CGB Occupational v. RHA Health Ser Inc

Opinions of the United

2007 Decisions States Court of Appeals

for the Third Circuit

8-23-2007

CGB Occupational v. RHA Health Ser Inc

Precedential or Non-Precedential: Precedential

Docket No. 05-3409

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_______________

Nos: 05-3409, 05-3586

_______________

CGB OCCUPATIONAL THERAPY, INC.

d/b/a CGB REHAB, INC.

v.

RHA HEALTH SERVICES, INC.; SYMPHONY HEALTH

SERVICES INC.;

RHA PENNSYLVANIA NURSING HOMES, INC.,

d/b/a PROSPECT PARK REHABILITATION CENTER

d/b/a PROSPECT PARK NURSING CENTER

d/b/a PROSPECT PARK HEALTH AND

REHABILITATION RESIDENCE;

RHA PENNSYLVANIA NURSING HOMES, INC.

d/b/a PEMBROOKE NURSING AND REHABILITATION

CENTER

d/b/a PEMBROOKE NURSING AND REHABILITATION

RESIDENCE

f/k/a WEST CHESTER ARMS NURSING AND

REHABILITATION CENTER;

SUNRISE ASSISTED LIVING, INC.; SUNRISE ASSISTED

LIVING MANAGEMENT, INC.

Sunrise Senior Living, Inc.

Sunrise Senior Living Management Inc.,

Appellants in 05-3409

CGB Occupational Therapy, Inc.,

Appellant in 05-3586

_______________

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. No. 00-cv-04918)

District Judge: Honorable Clarence C. Newcomer

_______________

Argued March 26, 2007

Before: FISHER, JORDAN and ROTH, Circuit Judges

(Filed: August 23, 2007)

_______________

Evan M. Tager [ARGUED]

Mayer, Brown, Rowe & Maw LLP

1909 K Street, NW

Washington, DC 20006

Counsel for Appellants/Cross-Appellees

2

Andrew L. Frey

Lauren R. Goldman

Mayer, Brown, Rowe & Maw LLP

1675 Broadway

New York, NY 10019

David G. Concannon [ARGUED]

Suite 116

200 Eagle Road

Wayne, PA 19087

Counsel for Appellee/Cross-Appellant

_______________

OPINION OF THE COURT

_______________

JORDAN, Circuit Judge.

Before us are cross-appeals arising from the reduction

of a $30 million punitive damages verdict to $2 million. The

District Court ordered the reduction on the ground that the

verdict was constitutionally excessive. Defendants Sunrise

Assisted Living Management, Inc. and Sunrise Assisted

Living, Inc. (collectively, “Sunrise”) contend that the reduced

verdict is still unconstitutional and seek a further reduction.

In a cross-appeal, Plaintiff CGB Occupational Therapy, Inc.

(“CGB”) challenges the District Court’s reduction of the

verdict and seeks either reinstatement of the original verdict

or some enhancement of the reduced verdict. For the reasons

that follow, we will vacate the District Court’s remittitur order

3

and remand the case with instructions to enter a new judgment

for punitive damages in the amount of $750,000. CGB’s

cross-appeal will be dismissed.

I.

This case is before us for the second time, following a

second jury trial. It is, as we said on the first go-around, a

case that “has been characterized by its contentious history.”

CGB Occupational Therapy, Inc. v. RHA Health Serv., Inc.,

357 F.3d 375, 379 (3d Cir. 2004) (“CGB I”). Since we have

previously set forth the facts in detail, the following factual

recitation is limited to the background necessary for our

ruling.

CGB is a provider of rehabilitation therapy services in

long-term care and assisted-living facilities. Beginning in

1995, CGB contracted with a company known as RHA

Pennsylvania Nursing Homes (“RHA”) to provide physical,

occupational, and speech therapy to residents at two nursing

home facilities owned by RHA, the Pembrooke facility and

the Prospect Park facility. CGB’s agreements with RHA

contained an “anti-raiding” clause providing that, in the event

CGB was terminated as the provider of therapy services, the

Pembrooke and Prospect Park facilities would not, for a

period of twelve months, seek to hire or contract with

therapists employed by CGB.

At all times relevant to this case, Sunrise managed

RHA’s Pembrooke and Prospect Park facilities. In 1998, the

federal Medicare program altered its process for reimbursing

care facilities for therapy services provided to residents.

4

Under the revised process, RHA claimed that it was more

difficult to pay CGB, and, on June 30, 1998, at RHA’s

direction, Sunrise notified CGB in writing that RHA intended

to terminate its contracts with CGB, effective September 30,

1998. Almost immediately after giving that notice, Sunrise,

again acting on behalf of RHA, executed agreements with

another provider of therapy services, Symphony Health

Services, Inc. (“Symphony”), to retain Symphony as the new

therapy provider at both the Pembrooke and Prospect Park

facilities, effective October 1, 1998.

What followed is central to this bitter legal contest.

Sunrise’s Prospect Park Administrator, Marjorie Tomes, met

with certain CGB therapists at the end of July 1998. She did

so despite the anti-raiding clause in RHA’s contracts with

CGB and despite direct admonitions by both RHA and CGB

that no such meeting should occur. During that meeting,

Tomes informed the therapists that CGB’s contracts with

RHA had been terminated because CGB could not comply

with Medicare changes. She made that representation even

though CGB’s owner, Cindy Brillman, had repeatedly told her

that CGB could comply with the Medicare requirements and

could continue to be competitive in providing therapy

services. Tomes also told the therapists that Symphony would

replace CGB as the therapy contractor, and that they might

have employment opportunities with Symphony. She polled

the therapists for their interest in pursuing employment with

Symphony, wrote down the names of those who replied in the

affirmative, and proceeded to facilitate Symphony’s hiring of

CGB therapists.

5

In September 2000, CGB brought this action against

Sunrise and other defendants, alleging claims under

Pennsylvania law for, among other things, tortious

interference with CGB’s contractual relationships both with

its therapists and with RHA. The jury in the first trial found

that Sunrise had indeed tortiously interfered with CGB’s

contractual relationship with its therapists, and returned a

compensatory damages verdict in the amount of $109,000 on

that claim. The jury also found that Sunrise had tortiously

interfered with CGB’s contractual relationship with RHA, and

returned compensatory damages in the amount of $576,000 on

that claim. The jury awarded punitive damages to CGB in the

amount of $1.3 million, but the verdict did not specify how

the punitive damages award was allocated between the two

claims of interference.

On the first appeal, we affirmed the jury’s verdict

against Sunrise for tortious interference with CGB’s

contractual relationship with its therapists, but we reversed

the verdict of tortious interference with CGB’s contractual

relationship with RHA. See CGB I, 357 F.3d at 385-90.1

Because the jury had awarded $1.3 million in punitive

1

We reversed the verdict on the claim of tortious

interference with CGB’s contractual relationship with RHA

because we determined that Sunrise acted within the scope of

its authority as an agent for RHA, CGB I, 357 F.3d at 385-88,

and that, under Pennsylvania law, “[t]he actions of a

principal's agent are afforded a qualified privilege from

liability for tortious interference with the principal's contract.”

Id. at 385.

6

damages without differentiating between the two acts of

interference by Sunrise, we noted that “it is impossible to

determine how punitive damages should be allocated in light

of our determination that Sunrise could not have interfered

with the contract between CGB and [RHA].” Id. at 390.

Consequently, we reversed the punitive damages

determination and remanded the case to the District Court for

“a new trial on the question of punitive damages.” Id. at 392.

Sunrise evidently had a “watch what you wish for”

experience when, at the second trial, the jury awarded CGB

$30 million in punitive damages on the claim that Sunrise had

tortiously interfered with CGB’s contractual relationship with

its therapists. Sunrise thereafter moved to reduce the punitive

damages award, arguing that the $30 million penalty was

constitutionally excessive. After considering the guideposts

for judicial review of punitive damages as articulated in BMW

of N. Am., Inc. v. Gore, 517 U.S. 559 (1996), and as amplified

by State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408

(2003), the District Court reduced the award to $2 million.

These cross-appeals followed. The District Court exercised

diversity jurisdiction pursuant to 28 U.S.C. § 1332. We have

jurisdiction over the final judgment pursuant to 28 U.S.C. §

1291.

II.

“The Due Process Clause of the Fourteenth

Amendment prohibits the imposition of grossly excessive or

arbitrary punishments on a tortfeasor.” Campbell, 538 U.S. at

416. In determining whether a punitive damages award

7

comports with due process,2 courts must “consider three

2

On the first appeal, Sunrise did not argue that the

$1,300,000 punitive damages award was constitutionally

excessive. Rather, it contended that the jury’s punitive

damages verdict should be overturned altogether because

CGB had failed to establish the necessary elements of its

tortious interference claims. CGB I, 357 F.3d at 383. Sunrise

now asserts that a punitive damages award of $2,000,000 is

constitutionally excessive, which raises the issue of whether it

is appropriate to address this argument even though a similar

argument was not made in the first appeal. Unlike our

dissenting colleague, we conclude that the constitutional issue

is unavoidable.

The dissent argues that it was inappropriate for the

District Court to conduct a new trial to redetermine punitive

damages de novo. We cannot agree. In CGB I, we declared

that it was impossible to determine how the punitive damages

could properly be allocated between the surviving claim and

the claim we reversed. Id. at 390. Therefore, we also

“reverse[d] the punitive damages determination and

remand[ed] to the District Court for a redetermination of

punitive damages in accordance with [that] opinion.” Id.

While our dissenting colleague interprets our

“redetermination of punitive damages” instruction in CGB I to

require something short of conducting an entirely new trial on

the issue, we expressly clarified our intent later in CGB I by

stating that “the jury’s punitive damages determination must

be reversed and the case remanded for a new trial on the

question of punitive damages,” id. at 392 (emphasis added),

and we further noted that claims of juror misconduct raised by

8

Sunrise were rendered moot by that disposition. Id. Thus, the

District Court did what we instructed. It held a new jury trial

on punitive damages, resulting in a new determination of

those damages. See Litman v. Massachusetts Mut. Life Ins.

Co., 825 F.2d 1506, 1513-14 (11th Cir. 1987) (en banc)

(reversal of one claim on which unapportioned punitive

damages award was partially based had the effect of

"void[ing] the original judgment," and "the litigants were sent

back to the district court for a new determination of punitive

damages as if the first trial never occurred"); 5 C.J.S. Appeal

and Error § 1106 (2007) (the effect of a reversal of a

judgment “is to nullify it completely and to leave the case

standing as if such judgment ... had never been rendered,

except as restricted by the opinion of the appellate court”).

Courts have “broad discretion” in their control and

management of a new trial. Cleveland by and through

Cleveland v. Piper Aircraft Corp., 985 F.2d 1438, 1449 (10th

Cir. 1993); see also 11 Wright, Miller, & Kane, Federal

Practice and Procedure: Civil § 2803 (2d ed. 1995). Courts

exercise that discretion in deciding whether to allow

additional witnesses and relevant proof in the new trial. See

Piper Aircraft Corp., 985 F.2d at 1450 (“[T]he court must

retain broad latitude and may with proper notice allow

additional witnesses and relevant proof [in a new trial.]”).

That discretion logically extends to making determinations of

whether parties may make additional arguments in a new trial

or in an appeal of that trial. Those decisions, and all others,

should be guided by “considerations of fairness and justice to

all parties.” Wright, Miller, & Kane, supra, at § 2803; see

also Piper Aircraft Corp., 985 F.3d at 1450 (stating that, in

9

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

damages award; and (3) the difference between the punitive

damages awarded by the jury and the civil penalties

authorized or imposed in comparable cases.” Id. at 418

(citing Gore, 517 U.S. at 575). We review the

constitutionality of the punitive damages award de novo, but

we must accept any findings of fact made by the District

Court, unless they are clearly erroneous. Cooper Indus., Inc.

v. Leatherman Tool Group, Inc., 532 U.S. 424, 440 n.14

(2001). We conclude that the $2 million award remains

constitutionally excessive and must be further reduced.

considering whether to allow a party to introduce additional

witnesses and relevant proof, a court should examine whether

the allowance would create a “manifest injustice” to the other

party).

Thus, when the jury returned a $30,000,000 punitive

damages award against Sunrise, it is hardly surprising the

District Court determined that the parties were in an entirely

new region of liability exposure and that it was appropriate to

permit Sunrise to argue that the new and much larger award

was constitutionally excessive. In so ruling, the District Court

did not abuse its discretion. Significantly, CGB has not

contended it is unfair to permit Sunrise to raise a due process

argument regarding the new verdict in either its original form

or its reduced, $2,000,000 amount, although CGB has argued

it is “disingenuous” for Sunrise to complain about the

$2,000,000 verdict since it is “only $700,000 higher than the

first [$1.3 million] award ... .” (Appellee’s Br. at 71-72.)

10

Because we agree with the District Court that the third

guidepost set forth in the Gore and Campbell cases, i.e., the

disparity between the punitive damages award and

comparable civil penalties, is not instructive here, see Inter

Med. Supplies, Ltd. v. EBI Med. Sys., Inc., 181 F.3d 446, 468

(3d Cir. 1999) (finding third guidepost “unhelpful” in case

involving tortious interference and related common law tort

claims), our discussion is confined to the first two guideposts,

namely the degree of reprehensibility and the disparity

between the harm and the award.

A. Degree of Reprehensibility

The Supreme Court has recognized that the degree of

reprehensibility of the defendant’s conduct is “[t]he most

important indicium of the reasonableness of a punitive

damages award.” Campbell, 538 U.S. at 419 (quoting Gore,

517 U.S. at 575). In evaluating the degree of Sunrise’s

reprehensibility in this case, we must consider whether: “[1]

the harm caused was physical as opposed to economic; [2] the

tortious conduct evinced an indifference to or reckless

disregard of the health or safety of others; [3] the target of the

conduct had financial vulnerability; [4] the conduct involved

repeated actions or was an isolated incident; and [5] the harm

was the result of intentional malice, trickery, or deceit, or

mere accident.” Id.

The District Court found that three of the five

reprehensibility subfactors were present in this case: CGB

was financially vulnerable; Sunrise’s actions involved

repeated misconduct; and Sunrise acted intentionally. We

11

agree with the District Court that the financial vulnerability

subfactor weighs in favor of finding Sunrise’s conduct

reprehensible. CGB was a small company which operated out

of Ms. Brillman’s home and only employed approximately

twenty therapists. At the time Tomes met with CGB’s

therapists, she knew that CGB was in a financially vulnerable

position because RHA owed CGB $600,000 in back

payments. She also knew that her successful recruitment of

CGB’s therapists would further decimate CGB’s business.

We also agree with the District Court that Sunrise

intentionally inflicted harm on CGB, which further increases

the culpability of Sunrise’s conduct. The evidence shows that

Tomes met with CGB’s therapists despite express warnings

from both Brillman and Sunrise’s own principal, RHA, not to

do so. At the meeting, Tomes told the therapists that CGB’s

contracts with RHA had been terminated because CGB was

unable to comply with Medicare changes and that CGB could

not compete with Symphony, even though Brillman had told

Tomes several times that CGB could, in fact, comply with the

Medicare changes and Tomes otherwise had no reason to

believe that CGB could not compete with Symphony. As a

result of Tomes’s misstatements, CGB’s therapists began to

fear for their jobs and distrust their employer, and they were

thus more inclined to respond favorably to Tomes’s

recruitment efforts. Although Brillman quickly confronted

Tomes about her misconduct, Tomes continued to assist

Symphony in its recruitment of CGB’s therapists, even

providing Symphony with access to a conference room at the

Prospect Park facility for the purpose of interviewing CGB’s

therapists. In sum, the evidence amply supports a finding that

12

Sunrise’s conduct was intentionally harmful, rather than

merely accidental.

In considering the “repeated conduct” subfactor of the

reprehensibility analysis, the District Court observed that

Sunrise’s tortious conduct involved “repeated stalling and

dishonesty” (JA at 12), and that Sunrise “continually refused

to be held responsible for its actions, ignoring and rebuffing

Plaintiff ... .” (JA at 9.) Sunrise argues that the District Court

applied this factor wrongly. Relying on our statement in

Willow Inn, Inc. v. Pub. Serv. Mut. Ins. Co., 399 F.3d 224 (3d

Cir. 2005) that “[t]he ‘repeated conduct’ cited in Gore

involved not merely a pattern of contemptible conduct within

one extended transaction ..., but rather specific instances of

similar conduct by the defendant in relation to other

parties[,]” id. at 232, Sunrise contends that the “repeated

conduct” subfactor is not satisfied here because there is no

evidence that it committed similar tortious acts against other

entities.

Contrary to Sunrise’s suggestion, we did not hold in

Willow Inn that the “repeated conduct” inquiry is so limited in

scope. We instead recognized that, while the “repeated

conduct” subfactor will necessarily have “less force” where

the defendant’s misconduct did not extend beyond his

dealings with the plaintiff , id. at 232-33, it may still be

“relevant” in measuring the reprehensibility of the

13

defendant’s conduct, based on the particular facts and

circumstances presented.3 Id. at 232-33.

“[E]vidence that a defendant has repeatedly engaged in

prohibited conduct while knowing or suspecting that it was

unlawful” is highly indicative of reprehensibility. Gore, 517

U.S. at 576. In this case, within days of meeting with CGB’s

therapists over the protestations of both RHA and CGB,

3

Sunrise alternatively argues that the facts and

circumstances of this case are distinguishable from those

before us in Willow Inn. In Willow Inn, the defendant-insurer

employed various stonewalling tactics in processing the

plaintiff-insured’s property damage claim. We determined

that the defendant’s misconduct was probative of

reprehensibility because it “suggest[ed] that [the defendant’s]

actions were designed to achieve a fiscally beneficial result

for itself at odds with the Pennsylvania Supreme Court’s

long-time dictate that an insurer must act with the utmost

good faith toward its insured.” Id. at 233 (citation and

internal quotation marks omitted). Sunrise reads Willow Inn

to hold that a pattern of misconduct by the tortfeasor within a

single transaction is only relevant under the repeated conduct

subfactor if the tortfeasor owed a fiduciary duty to the victim.

Contrary to Sunrise’s assertion, Willow Inn imposes no such a

limitation, and for good reason. Repeated misconduct is

probative of reprehensibility when the tortfeasor knows or

suspects that his pattern of behavior is unlawful, regardless of

whether that knowledge stems from a special legal

relationship with the victim. While the weight to be given the

factor may vary, its relevance remains.

14

Tomes received a letter from CGB’s counsel suggesting that

her actions “appear[ed]” to constitute tortious interference.

(JA at 461.) Despite thereby having reason to believe that her

previous contact with CGB’s therapists may have been

unlawful, Tomes nevertheless continued to assist Symphony

in recruiting the therapists. She thus evinced not only an

intent to damage CGB but a willingness to act repeatedly on

that intent, with utter contempt for CGB’s interests and

disregard for the law. We therefore believe that “the

Gore/Campbell ‘repeated conduct’ subfactor applies to this

case in a way not captured in the ‘intent’ subfactor.” Willow

Inn, 399 F.3d at 233.

While three of the five reprehensibility subfactors

support, to varying degrees, the award of substantial punitive

damages in this case, our consideration of the remaining two

subfactors counsels against the need for such a high award.

The harm suffered by CGB was economic, not physical, and

Sunrise’s tortious conduct did not demonstrate an indifference

to or a reckless disregard of the health or safety of others. We

have previously recognized that economic torts are “less

worthy of large punitive damages awards than torts inflicting

injuries to health or safety.” Inter Med., 181 F.3d at 467

(citation omitted). Based on our consideration of the

reprehensibility guidepost, it appears that Sunrise’s conduct

was not sufficiently egregious to warrant a punitive damages

award of $2 million. That conclusion is reinforced by our

analysis of the second Gore/Campbell guidepost, i.e., the

disparity between the punitive damages award and the harm

suffered by the plaintiff.

15

B. Ratio of Punitive Damages to Harm

“The second and perhaps most commonly cited

indicium of an unreasonable or excessive punitive damages

award is its ratio to the actual harm inflicted on the plaintiff.”

Gore, 517 U.S. at 580. The Supreme Court has been

“reluctant to identify concrete constitutional limits on the

ratio,” instead emphasizing that “[t]he precise award in any

case ... must be based upon the facts and circumstances of the

defendant’s conduct and the harm to the plaintiff.” Campbell,

538 U.S. at 424-425. It has cautioned, however, that “in

practice, few awards exceeding a single-digit ratio between

punitive and compensatory damages, to a significant degree,

will satisfy due process.” Id. at 425.

Measuring the $2 million punitive damages award

against the $109,000 compensatory award in this case yields a

double-digit ratio of over 18:1, which immediately “alerts the

court[] to the need for special justification.” Williams v.

ConAgra Poultry Co., 378 F.3d 790, 799 (8th Cir. 2004). The

District Court opined that the ratio it permitted, which it

characterized as “roughly 19:1,” was not constitutionally

excessive because of “the facts of this case (including the

wealth of Defendant and the state’s interest in punishment and

deterrence).” (JA at 14.) The District Court also sought to

justify the high ratio by saying it “suspect[ed]” that “given the

hardships Defendant imposed on Plaintiff in its treatment of

Plaintiff after the interference took place, and given

Defendant’s antics leading up to the first trial, the true ratio,

could [the full extent of] the harm caused by Defendant be

16

expressed as a simple dollar value, would be closer to three to

one.” Id.

The District Court’s “true ratio” justification cannot

withstand scrutiny. The Court effectively lowered the ratio by

inflating the denominator based on suspicions of unquantified

harm. We do not doubt that the District Court had reason to

believe that some unquantified harm inflicted by Sunrise

supports a substantial punitive damages award to CGB. But

suspicions and speculation alone will not suffice. We need

not reach the question of whether unquantified harm can ever

affect the denominator in a punitive damages-to-actual harm

ratio. It is enough to say that it does not affect it in this case.

The District Court did not point to evidence in the record, nor

did it articulate its reasoning for concluding that the

denominator ought to be something other than what the first

jury expressly held in its compensatory damages verdict was

the actual harm. With no evidence or articulated reason to

support the framing of a different denominator, the $109,000

compensatory award is the appropriate denominator under the

Gore/Campbell ratio analysis.4

4

This is not to say that the ratio’s denominator should

in all cases be limited to the amount of compensatory

damages awarded by the jury. See, e.g., Willow Inn, 399 F.3d

at 234-37 (measuring $150,000 punitive damages award

against $135,000 award in attorney fees and costs, rather than

against $2,000 compensatory award); Continental Trend

Resources, Inc. v. OXY USA Inc., 101 F.3d 634, 640 (10th

Cir. 1996) (considering expert testimony of potential loss to

plaintiffs in the amount of $769,895, in addition to

17

Heeding the Supreme Court’s admonition that few

awards exceeding the single-digit threshold will satisfy due

process, we conclude that the 18:1 ratio in this case crosses

the line into constitutional impropriety. Pacific Mut. Life Ins.

Co. v. Haslip, 499 U.S. 1, 24 (1991). While the

reprehensibility of Sunrise’s conduct and the harm it inflicted

on CGB should not be minimized, there are no special

circumstances justifying the enormous disparity between the

punitive damages award and the compensatory damages

recovered by CGB in this case. The Supreme Court has

suggested that greater ratios may comport with due process in

cases where “a particularly egregious act has resulted in only

a small amount of economic damages,” or where “the injury is

hard to detect or monetary value of noneconomic harm might

have been difficult to determine.” Campbell, 538 U.S. at 425

(quoting Gore, 517 U.S. at 582); see Deters v. Equifax Credit

Info. Servs., Inc., 202 F.3d 1262, 1273 (10th Cir. 2000)

(“[W]here the injury is primarily personal, a greater ratio may

be appropriate.”). But this is not such a case. In short, a

further reduction of the $2 million award is required, in light

of our consideration of the Gore/Campbell guideposts.

III.

As we stand in the “role as gatekeeper in reviewing an

award of punitive damages[,]” Inter Med., 181 F.3d at 468,

compensatory damages awarded for past harm, as part of

ratio’s denominator). We only conclude that District Court

was not free to arbitrarily quantify the value of any

uncompensated harm suffered by CGB for purposes of setting

the ratio’s denominator.

18

we turn next to our responsibility for determining the

constitutional limit on the award in this case. See id. (“[A]n

appellate panel, convinced that it must reduce an award of

punitive damages, must rely on its combined experience and

judgment.”). In making this determination, we must accord

“a measure of deference” to the jury’s award. Willow Inn,

399 F.3d at 231. We are obliged to “decrease the award to an

amount the evidence will bear, which amount must

necessarily be as high - and may well be higher - than the

level the court would have deemed appropriate if working on

a clean slate.” Id. (citing Dunn v. HOVIC, 1 F.3d 1371, 1381

(3d Cir. 1993) (en banc)). After carefully reviewing the

record and the parties’ arguments, we conclude that a punitive

damages award in the amount of $750,000 represents the

constitutional upper limit in this case.

A punitive award of $750,000 bears a reasonable

relationship to the reprehensibility of Sunrise’s tortious

conduct and results in a punitive damages-to-harm ratio of

less than 7:1, within the single-digit range, as counseled by

the Supreme Court. In arriving at this figure, we have also

considered the evidence of Sunrise’s financial strength, which

the jury was appropriately permitted to take into

consideration, recognizing that what “may be awesome

punishment for an impecunious individual defendant ... [may

be] wholly insufficient to influence the behavior of a

prosperous corporation.” Continental Trend, 101 F.3d at 641;

see Campbell, 538 U.S. at 427-28 (observing that

consideration of defendant’s wealth is not “unlawful or

inappropriate” so long as it is not used to “make up for the

failure of other factors, such as ‘reprehensibility,’ to constrain

19

significantly an award that purports to punish a defendant’s

conduct”) (citation omitted).

Wealth is also relevant because “[a] rich defendant

may act oppressively and force or prolong litigation simply

because it can afford to do so and a plaintiff may not be able

to bear the costs and the delay.” Continental Trend, 101 F.3d

at 642; accord Mathias v. Accor Economy Lodging, Inc., 347

F.3d 672, 677 (7th Cir. 2003) (Posner, J.) (“[W]ealth in the

sense of resources ... enable[s] the defendant to mount an

extremely aggressive defense against suits such as this and by

doing so to make litigating against it very costly ... . In other

words, the defendant is investing in developing a reputation

intended to deter plaintiffs.”). Informed by many decades of

experience as a trial judge and by the specific experience of

presiding over several years of pretrial proceedings and two

trials in this matter, the District Court Judge described

Sunrise’s litigation conduct as “tell[ing] a tale of repeated

stalling and dishonesty” (JA at 12), which included the

imposition of “countless obstacles to rapid resolution of

Plaintiff’s claims” (id. at 9), among other “antics.” (Id. at 14.)

Brillman testified about Sunrise’s abusive and dilatory

litigation tactics (JA at 156-61), including Sunrise’s initiation

of meritless collateral proceedings against CGB in RHA’s

bankruptcy case,5 and “constant[]” threats from Sunrise to

5

According to CGB, the Bankruptcy Court described

Sunrise’s claim as a “Machiavellian scheme” intended to

deprive CGB of a legitimate payment. (CGB Reply Br. at 11-

12.)

20

“keep litigation [going] forever.” (JA at 167.)6 Brillman

demonstrated tremendous fortitude. She took out a second

mortgage on her home and vowed to litigate CGB’s claims to

final resolution (JA at 166-67), but litigants should not have

to face something akin to medieval trial by combat to resolve

a basic business dispute. The mounting costs of this drawn-

out, no-holds-barred litigation might have forced many a

small business to accept an undervalued settlement or to

abandon its claims altogether. Indeed, the case history here

strongly implies that Sunrise had exactly that outcome in

mind.

This was not, it should be emphasized, simply a hard-

fought case. No litigant, whether its resources are great or

small, is required to “make nice” by giving up legitimate legal

positions. What sets this case apart and makes it, we hope,

truly unusual is the repeated use of procedural devices to

6

One of Sunrise’s claims of error on the first appeal

was that the District Court abused its discretion in denying

Sunrise’s request for a continuance, on the second day of trial,

due to Tomes’s unavailability to testify. The District Court

noted that it had ordered Tomes to be available to testify on

an earlier date, before she became unavailable, but that

Sunrise failed to produce her without explanation. The

District Court concluded that Sunrise’s continuance request

was “clearly the product of bad planning and, mostly likely,

bad faith,” and we upheld that ruling. CGB I, 357 F. 3d at

391. On remand, the second jury was made aware of Tomes’s

failure to attend the first trial on the date ordered. (JA at 353-

59.)

21

grind an opponent down, without regard for whether those

devices advanced any legitimate interest. The District Court

Judge, the Bankruptcy Judge who waded through the

meritless adversary action, and a previous panel of this Court

have all, to one degree or another, commented negatively on

Sunrise’s litigation tactics.7 Under these literally remarkable

circumstances, a substantial punitive damages award is

warranted to prevent Sunrise from gaining the unfair

advantage of a reputation for bleeding legal adversaries to

death before they can vindicate their rights. Mathias, 347

7

We would ordinarily rather see parties and district

courts deal directly with litigation misconduct by the statutory

and procedural mechanisms set up for that purpose, see, e.g.,

28 U.S.C. § 1927; Fed. R. Civ. P. 11, than to see frustration at

such misconduct take the form of a punitive damages ruling

subject only to constitutional review. As already noted,

however, evidence of litigation misconduct can support an

award of punitive damages, and, in this case, we do not face

the very real concerns that would arise if a trial were diverted

from the merits and converted into bickering about litigation

tactics. Jurors typically are not well-positioned to sort out

discovery questions that can vex even talented and well-

meaning members of the bench and bar, but the concerns

about misconduct that inform our decision today are largely

founded on comments from the judicial officers who were

required to ride herd on the various phases of this case. To

the extent evidence of misconduct was presented to the jury in

this case, Sunrise has chosen not to challenge the District

Court’s evidentiary rulings on appeal. (See Appellant’s Br. at

11.)

22

F.3d at 677. There is a cost to abusive litigation tactics, and

Sunrise will pay it, at least to a degree. While the punitive

damages award here represents far more than litigation

misconduct, that misconduct is relevant to our analysis.

In further considering the reasonableness of a reduced

award in the amount of $750,000, we find it significant that

Sunrise, in its first appeal, did not challenge the

constitutionality of the $1.3 million punitive damages verdict

that the first jury returned. Even considering that the $1.3

million punitive award was based on two verdicts for tortious

interference, one of which was subsequently overturned on

appeal, we think Sunrise’s past silence leaves it hard-pressed

to argue that the imposition of a six-figure penalty on the

surviving claim of tortious interference is grossly excessive.

In sum, we conclude that the maximum

constitutionally permissible punitive award in this case is

$750,000.

IV.

Punitive damages awards are “the product of

numerous, and sometimes intangible, factors ... . Because no

two cases are truly identical, meaningful comparisons of such

awards are difficult to make.” TXO Production Corp. v.

Alliance Resources Corp., 509 U.S. 443, 457 (1993) (plurality

opinion). We expect that will remain true of this abnormally

contentious case. For the foregoing reasons, we will vacate

the District Court’s punitive damages award and remand this

case with instructions to enter a new judgment for punitive

23

damages in the amount of $750,000. CGB’s cross-appeal is

dismissed.

CGB Occupational Therapy, Inc. v. RHA Health Service, Inc.

Nos. 05-3409, 05-3586

ROTH, Circuit Judge, dissenting:

‘It seems a shame,’ the Walrus said,

‘To play them such a trick,

After we've brought them out so far,

And made them trot so quick!’

Lewis Carroll, Through the Looking-Glass

This case was botched on remand. A litigant appealed to

our Court and won a partial reversal, and yet the judicial system

left that litigant worse off on remand than it had been before it

appealed. The proceedings before the District Court simply did

not comport with the mandate we had issued. For that reason

alone, the judgment of the District Court should be vacated, and

this case should be remanded for proceedings consistent with

our original mandate. We need not, and therefore should not,

reach the constitutional question of whether the remitted

punitive award was so excessive as to violate the Due Process

Clause of the Fourteenth Amendment. I therefore do not join

my colleagues in answering a question that should not be before

us, and so I respectfully dissent.

I.

24

The first jury found in favor of CGB Occupational

Therapy, Inc., having determined that the defendants, Sunrise

Assisted Living Management, Inc. and Sunrise Assisted Living,

Inc. (collectively, Sunrise), tortiously interfered with CGB’s

contracts with two nursing home facilities and its own

therapists. The jury awarded CGB $576,000 in compensatory

damages for Sunrise’s interference with the nursing home

contracts, $109,000 in compensatory damages for Sunrise’s

interference with CGB’s therapist contracts, and $1.3 million in

punitive damages. It was not clear how the jury allocated the

punitive damages award between the two acts of interference,

because the verdict form did not specify. See CGB

Occupational Therapy, Inc. v. RHA Health Serv., Inc., 357 F.3d

375, 382 (3d Cir. 2004).

A panel of our Court considered this case and concluded

that, as a matter of law, Sunrise was entitled to judgment in its

favor on the claim of tortious interference with the nursing home

contracts. Id. at 385-88. We allowed the judgment to stand on

the other claim of tortious interference, regarding the therapist

contracts. Id. at 389-90. The effect of our holding on

compensatory damages was simple: CGB retained the $109,000

award on the affirmed claim, but lost the $576,000 award on the

reversed claim. The award of punitive damages posed a thornier

question because we had no way to know what part, if any, of

the $1.3 million punitive award was intended by the jury to

punish Sunrise for action underlying the claim we had reversed.

In recognizance of this difficulty, we wrote:

[I]t is impossible to determine how punitive

damages should be allocated in light of our

25

determination that Sunrise could not have

interfered with the contract between CGB and

RHA/Pennsylvania. Consequently, we must

reverse the punitive damage determination and

remand to the District Court for a redetermination

of punitive damages in accordance with this

opinion.

Id. at 390. On remand, the sole task for the District Court was

to be a redetermination of punitive damages. Had we been able

to apportion the punitive award then, we would not be here

today.

The District Court found our mandate for the remand to

be unclear. The court ruled that although “[t]he Third Circuit

ruling in this case has not, unfortunately, completely illuminated

the path that this Court must take[,] . . . [t]his Court’s reading of

the Third Circuit’s mandate is that the entire issue of punitive

damages, including whether or not they are appropriate given

Defendants’ conduct, must be retried.” Order of December 29,

2004. The District Court went on to hold that Sunrise was

entitled to argue that its conduct was not “sufficiently grievous

as to justify an award of punitive damages,” but that it could not

argue that its conduct was not wrongful or tortious because our

Court had affirmed the first jury’s finding that the conduct was

tortious. Under this ruling, the second jury was to consider

whether punitive damages should be awarded based on

Sunrise’s tortious interference with CGB’s therapist contracts,

and the jury was free to award any punitive award it saw fit,

from zero to infinity, subject to review for excessiveness.

26

At the end of the second trial, the jury considered the

issue of punitive damages and returned with the punitive award

that it saw fit: $30 million. The District Court determined that

this award was excessive and reduced it to $2 million. Needless

to say, neither the jury’s award nor the court’s remittitur reflects

an attempt to apportion the first jury’s punitive award of $1.3

million.

II.

A longstanding and central principle of our judicial

system is that “an inferior court has no power or authority to

deviate from the mandate issued by an appellate court.” Briggs

v. Pa. R.R. Co., 334 U.S. 304, 306 (1948). See also Casey v.

Planned Parenthood of Se. Pa., 14 F.3d 848, 856 (3d Cir. 1994).

Where a reviewing court in its mandate states that the trial court

must proceed in accordance with the opinion of the reviewing

court, that opinion becomes a fully-merged part of the mandate.

See Bankers Trust Co. v. Bethlehem Steel Corp., 761 F.2d 943,

949 (3d Cir. 1985) (quoting Noel v. United Aircraft Corp., 359

F.2d 671, 674 (3d Cir. 1966)). Once the mandate is issued, “[a]

trial court must implement both the letter and spirit of the

mandate, taking into account the appellate court's opinion and

the circumstances it embraces.” Bankers Trust, 761 F.2d at 949.

The question we must answer is whether the District Court

violated the letter or the spirit of our Court’s mandate, looking

for guidance at the entirety of our opinion, which we expressly

stated to be part of our mandate.

By our Court’s express language, the punitive award was

reversed, and the case was remanded for a “redetermination” of

27

punitive damages. The judgment was silent as to whether the

range of punitive awards available on remand would be limited

by the award determination of the first jury. The District Court

interpreted our silence as lack of direction and proceeded to

decide that the range was open. If we did not settle this issue on

the first appeal, then the District Court acted properly, as a trial

court on remand “is free to make any order or direction in

further progress of the case, not inconsistent with the decision

of the appellate court, as to any question not settled by the

decision.” Casey, 14 F.3d at 857 (quoting Bankers Trust, 761

F.2d at 950) (internal quotation marks omitted).

The express language of the mandate was not, however,

the entirety of what the District Court should have considered.

As we explained in Bankers Trust, when a district court executes

a mandate issued by our Court, it must seek guidance not only

in the letter of mandate, but in its spirit, and it must look both to

the opinion and to the circumstances it embraces. 761 F.2d at

949.

What it means to follow the “spirit” of a mandate,

however, is uncomfortably ambiguous. When we remand a case

for further proceedings, we of course cannot expect the court to

do what we mean, even when what we mean cannot reasonably

be understood from what we say. We do, however, expect that

the court will implement faithfully the mandate it receives.

When a case is remanded for a limited purpose, faithful

implementation of the mandate means that the district court will

narrowly tailor the proceedings to ensure that the proceedings do

not enlarge themselves beyond their narrowly mandated scope,

as they are wont to do. Faithful implementation of a mandate is

28

often more art than science, and considerable discretion is owed

to the district court. This discretion, of course, has outer limits,

and at least one of those limits should be clear: When the

proceedings on remand result in an outcome that is grossly

incongruous with the purpose for which the remand was

ordered, the spirit of the mandate is violated.

The purpose of our mandate in this case was clear. The

District Court had ordered Sunrise to pay compensatory and

punitive damages totaling $1,985,000, and Sunrise appealed the

judgment against it. We partially reversed the judgment and

therefore needed to reduce the $1,985,000 award. We struck the

$576,000 compensatory award, and sought to do the same to a

portion of the $1.3 million punitive award. In other words, the

punitive award needed to be reduced, and we ordered a

redetermination of punitive damages because, although we knew

that the original punitive award was too high, we did not know

by how much. Instead, the redetermination resulted in an

enlargement of the punitive award, to a figure that was higher

than the original punitive and compensatory awards together.

The procedural history can be reduced to this: The District

Court used the remand we had ordered to nullify the effect of

our holding and place Sunrise in a worse position than it had

been before it won its appeal. The spirit of our mandate was

violated.

In a just legal system, such a result should not be

tolerated. If a victorious appellant is to be rewarded with a

higher award against it, then we as judges are little better than

the Walrus and the Carpenter, who beseech the Oysters to walk

with them, only to reward the Oysters by eating them. See

29

LEWIS CARROLL, Through the Looking-Glass and what Alice

found there, in THE COMPLETE WORKS OF LEWIS CARROLL 133,

185-88 (Vintage Books 1976) (1871). Litigants in federal court

deserve better treatment than that.8

III.

“A fundamental and longstanding principle of judicial

restraint requires that courts avoid reaching constitutional

questions in advance of the necessity of deciding them.” Lyng

v. Nw. Indian Cemetery Protective Ass’n 485 U.S. 439, 445

(1988). The majority decides this case under the Due Process

Clause of the Fourteenth Amendment. I recognize that the law

on this subject is not clear and that litigants in our circuit would

benefit from what guidance they can receive from our Court.

The role of the court of appeals, however, is not to provide

guidance whenever we believe it will be helpful. Our job is to

decide cases, and the case before us today does not raise a

constitutional question. Had the District Court adhered to the

spirit of our mandate, the $2 million punitive award that the

8

Judge McConnell recently has voiced similar concerns in

the context of criminal resentencing, where sometimes a defendant

successfully challenges his or her sentence and nonetheless faces

an “appeal tax” in the form of a higher sentence. See United States

v. Medley, 476 F.3d 835, 840-43 (10th Cir. 2007) (McConnell, J.,

concurring). I express no view as to whether appellants in some

circumstances must risk unfavorable outcomes as a result of their

success on appeal. Our mandate in this case, however, should not

have placed Sunrise in such a dilemma, and because the

proceedings on remand did so, they undermined our holding.

30

majority considers never would have issued. I would ask the

District Court to correct the error, not use the error as a

springboard to constitutional analysis.

The judgment of the District Court should be vacated as

to punitive damages and remanded with an explanation of what

our original mandate required. Punitive damages should be

capped at $1.3 million, the maximum amount attributable to

Sunrise’s interference with the therapist contracts under the first

jury’s award.

I respectfully dissent.

31