United States: Why Courts Should Not Defer To Phantom Factual Findings When Reviewing Punitive Damages Awards For Excessiveness

Last Updated: December 23 2014
Article by Evan M. Tager and Andrew L. Frey

Everyone who follows punitive damages law knows that the Supreme Court has identified three guideposts for determining whether a punitive award is excessive under the Due Process Clause: (i) the degree of reprehensibility of the defendant's conduct; (ii) the ratio of the punitive damages to the compensatory damages and/or the harm to the plaintiff that was likely to result from the defendant's conduct; and (iii) the disparity between the punitive damages and the legislatively established penalties for comparable conduct.  The first guidepost in particular requires an assessment predicated on the facts of the case, which the parties will likely have disputed.  How should courts go about resolving those disputes?

Many practitioners and courts assume that in conducting excessiveness review, courts should take the evidence in the light most favorable to the plaintiff, just as they do when determining whether the evidence is sufficient to support a liability finding.  Unless the jury has made specific factual findings, however, that assumption is wrong, except to the extent that the facts in question were necessary to the jury's finding of punitive liability.  The reason is that whereas a finding of liability necessarily constitutes a factual finding that each indispensable element of the cause of action has been established, the jury's function in setting the amount of punitive damages does nottypically involve determining whether any particular fact has been proven.

Once the punishment-setting stage is reached, the jury generally is not instructed that it must find particular facts.  Instead, the jury essentially is asked to make an impressionistic judgment about the amount of punishment to exact.  The resulting verdict is the legal equivalent of an ink blot, subject to any number of possible interpretations.

Because it is not possible to tell what facts (if any) the jury found in setting an amount of punitive damages or what relative weight it gave to any facts that may have been found, application of a sufficiency-of-the-evidence standard results in deference being given to what in all probability are phantom factual determinations.  It is simply not true that a large punitive verdict necessarily entails a finding of high reprehensibility.  A headline-making award might be (and all too often is) based largely or entirely on the defendant's finances; or it might be based on some other unknown or undisclosed consideration.

The California Supreme Court is the leading exponent of the view that reviewing courts should not defer to "findings" that the jury neither expressly nor implicitly made.  It explained in its seminal decision in Simon v. San Paolo U.S. Holding Co., 113 P.3d 63 (Cal. 2005), that when the jury has not made an express finding of fact, giving the plaintiff the benefit of all permissible inferences merely because the jury awarded a substantial amount of punitive damages would allow the punitive award to "indirectly justify itself."  Accordingly, it held that "[w]hile we defer to express jury findings supported by the evidence, in the absence of an express finding on the question we must independently decide" the existence of particular disputed facts bearing on the amount of punitive damages.

A decision by the Second Circuit exemplifies the countervailing position.  In Payne v. Jones, 711 F.3d 85 (2d Cir. 2013), the court expressed grave concerns about the administration of punitive damages and carved out an aggressive role for reviewing courts.  Yet it nonetheless stated—without analysis or citation—that "[o]n a motion to set aside or reduce a jury verdict for excessiveness, trial courts and appellate courts alike are required to view all evidence in the light most favorable to sustaining the verdict, and neither court is free to substitute its own fact findings or credibility determinations for those of the jury."

The facts of Payne illustrate why the court was mistaken in assuming that sufficiency-of-the-evidence review applies.  The case involved a claim of police brutality.  One highly disputed fact was whether the defendant was a recidivist.  A witness for the plaintiff testified that the defendant had used excessive force against him a few years earlier, but two police officers testified that the complainant had resisted arrest and that the defendant used no more force than was necessary to subdue him.

The jury didn't need to resolve this factual dispute in order to find either that the defendant had used excessive force against the plaintiff or that the standard for punitive damages had been satisfied.  But the Second Circuit accepted that the defendant was a recidivist merely because the jury awarded $300,000 in punitive damages.  As the California Supreme Court would put it, that allows the award "indirectly to justify itself."  And it is also apt to produce false-positive determinations of high reprehensibility, thereby undermining the effectiveness of the guideposts as constraints on excessive awards.

Consider, for example, the following hypothetical based on Payne.  Suppose that the plaintiff's wife (i.e., an inherently biased witness) testified that the defendant police officer beat her up at a particular time on a particular day in the middle of St. Patrick's Cathedral and that ten bishops testified that they were there that day at that time and that nothing of the sort took place.  This is the kind of credibility dispute that the Second Circuit would say must be resolved in favor of the plaintiff, even though no court reviewing the evidence independently would accept the wife's biased testimony over the unbiased testimony of the ten bishops.

Absent Supreme Court review, this issue is not likely to go away soon.  In the mean time, defendants will need to be vigilant not to acquiesce in the Second Circuit's mistaken assumption when litigating in courts in which the issue remains open.  And in the Second Circuit, defendants will need to consider whether to seek explicit factual findings on various issues that might bear on the guideposts on the theory that they would be no worse off if the jury finds against them than if there are no express factual findings at all—although often these are matters of degree not subject to "yes" or "no" answers and therefore not readily amenable to special verdicts.

Tags: reprehensibility

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