How much punishment is enough?
04/09/08
According to today's Gazette, CAMC is urging Webster Co. Circuit Court Judge Jack Alsop to reduce a $25 million verdict awarded in favor of Dr. R.E. Hamrick, Jr. The compensatory damages awarded Dr. Hamrick totaled $5 million. The lawsuit stemmed from a suspension of Dr. Hamrick's privileges after he made known his plan to use $1 million of his own money to insure himself against malpractice claims.
In West Virginia, a jury may award punitive damages against a defendant as punishment for a willful, wanton, reckless, intentional or malicious act. Punitive damages serve to punish the defendant and deter others from similar conduct.
In the Syllabus of the opinion in Garnes v. Fleming Landfill, Inc., 413 S.E.2d 897 (W.Va. 1991), the Supreme Court of Appeals of West Virginia exhaustively set forth the law is it pertains to awards of punitive damages:
1. Syllabus Point 3 of Wells v. Smith, 171 W.Va. 97, 297 S.E.2d 872 (1982), allowing a jury to return punitive damages without finding compensatory damages is overruled. Punitive damages must bear a reasonable relationship to the potential of harm caused by the defendant's actions.
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3. When the trial court instructs the jury on punitive damages, the court should, at a minimum, carefully explain the factors to be considered in awarding punitive damages. These factors are as follows:
(1) Punitive damages should bear a reasonable relationship to the harm that is likely to occur from the defendant's conduct as well as to the harm that actually has occurred. If the defendant's actions caused or would likely cause in a similar situation only slight harm, the damages should be relatively small. If the harm is grievous, the damages should be greater.
(2) The jury may consider (although the court need not specifically instruct on each element if doing so would be unfairly prejudicial to the defendant), the reprehensibility of the defendant's conduct. The jury should take into account how long the defendant continued in his actions, whether he was aware his actions were causing or were likely to cause harm, whether he attempted to conceal or cover up his actions or the harm caused by them, whether/how often the defendant engaged in similar conduct in the past, and whether the defendant made reasonable efforts to make amends by offering a fair and prompt settlement for the actual harm caused once his liability became clear to him.
(3) If the defendant profited from his wrongful conduct, the punitive damages should remove the profit and should be in excess of the profit, so that the award discourages future bad acts by the defendant.
(4) As a matter of fundamental fairness, punitive damages should bear a reasonable relationship to compensatory damages.
(5) The financial position of the defendant is relevant.
4. When the trial court reviews an award of punitive damages, the court should, at a minimum, consider the factors given to the jury as well as the following additional factors:
(1) The costs of the litigation;
(2) Any criminal sanctions imposed on the defendant for his conduct;
(3) Any other civil actions against the same defendant, based on the same conduct; and
(4) The appropriateness of punitive damages to encourage fair and reasonable settlements when a clear wrong has been committed. A factor that may justify punitive damages is the cost of litigation to the plaintiff.
Because not all relevant information is available to the jury, it is likely that in some cases the jury will make an award that is reasonable on the facts as the jury know them, but that will require downward adjustment by the trial court through remittitur because of factors that would be prejudicial to the defendant if admitted at trial...
In TXO Production Corp. v. Alliance Resources Corp., 419 S.E.2d 870 (W.Va. 1992), the Court offered advice as to a reasonable punitive damages award:
"The outer limit of the ratio of punitive damages to compensatory damages in cases in which the defendant has acted with extreme negligence or wanton disregard but with no actual intention to cause harm and in which compensatory damages are neither negligible nor very large is roughly 5 to 1. However, when the defendant has acted with actual evil intention, much higher ratios are not per se unconstitutional."
Ironically, notwithstanding its suggested ratio, the Court upheld and found reasonable the verdict against TXO for $19,000 in compensatory damages and $10,000,000 in punitive damages for TXO's acts of slander and libel. The Court noted:
"On the record, the jury may reasonably have determined that TXO set out on a malicious and fraudulent course to win back, either in whole or in part, the lucrative stream of royalties that it had ceded to Alliance. The punitive award is certainly large, but in light of the millions of dollars potentially at stake, TXO's bad faith, the fact that TXO's scheme was part of a larger pattern of fraud, trickery, and deceit, and TXO's wealth, the award cannot be said to be beyond the power of the State to allow. "
In the seminal case of State Farm v. Campbell, 538 U.S. 408 (2003), the U.S. Supreme Court discussed the ratio of punitive damages awards, and stated:
"We have been reluctant to identify concrete constitutional limits on the ratio between harm, or potential harm, to the plaintiff and the punitive damages award. We decline again to impose a bright-line ratio which a punitive damages award cannot exceed. Our jurisprudence and the principles it has now established demonstrate, however, that, in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process. In [Pacific Mut. Life Ins. Co. v.] Haslip, [499 U.S. 1(1991)] in upholding a punitive damages award, we concluded that an award of more than four times the amount of compensatory damages might be close to the line of constitutional impropriety. We cited that 4-to-1 ratio again in [BMW of North America, Inc. v.] Gore, [517 U.S. 559 (1996)]. The Court further referenced a long legislative history, dating back over 700 years and going forward to today, providing that sanctions of double, treble, or quadruple damages to deter and punish. While these ratios are not binding, they are instructive. They demonstrate what should be obvious: Single-digit multipliers are more likely to comport with due process, while still achieving the State's goal of deterrence and retribution, than awards with ratios in range of 500 to 1, or, in this case, 145 to 1."
In the matter of Boyd v. Goffoli, 608 S.E.2d 169 (W.Va. 2004) (citations and quotations omitted), the Court declined to overturn the punitive award, finding the ratio of damages, even with potentially inflated compensatory damages, to be acceptable:
"In addition, even if we were to consider a portion of the compensatory damages in this case to be punitive damages so as to result in a ratio of 8.4:1, such a ratio is by no means necessarily unconstitutional. As the Supreme Court noted in Campbell, while single-digit multipliers (meaning a ratio of up to 9 to 1) are more likely to comport with due process, there are no rigid benchmarks that a punitive damages award may not surpass. In sum, there is nothing in our jurisprudence or that of the United States Supreme Court that renders the ratio of the punitive damages award to the compensatory damages award in this case improper."
As the punitive/compensatory ratio of damages awarded Dr. Hamrick are 5:1, it will be interesting to see how this one turns out.
If you would like to speak with one of our attorneys regarding punitive damages issues, please feel free to contact as at our Charleston office (304.345.4222) or Wheeling office (304.233.3100), or simply drop us an email.
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