NOT RECOMMENDED FOR PUBLICATION
File Name: 05a0154n.06
Filed: February 25, 2005
No. 03-6429
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
GEORGE WINKLER, FLOYD E. BROWN,
DEIDRE W. BROWN, JAMES A. THAGARD,
FRANCES S. THAGARD, THOMAS F.
HUNTINGTON, SUSAN K. HUNTINGTON,
Plaintiffs-Appellees,
v. On Appeal from the United
States District Court for the
FRANK PETERSILIE; CENTRAL FLORIDA Eastern District of Tennessee
CAPITAL ENTERPRISES, INC.,
Defendants-Appellants.
/
Before: GUY and ROGERS, Circuit Judges; DOWD, District Judge.*
RALPH B. GUY, JR., Circuit Judge. Defendants appeal from the judgment
entered in favor of the plaintiffs following a nonjury trial on claims and counterclaims arising
from a dispute over the plaintiffs’ right to access and use Watauga Lake, which is located on
abutting property owned by defendant Central Florida Capital Enterprises, Inc. (CFCE).
Rejecting the competing claims of trespass as well as the plaintiffs’ claims for conversion,
the district court found CFCE vicariously liable for malicious destruction of plaintiffs’
*
The Honorable David D. Dowd, Jr., United States District Judge for the Northern District of Ohio,
sitting by designation.
No. 03-6429 2
property and awarded a total of $33,525 in damages. That amount was offset by an award
of $1,000 to CFCE to cure the encroachment of a portion of a patio constructed by plaintiffs
Susan and Thomas Huntington. The district court awarded punitive damages against Frank
Petersilie, a director, principal shareholder and CEO of CFCE, totaling $200,000. The
district court also found Petersilie liable for outrageous conduct (or intentional infliction of
emotional distress) and awarded plaintiffs a total of $100,000 in compensatory damages.
Defendants first challenge the district court’s determination that plaintiffs’ easements
included the right to build walkways, stairs, and docks as permitted by the Tennessee Valley
Authority (TVA). Petersilie argues that the evidence was insufficient to establish liability
to plaintiffs for outrageous conduct or to support the award of compensatory and punitive
damages. Without denying it may be held vicariously liable for Petersilie’s actions, CFCE
seeks reversal of the judgment in favor of the Huntingtons for malicious destruction of
property and the order transferring property to the Huntingtons to cure the encroachment.
After a review of the record and the arguments presented on appeal, we REVERSE the
judgments in favor of plaintiffs on their claims of outrageous conduct and AFFIRM in all
other respects.
I.
All of the property at issue in this case was once part of a single tract of land owned
by Betty Managoff located in Johnson County, Tennessee. A portion of that land was
permanently flooded after the TVA constructed a dam across the Watauga River pursuant
to a Flowage Easement dated March 11, 1948, granting the TVA permanent easement rights
to land lying below elevation 1980’ Mean Sea Level (MSL) (TVA 1980 elevation line). The
No. 03-6429 3
Flowage Easement expressly granted the TVA the right to permanently overflow the land,
to enter and clear the land of anything that would interfere with navigation or flood control,
and to “excavate, erect structures, and do such other work as is desirable in connection with
the needs of navigation.” There is no dispute that TVA approval is required to construct,
operate or maintain any obstructions on property in the TVA’s custody and control, including
not only TVA-owned land but also land subject to TVA flowage easements. The TVA also
has authority to cancel permits and require the removal of any structure on such land.
Managoff’s property lay beneath and on both sides of a part of Watauga Lake known
as Cobbs Creek Cove. She operated a fishing camp on one side and developed a subdivision
on the other. The plat for the Managoff Subdivision, recorded with the county in 1966,
described each lot by metes-and-bounds and noted the southeastern border of those lots to
be the “TVA 1980 elevation.” Although the TVA’s easement extends up to the TVA 1980
elevation line, the waters of Watauga Lake have never been that high. The waters have
fluctuated between an all-time high water mark of 1963’ MSL and a low water mark of
between 1930’ and 1940’ MSL. A second plat of the same date showed the boundary to be
the TVA 1960 elevation line, but that plat was never recorded.1
Plaintiffs and their predecessors purchased multiple lots in the Managoff Subdivision
before Managoff sold the tract of property on which the lake is located to CFCE’s
predecessors in title. Specifically, plaintiffs Floyd and Deidre Brown owned lots 7, 8, and
9 (the Browns); James and Frances Thagard owned lots 13, 14, and 15 (the Thagards);
1
Plaintiffs have abandoned any claim to ownership of property below the TVA 1980 elevation line
based on the unrecorded plat, errors in the placement of boundary markers, or adverse possession.
No. 03-6429 4
George Winkler owned lots 16 and 17 (Winkler); and Thomas and Susan Huntington owned
lots 18, 19 and 20 (the Huntingtons). The deeds for these lots expressly granted either (1)
“the right of egress and ingress to and from said lot and extending to the waters of Watauga
Lake on the southeasterly side thereof, which rights shall be coextensive with the width of
said lot and extending to said lake”; or (2) “water front privileges adjacent to the aforesaid
property with the free right to ingress and egress along the 1980 TVA elevation line.” Each
deed also granted all appurtenances appertaining to those lots.
The plaintiff property owners all obtained permits from the TVA to erect or maintain
stairs and floating docks within the TVA’s Flowage Easement. Pursuant to those permits,
all the plaintiffs, except for the Huntingtons, erected or maintained stairs and docks extending
from their property into Watauga Lake. The undisputed evidence showed that the slope from
the plaintiffs’ lots to the water was steep and rocky, with several lots having an incline of as
much as 60 degrees. One witness, a former owner of lot 9, testified that the slope was so
steep that one could not walk up from the lake without holding onto the trees. Plaintiffs
testified that it was difficult, if not dangerous, either to access the lake from their property
without stairs or to get in or out of a boat without a dock.
CFCE’s predecessors in interest, Charles and Edith Weathers, purchased the property
under the lake and extending up to the TVA 1980 elevation line. They were also parties to
state court litigation brought by the owner of lot 11, which is not owned by any of the
plaintiffs in this case. Managoff was deposed during that litigation, but died before this case
was commenced. An agreed judgment was entered declaring an easement on what is now
CFCE’s property allowing the owner of lot 11 to build stairs and a dock as permitted by the
No. 03-6429 5
TVA and ordering that the Weathers not attempt to interfere with the TVA’s permitting
decisions. That judgment also stated, however, that it did not affect the rights of the
Weathers with respect to any other lots in the Managoff Subdivision. The final modified
judgment in that case was entered in July 1992.2
CFCE bought the property in September 1999, and Petersilie began managing the
marina. Petersilie insisted that plaintiffs did not have the right to build or maintain stairs,
anchor floating docks, or otherwise access Watauga Lake without paying rent to CFCE.
Over the next two years, Petersilie directly confronted some of the plaintiffs on their docks
and told them they could not swim, boat, or use the lake unless they paid CFCE. Petersilie
had “no trespassing” signs posted along the TVA 1980 elevation line. In September 2001,
Petersilie directed that the stairs extending below the TVA 1980 elevation line be cut off with
a chain saw, the wood piled on the docks, and the docks cut loose and towed outside the
cove. Only the Huntingtons did not have stairs or a dock at that time. Petersilie had the
TVA 1980 elevation line spray-painted, and docks placed in front of the plaintiffs’ lots to
block their access to the lake. Plaintiffs testified that they felt threatened by Petersilie’s
actions and had been denied their right to use the lake since September 2001.
The Browns paid dock fees to CFCE’s predecessor until 1999, when they secured
2
Managoff testified that in granting “waterfront privileges” she intended that the property owners
would be able to “walk down to the water to swim or fish, or if somebody wanted to drop them off.” She also
explained that she understood nothing could be permanently placed below the TVA 1980 elevation line
because that property was subject to the TVA’s Flowage Easement. The magistrate judge ruled before trial
in this case that Managoff’s deposition was not admissible because Tennessee law does not allow the
admission of parol evidence to vary or explain the terms of an agreement when the ambiguity is patent.
Coble Sys., Inc. v. Gifford Co., 627 S.W.2d 359, 362 (Tenn. Ct. App. 1981). Defendants offered Managoff’s
deposition into evidence in this case. The district judge received the deposition, indicating he would
determine whether it was admissible, but did not refer to it in his written decision on the merits.
No. 03-6429 6
their own permit from the TVA. In the spring of both 2000 and 2001, Petersilie confronted
Floyd Brown on his dock, insisted that the state court judgment relating to lot 11 was invalid,
demanded that the Browns pay rent to CFCE, and threatened to have their dock removed.
“No trespassing” signs were posted, but they continued to use the lake.
One Sunday afternoon, the Browns were out boating when they were stopped by a
Tennessee Wildlife Officer and detained for an hour at defendant’s marina on a trespassing
complaint. Plaintiffs’ counsel wrote to Petersilie on behalf of the Browns and warned against
taking the “self-help” measures he had been threatening to take. No further action was taken
by Petersilie until their stairs were destroyed, the dock removed, and the property line spray-
painted in September 2001. Diedre Brown testified that she felt stress, fear, and harassment
as a result of Petersilie’s actions.
The Thagards originally purchased five lots, two of which were sold to George
Winkler. The Thagards specifically chose property with waterfront privileges so they could
swim, fish, and keep their boat. After obtaining TVA permits to built three sets of stairs and
docks in 1995, James Thagard hired some help and started building his first set of stairs. He
completed three sets of stairs and two docks without receiving any complaints.
On September 7, 2001, however, a man confronted Thagard on his dock, told him that
he was trespassing on private property and said there was no “ingress or egress” allowed to
the lake. The next day, Thagard returned to the property to have a picnic and found his steps
had been cut off with a chain saw and the property line had been spray-painted. He testified
that he was deeply affected by the destruction of steps he had built and by having lost the use
of the lake in his retirement.
No. 03-6429 7
When George Winkler bought his two lots from the Thagards, a dock and two sets of
stairs had already been built and the TVA permits were transferred into his name. Shortly
after the closing, Petersilie confronted Winkler out on the dock, warned Winkler that he was
trespassing, and told Winkler he could not use the lake. According to Winkler’s wife,
Petersilie told them they could not swim in the lake and threatened to have them arrested if
they did. In July 2001, Petersilie pinned the plaintiffs’ docks in with a larger dock before
agreeing to move it. In August 2001, Petersilie again accused Winkler of trespassing,
threatened to build a barricade on the property line, and declared that he would spend $5
million to keep Winkler off the lake. A month later, Winkler’s steps were cut down and the
dock towed away.
The Huntingtons purchased their lots for camping and lake access, but they were the
steepest of all the lots. As a result, Thomas Huntington built a roadway down to a concrete
patio. The patio, built between November 2000 and June 2001, was anchored to the rocks
with steel pins and constructed using steel I-beams and concrete. Although they had a permit
from the TVA, the Huntingtons had not yet built stairs or a dock below the TVA 1980
elevation line. Even so, Petersilie had signs posted at and paint sprayed along the boundary
of the Huntingtons’ property. James Huntington testified that this conduct, which he
characterized as “acts of terror,” caused them to postpone construction of stairs and a dock.
Placement of the patio was based on markers left from a previous survey, which it
turned out did not accurately mark the boundary line. A surveyor testified that the patio
encroached onto CFCE’s property by about two feet, or a rectangle of .005 acres. He
prepared a plat showing that the purchase of .021 acres, or 215.96 square feet, would cure
No. 03-6429 8
the encroachment. The county assessor testified that the assessed value of lots in that area
varied between $1.60 and $1.93 per square foot and that a special assessment applied to lake
property. At $1.93 per square foot, the value of the encroached property would be $418.80.
The district court found this would not be sufficient to compensate CFCE, but found $1,000
would be a fair value.
Petersilie testified, in an attempt to explain his actions, that he had been unable to get
liability insurance for the marina because he did not have control over the plaintiffs’ steps
or docks. Also, Petersilie admitted that he directed the removal of the stairs and docks, but
claimed he did so only after being told he could by someone at the Corps of Engineers. The
district court expressly found that Petersilie was not a credible witness, had produced no
evidence concerning his efforts to obtain liability insurance, and had offered no evidence to
substantiate the claim that he was authorized by the Corps of Engineers to destroy the
plaintiffs’ property. The district court also found Petersilie’s claim that he did not know the
amount of his own net worth or the marina’s income to be unbelievable. Petersilie admitted
that he had failed to include between $250,000 and $350,000 in cash on financial statements
he provided to the plaintiffs; that CFCE had no certificate of authority to do business in the
State of Tennessee; and that CFCE did not apply for transfer of the TVA permits until 2002.
A bench trial was held in March 2003, and the district court issued a written decision
in September 2003. Judgment was entered against defendants declaring that the plaintiffs’
easements permit the free right of ingress and egress to the waters of Watauga Lake through
any reasonable means, including the building of walkways, stairs, and docks as permitted by
No. 03-6429 9
the TVA, and to engage in any activity on the waters of Watauga Lake permitted by the
TVA.
With respect to CFCE’s vicarious liability, the district court found the intentional
malicious destruction of property at Petersilie’s direction constituted unlawful interference
with the reasonable use of the plaintiffs’ easements. Damages were awarded as follows
based on the cost of replacing the stairs that were cut down and diminution in value of the
Huntingtons’ property: $9,860 to the Browns; $7,350 to the Thagards; $11,315 to George
Winkler; and $5,000 to the Huntingtons. To cure the encroachment, the award of damages
to the Huntingtons was offset by $1,000 in exchange for transfer of the encroached property
to the Huntingtons.
Petersilie was found personally liable for outrageous conduct, and compensatory
damages of $25,000 was awarded to each couple and to Winkler for a total of $100,000.
Finally, applying Tennessee law, the district court awarded punitive damages of $50,000 to
each couple and to Winkler for a total of $200,000. This appeal followed.
II.
A. Plaintiffs’ Easements
At the outset, we must resolve defendants’ central claim, that the district court erred
in finding plaintiffs had the right to build and maintain stairs and docks below the TVA 1980
elevation line both as a result of the permits issued by the TVA and pursuant to the easement
contained in the deeds. We review a district court’s findings of fact under Fed. R. Civ. P.
52(a) for clear error and its determination of a question of law de novo. See Anderson v. City
of Bessemer, 470 U.S. 564, 573 (1985); Loudermill v. Cleveland Bd. of Educ., 844 F.2d 304,
No. 03-6429 10
308 (6th Cir. 1988).
There is no dispute that permits are required from the TVA in order to lawfully
construct any structure on property subject to the TVA’s Flowage Easement or that the TVA
may cancel permits and require removal of any structure on such property. The district court
also emphasized that the TVA’s statutory powers include the authority to convey by deed,
lease, or otherwise, real property in the possession of or under the control of the TVA to any
person for the purpose of recreation. See 16 U.S.C. § 831c(k)(a). In this case, however,
defendants argue and plaintiffs agree that the permits expressly stated that their issuance did
not constitute a conveyance by the TVA of any property or interest in any property covered
by or used in connection with the approved project. As such, plaintiffs do not rely on the
permits to establish their easement rights, but only to demonstrate that they had the required
approval of the TVA to place stairs and docks within the TVA’s Flowage Easement.
Instead, plaintiffs ask that we affirm based on the district court’s further determination
that the deeds granted riparian rights that included the right to construct walkways, stairs, and
docks as permitted by the TVA. It is true, as defendants argue, that a riparian owner is
ordinarily one who owns land bounded by, abutting, or adjacent to a lake or river. The
Pointe LLC v. Lake Mgmt. Ass’n, Inc., 50 S.W.3d 471, 475 (Tenn. Ct. App. 2000). In The
Pointe, the court held that when property adjacent to water is conveyed along with “all
appurtenances,” a presumption arises that the conveyance includes the right to the use and
enjoyment of the water unless the terms of the deed or description of the property expressly
indicates to the contrary. Id. Through this presumption, riparian rights were found to arise
in the form of an implied easement.
No. 03-6429 11
While plaintiffs’ lots do not abut Watauga Lake, the deeds to those lots were not silent
concerning the plaintiffs’ right to the use and enjoyment of the lake. Rather, the deeds
expressly granted the lot owners either (1) the right to free ingress and egress to the lake
across the full width of the lot at the TVA 1980 elevation line and extending to the waters
of Watauga Lake, or (2) the right to waterfront privileges adjacent to the plaintiffs lot with
the free right of ingress and egress along the TVA 1980 elevation line. We agree with the
district court that these deeds expressly conveyed riparian rights through an easement for free
access and use of Watauga Lake. Bradley v. McLeod, 984 S.W.2d 929, 934 (Tenn. Ct. App.
1998) (an easement is an interest in another’s property that confers an enforceable right to
use the property for a specified use). Riparian rights are not unlimited, but must be
reasonable under the circumstances. See Stanley v. Ring, No. W2001-00950, 2002 WL
1751409, at *4 (Tenn. Ct. App. Mar. 20, 2002) (unpublished decision). The undisputed
evidence supports the district court’s further finding that the manner in which the plaintiffs
exercised their rights by constructing stairs and docks was both reasonable under the
circumstances and done pursuant to permits issued by the TVA.
Defendants suggest that these lots were merely “lake view” lots with a right-of-way
easement that did not grant riparian rights, urging that we follow Gwynn v. Oursler, 712 A.2d
1072 (Md. App. 1998). In Gwynn, the Maryland appellate court stated that a “right-of-way
to a body of water, alone, does not entitle the grantee the right to construct a dock or pier.”
Id. at 1075. The two-part analysis adopted in Gwynn requires a court to first examine the
deed to determine whether it grants or denies riparian rights. If it grants such rights, the
language of the deed controls. If the deed is ambiguous, the court may then consider parol
No. 03-6429 12
or other extrinsic evidence to discover the grantor’s intent.
The deed at issue in Gwynn, unlike the deeds in this case, granted a general right-of-
way for ingress and egress without describing whether it was intended to provide access to
the river or the roadway or both. The trial judge found the deed did not expressly grant or
deny riparian rights, received additional evidence concerning the intention of the grantor, and
found that the right-of-way was intended only to provide access to the road. Without
attempting to determine whether the Tennessee courts would follow Gwynn or whether it
would conflict with Tennessee law to allow parol evidence to explain a patent ambiguity, we
find that application of Gwynn would not alter the outcome in this case because the plaintiffs’
deeds expressly grant riparian rights through an easement for access to the lake and/or
waterfront privileges.
Accordingly, we affirm the declaration of rights and the injunction prohibiting
defendants and their successors from interfering with those easement rights.3
B. Malicious Destruction of Property and Interference with Easement Rights
CFCE does not appeal from either the determination that it was vicariously liable for
Petersilie’s actions or the amount of damages awarded to the Browns, the Thagards, or
Winkler to replace the stairs cut down at Petersilie’s direction. With respect to the award of
$5,000 to the Huntingtons, however, defendants argue that no personal property was actually
destroyed and there was no evidence establishing the diminution in value resulting from the
denial of access to the lake.
3
Moreover, even if we were to look beyond the deeds, it is not clear that Managoff’s deposition
testimony would establish that she did not intend to grant the right to build stairs or docks even if they were
permitted by the TVA.
No. 03-6429 13
The district court found that the effect of the intentional destruction of plaintiffs’
personal property was the interference with the easement holders’ enjoyment and use of their
easements. Under Tennessee law, the owner of a subservient estate may be liable in damages
for interference with the easement holder’s use and enjoyment of the easement. See Rector
v. Halliburton, No. M1999-02802, 2003 WL 535924, at *9 (Tenn. Ct. App. Feb. 26, 2003)
(unpublished decision). In choosing the correct measure of damages for such interference,
courts must look to the particular nature of the injury and may appropriately measure
damages by any diminution in the value of the easement holder’s property, the cost to return
the easement to its previous condition, or the difference in the value of the easement before
the interference and after being obstructed. Id. at *10.
Finding interference with the Huntingtons’ easement rights, the district court
concluded that the proper measure of damages would be the diminution in value of the
easement during the two years before trial that they were denied access to the lake. As the
trier of fact, it was within the district court’s purview to decide that $5,000 would properly
compensate for that loss. We find no error in this regard.
As noted earlier, that award was offset by $1,000 to cure the encroachment of the
patio constructed by the Huntingtons. CFCE argues that the district court abused its
discretion by not ordering the Huntingtons to remove that portion of the patio that extended
onto CFCE’s property. In the same breath, CFCE concedes that an appropriate equitable
remedy for encroachment of a building onto the property of another may be to award
damages to the owner. See Morrison v. Jones, 430 S.W.2d 668 (Tenn. Ct. App. 1968).
While CFCE asserts that there was nothing in the record to suggest the concrete patio
No. 03-6429 14
could not be severed at the property line, there was also no evidence offered that it could.
The record indicates that the district court heard testimony concerning the construction of the
patio, the extent of the encroachment, and Huntington’s reliance on markers left from an
earlier survey. It was well within the sound discretion of the trial court to determine whether
the equitable remedy of injunction should be granted to cure an encroachment. Id. CFCE
has not demonstrated an abuse of that discretion.
C. Outrageous Conduct
Compensatory damages of $25,000 each were awarded to the Browns, the Thagards,
the Huntingtons, and Winkler on the plaintiffs’ claim of “outrageous conduct,” which is the
same as intentional infliction of emotional distress. To establish a claim for outrageous
conduct under Tennessee law, a plaintiff must prove that (1) the conduct complained of was
intentional or reckless, (2) the conduct was so outrageous as to be intolerable in a civilized
society, and (3) the conduct resulted in serious mental injury. Bain v. Wells, 936 S.W.2d 618,
622 (Tenn. 1997). Petersilie, who was found personally liable on this claim, argues that the
evidence was insufficient to establish the second or third elements of this tort. This is a
question of law, which we review de novo. White v. Vanderbilt Univ., 21 S.W.3d 215, 231
(Tenn. Ct. App. 1999).
The following threshold has been adopted in Tennessee to determine whether the
conduct was “outrageous”:
It has not been enough that the defendant has acted with an intent which is
tortious or even criminal, or that he has intended to inflict emotional distress,
or even that his conduct has been characterized by “malice,” or a degree of
aggravation which would entitle the plaintiff to punitive damages for another
tort. Liability has been found only where the conduct has been so outrageous
No. 03-6429 15
in character, and so extreme in degree, as to go beyond all bounds of decency,
and to be regarded as atrocious, and utterly intolerable in a civilized
community.
Bain, 936 S.W.2d at 623 (quoting Restatement (Second) of Torts § 46 cmt. d (1965)).
Petersilie argues that his conduct did not rise to this level because he acted on a
genuine good faith belief that plaintiffs did not have the right to maintain stairs or docks in
the easement. While the evidence supported the district court’s finding that Petersilie acted
in deliberate contravention of the plaintiffs easement rights through a continuing course of
confrontation and harassment, that conduct was not so outrageous in character and so
extreme in degree as to be considered intolerable in a civilized society. In Rector, for
example, the defendant’s campaign of harassment in an attempt to intimidate the plaintiff into
relinquishing her easement rights, although condemnable, was found not to rise to the level
of extreme and outrageous conduct. Rector, 2003 WL 535924, at *8. (reversing judgment
for plaintiff on the claim of outrageous conduct). Cf. Levy v. James C.D., No. M2002-02730,
2004 WL 1534185, at *15-17 (Tenn. Ct. App. July 9, 2004) (unpublished decision)
(campaign of intimidation over property dispute with neighbor, which included angry
profane confrontations, death threats, and shots being fired, rose to the level of outrageous
conduct).
With respect to the third element, serious mental injury, a plaintiff must show the
defendant’s conduct caused so much mental distress that a reasonable person would be
unable to cope. Ramsey v. Beavers, 931 S.W.2d 527, 532 (Tenn. 1996). Expert testimony
is not required to prove serious mental injury, and proof may include a plaintiff’s own
testimony as well as other lay witnesses. Miller v. Willbanks, 8 S.W.3d 607, 615 (Tenn.
No. 03-6429 16
1999). Physical manifestations of emotional distress and evidence that a plaintiff suffered
from nightmares, insomnia, and depression, or sought medical or psychiatric treatment may
support a claim for serious mental injury. Id.
In this case, plaintiffs testified generally that they experienced stress, fear, and anxiety
as a result of Petersilie’s campaign of intimidation and harassment. The district court found
that Petersilie had “destroyed the plaintiffs’ emotional tranquility and took away their use and
enjoyment of their lake property to such an extent that they felt terrorized by him.” As
defendants point out, however, plaintiffs did not testify to any physical manifestations of
emotional distress and did not seek medical treatment or counseling as a result of Petersilie’s
conduct. While no doubt upsetting and distressing, a loss of emotional tranquility will not
support a finding of serious mental injury. Id. at 615 n.4 (more than transient trivial
emotional distress is required).4
Accordingly, we vacate the judgments entered in favor of plaintiffs on their claims of
outrageous conduct.
4
Plaintiffs also argue that it was not necessary to prove serious mental injury, relying on the following
quote from Dunn v. Moto Photo, Inc., 828 S.W.2d 747, 749-50 (Tenn Ct. App. 1991):
The law recognizes and protects the right to emotional tranquility, but where recovery is
sought for mental or emotional disturbance alone, unconnected with any independently
actionable tort or with contemporaneous or consequential objectively ascertainable injury,
the conduct complained of must have been outrageous and serious mental injury must have
resulted therefrom.
Although plaintiffs are correct that Tennessee law has allowed recovery for emotional injury as an element
of compensatory damages for an independently actionable tort, proof of serious mental injury remains
necessary to prevail on a “stand-alone” claim of intentional or even negligent infliction of emotional distress.
Estate of Amos v. Vanderbilt Univ., 62 S.W.3d 133, 137 (Tenn. 2001) (citing cases). In this case, the
judgment makes clear that the plaintiffs were awarded compensatory damages on their “stand-alone” claims
of intentional infliction of emotional distress.
No. 03-6429 17
D. Punitive Damages
Petersilie’s challenge to the district court’s award of punitive damages is threefold.
He argues that his conduct did not justify the imposition of punitive damages, that the district
court failed to properly consider the necessary factors in determining the amount of such
damages, and that the amount of the award was so excessive as to be unconstitutional.
(1) Punitive damages may be recovered in addition to compensatory damages, but
may not be sustained absent an award of actual damages or injunctive relief. Whittington v.
Grand Valley Lakes, Inc., 547 S.W.2d 241, 243 (Tenn. 1977); Oakley v. Simmons, 799
S.W.2d 669, 672 (Tenn. Ct. App. 1990). While we have vacated the compensatory damage
awards for outrageous conduct, we have affirmed the award of both injunctive relief and
actual damages in tort for Petersilie’s conduct. Consequently, the district court was entitled
to consider plaintiffs’ request for punitive damages.
To recover punitive damages, a plaintiff must prove, by clear and convincing
evidence, that the defendant engaged in intentional, fraudulent, malicious, or reckless
conduct. Hodges v. S.C. Toof & Co., 833 S.W.2d 896, 901 (Tenn. 1992). A person acts
intentionally when “it is the person’s conscious objective or desire to engage in the conduct
or cause the result” and maliciously when he is “motivated by ill will, hatred, or personal
spite.” Id. Applying these standards, the district court specifically found
by clear and convincing evidence that it was Petersilie’s conscious objective
or desire to engage in the conduct or cause the result of the interference with
the easement holders’ enjoyment and use of the easements in question, and that
he acted intentionally and maliciously in posting signs, having their steps
destroyed with a chain saw, moving their docks, and by his oral threats.
Petersilie did so with the express purpose of obtaining a lease and rental
income for [CFCE], and in turn, for himself as principal shareholder, in
No. 03-6429 18
exchange for plaintiffs’ use of their easement. Therefore, the Court finds that
plaintiffs are entitled to punitive damages from Petersilie individually based
upon his intentional and malicious conduct.
Although Petersilie disingenuously testified that he did not know his net
worth, he did brag to one of the plaintiffs that he had $5,000,000. In addition,
he admitted on the stand that he had failed to include between $250,000 and
$350,000 in cash on his financial statement. Although he failed to accurately
assess his real property holdings, it was clear to the Court that they were
extensive.
On appeal, defendants again argue that Petersilie genuinely believed the steps were
constructed without authorization and that he had the right to have them removed.
Defendants also reiterate Petersilie’s claim that he acted out of concern for the safety of
others and to secure liability insurance for the marina. The district court explicitly found that
Petersilie’s testimony was not credible and that no evidence was offered to corroborate his
claim regarding liability insurance. Despite continued protestations that Petersilie was acting
in good faith, the record amply supports the finding that he acted with intentional and
malicious disregard for the plaintiffs’ rights.5
(2) In determining the amount of punitive damages to award, Tennessee law requires
the fact finder is to consider, to the extent relevant, at least the following factors:
(1) The defendant’s financial affairs, financial condition, and net worth;
5
The fact that no compensatory damages were assessed against Petersilie does not prevent the award
of punitive damages against him for interfering with the plaintiffs’ easement rights. Petersilie’s actions were
the basis for the damages award against CFCE, and just as an employer may be held vicariously liable for
punitive damages based on an employee’s actions within the scope of his employment, so may an employee
be forced to bear the deterrent effect of punitive damages for his own actions even when the compensatory
damages are assessed against his employer. See Louisville & N. R. Co. v. Ray, 46 S.W. 554, 555 (Tenn.
1898); Huckeby v. Spangler, 563 S.W.2d 555, 557-60 (Tenn. 1978) (punitive damages may be awarded
against some but not all defendants); Watson v. Dixon, 532 S.E.2d 175, 177-78 (N.C. 2000) (punitive
damages awarded against both employer and employee based on the same underlying conduct).
No. 03-6429 19
(2) The nature and reprehensibility of defendant’s wrongdoing, for example
(A) The impact of defendant’s conduct on the plaintiff, or
(B) The relationship of the defendant to plaintiff;
(3) the defendant’s awareness of the amount of harm being caused and
defendant’s motivation in causing the harm;
(4) The duration of defendant’s misconduct and whether defendant attempted
to conceal the conduct;
(5) The expense plaintiff has borne in the attempt to recover the losses;
(6) Whether defendant profited from the activity, and if defendant did profit,
whether the punitive award should be in excess of the profit in order to deter
similar future behavior;
(7) Whether, and the extent to which, defendant has been subjected to previous
punitive damage awards based upon the same wrongful act;
(8) Whether, once the misconduct became known to defendant, defendant
took remedial action or attempted to make amends by offering a prompt and
fair settlement for actual harm caused; and
(9) Any other circumstances shown by the evidence that bear on determining
the proper amount of punitive award.
Hodges, 833 S.W.2d at 901-02. In making this determination, the trier of fact is to keep in
mind that the primary purpose of a punitive damage award is deterrence. Id. at 902.
While objecting to the amount as excessive, Petersilie has not attempted to show that
the punitive damage awards were the result of passion, prejudice, improper sympathy, or
were otherwise unjust. See Coppinger Color Lab, Inc. v. Nixon, 698 S.W.2d 72, 75 (Tenn.
1985). Nor have defendants attempted to show that consideration of the above factors would
weigh against an award of punitive damages in this case.
Instead, Petersilie argues that it is not clear from the district court’s written findings
that any of the factors, except the first one relating to the defendant’s financial situation, were
No. 03-6429 20
considered in determining the amount of punitive damages to award. Without actually
saying so, Petersilie seems to argue that it was reversible error for the district court not to
have explicitly addressed each of the factors in its opinion. It is true that the Tennessee
Supreme Court requires that a trial court make explicit findings as to each of the relevant
Hodges criteria even in a nonjury trial. Culbreath v. First Tenn. Bank Nat’l Ass’n, 44 S.W.3d
518, 528-29 (Tenn. 2001). This is, however, a procedural requirement to which the federal
district court, sitting in diversity, is not bound to follow. Medlin v. Clyde Sparks Wrecker
Serv., Inc., No. 01-5941, 2003 WL 1194245, at *6 (6th Cir. Mar. 11, 2003) (citation omitted)
(unpublished decision). The failure to make explicit findings is not grounds for reversal in
this case.
(3) Finally, Petersilie argues that the punitive damage awards are so excessive as to
violate due process under the principles outlined in BMW of North America, Inc. v. Gore, 517
U.S. 559 (1996). In reviewing the constitutionality of a punitive damage award, the Court
in Gore instructed courts to “consider three guideposts: (1) the degree of reprehensibility of
the defendant’s misconduct; (2) the disparity between the actual or potential harm suffered
by the plaintiff and the punitive damage award; and (3) the difference between the punitive
damages awarded by the jury and the civil penalties authorized or imposed in comparable
cases.” State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 418 (2003). Our review
of the constitutionality of a punitive damage award is de novo. Cooper Indus., Inc. v.
Leatherman Tool Group, Inc., 532 U.S. 424, 431 (2001).
With respect to the first guidepost, Petersilie argues that it was not “that
reprehensible” for him to have the structures removed because he genuinely believed that
No. 03-6429 21
they were unauthorized encroachments, no one was physically injured, and the structures
were removed when plaintiffs were not present. According to the Supreme Court,
reprehensibility is determined based on consideration of whether
the harm caused was physical as opposed to economic; the tortious conduct
evinced an indifference to or a reckless disregard of the health or safety of
others; the target of the conduct had financial vulnerability; the conduct
involved repeated actions or was an isolated incident; and the harm was the
result of intentional malice, trickery, or deceit, or mere accident.
State Farm, 538 U.S. at 419. The weighing of only one of these factors in favor of plaintiff
may not be sufficient, and the absence of any factor weighing in favor of plaintiff “renders
any award suspect.” Id.
It is clear that the district court found Petersilie’s actions were not taken in good faith,
but were malicious and in reckless disregard of the plaintiffs’ rights. The evidence further
showed that the harm was not merely economic, but involved the destruction of property and
intentional interference with the plaintiffs’ use of the lake. Petersilie attempted to intimidate
the plaintiffs into acquiescing, threatened them with arrest, and even caused the Browns to
be detained for an hour on a charge of trespass. We find that several of the factors weigh in
favor of the plaintiffs such that the degree of reprehensibility guidepost supports the award
of punitive damages in this case.
The second guidepost focuses on the disparity between the actual harm or potential
harm suffered by the plaintiff and the punitive damage award. The Supreme Court has
declined to adopt concrete or bright-line constitutional limits for the ratio between actual or
potential harm and a punitive damage award. State Farm, 538 U.S. at 425. The Court
nonetheless observed that, “in practice, few awards exceeding a single-digit ratio between
No. 03-6429 22
punitive and compensatory damages, to a significant degree, will satisfy due process.” Id.
Noting that it had cited a 4-to-1 ratio as being close to the line of unconstitutional
impropriety, the Court also emphasized that these ratios are instructive and demonstrate the
principle that “[s]ingle-digit multipliers are more likely to comport with due process, while
still achieving the State’s goals of deterrence and retribution, than awards with ratios in range
of 500 to 1,” or, as in State Farm, 145 to 1. Id. Particularly relevant to this case is the
Court’s further observation that the magnitude of the compensatory damage award may
impact what may be a constitutionally permissible disparity. The Court explained that
“because there are no rigid benchmarks that a punitive damages award may not surpass,
ratios greater than those we have previously upheld may comport with due process where ‘a
particularly egregious act has resulted in only a small amount of economic damages.’” Id
(citation omitted).
When the district court awarded $50,000 in punitive damages to each of the couples
and to Winkler, that amount was not even double the compensatory damage awards, which
ranged between $29,000 and $36,315. With this court’s determination that plaintiffs did not
establish the independent tort of outrageous conduct, the compensatory damage awards fall
to between $5,000 and $11,315. These amounts clearly do not include any element of
damages for mental anguish or distress and represent only the cost to replace the stairs and
compensate the Huntingtons for interference with their easement rights. Even so, the ratios
between the punitive damage awards and the remaining damage awards were as little as 5 to
1 and as much as 10 to 1. When the damages are aggregated, the ratio between the $200,000
in punitive damages and the $33,525 in compensatory damages is just less than 6 to 1. While
No. 03-6429 23
the ratios exceed the 4-to-1 ratio cited by the Supreme Court, all but one are single-digit
ratios and the defendant’s malicious conduct resulted in only a small amount of economic
damages for injury to the plaintiffs’ property or property interest.
As for the final Gore guidepost, Petersilie argues that there is a disparity between the
punitive damage awards of $50,000 and the maximum fine of $10,000 that could be imposed
upon a conviction for vandalism, a Class C felony under Tennessee law. TENN. CRIM. CODE
§§ 39-14-408, 39-14-105, and 40-35-111(b)(3). While the existence of criminal penalties
has bearing on the seriousness with which a state views the conduct, the Supreme Court
noted in State Farm that a criminal penalty has “less utility” in determining the dollar amount
of an award. 538 U.S. at 428. Defendants have not offered comparison to any civil penalties
that might be authorized for similar conduct. Reviewing the punitive damages awarded in
this case de novo and with reference to the Gore guideposts, we find the amount of punitive
damages awarded in this case were not so grossly excessive as to violate due process.
We REVERSE the judgments in favor of plaintiffs on their claims of outrageous
conduct and AFFIRM in all other respects.
No. 03-6429 24
ROGERS, Circuit Judge, concurring and dissenting.
I concur in all of the majority opinion except for Part II.D(2). Punitive damages were
properly awarded, and the amounts do not violate due process. However, we are required
to review the amount of punitive damages and “such an award will be set aside if it is grossly
excessive or appears to be the result of passion, prejudice, improper sympathy, or for some
other reason appears to constitute an injustice.” Coppinger Color Lab, Inc. v. Nixon, 698
S.W.2d 72, 75 (Tenn. 1985). In order to determine whether the amount of punitive damages
is excessive and constitutes an “injustice,” federal courts sitting in diversity must apply the
Hodges factors, to the extent relevant. Hodges v. S.C. Toof & Co., 833 S.W.2d 896, 901-02
(Tenn. 1992). Even if we apply a deferential abuse-of-discretion scope of review to the
district court’s application of those factors, the record in this case does not, in my view,
support an award of $200,000 in punitive damages. I would accordingly reverse the punitive
damages award as well, and remand for further consideration in light of the substantive
factors that Tennessee law requires a district court to consider in connection with the award
of punitive damages.