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Focusing the Penalty: New Limits on
Punitive Damages Minnesota Punitive Damages Law Punitive damages have been recognized and permitted
in Minnesota since the state’s formation, initially as a matter of
common law.3 These early cases
applied the traditional “preponderance of the evidence” standard to
punitive damages claims.4 In 1978, the Legislature enacted Minn. Stat.
§549.20 against a “backdrop of concern over the increasing number
of punitive damages awards in product liability cases.”5 The statute “was intended to codify our
common law on punitive damages,”6 but also
If punitive damages are sought, any party may request
a bifurcated trial so that the initial proceeding is limited to a
determination of whether compensatory damages are to be awarded. If a defendant is found liable in the first
phase for compensatory damages, there will be a separate proceeding
to “determine whether and in what amount punitive damages will be
awarded.”11 The statute also requires that every award of punitive
damages be reviewed by the court in light of the factors set out in
the statute for measuring punitive damages.
The court must make specific findings with respect to the relevant
factors and, upon review of the jury’s determination, may limit the
punitive damages award.12 The federal judges in the District of Minnesota apply
the pleading requirements of Minn. Stat. §549.20 to punitive damages
claims arising from causes of action premised upon Minnesota law,
concluding that the statute is “substantive” rather than “procedural”
for purposes of Erie analysis.13 Although this rule is “well settled”14
and applied “consistently”15 by the federal court in Minnesota, it
is the minority view among federal courts and has not escaped criticism.16 Since the purpose of punitive damages is to punish
serious misbehavior, the focus in determining the amount of punitive
damages is on the defendant’s conduct, not on the plaintiff’s harm.17 The statute provides as follows:
A plaintiff is not required to prove every one of these
factors in order to justify an award of punitive damages. Thus, for example, “evidence of a defendant’s
financial condition is an important consideration … but it is not
necessarily an essential element to prove entitlement to those damages.”19 However, all of the factors are relevant
to a reviewing court’s determination of the appropriateness of a punitive
damages award.20 Initially, the appropriate amount of punitive damages
is a question for the jury, but the “open ended and volatile nature
of punitive damages” requires the court to exercise close supervision
over the award.21 In general,
Minnesota courts will look for proportionality between the egregious
conduct and the amount of damages.22
In so doing, Minnesota courts have considered several factors
affecting the appropriateness of jury awards,23 and have not infrequently
remitted awards found to be excessive.24 Federal Constitutional Limitations Punitive damage claims also involve consideration of
federal constitutional limits. In
a trio of decisions starting in 1993,25 the U.S.
Supreme Court concluded that punitive damage awards raise important
federal due process considerations that directly affect the state’s
ability to provide for this remedy.
While recognizing punitive damages serve the state’s legitimate
interest in punishing unlawful conduct and deterring its repetition,26
the U.S. Supreme Court concluded such awards are similar to criminal
sanctions and raise both procedural and substantive federal due process
concerns. The Philip
Morris decision is the fourth in the series, and is significant
for the fact that it charges the state courts with providing adequate
protections for defendants at the time the issue is submitted to the
jury, rather than through trial court review after the fact. This more active role began about 20 years ago, when
the Supreme Court expressed a general concern about the lack of adequate
guidance given to juries in determining punitive damages awards, as
well as a concern about excessive punitive awards.
At first, the Court seemed content to provide guidance to the
states only in developing procedures
to ensure that juries do not impose punitive damages in an arbitrary
or irrational manner and thereby violate the due process guarantee
of the 14th Amendment.27 Along the
way, however, the Court suggested that punitive damages awards may
also raise substantive due
process concerns. The first
hint of this substantive dimension is found in Browning
Ferris Industries of Vermont v. Kelco Disposal,
Inc., 492 U.S.257 (1989), and later given considerable emphasis
in TXO Production Corp v. Alliance Resources Corp,
509 U.S. 443 (1993), where Justice Stevens framed the question before
the Court as “whether that punitive damages award violates the Due
Process Clause of the 14th Amendment, either because its amount is
excessive or because it is the product of an unfair procedure.”28 Then, in BMW
of North America v. Gore, 517 U.S. 559 (1996), the Court finally
focused its full attention on this substantive dimension of due process
review and, for the first time, reversed an award of punitive damages,
not for being procedurally wanting, but for being “grossly excessive”
in violation of the Due Process Clause.
BMW set forth three “guideposts” for reviewing courts to use to determine
whether a punitive damages award has been narrowly tailored to satisfy
a state’s interest in punishing conduct so as to protect its own consumers
and its own economy. The guideposts
are (1) the degree of reprehensibility of the defendant’s conduct
toward the plaintiff, (2) the ratio between the compensatory award
and the punitive award, and (3) a comparison of the punitive damages
award to any civil or criminal penalties that could be imposed for
comparable conduct. BMW
admonished reviewing courts to reverse punitive awards if, after carefully
scrutinizing the record while applying these three guideposts, they
determine that a “more modest” award would satisfy the state’s interest
in punishing the defendant’s conduct.
The case necessarily requires a heightened review of punitive
damages awards should such awards be appealed. A few years later, in Cooper Industries, Inc. v. Leatherman Tool Group,
Inc., 532 U.S. 424 (2001), the Court held that federal and state
appellate courts must review de
novo the trial court’s determination of the constitutionality
of a punitive damages award. This
emphasized the need for heightened review where the constitutionality
of the award was directly challenged.
Thus, while a reviewing court will defer to the trial court’s
discretion on whether the award comports with Minnesota law,29
a challenge to the constitutionality of the award as grossly excessive
or violating due process is reviewed de
novo. In 2003, in State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003), the Court further refined its
notion of the “grossly excessive” limitation on punitive awards. The Court found that the state’s decision to
impose punitive damages was permissible, but that “a more modest”
award would have served Utah’s interest in punishing and deterring
State Farm and others from similar conduct in the future, and so reversed
the award as unconstitutional.30 Applying its BMW guideposts to its review, the Court clarified several issues as
to the evidence that can be considered in making the reprehensibility
analysis, provided further guidance on the ratio between compensatory
awards and punitive awards, and provided some guidance on the relationship
of the punitive award to public fines or penalties levied for comparable
conduct. In assessing reprehensibility, Campbell makes it clear that a state may not punish for conduct that
may have been lawful where it occurred or even for unlawful acts that
occurred outside of a state’s jurisdiction.31 Nor may a defendant be punished for “dissimilar
acts, independent from the acts upon which liability was premised.”32
As to the ratio between compensatory damages and punitive
damages, Campbell said that
while there are no “concrete constitutional limits on the ratio …
in practice, few awards exceeding a single-digit ratio … will satisfy
due process.”33 Moreover, the Court
said that “[w]hen compensatory damages are substantial, then a lesser
ratio, perhaps only equal to compensatory damages,” can satisfy due
process.34 While concluding
that “there are no rigid benchmarks that a punitive damages award
may not surpass,” the Court suggested that larger ratios may be constitutionally
permissible where the plaintiff suffered economic damages only, the
amount of economic damages is small, and the defendant’s conduct is
particularly egregious. As to the third benchmark, the Campbell court noted that “[t]he most relevant civil sanction under
Utah state law … appears to be a $10,000 fine for an act of fraud,
an amount dwarfed by the $145 million punitive damages award.”35 However, the Court also observed that
while the existence of a criminal penalty for the defendant’s conduct
shows the seriousness with which the state views such conduct, it
provides little assistance to the jury in determining the appropriate
amount of punitive damages. Since
it is more difficult to impose criminal sanctions due to a heightened
burden of proof and other factors, the Court observed that “the remote
possibility of a criminal sanction does not automatically sustain
a punitive damages award.”36 Dozens of appellate rulings in the wake of Campbell resulted in a reduction in the
size of many punitive damages awards, but in the vast majority of
instances, the ratio of punitive damages to compensatory damages remained
greater than the 1:1 ratio that the Campbell
court proposed for all but extraordinary cases.37 Reviewing courts also began to reflect
their understanding of the other BMW
guideposts as further clarified by Campbell. However, the post-Campbell cases do not reflect a consistent understanding or application
of the Supreme Court’s guidance in that case. Many courts seem to have determined to apply
Campbell as narrowly as possible. The last chapter in this saga, for the moment, is Philip Morris USA v. Williams, 127 S.Ct. 1057 (2007). In
a 5-4 opinion filed on February 20, 2007, the Court explicitly held
that a jury may not punish a defendant through a punitive award for
harm inflicted on nonparties to the lawsuit.
The Court also addressed the procedure for implementing this
limitation, stating that a state trial court should, upon
request, provide assurances and authorize procedures to ensure
that the jury does not award damages for harm inflicted upon nonparties.
In the Philip
Morris case, an Oregon jury found that Jesse Williams smoked in
significant part because he was deceived by Philip Morris into believing
that it was safe to do so. The
trial court rejected a jury instruction proposed by Philip Morris
that stated that punitive damages could not “punish the defendant
for the impact of its alleged misconduct on other persons, who may bring lawsuits of their
own in which other juries can resolve their claims” and award
punitive damages for those harmed.38 The jury ultimately awarded his estate
$821,485 in compensatory damages and $79.5 million in punitive damages. The Oregon Supreme Court affirmed the trial
judge’s denial of the requested jury instruction, and the U.S. Supreme
Court agreed to review the case. In its opinion, the Supreme Court held that the 14th
Amendment’s due process clause forbids a state from using a punitive
damages award to punish for harm inflicted on nonparties to the lawsuit. According to the Court, the due process clause
prevents a state from punishing a defendant without that defendant
being able to present every available defense, which would be impossible
to do with respect to nonparties.
Without this limitation, a plaintiff would be asking a jury
to speculate on the number of victims and circumstances in which they
were injured. The Court noted
that while evidence of harm to nonparties might be relevant to assess
whether conduct was “reprehensible,” the jury could go no further
and punish for harm to nonparties.39 More importantly, however, the Court addressed the
procedural aspects of implementing this limitation on the jury award. If requested, the state court is responsible
for providing some form of protection against the risk that the jury
will award punitive damages for harm inflicted on nonparties.40 While noting states have some flexibility
in deciding appropriate protections for each case, the Supreme Court
charged the state courts with the responsibility of ensuring the jury
asks the “right question”41 and avoiding procedures that create an
“unreasonable and unnecessary risk” of jury confusion.42 Impact on Minnesota Law The Philip Morris
decision will certainly have an impact on submission of the punitive
damages case to the jury. Practitioners
should therefore be mindful of a number of considerations. First, the decision did not articulate exactly
what sort of protections will be necessary to adequately protect the
defendant. Most likely, the
protections may vary depending on the particular case, and may include
exclusion of certain evidence, strongly worded jury instructions,
more explicit special verdict forms, or even special admonitions to
the jury. For example, if the
trial court screens certain evidence, the jury may never hear or consider
evidence of the defendant’s conduct affecting nonparties.
Or if such evidence is admitted for the limited purpose of
showing the conduct was “reprehensible,” which is permissible under
due process standards,43 the trial judge
may give a cautionary instruction to the jury on the limited use of
such evidence. Depending on
the case, these protections should be adjusted for the case at hand,
with the overarching goal to ensure the jury is asking the “right
question” when it considers and awards punitive damages, and understands
that an award can only punish the defendant for harm or potential
harm to the plaintiff alone. The current pattern instruction will require
some alteration to ensure such message is clearly given to the jury.44
Second, while the decision charges the state courts
to ensure appropriate protections are used, it also appears to put
most of the burden on the defendant to request such appropriate protections.45 While Minnesota appellate courts do,
in limited circumstances, permit the appeal of plain error, the parties
are generally responsible for requesting jury instructions and evidentiary
limitations that accurately reflect Minnesota law and any constitutional
limits. In a punitive damage
situation, defendants must be careful to request such adequate protections
through jury instructions, special verdict forms, and evidence limitations,
and to preserve error if such protections are denied.
In most cases, it is helpful to consult with an appellate practitioner
to ensure that the appropriate protections are requested. Conclusion Philip Morris and its Supreme Court predecessors add another facet to the well-developed Minnesota law on punitive damages claims. The recent decision also charges the state court and the defendant with ensuring that appropriate protections are in place for preventing the jury from awarding punitive damages for harm suffered by nonparties. It will likely prompt some changes in both evidentiary issues and jury instruction issues in future cases, in supplement to the other protections provided in the Minnesota statutes and common law.
2 127 S.Ct. at 1064-65.
3 See Lynd v. Picket, 7 Minn. 184, 7 Gil. 128 (1862); Jensen v. Peterson,
264 N.W.2d 139 (Minn. 1978). 4 See Gryc v. Dayton-Hudson, 297
N.W.2d 727, 738-39 (Minn. 1980). 5 Jensen v. Walsh, 623 N.W.2d 247, 250 (Minn. 2001). 6 Id. 7 Id. 8 See Bougie v. Sibley Manor, Inc., 504 N.W.2d 493,
500 n.4 (Minn. App. 1993). 9 See Minn.
Stat. §549.20, subd. 1(b).
10 See Minn.
Stat. §549.20, subd.
1(a) (2003). See also Ulrich v. City of Crosby, 848 F. Supp. 861, 868 (D. Minn.
1994); Becker v. Alloy Hardfacing & Eng’g Co.,
401 N.W.2d 655, 659 (Minn. 1987). 11 Minn. Stat. §549.20, subd. 4 (2003). 12 Minn. Stat. §549.20, subd. 5 (2003). 13 Berczyk v. Emerson Tool
Co., 291 F. Supp. 2d 1004, 1008 (D. Minn. 2003); Olson v. Snap Prods., Inc., 29 F. Supp. 2d
1027, 1034 (D. Minn. 1998). The issue was first analyzed by Judge
Devitt in Kuehn v. Shelcore, Inc., 686 F. Supp. 233, 234 (D. Minn. 1988). 14 Backlund v. City of Duluth,
176 F.R.D. 316, 320 n.3 (D. Minn. 1994). 15 Engele v. Indep. Sch. Dist. No. 91, 846 F. Supp. 760,
768 (D. Minn. 1994). 16 See Josh
Jacobson, “Pleading Punitive Damages: An Erie Dilemma,” 58 Bench & Bar of
Minn. 2 (Feb. 2001), at 17 ff. 17 See Jensen v. Walsh, 623
N.W.2d 247, 250 (Minn. 2001). 18 See Steenson & Knapp, 4 Minnesota
Practice: Jury Instruction Guides – Civil, CIVJIG 94.10. 19 Nugent v. Kerr, 543 N.W.2d 688, 691 (Minn. App. 1996). 20 See Johnson v. Ramsey County, 424 N.W.2d 800, 807-08 (Minn. App. 1988). 21 Mzorka v. Archdiocese of St. Paul and Minneapolis,
482 N.W.2d 806, 813 (Minn. App. 1992); Hodder v. Goodyear Tire
& Rubber Co., 426 N.W.2d 826, 835 (Minn. 1988). 22 Mzorka, supra at 813; Hodder, supra at 837. 23 See, e.g., Lundman v. McKown, 530
N.W.2d 807 (Minn. App. 1995); Mzorka v. Archdiocese
of St. Paul and Minneapolis, supra; Anderson
v. Amundson, 354 N.W.2d 895 (Minn. App.
1984). 24 See, e.g., Mzorka v. Archdiocese of St. Paul and Minneapolis,
supra; Bradley v. Hubbard Broadcasting, Inc., 471 N.W.2d 670 (Minn. App.
1991); Hodder v. Goodyear Tire & Rubber Co., supra at 837. 25 See BMW of North America v. Gore, 517 U.S.
559 (1996); Cooper Industries,
Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424 (2001); State Farm Mut. Auto. Ins.
Co. v. Campbell, 538 U.S. 408 (2003). 26 BMW, supra, at 568. 27 See the
line of cases including Aetna
Life Ins. Co. v. Lavoie, 475 U.S. 813 (1986); Bankers
Life and Cas. Co. v. Crenshaw, 486 U.S. 71 (1988);
Browning Ferris Indus. of Vermont v. Kelco
Disposal, Inc., 492 U.S. 257 (1989);
Pacific Mut. Life
Ins. Co. v. Haslip, 499 U.S. 1 (1991);
and TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443 (1993). 28 509 U.S. 443, 447 (1993). 29 See Ray v. Miller Meester
Advertising, Inc., 664 N.W.2d 355 (Minn. App. 2003), aff’d, 684 N.W.2d 404 (Minn. 2003). 30 538 U.S. 408, 429 (2003). 31 Campbell, 538 U.S. at 421 (2003). 32 Id. at 422. 33 Id. at 424-25. 34 Id. at 425. 35 Id. at 428. 36 Id. 37 See, e.g., McLain v. Metabolife Int’l, Inc., 259 F. Supp. 2d 1225 (N.D. Ala.
2003); Romo v. Ford Motor Co., 113 Cal. App. 4th 738
(2003); Henley v. Philip Morris,
Inc., 112 Cal. App. 4th 198 (2003).
By mid-2005, only two rulings had reduced the punitive award
to a 1:1 ratio. See
Williams v. Con Agra Poultry
Co., 378 F.3d 790 (8th Cir. 2004); TVT
Records v. Def Island Jam Music Group, 279 F. Supp. 2d 413 (S.D.N.Y.
2003). 38 127 S.Ct. 1057, 1061 (2007)
(emphasis added). 39 Id. at 1064. 40 Id. at 1065. 41 Id. at 1064. 42 Id. at 1065. 43 Id. at 1064. 44 The current instruction follows the language of Minn.
Stat. §549.20 and states jurors may award punitive damages if the
“defendant acted with deliberate disregard for the rights or safety
of others,” and should consider “the seriousness of the hazard to
the public that may have been or was caused by the defendant’s misconduct.” Steenson & Knapp,
4 Minnesota Practice: Jury Instruction Guides – Civil, CIVJIG
94.10. A jury could understand
that language to allow them to punish the defendant for harm caused
to nonparties. While the instruction also tells the jury that it “may
not consider any harm to persons who are not parties to this case
that was the result of lawful conduct in another state” in compliance
with the Campbell decision,
this language would likely need to be expanded to exclude all harm
to nonparties, even for similar conduct.
45 Id. at 1065
(where the risk of misunderstanding the purpose of the award is great,
“a court, upon request,
must protect against that risk) (emphasis added).
J. DAVID PRINCE is a professor of law at William
Mitchell College of Law. He
teaches in the areas of torts, toxic torts, and products liability
law. He is Of Counsel at Larson•King,
where he focuses his practice on products safety and product liability
prevention, mass tort and products liability litigation, appellate
advocacy, and alternative dispute resolution. PAULA DUGGAN VRAA is a partner with Larson•King
in St. Paul, focusing her practice on appellate advocacy and insurance
coverage disputes. She is a former law clerk of Judge Harriet Lansing
of the Minnesota Court of Appeals and an adjunct professor of law
for appellate advocacy at the University of
St. Thomas Law School. |
