Spring 2009 - #9. Lost in Translation: The Circuitous Route to a Standard for Punitive Damages.

Author:by Mary P. Kehoe, Esq.
 
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Vermont Bar Journal

2009.

Spring 2009 - #9.

Lost in Translation: The Circuitous Route to a Standard for Punitive Damages

THE VERMONT BAR JOURNAL Volume 35, No. 1 SPRING 2009

Lost in Translation: The Circuitous Route to a Standard for Punitive Damagesby Mary P. Kehoe, Esq.

On May 13, 2008, a Chittenden County jury returned a plaintiff's verdict for $950,000 in compensatory damages and $7,750,000 in punitive damages in the case of Babel v. Roman Catholic Diocese of Burlington, Vermont.(fn1) The jury in Babel found that the Roman Catholic Diocese of Burlington negligently supervised its employee, Father Paquette, who repeatedly molested the plaintiff when he was an eight year-old boy. The defendant has appealed the verdict to the Vermont Supreme Court. The diocese hired Paquette, despite its knowledge that he had previously molested young boys while serving as a priest in other states. The diocese assigned Paquette full duties without restriction or supervision. Paquette continued to molest young boys while serving in Rutland and, later, in Burlington. The diocese neither informed Paquette's co-workers of his previous misconduct, nor did it take any other steps to prevent Paquette from access to boys. While serving at Christ the King School in Burlington, Paquette repeatedly molested Plaintiff Perry Babel over a period of two years.

The jury concluded that the diocese's failure to supervise Paquette amounted to reckless disregard for Babel's rights and awarded him punitive damages as punishment to the diocese for its reckless conduct. It is not surprising that the diocese would appeal this rather stunning punitive damage award. What is surprising, though, is that the outcome of its appeal should be so difficult to predict.

Recovery of punitive damages in Vermont is hardly a novel concept. In 1862, the Vermont Supreme Court observed in Nye v. Merriam that "the law [has] been long settled in this state that willful fraud, as well as malice, may be punished by exemplary damages."(fn2) Yet, nearly 150 years later, the standard for determining when punitive damages are available is still not entirely clear. Comparatively recent case law reveals that the standard has been applied with such varying results that it is difficult to predict the outcome in Babel.

In Nye, the defendant purchased butter from the plaintiff. Plaintiff Nye subsequently claimed that defendant Merriam had deliberately under-weighed his butter. The transaction went from bad to worse when Merriam altogether failed to pay Nye for the butter. Nye then followed Merriam to New York and Boston before tracking him down in Lebanon, New Hampshire. Nye's first order of business was to demand payment. He also complained to Merriam of the inconvenience caused to him by Merriam's lack of honesty in weighing the butter. The parties negotiated a payment of $60, which was $5 more than the original purchase price, to compensate plaintiff for his butter and his trouble collecting just payment. Implicit in this agreement was an understanding that the pending dispute between the parties had been resolved without the need for recourse to the courts.

Notwithstanding their agreement, Nye subsequently sued Merriam for fraud. The jury returned a verdict for Nye. Although there was no award for compensatory damages, as that matter had been resolved by agreement, the jury awarded Nye exemplary damages based on his fraudulent conduct in under-weighing the butter. This verdict was reversed by the Vermont Supreme Court. It held that neither an action for fraud can be sustained, nor exemplary damages upheld, absent a determination that Nye had experienced at least some consequential damages. Because Merriam had paid Nye a mutually-agreed amount for the full weight of the butter as well as an additional sum for his inconvenience, Nye had not suffered harm. This case is significant in the context of punitive damages because the Court observed that such damages have long been recognized as available where the defendant's conduct is either willful or malicious.(fn3)

One of the first recorded cases to expressly sanction the right to recover punitive damages was Huckel v. Money.(fn4) There, the court refused to set aside an exemplary damage award of £300 in a case where consequential damages only amounted to £20. Plaintiff Huckel was taken into custody by Defendant Money, a King's Messenger, on a false warrant. Huckel was held for only six hours and "used . . . very civilly," Money having "treated him with beef-steaks and beer, so that he suffered very little or no damages."(fn5) According to the court, however, Money's conduct amounted to the exercise of "arbitrary power, violating the Magna Charta, and attempting to destroy the liberty of the kingdom" by insisting on the legality of the warrant. The court observed that "to enter a man's house by virtue of a nameless warrant, in order to procure evidence, is worse than the Spanish Inquisition; a law under which no Englishman would wish to live an hour." Thus, the court upheld what it called "exemplary damages," ruling that "the law has not laid down what shall be the measure of damage in actions of tort; the measure is vague and uncertain, depending on a vast variety of causes, facts, and circumstances."(fn6) The historical recognition of the right to recover punitive damages notwithstanding, the circumstances in which such damages are warranted remain almost as "vague and uncertain" today as they were over two hundred years ago.

In 1921, the Vermont Supreme Court articulated a standard for punitive damage awards in Sparrow v. Vermont Savings Bank.(fn7) Plaintiff Sparrow, executor of his mother's estate, successfully sued a bank for malicious prosecution, but no punitive damages were awarded. The bank had frozen Sparrow's mother's accounts and she sought a mandatory injunction to unfreeze them. The trial court refused to lift the injunction but issued a discovery order which the bank failed to follow, causing the litigation to pend for an unreasonable period of time. Sparrow's mother died before the litigation was concluded. Eventually, Sparrow sued the bank for malicious prosecution on behalf of his mother's estate. The Court set forth the standard for an award of punitive damages, holding that such damages may only be established by a showing of "actual, not implied, malice, [or by] conduct manifesting personal ill will, or carried out under circumstances of insult or oppression, or even by conduct manifesting nothing worse than a reckless and wanton disregard of the plaintiff's rights . . . "(fn8)

In Shortle v. Central Vermont Public Service Corp., the Supreme Court echoed the "reckless disregard" standard applied in...

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