McHUGH, Circuit Judge.
This appeal challenges the jury's award of punitive damages in a personal injury action. Amber Lompe was exposed to high levels of carbon monoxide (CO) from a malfunctioning furnace in her apartment at the Sunridge Apartments in Casper, Wyoming. Ms. Lompe brought a diversity action in the Federal District Court for the District of Wyoming against Sunridge Partners LLC (Sunridge) and Apartment Management Consultants, L.L.C. (AMC), the owner and the property manager, respectively, of the Sunridge Apartments. The jury found both Defendants liable for negligence and awarded Ms. Lompe compensatory damages totaling $3,000,000 and punitive damages totaling $25,500,000, of which the jury apportioned $3,000,000 against Sunridge and $22,500,000 against AMC.
On appeal, Defendants argue the district court erred in failing to grant their motion for judgment as a matter of law (JMOL) as to punitive damages. Alternatively, they contend the district court's jury instructions on punitive damages were erroneous and the amount of punitive damages awarded against each Defendant was excessive under common law and constitutional standards. Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we hold the evidence was insufficient to submit the question of punitive damages to the jury as to Sunridge and the amount of punitive damages awarded against AMC is grossly excessive and arbitrary in violation of the Due Process Clause of the Fourteenth Amendment. Accordingly, we vacate the award of punitive damages against Sunridge and reduce the punitive damages awarded against AMC from $22,500,000 to $1,950,000.
Before addressing the merits of the issues on appeal, we pause to consider our subject-matter jurisdiction. See Arbaugh v. Y & H Corp., 546 U.S. 500, 514, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006) (holding that federal courts "have an independent obligation to determine whether subject-matter jurisdiction exists, even in the absence of a challenge from any party"). In her Complaint, Ms. Lompe alleged she is a citizen of Wyoming and Defendants are each limited liability companies (LLCs) with principal offices in Utah. In their responsive pleadings, neither Defendant identified the citizenship of each of the members of the respective LLCs. Nevertheless, the district court asserted jurisdiction based on the diversity of citizenship. See 28 U.S.C. § 1332.
But federal courts must treat LLCs as partnerships for purposes of establishing
Ms. Lompe was a twenty-year-old student at Casper College when she moved into the Sunridge Apartments in September 2010. On February 1, 2011, Ms. Lompe was evacuated from her apartment unit and taken to the hospital after a gas company employee detected high levels of CO emanating from her apartment. Ms. Lompe was treated for acute CO poisoning and as a result of this incident has suffered from various neurological conditions including cognitive deficits, chronic headache, sleep disturbance, and emotional disorders. She has been prescribed a variety of antiseizure, migraine, mood stabilizing, and sleep stabilizing medications. Based on her injuries, Ms. Lompe filed this action against Sunridge and AMC, alleging they violated their duty of care as property owner and manager of the Sunridge Apartments. After the district court denied Defendants' motion for summary judgment, the case proceeded to trial.
Our review requires a detailed examination of the trial record because Defendants challenge the district court's decisions denying JMOL on punitive damages and affirming the constitutionality of the punitive damages awarded against each Defendant. See Deters v. Equifax Credit Info. Servs., 202 F.3d 1262, 1268 (10th Cir.2000) (explaining we review a district court's denial of a motion for JMOL de novo, "applying the same legal standard as the district court"). Defendants are "entitled to judgment as a matter of law only if all of the evidence, viewed in the light most favorable to the nonmoving party, reveals no legally sufficient evidentiary basis to find for the nonmoving party." Jones v. United Parcel Serv., Inc., 674 F.3d 1187, 1195 (10th Cir. 2012) (internal quotation marks omitted). Separately, we must conduct an "exacting" de novo review of the constitutionality of the punitive damages award. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 418, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003). We therefore begin with a review of the relevant evidence presented to the jury.
In 2007, Mr. Bob Ctvrtlik
Before purchasing the Sunridge Apartments, Sunridge obtained a "Property Condition Report" from LandAmerica, which was intended to "observe and document readily visible materials and building system defects which might significantly affect the value of the property, and determine if conditions exist which may have a significant impact on the continued operation of the facility." The report provided a general assessment of the apartment complex, ranking the condition of various components as excellent, good, fair, or poor, including the forced air heating system.
Constructed in 1979, most of the apartments were still heated by the original furnaces when Sunridge purchased the complex in 2007, though some had been replaced. The LandAmerica report identified the heating portion of the complex's broader HVAC system as "forced air gas fired furnaces" and ranked the complex's HVAC system as "fair," meaning that although it was in average or satisfactory condition, "some short term and/or immediate attention is required or recommended, primarily due to the normal aging and wear of the building system, to return the system to a good condition." Although the report did not identify replacing the furnaces as an immediate concern, it recommended the property owner set aside a capital reserve of $153,600 to replace the furnaces on a rolling basis over the course of the next five years.
Sunridge hired AMC as property manager to run the day-to-day operations of the apartments based on Sunridge's previous favorable experience using AMC to manage other properties. The management agreement between Sunridge and AMC required AMC to seek prior written approval from Sunridge before making any purchase over $1,000, except in the case of an emergency. The agreement further provided that if AMC made an emergency expenditure, it must report that purchase to Sunridge within twenty-four hours. AMC was also required to provide a monthly accounting to Sunridge detailing by category the apartment complex's monthly income and expenses. AMC received a fee of 3.4% of the complex's monthly gross income as compensation for its services. The fee was not affected by expenses.
Sunridge relied exclusively on AMC to determine what repairs and other capital expenditures should be made at the Sunridge Apartments. Contrary to the management agreement's provision that AMC must notify Sunridge of large or emergency purchases, the evidence at trial indicated that AMC provided only monthly financial statements that described expenses in general categories. Likewise, there is no direct evidence that AMC notified Sunridge of any CO-related incidents or furnace repairs. And Bob Ctvrtlik testified that AMC did not communicate this information to Sunridge.
The trial evidence showed that AMC had exclusive knowledge about the day-to-day management of the apartment complex and the maintenance or condition of the furnaces.
Mr. Few, AMC's property manager at the apartment complex, lived on the same floor as Ms. Lompe. He testified AMC provided him with no safety or HVAC training after hiring him. Similarly, neither Scott Kemberling, the apartment complex's maintenance employee at the time of Ms. Lompe's CO incident, nor anyone else who worked at the Sunridge Apartments, received any training on furnace maintenance, even though Mr. Kemberling had requested such training. AMC did nothing to inspect, clean, or maintain the furnaces to ensure their safety. During semiannual, move-in, and move-out inspections of each apartment, AMC replaced furnace filters but did nothing further to inspect the furnaces for functionality or safety. And Candice Capitelli, AMC's regional property manager since May 2010, conceded on cross-examination that she had not been fully aware of all the issues she should have known about "in terms of the furnaces at Sunridge Apartments" before Ms. Lompe's CO poisoning.
Stephanie Brooks, AMC's regional property manager until May 2010, testified that in her experience, it was more common to repair furnaces as they presented problems than to institute a preventive maintenance program. Although a professional HVAC contractor did not periodically inspect all the furnaces, AMC's semiannual inspection of each apartment and furnace included "clean[ing] them, chang[ing] the furnace filters, and just identify[ing] if there are any type of issues."
An inspection conducted just after Ms. Lompe's CO incident revealed that only about half of the Sunridge Apartment units had working CO detectors. But a semiannual inspection report of Ms. Lompe's apartment conducted two years before she lived there indicated "[r]eplaced Batt on CO
Valerie Lynne Mesenbrink, a manager at the apartments in 2007 who was promoted to a senior manager position in 2008, testified about continual problems with the complex's furnaces since 2007. She said AMC had not done any safety maintenance or inspections on the furnaces between 2007 and Ms. Lompe's CO poisoning in 2011. Instead AMC's policy was to have a CO detector in each apartment and to test and "go over" it with each tenant upon move-in. Ms. Mesenbrink also indicated that AMC amended the tenants' lease agreements in 2009 to include a fine for removing or unplugging CO detectors.
John Haid, the owner of Haid's Plumbing & Heating in Casper, Wyoming, provided maintenance and repair services at Sunridge Apartments for about twenty years. AMC periodically requested bids from Mr. Haid for a preventive safety inspection on all the furnaces. Mr. Haid provided only oral bids, and AMC never accepted one. Mr. Haid told AMC employees they should regularly inspect and maintain furnaces, particularly as they age. Mr. Haid occasionally repaired furnaces that SourceGas, the local gas company, had red-tagged to indicate the furnace was dangerous and could not be operated until repaired or replaced. AMC called him when a tenant at Sunridge Apartments smelled gas or an apartment had no heat, but Mr. Haid was never called to do any safety inspections.
According to Mr. Haid, AMC's approach to furnace maintenance was consistent with other apartments or buildings he serviced. Even though Mr. Haid did not believe it was safe to operate furnaces until they fail or break down without inspecting
At trial, Ms. Lompe elicited testimony about four CO incidents at the Sunridge Apartments — her own and three others. The first incident occurred on January 23, 2009, when Mr. Haid serviced a furnace that had been red-tagged by the gas company "possibly for a [CO] tester going off or something or they smelled gas." He cleaned the heat exchanger, replaced the gas valve, pilot assembly, and setup.
The second incident happened in October 2009, when Mr. Few was exposed to CO while in the complex's clubhouse and was treated at the hospital for CO poisoning. The clubhouse did not have a CO detector because no one slept there. After the incident involving Mr. Few, Ms. Mesenbrink suggested to her employer, AMC, that it should maintain the furnaces better or replace them, but nothing was done. The regional manager, Ms. Brooks, testified she was not aware of any changes to AMC's furnace inspection policies after Mr. Few's CO exposure. Mr. Ctvrtlik testified that AMC never informed Sunridge of Mr. Few's CO exposure or that, following this incident, AMC had replaced the clubhouse furnace at a cost of over $2,600.
On January 6, 2010, the third CO incident resulted in the evacuation of an apartment, but no injuries were reported. At oral argument before this court, counsel for Defendants argued this incident did not involve the Sunridge Apartments, relying on a service order produced by SourceGas. The service order, which is part of the record, was referred to as Exhibit 9 at trial but not admitted into evidence. The first page of the exhibit is a screen shot of a CO leak report dated January 6, 2010, showing an address that does not match that of the Sunridge Apartments. The second page of this exhibit, however, lists the correct address for the Sunridge Apartments and contains comments about a service call on that date, stating "emergency carbon monoxide leak ... dispatched to Cathy Imus C/O detector was going off at 200 parts per million apt complex evacuated renters." Whatever question there may be about the conflicting address information contained in Exhibit 9, it was not brought to the attention of the jury. And Mr. Few testified about a CO leak in January of 2010 that required the evacuation of a unit at the Sunridge Apartments. Accordingly, we consider the January 2010 event as one of those forming the basis of AMC's knowledge regarding the state of the furnaces prior to the incident involving Ms. Lompe. But Ms. Lompe did not provide evidence that Sunridge was informed of any of the three CO incidents that occurred prior to her own CO exposure.
The evidence at trial also included expert testimony regarding the significance of these CO incidents. Over Defendants' objection, Ms. Lompe offered the expert testimony of Michael Slifka, a fire protection engineer and an expert in the area of property management. Mr. Slifka explained that the complex's furnaces greatly exceeded their twenty-year useful life under industry standards, because they were over thirty years old at the time of Ms. Lompe's CO exposure. He also testified that the Sunridge furnaces had been "poorly maintained" and that neither Sunridge nor AMC was meeting its obligations under industry standards to maintain a safe heating system. Mr. Slifka further opined that Defendants had received three forms of notice indicating the furnaces were not safe: (1) the LandAmerica assessment, (2) their knowledge of a
Defendants' expert, an astrogeophysicist named Dr. Romig, testified that because so many variables are involved in a furnace leak, he could not state that an inspection within the previous six months could have prevented the incident involving Ms. Lompe. But upon cross-examination, Dr. Romig conceded that the maintenance issues and previous CO incidents at the apartments "should have prompted a decision to look into getting new furnaces."
Mr. Few testified that he arrived at the complex's office at about 7:30 a.m. on February 1, 2011. At about 9:30 a.m. he went to Ms. Lompe's floor to deliver a lease renewal to another tenant. Outside Ms. Lompe's apartment, Mr. Few detected an odor reminiscent of the smell he encountered during his CO exposure in 2009. He called SourceGas, which dispatched a technician to the Sunridge Apartments. The technician, Mr. Mike Coryell, detected high levels of CO on Ms. Lompe's floor. Mr. Few and Mr. Coryell removed Ms. Lompe from her apartment and then immediately called 911 and evacuated the area. Shortly after ventilating Ms. Lompe's apartment, Mr. Few sent Mr. Kemberling to look for a CO detector in the unit. Mr. Kemberling testified that he found an unplugged CO detector in the apartment unit at that time. Following Ms. Lompe's incident, Mr. Kemberling inspected each unit to verify whether it had a functioning CO detector, finding that many units did not.
Mr. Coryell testified that he responded to the emergency dispatch order at the complex on February 1, 2011. Mr. Coryell's CO detector sounded an alarm immediately as he entered the building, indicating a CO level of at least twenty-five parts per million. When he reached Ms. Lompe's floor, a second level alarm sounded, indicating at least fifty parts per million. Mr. Coryell explained that this is the level at which an evacuation should take place, which he implemented, beginning with Ms. Lompe. Mr. Coryell testified that Ms. Lompe, "from a sitting position right at the door, reached up and opened the door and then slumped back down.... She was not able to stand up. She crawled out into the hallway." Upon opening Ms. Lompe's door, Mr. Coryell's meter began reading 500 parts CO per million. He then told Mr. Few to call 911, and Ms. Lompe was taken to the hospital.
After ventilating Ms. Lompe's apartment, Mr. Coryell red tagged her furnace and, after inspecting the other furnaces on Ms. Lompe's floor, also red tagged her neighbor's furnace because it too was emitting CO. He testified that he did not remember seeing any CO detectors on Ms. Lompe's floor, including in Ms. Lompe's or her neighbor's apartments. Mr. Coryell also testified that furnaces should have some maintenance work or an inspection conducted at least every other year. On cross-examination, however, Mr. Coryell reiterated that in his post-incident inspection of all the furnaces on Ms. Lompe's floor, he red tagged only two of them. And he stated that he had seen furnaces on other occasions that were "dirty and starting to accumulate, but they were not plugged. They were not putting out carbon monoxide. They were not a danger."
Mr. Haid testified that AMC hired him to repair or replace the furnaces that had
Ms. Lompe also testified. She stated that no one explained any safety features when she moved into Sunridge and although she found what she believed to be a CO detector in her unit, it did not appear to work properly even after she replaced the battery. Assuming the CO detector was broken, and believing it had belonged to the prior tenant (because CO detector was not listed on the move-in sheet), Ms. Lompe had thrown it away.
After the close of evidence, Defendants moved for JMOL. As to punitive damages, Defendants argued that Ms. Lompe had not presented evidence sufficient to show that either Defendant had acted willfully and wantonly, with a conscious disregard for the safety of the tenants and knowing or having reason to know with a high degree of probability that the conduct would result in harm, as required by Wyoming law. The district court denied Defendants' motion and allowed the question of punitive damages to go to the jury as to both Defendants, recognizing, however, that punitive damages are a "disfavored form of relief" in Wyoming and that the evidence in this case was "weak ... because it is a failure to act rather than an act done in a negligent way"; that is, "it is an act that smacks highly of inattention on the part of the defendants in this case as well as ignorance."
Defendants proposed two instructions on punitive damages. Proposed instruction 11 stated "Willful and wanton misconduct has been defined as: that which tends to take on the aspect of highly unreasonable conduct, or an extreme departure from ordinary care, in a situation where a high degree of danger is apparent." Defendants' proposed instruction 12 provided the following further guidance: "The aggravating factor which distinguishes willful misconduct from ordinary negligence is the actor's state of mind. In order to prove that an actor has engaged in willful misconduct, one must demonstrate that he acted with a state of mind that approaches intent to do harm." These proposed instructions incorporated language from Danculovich v. Brown, 593 P.2d 187, 191 (Wyo.1979) and Cramer v. Powder River Coal, LLC, 204 P.3d 974, 979 (Wyo.2009), respectively. But the district court refused both instructions, providing instead Jury Instruction No. 42, modeled on the Wyoming Civil Pattern Jury Instructions:
In response to the jury's request during deliberations for a definition of "wanton,"
The jury found by a preponderance of the evidence that AMC, Sunridge, and Ms. Lompe had each been negligent in the circumstances resulting in her injury, apportioning the fault 65% to AMC, 25% to Sunridge, and 10% to Ms. Lompe. Thus, the jury's verdict reduced the $3,000,000 compensatory damages award by 10% to $2,700,000 to reflect Ms. Lompe's share of fault for her injury. This award included amounts for economic loss, loss of enjoyment of life, disability, and $950,000 for "[p]ain, suffering, and emotional distress (past and future)." AMC's portion of the compensatory damages award was $1,950,000, and Sunridge was responsible for $750,000. The jury also found by a preponderance of the evidence that punitive damages should be awarded against both Sunridge and AMC, necessitating a second phase of the trial for the jury to decide the amount of punitive damages.
In the punitive damages phase of the trial, Ms. Lompe called Dr. Paul Randle as an expert witness on Defendants' financial condition. Dr. Randle testified as to the income and profitability of Sunridge and AMC. As to AMC, Dr. Randle summarized its income, expenses, and members' share of income from 2007 through 2012 using gross and net income figures from the members' tax returns. Dr. Randle explained that nearly all of AMC's net income was distributed to its owners, with a total distribution between 2005 and 2012 of $22,860,142. Factoring executive salaries into this amount, Dr. Randle opined the total partner income for those years was over $24 million.
After closing arguments, the jury deliberated and returned a punitive damages award of $25,500,000, assessing $3,000,000 against Sunridge and $22,500,000 against AMC.
After the close of trial, Defendants renewed their motion for JMOL or, in the alternative, for a new trial or remittitur, challenging the sufficiency of the evidence for the jury's verdict of liability, compensatory damages, and entitlement to punitive damages, as well as the jury instructions on punitive damages and the amount of punitive damages. The district court denied Defendants' motion in its entirety. Lompe v. Sunridge Partners, LLC, 54 F.Supp.3d 1252, 1270-71 (D.Wyo.2014) (concluding Ms. Lompe presented sufficient evidence of willful and wanton misconduct to send the question of punitive damages to the jury, the jury was properly instructed on the standard for punitive damages under Wyoming law, and the punitive damages award was "within the realm of punitive damages that does not cross the constitutional line"). As to the punitive damages challenge, the district court concluded the ratio of punitive damages to compensatory damages was "9-to-1 (considering the total punitive damages award for both defendants collectively)." Id. at 1270.
The district court acknowledged, however, "that the award of punitive damages is significant and far greater than that usually seen in this district," stating that "[i]n all probability, the Court likely has not made such a large award for punitive damages." Id. at 1271. The district court nevertheless denied defendants' request for a remittitur or new trial, concluding that "[w]hile surprising, the award does not shock the judicial conscience nor is the Court compelled to conclude that the jury's award should be upset, based on the facts and circumstances of the defendants' conduct and the harm to the plaintiff and potential harm to others." Id.
In this appeal, Defendants argue the district court erred in (A) denying their motion for JMOL as to punitive damages because the evidence was insufficient to show willful and wanton misconduct and because Ms. Lompe had failed to prove Defendants' net worth,
We review the district court's denial of JMOL de novo. Jones v. United Parcel Serv., Inc., 674 F.3d 1187, 1200 (10th Cir.2012). But we will reverse the district court "only if all of the evidence, viewed in the light most favorable to the nonmoving party, reveals no legally sufficient evidentiary basis to find for the nonmoving party." Id. (internal quotation marks omitted). "[W]e will not weigh the evidence, judge witness credibility, or challenge the factual conclusions of the jury" and "we may not substitute our judgment for that of the jury." Rocky Mountain Christian Church v. Bd. of Cty. Comm'rs, 613 F.3d 1229, 1235-36 (10th Cir.2010) (internal quotation marks omitted). When applying this standard in diversity cases, "the substantive law of the forum state governs the analysis of the underlying claims, including specification of the applicable standards of proof, but federal law controls the ultimate, procedural question whether judgment as a matter of law is appropriate." Jones, 674 F.3d at 1195 (internal alteration and quotation marks omitted). This is a deferential standard because, even though the district court makes a de novo determination about the sufficiency of the evidence, it must defer to the jury's determinations as the fact finder.
Defendants argue (1) the evidence was insufficient to show either party engaged in willful and wanton misconduct, and (2) Ms. Lompe failed to prove Defendants' net
Under Wyoming law, punitive damages are disfavored "and are to be allowed with caution within narrow limits." Weaver v. Mitchell, 715 P.2d 1361, 1369 (Wyo.1986). Punitive damages are only appropriate for "circumstances involving outrageous conduct, such as intentional torts, torts involving malice and torts involving willful and wanton misconduct." Cramer v. Powder River Coal, LLC, 204 P.3d 974, 979 (Wyo.2009) (internal quotation marks omitted). The Wyoming Supreme Court defines willful and wanton misconduct as "the intentional doing, or failing to do, an act in reckless disregard of the consequences and under circumstances and conditions that a reasonable person would know that such conduct would, in a high degree of probability, result in harm to another." Id. "The aggravating factor which distinguishes willful misconduct from ordinary negligence is the actor's state of mind." Id. (internal quotation marks omitted). A willful or wanton state of mind is one "that approaches intent to do harm." Id. (internal quotation marks omitted). We apply this punitive damages standard in determining whether the trial evidence sufficiently showed that each Defendant's actions constituted the willful and wanton misconduct required to submit the question of punitive damages to the jury as a matter of law.
Our review of the record convinces us that, "viewed in the light most favorable to" Ms. Lompe, "the evidence and all reasonable inferences to be drawn from it point but one way" — that they do not show willful and wanton misconduct by Sunridge. See Rocky Mountain Christian Church, 613 F.3d at 1235. The trial evidence establishes Sunridge purchased the property for investment purposes and hired a reputable property manager to take care of the day-to-day management of the apartments. Sunridge owner Mr. Ctvrtlik believed, based on his prior favorable experience, that he could rely on AMC to ensure safe conditions at Sunridge. Whether Wyoming law allows such a delegation of a duty from a passive real estate investor-owner to a residential property management company is not relevant to the question of whether Sunridge exhibited willful and wanton misconduct for purposes of assessing punitive damages.
Furthermore, Mr. Ctvrtlik testified that he had no knowledge of Mr. Few's CO poisoning in 2009 and that Sunridge, as opposed to AMC, had received no complaints about the furnaces. The only evidence Ms. Lompe could present to show Sunridge had any knowledge about the condition of the furnaces — or any potential danger resulting from the age of the furnaces — was the LandAmerica report, which had recommended somewhat generically that reserves be set aside to replace the furnaces on a rolling basis over a five-year period. Noticeably absent from the LandAmerica report is any warning that the furnaces posed a potential danger to tenants. And the evidence at trial indicated that the policy employed at the Sunridge Apartments of replacing furnaces as they failed was not an "extreme departure from ordinary care." Danculovich v. Brown, 593 P.2d 187, 191 (Wyo.1979).
At oral argument before this court, Ms. Lompe's counsel identified as the best evidence of Sunridge's willful and wanton misconduct meriting punitive damages under Wyoming law an inference that Sunridge must have known about Mr. Few's CO poisoning because of certain provisions in Sunridge's contract with AMC. Specifically, counsel argues Sunridge must have been aware of Mr. Few's CO poisoning because the management agreement requires AMC to seek approval from Sunridge for any expense exceeding $1,000 or to notify Sunridge within twenty-four hours of any emergency expenses. And the evidence shows that replacing the clubhouse furnace after Mr. Few's incident cost over $2,600.
But the unimpeached evidence establishes that Sunridge relied entirely on AMC to manage the apartment complex. Mr. Ctvrtlik testified that Sunridge received only the monthly financial reports from AMC, which listed expenses and income in general categories. And, while language in the management agreement may have required AMC to provide notice for large expenses, Ms. Lompe presented no evidence showing AMC, in fact, notified Sunridge of expenses related to, or that Sunridge had actual knowledge of, Mr. Few's CO incident or any other CO leaks prior to Ms. Lompe's exposure.
Thus, even if the evidence of Sunridge's minimal involvement in the operation of the apartments could support a finding of negligence, it is insufficient as a matter of law to establish the willful and wanton misconduct necessary to support an award of punitive damages in Wyoming. See Weaver, 715 P.2d at 1370 ("Punitive damages are not appropriate in circumstances involving inattention, inadvertence, thoughtlessness, mistake, or even gross negligence." (citing Danculovich, 593 P.2d at 191)). Accordingly, we reverse the district court's denial of JMOL as to Sunridge because the trial evidence was insufficient to send the question of punitive damages to the jury.
Defendants also contend the evidence was insufficient to show AMC's actions constituted willful and wanton misconduct. They argue that AMC relied on the services of trained professionals such as Mr. Haid and always repaired or replaced furnaces when problems arose. Defendants also emphasize AMC's policy of providing a CO detector in each apartment unit even though not required to do so by Wyoming law. And they insist AMC did not fail to do anything that any tenants requested after Mr. Few's CO incident.
Viewing the evidence in the light most favorable to Ms. Lompe, we conclude a reasonable jury could find AMC engaged in willful and wanton misconduct warranting punitive damages under Wyoming law. Specifically, AMC was on notice of the dangerous condition of the complex's fleet of furnaces well before Ms. Lompe's CO incident. AMC knew the furnaces were nearly thirty years old despite having a useful life of about twenty years, and AMC failed to act on bids for regular safety inspections of the furnaces despite three CO leaks at the Sunridge Apartments prior to Ms. Lompe's injury. On this record, a reasonable jury could find that AMC intentionally failed to act "in reckless disregard of the consequences and under circumstances and conditions that a reasonable person would know that such [inaction] would, in a high degree of probability, result in harm to another." See Cramer, 204 P.3d at 979. Specifically, the age of the furnaces, the prior failures, and the proven risk of the escape of dangerous levels of CO made it almost certain that a repair-as-needed maintenance program, in this instance, would result in serious injury to one or more tenants. Accordingly, we affirm the district court's denial of JMOL on punitive damages as to AMC.
We also reject AMC's argument that the district court should have granted JMOL because Ms. Lompe did not provide sufficient evidence of AMC's "net worth."
Defendants "do not argue that net worth is the only appropriate evidence" of wealth or financial condition. Nevertheless, they misinterpret Rosty as requiring evidence specifically of net worth at the time of trial as a predicate to seeking punitive damages in this case. Rosty did not establish such a rigid rule.
To the extent AMC believed this evidence was not representative of its real economic condition, it could have presented rebuttal evidence. See Sears v. Summit, Inc., 616 P.2d 765, 772 (Wyo.1980), modified on other grounds by Adel v. Parkhurst, 681 P.2d 886 (Wyo.1984) ("Not only may the plaintiff introduce evidence as to the wealth of the defendant, but the defendant may also introduce evidence of impecunity in order to mitigate the award of punitive damages."). But AMC failed to do so. Under these circumstances, we decline to hold Ms. Lompe's evidence of AMC's wealth or financial condition insufficient for purposes of submitting the question of punitive damages to the jury.
AMC argues that even if the district court properly sent the question of punitive damages to the jury, its punitive damages instruction misstated Wyoming law. We review a district court's decision to give a particular instruction for an abuse of discretion, but we review the "legal sufficiency of an instruction" de novo. EEOC v. Beverage Distribs. Co., 780 F.3d 1018, 1020 n. 1 (10th Cir.2015).
Rejecting AMC's two proposed jury instructions on punitive damages, the district court instructed the jurors that they could award punitive damages "if, and only if, you find by a preponderance of the evidence that that defendant was guilty of willful and wanton misconduct." Modeled on Wyoming Civil Pattern Jury Instruction 4.06, the district court's Jury Instruction No. 42 also defined "willful and wanton misconduct" as follows:
See also Cramer v. Powder River Coal, LLC, 204 P.3d 974, 979 (Wyo.2009). And in response to the jury's request for a definition of "wanton," the district court instructed the jury using language identical to AMC's proposed instruction 11, which included the following language from Danculovich v. Brown, 593 P.2d 187, 191 (Wyo.1979): "Willful and wanton misconduct has been defined as: that which tends to take on the aspect of highly unreasonable conduct, or an extreme departure from ordinary care, in a situation where a high degree of danger is apparent."
Although the district court gave these two instructions on punitive damages, AMC now argues, based on Farmers Insurance Exchange v. Shirley, 958 P.2d 1040 (Wyo.1998), that the district court erred in declining to offer Defendants' proposed instruction 12 to further define "willful misconduct"
Even if Shirley is not limited to claims for breach of the duty of good faith, as Ms. Lompe argues, the context here does not raise the same concerns. The intent element of negligence, the underlying tort claim here, is more easily distinguished from the intent required for the willful and wanton misconduct needed to support punitive damages than the intent element at issue in Shirley. Where jury confusion was not likely, there was no requirement that the district court provide further instruction. And although the district court did not give AMC's proposed instruction 12, explaining that the state of mind required for punitive damages must approach an intent to harm,
We accordingly hold that under the circumstances here, the jury instructions as given were an accurate statement of Wyoming law on punitive damages.
AMC also argues it is entitled to a new trial or remittitur of the amount of punitive damages because the award was so excessive that it shocks the judicial conscience under Wyoming law. We agree with Ms. Lompe that AMC has waived this argument by failing to present it properly in the district court. In its post-verdict renewed motion for JMOL, new trial, or remittitur, AMC correctly cited the legal standard governing a motion for new trial or remittitur on grounds that a damages award is so excessive that it shocks the judicial conscience. (Defs.' Mot. JMOL 10) Rather than pressing this particular common-law excessiveness objection in its argument, however, AMC instead focused exclusively on its objection to the constitutionality of the punitive damages award under the Fourteenth Amendment's Due Process Clause. But differing standards of review govern each claim. Hardeman v. City of Albuquerque, 377 F.3d 1106, 1122 (10th Cir.2004) ("Unlike constitutional challenges, we review the district court's disposition of a motion for remittitur or new trial based on a common law excessiveness claim for abuse of discretion.").
We now consider Defendants' argument that the district court erred in finding the amount of the punitive damages award against AMC constitutional under the Due Process Clause of the Fourteenth Amendment. We first discuss the "exacting de novo" review the Supreme Court has mandated in reviewing constitutional challenges to punitive damages awards. We then apply that standard using the Supreme Court's guidepost analysis in BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996). Finally, we conclude that the punitive damages award against AMC is grossly excessive and arbitrary in violation of constitutional due process, and we reduce it accordingly.
Due process requires federal courts to perform an "exacting" de novo review of the constitutionality of punitive damages awards to ensure "that an award of punitive damages is based upon an `application of law, rather than a decisionmaker's caprice.'" State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 418, 123 S.Ct. 1513 (2003) (quoting Cooper Indus., Inc. v. Leatherman Tool Grp., Inc., 532 U.S. 424, 436, 121 S.Ct. 1678, 149 L.Ed.2d 674 (2001) ("[C]ourts of appeals should apply a de novo standard of review when passing on district courts' determinations of the constitutionality of punitive damages awards.")). This standard differs from the deferential de novo review that a court applies when ruling on a motion for JMOL, new trial, or remittitur.
Although "it is the duty of the trial judge to require a remittitur or a new trial" if "the amount of damages awarded is excessive," Linn v. United Plant Guard Workers, 383 U.S. 53, 65-66, 86 S.Ct. 657, 15 L.Ed.2d 582 (1966), the Seventh Amendment constrains the trial court to defer to the fact-finding function of the jury, Cooper Indus., 532 U.S. at 437 n. 11, 121 S.Ct. 1678. This fact-finding function encompasses questions of liability and the amount of compensatory damages. Under this deferential standard, when "a new trial motion asserts that the jury verdict is not supported by the evidence, the verdict must stand unless it is clearly, decidedly,
The Supreme Court has explained, however, that "[u]nlike 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." Cooper Indus., 532 U.S. at 437, 121 S.Ct. 1678 (quoting Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 459, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996) (Scalia, J., dissenting) (other internal citation omitted)). "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... Seventh Amendment concerns." Id. (emphasis added). Although "[a] jury's assessment of the extent of a plaintiff's injury is essentially a factual determination," the jury's "imposition of punitive damages is an expression of its moral condemnation." Id. at 432, 121 S.Ct. 1678 (citing Gertz v. Robert Welch, Inc., 418 U.S. 323, 350, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974) ("[Punitive damages] are not compensation for injury. Instead, they are private fines levied by civil juries to punish reprehensible conduct and to deter its future occurrence." (alteration as in Cooper Industries))). Moreover, "[a]s the types of compensatory damages available to plaintiffs have broadened, the theory behind punitive damages has shifted toward a more purely punitive (and therefore less factual) understanding." Id. at 437 n. 11, 121 S.Ct. 1678 (emphasis added, internal citation omitted). Thus, we need not remand for Ms. Lompe "to choose between a new jury trial or acceptance of [a] remittitur" if a reduction in the amount of punitive damages is "required by the Constitution" rather than merely "a court's determination as to whether substantial evidence at trial supported the amount awarded." Jones v. United Parcel Serv., 674 F.3d 1187, 1208 n. 8 (10th Cir. 2012).
In ruling on Defendants' constitutional challenge in this case, the district court improperly applied a deferential standard of review, explaining that it "hesitates to interfere with the jury's determination as to [the amount of] punitive damages" because "it is not the Court's province to second-guess the jury's findings." Lompe, 54 F.Supp.3d at 1271. This might have been a valid conclusion under the deferential JMOL standard or the new trial or remittitur standards for reviewing the jury's determination as to liability, compensatory damages, and even for analyzing whether a punitive damages award is overly excessive under the common law. But it is not a correct description of the district court's responsibility in reviewing the constitutionality of a punitive damages award under the Due Process Clause. Because the Supreme Court has directed lower federal courts to apply an "exacting" de novo standard of review when considering the constitutionality of a punitive damages award, the district court erred by deferring to the jury's punitive damages award. We therefore separately analyze the constitutionality of the punitive damages award under the exacting de novo standard mandated by the Supreme Court.
The Supreme Court has instructed that "[e]lementary notions of fairness enshrined in our constitutional jurisprudence dictate that a person receive fair notice not only of the conduct that will
Although our review of the district court's due process analysis is de novo, we defer to the jury's and the district court's factual findings unless they are clearly erroneous. See Cooper Indus., 532 U.S. at 440 n. 14, 121 S.Ct. 1678 ("While we have determined that the Court of Appeals must review the District Court's application of the Gore test de novo, it of course remains true that the Court of Appeals should defer to the District Court's findings of fact unless they are clearly erroneous.").
Lompe, 54 F.Supp.3d at 1267. See also Cooper Indus., 532 U.S. at 449 n. 2, 121 S.Ct. 1678 (Ginsburg, J, dissenting) (criticizing the majority's adoption of a de novo review standard for reviewing the due process limits of punitive damages awards and noting that although the de novo standard includes deference to factual findings unless
With respect to the jury's first verdict, we have already held that the evidence presented at trial is sufficient to support the jury's finding that AMC's conduct met the Wyoming threshold for an award of punitive damages.
There is a similar dearth of factual findings by the district court. This is in large measure because the district court improperly applied a deferential standard of review to AMC's due process challenge.
Ultimately, federal courts "must ensure that the measure of punishment is both reasonable and proportionate to the amount of harm to the plaintiff and to the general damages recovered." State Farm, 538 U.S. at 426, 123 S.Ct. 1513. In our review of the constitutionality of the punitive damages award against AMC, therefore, we must primarily decide "whether [the] particular award is greater than reasonably necessary to punish and deter." Pac. Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 22, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991). The Supreme Court has instructed us to go "no further" if a "more modest punishment" for the "reprehensible conduct" at issue "could have satisfied the State's legitimate objectives" of punishing and deterring future misconduct. State Farm, 538 U.S. at 419-20, 123 S.Ct. 1513.
We look first to the degree of reprehensibility of AMC's conduct.
Jones, 674 F.3d at 1207 (citing State Farm, 538 U.S. at 419, 123 S.Ct. 1513).
Addressing the first factor, the district court has found the harm here was physical, and that finding is not clearly erroneous. Ms. Lompe suffered injuries consistent with CO poisoning, and the record reflects at least the possibility she will have lingering physical injuries for many years, possibly the rest of her life.
Skipping to the third Gore factor, it is true that as a low income college student, Ms. Lompe was financially vulnerable. But as a practical matter, the financial vulnerability factor does not have particular relevance in this case, where the harm Ms. Lompe suffered was physical rather than a reprehensible exploitation of financial vulnerability through fraud or other financial misconduct. Here, Ms. Lompe's financial vulnerability reflects at most her unequal bargaining power in negotiating the lease or in interactions about unpaid rent or fees. However, we find such matters tangential to the constitutionality of the amount of punitive damages in this case.
We analyze the second, fourth, and fifth factors together because they relate to AMC's actions — or inaction — as the on-site management company responsible for the day-to-day business of managing the buildings and tending to regular maintenance. The district court found that AMC failed to correct known problems with the furnaces and that AMC's inaction risked exposing all of the complex's tenants to CO poisoning. Nevertheless, neither the jury nor the district court found that AMC acted with the intent to harm Ms. Lompe or any other tenants. Thus, we conclude AMC's failure to act was not the "result of intentional malice, trickery, or deceit," and was instead a "mere accident." See State Farm, 538 U.S. at 419, 123 S.Ct. 1513. See also Jones, 674 F.3d at 1207.
Notwithstanding that conclusion, the evidence at trial showed that AMC's failure to act was not an isolated incident but rather resulted from AMC's "wrongful conduct involv[ing] repeated actions," or in this case, repeated failures to act. Jones, 674 F.3d at 1207. That is, three prior CO leaks, including one in which Mr. Few was poisoned, put AMC on notice that the furnaces needed regular substantive safety inspections to prevent future dangerous releases of CO. Failing to perform such inspections recklessly endangered not only Ms. Lompe, but also all the tenants at the apartment complex, and the risk included death. See Phillip Morris USA v. Williams, 549 U.S. 346, 354-57, 127 S.Ct. 1057, 166 L.Ed.2d 940 (2007) (holding that punitive damages cannot be used to punish the defendant for harm to nonparties, but that the risk of harm to nonparties can be considered in assessing reprehensibility).
But we cannot ignore the evidence that distances AMC's misconduct from the "extreme reprehensibility" end of the constitutional reprehensibility spectrum in the due process analysis. AMC was never cited or criticized by SourceGas or other regulators in Wyoming for the condition of the furnaces or the incidents in which Mr. Few or Ms. Lompe were poisoned. Moreover, AMC provided each tenant with a CO detector even though this was not required by state law or industry custom. The evidence regarding the effectiveness of providing these monitors was mixed. Although AMC amended the lease agreements to provide sanctions for tampering with the CO monitors, an inspection immediately after Mr. Lompe was poisoned revealed that many units lacked functioning CO monitors. There was also some evidence to suggest AMC conformed to industry standards in dealing with the aging fleet of furnaces by repairing them as
On balance, application of the Gore factors does not support a conclusion that AMC's conduct was particularly reprehensible.
"The second and perhaps most commonly cited indicium of an unreasonable or excessive punitive damages award is its ratio to the actual harm inflicted on the plaintiff." Gore, 517 U.S. at 580, 116 S.Ct. 1589. But the Supreme Court's guidance on the proper ratio between punitive and compensatory damages is difficult to apply.
But, on the other hand, the Supreme Court questions the propriety of single digit ratios that exceed 4:1, stating "an award of more than four times the amount of compensatory damages might be close to the line of constitutional impropriety." Id. (citing Haslip, 499 U.S. at 23-24, 111 S.Ct. 1032 (1991)). The Court further explains that even a 2:1 ratio may be unconstitutional in some circumstances: "When compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee." Id. The Supreme Court has not defined "substantial" in this context and has been "reluctant to identify concrete constitutional limits on the ratio between harm, or potential harm, to the plaintiff and the punitive damages award." Id. at 424, 123 S.Ct. 1513 (citing Gore, 517 U.S. at 582, 116 S.Ct. 1589); see also id. at 425, 123 S.Ct. 1513 ("[T]hese ratios are not binding, they are instructive."). Ultimately, however, "[t]he precise award" of punitive damages "must be based upon the facts and circumstances of the defendant's conduct and the harm to the plaintiff." Id. Against this backdrop, we now undertake our de novo review of the award against AMC.
We begin by examining the amount of compensatory damages. As discussed, the jury awarded Ms. Lompe $3,000,000 in compensatory damages, including $1,450,000 for pain, suffering, and emotional distress (past and present), disability, and loss of enjoyment of life, and $1,550,000 for loss of future earning capacity and medical expenses (past and future). This amount was reduced by 10% to account for Ms. Lompe's contributory negligence, resulting in a compensatory damages award of $2,700,000.
In reviewing the alleged unconstitutional excessiveness of the punitive award, the district court created a ratio for each Defendant by comparing the punitive damages award assessed against each Defendant individually ($3,000,000 against Sunridge and $22,500,000 against AMC) to the full compensatory damages award of $3,000,000. The district court thus calculated a 1:1 ratio for Sunridge and a 7.5:1 ratio for AMC. This calculation was incorrect because it did not, first, reduce the compensatory amount to $2,700,000 to account for Ms. Lompe's own negligence or, next, compare the proportion of the punitive damages award assessed against each Defendant with only that Defendant's individual portion of the total compensatory damages.
In determining whether a ratio of 11.5:1 is unconstitutionally excessive in this case, we must review the substantiality of the compensatory damages award. The Supreme Court has defined different standards for punitive awards depending on whether they are combined with substantial or insubstantial compensatory damages. When compensatory damages are low but the degree of reprehensibility high, double digit ratios, such as 10:1, might "comport with due process." State Farm, 538 U.S. at 425, 123 S.Ct. 1513 (citing Gore, 517 U.S. at 582, 116 S.Ct. 1589). Such a situation could exist if, for example, a defendant fired a gun into a crowd but did not hit anyone. But "[w]hen compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee." Id. (emphasis added). That is, where compensatory damages are already substantial, a ratio of 1:1 may be the most the Constitution will permit.
Because the Supreme Court has not defined "substantial" for purposes of compensatory damages, we must glean its meaning from application. In State Farm, for example, the Supreme Court held that a compensatory damages award of $1,000,000 for a year and a half of emotional distress was "substantial." And in cases decided since State Farm, compensatory damages have often been considered "substantial" when they are over $1,000,000. The Eighth Circuit recently observed that between 1996 (when the Supreme Court decided Gore) and 2012, the circuit had "reviewed an award of punitive damages exceeding $1 million with a ratio to compensatory damages greater than 1:1" on only three occasions. Ondrisek v. Hoffman, 698 F.3d 1020, 1029-30 (8th Cir. 2012). And in each of those instances, the Eighth Circuit concluded the compensatory damages were substantial and the punitive award should be reduced after a Gore analysis. Id.
Here, Ms. Lompe received compensatory damages totaling $2,700,000, of which $1,950,000 was assessed against AMC. And the compensatory damages included $950,000 for "emotional distress (past and future)," a component of compensatory damages the Supreme Court has noted may be redundant of punitive damages. State Farm, 538 U.S. 408, 426, 123 S.Ct. 1513 (2003) (quoting Restatement (Second) of Torts § 908, Comment c, at 466 (1977) ("In many cases in which compensatory damages include an amount for emotional distress, such as humiliation or indignation aroused by the defendant's act, there is no clear line of demarcation between punishment and compensation and a verdict for a specified amount frequently includes elements of both.")). In light of the nature of the injuries actually suffered by Ms. Lompe, the award of compensatory damages is substantial.
Under the third guidepost, we must evaluate "the disparity between the punitive damages award and the civil penalties authorized or imposed in comparable cases." State Farm, 538 U.S. at 428, 123 S.Ct. 1513 (internal quotation marks omitted).
Looking first to comparable civil penalties, we acknowledge that violations of common law tort duties often "do not lend themselves to a comparison with statutory penalties." Id. This comparison is particularly challenging here because Wyoming law does not regulate the inspection or replacement of furnaces, nor does it require property owners to provide CO detectors. But Wyoming law does impose some obligations on the owner of a residential building: "To protect the physical health and safety of the renter, each owner [in Wyoming] shall: ... (iii) Maintain electrical systems, plumbing, heating and hot and cold water." Wyo.Stat. Ann. § 1-21-1203(a)
AMC notes that at least one state requires landlords to provide CO detectors but imposes penalties of no more than $10,000 for failure to do so. See, e.g., Vt. Stat. Ann. tit. 20, §§ 2729(d), 2734(a). And we have located other state statutes that require carbon monoxide monitors in residential units and impose moderate fines or, in some cases, misdemeanor criminal liability for noncompliance.
We have not located any decisions in Wyoming, or elsewhere throughout the Tenth Circuit, in which a large punitive damages award was entered in a personal injury action based on CO poisoning.
Thus, although our analysis of the third guidepost has not produced particularly robust comparisons, on the whole it reinforces our assessment that the $22,500,000 punitive damages award here was excessive because AMC was not on fair notice that it could be held to an award of $22,500,000 as a civil fine in the form of punitive damages.
In summary, we hold that the punitive damages award against AMC is unconstitutionally excessive. We reach this conclusion after exacting de novo review of the degree of AMC's reprehensibility, a comparison of the amount of general damages to the amount of punitive damages, and the review of the civil penalties awarded in comparable cases. Our next task, therefore, is to determine the proper punitive damages award in this case.
Because we have concluded that the amount of the compensatory damages awarded to Ms. Lompe is substantial, an award of punitive damages equal to the compensatory award — $1,950,000 — may represent the outermost limit of the due process guarantee. Indeed, since the Supreme Court's decision in State Farm, many federal appellate courts have imposed a 1:1 ratio where, as here, the compensatory damages exceed $1 million. See, e.g., Morgan v. New York Life Ins. Co., 559 F.3d 425, 443 (6th Cir.2009) (vacating excessive punitive damages award in age discrimination case where the compensatory award was $6 million and remanding with instructions for district court to enter an amount of punitive damages not to exceed a 1:1 ratio); Boerner v. Brown & Williamson Tobacco Co., 394 F.3d 594, 603 (8th Cir.2005) (reducing punitive damages award to "a ratio of approximately 1:1" where compensatory award was over $4 million and there was no evidence that the defendant intended to victimize the deceased).
When courts have deviated upwards from a 1:1 ratio, the defendant has either intended to cause the substantial compensatory damages or engaged in particularly egregious behavior. See, e.g., Turley v. ISG Lackawanna, Inc., 774 F.3d 140, 146, 167 (2d Cir.2014) (holding that a remittitur to an approximate 2:1 ratio would be constitutional where defendants subjected the plaintiff to "an extraordinary and steadily intensifying drumbeat of racial insults, intimidation,
In Jones, this court reduced the punitive damages to an amount equal to compensatory damages after considering the Gore factors as applied to the unique facts of that case. See Jones, 674 F.3d at 1208. There, the plaintiff brought a retaliatory discharge claim against the United Parcel Service (UPS), and the jury awarded the plaintiff $630,307 in compensatory damages and $2 million in punitive damages. On appeal, the Jones panel held the punitive damages award violated due process, despite the fact that the defendant's "conduct was both wilful and improper." Id. at 1207. In reaching that conclusion, the court was "persuaded primarily by the fact that [defendant's] conduct resulted solely in economic injury to Jones and that [defendant] did not act with disregard for the health and safety of others." Id. The panel also determined that the compensatory damages award was substantial in light of the plaintiff's injuries. Id. at 1208. Finally, the Jones panel reviewed comparable cases reducing punitive damages as excessive where the compensatory award was substantial. Id. We ultimately held in Jones that "a punitive damage award equal to the compensatory damage award is the maximum constitutionally allowable award under these particular facts." Id.
Here, application of the Gore factors also calls for a 1:1 ratio of punitive damages to compensatory damages. To begin, we consider the first and most significant Gore factor — reprehensibility. State Farm, 538 U.S. at 419, 123 S.Ct. 1513 ("The most important indicium of the reasonableness of a punitive damage award is the degree of reprehensibility of the defendant's conduct." (alteration and internal quotation marks omitted)). As previously discussed, AMC's conduct caused Ms. Lompe physical harm and resulted from AMC's "indifference to or ... reckless disregard of the health or safety of others," which it exhibited on several occasions. Id. But although we have concluded the evidence is sufficient to support the jury's finding that AMC's inaction was willful and wanton, thereby supporting an award of punitive damages, this finding by the jury required only that AMC's inattention or inadvertence fall just above gross negligence in its indifference or reckless disregard for the safety of AMC's tenants.
Next, the jury awarded Ms. Lompe substantial compensatory damages that include almost $1 million for her emotional distress. See State Farm, 538 U.S. at 426, 123 S.Ct. 1513 (stating that compensatory damages which included amounts for emotional distress "likely were based on a component which was duplicated in the punitive award"). Finally, our review of "civil penalties authorized or imposed in comparable cases," id. at 428, 123 S.Ct. 1513 (quoting Gore, 517 U.S. at 575, 116 S.Ct. 1589), reinforces our conclusion that a 1:1 ratio under the facts of this case represents the appropriate limit of due process.
A ratio of 1:1 under the present facts ensures that the punishment imposed on AMC is "reasonable and proportionate" to the harm Ms. Lompe suffered, in light of the general damages she recovered. Id. at 426, 123 S.Ct. 1513. And a higher amount of punitive damages, under the circumstances of this case, would be "greater than reasonably necessary to punish and deter." Haslip, 499 U.S. at 22, 111 S.Ct. 1032. Because a 1:1 ratio of punitive damages to compensatory damages here satisfies "the State's legitimate objectives" of punishing and deterring future misconduct, we may go "no further." State Farm, 538 U.S. at 419-20, 123 S.Ct. 1513.
We REVERSE IN PART and AFFIRM IN PART the district court's denial of Defendants' post-trial motion for JMOL, new trial, or remittitur. We REVERSE the district court's denial of Defendants' motion for JMOL on the question of submitting punitive damages to the jury as to Sunridge but AFFIRM as to AMC. We AFFIRM the district court's denial of Defendants' motion as to the jury instructions because the district court adequately instructed the jury as to the standard for punitive damages under Wyoming law, and we hold that Defendants waived their common law excessiveness objection to the amount of the punitive damages award. Finally, we REVERSE the award of punitive damages against AMC in the amount of $22,500,000, an 11.5:1 ratio to AMC's share of the compensatory damages award, and reduce it to $1,950,000, reflecting a 1:1 ratio to compensatory damages to comport with constitutional due process under the Fourteenth Amendment.
BACHARACH, J., concurring in part and dissenting in part.
I agree with much of the majority's well-reasoned opinion, but I respectfully disagree with the conclusions in Parts IV(A)(1)(a) and IV(D), which address (1) the sufficiency of the evidence for an award of punitive damages against Sunridge and (2) the constitutionality of the punitive damages assessed against Apartment Management Consultants (AMC). In my view, the evidence was sufficient for the jury to assess punitive damages against Sunridge. As to AMC, I agree with the majority that the punitive-damages award was so large that it resulted in a denial of due process. But I believe the majority reduces the punitive-damages award too far below the constitutional limit. Rather than order a remittitur of $1.95 million, I would reduce the amount of punitive damages to be assessed against AMC to $7.8 million, four times the amount of compensatory damages.
In considering the sufficiency of the evidence, we engage in de novo review. Shaw v. AAA Eng'g & Drafting, Inc., 213 F.3d 519, 529 (10th Cir.2000). For this review, we consider the evidence and reasonable inferences in the light most favorable to the plaintiff, Ms. Lompe. See Sanjuan v. IBP, Inc., 160 F.3d 1291, 1298 (10th Cir.1998).
Viewing the evidence in this light, we must determine if a rational jury could regard Sunridge's misconduct as willful and wanton. Weaver v. Mitchell, 715 P.2d 1361, 1370 (Wyo.1986). Sunridge's misconduct would be "willful and wanton" if Sunridge intentionally failed to replace the furnaces "in reckless disregard of the consequences and under circumstances and conditions that a reasonable person would know, or have reason to know that such conduct would, in a high degree of probability, result in harm to another." Id.
The evidence of Sunridge's willful and wanton misconduct included
Together, these four forms of evidence would have allowed the trier of fact to find willful and wanton misconduct on the part of Sunridge.
Yet three years after buying the complex, Sunridge had not authorized replacement of any furnaces. Thus, the jury could reasonably infer that when Ms. Lompe's furnace leaked, it was already about six years past its expected life. Because all of the furnaces were overdue for replacement, the jury could also reasonably infer that Sunridge had known that the risk of a carbon monoxide leak increased with each passing year.
Ms. Lompe also presented evidence that Sunridge had obtained contractors' bids in 2007 or 2008 to replace all of the furnaces. Id. at 640. But Sunridge did not act on the bids, conduct preventative maintenance on the furnaces, or otherwise attempt to make the furnaces safe. Id. at 640, 1213.
Along with this evidence of inaction, Ms. Lompe presented testimony that Sunridge had known about prior furnace malfunctions. For example, a furnace leaked carbon monoxide in the apartment of the complex's manager. Ms. Lompe argued that Sunridge had been aware of this leak, presenting testimony that "[d]epending on the situation," an incident report would have been sent to Sunridge. Id. at 1546. In addition, one of Sunridge's two owners acknowledged that he would have expected to be told if a tenant evacuated because of a carbon monoxide leak. Id. at 1549, 1577-78.
The majority notes that there was no direct evidence of Sunridge's knowledge. Maj. Op. at 1048. But direct evidence was unnecessary because the jury could reasonably rely on two types of indirect evidence demonstrating that Sunridge had failed to act after learning of furnace leaks.
First, the jury could rely on the property manager's routine practice of forwarding inspection reports to Sunridge. See Fed.R.Evid. 406 (stating that evidence of an organization's routine practice can be admitted to prove that the organization acted in accordance with that routine practice on a particular occasion). This type of evidence does not require corroboration or testimony that the property manager carried out the routine practice on a particular occasion. Id.; see also Hancock v. Am. Tel. & Tel. Co., 701 F.3d 1248, 1261-62 (10th Cir.2012) (stating that courts may accept "Rule 406 evidence" for an "inference that a routine practice was actually carried out").
Second, AMC's regional property manager testified that Sunridge had received information about the furnace leak in Ms. Lompe's apartment. Appellants' App'x at 1546. Nonetheless, according to the regional property manager, Sunridge failed to do anything to replace the furnaces even after learning of the leak in Ms.
If the jury had drawn this inference, as permitted, the jury could have reasonably found Sunridge's inaction to be willful and wanton in light of the gravity of the risk. Carbon monoxide can be deadly. See Appellants' App'x at 1531 (AMC's regional property manager acknowledging this risk); see also Hanlon v. Lane, 98 Ohio App.3d 148, 648 N.E.2d 26, 30 (1994) (holding that "the danger of carbon monoxide poisoning from the use of an improperly vented gas furnace is an open and obvious danger as a matter of law"). Thus, as the majority notes, the leakage of carbon monoxide risked death for every tenant in the complex. Maj. Op. at 1066.
The jury could rationally have found that Sunridge's inaction was not willful or wanton. But the jury could also rationally credit Ms. Lompe's version of events and infer that Sunridge
With these inferences from the evidence, the jury could reasonably have found that Sunridge's misconduct was willful and wanton. Accordingly, I respectfully dissent from the majority's contrary conclusion in Part IV(A)(1)(a).
The majority concludes that the assessment of $22.5 million in punitive damages against AMC constitutes a deprivation of substantive due process. I agree that this assessment was so large that it denied AMC due process and that the district court applied the incorrect standard when reviewing the jury's assessment. But I believe that the majority overcorrected the assessment given the factual findings made by the district court and the jury.
The jury found that AMC's conduct had constituted "willful and wanton misconduct," a finding the majority upholds. And in upholding this finding, the majority acknowledges that AMC intentionally failed to inspect the furnaces, recklessly risking the life of every tenant in the complex. But then the majority engages in its own fact finding, downplaying AMC's culpability based on the majority's own weighing of the evidence.
Instead, I would use the district court's and jury's fact findings to determine the constitutional limit for assessing punitive damages against AMC. In my view, the district court's and jury's findings would allow an assessment of punitive damages up to $7.8 million, four times the compensatory-damages award of $1.95 million.
As the majority explains, the Supreme Court has established three "guideposts" bearing on our constitutional inquiry:
Maj. Op. at 1063 (quoting State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 418, 123 S.Ct. 1513 (2003)); see also BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 574-75, 116 S.Ct. 1589 (1996) (setting out these guideposts). Like the majority, I would apply these three guideposts to determine the constitutionality of the punitive damages assessed against AMC. Unlike the majority, however, I would apply these three guideposts based on the factual findings made by the district court and the jury.
The majority is correct in stating that we apply de novo review to the ultimate issue: whether the amount of the punitive damages is so large that it violates AMC's right to substantive due process. Maj. Op. at 1061-62. But the three-part test is laden with factual issues, such as what the defendant did to merit punitive damages and the extent of the plaintiff's injury. Under Supreme Court precedent, we can disturb the resolution of these factual issues only if the district court's factual findings are clearly erroneous.
In applying more intensive scrutiny to these factual matters, the majority relies on Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 121 S.Ct. 1678 (2001). Maj. Op. at 1061-62, 1067 n. 21. But there, the Supreme Court distinguished between review of the ultimate constitutional issue (where de novo review is required) and the underlying factual matters bearing on the constitutional issue (where clear error review is required): "While we have determined that the Court of Appeals must review the District Court's application of the Gore test de novo, it of course remains true that the Court of Appeals should defer to the District Court's findings of fact unless they are clearly erroneous." Cooper Indus., 532 U.S. at 440 n. 14, 121 S.Ct. 1678. The Supreme Court cautioned that even though the ultimate constitutional issue requires de novo review, that does not mean that the jury's findings are also subject to de novo review. Id. To the contrary, the Court noted that its requirement of de novo review on the ultimate constitutional issue does not permit a reviewing court to disregard the jury's factual findings. See id. at 439 n. 12, 121 S.Ct. 1678 ("[N]othing in our decision today suggests that the Seventh Amendment would permit a court, in reviewing a punitive damages award, to disregard such jury findings.").
In light of the Supreme Court's observations, I would give due regard to the factual findings expressly made by the district court and the factual findings made by the jury. See Rhone-Poulenc Agro, S.A. v. DeKalb Genetics Corp., 272 F.3d 1335, 1347 (Fed.Cir.2001) (interpreting the quoted language in Cooper Industries "to mean that if a punitive damages determination rests on purely factual issues, we are to assume that those factual issues have been resolved adversely to the defendant, absent contrary indication"), vacated sub nom. DeKalb Genetics Corp. v. Bayer CropScience, S.A., 538 U.S. 974, 123 S.Ct. 1828, 155 L.Ed.2d 662, reinstated sub nom. Rhone-Poulenc Agro, S.A. v. DeKalb Genetics Corp., 345 F.3d 1366 (Fed.Cir.2003); Leatherman Tool Grp., Inc. v. Cooper Indus., Inc., 285 F.3d 1146, 1150 (9th Cir. 2002) (stating, after the Supreme Court's remand, that "despite [the Supreme Court's] holding that we must review the district court's application of the Gore test de novo, we still must `defer to the district
In light of the factual findings by the district court and the jury, I respectfully disagree with the way that the majority assesses reprehensibility. In my view, the majority should have deferred to all of the district court's findings and assumed that the jury had resolved evidentiary conflicts against AMC; instead, the majority makes new factual findings, seeing mitigating evidence where the jury presumably did not. I do not believe that this independent fact finding was what the Supreme Court had in mind in Cooper Industries.
Of the three guideposts, reprehensibility is the most important. See State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 419, 123 S.Ct. 1513 (2003). In considering this most important guidepost, the factual findings by the district court and the jury take on special importance. See Haynes v. Stephenson, 588 F.3d 1152, 1157 (8th Cir.2009) (distinguishing the legal conclusion of reprehensibility from the findings of fact required to identify conduct that demonstrates reprehensibility); Clark v. Chrysler Corp., 436 F.3d 594, 601 n. 7 (6th Cir.2006) (explaining an appellate court's deference to the district court's factual findings regarding the reprehensibility guidepost); Leatherman Tool Grp., Inc. v. Cooper Indus., Inc., 285 F.3d 1146, 1150 (9th Cir.2002) (observing that in "determining the `degree of reprehensibility,'" the reviewing court "must accept the underlying facts as found by the jury and the district court").
The term "reprehensibility" can refer to varying degrees of culpability. Properly understood, the level of reprehensibility involves a continuum rather than a precise point. See BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 575, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996) (observing that "some wrongs are more blameworthy than others"); see also Mendez v. Cty. of San Bernardino, 540 F.3d 1109, 1120 (9th Cir. 2008) ("Reprehensibility falls along a scale."), overruled on other grounds by Arizona v. ASARCO LLC, 773 F.3d 1050 (9th Cir.2014); Asa-Brandt, Inc. v. ADM Inv'r Servs., Inc., 344 F.3d 738, 748 (8th Cir.2003) (explaining that Gore established a "hierarchy of reprehensibility" for evaluating the constitutionality of a punitive-damages award); Laura J. Hines & N. William Hines, Constitutional Constraints on Punitive Damages: Clarity, Consistency, & the Outlier Dilemma, 66 Hastings L.J. 1257, 1303 (2015) ("Today, courts routinely rank the degree of the defendant's reprehensibility on a wide spectrum that runs from very little reprehensibility, through modest or intermediate reprehensibility, and up to substantial or extreme reprehensibility." (footnotes omitted)). For example, it may be reprehensible to steal from someone. But it is even more reprehensible to kill the victim afterward.
We must decide where AMC's conduct fell along the continuum of reprehensibility, ranging from a mere accident to intentional ill will. Gore, 517 U.S. at 575-76, 116 S.Ct. 1589. But we are confined to a
The majority acknowledges that the district court's and jury's findings are subject to clear-error review. But without finding clear error, the majority downplays certain findings and supplements them based on the majority's own assessment of mitigating evidence.
The jury was asked to decide whether AMC's conduct satisfied Wyoming law's threshold for punitive damages. As the majority notes, that threshold requires a rigorous showing that the defendant's conduct was especially blameworthy: punitive damages can be assessed only if the defendant's conduct is "outrageous" because it is intentional, malicious, or involves willful and wanton misconduct. Maj. Op. at 1047-48. The majority further explains that Wyoming considers conduct "willful and wanton" only if it "approaches intent to do harm." Id. (quoting Cramer v. Powder River Coal, LLC, 204 P.3d 974, 979 (Wyo.2009)). Thus, the district court instructed the jury that it could assess punitive damages only if AMC had intentionally acted or declined to act "in reckless disregard of the consequences, and under such circumstances and conditions that a reasonable person would know, or have reason to know, that such conduct would, with a high degree of probability, result in harm to another." Appellants' App'x at 128. The jury specifically found that AMC's misconduct satisfied this rigorous threshold of blameworthiness, and the majority concludes that this finding was sufficiently supported by the evidence. Id. at 158; Maj. Op. at 1057.
Because I agree that this finding is supported by the evidence, I would consider AMC's misconduct as "willful and wanton" when assessing the reprehensibility guidepost. See Cabral v. U.S. Dep't of Justice, 587 F.3d 13, 26 (1st Cir.2009) (noting that the jury's finding supported the reprehensibility guidepost).
The majority points out that the amount of punitive damages that the jury chose to award is not a factual finding. Maj. Op. at 1061-62, 1063-64; see also Cooper Indus., 532 U.S. at 437, 121 S.Ct. 1678 ("[T]he level of punitive damages is not really a `fact' `tried' by the jury." (quoting Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 459, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996) (Scalia, J., dissenting))). But the jury did make a factual finding when it determined that AMC's alleged misconduct was so blameworthy that it met Wyoming's high threshold for punitive damages. The majority concludes that this finding was supported by the record. Nevertheless, the majority then disregards this finding when evaluating the reprehensibility of AMC's conduct. See Maj. Op. at 1064 ("[T]he jury's verdict in the liability phase of trial does not inform our constitutional analysis.... [T]he jury here made no findings that are relevant to our application of the Gore factors.").
The majority seems to suggest that we cannot defer to a jury's findings in the absence of special interrogatories. See id. at 1063 (noting that the jury was not asked to answer special interrogatories). I respectfully disagree. In my view, we should assume that the jury resolved evidentiary conflicts adversely to AMC unless the record indicates otherwise. See United States v. Dowell, 430 F.3d 1100, 1110
Because the jury found willful and wanton misconduct, the jury must have regarded AMC's misconduct as "something in the nature of special ill-will" that constituted "oppression, fraud or malice." Farmers Ins. Exch. v. Shirley, 958 P.2d 1040, 1051 (Wyo.1998) (quoting McCullough v. Golden Rule Ins. Co., 789 P.2d 855, 861 (Wyo.1990)).
Even if we were to disregard the jury's implicit findings, we must still defer to the district court's factual findings. See CGB Occupational Therapy, Inc. v. RHA Health Servs., Inc., 499 F.3d 184, 189 (3d Cir.2007). After hearing the evidence, the district court denied AMC's and Sunridge's renewed motion for judgment as a matter of law or, in the alternative, for new trial or remittitur. Appellants' App'x at 287-314. In doing so, the district court made four factual findings bearing on the reprehensibility of AMC's conduct:
Id. at 309, 313. Neither AMC nor the majority suggests that the district court clearly erred in making these factual findings.
These four findings reflect particularly reprehensible conduct by AMC. In Bielicki v. Terminix International Co., we recognized that a defendant acts reprehensibly when operating in an "atmosphere of condoning the disregard of safety practices" that could result in physical injuries to others. 225 F.3d 1159, 1163, 1165 (10th Cir.2000); see also Willow Inn, Inc. v. Pub. Serv. Mut. Ins. Co., 399 F.3d 224, 233 (3d Cir.2005) (concluding that "a mix of purposefully indifferent inaction and intentionally dilatory action" is reprehensible). The jury presumably found that AMC had disregarded safety practices, for even the majority acknowledges that AMC had recklessly failed to conduct regular furnace inspections, risking the life of every tenant in the apartment complex. Maj. Op. at 1066. Under Bielicki, AMC's reckless disregard for safety practices is particularly reprehensible.
The majority downplays AMC's culpability based on evidence that the majority
Though we exercise de novo review on the ultimate question of constitutionality, we are not fact finders. Nonetheless, the majority independently evaluates the evidence, finding in the first instance that AMC's conduct was not "particularly reprehensible" based on what the majority regards as mitigating evidence:
Maj. Op. at 1066-67. But faced with this same evidence, the jury regarded AMC's misconduct as willful and wanton. Appellants' App'x at 128, 153, 158. The district court then concluded that the jury must have "viewed the defendants' conduct as egregious." Id. at 314. In light of the jury's apparent conclusions from conflicting evidence, I believe that we should regard AMC's conduct as particularly reprehensible for purposes of the first guidepost.
In my view, even the majority's fresh look at the evidence would support a large assessment of punitive damages. For example, while regarding some of the evidence as mitigating, the majority concludes that Ms. Lompe's injury resulted from repeated actions or failures to act, rather than an isolated incident:
Maj. Op. at 1066.
Though the majority finds that AMC's "reckless[]" failure to conduct inspections endangered the lives of every tenant in the apartment complex, the majority concludes that AMC's conduct was not particularly reprehensible in part because it did not involve "intentional malice, trickery, or deceit." Id. at 1067 (quoting Jones v. UPS, Inc., 674 F.3d 1187, 1207 (10th Cir.2012)). I respectfully think that this characterization understates the reprehensibility of AMC's conduct and displaces the jury's finding of willful and wanton misconduct.
In my view, AMC's conduct was worse than trickery or deceit — AMC recklessly risked the life of every tenant in the entire apartment complex. See Mendez v. Cty. of San Bernardino, 540 F.3d 1109, 1120 (9th Cir.2008) (stating that on a scale of reprehensibility, reckless disregard for others' health and safety is even more egregious than affirmative acts of trickery and deceit), overruled on other grounds by Arizona v. ASARCO LLC, 773 F.3d 1050, 1058 n. 1 (9th Cir.2014); Action Marine, Inc. v. Cont'l Carbon Inc., 481 F.3d 1302, 1320 (11th Cir.2007) (noting that, though "punitive damages may not be awarded to punish for harm inflicted on nonparties, [the court] may consider the risk of harm to others as part of the reprehensibility analysis" and the fact that the defendant's conduct endangered "a great number of people" who were not parties to the litigation rendered the defendant's conduct "exceedingly reprehensible" (citing Philip Morris U.S.A. v. Williams, 549 U.S. 346, 127 S.Ct. 1057, 166 L.Ed.2d 940 (2007))); see also Blaine LeCesne, Crude Decisions: Re-Examining Degrees of Negligence in the Context of the BP Oil Spill, 2012 Mich.
The majority correctly states that willful and wanton misconduct is not as reprehensible as "intentional malice." Maj. Op. at 1067 (quoting Jones v. UPS, Inc., 674 F.3d 1187, 1207 (10th Cir.2012)). But this is not saying much. The majority elsewhere holds that under Wyoming law, "[a] willful or wanton state of mind is one `that approaches intent to do harm.'" Id. at 1055 (quoting Cramer v. Powder River Coal., LLC, 204 P.3d 974, 979 (Wyo.2009)). Applying this test, the majority concluded that the jury had sufficient evidence to find that AMC had a state of mind approaching an intent to do harm. Id. at 1057. I would regard that state of mind as particularly reprehensible even if it did not involve intentional malice.
But I respectfully disagree with more than the majority's placement of AMC's misconduct on the reprehensibility continuum. In my view, the majority should not find mitigation in the first instance when the jury considered the same evidence and regarded the misconduct as willful and wanton.
For example, the majority states that AMC was not cited by regulators for the prior leaks of carbon monoxide. Id. at 1066. But the apartment complex's sole maintenance employee from 2009 to 2012 testified that no one had ever inspected any of the furnaces in the complex. Appellants' App'x at 1214. Without evidence that an inspection took place, the absence of a regulatory citation is neither surprising nor meaningful.
Regardless of whether a formal citation was issued, the district court stated that after the apartment manager was poisoned, the local gas utility had told AMC that the furnaces should be inspected. Appellants' App'x at 291; see also id. at 655, 761. AMC apparently ignored that recommendation. Even the majority acknowledges that AMC knew that its furnaces had outlived their expected duration and had leaked carbon monoxide on multiple occasions, endangering all the tenants. Maj. Op. at 1057. As a result, I question the majority's reliance on the absence of a citation by the gas utility.
The majority also points to evidence that carbon monoxide detectors were provided to the tenants. Id. at 1066. But the evidence also showed that (1) after Ms. Lompe's furnace leaked carbon monoxide, approximately half of the apartments lacked a working carbon monoxide detector, (2) the tenants with carbon monoxide detectors were never told anything about the detectors, and (3) the distribution of carbon monoxide detectors was not a substitute for proper maintenance of the furnaces. Appellants' App'x at 657, 667-68, 674-76, 1127-28, 1204, 1220, 1231, 1256 (lack of working carbon monoxide detectors); id. at 1127-28, 1143, 1204 (tenants who had detectors were never told about
AMC's own maintenance worker testified that he had expressed concern to AMC about the lack of carbon monoxide detectors in all of the units and the need for hardwired carbon monoxide detectors. Id. at 1256-57. AMC replied to this concern by saying that hardwired detectors were "[n]ot in the budget." Id. at 1257.
How are we to balance AMC's provision of carbon monoxide detectors against evidence of the detectors' ineffectiveness? And how does AMC's provision of the detectors factor into AMC's overarching misconduct? It is difficult, if not impossible, to resolve these questions on the basis of a cold record. Having heard all the evidence, mitigating and aggravating, the jury regarded AMC's misconduct as willful and wanton. I would not lightly disregard this assessment based on our own characterization of AMC's distribution of detectors as mitigating.
Finally, the majority says that there was some evidence that AMC "conformed to industry standards in dealing with the aging fleet of furnaces." Maj. Op. at 1066. But there was also evidence to the contrary. For example, an expert witness testified that AMC had violated the Wyoming fire safety code by failing to maintain a safe heating system. Appellants' App'x at 708. The expert witness also testified that the industry standard required inspections and maintenance of the furnaces. Id. at 703-04. And Ms. Lompe presented evidence that no one had ever inspected the furnaces. Id. at 1214. The jury evaluated this conflicting evidence and found that AMC had engaged in willful and wanton misconduct. To me, this finding requires us to consider AMC's misconduct as particularly reprehensible, for resolution of the evidentiary conflicts was for the jurors, not for us on the basis of a cold record.
We must also consider the ratio of punitive to compensatory damages. As the majority notes, the Supreme Court has provided only general guidelines for the constitutionally permissible ratio. Maj. Op. at 1067-68 & n. 24. For example, the Supreme Court stated that (1) a 4-to-1 damages ratio might be close to the constitutional boundary and (2) a ratio significantly exceeding single digits might cross the constitutional line. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 425, 123 S.Ct. 1513 (2003); see also Clark v. Chrysler Corp., 436 F.3d 594, 620 (6th Cir.2006) (Moore, J., concurring in part & dissenting in part) ("[T]he Court has never explicitly said that a 4:1 ratio actually is close to the constitutional line, just that it might be." (emphasis in original)); Mathias v. Accor Econ. Lodging, Inc., 347 F.3d 672, 676 (7th Cir.2003) ("The Supreme Court did not ... lay down a 4-to-1 or single-digit-ratio rule — it said merely that `there is a presumption against an award that has a 145-to-1 ratio.'" (quoting State Farm, 538 U.S. at 425, 123 S.Ct. 1513)). The Supreme Court added that even a 1-to-1 ratio might represent the constitutional limit when the award of compensatory damages is substantial. State Farm, 538 U.S. at 425, 123 S.Ct. 1513.
Despite these conflicting and ambiguous signals from the Supreme Court, the majority finds a pattern among the circuit court cases. Some courts have held that when a defendant's conduct is not particularly reprehensible and the compensatory damages are substantial, a 1-to-1 ratio represents the constitutional boundary. See Maj. Op. at 1073-76 (citing cases). Other courts have held that even when the compensatory damages are substantial, the constitutionally permissible ratio can far
How should we reconcile these conflicting signals from the Supreme Court and
Accordingly, the Supreme Court has declined to impose a bright-line ratio and has cautioned reviewing courts to assess the permissible ratio in light of the compensatory-damages award. See State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 425-26, 123 S.Ct. 1513 (2003).
This caution reflects the Supreme Court's recognition that when the compensatory damages are extraordinarily large, any multiplier above 1 might render the punitive-damages award excessive. Id. at 425, 123 S.Ct. 1513. Consider the $300 million hypothetical above: even a 1-to-1 ratio would yield punitive damages of $300 million. Thus, any multiplier greater than 1 might be overly severe and violate the defendant's right to due process even if the defendant's conduct is particularly reprehensible.
Here, the compensatory damages were $1,950,000. Like the majority, I regard this amount as substantial. But the Supreme Court has not suggested a hard-and-fast rule limiting punitive damage awards to a 1-to-1 ratio whenever the compensatory damages are considered substantial.
Against this backdrop, I would regard the substantiality of the award as a continuum, much like the continuum on reprehensibility. Just as the term "reprehensibility" describes various degrees of culpability, the term "substantial" describes many different dollar amounts. Compare Clark v. Chrysler Corp., 436 F.3d 594, 607 (6th Cir.2006) (noting that a $236,000 compensatory-damages award was "not particularly large"), and Flax v. DaimlerChrysler Corp., 272 S.W.3d 521, 539 (Tenn.2008) ("Although the United States Supreme Court has made no effort to demonstrate when damages are `substantial,' we do not believe that an award of $2,500,000 is so large as to require a ratio of 1 to 1."), with Bains LLC v. Arco Prods. Co., 405 F.3d 764, 776 (9th Cir. 2005) (stating that $50,000 in economic damages was "substantial").
Ms. Lompe's compensatory-damages award of $1,950,000 was large, and I would consider that fact along with the other two State Farm guideposts articulated in Gore. Gore, 517 U.S. at 575-76, 116 S.Ct. 1589 (identifying two other guideposts: reprehensibility and the "difference between
The third State Farm guidepost directs us to consider the disparity between the punitive-damages award in this case and civil penalties authorized or imposed in comparable cases. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 418, 123 S.Ct. 1513 (2003). In my view, this guidepost does not help us evaluate the constitutionality of the punitive damages to be assessed against AMC. See CGB Occupational Therapy, Inc. v. RHA Health Servs., Inc., 499 F.3d 184, 189-90 (3d Cir. 2007) (limiting the constitutional analysis to the first two guideposts in the absence of relevant, comparable civil penalties).
The majority acknowledges that the penalties associated with "violations of common law tort duties often do not `lend themselves to a comparison with statutory penalties.'" Maj. Op. at 1070 (quoting Cont'l Trend Res., Inc. v. OXY USA Inc., 101 F.3d 634, 641 (10th Cir.1996)). Nonetheless, the majority concludes that this guidepost "reinforces" a substantial reduction in punitive damages because
Id. at 1073.
For the sake of argument, we may assume that this guidepost supports a substantial reduction in the assessment of punitive damages. But I do not believe the majority's analysis requires us to remit the punitive damages to be assessed against AMC to $1.95 million.
The majority identifies several state statutes that require maintenance of heating systems, pointing out that they do not authorize civil penalties. Id. at 1071-72 & nn. 33-32. The majority views this factor as reinforcing its decision to cap the punitive damages to be assessed against AMC at $1.95 million. Id. at 1076. But, as the majority notes, no state authorizes civil penalties for failure to properly maintain furnaces. As a result, this factor is neutral; it does not reinforce anything.
In addition, the majority cites three cases in two states (Alabama and Missouri) between 1991 to 1993 for the proposition that courts "have generally awarded much smaller punitive damages than those awarded here." Id. at 1073-74 & n. 36. Again, I do not believe the cited cases help us to decide the amount of the remittitur. Each of these cases was decided before the Supreme Court decided BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589 (1996), which fundamentally changed the nature of our inquiry into the constitutionality of punitive damage assessments. The majority seems to acknowledge this fact, but still holds that these cases should have put AMC on notice of the potential degree of punitive damages. See Maj. Op. at 1072-73. I respectfully disagree.
First, in Sears, Roebuck and Co. v. Harris, the Alabama Supreme Court upheld a $2.5 million punitive-damages award after reducing the compensatory damages to $350,001, yielding a constitutionally permissible ratio of over 7.1 to 1 — several degrees higher than my proposed 4-to-1 ratio and magnitudes above the majority's
Second, in Killough v. Jahandarfard, the Alabama Supreme Court upheld an assessment of $2.5 million in punitive damages in a wrongful-death action because (1) the defendant had failed to equip the tenant's home with a smoke detector and (2) a fire resulted in a child's death from carbon monoxide poisoning. 578 So.2d 1041, 1042 (Ala.1991). But we do not know anything about the defendant's conduct in maintaining the house or when the fire took place. We know only when the suit was filed: over 27 years ago. See id. at 1042. Even then, the state supreme court upheld an assessment of $2.5 million in punitive damages.
For our inquiry on punitive damages, these cases tell us only that (1) more than 25 years ago, two Alabama juries awarded $2.5 million in punitive damages in cases involving carbon monoxide, and (2) in one of those cases, the ratio of punitive to compensatory damages was over 7.1-to-1. I do not think these Alabama cases could have put AMC on notice that any punitive-damages award would be limited to the extent of actual harm caused to its tenants (either to $1.95 million or any other amount).
In the third case that the majority cites, Kilmer v. Browning, a Missouri appellate court affirmed a $300,000 award based on "aggravating circumstances" that could be considered under a Missouri statute. 806 S.W.2d 75, 77, 80 (Mo.Ct.App.1991). But we do not know how much of this award was for compensatory damages versus punitive damages — we know only that "it was for the jury to determine if aggravating circumstances were present." Id.
In my view, we cannot determine the constitutional limit for punitive damages to be assessed against AMC based on
I respectfully disagree with the majority's adjusted assessment of punitive damages against AMC. The majority makes its own factual findings on AMC's reprehensibility without applying the clear-error standard to the district court's factual findings or considering the jury's finding of willful and wanton misconduct. These findings require us to consider AMC's conduct as particularly reprehensible — the most important of the three State Farm guideposts bearing on the constitutionality of the punitive-damages award.
I agree that the compensatory-damages award is substantial. But other courts have regularly permitted an assessment of punitive damages at a multiplier approximating four times the compensatory-damages award, even when the compensatory damages are substantial, as shown in the appendix.
I respectfully dissent from two of the majority's conclusions:
Instead, I would uphold the punitive-damages award against Sunridge and order a remittitur on the punitive-damages award against AMC for $7.8 million.
This appendix displays the results of a survey of punitive damage awards when the underlying award of compensatory damages was at least $400,000. In each of the surveyed cases, a federal court of appeals upheld the award of punitive damages, either as a constitutionally permissible award by the jury or as a constitutionally permissible amount through remittitur. Each point represents a single damages award. The bold line represents a 1-to-1 ratio of punitive damages to compensatory damages. Each case is labeled with a data point. The red triangle shows how my proposed ratio of 4 to 1 would fit within the survey of awards upheld against due process challenges when the compensatory damages awarded are $400,000 or more.
Data Case Punitive Compensatory Ratio Point Damages Damages My Proposed Remittitur $7,800,000 $1,900,000 4.00 1 Zhang v. Am. Gem Seafoods, Inc., 339 F.3d 1020 (9th Cir.2003) $2,600,000 $360,000 7.22 2 Bach v. First Union Nat. Bank, 486 F.3d 150 (6th Cir.2007) $400,000 $400,000 1.00 3 Stogsdill v. Healthmark Partners, L.L.C., 377 F.3d 827 (8th Cir.2004) $2,000,000 $500,000 4.00 4 Williams v. ConAgra Poultry Co., 378 F.3d 790 (8th Cir.2004) $600,000 $600,000 1.00 5 Jones v. United Parcel Serv., Inc., 674 F.3d 1187 (10th Cir.2012) $630,307 $630,307 1.00 6 Diesel Mach., Inc. v. B.R. Lee Indus., Inc., 418 F.3d 820 (8th Cir.2005) $2,660,000 $665,000 4.00 7 Lee ex rel. Lee v. Borders, 764 F.3d 966 (8th Cir.2014) $3,000,000 $1,000,000 3.00 8 Brand Mktg. Grp. v. Intertek Testing Servs., N.A., Inc., 801 F.3d 347 (3d Cir.2015) $5,000,000 $1,045,000 4.78 9 Turley v. ISG Lackawanna, Inc., 774 F.3d 140 (2d Cir.2014) $2,640,000 $1,320,000 2.00 10 Leavey v. Unum Provident Corp., 295 F. App'x 255 (9th Cir.2008) $3,000,000 $1,400,000 2.14 11 Gibson v. Moskowitz, 523 F.3d 657 (6th Cir. 2008) $3,000,000 $1,500,000 2.00 12 Hangarter v. Provident Life & Accident Ins. Co., 373 F.3d 998 (9th Cir.2004) $5,000,000 $1,920,000 2.60 13 Eden Elec., Ltd. v. Amana Co., 370 F.3d 824 (8th Cir.2004) $10,000,000 $2,100,000 4.76 14 Pollard v. E.I. DuPont De Nemours, Inc., 412 F.3d 657 (6th Cir.2005) $2,500,000 $2,200,000 1.14 15 Ondrisek v. Hoffman, 698 F.3d 1020 (8th Cir.2012) $12,000,000 $3,000,000 4.00 16 Action Marine, Inc. v. Cont'l Carbon Inc., 481 F.3d 1302 (11th Cir.2007) $17,500,000 $3,200,000 5.47 17 Conseco Fin. Serv. Corp. v. N. Am. Mort. Co., 381 F.3d 811 (8th Cir.2004) $7,000,000 $3,500,000 2.00 18 Boerner v. Brown & Williamson Tobacco Co., 394 F.3d 594 (8th Cir.2005) $5,000,000 $4,025,000 1.24 19 Morgan v. N.Y. Life Ins. Co., 559 F.3d 425 (6th Cir.2009) $6,000,000 $6,000,000 1.00
Cooper Indus., 532 U.S. at 440, 121 S.Ct. 1678 (addressing the relative institutional competence of district and appellate courts with respect to assessing the constitutionality of punitive damages awards).
But none of these statutes imposes civil fines or criminal liability. See Col.Rev.Stat. Ann. § 38-12-507 (providing that tenant can obtain injunctive relief, "actual damages," and under certain conditions may terminate the lease agreement if the landlord breaches the warranty of habitability); Kan. Stat. Ann. § 58-2559(a)-(b) (providing that tenant may terminate the lease agreement and "recover damages and obtain injunctive relief"); N.M. Stat. Ann. § 47-8-27.1(A)(1), (B) (providing that "if a reasonable attempt to remedy [a] breach is not made" after written notice "the rental agreement shall terminate as provided in the notice" and the renter "may also recover damages and obtain injunctive relief for any material noncompliance by the owner"); Okla. Stat. Ann. tit. 41, § 121(A)-(D) (providing that tenant may, upon notice and failure of the landlord to remedy, terminate the rental agreement or "[r]ecover damages based upon the diminution of the fair rental value of the dwelling unit"); Utah Code Ann. § 57-22-6(2), (5)(c)(ii) (providing that upon written notice of defect and failure to correct, renter may terminate the rental agreement and recover damages in court). And Utah, like Wyoming, excludes the recovery of damages for pain and suffering. See Utah Code Ann. § 57-22-6(6) ("An owner may not be held liable under this chapter for a claim for mental suffering or anguish."). See also Col.Rev. Stat. Ann. § 38-12-507(b) (limiting tenant to "actual damages" for breach of warranty of habitability).
Id.
In my view, the Eighth Circuit's opinion in Ondrisek supports some reduction in Ms. Lompe's award of punitive damages, but not to a 1-to-1 ratio. My proposed ratio, 4-to-1 in this case, is below the Eighth Circuit's constitutional boundary of 4.8-to-1 in cases involving compensatory damages in the millions of dollars.
The majority attempts to distinguish some of these cases in which a court approved of a ratio of damages exceeding 1-to-1, stating that the cases involved "intentionally culpable behavior ... or significantly greater actual damages to the plaintiff." Maj. Op. at 1075 n. 38. In my view, this distinction is immaterial for two reasons. First, as the majority states, each case is fact specific. See id. at 1069 n. 28 ("[T]he disparity in holdings indicates that the maximum of punitive damages that comports with due process is highly dependent upon the relevant facts."). The majority points to a number of cases that limit the ratio to 1-to-1. I am simply pointing to these cases to show that numerous courts have approved higher ratios even when the damages are substantial. Second, the majority's distinction assumes that AMC was not particularly culpable in this case. But as discussed above, the jury's verdict was tantamount to a finding that AMC's misconduct had "approached an intent to do harm." See p. 1084, above.
