Post-Judgment Review of Punitive Damages, 0716 ALBJ, 77 The Alabama Lawyer 250 (2016)

• Author: By William E. Shreve, Jr.
• Position: Vol. 77 4 Pg. 250

Post-Judgment Review of Punitive Damages

Vol. 77 No. 4 Pg. 250

Alabama Bar Lawyer

July, 2016

By William E. Shreve, Jr.

Punitive damages “pose an acute danger of arbitrary deprivation of property” through excessive punishment.¹ To address this danger, the U.S. and Alabama Supreme courts developed standards and procedures for post-judgment review of punitive-damages awards to determine whether the damages are excessive and should be reduced. This article aims to summarize these standards and procedures and outline the steps defendants should take to obtain effective review.

I. The Legal Foundations for Review

Federal and Alabama law provide separate legal bases for review of punitive damages. The federal grounds are the due-process clauses of the Fourteenth and Fifth amendments, which prohibit the states and the federal government, respectively, from depriving persons “of life, liberty, or property, without due process of law.” Due process “imposes a substantive limit on the size of punitive damages awards,” Honda Motor Co. v. Oberg, 512 U.S. 415, 420 (1994), in that courts may not inflict “grossly excessive or arbitrary punishments on a tortfeasor,” State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 416 (2003). Fourteenth Amendment due process applies to punitive damages awarded in state courts and in federal courts applying state law under diversity jurisdiction, while Fifth-Amendment due process limits punitive awards in federal courts under federal law. See BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 562-68 (1996); Eden Elec., Ltd. v. Amana Co., 258 F. Supp. 2d 958, 967 (N.D. Iowa 2003), aff ’d, 370 F.3d 824 (8^th Cir. 2004), cert. denied, 543 U.S. 1150 (2005); Morgan v. Woessner, 997 F.2d 1244, 1255 (9^th Cir. 1993), cert. dism'd, 510 U.S. 1033 (1994). The analysis as to whether punitive damages violate due process is the same under both amendments. See Morgan, 997 F.2d at 1255.

Under Alabama law, as set forth in Green Oil Co. v. Hornsby, 539 So. 2d 218 (Ala. 1989), punitive damages "must not exceed an amount that will accomplish society's goals of punishment and deterrence" (hereafter "the Green Oil standard"). M. at 222. Punitive awards higher than that amount are "considered excessive, as a matter of law," Killough v. Jahandarfard, 578 So. 2d 1041, 1046 (Ala. 1991), and also violate due process under Alabama Constitution Art. I, § 13, see Fuller v. Preferred Risk Life Ins. Co., 577 So. 2d 878, 885 (Ala. 1991).² The Green Oil standard applies in federal diversity cases as well as in state court. See American Employers Ins. Co. v. Southern Seeding Servs., Inc., 931 F.2d 1453, 1457-58 (11^th Cir. 1991); Atchafalaya Marine, LLC v. National Union Fire Ins. Co., 959 F. Supp. 2d 1313, 1330-31 & n.17 (S.D. Ala. 2013). Thus, Alabama courts, and federal courts applying Alabama law, must examine punitive damages under both Fourteenth-Amendment due process and the Green Oil standard. See Shiv-Ram, Inc. v. McCaleb, 892 So. 2d 299, 315-16 (Ala. 2003). But see McClain v. Metabolife Int'l, Inc., 259 F Supp. 2d 1225, 1234, 1236 (N.D. Ala. 2003) (opining that Green Oil standard no longer applies in federal court in view of U.S. Supreme Court decisions establishing due-process review).

In addition to the Green Oil standard, the Alabama Legislature has enacted caps on punitive damages. Ala. Code § 6-11-21 provides that, except in "actions for wrongful death or for intentional infliction of physical injury," a punitive award may not exceed (1) the greater of three times compensatory damages or $500,000 (adjusted every three years for inflation, beginning January 1, 2003); (2) for a "small business" as defined in § 6-11-21(c), the greater of $50,000 (adjusted for inflation) or 10 percent of the business's net worth; or (3) in cases of "physical injury," the greater of three times compensatory damages or $1.5 million (adjusted for inflation). § 6-11-21(a), -(b), -(d), -(f), & -G) (emphasis added).³

Juries are not instructed on these caps, see § 6-11-21(g), so courts must apply the caps post-verdict. Punitive damages that are reduced to or that are less than the applicable cap may still be excessive, however, and are therefore still subject to review. See §6-11-21(i) ("Nothing herein shall.. .limit the duty of the court, or the appellate courts, to scrutinize all punitive damage awards, ensure that all punitive damage awards comply with applicable procedural, evidentiary, and constitutional requirements, and to order remittitur where appropriate."); Ross v. Rosen-Rager, 67 So. 3d 29, 34, 41-45 (Ala. 2010) (reducing damages already within cap).

II. The BMW Guideposts And Green Oil Factors

In BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996), the U.S. Supreme Court set forth "guide-posts" for determining whether punitive damages violate due process. The Alabama Supreme Court, with help from the Alabama Legislature, has also directed courts to consider certain factors in applying the Green Oil standard. Below are lists of these guide-posts and factors.

BM guideposts:

1. Degree of reprehensibility of the defendant's conduct;

2. Ratio of punitive damages to the actual harm inflicted on the plaintiff; and

3. Civil or criminal penalties that could be imposed for comparable misconduct.

See BMW, 517 U.S. at 574-85.

Green

Oil factors:

1. Culpability of the defendant’s conduct;

2. Desirability of discouraging others from similar conduct;

3. Impact of the punitive award upon the parties;

4. Impact of the punitive award on innocent third parties;

5. Harm that is likely to occur from the defendant’s conduct as well as the harm that actually has occurred;

6. Degree of reprehensibility of the defendant’s conduct;

7. If the wrongful conduct was profitable to the defendant, the damages should remove the profit and be in excess of the profit;

8. Defendant’s financial position;

9. Plaintiff’s costs of litigation;

10. Criminal sanctions imposed on the defendant for his conduct, taken into account in mitigation of the punitive award;

11. Other civil actions against the defendant based on the same conduct, taken into account in mitigation of the punitive award;

12. Economic impact of the verdict on the defendant and on the plaintiff;

13. Amount of compensatory damages awarded;

14. Whether the defendant has been guilty of the same or similar acts in the past; and

15. Nature and the extent of any effort the defendant made to remedy the wrong and the opportunity or lack of opportunity the plaintiff gave the defendant to remedy the wrong.

See Green Oil, 539 So. 2d at 223-24; Hammond v. City of Gadsden, 493 So. 2d 1374, 1379 (Ala. 1986); Ala. Code § 6-11-23(b). These factors are not exclusive; a court may also consider “other relevant factors.” Killough, 578 So. 2d at 1046; see also Hammond, 493 So. 2d at 1379.

This article will later examine the details of the BMW guideposts and Green Oil factors as developed in case law.

III. Post-Judgment Motions Necessary for Review

Post-judgment review of punitive damages is not automatic. A court has no obligation to reduce punitive damages to the statutory cap, to review such damages for excessiveness or to hold a hearing on whether the damages are excessive, unless the defendant moves the court to do so. See Lifestar Response of Ala., Inc. v. Lemuel, 908 So. 2d 207, 225-26 (Ala. 2004); M & J Materials, Inc. v. Isbell, 153 So. 3d 24, 26-27 n.2 (Ala. Civ. App. 2013) (plurality opinion); Peete v. Blackwell, 504 So. 2d 222, 225 (Ala. 1986). Therefore, faced with a jury’s verdict or a trial court’s judgment that includes punitive damages, the defendant should make several post-judgment filings challenging the damages and asking for a hearing.

Motion to apply statutory cap:

If the damages exceed an applicable cap under Ala. Code § 6-11-21, the defendant should move the court to reduce the damages to the cap amount, without waiver of the defendant’s rights to (a) challenge the sufficiency of the evidence to support punitive damages, and (b) have the court review the punitive award for excessiveness. A defendant who contends that the “small business” cap applies must prove that “at the time of the occurrence made the basis of the suit,” the defendant was a “business having a net worth of [$2 million] or less.” § 6-11-21(c) (emphasis added); see also Ross, 67 So. 3d at 44-45. The defendant should provide evidence of net worth either by filing an affidavit with the motion or by moving for a post-judgment hearing and the right to introduce such evidence at the hearing. Evidence of the defendant’s net worth should be specific, credible and persuasive, or else the trial court may decide not to accept it. See Tanner v. Ebole, 88 So. 3d 856, 877-81 (Ala. Civ. App. 2011); Ross, 67 So. 3d at 44-45.

Motion for new trial:

The issue of an excessive verdict must be raised by motion for new trial. See State v. Long, 344 So. 2d 754, 756 (Ala. 1977). The motion should aver that the punitive award is grossly excessive in view of the pertinent BMW guideposts and Green Oil factors, and that it violates Fourteenth ( or Fifth) Amendment due process, the Green Oil standard and due process under Alabama Constitution Art. I, § 13. Motions that fail to do so may be considered inadequate to preserve the issue. See Lifestar, 908 So. 2d at 225-26; Waldrip Wrecker Serv., Inc. v. Wallace, 758 So. 2d 1110, 1115 (Ala. Civ. App. 1999); Hill v. Jackson, 669 So. 2d 921, 924 (Ala. Civ. App. 1995). The motion should ask alternatively for remittitur, a type of ruling on a new-trial motion in which the court orders a new trial unless the plaintiff agrees to accept reduced damages. A remittitur order, giving the plaintiff the choice of a new trial or a reduced...