courts must review punitive damages awards and consider the reprehensibility of the

defendant‟s misconduct, the disparity between the harm and the award, and the difference

11
   In Overbey, the Court held that application of the punitive damages cap in section
510.265 to an award for an MMPA claim did not violate the right to a jury trial because
an MMPA claim did not exist in 1820. Id. at 376. Because the legislature created a
cause of action under the MMPA, the legislature could establish the substance of an
MMPA claim, including the maximum amount of punitive damages available for
recovery. Id.
between the award and civil penalties authorized or imposed in comparable cases. BMW

of N. Am., Inc. v. Gore, 517 U.S. 559, 574-75 (1996).12 Courts may reduce the award

accordingly if it violates the defendant‟s due process rights. Id. Mr. Franklin contends

that, because punitive damages are already subject to legal limits under the Due Process

Clause, the legislature may also impose legal limits on them through a statutory cap.

       The limitations under section 510.265 are not of the same species as those required

by the Due Process Clause of the United States Constitution. The Supreme Court has

explicitly refused to establish a bright-line ratio that a punitive damages award cannot

exceed due to the Supreme Court‟s reluctance to recognize concrete limits imposed by

due process. State Farm, 538 U.S. at 425. Instead, “[t]he precise award in any case . . .

must be based upon the facts and circumstances of the defendant‟s conduct and the harm

to the plaintiff.”   Id.   In contrast, section 510.265 is not based on the facts or

circumstances of a case; it caps the punitive damages award at $500,000 or five times the

judgment amount regardless of the facts and circumstances of the particular case.

       Due process requires a court to review a punitive damages award under the

considerations articulated by the Supreme Court to prevent grossly excessive or arbitrary

awards. State Farm, 538 U.S. at 417. Section 510.265 is not a codification of due

process.13 Like section 538.210 in Watts, section 510.265 “operates wholly independent

12
   Because Mr. Franklin and National challenge the punitive damages awards as
violations of their due process rights, a more thorough examination of these
considerations is provided infra.
13
   Merely because an award is within the bounds of section 510.265 does not relieve a
court from its duty to review it in light of the particular facts of the case when a party
of the facts of the case.” Watts, 376 S.W.3d at 640. Accordingly, this Court‟s holding

that section 510.265 violates Missouri‟s right to a trial by jury does not imply that a right

conferred by the Missouri Constitution overrides the United States Constitution14 and

does not discharge courts from their duty to review a punitive damages award under the

Due Process Clause.

       Rather, bound by Watts, this Court holds that the punitive damages cap in section

510.265 “curtails the jury‟s determination of damages and, as a result, necessarily

infringes on the right to a trial by jury when applied to a cause of action to which the

right to jury trial attaches at common law.” Id. at 640. Because a party seeking punitive

damages for fraud in 1820 would have had the right to have a jury try the issue of

punitive damages, the statutory reduction of Ms. Lewellen‟s punitive damages award

against Mr. Franklin pursuant to section 510.265 was unconstitutional.

       Ms. Lewellen also challenges the punitive damages cap as violating her rights to

due process and equal protection and as violating the doctrine of separation of powers.

Because this Court finds section 510.265 violates the right to a jury trial, it does not

address Ms. Lewellen‟s other constitutional challenges.

                          Awards Do Not Violate Due Process

       In their cross-appeal, Mr. Franklin and National assert that the circuit court erred

by overruling their motion to reduce Ms. Lewellen‟s punitive damages awards because

claims the award violates due process. See Overbey, 361 S.W.3d at 372-74; Peel v.
Credit Acceptance Corp., 408 S.W.3d 191, 212-14 (Mo. App. 2013).
14
   Such a conclusion would contravene the supremacy clause of the United States
Constitution. See U.S. Const. art. VI, cl. 2.
the amount of the award violated their due process rights under the Fourteenth

Amendment of the United States Constitution and article I, section 10 of the Missouri

Constitution. They argue that both the amount of punitive damages assessed by the jury

and the reduced amount in the circuit court‟s judgment were grossly excessive. Because

this Court holds that the circuit court could not constitutionally apply the damages cap to

Ms. Lewellen‟s award against Mr. Franklin, it will consider whether the amount of

punitive damages awarded by the jury violates Mr. Franklin‟s right to due process and

whether the amount of punitive damages awarded after application of section 510.265

violates National‟s right to due process. Like Ms. Lewellen‟s constitutional challenge,

this Court reviews Mr. Franklin and National‟s due process claim de novo. Overbey, 361

S.W.3d at 372; see also State Farm, 538 U.S. at 418.

      The constitutions of the United States and Missouri guarantee that no person will

be deprived of “life, liberty, or property without due process of law.” U.S. Const. amend.

XIV, section 1; Mo. Const. art. I, sec. 10. This due process guarantee “prohibits the

imposition of grossly excessive or arbitrary punishments on a tortfeasor.” State Farm,

538 U.S. at 409.     “Elementary notions of fairness enshrined in . . . constitutional

jurisprudence dictate that a person receive fair notice not only of the conduct that will

subject him to punishment, but also of the severity of the penalty that a State may

impose.” Gore, 517 U.S. at 574-75 (internal citations omitted). In determining if a

punitive damages award comports with due process, courts consider three guideposts:

(1) the reprehensibility of the defendant's misconduct; (2) the disparity between the harm
and the punitive damages award; and (3) the difference between the punitive damages

award and penalties authorized or imposed in comparable cases. Id.

       The reprehensibility of the conduct is the most important factor and includes

consideration of whether:

       [T]he 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.

The Supreme Court has recognized that “trickery and deceit are more reprehensible than

negligence” and that “infliction of economic injury, especially when done intentionally

through affirmative acts of misconduct, or when the target is financially vulnerable, can

warrant a substantial penalty.” Gore, 517 U.S. at 576 (internal citations omitted).

       While the harm in this case was economic and there was no threat to the health or

safety of others, Mr. Franklin‟s and National‟s conduct was nonetheless reprehensible.

The persons targeted by the $49-per-month vehicles are financially vulnerable, low-

income persons. Ms. Lewellen was one such financially vulnerable person; she was an

unemployed, 77-year old widow whose only source of income was $920 of social

security benefits per month. Additionally, Mr. Franklin and National engaged in trickery,

malice or deceit by using deceptive and misleading advertisements. They lured in

customers like Ms. Lewellen with frequently aired advertisements promising customers

that they could purchase cars for only $49 per month but had them sign documents

obligating them to pay larger monthly sums. For example, Ms. Lewellen was ultimately
contractually obligated to pay $379 per month, or $4,548 annually. National employees

repeatedly assured Ms. Lewellen that she would have to pay only $49 per month, or $588

annually, for five years and that National would send her a check to cover the difference

in her car payments.      Contrary to their representations, National employees had

Ms. Lewellen sign a document that stated “$49 first six months.” And National only sent

a check sufficient to cover the difference for nine months, leaving Ms. Lewellen

contractually obligated to make car payments she could not afford.

      Mr. Franklin and National repeatedly engaged in this deceitful conduct. Two

witnesses testified that Mr. Franklin and National made misrepresentations to them

similar to those made to Ms. Lewellen. Evidence was also presented showing that

hundreds of complaints from other customers of National or Mr. Franklin‟s other

dealership have been filed with either the Kansas or Missouri attorney general with

regard to deceptive promotional programs and advertisements.

      Mr. Franklin and National contend that the repeated conduct factor for

reprehensibility is limited to similar prior conduct and that there was no proof these

customer complaints occurred prior to Ms. Lewellen‟s dealings with National.           In

discussing the constitutional parameters of punitive damages, the United States Supreme

Court has stressed that “courts must ensure the conduct in question replicates the prior

transgressions.” State Farm, 538 U.S. at 423. The emphasis on prior transgressions,

however, was in recognition that “repeated misconduct is more reprehensible than an

individual instance of malfeasance.” Id. Therefore, this Court finds that any sufficiently

similar misconduct, regardless of when it occurred, is relevant in assessing the
reprehensibility of a defendant‟s conduct. Mr. Franklin‟s and National‟s repetitive use of

intentionally deceptive business practices targeting financially vulnerable persons weighs

in favor of a higher punitive damages award.

       Turning to the second guidepost, this Court must consider the disparity between

the actual damages and the punitive damages awarded. Ms. Lewellen suffered damages

from the repossession of her Lincoln, the damage to her good credit record after her

unpaid account with Harris Bank was turned over to a collection agency, the suit brought

by Harris Bank for defaulting on her loan, the stress of being unable to make her loan

payments, and Ms. Lewellen‟s fear that she would go to jail. The jury awarded actual

damages in the amount of $25,000 against both Mr. Franklin and National. It awarded

punitive damages against Mr. Franklin for $1 million, creating a 40:1 ratio between

punitive damages to actual damages. The final punitive damages award against National

was $539,050, which yields a 22:1 ratio.15

       While “few awards exceeding a single digit ratio between punitive damages and

compensatory damages . . . will satisfy due process,” greater ratios may “comport with

due process where „a particularly egregious act has resulted in only a small amount of

15
   Ms. Lewellen claims the amount of actual damages assessed against National is
$107,810, which includes attorneys‟ fees, and, therefore, the ratio is 5:1. Attorneys‟ fees
are a part of the “net judgment” used to calculate punitive damages under section
510.265. Hervey v. Missouri Dept. of Corr., 379 S.W.3d 156, 164 (Mo. banc 2012). But
in setting out the guideposts, the United States Supreme Court considered only
compensatory damages. See State Farm, 538 U.S. at 424-427. Because compensatory
damages are limited to the plaintiff‟s loss, the ratio does not include attorneys‟ fees. See
Firestone v. Crown Ctr. Redevelopment Corp., 693 S.W.2d 99, 103 (Mo. banc 1985),
superseded by statute on other grounds as recognized in Badahman v. Catering St. Louis,
395 S.W.3d 29, 36 (Mo. banc 2013).
economic damages.‟” Id. at 425. The double-digit ratios between punitive damages and

compensatory damages are warranted in this case. Mr. Franklin‟s and National‟s conduct

was particularly egregious. Mr. Franklin, believing he was not receiving his “share of the

pie,” sought to create creative and aggressive advertisements to bring in business. One

advertising campaign targeted financially vulnerable consumers by promising monthly

payments as low as $49, $69, or $89 a month. Once customers were legally bound to pay

an amount several times greater than the advertised amount,16 National would fail to live

up to its promise. National‟s actions left customers without their trade-in vehicles and

with bills they could not afford to pay, leading to repossession of the new vehicles, suits

for default on the loans, and bad credit. This type of bait-and-switch practice was not

limited to Ms. Lewellen‟s purchase but was employed repeatedly.17                 Further,

Mr. Franklin has showed no remorse or effort to rectify the consequences of his unlawful

practices. Even in the instant action, Mr. Franklin refused to respond to discovery

requests, resulting in sanctions.

       Mr. Franklin and National argue that this case does not fall within the variety

warranting larger ratios because $25,000, the amount of compensatory damages awarded,

is not a “small amount.” The amount of actual damages in this case is not so large as to

make a double-digit ratio “grossly excessive.” It is certainly a small amount when

16
   In Ms. Lewellen‟s case, her monthly obligation of $387.45 was almost eight times the
$49 she was assured that she would have to pay.
17
   The widespread use of this bait-and-switch practice is evidence that the conduct posed
a greater risk to the public and was more reprehensible. But the reasonableness of the
punitive damages awards in this case is determined only by the harm to Ms. Lewellen and
should not reflect punishment for harming others. See Phillip Morris USA v. Williams,
549 U.S. 346, 354-55 (2007).
compared to the $2.6 million actual damages award that caused concern in State Farm.

See 538 U.S. at 416. And $25,000 is not much larger than some of the actual damages

awards used by courts to justify higher ratios. See TXO Prod. Corp v. Alliance Res.

Corp., 509 U.S. 443, 461 (1993) (526:1 ratio with $19,000 in actual damages); Krysa v.

Payne, 176 S.W.3d 150, 160-162 (Mo. App. 2005) (27:1 ratio with $18,449 in actual

damages). Further, much higher ratios than the ones in this case have been found to

comport with due process. See Overbey, 361 S.W.3d at 374 (affirming award yielding

111:1 ratio); Weaver v. African Methodist Episcopal Church, Inc., 54 S.W.3d 575, (Mo.

App. 2001) (finding a ratio of 66:1 was not excessive). Considering the particularly

egregious conduct and the relatively small amount of compensatory damages, ratios of

22:1 and 40:1 do not make the punitive damages awards in this case grossly excessive.

“A jury would be within its discretion in determining that, in these circumstances, in

which „a particularly egregious act has resulted in only a small amount of economic

damages,‟ the usual single-digit ratio may not be an appropriate measure of the limits of

due process.” See Overbey, 361 S.W.3d at 374.

      The third guidepost is the disparity between the punitive damage and “the civil

penalties authorized or imposed in comparable cases.” Gore, 517 U.S. at 575.

Comparable civil penalties that could arise from Mr. Franklin‟s and National‟s conduct

are delineated in the MMPA. The MMPA permits courts “to award the state a civil

penalty of not more than one thousand dollars per [MMPA] violation,” section 407.100.6,

and $5,000 for any violation of an injunction, restitution order or judgment issued
pursuant to the MMPA, section 407.110. There is no doubt that the punitive damages

awards in this case are larger than the penalties authorized under the MMPA.

       Nonetheless, this Court considers all three guideposts, and the punitive damages

awards assessed against Mr. Franklin and National are not grossly excessive considering

their intentional and flagrant trickery and deceit employed to target a financially

vulnerable person causing her to lose her means of transportation, subject her to suit, and

damage her credit. The circuit court, therefore, did not err in overruling Mr. Franklin and

National‟s motion to reduce punitive damages on the grounds that the awards violated

their due process rights.

                                  Discovery Sanctions

       Mr. Franklin and National also challenge the circuit court‟s ruling on

Ms. Lewellen‟s motion for discovery sanctions. They assert the court failed to provide

adequate notice of its sanctions because the order was ambiguous as to the restrictions on

their ability to present evidence, make objections, and present arguments at trial.18

Mr. Franklin and National argue that this ambiguity made it impossible for counsel to

adequately prepare for trial, thereby prejudicing them.

       A circuit court has broad discretion in determining the admission of evidence and

imposing sanctions for discovery violations. Giddens v. Kansas City S. Ry. Co., 29

S.W.3d 813, 819 (Mo. banc 2000). Its decision will not be overruled unless there is an

abuse of discretion. Id. An abuse of discretion occurs “when the trial court‟s ruling is

18
  Mr. Franklin and National do not challenge the imposition of sanctions but rather the
vagueness of the sanctions imposed.
clearly against the logic of the circumstances then before the court and is so arbitrary and

unreasonable as to shock the sense of justice and indicate a lack of careful consideration.”

Id. Even if there is an error, this Court will not reverse a judgment unless the erroneous

sanction resulted in prejudice. See id.

       After failing to appear for depositions twice,19 Ms. Lewellen filed a motion to

sanction Mr. Franklin and National. After a hearing on the motion, the court ordered

Mr. Franklin‟s and National‟s pleadings be struck and precluded them from introducing

evidence regarding the issue of liability.     Additionally, the court ordered that any

documents produced by Mr. Franklin and National as a result of discovery could be

admitted only as evidence against them. Specifically, the circuit court stated:

       This court does find that Chad Franklin, and as the representative, corporate
       representative of Chad Franklin National Auto Sales, has intentionally violated the
       rules of discovery, has intentionally violated the court order to appear for
       depositions, that that [sic] has caused prejudice to [Ms. Lewellen] . . . that the
       conduct is willful . . .. Therefore, [Ms. Lewellen‟s] motion for sanctions is
       granted.

       The pleadings of defendant, Chad Franklin, and defendant, Chad Franklin
       National Auto Sales, are struck. Those two defendants will be precluded from
       introducing evidence in defense of the claims. Any documents that had been
       produced as a result of the discovery process by those two defendants, if offered
       by [Ms. Lewellen], can be admitted for purposes against defendants Franklin, the
       Franklin defendants only.

       When counsel for Mr. Franklin and National requested clarification about whether

counsel would be precluded from cross-examining witnesses at trial, the court responded

19
   After the first time Mr. Franklin failed to appear, the circuit court ordered him and a
representative of National to appear at the next deposition. Despite this order, neither
Mr. Franklin nor a representative of National appeared. The court also appointed a
discovery master to the case due to other discovery issues.
that the court would get back to counsel after considering the matter further. At a later

pretrial hearing, the court limited Mr. Franklin‟s and National‟s participation in voir dire

and ability to cross-examine witnesses, stating:

       My rulings with respect to defendants Franklin, or the dealer defendants,
       hasn‟t changed. And it‟s almost as if they‟re in default. The pleadings
       have been struck. I‟m allowing participation in the voir dire to the extent
       that an appropriate voir dire question has not been asked by any of the
       remaining non-sanctioned and not in default parties, including
       [Ms. Lewellen], of course, and will allow cross-examination only on the
       issue of damages.

       The circuit court‟s order of sanctions in this case was not vague or ambiguous

because it specifically informed counsel what counsel could and could not do. In striking

Mr. Franklin‟s and National‟s pleadings and precluding them from defending against

Ms. Lewellen‟s claims, the court, in effect, found Mr. Franklin and National liable.

Additionally, the court was clear that documents produced by Mr. Franklin and National

during discovery could be admitted only as evidence against them.            Further, their

counsel‟s participation in voir dire was limited to asking appropriate questions not

otherwise asked, and counsel could cross-examine witnesses only on the issue of

damages.

       Even though the court‟s order did not address specifically whether Mr. Franklin

and National could object to evidence, later statements by the court at the pretrial

conference made clear that they would be allowed to make objections to improper

evidence. In ruling on motions in limine brought by Mr. Franklin and National, the court

declined to exclude certain evidence from the outset but repeatedly informed counsel for

Mr. Franklin and National to “be on [counsel‟s] toes with an objection” and that the court
would be watching for those objections. After these statements, there was no doubt that

counsel would be allowed to object to any improper evidence offered by Ms. Lewellen.

      Aside from making broad statements that their counsel could not adequately

prepare for trial, Mr. Franklin and National fail to show how they were prejudiced by the

purported lack of clarity in the circuit court‟s order. They do not specify what counsel

would have done differently at trial or to prepare for trial if the order were clearer.

Moreover, Mr. Franklin and National could not have been prejudiced by the trial court‟s

initial failure to specify whether counsel could object to evidence because the record

shows counsel made multiple objections to evidence offered by Ms. Lewellen. They also

could not have been prejudiced by the failure to specify whether counsel could make

arguments to the jury regarding issues raised by Ms. Lewellen because counsel‟s closing

argument referred to evidence Ms. Lewellen presented.

      Mr. Franklin and National fail to demonstrate how the circuit court‟s order was

vague or how it prejudiced them. Therefore, the circuit court did not abuse its discretion

when it imposed discovery sanctions.

                                       Conclusion

      Because the right to a jury trial in 1820 included the right to have a jury determine

the amount of punitive damages in an action for fraud, section 510.265‟s cap on punitive

damages awards is unconstitutional because the statute imposes a legislative limit on the

jury‟s assessment of punitive damages when such limits did not exist in 1820. The circuit

court erred by reducing Ms. Lewellen‟s punitive damages award against Mr. Franklin

pursuant to the caps in section 510.265. The circuit court did not err, however, in
overruling Mr. Franklin and National‟s motion to reduce the punitive damages awards as

a matter of due process because the punitive damages awards were not grossly excessive.

Lastly, the circuit court‟s order imposing discovery sanctions against Mr. Franklin and

National was not ambiguous, and Mr. Franklin and National failed to show any resulting

prejudice. Accordingly, this Court affirms the circuit court‟s judgment in all respects

except for the portion applying section 510.265 to the punitive damages award assessed

against Mr. Franklin for fraudulent misrepresentation. That portion of the judgment is

vacated, and this Court enters judgment awarding Ms. Lewellen $1 million in punitive

damages against Mr. Franklin.

                                               _________________________________
                                                PATRICIA BRECKENRIDGE, JUDGE

All concur.