Johnson v. Hugo's Skateway

MURNAGHAN, Circuit Judge,

dissenting:

While I concur with the majority opinion to the extent that it affirms Johnson’s compensatory damages award and his entitlement to some amount of punitive damages,1 I dissent from the majority’s decision, on due process grounds, to vacate and remand the punitive damages award of $175,000 for a new trial as to the amount thereof. Because I believe that the award comports with due process, in that the punitive damages jury instructions and evidence presented sufficiently constrained the jury’s discretion, I would affirm the $175,000 punitive damages award.2

At the outset, I am compelled to point out that, although I am not a great enthusiast of awards of punitive damages, I believe that the law as developed over the years should, nevertheless, be applied. A concentrated effort has been made to limit severely the concept of punitive damages, most recently finding expression in Pacific Mutual Life Insurance Co. v. Haslip, — U.S. -, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991), and in Mattison v. Dallas Carrier Corp., 947 F.2d 95 (4th Cir.1991). But in Haslip the Supreme Court expressly refused to curtail the concept of punitive damages, instead only making more precise the principles of due process to be applied in determining whether a grant of punitive *1420damages is to be deemed appropriate. Haslip, — U.S. at -, 111 S.Ct. at 1043.3

Historically, the rule has been (and remains after Haslip) that, where egregious tortious conduct has been shown to the factfinder’s (usually the jury’s) satisfaction to exist, the factfinder in his, her or its discretion may add an additional sum to punish the offender. Haslip, — U.S. at - n. 1 & -, 111 S.Ct. at 1037 n. 1 & 1039 (“for the determination of how large an award of punitive damages is appropriate in a given case, juries are left largely to themselves in making this important, and potentially devastating decision”).

The amount of the punitive award consequently has been whatever the factfinder has found in its judgment in “wholly unpredictable amounts,” subject only to the limitation that it not be excessive.4 Id. at -, 111 S.Ct. at 1040 (“jury discretion over the amounts awarded is limited only by the gentle rule that they not be excessive”). The “not excessive” approach has been treated as sufficient from the founding of our country two hundred years ago until the decision in Haslip. However, Haslip did not end or even redefine the concept of punitive damages. Id. at -, 111 S.Ct. at 1043. Rather, it added precision to the due process requirement by measuring with greater particularity the idea incompletely or too cursively expressed by “not excessive.”

Haslip required that a punitive damages award be within the limits of reasonableness, and that the jury’s discretion be sufficiently constrained such that the discretion is not “unlimited.” Id. Such jury discretion is not “unlimited” when it is “confined to deterrence and retribution, the state policy concerns sought to be advanced” by punitive damages. Id. at -, 111 S.Ct. at 1044. The Haslip court approved the jury instructions on punitive damages provided under Alabama law, as sufficient in and of themselves to satisfy due process. Id. The Court went on to note that the post-verdict review provided under Alabama law provided additional, but not necessary, due process safeguards. Id. at -, 111 S.Ct. at 1045. In conducting a fact-specific analysis of Alabama’s post-verdict review process, the Court outlined and approved seven considerations which Alabama courts took into account when “scrutinizing damage awards” for reasonableness. Id. at ---, 111 S.Ct. at 1044-45. They are;

(a) whether there is a reasonable relationship between the punitive damages award and the harm likely to result from the defendant’s conduct as well as the harm that actually has occurred;
(b) the degree of reprehensibility of the defendant’s conduct, the duration of that concealment, and the existence and frequency of similar past conduct;
(c) the profitability to the defendant of the wrongful conduct and the desirability of removing that profit and of having the defendant also sustain a loss;
(d) the “financial position” of the defendant;
(e) all the costs of litigation;
(f) the imposition of criminal sanctions on the defendant for its conduct, these to be taken in mitigation; and
*1421(g) the existence of other civil awards against the defendant for the same conduct, these also to be taken in mitigation.

Id. at -, 111 S.Ct. at 1045.

It is critical to note that nowhere does Haslip mandate that the seven factors must be present in a post-verdict review system, nor does the Court require such factors to be given to the jury by way of instructions. Haslip stands merely for the proposition that Alabama’s scheme for awarding punitive damages in that case satisfied due process.5 Haslip provides little, to no, guidance for determining whether other state schemes, such as Virginia’s, comport with due process.6

Excessiveness vel non of compensatory damages has been traditionally treated as a question of law for resolution by the judge. See Dagnello v. Long Island R.R. Co., 289 F.2d 797, 806 (2nd Cir.1961) (“there must be an upper limit [on an award of compensatory damages], and whether that has been surpassed is not a question of fact with respect to which reasonable men may differ, but a question of law”). I can perceive no principled reason as to why the question of excessiveness or unreasonableness of punitive damages should not, likewise, be resolved by the court. The Fifth Circuit, in a case decided post-Haslip, has held just that. See Eichenseer v. Reserve Life Ins. Co., 934 F.2d 1377, 1382 (5th Cir.1991) (holding that the reasonableness test for punitive damages “is not a vehicle for expansive appellate review of punitive damages awards. It creates, instead, a narrow channel for appellate review in which the focus of the reviewing court is to ensure that, under the circumstances of the case in question, the award of punitive damages is not grossly excessive or unreasonable”) (emphasis in original). Furthermore, such an excessiveness review does not run afoul of the Seventh Amendment. See, e.g., Dagnello, 289 F.2d at 797. Accord Grunenthal, 393 U.S. at 159-60, 89 S.Ct. at 333-34.

It may well be that the Haslip requirement that the jury have “adequate guidance from the court” in determining punitive damages contributes to the difference between the majority and myself. See Haslip, — U.S. at -, 111 S.Ct. at 1043. The phrase has perhaps been construed by the majority to require that the judge’s formal instruction prior to submission to the jury embody, in haec verba, the requisite number of factors, such as those employed by Alabama that were approved in Haslip, to insure that the punitive damages verdict is not unreasonable in amount. I do not read the phrase “adequate guidance from the court” in that way. It does not convert into a jury question one traditionally reserved for the court.

Obviously, excessiveness has been a question for the judge, it being inappropriate for a jury to decide whether its own verdict was excessive. See, e.g., Union Nat’l Bank v. Mosbacher, 933 F.2d 1440, 1448 (8th Cir.1991), cert. denied, — U.S. -, 112 S.Ct. 870, 116 L.Ed.2d 775 (1992) (“the Arkansas Supreme Court reviews punitive damages awards to determine whether the award shocks the conscience of the court or is so great that it must be the product of passion or prejudice ... ”); State ex rel. State Highway Comm’n v. Thurman, 552 S.W.2d 42, 44 (Mo.App.1977) (“[t]erm ‘excessive’ when used in reference to a verdict is a legal term of art and, *1422generally, test for determining whether verdict is ‘excessive’ is whether its size is such as to shock the conscience of the court”). I believe substituting “unreasonable” as a more precise definition for “excessive” should not bring about a shift, from judge to jury, of the responsibility for deciding. No doubt the court will be aided, in addressing the question, if it knows the factors which the jury was instructed to consider. Knowledge on that aspect is supplied, however, not by the instruction alone, but by the evidence which had been introduced for jury consideration on the question. All the instructions in the world will not suffice in the absence of sufficient supporting evidence. Therefore, the jury finding as to the amount of punitive damages must be shown to have been supported by the evidence admitted under guidance from the court. While I would agree that it might render the reviewing court’s task easier if the Haslip factors were precisely delineated, the question of whether there was sufficient evidence to permit the award of punitive damages in the amount selected by the jury remains one for the judge.

In the instant case, the punitive damages award comports with due process. Here, as in Haslip, although the jury’s discretion was substantial, it was “not unlimited” because it was tied to the goals of deterrence and retribution. See Haslip, — U.S. at -, 111 S.Ct. at 1044. The jury instructions in the case at bar clearly set forth the limitations applicable to an award of punitive damages. More particularly, the jury instructions provided that Hugo’s had to have acted “maliciously or wantonly or oppressively.” Cf. Wallen v. Allen, 2B1 Va. 289, 297, 343 S.E.2d 73, 78 (1986). Second, the instructions carefully defined “wanton,” “oppressive” and “malicious” conduct. Third, the instructions emphasized that entitlement to punitive damages, under Virginia law, was conditioned on the awarding of compensatory damages. Cf O’Brien v. Snow, 215 Va. 403, 405, 210 S.E.2d 165, 167 (1974). Fourth, the instructions directed that punitive damages “be fixed with calm discretion and sound reason and must never be awarded or fixed in amount because of any sympathy or bias or prejudice with respect to any party of the case.” Finally, the instructions pointed out that “the law permits the jury under certain circumstances to award the injured person punitive and exemplary damages in order to punish the wrongdoer for some extraordinary conduct and to serve as an example and warning to others not to engage in such conduct.” (Emphasis added). As a whole, the jury instructions clearly set forth the purposes of punitive damages as contemplated by Haslip and sufficiently circumscribed the jury’s discretion for due process purposes.7

Relying solely on the adequate jury instructions, I would approve Virginia’s punitive damages scheme as comporting with due process, just as the Haslip court approved Alabama’s scheme based solely on the sufficiency of the jury instructions. See Haslip, — U.S. at -, 111 S.Ct. at 1044-45. However, even if one reads Has-lip as requiring a post-verdict review system akin to Alabama's seven factors, when the record is here examined it develops that, of the seven Alabama post-verdict review factors mentioned in Haslip, at least five were supported by substantial evidence.8 First, the record makes clear that *1423the harm likely to result, blatant racial discrimination resulting in harassment and intimidation, is substantial. Additionally, an award of $175,000, less than half of the statutorily imposed cap of $350,000,9 is rationally related to the degree of that sub-stantia] harm. Second, the conduct was long-enduring, as is demonstrated by the failure to observe the terms of the ten-year consent decree, which terms were not being observed for as long as any witness could remember. Third, the existence of profit which should be removed and a concomitant loss from such improper behavior is readily discernible from the record. Fourth, as in Haslip itself, no evidence of Hugo’s Skateway’s financial position was introduced. Fifth, no evidence was introduced of any other civil or criminal penalty assessed against Hugo’s Skateway that would stand to mitigate the instant award of punitive damages. Based upon the foregoing, the evidence supports the conclusion that the punitive damages were “reasonable in their amount and rational in light of their purpose to punish what has occurred and to deter its repetition.” Haslip, — U.S. at -, 111 S.Ct. at 1045. Thus, a post-verdict review process, utilizing the seven factors approved in Haslip, would result in upholding the punitive damages award in the instant case.

The question remains, however, whether, in a diversity jurisdiction case, the district court or the appellate court should conduct the post-verdict review. In the earlier panel opinion, which was vacated due to the en banc consideration of the instant case, I agreed to a remand principally to allow the district judge, with his greater and more intimate familiarity with the trial proceedings, to decide whether due process inhered in the jury verdict of $175,000 in punitive damages.10 Such a decision, at the time,11 seemed reasonable, especially since the instant punitive damages verdict antedated Haslip so that the jury and the district court did not have the benefit of its teachings.12

At the level of rehearing en banc, I have reconsidered the matter more closely and am now convinced that jury instructions as to punitive damages were sufficient to satisfy due process. The conclusion is further supported by the fact that substantial evidence in the record of no less than five of the seven post-verdict review factors approved in Haslip sufficed to require the upholding of the jury’s punitive damages award. See Grunenthal v. Long Island R.R. Co., 393 U.S. 156, 158, 89 S.Ct. 331, 333, 21 L.Ed.2d 309 (1968). While not regarding it as directly relevant to the due process question,13 I cannot overlook that the $175,000 amount was well within the $350,000 cap on punitive damages enacted *1424by the Virginia legislature.14

Furthermore, I can find no justification for the majority's imposition, in a diversity jurisdiction case, of what are essentially federal jury instructions on state punitive damages. While the majority places great reliance on just such a procedure adopted in Mattison v. Dallas Carrier Corp., 947 F.2d 95 (4th Cir.1991), I conclude that the Mattison decision should, and could by the en banc court, be overruled for several reasons. First, as a matter of state law, no entitlement to punitive damages was shown under the facts of the Mattison case.15 Second, a federal appellate court, in my opinion, lacks the authority assumed in Mattison to impose federal jury instructions on state punitive damages upon a jury sitting in a federal case arising under diversity jurisdiction. It seems to me that such an imposition clearly violates the directive of Browning-Ferris Industries, Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 279, 109 S.Ct. 2909, 2922-23, 106 L.Ed.2d 219 (1989), that the jury’s punitive damages verdict be bound by the confines of state, and not federal, law. See also Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Moreover, Mattison appears to rewrite Haslip as Justice O’Con-nor, the sole dissenter in that case, would have written it. See Haslip, — U.S. at -, 111 S.Ct. at 1061 (O’Connor, J., dissenting) (suggesting that the seven Haslip factors should be given to the juries to assist them in making “fair, rational decisions”). As such, Mattison sets forth several lines of analysis either explicitly or implicitly rejected by the Haslip majority, including the void for vagueness analysis.16 Thus, while I would agree that the court in Haslip had no occasion to address the applicability of its decision to federal courts sitting in diversity, such lack of consideration does not justify the adoption of the sole dissenter’s approach as the proper rule. Yet in Mattison, and now in Hugo’s Skateway, the Fourth Circuit’s imposition of jury instructions patterned after Haslip does just that.

Unlike the majority, I would affirm the jury’s punitive damages award to Johnson in the instant case. I do not perceive how affirming the award, i.e., upholding the exact amount the jury has assessed, creates any conflict with the Seventh Amendment. The result, rather, carries out the Seventh Amendment’s intent that no fact in a jury verdict “shall be otherwise reexamined in any Court of the United States, than according to the rules of the common law.” Cf. Grunenthal, 393 U.S. at 157, 89 S.Ct. at 332.

For the foregoing reasons, I respectfully dissent from that portion of the majority opinion vacating and remanding, on due process grounds, the punitive damages award.17 Otherwise, I concur.

. The majority has concluded that the Virginia requirements for an award of punitive damages have been satisfied, and that the facts present for federal purposes justified an award of an undetermined amount of punitive damages. Insofar as the Virginia law is concerned, it should not be overlooked that the Commonwealth of Virginia has intervened to present arguments in support of the constitutionality of the punitive damages award in the instant case.

. The fact that we are a fractionated court is evidenced by what Judge Hamilton has written in dissent. While disagreeing with both the majority and me as to whether, under the state law of Virginia, a right in Johnson to punitive damages has been made out, he ringingly asserts that, going beyond that, Pacific Mut. Life Ins. Co. v. Haslip, — U.S. -, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991), does not, as here applied, demonstrate a violation of the due process provision of the Fifth Amendment to the United States Constitution.

Furthermore, while I agree with Judge Hamilton’s opinion that Mattison v. Dallas Carrier Corp., 947 F.2d 95 (4th Cir.1991), should be overruled, that is, in fact, not necessarily required. The lack of an entitlement, under state law, to any award of punitive damages under the facts in Mattison has rendered the opinion in that case purely dictum, not affording it prec-edential authority. See Colgrove v. Battin, 413 U.S. 149, 158 & n. 13, 93 S.Ct. 2448, 2453 & n. 13, 37 L.Ed.2d 522 (1973).

. The Solicitor General, Kenneth W. Starr, has recently explained Haslip as indicating that, while there are substantive due process limitations on punitive damages awards, “the limits are very flexible and not at all clear." Vol. XIII Judicial Legislative Watch Report No. 6, at 11.

. Such a "not excessive" constraint on an otherwise entirely open-ended award would appear to have been a necessary corollary of the due process principle, if the latter is to have any real force at all. See Grunenthal v. Long Island R.R. Co., 393 U.S. 156, 159, 89 S.Ct. 331, 333, 21 L.Ed.2d 309 (1968):

We must give the benefit of every doubt to the judgment of the trial judge; but surely there must be an upper limit, and whether that has been surpassed is not a question of fact with respect to which reasonable men may differ, but a question of law.4
4 The standard has been variously phrased: "Common phrases are such as: ‘grossly excessive,’ ‘inordinate,’ ‘shocking to the judicial conscience,’ ‘outrageously excessive,’ ‘so large as to shock the conscience of the court,' ‘monstrous,’ and many others.” Dagnello v. Long Island R.R. Co., supra, at 802.

Dagnello v. Long Island R.R. Co., 289 F.2d 797, 806 (2nd Cir.1961), equates “excessiveness” in the compensatory damages context with "a denial of justice.”

. In Haslip itself, the award of punitive damages was upheld as meeting constitutional due process requirements despite the fact that consideration of at least one of the factors, "financial position," was not permitted under the applicable Alabama law. Similarly, in Eichenseer v. Reserve Life Ins. Co., 934 F.2d 1377, 1384 (5th Cir.1991), a post-Haslip decision, three factors were deemed sufficient to support a punitive damages award. The Eichenseer court noted that "the procedural protection need not be exhaustive,” and that "[i]f there are any circumstances of probative force that support the amount of the award, then the award meets the ‘reasonableness’ prong of the due process test in Haslip.'' 934 F.2d at 1385, 1382 (emphasis in original). In this connection, Solicitor General Starr’s observation should not be ignored. See supra note 1.

. Cf. Haslip, — U.S. at -, 111 S.Ct. at 1046-47 (Scalia, J., concurring) (noting that Haslip "provides no guidance as to whether any other procedures [for awarding and reviewing punitive damage awards] are sufficiently 'reasonable’”) (emphasis in original).

. As Judge Hamilton aptly observed, the jury instructions provided in the instant case "are more clear and concise, but otherwise indistinguishable from the instructions specifically approved in Haslip as satisfying due process.” See Hamilton, J., dissenting, at 1443. In sum, we do not confront in the present case "unlimited jury discretion," the evil that the Supreme Court has instructed us to avoid. Haslip, — U.S. at -, 111 S.Ct. at 1043. To the contrary, cogent limits, in the way of pertinent evidence and adequate jury instructions, have been produced and considered.

. It should not be overlooked that a strong analogy exists between an award of punitive damages and a finding of guilt in a criminal case. Punitive damages "have been described as quasi-criminal." Haslip, — U.S. at -, 111 S.Ct. at 1044. A guilty verdict in a criminal case and a punitive damages award are each designed to punish egregious conduct. So it is not surprising to find that the existence of substantial evidence is enough, following the jury’s award, to sustain a finding of guilt or a punitive damages award. See, e.g., Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680 *1423(1942); Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979). See also Grunenthal v. Long Island R.R. Co., 393 U.S. 156, 160, 89 S.Ct. 331, 334, 21 L.Ed.2d 309 (1968) (“We cannot say that the trial judge’s view that the jury might properly have awarded $150,000 for loss of future earnings is without support in the evidence”).

. Virginia’s $350,000 cap on punitive damages awards is codified at Va.Code Ann. § 8.01-42.-1(A).

. Cf. Robertson Oil Co. v. Phillips Petroleum Co., 930 F.2d 1342, 1347 (8th Cir.1991) (holding that "we deem it advisable to remand for the district court to articulate its analysis under Arkansas law and to review the award under the criteria approved in Haslip ... as well as principles enumerated in the Arkansas cases”).

. On the panel with me were Senior District Judge Young and, in dissent, my colleague, Judge Niemeyer.

. It must not be forgotten that due process is a two-way street on which a plaintiff, such as Johnson, is as entitled to travel and to enjoy the same protections as a defendant such as Hugo's Skateway. Johnson, abiding fully with the law as it had been declared to be at the time of trial, produced several factors demonstrating egregious conduct warranting deterrence and retribution. The $175,000 amount of punitive damages was reasonable, given the circumstances. The punitive damages award upheld in Haslip was $1,000,000, and that in Eichenseer was $500,000. — U.S. at -, 111 S.Ct. at 1037; 934 F.2d at 1380. Hence, in my opinion, penalizing Johnson for not foreseeing every jot and tittle of Haslip would smack of injustice.

. See Haslip, - U.S. at - n. 9, 111 S.Ct. at 1044 n. 9 (implying that Alabama’s statutory cap for punitive damages might be a factor to consider in determining whether reasonable constraints on jury discretion existed).

. See Va.Code Ann. § 8.01-42.1(A).

. See supra note 2.

. See Haslip, — U.S. at ---, 111 S.Ct. at 1044-45 (rejecting void for vagueness argument).

.Circuit Judge Widener joins in my dissent at the en banc level.