Juries And Punitive Damages Awards

Wednesday, November 1, 2006 - 01:00

The Hon. Ronald J. Hedges

Over the past ten years, the United States Supreme Court has addressed the constitutionality of punitive damages awards under the Due Process Clause of the Fourteenth Amendment on several occasions. In BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996), and State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003), the Supreme Court established and applied three "guideposts" to assist courts in the review of punitive damage awards. In Cooper Industries, Inc. v. Leatherman Tool Group, 532 U.S. 424 (2001), the Supreme Court addressed the standard of review for such awards.

Cooper Industries gives rise to a serious question of whether there is a right to a jury trial under the Seventh Amendment on the quantum or amount of punitive damage awards. This article suggests that there is no such right.

Recall the guideposts of reprehensibility, ratio and disparity established by Gore and applied in Campbell. In Cooper Industries, the Supreme Court held that de novo review of punitive damage awards was appropriate. The Supreme Court reasoned:

Unlike the measure of actual damages suffered, which presents a question of historical or predictive fact, the level of punitive damages is not really a 'fact' 'tried' by the jury." Because the jury's award of punitive damages does not constitute a finding of 'fact,' appellate review of the district court's determination that an award is consistent with due process does not implicate the Seventh Amendment concerns raised by respondent and its amicus.

Differences in the institutional competence of trial judges and appellate judges are consistent with our conclusion. In Gore, we instructed courts evaluating a punitive damages award's consistency with due process to consider three criteria: (1) the degree or reprehensibility of the defendant's misconduct, (2) the disparity between the harm (or potential harm) suffered by the plaintiff and the punitive damages award, and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases. Only with respect to the first Gore inquiry do the district courts have a somewhat superior vantage over courts of appeals, and even then the advantage exists primarily with respect to issues turning on witness credibility and demeanor. Trial courts and appellate courts seem equally capable of analyzing the second factor. And the third Gore criterion, which calls for a broad legal comparison, seems more suited to the expertise of appellate courts. Considerations of institutional competence therefore fail to tip the balance in favor of deferential appellate review." [532 U.S. at 437-40 (footnotes omitted)].

If, as Cooper Industries notes, a punitive damage award "is not really a 'fact' 'tried' by the jury," is there a right to a jury trial? This requires a review of Supreme Court precedent.

In Curtis v. Loether, 415 U.S. 189 (1974), the Supreme Court considered whether there was a right to a jury trial under Section 812 of the Civil Rights Act of 1968, which allowed recovery of both actual and limited punitive damages in civil actions for fair housing violations. In answering that question 'yes,' the Supreme Court held:

We think it is clear that a damages action under 812 is an action to enforce 'legal rights' within the meaning of our Seventh Amendment decisions. A damages action under the statute sounds basically in tort - the statute merely defines a new legal duty, and authorizes the courts to compensate a plaintiff for the injury caused by the defendant's wrongful breach. As the Court of Appeals noted, this cause of action is analogous to a number of tort actions recognized at common law. More important, the relief sought here - actual and punitive damages - is the traditional form of relief offered in the courts of law." [415 U.S. at 195-96 (footnotes omitted)].

In Tull v. United States, 481 U.S. 412 (1987), the Supreme Court analogized the assessment of civil penalties under the Clean Water Act to a common law action in debt and held that such assessment carried a jury trial right to determine liability. However, the Supreme Court concluded that the right did not attach to the determination of a penalty:

The Seventh Amendment is silent on the question whether a jury must determine the remedy in a trial in which it must determine liability. The answer must depend on whether the jury must shoulder this responsibility as necessary to preserve the 'substance of the common-law right of trial by jury.' Is a jury role necessary for that purpose? We do not think so. 'Only those incidents which are regarded as fundamental, as inherent in and of the essence of the system of trial by jury, are placed beyond the reach of the legislature.' The assessment of a civil penalty is not one of the 'most fundamental elements.' Congress' authority to fix the penalty by statute has not been questioned, and it was also the British practice. In the United States, the action to recover civil penalties usually seeks the amount fixed by Congress. The assessment of civil penalties thus cannot be said to involve the 'substance of a common-law right to a trial by jury,' nor a 'fundamental element of a jury trial.'

Congress' assignment of the determination of the amount of civil penalties to trial judges therefore does not infringe on the constitutional right to a jury trial. Since Congress itself may fix the civil penalties, it may delegate that determination to trial judges. In this case, highly discretionary calculations that take into account multiple factors are necessary in order to set civil penalties under the Clean Water Act. These are the kinds of calculations traditionally performed by judges. We therefore hold that a determination of a civil penalty is not an essential function of a jury trial, and that the Seventh Amendment does not require a jury trial for that purpose in a civil action." [481 U.S. at 425-27].

Justice Scalia (with Justice Stevens) dissented to the latter holding:

While purporting to base its determination (quite correctly) upon historical practice, the Court creates a form of civil adjudication I have never encountered. I can recall no precedent for judgment of civil liability by jury but assessment of amount by the court. Even punitive damages are assessed by the jury when liability is determined in that fashion. One is of course tempted to make an exception in a case like this, where the Government is imposing a noncompensatory remedy to enforce direct exercise of its regulatory authority, because there comes immediately to mind the role of the sentencing judge in a criminal proceeding. If criminal trials are to be the model, however, determination of liability by the jury should be on a standard of proof requiring guilt beyond a reasonable doubt. Having chosen to proceed in civil fashion, with the advantages which that mode entails, it seems to me the Government must take the bitter with the sweet. Since, as the Court correctly reasons, the proper analogue to a civil-fine action is the common-law action for debt, the Government need only prove liability by a preponderance of the evidence; but must, as in any action for debt, accept the amount of award determined not by its own officials but by 12 private citizens. If that tends to discourage the Government from proceeding in this fashion, I doubt that the Founding Fathers would be upset." [481 U.S. at 428 (Scalia, J., dissenting)].

Other case law is sparse. In Defender Industries, Inc. v. Northwestern Life Ins. Co., 938 F.2d 502 (4th Cir. 1991), the Fourth Circuit Court of Appeals, in an en banc decision, held that, "[a]n assessment by a jury of the amount of punitive damages is an inherent and fundamental element of the common-law right to trial by jury." 938 F.2d at 507. In Smith v. Printup, 254 Kan. 315, 866 P.2d 985 (Sup. Ct. 1993), the Kansas Supreme Court upheld a state law that provided for judicial determination of the amount of a punitive damage award, reasoning that punitive damages were equitable in nature. 254 Kan. at 326, 866 P.2d at. Contrariwise, in Zoppo v. Homestead Ins. Co., 71 Ohio St. 3d 552, 644 N.E. 2d 397 (Sup. Ct. 1994), the Ohio Supreme Court struck down an analogous Ohio statute, concluding that, "the assessment of punitive damages by the jury stems from the common law and is encompassed within the right to trial by jury." 71 Ohio St. 3d at 557, 644 N.E. 201 at.

Where does all this leave us? "Consistently with the historical objective of the Seventh Amendment, our decisions have defined the jury trial right, as 'the substance of the common-law right of trial by jury, as distinguished from mere matters of form or procedure'" Colgrove v. Battin, 413 U.S. 149, 156 (1973) (quoting Baltimore & Carolina Line, Inc. v. Redman, 295 U.S. 654, 657 (1935)). In Tull, the Supreme Court distinguished between liability and assessment of an amount for purposes of Seventh Amendment analysis. In Cooper Industries , the Supreme Court rejected the proposition that the level of a punitive damage award is a "fact" "tried" by a jury. 532 U.S. at 438 & n.11.

This line of reasoning is a simple thought exercise. It does not pretend to be a detailed analysis. Nevertheless, when one recalls the questions that must be answered under the Gore and Campbell guideposts, a plausible argument can be made that those questions should not be answered by a jury, but by a judge.1 1 Such a conclusion would also avoid the troubling question of how, under the Seventh Amendment, a court could conduct a de novo review of a jury award.

The Hon. Ronald J. Hedges is a United States Magistrate Judge. He sits in Newark, New Jersey, and has been on the Bench since 1986.