UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 00-60768
ELNORA CHANEY WATSON
Plaintiff-Appellee,
versus
JOHNSON MOBILE HOMES; ET AL
Defendants,
JOHNSON MOBILE HOMES;
WILLIAM P. JOHNSON
Defendants-Appellants.
Appeal From the United States District Court
For the Southern District of Mississippi
February 27, 2002
Before JOLLY and PARKER, Circuit Judges, and MILLS,* District
Judge.
ROBERT M. PARKER, Circuit Judge:
Defendants-Appellants Johnson Mobile Homes and William P.
Johnson (“Defendants”) appeal the district court’s refusing to
set aside the jury’s award of punitive damages as not supported
by the evidence or to remit as constitutionally excessive. They
*
District Judge of the Central District of Illinois, sitting
by designation.
also argue that Plaintiffs’ claim for intentional breach of
contract against Johnson must fail as a matter of law. We
conclude that the evidence in this case supports the jury’s
awarding punitive damages, but we agree that the amount awarded
is constitutionally excessive. We therefore reverse in part the
district court’s denial of Defendants’ motion for judgment as a
matter of law and remit the jury’s punitive damages award. In
all other respects, we affirm.
BACKGROUND
This case arises from Elnora Watson’s aborted purchase of a
mobile home from Johnson Mobile Homes, a Mississippi company with
its principal place of business there. Watson, a resident of
Alabama, appeared on Defendants’ lot in Meridian, Mississippi,
and agreed to buy a mobile home for $22,995, to be financed over
a number of years. The purchase required a credit application
and a deposit of $4,000. Under the terms of the written purchase
agreement, if the financing company refused Watson’s application
she was entitled to the immediate return of her deposit. If she
was approved yet did not go through with the purchase, however,
she would forfeit the $4,000. Watson’s daughter, Michelle,
cosigned the application and provided the deposit.
Several days later, Watson learned that her application had
been rejected. About the same time, Johnson Mobile Homes’
salesman Daniel Johnson called Michelle to see if she would be
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willing to pay another $3,000. This concession, along with
several others, was necessary to meet the financing company’s
requirements in light of Watson’s poor credit history. After
considering the new deal for two days, Watson and Michelle went
to Defendants’ lot to get their deposit back. The company
refused to return it. A few days later, Watson’s son tried to
secure return of the deposit, but he too was unsuccessful. A
third attempt was made, this time by Michelle with Watson’s
daughter-in-law. At the lot, Michelle confronted Bill Johnson,
co-owner of Johnson Mobile Homes, who refused to return the
deposit, telling Michelle “to go get herself a lawyer.”
Watson filed suit in Alabama state court, naming Johnson
Mobile Homes, Johnson Mobile Homes of Alabama, Inc., and Bill and
Daniel Johnson as defendants. The suit was removed to federal
district court, the Alabama company having been dismissed, and
was thereafter transferred to the Southern District of
Mississippi. The case proceeded to trial, during which the jury
heard evidence of 45 other applicants whose deposits were also
forfeited. At the end of evidence, the jury was charged on three
theories of recovery: intentional breach of contract, fraud, and
conversion. The jury found Bill Johnson and Johnson Mobile Homes
liable on each theory, but found Daniel Johnson not responsible.
Watson was awarded $4,000 in actual damages and $700,000 in
punitive damages. Defendants’ subsequent motion for judgment as
a matter of law or new trial and for remittitur was denied.
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On appeal, Defendants argue that the evidence is
insufficient to sustain an award of punitive damages and further
that the amount awarded cannot withstand constitutional scrutiny.
Defendants also argue that the district court’s submission of a
general verdict form may have permitted the jury to find Bill
Johnson responsible for intentional breach of contract, a finding
that cannot be sustained because Johnson was not himself a party
to the purchase agreement.
DISCUSSION
I.
When reviewing a district court’s refusal to set aside an
award of punitive damages, we will reverse only upon determining
that “no legally sufficient evidentiary basis” exists for making
such an award, the same standard applied by the district court in
the first instance. See FED. R. CIV. P. 51(a)(1); Wallace v.
Methodist Hosp. Sys., 271 F.3d 212, 218-19 (5th Cir. 2001).
Under Mississippi law, punitive damages may be had for each of
the three theories of recovery submitted in this case. To
sustain an award of punitive damages for intentional breach of
contract, “the plaintiff must prove by a preponderance of the
evidence that the defendant acted with (1) malice or (2) gross
negligence or reckless disregard for the rights of others.” See
Paracelsus Health Care Corp. v. Willard, 754 So. 2d 437, 447
(Miss. 2000). Meeting this burden requires proof of “an
intentional wrong, insult, or abuse” or “such gross negligence as
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constitutes an independent tort.” See id. “[O]rdinary torts,
the product of forgetfulness, oversight, or the like, do not rise
to the heightened level of an independent tort.” Andrew Jackson
Life Ins. Co. v. Williams, 566 So. 2d 1172, 1187 (Miss.
1990)(internal quotations omitted). Conversion and fraud,
Watson’s other theories of recovery, are independent torts. See
West v. Combs, 642 So. 2d 917, 921 (Miss. 1994)(conversion);
Andrew Jackson, 566 So. 2d at 1187 (fraud). Thus, Watson’s
proving Defendants’ perpetrated conversion or fraud will also
establish an independent tort, which in turn is needed to sustain
an award of punitive damages for breach of contract.
Showing fraud or conversion will not by itself secure an
award of punitive damages, however. Not all independent torts
are committed with malice, gross negligence, or reckless
disregard for the rights of others.1 This precept goes with the
rule that punitive damages are disfavored under Mississippi law
and are reserved for extreme cases and even then should be
narrowly applied. See Tideway Oil, 431 So. 2d at 460 n.1. Thus,
the propriety of awarding punitive damages in this case depends
on our concluding that there is a sufficient evidentiary basis to
1
See Boling v. A-1 Detective & Patrol Serv., Inc., 659 So.
2d 586, 589 (Miss. 1995)(“Though fraud is frequently an
ingredient of an award of punitive damages, it is clear from our
cases that more is required.”)(internal quotations omitted);
West, 642 So. 2d at 921 (concluding that the evidence was
sufficient to support finding that defendant was responsible for
conversion but not that his conduct warranted punitive damages).
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find that Defendants (1) committed an independent tort and (2) in
so doing perpetrated conduct that shows malice, gross negligence,
or recklessness. Because Defendants do not challenge the jury’s
finding each responsible for fraud and conversion, we look only
for evidence of the latter element.
The jury heard that compared to the 45 other applicants who
forfeited their deposits during a seven-year period, Watson’s was
excessive. With the exception of one other amounting to $3,100,
Watson’s deposit was eight times the next highest ($500) and over
25 times the average ($154). Further, and remembering that what
she paid was essentially an application fee, not a down payment,
the amount was 17 percent of the mobile home’s purchase price.
Watson claims that requiring such an amount just to make an
application is indefensible; she alleges that not returning the
payment immediately after the application was refused is gross
misconduct. Defendants attempt to justify their actions by
arguing that the finance company had made an “initial conditional
acceptance” of her application, and that therefore Watson was not
entitled to the return of her deposit. Defendants leave out that
the conditions of the acceptance included Watson’s paying an
additional $3,000, making more payments at a higher interest
rate, and agreeing to an arbitration provision. These terms are
hardly “more favorable” to Watson, as Defendants contend.
Defendants’ also tried to tie Watson to a third deal, offering
her a $4,000 “credit” toward the purchase of a different, less
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expensive mobile home. Never once did Defendants offer to return
Watson’s deposit, despite Watson’s and her family’s several
requests. Viewing this evidence, we conclude that it readily
provides a legally sufficient basis for upholding the jury’s
awarding punitive damages in this case.
II.
We review de novo a challenge to the constitutionality of
the size of a punitive damages award. See Cooper Indus., Inc. v.
Leatherman Tool Group, Inc., 121 S. Ct. 1678, 1683 (2001). The
imposition of punitive damages under state law is constrained by
the Eighth and Fourteenth Amendments, the first proscribing
excessive fines and cruel and unusual punishment, the second
making grossly excessive punishments unlawful under its Due
Process Clause. See id. at 1684. In BMW of North America, Inc.
v. Gore, 517 U.S. 559, 575-86 (1996), the Supreme Court
articulated three factors that courts should consider in
determining whether an award of punitive damages is
constitutionally excessive. They are “the defendant’s
reprehensibility or culpability; the relationship between the
penalty and the harm to the victim caused by the defendant’s
actions; and the sanctions imposed in other cases for comparable
misconduct.” Cooper, 121 S. Ct. at 1684-85 (citations omitted).
We consider each factor in turn.
“Perhaps the most important indicium of the reasonableness
of a punitive damages award is the degree of reprehensibility of
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the defendant’s conduct.” BMW, 517 U.S. at 575.
Reprehensibility depends on the nature of the conduct itself and
the context in which it occurred. Reprehensibility does not ask
whether Defendants’ conduct warrants punishment; we have already
determined that there is sufficient evidence to conclude that it
does. Instead, the first BMW factor is concerned with where
Defendants’ conduct fits on a scale of outrageousness. Conduct
involving violence or threats of violence is obviously more
shocking than that which causes only economic harm. See id. at
575-76. Similarly, trickery and deceit are more deserving of
sanction than mere negligence. See id. at 576. And a wrong that
is part of larger pattern of misconduct is more blameworthy than
a single, isolated malfeasance. See id. 576-77. We are also
mindful that taking advantage of someone who is relatively
unsophisticated or financially vulnerable is particularly
deserving of rebuke. See id. at 576.
As we discussed above, there is substantial evidence to
support an award of punitive damages in this case. Preying on
the relatively unsophisticated, charging an exorbitant deposit,
refusing to return the deposit once the application was rejected,
using the $4,000 to wrest a better deal--each is an example of
the sort of conduct that supports a punitive damages award. At
the same time, however, we see evidence that somewhat mitigates
Defendants’ blameworthiness. First, we cannot conclude that the
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practice of requiring a reasonable, nonrefundable application fee
for purposes of processing a loan application is untenable.
Second, we see no evidence that Defendants required other
deposits approaching the amount paid by Watson in this case.
Third, the jury heard that the vast majority of applicants,
numbering over two thousand, either went through with the
purchase or were returned their deposits upon refusal by the
financing company. We also note that there was no evidence of
physical abuse or emotional suffering, Watson’s damages having
arisen solely as the result of economic injury.
The second BMW factor looks at the ratio between punitive
damages and actual or potential harm to plaintiff. 517 U.S. at
580. There is no particular disparity between punitive and
actual damages that will automatically result in our declaring a
punitive damages award unconstitutional. See id. at 582-83.
Nevertheless, comparing punitive damages with actual harm gives
us an idea whether the size of the award is suspect. See id. at
583. Here, the ratio between actual damages ($4,000) and
punitive damages ($700,000) is 175:1, a disparity not near the
500:1 figure in BMW called “breathtaking,” but very great
nonetheless. Plaintiff asks that we mitigate the difference by
including the potential harm to each of the 46 applicants whose
deposits were forfeited. BMW suggests that a court should
aggregate the actual and threatened harm suffered not only by the
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plaintiff but also by individuals similarly situated. See id. at
582. As we said before, however, we cannot conclude that
charging a nonrefundable application fee is unlawful or otherwise
improper. But even if we did include the amounts forfeited by
the 45 other applicants in our calculus, their smallness would
fail to substantially lessen the disparity between actual and
punitive damages. The ratio in that case would be approximately
50:1.
We last consider the penalties provided under state law for
comparable misconduct, the third BMW factor. Of particular
relevance here are state statutes punishing perpetrators for
conduct similar to Defendants’, for the Supreme Court has
directed that we “accord substantial deference to legislative
judgments concerning appropriate sanctions for the conduct at
issue.” BMW, 517 U.S. at 583 (internal quotations omitted).
Mississippi’s Consumer Protection Act, which proscribes a host of
deceptive trade practices, see MISS. CODE ANN. § 75-24-5(2)(a)-
(l)(1972 & Supp. 2001), imposes a civil penalty of up to $10,000
for each violation, id. § 75-24-19(1)(b). The Act also provides
that its violation is a misdemeanor for first-time offenders, who
are subject to $1,000 fine, and a felony for third-time and
subsequent offenders, who are subject to a fine between $1,000
and $5,000 and between one and five years’ imprisonment. Id. §
75-24-20. We view these provisions as imposing relatively severe
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penalties on those who take unfair advantage of consumers.2 At
the same time, we note that the penalty for single-incident
offenders is small compared to the sanction imposed against
Defendants in this case. In BMW, the Court found that Alabama’s
consumer protection law did not give adequate notice that a
single offense of fraud might subject defendant to a multimillion
dollar penalty. 516 U.S. at 584. Likewise, we conclude that in
this case Mississippi’s statute could not have made Defendants
aware that their acts of fraud, conversion, and intentional
breach of contract would result a penalty amounting to 175 times
actual damages.
Viewing the record against the yardsticks articulated in
BMW, we conclude that the size of punitive damages award in this
case makes it constitutionally infirm. Again, the wrongfulness
of Defendants’ conduct cannot be gainsaid. But we do not see a
pattern of malfeasance on their part, nor did Defendants act in
such a way that Watson’s health and safety were put at risk. We
therefore conclude that remittitur is required. See Rubinstein
2
Cf. LA. REV. STAT. ANN. (1987 & Supp. 2002) § 51:1401, et seq.
(Louisiana’s Unfair Trade Practices and Consumer Protection Law);
id. § 51:1409(A)(“If the court finds the unfair or deceptive
method, act or practice was knowingly used . . . the court shall
award three times the actual damages sustained); TEX. BUS. & COM.
CODE ANN. § 17.41, et seq. (1987 & Supp. 2002)(Texas’s Deceptive
Trade Practices-Consumer Protection Act); id. §
14.50(b)(1)(permitting a maximum award of three times economic
damages upon a finding that defendant’s conduct was committed
intentionally). Neither the Louisiana nor the Texas law provides
for criminal penalties.
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v. Administrators of the Tulane Educ. Fund, 218 F.3d 392, 409
(5th Cir. 2000)(ordering remittitur). We remit punitive damages
to $150,000, concluding that this amount is the maximum we could
sustain in this case. See Seidman v. American Airlines, Inc.,
923 F.2d 1134, 1141 (5th Cir. 1991). It is an amount, though
still very high, that honors both the jury’s well-supported
findings regarding Defendants’ conduct and the constitutional
standards articulated in Cooper and BMW.
III.
A general verdict form, while not favored, will not result
in reversible error so long as there was sufficient evidence to
support each theory of recovery put to the jury. See Nowell v.
Universal Elec. Co., 792 F.2d 1310, 1312 (5th Cir. 1986).
Johnson argues that of the three theories submitted to the jury,
on only two could he have been found liable--fraud and
conversion. On the third claim--intentional breach of contract--
Johnson contends that he cannot because he was acting as an agent
for Johnson Mobile Homes and was not himself a party to the
contract. To begin with, Johnson never objected to the district
court’s submission of a general verdict form; indeed, in his own
proposed jury instructions he submitted such a form. Nor did
Johnson object to the Court’s charging the jury on his liability
for intentional breach of contract. His failure to object means
that we must sustain the jury’s verdict unless plain error is
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evident. See Nero v. Industrial Molding Corp., 167 F.3d 921, 932
(5th Cir. 1999).
In a breach of contract action, under Mississippi law,
“agents for a disclosed principal [] incur no individual
liability, absent fraud or other equivalent conduct.” See Gray
v. Edgewater Landing, Inc., 541 So. 2d 1044, 1047 (Miss. 1989).
Here there was evidence of fraud, so Johnson could have been
found individually responsible. We therefore see no plain error
in the district court’s charging the jury on all three theories
of recovery.
CONCLUSION
For the foregoing reasons, we REVERSE IN PART the district
court’s denial of Defendants’ motion for judgment as a matter of
law and REMIT punitive damages to $150,000. At her option,
Watson may refuse to accept the damages as remitted and instead
have that issue tried anew. If she so chooses, we REMAND to the
district court for new trial on the issue of punitive damages.
In all other respects the judgment of the district court is
AFFIRMED.
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