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No. 99-444
IN THE SUPREME COURT OF THE STATE OF MONTANA
2000 MT 228
301 Mont. 240
8 P. 3d 778
KENNETH R. FINSTAD and EDITH L.
FINSTAD, husband and wife,
Plaintiffs, Respondents, and Cross-Appellants,
v.
W.R. GRACE & CO.-Conn., a Connecticut
corporation, and DOES I-IV,
Defendants, Appellants, and Cross-Respondents.
APPEAL FROM: District Court of the Nineteenth Judicial District,
In and for the County of Lincoln,
The Honorable Michael C. Prezeau, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
Gary L. Graham and David C. Berkoff, Garlington, Lohn & Robinson,
Missoula, Montana
For Respondents:
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Allan M. McGarvey (argued), Jon L. Heberling, Roger M. Sullivan,
McGarvey, Heberling, Sullivan & McGarvey, Kalispell, Montana
For Amicus (Montana Trial Lawyers Association):
Sean Hinchey (argued), Bottomly Law Offices, Kalispell, Montana
Jennifer Hendricks, Meloy & Morrison, Helena, Montana
Argued: March 21, 2000
Submitted: April 27, 2000
Decided: August 22, 2000
Filed:
__________________________________________
Clerk
Justice Jim Regnier delivered the opinion of the Court.
¶1 Kenneth R. Finstad and Edith L. Finstad, husband and wife (Finstads), filed suit against
W.R. Grace & Co.-Conn. (W.R. Grace) in the Nineteenth Judicial District Court, Lincoln
County. A jury trial resulted in a verdict in favor of the Finstads, awarding $400,000 in
compensatory damages and determining that an award of punitive damages was
warranted. Immediately thereafter, the District Court conducted a mini-trial regarding the
award of punitive damages. At the conclusion of the punitive damage mini-trial, the jury,
by a vote of eight to four, awarded the Finstads punitive damages in the amount of
$83,000. After reviewing the jury's punitive damage award, the District Court entered
findings of fact, conclusions of law, and an order affirming the award. W.R. Grace appeals
from the final judgment entered in favor of the Finstads and the Finstads cross-appeal. We
affirm in part, reverse in part, and remand for a new trial on the amount of punitive
damages.
¶2 W.R. Grace presents the following issues on appeal:
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¶3 1. Whether the District Court erred when it declared § 27-1-221(6), MCA,
unconstitutional?
¶4 2. Whether the District Court erred when it denied W.R. Grace's motion to dismiss the
Finstads' claim for punitive damages based on the theory of collateral estoppel by virtual
representation?
¶5 The Finstads raise the following issues on cross-appeal:
¶6 1. Whether the District Court erred when it allowed the jury to be advised that the
Finstads would be the recipients of the punitive damage award?
¶7 2. Whether the District Court erred when it allowed W.R. Grace to present evidence of
other asbestos litigation involving W.R. Grace as well as fictional average amounts for
each pending claim during the punitive damage mini-trial?
BACKGROUND
¶8 Kenneth Finstad was employed by W.R. Grace at its vermiculite mining and milling
operation in Lincoln County, Montana, from 1965 to 1967. During his employment with
W.R. Grace, Mr. Finstad was exposed to dust containing tremolite asbestos. Mr. Finstad
was subsequently diagnosed with asbestosis in September 1998.
¶9 On October 2, 1998, the Finstads filed a personal injury action against W.R. Grace
seeking compensatory and punitive damages. W.R. Grace filed a motion to dismiss the
claim for punitive damages on the basis that the issue of punitive damages had already
been decided in two previous cases involving W.R. Grace and was barred under the
doctrine of collateral estoppel by virtual representation. After the motion had been fully
briefed by the parties, the District Court issued an order denying dismissal of the Finstads'
claim for punitive damages.
¶10 The parties conducted discovery and filed several motions in limine. After the motions
in limine had been fully briefed by the parties, the District Court issued an order granting
the Finstads' motion regarding the constitutional right to a jury verdict by a majority of
two-thirds in a civil case. In doing so, the District Court declared § 27-1-221(6), MCA, to
be unconstitutional.
¶11 A jury trial was commenced on May 3, 1999, resulting in verdicts awarding the
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Finstads compensatory and punitive damages. Judgment was entered on the verdicts from
which W.R. Grace appeals and the Finstads cross-appeal. During appellate mediation
pursuant to Rule 54, M.R.App.P., the parties settled the issues concerning compensatory
damages, preserving the issues pertaining to punitive damages for appeal.
ISSUE 1
¶12 Whether the District Court erred when it declared § 27-1-221(6), MCA,
unconstitutional?
¶13 "A legislative enactment is presumed to be constitutional and will be upheld on
review except when proven to be unconstitutional beyond a reasonable doubt." State v.
Lilburn (1994), 265 Mont. 258, 262, 875 P.2d 1036, 1039. We have also previously held
that "the burden of demonstrating an alleged constitutional infirmity in a legislative
enactment rests upon the party raising the challenge." State v. Lorash (1989), 238 Mont.
345, 347, 777 P.2d 884, 886.
¶14 The Finstads allege that the portion of § 27-1-221(6), MCA, which states that an
award of punitive damages must be unanimous as to liability and amount, violates Article
II, Section 26 of the Montana Constitution guaranteeing the right to a trial by jury in all
civil cases and a verdict by a two-thirds majority. In response, W.R. Grace asserts that
there is no constitutional right to punitive damages in Montana and that this Court has
upheld legislative enactments limiting and even eliminating punitive damages. W.R.
Grace also claims that before a jury can reach the issue of punitive damages, the verdict by
a two-thirds majority is satisfied upon its determination of the issue of compensatory
damages.
¶15 The District Court concluded, as a matter of law, that the framers of the Montana
Constitution intended that in all civil actions two-thirds of the jury may render a verdict
and a verdict so rendered shall have the same force and effect as if it were unanimous. The
District Court also concluded that punitive damage claims are civil actions. The court went
on to rule that the unanimous verdict provision of § 27-1-221(6), MCA, directly
contradicted the plain language of Article II, Section 26 of the Montana Constitution, that
the provision was unconstitutional beyond a reasonable doubt, and that it was thus void ab
initio.
¶16 We have previously stated:
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In interpreting a constitutional provision, the intent of the framers of the
constitutional provision controls its meaning. The intent of the framers should be
determined from the plain meaning of the words used. If that is possible, no other
means of interpretation are proper.
Woirhaye v. Montana Fourth Judicial Dist. Court, 1998 MT 320, ¶ 15, 292 Mont. 185, ¶ 15, 972
P.2d 800, ¶ 15 (citations omitted). Article II, Section 26 of the Montana Constitution provides:
Trial by jury. The right of trial by jury is secured to all and shall remain
inviolate. . . . In all civil actions, two-thirds of the jury may render a verdict, and a
verdict so rendered shall have the same force and effect as if all had concurred
therein. In all criminal actions, the verdict shall be unanimous.
(Emphasis added.) The plain language of Article II, Section 26 clearly and unambiguously
provides that in all civil actions two-thirds of the jury may render a verdict that has the
same force and effect as if the entire jury had concurred in the decision.
¶18 The portion of § 27-1-221(6), MCA, at issue was added in 1997 and states: "An award
of punitive damages must be unanimous as to liability and amount." To determine whether
this portion of § 27-1-221(6), MCA, conflicts with Article II, Section 26 of the Montana
Constitution, we must decide if the District Court was correct in concluding that claims for
punitive damages are civil actions.
¶18 "A civil action is prosecuted by one party against another for the enforcement or
protection of a right or the redress or prevention of a wrong." Section 27-1-103(2), MCA.
Here, the Finstads brought suit against W.R. Grace for redress of a wrong and sought
punitive damages to punish and deter W.R. Grace from committing similar wrongful
conduct. Thus, the Finstads' action, which includes their claim for punitive damages, fits
within the statutory definition of a civil action.
¶19 W.R. Grace argues that since an award of punitive damages is only permitted after a
showing of actual damages, if the jury reaches the issue of punitive damages, it must have
already satisfied the constitutional guarantee by rendering at least a two-thirds verdict on
the issue of liability. It is on this basis that W.R. Grace believes the legislature may restrict
punitive damage awards by requiring a unanimous decision of the trier of fact. We
disagree.
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¶20 It is true that we have previously held that a party must present evidence of actual
damages to support an award of punitive damages. See Harris v. American Gen. Life Ins.
Co. (1983), 202 Mont. 393, 400-01, 658 P.2d 1089, 1092-93. However, as such, punitive
damages are merely a component of recovery of the underlying civil cause of action. See
22 Am. Jur. 2d Damages § 741 (1988).
¶21 In addition, under Montana law punitive damages serve two purposes: (1) to set an
example, and (2) to punish the wrongdoer. See § 27-1-220(1), MCA; see also Tillett v.
Lippert (1996), 275 Mont. 1, 8, 909 P.2d 1158, 1162. Punitive damages are not imposed as
a substitute for criminal punishment, but rather as enlarged damages for a civil wrong.
They are a type of private fine or civil penalty inflicted to deter similar conduct in the
future. See 22 Am. Jur. 2d Damages § 736 (1988); see also Gertz v. Robert Welch, Inc.
(1974), 418 U.S. 323, 350, 94 S. Ct. 2997, 3012, 41 L. Ed. 2d 789. Consequently, we
concur in the District Court's determination that punitive damages are civil actions.
¶22 As a result, the portion of § 27-1-221(6), MCA, requiring an award of punitive
damages to be unanimous as to liability and amount directly conflicts with Article II,
Section 26 of the Montana Constitution. Accordingly, we conclude that the District Court
did not err when it declared that portion of § 27-1-221(6), MCA, unconstitutional.
ISSUE 2
¶23 Whether the District Court erred when it denied W.R. Grace's motion to dismiss the
Finstads' claim for punitive damages based on the theory of collateral estoppel by virtual
representation?
¶24 The standard of review concerning a district court's ruling on a motion to dismiss
under Rule 12(b)(6), M..R.Civ.P., is as follows:
A complaint should not be dismissed for failure to state a claim unless it appears
beyond doubt that the plaintiff can prove no set of facts in support of [the plaintiff's]
claim which would entitle [the plaintiff] to relief. A motion to dismiss under Rule 12
(b)(6), M.R.Civ.P., has the effect of admitting all well-pleaded allegations in the
complaint. In considering the motion, the complaint is construed in the light most
favorable to the plaintiff, and all allegations of fact contained therein are taken as
true.
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Boreen v. Christensen (1994), 267 Mont. 405, 408, 884 P.2d 761, 762. The determination that a
complaint fails to state a claim upon which relief can be granted is a conclusion of law, which we review
to determine whether the court's interpretation of the law is correct. See Boreen, 267 Mont. at 408, 884
P.2d at 762.
¶25 W.R. Grace alleges that the Finstads' claim for punitive damages should have been
dismissed based on the doctrine of collateral estoppel since the issue had already been
litigated in two previous Lincoln County asbestos cases against W.R. Grace. Specifically,
W.R. Grace contends that the issues in the prior cases were identical to those presented in
this case, final judgments on the merits were rendered in the previous actions, and the
party against whom the doctrine is invoked was a party to, or in privity with a party, in the
previous cases and were thus virtually represented by those parties.
¶26 The Finstads contend that claim preclusion requires both an identity of parties and
issues between the current and former adjudication, neither of which exists in the instant
case. The Finstads also contend that virtual representation is a narrow doctrine and that W.
R. Grace's interpretation would violate both substantive and procedural due process.
¶27 The District Court determined that the issues relating to punitive damages presented
by the Finstads were not identical to the issues presented by the plaintiffs in the two
previous cases. The District Court also went on to rule on the issue of virtual
representation, stating that W.R. Grace had failed to show that the Finstads exercised any
control over the preceding litigation or that the plaintiffs in the earlier cases were in any
way legally accountable to the Finstads in those cases. Thus, the District Court concluded
that the doctrine of collateral estoppel did not apply because W.R. Grace failed to establish
that the issues in the previous cases were identical to the issues in the instant case and
failed to establish that the Finstads were in privity with or virtually represented by the
plaintiffs in the previous cases.
¶28 We previously distinguished collateral estoppel from res judicata in Holtman v. 4-G's
Plumbing & Heating, Inc. (1994), 264 Mont. 432, 872 P.2d 318:
Collateral estoppel, sometimes referred to as issue preclusion, is a form of res
judicata. While res judicata bars parties from relitigating claims in subsequent
proceedings based on the same cause of action, collateral estoppel bars the
reopening of an issue in a second cause of action that has been litigated and
determined in a prior suit.
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The doctrine of collateral estoppel consists of three elements:
1) the identical issue raised has been previously decided in a prior
adjudication;
2) a final judgment on the merits was issued in the prior adjudication; and
3) the party against whom the plea is now asserted was a party or in privity
with a party to the prior adjudication.
Holtman, 264 Mont. at 439, 872 P.2d at 322.
¶29 "Identity of issues is the most crucial element of collateral estoppel." Holtman, 264
Mont. at 439, 872 P.2d at 322. To satisfy this element, the identical issue or "precise
question" must have been litigated in the prior actions. We compare the pleadings,
evidence, and circumstances surrounding the actions to determine whether the issue raised
is identical. See Holtman, 264 Mont. at 439, 872 P.2d at 322.
¶30 A review of the record reveals that while some of the evidence and witnesses with
regard to the punitive damages claim in the instant case were the same as they were in the
two previous cases, several significant factual distinctions and legal claims exist. First of
all, one of the previous cases was a personal injury action involving a W.R. Grace
employee who worked at the mine from 1959 to 1961 and the other was a wrongful death
action involving the family members of the wife of a W.R. Grace employee who had
worked at the Libby mine from 1954 to 1973. Second, the job duties of each of the
employees involved in all of these cases vary. Third, it has been alleged that W.R. Grace
possessed varying degrees of knowledge concerning the asbestos hazards at given time
periods with regard to particular employees. Finally, when the District Court compared the
pleadings in the instant case with the two previous cases, it found that the basis for the
plaintiffs' punitive damages claims varied from actual malice to actual fraud.
¶31 Consequently, in determining whether an award of punitive damages is warranted, the
trier of fact will need to consider whether the claim is based on actual fraud or actual
malice, the degree of W.R. Grace's knowledge concerning the asbestos hazards related to
the job or jobs the employee performed during the time period the employee worked at the
mine, and the length of time the employee worked at the mine, among other factors
(1)
relating to the particular facts and circumstances of the claim. Accordingly, we conclude
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that the District Court did not err when it concluded that the issues relating to punitive
damages presented by the Finstads were not identical to those presented by the plaintiffs in
the two previous cases. Thus, the first element of collateral estoppel has not been met. As
a result, the Finstads' claim for punitive damages is not barred by the doctrine of collateral
estoppel.
¶32 As part of its ruling with regard to the issue of collateral estoppel, the District Court
addressed W.R. Grace's argument concerning virtual representation. In addition, the
parties have devoted a significant portion of their briefs on appeal to the issue of virtual
representation. However, based on our determination that the first and most crucial
element of collateral estoppel has not been met, we need not address the third element
regarding whether the Finstads were virtually represented with respect to their punitive
damage claim by the plaintiffs in the two previous cases.
CROSS-APPEAL
ISSUE 1
¶33Whether the District Court erred when it allowed the jury to be advised that the
Finstads would be the recipients of the punitive damage award?
¶34 The Finstads allege that the District Court erred by refusing to give their proposed
jury instruction concerning punitive damages which stated that the jury was not to
consider where the punitive damage payment would go. In addition, the Finstads contend
that the District Court compounded this error when it permitted W.R. Grace to state in
closing argument that the punitive damage award would go to the Finstads. The Finstads
argue that consideration of any effect of a punitive damage award, including the
beneficiary of the award, improperly distracts the jury from the purpose of such an award,
which is to punish the wrongdoer and to set an example, and results in an improper
reduction in the amount of punitive damages awarded.
¶35 Conversely, W.R. Grace contends that the jury was properly informed that the
punitive damage award would go to the Finstads. In support of this contention, W.R.
Grace states that the Finstads were the ones claiming the punitive damages and they would
be the only ones entitled to enforce a judgment awarding such damages.
¶36 During closing argument counsel for W.R. Grace stated, "Your award of punitive
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damages in this case goes to Mr. and Mrs. Finstad. It doesn't go to the other workers. They
have their own claims." During rebuttal closing argument, the Finstads' counsel stated that
counsel for W.R. Grace "has no idea where the punitive damage award will go," which
was objected to by counsel for W.R. Grace. At that point, the District Court stated that
"the award goes to the Finstads" and "what they choose to do with it is their own decision."
¶37 The standard of review for a district court's refusal to give a proposed jury instruction
is whether the district court abused its discretion. See Barnes v. City of Thompson Falls,
1999 MT 77, ¶ 8, 294 Mont. 76, ¶ 8, 979 P.2d 1275, ¶ 8. "A trial court is imbued with
broad discretion to determine whether or not it will give a proposed instruction to the jury,
and this Court will not overturn a district court on the basis of alleged instructional errors
absent an abuse of that discretion." Barnes, ¶ 8.
¶38 The Finstads offered a jury instruction that stated, among other things, the jury was
not to consider where the punitive damage payment would go. The District Court rejected
this instruction and instead gave Montana Pattern Instruction No. 25.65 relating to the
determination of the amount of punitive damages. The instruction given by the District
Court set forth the statutory criteria for determining the amount of an award of punitive
damages and made no mention of the recipient of the punitive damage award. In enacting
the statutory scheme for punitive damages, the legislature did not prohibit juries from
considering where a punitive damage payment would go when determining the amount of
the award. Furthermore, party plaintiffs are the true recipients of punitive damage awards
and keeping such information from jurors would only frustrate the goal of every trial
which is a search for the truth. As a result, we conclude that the District Court did not
abuse its discretion when it refused to give the Finstads' proposed instruction.
ISSUE 2
¶39 Whether the District Court erred when it allowed W.R. Grace to present evidence of
other asbestos litigation involving W.R. Grace as well as fictional average amounts for
each pending claim during the punitive damage mini-trial?
¶40 The Finstads allege that the District Court erred when it overruled their objections to
portions of the economic expert's deposition that were presented during the punitive
damage mini-trial. The Finstads also contend that it was error to allow W.R. Grace to
present testimony and statements during closing argument regarding the number of
asbestos claims pending in Lincoln County as well as nationwide and fictional average
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amounts for each of these claims. The Finstads contend that this evidence was irrelevant,
misleading, and prejudicial, which was compounded by the court taking judicial notice of
the number of asbestos claims pending against W.R. Grace in Lincoln County.
¶41 W.R. Grace asserts that the District Court did not err in admitting the portions of the
economic expert's deposition at issue. W.R. Grace argues that it properly posed the
hypothetical calculations involving the number of asbestos-related personal injury claims
to test the expert's opinions of the company's worth. In addition, W.R. Grace contends that
the court acted correctly when it took judicial notice of the number of asbestos cases
pending against W.R. Grace in Lincoln County to clarify the number of claims used in the
hypothetical calculations.
¶42 Moreover, W.R. Grace argues that the Finstads did not object to the expert's testimony
concerning the number of pending asbestos claims nor did the Finstads object to the
District Court taking judicial notice of the pending claims in Lincoln County, resulting in
waiver of these arguments on appeal. W.R. Grace also contends that the Finstads have not
shown any prejudice as a result of the hypothetical calculations.
¶43 The standard of review for a district court's evidentiary rulings is abuse of discretion.
See Busta v. Columbus Hosp. Corp. (1996), 276 Mont. 342, 353, 916 P.2d 122, 128. The
district court has broad discretion to determine if evidence is admissible. Thus, absent an
abuse of that discretion, this Court will not overturn the district court's determination. See
Busta, 276 Mont. at 353, 916 P.2d at 128.
¶44 Prior to trial, the Finstads filed written objections to portions of the economic expert's
deposition that W.R. Grace had designated for use during trial on the grounds that the
testimony was irrelevant, speculative, argumentative, assumed facts not in evidence, and
lacked foundation. The portions of the testimony objected to included discussion of the
number of claims pending against W.R. Grace and the hypothetical calculations. Prior to
commencement of the punitive damage portion of the trial, counsel for the Finstads also
objected to the introduction of the expert's testimony regarding the hypothetical
calculations. The District Court overruled the Finstads' objection on the basis that the
probative value of the testimony substantially outweighed its prejudicial impact. Since the
District Court ruled on the objections, there was no need for further objection. See State v.
Harris, 1999 MT 115, ¶ 30, 294 Mont. 397, ¶ 30, 983 P.2d 881, ¶ 30. Therefore, we
conclude that the Finstads preserved their objections regarding the expert's testimony for
appeal.
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¶45 Section 27-1-221(7), MCA, sets forth guidelines for determining the amount of an
award of punitive damages:
(a) Evidence regarding a defendant's financial affairs, financial condition, and net
worth is not admissible in a trial to determine whether a defendant is liable for
punitive damages. When the jury returns a verdict finding a defendant liable for
punitive damages, the amount of punitive damages must then be determined by the
jury in an immediate, separate proceeding and be submitted to the judge for review
as provided in subsection (7)(c). In the separate proceeding to determine the amount
of punitive damages to be awarded, the defendant's financial affairs, financial
condition, and net worth must be considered.
(b) When an award of punitive damages is made by the judge, the judge shall clearly
state the reasons for making the award in findings of fact and conclusions of law,
demonstrating consideration of each of the following matters:
(i) the nature and reprehensibility of the defendant's wrongdoing;
(ii) the extent of the defendant's wrongdoing;
(iii) the intent of the defendant in committing the wrong;
(iv) the profitability of the defendant's wrongdoing, if applicable;
(v) the amount of actual damages awarded by the jury;
(vi) the defendant's net worth;
(vii) previous awards of punitive or exemplary damages against the defendant based
upon the same wrongful act;
(viii) potential or prior criminal sanctions against the defendant based upon the same
wrongful act; and
(ix) any other circumstances that may operate to increase or reduce, without wholly
defeating, punitive damages.
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(c) The judge shall review a jury award of punitive damages, giving consideration to
each of the matters listed in subsection (7)(b). If after review the judge determines
that the jury award of punitive damages should be increased or decreased, the judge
may do so. The judge shall clearly state the reasons for increasing, decreasing, or
not increasing or decreasing the punitive damages award of the jury in findings of
fact and conclusions of law, demonstrating consideration of each of the factors listed
in subsection (7)(b).
¶46 The testimony at issue in the instant case involved discussion of the approximately
97,000 asbestos cases pending against W.R. Grace nationwide, as well as the 84 asbestos
cases pending against W.R. Grace in Lincoln County. Counsel for W.R. Grace asked the
economic expert to perform a series of calculations using the fictional amounts of
$30,000; $20,000; and $10,000 for each claim and multiplying the figures by the 97,000
claims pending nationwide. In addition, counsel for W.R. Grace asked the jury in closing
argument to multiply the $400,000 compensatory damage award in this case by the 97,000
pending cases nationwide and the 84 claims pending in Lincoln County before rendering a
decision regarding the amount of punitive damages to ensure that funds would be
available to pay compensatory damages for the potential claims of other plaintiffs who are
sick and injured on account of the actions of W.R. Grace.
¶47 The legislature did not include other pending or potential litigation against the
defendant as a factor the judge is to consider when reviewing the amount of a jury's
punitive damage award. While this information may be relevant to demonstrate the
existence of actual malice or actual fraud in determining whether an award of punitive
damages is appropriate, it is not relevant to the jury's determination of the amount of
punitive damages.
¶48 Montana's statutory scheme recognizes and addresses the fact that multiple claims for
punitive damages may be brought against a defendant for a single wrongful act. The
legislative safeguards listed in § 27-2-221, MCA, ensure that an award of punitive
damages is not greater than reasonably necessary to punish and deter. See Pacific Mut.
Life Ins. Co. v. Haslip (1991), 499 U.S. 1, 22-23, 111 S. Ct. 1032, 1045-46, 113 L. Ed. 2d
1. These safeguards include consideration of previous awards of punitive damages and
potential or prior criminal sanctions against the defendant. There is no mention of
consideration of pending or potential claims against the defendant. Advising the jury of
the number of claims pending against a defendant and attempting to predict the total
amount of the defendant's liability for these claims by using figures without any basis in
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fact, is highly speculative.
¶49 While § 27-1-221(7)(b)(ix), MCA, provides for consideration of "any other
circumstances that may operate to increase or reduce, without wholly defeating, punitive
damages," consideration of the type of evidence at issue in this case could not have been
what the legislature intended given the purpose for punitive damages and the factors for
reviewing the amount of such an award, especially considering that the statute specifically
mandates consideration of previous awards of punitive damages against a defendant.
Accordingly, we conclude that the District Court abused its discretion when it allowed W.
R. Grace to present evidence of other asbestos litigation involving W.R. Grace as well as
fictional average amounts for each pending claim during the punitive damage mini-trial.
¶50 Affirmed in part, reversed in part, and remanded for a new trial on the amount of
punitive damages.
/S/ JIM REGNIER
We Concur:
/S/ J. A. TURNAGE
/S/ TERRY N. TRIEWEILER
/S/ WILLIAM E. HUNT, SR.
Justice W. William Leaphart dissents.
¶51 I concur with the Court's resolution of Issue 1 and 2 and with the second cross-appeal
issue. I dissent as to the first issue on cross-appeal: "Whether the District Court erred
when it allowed the jury to be advised that the Finstads would be the recipients of the
punitive damage award?"
¶52 In Tillett v. Lippert (1996), 275 Mont. 1, 909 P.2d 1158, we held that under Montana
statute, § 27-1-220, MCA, punitive damages serve two purposes: (1) to set an example,
and (2) to punish the wrongdoer.
The decisions of this Court further support the conclusion that punitive damages
serve not only to punish, but also to set an example to the public for purposes of
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deterrence. Punitive damages should not be in excess of the "amount necessary
adequately to punish the defendant and serve as an example to it and others."
Tillett, 275 Mont. at 8, 909 P.2d at 1162 (citations omitted). Clearly the focus of a punitive damage
award should be on punishing the wrongdoer and setting an example. Nothing in the statute or in the
rationale for assessing punitive damages would suggest that the identity of the recipient is a relevant
consideration.
¶53 Naming the recipient of the punitive damage award serves no purpose other than to
influence the jury in arriving at an appropriate figure. This information can work to the
detriment of the defense or the plaintiff depending upon the statutory scheme at issue. In
states where all or part of the punitive damage award goes to a public fund, courts have
held that informing the jury of this fact is improper since it tends to inflate the award. In
Ford v. Uniroyal Goodrich Tire Co. (Ga. 1996), 476 S.E.2d 565, the Georgia Supreme
Court held that an instruction advising the jury that seventy-five percent of the punitive
damage award would go to the state's treasury was improper.
As the statute repeatedly states, the purpose of punitive damages is to punish and
deter the defendant, not to compensate the victim. . . . Given the unquestioned
purpose of the punitive damages statute, the sole issue for a jury is the amount of
money necessary to punish the defendant and deter future misconduct. Therefore, it
is irrelevant who will be compensated by the award or how much the plaintiff will
ultimately receive. By instructing the jury on the statutory scheme for allocating a
punitive damages award, the trial court improperly shifted the jury's focus from the
critical question of the defendant's conduct to the inappropriate question of the
plaintiff's compensation.
Ford, 476 S.E.2d at 570.
¶54 On a related issue, the Fifth Circuit Court of Appeals held that it was error to instruct
the jury that damages in a civil antitrust case could be trebled. Instructing the jury as to the
multiplier effect would thwart the purpose of treble damages, which is to deter violations
and encourage private enforcement of the antitrust laws. The likely result of such an
instruction is that "juries will adjust the damage award downward or find no liability,
therefore thwarting Congress's purpose, because of some notions of a windfall to the
plaintiff." Pollack & Riley, Inc. v. Pearl Brewing Co. (1974), 498 F.2d 1240 at 1243.
Although the Pollack & Riley decision does not involve the naming of the recipient, it
underscores how irrelevant factors tend to shift the jury's attention away from
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considerations of punishment and towards adjusting damages or avoiding windfalls.
¶55 In Honeywell v. Sterling Furniture Co. (Or. 1990), 797 P.2d 1019, the Oregon
Supreme Court held that it was reversible error to instruct the jury that a portion of any
punitive damage award will be used to pay the plaintiff's attorney or to contribute to a
worthy cause. The court further concluded that such an instruction does nothing to further
or even to inform the jury as to the proper goals of punitive damage awards. Concluding
that such an instruction distracts the jury from the appropriate line of analysis, the court
stated:
We agree with the Court of Appeals that the potential effect of the instruction was to
"[permit] a jury to consider as a part of its deliberations on punitive damages that a
plaintiff should receive a certain amount of money and, in order to ensure that he
does, to add additional amounts to pay the attorney fees and contributions to the
Criminal Injuries Compensation Account." We also think there is another, perhaps
even more serious problem with the instruction: It encouraged the jury to award
punitive damages for a purpose, enhancement of the Criminal Injuries
Compensation Account, that is not a reason for awarding punitive damages under
Oregon law. So construed, the instruction was erroneous.
....
Offering a jury an additional, inappropriate basis for awarding punitive damages
harmed the defendant.
Honeywell, 797 P.2d at 1022 (citation omitted).
¶56 As the above authorities illustrate, advising the jury as to how or to whom a punitive
damage award is to be distributed will, depending upon the case, sometimes work to the
benefit of the plaintiff and other times to the benefit of the defendant. Under no
circumstances, however, does such information have any probative value and it invariably
interjects irrelevant considerations into the jury's deliberations thereby prejudicing one
side or the other.
¶57 In Montana, where a punitive damage award inures to the benefit of the plaintiff,
instructing the jury as to the identity of the recipient does not advance the goals of
punishment; rather it impermissibly invites the jury to consider whether a plaintiff should
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enjoy a windfall in addition to whatever compensatory damages were awarded. I would
hold that the District Court erred in failing to instruct the jury that it should not consider to
whom the punitive damage award would be paid.
/S/ W. WILLIAM LEAPHART
Justice James C. Nelson joins in the foregoing dissent.
/S/ JAMES C. NELSON
Justice Karla M. Gray, concurring in part and dissenting in part.
¶58 I join in the Court's resolution of both issues in the appeal brought by W.R. Grace and
also its resolution of the first issue on cross-appeal raised by the Finstads. I respectfully
dissent, however, from the Court's resolution of the second cross-appeal issue, namely,
whether the District Court abused its discretion in allowing W.R. Grace to present certain
evidence during the punitive damage mini-trial. I would affirm the District Court on that
issue.
¶59 As the Court properly notes, our standard in reviewing a trial court's evidentiary
rulings is abuse of discretion. Moreover, the discretion vested in the trial courts on such
matters is "broad." See Busta, 276 Mont. at 353, 916 P.2d at 128. Thus, while broad
discretion certainly is not without limits, that standard does not permit this Court to simply
substitute its judgment for that of the trial court. Indeed, the standard for abuse of
discretion is whether the district court "acted arbitrarily without employment of
conscientious judgment or exceeded the bounds of reason resulting in substantial
injustice." Shilhanek v. D-2 Trucking, Inc., 2000 MT 16, ¶ 24, 298 Mont. 101, ¶ 24, 994
P.2d 1105, ¶ 24 (citation omitted). This standard is--and must remain--a difficult one to
meet. I submit that nothing in the Court's analysis of whether the District Court abused its
discretion in admitting W.R. Grace's challenged evidence supports an abuse of discretion
determination in this regard.
¶60 Section 27-1-221(7)(a), MCA, expressly provides that, in any separate proceeding to
determine the amount of punitive damages to be awarded, "the defendant's financial
affairs, financial condition, and net worth must be considered." The Court makes no
showing that the challenged testimony at issue here does not relate to W.R. Grace's
financial affairs and financial condition. Indeed, how the existence of the approximately
97,000 asbestos cases pending against W.R. Grace nationwide could fail to relate to its
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financial affairs and condition is beyond imagining. In addition, the expert economic
testimony regarding the potential value of such claims--which the Court chooses to call
"fictional"--was presented through the time-honored method of inquiring of experts about
hypothetical scenarios.
¶61 It is true, as the Court posits, that the Legislature did not expressly include pending or
potential litigation against a defendant in enacting § 27-1-221(7), MCA. It did, however,
as noted above, mandate consideration of the defendant's "financial affairs, financial
condition, and net worth . . . ." See § 27-1-221(7)(a), MCA. I submit that such broad
categorization of matters bearing on a defendant's financial condition which must be
considered by a jury in determining the amount of punitive damages to be awarded easily
encompasses the evidence at issue here. Nor--the Court's implication to the contrary
notwithstanding--is there any requirement for an itemized listing of every conceivable
kind of information which might fall within those categories, especially given the
Legislature's inclusion of such broad categories of information in the first instance.
¶62 Furthermore, the language the Legislature used in § 27-1-221(7)(b)(ix), MCA, that
matters to be considered include "any other circumstances that may operate to . . . reduce,
without wholly defeating, punitive damages[,]" matches the breadth of the mandatory
categories of information relating to a defendant's financial condition set forth in § 27-1-
221(7)(a), MCA. Clearly, given the jury's award of $83,000 in punitive damages, the W.R.
Grace evidence at issue did not wholly defeat punitive damages in the present case. Just as
clearly, that evidence easily falls within the broad "any other circumstances" serving to
reduce punitive damages language used by the Legislature.
¶63 The Court's somewhat facile observation that the Legislature did not include "other
pending or potential litigation" within the ambit of matters to be considered is
insupportable given the breadth of the language the Legislature quite purposely did use in
both subsections (a) and (b) of § 27-1-221(7), MCA. Its further statement that the type of
evidence at issue here "could not have been" what the Legislature intended is, itself,
entirely speculative and equally insupportable in light of the legislative language.
¶64 For these reasons, it is clear that the District Court did not act arbitrarily without
employment of conscientious judgment or exceed the bounds of reason in admitting the
challenged evidence. Consequently, there is no abuse of discretion here.
¶65 Finally, even assuming arguendo that an abuse of discretion had been established,
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error cannot be predicated on a ruling admitting evidence "unless a substantial right of the
party is affected[.]" Rule 103(a), M.R.Evid. Since punitive damages were awarded and, as
a result, the evidence at issue did not wholly defeat such a recovery, I cannot see how the
Finstads' substantial rights were affected. True, they sought--and hoped for--a larger
punitive damage award. The Court apparently agrees a larger punitive damage award
should have been made. Neither seeking nor hoping, however, constitutes a "substantial
right" to a larger punitive damage award. Such matters are solely within the province of
the jury.
¶66 I would affirm the District Court's admission of the W.R. Grace evidence at issue
here. I dissent from the Court's failure to do so.
/S/ KARLA M. GRAY
1. In addition, we note that in each case W.R. Grace was successful in persuading the District Court to
narrow the punitive damage claim to whether W.R. Grace committed actual malice or actual fraud with
respect to each of the particular plaintiffs involved.
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