Appendix — Life Insurance Co. of Georgia v. Johnson
Supreme Court brief1996
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| $96 184 Jul 24196
* No. 96-
IN THE
Supreme Court of the United States
OCTOBER TERM, 1995
;?
LIFE INSURANCE COMPANY OF GEORGIA,
Petitioner,
v.
DAISEY L. JOHNSON,
Respondent.
On Petition for a Writ of Certiorari
to the Supreme Court of Alabama
APPENDIX TO
PETITION FOR WRIT OF CERTIORARI
Of Counsel: THEODORE B. OLSON
Counsel of Record
FRANCIS J. MULCAHY THEODORE J. BOUTROUS, JR.
VICE-PRESIDENT AND JERRY S. FOWLER, JR.
GENERAL COUNSEL GIBSON, DUNN & CRUTCHER LLP
LIFE INSURANCE CO. OF 1050 Connecticut Avenue, N.W.
GEORGIA Washington, D.C. 20036
(202) 955-8500
DAVIS CARR
JAMES W. LAMPKIN II
CARR, ALFORD, CLAUSEN
& MCDONALD, L.L.C.
Post Office Drawer C
Mobile, AL, 36601
(334) 432-1600
Attorneys for Petitioner
eS A SE A Se A
PRESS OF BYRON 8S. ADAMS @ WASHINGTON, D.C. + 1-800-347-8208 \
TABLE OF CONTENTS
OPINION ON APPLICATIONS FOR
REHEARING, ALABAMA SUPREME
COURT (APRIL 26, 1996) ..........cccccsesececsees
OPINION, ALABAMA SUPREME COURT
SAI V EE 50 5 SIOOD sevcncetecssascnecnnsecceseses
ORDER DENYING MOTION FOR NEW
TRIAL (OCTOBER 19, 1994) ................eeeee:
ANSWER OF DEFENDANT LIFE
INSURANCE COMPANY OF GEORGIA
(MAY 14, 1993) (EXCERPT)..........00es0ceceeee:
BRIEF IN SUPPORT OF DEFENDANT
LIFE INSURANCE COMPANY OF
GEORGIA'S MOTION FOR NEW TRIAL,
OR IN THE ALTERNATIVE, FOR JNO\,
OR IN THE ALTERNATIVE, FOR
REMITTITUR (SEPTEMBER 16, 1994)
GAIN 0 Bibiobate senedrvebubiecttvsscestetestezcccers
FORE GEE ED ctrcicncsuntericsnvndsccecsaceseses:
ORDER DENYING APPLICATION FOR
Re GE Gh SEED epnnvecsisenonagoreeeccccsnves
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NOTICE: This opinion is subject to formal revision before publication
in the advance sheets of Southern Reporter. Readers are requested to
notify the Reporter of Decisions, Alabama Appellate Courts, 300
Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 242-4621),
of any typographical or other errors, in order that corrections may be
made before the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
OCTOBER TERM, 1995-96
1940357
Life Insurance Company of Georgia
v.
Daisey L. Johnson
Appeal from Mobile Circuit Court
(CV-93-969)
On Applications for Rehearing
SHORES, JUSTICE.
The opinion released November 17, 1995, is withdrawn
and the following is substituted therefor. The Court wishes
to express its appreciation to counsel for the parties and to
counsel for amici curiae for the excellent briefs filed in
support of the applications for rehearing. The Court has
been aided and persuaded by the excellent and well-
reasoned arguments advanced by both the parties and the
2a
Daisey L. Johnson sued Life Insurance Company of
Georgia ("Life of Georgia"), alleging that it had engaged in
intentional and reckless fraud and fraudulent suppression by
selling her a Medicare supplement insurance policy that was
worthless to her because she was eligible for Medicaid.
The jury returned a verdict in favor of Ms. Johnson,
assessing compensatory damages at $250,000 and punitive
damages at $15 million. Life of Georgia moved for a new
trial or for a remittitur of damages. The trial judge held a
hearing pursuant to Hammond v. City of Gadsden, 493 So.
2d 1374 (Ala. 1986), and Green Oil Co. v. Hornsby, 539
So. 2d 218 (Ala. 1989). Following the hearing, the trial
judge reduced the punitive damages award to $12.5 million,
pursuant to Ala. Code 1975, § 6-11-21, and this remittitur
was accepted by the plaintiff. Life of Georgia appeals.
Ms. Johnson, a resident of Grove Hill, Alabama, is an
84- year-old woman who went through the third grade in
school and who spent her life as a domestic worker.
Because Ms. Johnson had dealt with Life of Georgia for
over 25 years, paying premiums on nine different policies,
she trusted its agents. Sometime before January 8, 1990, a
Life of Georgia agent, Barbara Holt, came to
Ms. Johnson's home to collect the monthiy premiums on
her existing policies. Ms. Holt recommended _ that
Ms. Johnson purchase a Medicare supplement policy. The
next week Ms. Holt returned and again discussed the
Medicare supplement policy with Ms. Johnson, who agreed
to purchase the policy. Ms. Johnson testified that Ms. Holt
told her that the Medicare supplement policy would protect
her. She testified: “If I got in the hospital, you wouldn't
have to worry about your doctor bill, you could stay in
there because they would pay your doctor bill, and I got
it." Ms. Holt filled out the application for Ms. Johnson.
At first, Barbara Holt testified that she asked Ms. Johnson
for her Social Security card; later, she testified that she
ee
3a
asked Ms. Johnson for her Medicaid card and that she
asked the questions on the application, one of which was
whether Ms. Johnson was on Medicaid. At trial,
Ms. Johnson disputed Ms. Holt's testimony that she was
asked whether she was on Medicaid. Ms. Johnson showed
the jury how she gave her cards to Ms. Holt, by pulling a
vinyl holder out of her purse. She testified that she always
kept her cards in this vinyl holder, which contained her
Medicaid, Medicare, and Social Security cards.
Despite the fact that Ms. Holt knew that it was illegal and
against company policy to sell a Medicare supplement
policy to Ms. Johnson, because she was on Medicaid,
Ms. Holt completed the application and collected the
premiums on the policy. Initially che premiums were $71
per month; by 1992, they had risen to $103 -- almost one-
third of Ms. Johnson's fixed income. Over almost a three-
year period from 1990 through 1992, Ms. Johnson paid a
total of $3,132 in premiums on this policy.
Life of Georgia first argues that it was entitled to a
directed verdict or to a judgment notwithstanding the
verdict, with respect to the award of punitive damages
because, it argues, the plaintiff failed to prove by clear and
convincing evidence that the company "consciously or
deliberately engaged in oppression, fraud, wantonness, or
malice” as is required by § 6-11-20, Ala. Code 1975, for
the award of punitive damages. The statute provides:
"§ 6-11-20. Punitive damages not to be
awarded other than where clear and
convincing evidence proven; definitions.
"(a) Punitive damages may not be
awarded in any civil action, except civil
actions for wrongful death pursuant to
Sections 6-5-391 and 6-5-410, other than in
a tort action where it is proven by clear and
convincing evidence that the defendant
consciously or deliberately engaged in
oppression, fraud, wantonness, or malice
with regard to the plaintiff. | Nothing
contained in this article is to be construed as
creating any claim for punitive damages
which is not now present under the law of
the State of Alabama.
"(b) As used in this article, the
following definitions shall apply:
"(1) Fraud. An _ intentional
misrepresentation, deceit, or
concealment of a miaterial fact the
concealing party had a duty to
disclose, which was __ gross,
oppressive, or malicious and
committed with the intention on the
part of the defendant of thereby
depriving a person or entity of
property or legal rights or otherwise
causing injury.
"(2) Malice. The intentional
doing of a wrongful act without just
cause or excuse, either:
"a. With an intent to injure
the person property of
another person or entity,
or
"b. Under such circumstances
that the will imply an evil
intent.
"(3) Wantonness. Conduct
which is carried on with a reckless or
Sa
conscious disregard of the rights or
safety of others.
"(4) Clear and convincing evidence.
Evidence that, when weighed against
evidence in opposition, will produce in the
mind of the trier of fact a firm conviction as
to each essential element of the claim and a
high probability as to the correctness of the
conclusion. Proof by clear and convincing
evidence requires a level of proof greater
than a preponderance of the evidence or the
substantial weight of the evidence, but less
than beyond a reasonable doubt.
The standard of review applicable to a directed verdict or
to a denial of a motion for a directed verdict is whether the
nonmoving party presented substantial evidence in support
of his or her position. If not, then a directed verdict is
proper. Bailey v. Avera, 560 So. 2d 1038, 1039 (Ala.
1990). A verdict is properly directed only where there is a
complete absence of proof on a material issue or where
there are no disputed questions of fact for the jury to
determine. Woodruff v. Johnson, 560 So. 2d 1040, 1041
(Ala. 1990); K.S. v. Carr, 618 So. 2d 707, 713 (Ala.
1993). Life of Georgia argues strenuously that the
evidence was not sufficient to meet this clear and
convincing standard; however, it admits that the evidence
was in sharp conflict.
The trial judge denied Life of Georgia's motion for a
directed verdict because he was satisfied that the plaintiff
had presented a jury question with regard to the issue of
punitive damages. He stated in his Hammond order:
6a
"Clear and and convincing evidence
was presented at trial that Life of Georgia
was aware of the fraudulent sale of these
Medicare supplement policies. ... Plaintiff
further produced clear and convincing
evidence through the testimony of three live
pattern witnesses that Life of Georgia's
conduct in selling these policies to elderly,
uneducated, single black women was not an
isolated event and had not ceased and these
people were paying a very substantial portion
of their fixed income for useless policies.
Evidence was presented at trial that Life of
Georgia was aware of the unfitness of its
agent in selling this specialized type policy.
Eric Peek testified that he trained Barbara
Holt for Life of Georgia yet gave her no
training relative to the Medicare Supplement
policies because he himself did not receive
training to enable him to understand and
properly sell these policies. Evidence was
presented at trial that Life of Georgia began
marketing the Medicare supplement policies
in 1986 and that continuing through the date
of the verdict in June of 1994, Life of
Georgia had done nothing to ferret out and
correct the problem. In fact, Life of
Georgia's corporate officers testified during
the Plaintiff's presentation of her case that
Life of Georgia had done nothing to try to
prevent the sale of Medicare supplement
policies to unqualified persons, even though
in 1992 Life of Georgia had been faced with
trial in Mobile County and experienced an
adverse verdict... ."
Ta
The trial judge then instructed the jury that, pursuant to §
6-1-20, it must be satisfied by "clear and convincing
evidence” of the plaintiff's allegations before it could return
a punitive damages award. In the Hammond order, the
trial judge recited the proof presented by the piaintiff as to
her dealings with agent Barbara Holt in regard to the
Medicare supplement policy:
"Plaintiff proved that Life of Georgia's
agent, Barbara Holt, misrepresented to her
that she needed health insurance under a
Medicare supplement policy in order to pay
her hospital and medical bills should she
become sick. There was ample and
substantial evidence that Plaintiff showed
Barbara Holt her Medicaid card and that
Barbara Holt knew or should have known
that Plaintiff did not qualify for the insurance
since she was a Medicaid recipient. Plaintiff
proved that Barbara Holt was not properly
trained to be aware of circumstances where
elderly persons living on low fixed income
such as Daisey Johnson have coverage under
both Medicare and Medicaid. This lack of
awareness permeated Life of Georgia's entire
corporate structure as the vice president in
charge of marketing and training, Robert
Hayes, gave uncontradicted testimony that he
too would ‘assume’ that if someone was on
Medicare they did not have Medicaid.
Plaintiff proved that over 116,000
Alabamians have both Medicare and
Medicaid. This lack of training and
awareness fostered both intentional and
reckless misconduct on behalf of its agents,
including Barbara Holt. Plaintiff discovered,
8a
after hearing about a similar situation
involving Mattie Foster and Life of Georgia,
that she had been sold a Medicare
supplement policy she did not need and was
useless to her. Plaintiff's proof that Life of
Georgia was aware of the situation where
unqualified elderly people living on fixed
income were sold this Medicare supplement
policy yet did nothing to prevent or detect
such wrongful conduct distinguishes this case
from ‘renegade agent’ cases. Life of
Georgia played an active role in allowing
Barbara Holt to sell the policy in question
and continue to collect the premiums."
When the evidence meets the “sufficiency” test, jury
verdicts are presumed correct, and this presumption is
strengthened by the trial court's denial of a motion for new
trial. Therefore, a judgment based upon a jury verdict and
sustained by the denial of a post-judgment motion for a new
trial will not be reversed on the ground that it is against the
weight of the evidence, unless it is plainly and palpably
wrong. Alpine Bay Resorts, Inc. v. Wyatt, 539 So.2d 160,
162 (Ala. 1988); Ashbee v. Brock, 510 So.2d 214 (Ala.
1987); Jawad v. Granade, 497 So.2d 471 (Ala. 1986).
Having carefully studied the lengthy record, we conclude
was substantial evidence before the jury to support the
plaintiff's claim.
Life of Georgia next contends that the trial court erred in
admitting what it calls “highly improper, prejudicial and
inflammatory evidence” with respect to the plaintiff's claim
that Life of Georgia was negligent and wanton in its
training of its agents. The company contends that the only
reason the plaintiff pursued the negligent and wanton
training claim was to introduce evidence that would
prejudice and bias the jury against the company. This
onto. iw tie
9a
argument disregards the Alabama statute on vicarious
liability, § 6-11-27, Ala. Code 1975, and the strong proof
required under this statute. The common law rule of
vicarious liability is modified by § 6-11-27; this Code
section requires a higher degree of proof of culpability on
the part of the principal before punitive damages can be
imposed against the principal for the conduct of its agent.
Northwestern Mut. Life Ins. Co. v. Sheridan, 630 So. 2d
384, 390 (Ala. 1993). This Court noted this modification
in Sheridan and commented: "Thus, as a logical matter, if
plaintiffs can meet the statutory requirement for vicarious
liability, they will, in many cases, also have established the
elements of their claims for wantonness in the hiring and
supervision of the agent." Id. The plaintiff's evidence
relating to her claim that Life of Georgia negligently and
wantonly trained its agents was directly related to her fraud
claim. Because the plaintiff was required to prove a higher
degree of culpability on the part of Life of Georgia to bind
it for the acts of its agent, the trial court did not err in
admitting this evidence. Id.
Next, Life of Georgia argues that it is entitled to a
remittitur of the $250,000 compensatory award, on the
grounds that the award grossly exceeds the plaintiff's
“mental anguish” damages and her $3,132 out-of-pocket
loss. Life of Georgie contends that the only evidence
presented by the plaintiff concerning her mental state, upon
learning that the insurance policy she had paid on for
almost three years was worthless, was “that it made her
angry” and that it “worried” her. The record reflects that
this is mot an accurate picture of her testimony.
Ms. Johnson testified that after she learned that she had
been paying the premiums on a worthless insurance policy,
she could not sleep and her meal schedule was disrupted.
Her testimony that she ran two insurance agents off her
property, telling them “to leave -- leave out of my yard
and don't come back" is evidence from which the jury
10a
could conclude that Ms. Johnson was distressed to learn
that she had been paying for a worthless policy and that she
had suffered mental anguish as a result. The jury listened
to her evidence and concluded that she had suffered
emotionally as a result of the company's conduct. "[T]here
{is no] yardstick to measure the amount of recompense
which should be awarded for. . . mental suffering.”
Birmingham Electric Co. v. Thompson, 251 Ala. 465, 466,
37 So. 2d 633, 634 (1948).
The trial judge also reviewed the evidence presented by
the plaintiff concerning her claim for mental anguish. He
concluded: “Ample evidence was presented at trial which
supports the total compensatory damages award of
$250,000 against Life of Georgia." This Court has said
that the trial judge has much discretion in determining
whether to grant a new trial and whether to require a
remittitur of damages for mental anguish. Crown Life Ins.
Co. v. Smith, 657 So. 2d 821 (Ala. 1994); Fields v.
Parker, 361 So. 2d 356 (Ala. 1978). We find no abuse of
discretion on his part in denying the motion for a new trial
and in refusing to remit the award for compensatory
damages, based upon the evidence before him. Pitt v.
Century II, Inc., 631 So. 2d 235, 239 (Ala. 1993).
Finally, we come to the question of the imposition of
punitive damages. Life of Georgia, a tortfeasor that has
been found by this jury to be guilty of conduct for which
the law permits the imposition of punitive damages, argues
that its rights have been unconstitutionally impinged upon
by the imposition of such damages. Over the years the
constitutional arguments advanced in efforts to eliminate or
to cap punitive damages awards have taken different forms.
It has been argued that the "excessive fines" provisions of
the State and Federal Constitutions forbid the imposition of
punitive damages. Kumar v. Lewis, 561 So. 2d 1082 (Ala.
1990); Industrial Chemical & Fiberglass Cord, v.
lla
Chandier, 547 So. 2d 812 (Ala. 1988); Alabama Power Co
v. Turner, 575 So. 2d 551 (Ala. 1991), cert. denied, 500
U.S. 953 (1991). As it relates to the Eighth Amendment,
this argument was rejected by the United States Supreme
Court in Browning-Ferris Industries of Vermont, Inc. v.
Kelco Disposal, Inc., 492 U.S. 257 (1989), and this
argument now has largely been abandoned. See Ingraham
v. Wright, 430 U.S. 651 (1977). More recently, the due
process provisions of the Fourteenth Amendment have been
the basis of constitutional challenges where, as in this case,
the defendant argues that the award of punitive damages is
grossly excessive and fundamentally unfair and therefore
contravenes Alabama law and the Due Process Clause of
the Fourteenth Amendment. See Intercontinental Life Ins.
Co. v. Lindblom, 571 So. 2d 1092 (Ala. 1990) vacated. It
is also frequently argued that, under Alabama law, juries
are provided too few standards for determining a verdict
appropriate both to punish the defendant, whose conduct
inflicted harm upon the victim, and to deter others from
engaging in similar conduct, without completely destroying
the defendant financially. Aetna Life Ins. Co. v. Lavoie,
475 U.S. 813 (1986).
These arguments have been carefully considered by this
Court. The standards set forth in Hammond v. City of
Gadsden, 493 So. 2d 1374 (Ala. 1986), and Green Oil Co.
Hornsby, So. 2d 218 (Ala. 1989), were adopted partly in
response to these concerns. These cases require the trial
court, after the jury returns a verdict that the defendant
claims to be excessive, to consider all relevant factors
bearing on the issue of excessiveness when viewed from the
perspective of the defendant. The factors set out in
Hammond and Green Oil are not intended to be all-
inclusive. Trial judges are encouraged to consider any
evidence that has any relevance to the question of the
fairness and justness of the jury verdict.
12a
In this case, a jury found that Life of Georgia had
defrauded an elderly Alabama citizen, and there was
evidence that she was not the only Alabama victim of such
fraud. The evidence established, and a jury has found, that
the conduct of Life of Georgia justifies requiring it to pay a
substantial sum of money as punitive damages. The trial
judge has considered evidence offered in a post-verdict
hearing pursuant to Hammond and Green Oil. After that
hearing, the trial judge ordered a remittitur and explained
his order, remitting the $15 million punitive damages award
to $12.5 million, as follows:
“This Court is mindful that this
verdict is large. Yet this Court finds that a
punitive damages award of $12,500,000
bears a reasonable relationship to the harm
that is likely to occur from Life of Georgia's
conduct as well as to the harm that actually
has occurred. The harm which was
committed is even more egregious because
Life of Georgia refuses to admit or concede
any wrongdoing whatsoever and merely
[attributes] the sale of this policy [to] a
‘miscommunication.' Life of Georgia has
profited from such 'miscommunications. '
“This Court finds that the economic
impact of the verdict on Defendant Life of
Georgia is slight. In 1993, the company had
assets exceeding $2.3 billion. Investment
income alone totaled $173 million for 1993
and the company has over $1.1 billion in
reserve. The company has testified that it
has sufficient resources to pay the judgment
if it should be affirmed. The financial
position of Life of Georgia does not support
any reduction in this verdict.
13a
"The Court finds that the the verdict
should be high in order to encourage a
plaintiff such as this, and her attorneys, to
pursue this type of case. The Court is of the
opinion that there are many people situated
such as Plaintiff who are unable due to
sickness, age, infirmity or whatever to
pursue such a case. The Court has
considered whether the cost of this litigation
favors remittitur and is of the opinion that
this factor does not weigh in favor of
reducing this verdict.
"The Court has compared this verdict
to other verdicts affirmed by the Alabama
Supreme Court, including Northwestern
Mutual Life Insurance Co. v. Sheridan, [630
So. 2d 384 (Ala. 1993)]. The Court is
mindful that the $15 million punitive award
is $2,500,000.00 larger than that amount
affirmed in Sheridan, which is the largest
punitive damages award in a fraud case ever
affirmed by our Supreme Court. The Court
has compared the facts of the Sheridan case,
as set forth in the Supreme Court's opinion,
and the facts of this case. The Court is
clearly convinced that the wrongful conduct
in this case is much worse. The class of
plaintiffs Life of Georgia preyed upon were
from a group of citizens that need the most
protection: elderly, uneducated, and low
income. Life of Georgia knew that these
types of individuals were easily persuaded,
and used sales techniques such as ‘fear’ to
sell these policies. The Court further
compared this verdict to other verdicts
similar in nature. Nevertheless, although
l4a
this Court is of the opinion that the facts in
this case are much worse than those in the
Sheridan case, the Court is of the opinion
that the punitive award in this case should be
reduced by $2.5 million so as to not exceed
the largest punitive award affirmed by our
Supreme Court.
"Next, the president of Life of
Georgia testified that Life of Georgia ceased
doing business in Alabama and would never
return. He also testified that if any
policyholder of Life of Georgia had been
sold a Medicare supplement policy who had
received Medicaid benefits, that person's
premiums would be immediately refunded.
He further stated that Life of Georgia had
undertaken a program in Alabama to
determine whether there were any
policyholders situated such as Daisey
Johnson. However, the Court is aware that
following the testimony of Life of Georgia's
president, a witness testified by deposition
for Plaintiff that her 91-year-old father was
on Medicaid, had been sold a Medicare
supplement policy, and that she had
demanded Life of Georgia return his
premiums. Ms. Pernell, the daughter of the
person sold the Medicare supplement policy,
was informed by Life of Georgia that they
would not refund the premiums. This
testimony contradicts that of the president
and concerns the Court as to the quality of
Life of Georgia's assertion that it would
refund premiums once an _ unqualified
policyholder came forward.
15a
"It is the conclusion of this Court that
the verdict was not based upon bias, passion,
prejudice, corruption, or other improper
motive, but instead was the product of the
jury's careful and studious consideration of
the evidence and applicable law. This
conclusion is based in part on this Court's
observing . . . all of the parties to the trial,
the respective attorneys, and the jury and its
reaction to all of the others. The jury was
justified in awarding these damages to punish
Life of Georgia and to prevent similar
wrongs in the future. The imposition of
these damages in this case creates a strong
incentive for vigilance on the part of all
insurance companies doing business in this
state. The jury arrived at an amount that it
considered necessary to vindicate the public
interest by eliminating the reprehensible
conduct of this defendant and in punishing it
appropriately. This verdict is not so large
that it goes beyond an amount necessary to
accomplish these goals. This verdict will
have little, if any, impact upon Life of
Georgia and other insurance companies
unless it is substantial . . . ."
The trial judge's order demonstrates that he focused on
the conduct of Life of Georgia to determine whether the
punishment was excessive in relationship to that conduct.
The trial judge also considered the public policy upon
which punitive damages are based: to eradicate intentional
conduct by the particular defendant before the court and to
deter others from similar conduct. The trial court remitted
the award to an amount that it determined, from an
examination of the facts specific to the defendant, was not
excessive; the court determined that the reduced award is
16a
not so large as to destroy the defendant, but is large enough
to serve the public policy of punishment and deterrence.
Alabama citizens who become the victims of fraud have
little recourse other than through litigation. The record in
this case is replete with expert testimony to the effect that
the State Insurance Department has little power to regulate
agents, and we judicially know that litigation is often the
only weapon defrauded citizens have. Punitive damages
have historically been part of the remedy for such victims,
and to get that remedy they must prove that the defendant
intentionally inflicted the injury for which punishment is
sought. As Jonathan Massey, writing recently in Trial
magazine, explained, punitive damages have been used "to
help equalize the playing field between the powerful and
the powerless -- whether between king and subject, railroad
and passenger, or corporation and consumer." "Why
Tradition Supports Punitive Damages: and How the
Defense Bar Misreads History,” Trial, September 1995 p.
19. Massey continues:
“Punitive damages awards in
consumer fraud and products liability cases
are within the historical tradition of tort law
for an even more fundamental reason:
Punitive damages have traditionally been
used as a populist weapon to help level the
playing field between powerless plaintiffs
and powerful defendants. As the U.S.
Supreme Court observed in an 1886 case,
"'The dignity and value of the right
assailed, and the power and authority
of the source from which the assault
proceeds, are elements to be
considered in the computation of
damages, if they are to be not only
17a
compensation for the direct loss
inflicted, but a remedy and
prevention for the greater wrong and
injury involved in the appretiension of
its repetition. [Barry v. Edmunds,
116 U.S. 550, 556 (emphasis
added)].'
"In common law England, punitive
damages were often against the crown and
the aristocracy. In 19th-century America,
they were frequently used against railroads
and robber barons. As the Pennsylvania
Supreme Court observed in 1886, 'The
liability of railway and other corporations to
exemplary damages for gross negligence is
well settled.’ [Lake Shore & Michigan S.
Ry. v. Rosenzweig, 113 Pa. 519, 544, 6 A.
545 (1886)].
"The modern-day heir of this populist
legacy is the consumer plaintiff suing a large
corporate defendant. Using punitive
damages to redress the imbalance in the
relationship between consumer and
corporation is squarely within their historical
tradition.”
Id. at pp. 24-27.
Attorneys who represent victims of fraud, such as the
fraud practiced upon this plaintiff, usually bear all of the
expense of the litigation and carry all of the risk of failure.
They are reimbursed only if the victim recovers from the
wrongdoer. The lawyer takes a significant risk in such
18a
cases. According to Business Week magazine,! plaintiffs
today are losing a greater proportion of cases that go to trial
than in past years; in 1988 plaintiffs won 63% of the cases
that went to trial, but in 1992 plaintiffs won only 54%.
This Business Week statistic is supported by a United States
Justice Department Survey? of the country's 75 most
populus counties, which concluded that in 1992 that only
2% of the 762,000 civil cases disposed of in those counties
were decided by juries, and that plaintiffs won in only 52%
of those cases.3
American Bar Association statistics show that personal
injury claims represent only 9% of the civil caseload in this
country. Since 1986, personal injury cases have remained
essentially flat on the scale, while domestic relations
matters have increased by 43%.4
There are also many cases that are concluded by the entry
of a summary judgment for the defendant. Cases decided
by summary judgments formed the largest category of civil
cases decided by this Court in 1994, 47.6%. Eighty-three
percent of those cases were affirmed by this Court, either in
I*Corporate America's fear of juries may be overblown,"
Business Week, November 8, 1993.
2*Civil Jury Cases and Verdicts in Large Counties” is a joint
project of the Bureau of Justice Statistics and the National Center for
State Courts.
Richard C. Reuben, “Plaintiffs Rarely Win Punitives, Study
Says,” A.B.A. Journal, p. 26, October 1995.
4Statistics according to the State Court Caseload Statistics
Annual Report 1992, published February 1994. The report is a joint
project of the Conference of State Court Administrators, the State
Justice Institute, and the National Center for State Courts Court
Statistics Project.
19a
whole or in part. In those cases in which the plaintiff's
lawyer works on a contingency fee basis, the lawyer loses
the amount she or he has expended in filing the action and
in preparing for trial.
Litigation is slow and costly and carries no guarantee of
success. Victims of fraud bear the burden of proving to the
satisfaction of a jury of 12 citizens that they have been
victimized by the defendant. It is a heavy burden, and
litigation is an inefficient way to stop fraudulent conduct --
one lawsuit at a time, brought by one victim at a time -- but
it provides only recourse a defrauded citizen of Alabama
has.
The question whether setting standards for post-trial
review of a jury's verdict is sufficient to provide due
process, while allowing the jury discretion to determine
punitive damages, has been much discussed. Under our
present procedure, the jury, before rendering its verdict,
never hears whether the amount it selects as the appropriate
amount for punishing the defendant and deterring others
from similar conduct is actually an appropriate amount,
considering the factors that trial courts and appellate courts
must consider in reviewing jury verdicts (i.e., the
Hammond and Green Oil factors). In some cases, the
plaintiff or defendant may offer evidence that the acts
complained of resulted in profit to the defendant in a
specific amount. In some cases the evidence might show
how much or how little it would have cost the defendant to
remedy a defect in a product or to change its method of
doing business, but, in most cases, it could be argued that
the jury has incomplete information from which to
determine with certainty the amount that is appropriate to
serve the ends for which punitive damages were intended.
Under our present procedure, much evidence relevant to
reaching a decision as to an appropriate amount to punish
the particular defendant is withheld from the jury. To
20a
rear’. a verdict and to fix an amount of punitive damages,
the jury may consider only the character of the defendant's
conduct and the degree of wrong as shown by the evidence
in the case. These strictures on the evidence that the jury
may consider in awarding punitive damages result from
concern that evidence of the defendant's wealth or the
defendant's lack of wealth and other evidence that is
relevant, if not critical, to the issue the jury is asked to
decide must be excluded because such evidence could
potentially influence the jury to the prejudice of one party
or another. We have concluded, after much deliberation,
that the need for more guidance for the jury in these cases
outweighs the concern that such evidence might prejudice
the jury. Juries are presumed to follow the law as
instructed by the trial court. There is no reason to assume
that the jury would disregard the trial court's instructions
on this issue.
Separating the fact-finding process for adjudging liability
and compensatory damages from the damages-assessment
process in a punitive damages case and, at the same time,
improving the reliability of the punitive damages-
assessment process is a procedural goal that was recognized
by Justice Jones in his special concurrence in Ridout's-
Brown Service, Inc. v. Holloway, 397 So.2d 125 (Ala.
1981), as adopted by this Court in Green Oil Co. v.
Hornsby, supra. Justice Houston, concurring specially in
Charter Hosp. of Mobile. Inc. v. Weinberg, 558 So.2d 909
(Ala. 1990), expressed his opinion that constitutional due
process provisions are violated when the jury is "given the
unbridled discretion to award no punitive damages or to
award an unlimited amount of punitive damages, taking
into consideration only the character and the degree of the
wrong as shown by the evidence in the case and the
necessity of preventing similar wrongs in the future.” 558
So. 2d at 917. Justice Houston then set out a procedure
EARL wan se 6 Up mares: 2 tarty BCD at
2la
providing for a bifurcated trial as a way to ensure due
process:
"Therefore, I would recommend that
the following procedure be applied in all jury
cases involving claims for punitive damages
and as to which claims a party had a right to
trial by jury at common law prior to the
adoption of the first Alabama Constitution
"A jury will determine the
issues of liability, the amount of
compensatory damages, and whether the
defendant's conduct warrants the imposition
of punitive damages. In addition to other
jury verdict forms, in common law cases
involving punitive damages the following
jury verdict form should be given to a jury
for each party against whom punitive
damages are sought:
""In accordance with the
instructions given to us by the trial
court, we find that punitive damages
(should) (should not) be assessed
against (name of party against whom
punitive damages are sought).'
"In the event that the jury
determines that punitive damages should be
imposed against one or more defendants, the
trial will resume; and evidence of the
following, which was not admissible in the
trial in chief, shall be admissible upon an
offer by any party in accordance with the
rules of evidence.”
22a
“Evidence of the harm that
was likely to occur from the defendant's
conduct as well as the harm that actually has
occurred is relevant. The jury should be
instructed that, if it finds that the actual and
likely harm is slight, the punitive damages
(subject to the other factors hereinafter set
out) should be relatively small. If the actual
harm and/or likely harm was grievous, the
punitive damages (subject to the other factors
hereinafter set out) should be much greater.
"The duration of the
defendant's conduct, the degree of the
defendant's awareness of any hazard that his
conduct has caused or is likely to cause, any
concealment or ‘cover-up’ of that hazard,
and the existence and frequency of similar
conduct of the defendant are relevant. The
jury should be instructed that if it finds that
the defendant's offensive conduct was of
long duration or was frequently repeated;
that the defendant acted with awareness that
his conduct was causing or was likely to
cause the hazard by which the plaintiff was
in fact damaged; or that the defendant
concealed or covered up that hazard, then
such a finding should increase the amount of
punitive damages.
"The profitability of the
conduct to the defendant is relevant. The
jury should be instructed that the punitive
damages should remove all profit from the
wrongful conduct and should be in excess of
the profit, so that the damages would 'sting.'
mee oe ee
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Ae enor ee
atl Ee a om
23a
"The financial position of the
defendant is relevant. The jury should be
instructed that the amount of punitive
damages should ‘sting’ the defendant,
considering his financial condition.
"All costs of the litigation,
including the attorney fees to be paid to the
plaintiff's attorney, are relevant; and the jury
should be instructed that its award should
include all reasonable costs of litigation, so
as to encourage injured parties to bring
wrongdoers to trial.
"If criminal sanctions have
been imposed on the defendant for his
conduct, this is relevant; and the jury should
be instructed that such criminal sanctions
should be taken into account in mitigation of
the punitive damages award.
“If there have been other civil
actions against the defendant based on the
same conduct and if punitive damages have
been assessed against the defendant in those
civil actions, this is relevant; and the jury
should be instructed that it should consider
this in mitigation of the punitive damages
award.
"I believe that, if these factors
are considered by a jury in assessing the
amount of punitive damages a defendant
should pay, this will improve the elizoility
of the punitive damages assessment process
and will fit the punishment to the offensive
conduct of the offender. I believe that by
doing this in a bifurcated trial the court could
24a
preserve the reliability of the fact-finding
process for adjudging liability, thereby
accomplishing the goal we set in Green Oil
Co. v. Hornsby, supra, when we adopted
Justice Jones's special concurrence in
(397 So.2d 125, 127-28 (Ala. 1981)].
“""A bifurcated trial is also
recommended by the American College of
Trial Lawyers, ‘Report on Punitive Damages
of the Committee on Special Problems in the
Administration of Justice’ (March 3, 1989),
pp. 18-19."
558 So.2d at 917-18.
i. Bif i
We hold that after the new procedures announced in this
case become effective in all cases in which punitive
damages are sought, excluding all actions based upon
wrongful death, the trial shall be bifurcated in accordance
with the procedure set out in Justice Houston's special
concurrence in Charter Hospital of Mobile v. Weinberg,
supra. The trial court shall charge the jury on the
appropriate law, and the jury shall determine liability and
the amount of compensatory damages, if any. The jury
will also decide, by special verdict, whether the evidence
justifies the imposition of punitive damages. In order to get
an award of punitive damages, the plaintiff must prove a
prima facie case of conduct supporting an award of punitive
damages and the jury's decision to award punitive damages
must be based upon clear and convincing evidence. If the
jury returns the special verdict in the affirmative, the trial
shall resume for the second part of the bifurcated trial.
25a
In the second part, all evidence shall be admitted that is
relevant to the question of what amount would be
appropriate, to accomplish the purposes punitive damages
were designed to serve, and it shall be admitted in
accordance with § 6-11-23(b), Ala. Code 1975, which
provides:
"(b) In all cases wherein a verdict for
punitive damages is awarded, the trial court
shall, upon motion of any party, either
conduct hearings or receive additional
evidence, both, concerning the amount of
punitive damages. Any relevant evidence,
including but not limited to the economic
impact of the verdict on the defendant or the
plaintiff, the amount of compensatory
damages awarded, whether or not the
defendant has been guilty of the same or
similar acts in the past, the nature and the
extent of any effort the defendant made to
remedy the wrong and the opportunity or
lack of opportunity the plaintiff gave the
defendant to remedy the wrong complained
of shall be admissible; however, such
information shall not be subject to discovery,
unless otherwise discoverable, until after a
verdict for punitive damages has been
rendered... .”
All evidence that has heretofore been admissible at post-
verdict Hammond/Green Oil hearings, can be introduced
under this new procedure, before the jury retires to
consider its punitive damages verdict.
The jury is to be guided not only by the factors set forth
in Hammond and Green Oil, but also by those factors stated
in the statute and in other case law. Davis Carr, writing in
26a
the Alabama Lawyer, has offered the following compilation
of factors, drawn from both case law and statute, that can
be considered:
"From the statute [§ 6-11-23, Ala. Code
1975 (Supp. 1989)]:
"1. Nature, extent and ‘economic
impact’ of verdict on plaintiff or defendant.
aw Amount of compensatory
damages.
"3. Whether defendant has been
guilty of similar acts in the past.
"4. The nature and extent of any
effort by defendant to remedy the wrong.
"From Green Oil:
"1. Does the punitive damages award
bear a reasonable relationship to the harm
likely to occur from the defendant's conduct?
"2. The degree of reprehensibility of
defendant's conduct, including:
"(a) the duration of this conduct;
"(b) the degree of defendant's
awareness of any hazard which this
conduct has caused or is likely to
cause;
"(c) any concealment or cover-up of
the hazard;
"(d) existence and frequency of
similar past conduct.
"3. Punitive damages should remove
the profit, if any, from the defendant and
a dt ieee, ~~
27a
should be in excess of the profit so that
defendant recognizes a loss.
"4. Defendant's ‘financial position.
"5. Cost of litigation to the plaintiff.
"6. If defendant has received
criminal sanctions, that should be taken into
account in mitigation.
"7. If there have been other civil
actions against the same defendant based on
the same conduct, this should be taken into
account in mitigation of the punitive
damages.
“From Hammond:
"1. Culpability of defendant's
conduct.
a desirability of
discouraging others.
"3. “The impact’ on the parties.
"4. ‘Impact’ on innocent third
parties.
"From Holloway [Ridout's-Brown Service,
Inc. v. Holloway, 397 So.2d 125, 127 (Ala.
1981)]:
"The punitive damages award should
sting, but ordinarily it should not
destroy.
"From Wilson [v. Dukona Corp., N.V.,547
So.2d 70 at 73 (Ala. 1989)]:
“Defendant's ‘right to fair
punishment' must be _ considered
28a
above plaintiff's right to recover the
fullest amount of punitive damages.
"From Lavoie [Aetna Life Ins. Co. v.
Lavoie, 505 So.2d 1050 at 1053 (Ala.
1987)]:
""A comparative analysis with other
awards in similar cases.'"5
We agree with the parties and amici curiae that the fact of
the existence of liability insurance and the amount thereof
cannot be disclosed to the jury. In addition, the discovery
of financial information concerning the defendant will be
limited to that which is relevant to the issue in the case.
How much the defendant profited as a result of the tortious
conduct would be relevant, as would, in many cases, how
much it would have cost the defendant to avoid the tortious
conduct. he net worth of the defendant may or may not
be relevant, depending upon the nature of the case. In no
event, however, is the defendant to be punished for its size
or its success, only for its tortious conduct. This new
procedure is intended to allow the jury to decide, based
upon all the evidence that is relevant to that inquiry, the
award that the specific defendant before the jury should be
required to pay as punishment for the specific conduct
justifying the punitive award.
SDavis Carr, "Punitive Damages and Post-Verdict Procedures:
Where Are We Now and Where Do We Go From Here? * Ala. Lawyer,
Vol. 51, March 1990, pp. 94-95. Mr. Carr's article carried the
following note: “As to this listing of factors, the author hereby
acknowledges ‘limited plagiarism’ from a handout by Danner Frazer,
Jr., "How to Handle a Post-Judgment Punitive Damage Hearing —
Discovery to End,‘ presented at the Alabama Defense Lawyers
Association fall meeting, 1989."
29a
The adoption of this bifurcated procedure is not a
substitute for post-trial procedures for reviewing punitive
damages awards. These awards, when challenged as
excessive or inadequate, still must be considered through
the procedures set out in Green Oil v. Hornsby, supra, and
Hammond vy. City of Gadsden, supra. However, the
evidence need not be readmitted in any post-verdict hearing
on the question of excessiveness. Only such evidence as
was not available for consideration by the jury that bears on
the issue of excessiveness will be admitted in a post-verdict
hearing on excessiveness. The trial courts must continue to
review jury verdicts not only for excessiveness, but also to
determine the validity of other challenges to jury verdicts.
After this procedure is put in place, it can no longer be said
that juries are left with no guidance in determining an
appropriate punitive award.
Il. Allocation
Much of the criticism surrounding the issue of punitive
damages has been based on the perception that punitive
damages awards sometimes amount to undeserved windfalls
to the prevailing plaintiffs. Chief Justice Rehnquist has
suggested that the windfall effect could be avoided by
requiring the losing defendant to pay the punitive award "to
the State, not to the plaintiff -- who by hypothesis is fully
compensated." Smith v. Wade, 461 U.S. 30, 59 (1983)
(Rehnquist, C. J., dissenting). Such broad power to shape
and effectuate remedies is deeply rooted in the common law
Eisenberg and Yeazell, The Ordinary and the Extraordinary
in_Institutional Litigation, 93 Harv. L. Rev. 465 (1980);
Chayes, The Role of the Judge in Public Law Litigation, 89
Harv. L. Rev. 1281 (1976).
Some states have passed statutes that allocate punitive
damages and require that a portion of each punitive
damages award be paid to the state general fund or some
30a
special fund that serves a public purpose. Fuller v.
Preferred Risk Life Ins. Co., 577 So. 2d 878, 887 (Ala.
1991). For example, Illinois® and Iowa’ allocate punitive
damages pursuant to statute. Florida® and Colorado?
passed such statutes in 1987; these were both repealed,
effective 1995.
A special concurrence in Preferred Risk, 577 So. 2d at
886, suggested that if a court concludes that the amount of
punitive damages awarded is not so large as to deprive the
defendant of property in contravention of § 13 of the
Alabama Constitution of 1901 and the Due Process Clause
of the Fourteenth Amendment to the United States
Constitution, then the court, nevertheless, may also
determine that it would be in the best interest of justice to
require the plaintiff to accept less than all of the amount
and to devote part of the amount to such purposes as the
court may determine would best serve the goals for which
punitive damages are allowed in the first place: vindication
of the public interest and deterrence to the defendant and to
others who might commit similar wrongs in the future.
This viewpoint was again expressed by three Justices in
61)].Rev.Stat. Ch. 110, para. 2-1207 (Supp. 1987); now cited
as Hll.St.Ch. 735 § 5/2-1207.
Tiowa Code Ann. § 668A. 1(2)(b) (West Supp. 1987).
8Fla.Stat.Ann. § 768.73(2) (West Supp. 1987); held
constitutional in Gordon v. State, 608 So.2d 800 (Fla. 1991) cert;
repealed by Laws 1992, c. 92-85, § 3, effective July 1, 1995.
9Colo.Rev.Stat. § 13-21-102(4) (1987); held unconstitutional
in Kirk v. Denver Publishing Co., 818 P.2d 262 (Colo. 1991), because
a judgment for exemplary damages qualifies as a property interest under
Colorado law (there is no right to punitive damages under Alabama
law); repealed by Laws 1995, H.B. 95-1090, § 1, effective March 9,
i995.
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3la
Smith v. States General Life Ins. Co., 592 So.2d 1021,
1025 (Ala. 1992), and in special concurrences in Principal
Financial Group v. Thomas, 585 So.2d 816, 819 (Ala.
1991) (with Shores, Houston, and Steagall, JJ., joining),
cert. denied, 502 U.S. 1009 (1991); Southern Life &
Health Ins. Co, v. Tumer, 586 So.2d 854, 859 (Ala.
1991); Union Mortgage Co. v. Barlow, 595 So.2d 1335,
1348 (Ala.), cert. denied, 506 U.S. 906, (1992); BMW of
North America, Inc. v. Gore, 646 So.2d 619, 629 (Ala.
1994).
In a special concurrence in BMW of North America, Inc.
y. Gore, supra, a Justice views a procedure that directs a
substantial portion of punitive damages awards to the state
general fund or some special fund that serves a public
purpose as a means of both avoiding the windfall effect and
strengthening the jury system:
"In the name of all that is fair, I ask
this Court, which has consistently held that
plaintiffs have no right to punitive damages,
to direct that all or a substantial portion of
punitive damages awarded in civil cases,
after deducting attorney fees and expenses
litigation, be paid to the state general fund or
to some special fund that serves a public
purpose or advances the cause of justice. If
this is done, then the time-honored and
constitutionally mandated right to trial by
jury will not be perceived, insofar as
punitive damages is concerned, as Alabama's
lottery, as it is now perceived by so many."
646 So.2d at 631. We agree, and we now hold that a part
of the punitive damages awarded in future cases (excluding
cases based on wrongful death) shall be paid into the state
general fund. It is appropriate and fair that some part of
32a
the civil fine imposed by juries in the form of punitive
damages awards should be devoted to the general welfare of
all the citizens of Alabama. We believe that this practice
will strengthen the public's confidence in our civil justice
system because, under this procedure, wrongdoers can be
appropriately discouraged from inflicting harm upon others
without inappropriately rewarding the victim.
All punitive damages judgments (excluding all damages
in actions based upon wrongful death) that are entered as a
result of the new bifurcated procedure shall be allocated as
follows: After any post-verdict review is concluded by the
trial court, and after appellate review, if any, the amount of
the judgment as finally determined shall be paid into the
trial court. The trial court shall order all reasonable
expenses of the litigation, including the plaintiff's attorney
fees (as determined in accordance with any agreement
between the plaintiff and the plaintiff's attorney), paid.
The trial court shall then order the clerk of the court to
divide the remaining amount equally between the plaintiff
and the State general fund. The fact that the State may
ultimately share in some part of a punitive damages award
does not mean that the State has a vested interest in a
private lawsuit seeking punitive damages. The State shall
have no right to intervene or participate in such cases. The
parties will continue to have full authority to settle cases
without the participation or consent of the State, and court
approval is not required. In the case of settlement, the
parties need not designate any part of the settlement
proceeds as punitive damages and no part of the settlement
proceeds shall be paid into the general fund. In summary,
the right of the parties to settle any lawsuit is unaffected by
this opinion.
33a
Ill. Judicial Review of Jury
Verdicts in General
Under our system of government, with its guarantee of
separation of powers between the executive, legislative, and
judicial branches of government, it is peculiarly and
| exclusively the function of the judiciary to determine
| whether a jury award in a civil case exceeds the amount
that the State and Federal Constitutions will allow without
violating the due process rights guaranteed to all citizens of
this State and this country. Armstrong v. Roger's Outdoor
Sports, 581 So.2d 414, 419 (Ala. 1991). Zhe separation of
powers provision, found in Article III, § 42, of the
Alabama Constitution of 1901, provides:
"The powers of the government of
the State of Alabama shall be divided into
three distinct departments, each of which
shall be confided to a separate body of
magistracy, to wit: those which are
legislative, to one; those which are executive
| to another, and those which are judicial to
another.”
Section 43 reads:
"In the government of this state,
except in the instances in this Constitution,
hereinafter expressly directed or permitted,
the legislative department shall never
exercise the executive and judicial powers,
or either of them; the executive shall never
exercise the legislative and judicial powers,
or either of them; the judicial shall never
exercise the legislative and executive powers,
or either of them; to the end that it may be a
government of laws and not of men.”
ee
34a
In Armstrong v. Roger's Outdoor Sports, we held certain
Statutes, which attempted to remove all presumption of
correctness from a jury verdict and from a trial court's
judgment, to be unconstitutional as a violation of the
separation of powers provisions of the Alabama
Constitution, Article III, §§ 42 and 43.!° Armstrong, 581
So. 2d at 421. In Armstrong v. Roger's Outdoor Sports we
quoted with approval Cobb v. Malone, 92 Ala. 630, 9 So.
738 (1891):
""The power to set aside verdicts has
been generally regarded in this country as
inherent in courts organized upon the
principles of common law, though in some
States it is regulated by statute, enumerating
the grounds upon which a motion for a new
trial may be made. The power is essential to
prevent irreparable injustice in cases where a
verdict wholly wrong is the result of
inadvertence, forgetfulness, or intentional or
capricious disregard of the testimony, or of
bias or prejudice, on the part of juries, which
sometimes occurs... .'"
581 So. 2d at 419.
In two other cases, this Court had held that statutes
enacted by the legislature violated the right-to-jury-trial
provisions of the Alabama Constitution. In Moore v.
10in Armstrong, we wrote: "In summary, we hold that § 6-
11-23(a), § 6-11-24(a), and the parenthetical phrase in the last sentence
of § 6-11-23(b) are unconstitutional. Section 6-11-24(b) and the
remaining portion of § 6-11-23(b) are constitutional as construed
herein.” 581 So. 2d at 421.
35a
/ Mobile Infirmary Ass'n, 592 So.2d 156 (Ala. 1991), this
Court held that § 6-5-544(b), Ala. Code 1975, which
: limited the amount of “noneconomic" damages recoverable
; in a medical malpractice action, violated the right to trial
{ by jury as guaranteed by Article I, § 11, of the Alabama
: Constitution 1901. This section provides “[tJhat the right
of trial by jury shall remain inviolate." Then, in
: Henderson v. Alabama Power Co., 627 So.2d 878 (Ala.
1993), this Court held that a limitation on punitive
damages, such as that imposed by § 6-11-21, clearly
impairs the traditional function of the jury, thus violating
the right to trial by jury guaranteed by Article I, § 11. In
those cases, we said that, under an analysis of § 11, the
pertinent question is not whether the right still exists under
the statute, but whether it still remains inviolate. 627 So.
2d at 885 (quoting Alford v. State, 170 Ala. 178, 197, 54
So. 213 (1910)). Because the majority was convinced that
the statutes violated the right-to-jury-trial provision of the
Alabama Constitution, it was not necessary in those cases to
decide whether those statutes also violated the separation of
powers provisions of the Alabama and United States
Constitutions. However, it is arguable that these statutes
did violate the separation powers provisions.
Because, under the separation of powers provisions, it is
the inherent and exclusive power of the judiciary to
determine whether a jury award in a civil case exceeds the
amount that the State and Federal Constitutions will allow
without violating due process rights, the trial judge in this
case, in a post-verdict Hammond hearing, considered the
question whether the jury had followed its instructions on
the law, as well as whether the verdict was the result of
passion or bias in favor of, or against, either side in the
litigation. After so doing, he ordered a remittitur of the
$15 million award of punitive damages to $12.5 million.
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36a
IV. APPELLATE REVIEW IN
THIS CASE
We have independently reviewed the evidence in this
case, applying the factors set forth in Green Oil Co. v.
Hormsby, 539 So.2d 218, 223-24 (Ala. 1989), cited in
Pacific Mutual Life Insurance Co. v. Haslip, 499 U.S. |
(1991), and quoted ‘n Northwestern Mut. Life Ins. Co. v.
Sheridan, 630 So. 2d 384 (Ala. 1993), including:
""(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 conduct, the defendant's
awareness, amy 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) imposition of
criminal sanctions on the defendant for its
conduct, these to be taken in mitigation; and
(g) the existence of other civil awards against
the defendant for the same conduct, these
also to be taken in mitigation.' Haislip, 499
U.S. at 21-22, 111 S. Ct. at 1045."
Northwestern Mut. Life v. Sheridan, 630 So. 2d at 393.
We conclude, as did the trial judge, that the conduct of
this defendant was egregious and reprehensible and resulted
in a great financial hardship to some of the most vulnerable
members of our society. Life of Georgia fraudulently sold
37a
policies to people on Medicaid that were totally worthless
to the victims of the fraud. Life of Georgia had no risk
under these fraudulently sold policies. The practice was a
sham and would never have been per:nitted in this state if
the activities of insurance agents were properly regulated.
However, as reprehensible as Life of Georgia's conduct
was, it is not the most odorous this Court has been required
to review. Without in any way condoning the conduct, we
nevertheless are compelled, when comparing this conduct
with other acts perpetrated upon Alabama citizens, to
reduce the award against the defendant Life of Georgia to
$5 million.!! Pacific Mutual Life Insurance Co, v. Haslip,
499 U.S. 1 (1991). It is the opinion of this Court that $5
million is not excessive for punishment and deterrence
specific to Life of Georgia, considering all of the facts of
this case.
VY. PROSPECTIVE
APPLICATION OF THE PROCEDURES
ANNOUNCED IN THIS CASE
The new procedures announced in this case shall be
applied in all cases in which punitive damages are sought
(excluding all actions for wrongful death) which are filed
more than 90 days after the certificate of judgment issues in
this case. We are persuaded by the arguments of both
parties that these new procedures, including allocation of
part of the punitive damages award, should not be applied
in this case or in any other case filed within 90 days after
I1justice Maddox in his writing, concurring in part and
dissenting in part, has attached statistics appearing on pages he
designates as Appendix A to his special writing, and he cites the data
included on those pages. Those pages appearing as Justice Maddox's
Appendix A were not authenticated and were merely attached to a brief
filed in this case. The writing on those pages has no probative value.
38a
the issuance of the certificate of judgment in this case.
Inevitably, the new procedures announced here will affect
settlement negotiations, and they may, as suggested by
some amici curiae, promote more settlements. These and
other considerations convince us that these procedures
should have prospective effect only. Accordingly, we hold
that the procedures announced in this opinion shall be
applied in all punitive damages cases (excluding wrongful
death cases) filed more than 90 days after the certificate of
judgment issues in this case.
SUMMARY OF HOLDINGS
I. Bifurcation
The trial of all cases in which punitive damages are
sought (excluding cases based upon wrongful death causes
of action), that are filed more than 90 days after the
certificate of judgment issues in this case, shall be
bifurcated. The jury shall first determine liability and the
amount of compensatory damages, if any. The plaintiff
must prove a prima facie case of conduct supporting an
award of punitive damages, and the jury's decision must be
based upon clear and convincing evidence. If the jury finds
against the defendant, it will also decide, by a special
verdict, whether the evidence justifies the imposition of
punitive damages. If the jury returns the special verdict in
the affirmative, the trial shall resume.
In the second part of the trial, all evidence shall be
admitted that is relevant to the question of what amount
would be appropriate to accomplish the purposes punitive
damages were designed to serve, and it shall be admitted in
accordance with § 6-11-23(b), which provides:
"(b) In all cases wherein a verdict for
punitive damages is awarded, the trial court
39a
shall, upon motion of any party, either
conduct hearings or receive additional
evidence, or both, concerning the amount of
punitive damages. Any relevant evidence,
including but not limited to the economic
impact of the verdict on the defendant or the
plaintiff, the amount of compensatory
damages awarded, whether or not the
defendant has been guilty of the same or
similar acts in the past, the nature and the
extent of any effort the defendant made to
remedy the wrong and the opportunity or
lack of opportunity the plaintiff gave the
defendant to remedy the wrong complained
of shall be admissible; however, such
information shall not be subject to discovery,
unless otherwise discoverable, until after a
verdict for punitive damages has been
rendered... ."
All evidence that has heretofore been admissible at post-
verdict Hammond/Green Oil hearings, can be introduced
under this new procedure, before the jury retires to
consider its punitive damages verdict. However, the fact of
the existence of liability insurance and the amount thereof
cannot be disclosed to the jury. In addition, the discovery
of financial information concerning the defendant will be
limited as provided in § 6-11-23(b) and shall be limited to
information that is relevant to the issue in the case. The net
worth of the defendant may or may not be relevant,
depending upon the nature of the case. Again, we reiterate
that a defendant is not to be punished for its size or its
success; instead, it may be punished only for the tortious
conduct proved in the trial of the case. This new procedure
is intended to allow the jury to decide, based upon all the
evidence that is relevant to that inquiry, the award that the
40a
specific defendant before the jury should be required to pay
as punishment for the specific conduct made the basis of the
action.
If the punitive damages verdict is challenged in a post-
verdict motion as excessive or inadequate, it must still be
considered by the trial judge through the procedures set out
in Green Oil Co. v. Hornsby, supra, and Hammond vy. City
of Gadsden, supra.
Il. Allocation
All punitive damages (excluding all damages in actions
based upon wrongful death) awarded by judgments entered
as a result of the new bifurcated procedure established by
this opinion shall be allocated as follows: After any post-
verdict review is concluded by the trial court, and after
appellate review, if any, the amount of the judgment as
finally determined shall be paid into the trial court. The
trial court shall order all reasonable expenses of the
litigation, including the plaintiff's attorney fees, paid. In
doing so, the trial court will enforce any agreement
between the plaintiff and counsel for the plaintiff as to
attorney fees. The trial court shall then order the clerk of
the court to divide the remaining amount equally between
the plaintiff and the State general fund.
The State shall have no vested right in any private lawsuit
in which punitive damages are sought and shall not be
permitted to intervene or participate in any way in the trial
or settlement of such cases. Court approval i; not required
to settle such cases. In the case of settlemeni, the parties
need not designate any part of the settlement as punitive
damages, and no part of the settlement proceeds shall be
paid into the general fund. In summary, the right of the
parties to try and settle any lawsuit is unaffected by this
4la
opinion. Settlement of these cases, like all others, is
encouraged.
IIL. Reduction of the Punitive
Award
The award of $12.5 million in punitive damages is
reduced to $5 million.
IV. Prospective Application
The new procedures announced in this case shall be
applicable only to cases in which punitive damages are
sought (excluding all actions based upon wrongful death)
and only to cases that are filed more than 90 days after the
certificate of judgment issues in this case.
Judgment
That portion of the judgment awarding compensatory
damages is affirmed. The award of punitive damages is
reduced to $5 million. If the plaintiff does not, within 28
days of the date of this opinion, file in this Court a
remittitur of $7.5 million, then thé defendant shall be
granted a new trial.
APPLICATIONS GRANTED; OPINION
WITHDRAWN; OPINION SUBSTITUTED; AFFIRMED
CONDITIONALLY.
Almon, Houston, Kennedy, Ingram, and Cook, JJ.,
concur.
Hooper, C.J., concurs in the result in part and dissents in
part.
Maddox and Butts, concur in part and dissent in part.
42a
HOOPER, CHIEF JUSTICE (concurring in the result in
part and dissenting in part):
I concur in the result as to parts II, Ill, and IV, as the
result is stated in the "Summary of Holdings” portion of the
opinion. See ___ So. 2d at___. Specifically: (1) I agree
with the decision to allocate half of a punitive damages
award to the State, because the plaintiff does not have a
proprietary or any other interest in a punitive damages
award, see City Bank of Alabama v. Eskridge, 521 So. 2d
931, 933 (Ala. 1988); (2) I agree with the reduction of the
punitive damages award from $12.5 million to $5 million;
and (3) I agree with the procedures set out in part IV. I
dissent from part I of the majority opinion because that
holding violates the clear intent of the Legislature in Ala.
Code 1975, § 6-11-23(b), and also changes a common law
principle of 140 years’ standing that had excluded evidence
of a defendant's wealth or financial position from being
considered by the jury.
Evidence of a defendant's wealth or financial standing has
never been admissible in a jury trial. Southern Life &
Health Ins. Co. v. Whitman, 358 So. 2d 1025 (Ala. 1978);
and Ware v. Cartledge, 24 Ala. 622, 627 (1854). This
principle was reinforced by the fact that the
Hammond/Green Oil factors were never intended to be
considered by the jury, but solely by the judge in
considering whether a jury award was proper. Reserve
National Ins. Co. v. Crowell, 614 So. 2d 1005, 1009 (Ala.
1993). Allowing evidence of a defendant's wealth into
evidence brings the politics of resentment into the
courtroom and encourages and legitimates the Robin Hood
reaction.
In 1987, in the “Tort Reform Act," the Legislature
adopted the common law rule excluding evidence of a
defendant's financial position. Section 6-11-23(b) states:
43a
“[TyJhe trial court shall ... either conduct hearings or
receive additional evidence, or both, concerning the amount
of punitive damages." That section goes on to state that
evidence of the economic impact of the verdict on the
defendant “shall not be subject to discovery, unless
otherwise discoverable, until after a verdict for punitive
damages has been rendered" (emphasis added). The
purpose of § 6-11-23(b) was to prevent the exposure of
such evidence to a jury. The majority's holding on this
point contravenes the clear intent of the Legislature by
allowing a jury to consider evidence of a defendant's
wealth.
The majority addresses the issue of “prejudice” by
stating: “Juries are presumed to follow the law as instructed
by the trial court. There is no reason to assume that the
jury would disregard the trial court's instruction on this
issue." _—‘So. 2d at ___.__ In other words, the majority
appears to be saying that defendants should not be
concerned about the danger of prejudice because the trial
judge can always instruct the jury to disregard certain
evidence after the fact or remedy the error in a jury's
hearing any evidence that should not have been heard. This
rationale could also support an argument in favor of
abolishing all limiting rules of evidence and letting the jury
hear any and all evidence, such as hearsay and opinions,
regardless of its relevance, trustworthiness, or prejudicial
content, because juries are presumed to listen to the trial
judge's instructions, and those instructions may direct the
jury to unring the bells that were rung by the parties. The
majority's approach to evidence endangers the
constitutional guarantee of a fair trial.
The foundation of western law is “equal justice under the
law." "Ye shall do no unrighteousness in judgment: thou
shalt not respect the person of the poor, nor honor the
person of the migh* ui in righteousness shalt thou judge
44a
thy neighber." Leviticus 19:15 (King James). The
temptation of a jury to ignore this fundamental principle is
the reason evidence of a “mighty” defendant's wealth is
excluded from consideration by the jury.
I concur in the result as \o parts II, I, and IV, but, for
the foregoing reasons, I must dissent as to part I.
45a
Life I C ’ Genesia y. Dairy 1. Icd
MADDOX, JUSTICE (concurring in part; dissenting in
part).
I concur in that portion of the majority opinion that
affirms the judgment entered upon the jury verdict,
conditioned upon the plaintiff's agreement to remit all but
$5,000,000 of the punitive damages awarded.
I also concur in that portion of the opinion that adopts a
procedure requiring a bifurcation of trials in cases in which
claims for punitive damages are presented to a jury, but I
must point out that this is a major procedural change, and I
would have preferred that this Court follow the normal
practice when adopting procedural changes. By following
our usual procedures of giving notice to the bench and bar
and other interested parties of such a proposed change in
our procedures, such interested persons would have had an
opportunity to comment on the proposal before its
adoption.
For at least three reasons, I cannot agree with the holding
of this Court that establishes a procedure for the
distribution of a portion of the punitive damages award to
the State. First, I question the power of this Court to direct
the payment of damages recovered in a civil case into the
General Fund of the State; second, I believe that the
Legislature is the proper branch of government to make
policy determinations of this magnitude; and third, even if
the Court has the power to adopt the procedure under its
rule-r; aking power, I would not adopt the procedure
without giving notice of the proposal to the parties, the
bench and bar, and the public, so that each member of each
group would have an opportunity to comment on the
proposal.
Before I specifically address the reason for my vote, I
offer this preface about the development of the law in this
46a
State relating to damages, especially punitive damages, that
can be recovered for breach of a noncommercial contract of
insurance. That law has dramatically changed over the past
decade or so, and actions such as this one, in which a jury
awarded $15,000,000 in punitive damages, have raised
some serious policy questions, such as: What type of
remedy should be employed when an insurer faiis to pay a
valid claim made by its insured? What is the measure of
damages and to whom should they be paid? What is the
proper role of the courts in reviewing jury awards that are
claimed to be excessive? Can courts direct the distribution
of a punitive damages award? In many of the past cases
involving alleged breaches of insurance policies, I had to
dissent. I specifically disagreed when the Court selectively
struck down most of the so-called “Tort Reform” legislation
that was adopted to address some of these issues.
Much of the history of the development of the law that
allows juries to assess punitive damages against an insurer
is contained in a dissenting opinion I filed in Continental
Assur, Co, v. Kountz, 461 So.2d 802, 810 (Ala. 1984)
(Maddox, J., dissenting), wherein I discussed the
development of the tort of bad faith and why I thought that
either this Court or the Legislature should provide an
alternative to the tort of bad faith failure to pay a
noncommercial insurance claim, by permitting the recovery
of attorney fees and consequential damages when a
policyholder was forced to go to court to establish
entitlement to insurance benefits. !2
12] realize, of course, this present case does not involve a bad
faith failure to pay, but it arose ovt of a relationship between an insured
and an insurer.
47a
In the following sections of this opinion, will specifically
state the reasons why I concur in part and why I must also
respectfully dissent in part.
L
First, I will discuss why I concur in that portion of the
opinion that conditionally affirms the judgment and orders a
remittitur.
Jury awards of punitive damages in Alabama have
dramatically increased in Alabama in the last 15 years. See
Appendix A, which was included as an appendix to Life of
Georgia's brief in this case, and which purports to be based
on published reports of cases from Alabama.!3 The
substantial amount of those jury awards in Alabama has
caused defendants to ask this Court to review the awards
and to either grant a new trial or order a remittitur. Many
defendants have claimed that the awards of punitive
damages by Alabama juries violate their federal
constitutional rights and some have appealed these awards
to the United States Supreme Court. See, e.g., Aetna v.
Lavoie, 475 U.S. 813 (1986); Pacific Mut. Life Ins, Co. v.
Haslip, 499 U.S. 1 (1991), BMW_of North America, Inc.
v. Gore, 646 So.2d 619 (Ala. 1994), cert. granted, __
U.S. __, 115 S.Ct. 932 (1995).
13] would point out that the statistics given by the majority
concerning the percentages of cases won and lost by plaintiff attorneys
were not in the record of this case. Although the majority cites these
statistics to support the proposition that plaintiffs rarely win cases and
that their attorneys often lose “the amount [they have] expended in
filing the action and in preparing for trial," So.2d at __, this
proposition is persuasive only if one assumes that all these actions
be used to argue that a large number of frivolous actions are being
filed.
48a
The jury award of $15,000,000 is obviously excessive,
and the reduction of the judgment to $5,000,000 by this
Court still imposes a substantial penalty on the defendant.
After reviewing the record, and comparing this judgment to
other judgments in similar cases that have been approved by
this Court, and after reviewing the defendant's
constitutional claims, I concur in the conditional affirmance
of the judgment in this case. However, my concurrence is
subject to the caveats expressed in this special writing. My
reasons are as follows: (1) this was an action alleging
fraud, and, although the evidence was conflicting regarding
whether a misrepresentation was made, the jury, as the
factfinder, determined that a misrepresentation had been
made; and, (2) this Court, on other occasions, has approved
substantial penalties levied against defendants under similar
circumstances. National States Ins. Co. v. Jones, 393
So.2d 1361 (Ala. 1980) (trial judge remitted $3,500,000
jury verdict in an insurance fraud case to $500,000, and
this Court affirmed); North Carolina Mut. Life Ins. v.
Holley, 533 So.2d 497 (Ala. 1987) ($1,000,000 jury award
was subjected to a remittitur of $500,000). I realize that
this judgment, even after the remittitur, is substantially
higher than the judgments approved in those two prior
fraud cases, but, according to the statistics furnished to us
by Life of Georgia, which appear in Appendix A to this
opinion, judgments of this size and greater have been
approved by this Court in the past for similar or less
egregious conduct. I personally know that to be true,
because I have reviewed the records in many, if not all, of
the cases coming before this Court.
I have also examined Life of Georgia's claim that this
verdict violates its federal constitutional rights. If I were
addressing the federal constitutional question without the
benefit of al! the decisions of the United States Supreme
Court on the question, I would agree that Justice
O'Connor, in her dissents in Browning-Ferris Industries v.
49a
Kelco Disposal Inc., 492 U.S. 289 (1989), and TXO
Production Corp. v. Alliance Resources Corp., ____ U.S.
___, 113 S.Ct. 2711 correctly interpreted the provisions
of the States Constitution on the issue. Of course, her
reasoning did not prevail, and my prediction about what the
United States Supreme Court would do in Pacific Mutual
Life Ins. Co. v. Haslip, 553 So.2d 537, 544 (Ala. 1989)
(Maddox, J., concurring in part; dissenting in part), was
incorrect, because the United States Supreme Court
affirmed the decision of this Court. Pacific Mutual Life
Ins. Co. v. Haslip, 499 U.S. 1 (1991).
I have carefully read several of the decisions of the
Supreme Court of the United States that address the
question of jury awards of punitive damages, and I have
read a transcript of the oral arguments in the BMW case,
now pending before the United States Supreme Court.
Based upon my reading of those cases, and based upon my
understanding of the questions asked at oral argument by
the Justices in BMW, it appears to me that the Supreme
Court of the United States, at this time, requires State
justices and judges to review jury awards of punitive
damages to ensure that juries do not unreasonably or
disproportionately punish a defendant; I have made the
required review. It also appears to me that the Supreme
Court, in BMW, will address the question whether a State,
through a State jury, can punish a defendant not only for
misconduct occurring in the State, but also for misconduct
occurring outside the State. In BMW, the Court may also
address the question whether a defendant, like Life of
Georgia in this case, can be punished not once, but twice,
for the same or similar misconduct.
50a
On this issue of double punishment, there was evidence
presented in this case and of an alleged pattern and practice
of fraud that involved policies sold not just in Alabama but
in other states as well.!4 This fact was argued to the jury,
which very well may have considered other out-of-state
transactions in its deliberations; such evidence could have
influenced the jury's deliberations and the resulting punitive
damages award in this case.!5 The issue of allowing a jury
to consider evidence of alleged misconduct occurring
outside the State is presented in the BMW appeal, but the
Supreme Court of the United States has not addressed it
yet.
I cannot predict what the Supreme Court of the United
States will do in BMW, so I do not know whether a State
can successively punish the same defendanit in separate civil
cases without violating the Double Jeopardy Clause or the
Interstate Commerce Clause of the United States
Constitution. I do know that in the oral arguments in
BMW some of the Justices asked questions relating to these
issues. I also know that, as was true in BMW, separate
14 according to the appellant's brief, only one of the witnesses
who testified to Life of Georgia's pattern and practice of seliing these
policies to elderly citizens resided in the State of Alabama. That
witness was Mattie Foster, the plaintiff in Foster v. Life Insurance Co.
of Georgia, 656 So.2d 333 (Ala. 1994).
15Ms. Johnson, the plaintiff in this case, testified in the
Hammond/Green Oil hearing at the trial level in Ms. Foster's case (see
n. 13) as to what Life of Georgia had done to her, and the plaintiffs in
both of these cases were represented by the same attorneys. By
allowing punitive damages to be awarded in this case, this Court is
allowing the defendant to be punished twice for the same conduct. In
the oral arguments in BMW, one of the Justices inquired about just
such a factual setting, suggesting that permitting a defendant to be
punished by every victim might raise constitutional questions.
S5la
juries, based upon the same or similar evidence of
misconduct, can reach alarmingly disparate results. In
BMW for example, the jury awarded $4 million in punitive
damages; but another jury, hearing much of the same
evidence about BMW's alleged misconduct presented by the
same attorneys, awarded $0 punitive damages. Yates v.
BMW of North America, Inc., 642 So.2d 937 (Ala. Civ.
App. 1993). In Foster v. Life Ins. Co. of Georgia, 656
So.2d 333 (Ala. 1994), which involved another claimant
who alleged the same misconduct as that alleged in this
case, and who was represented by the same counsel as
represents the plaintiff in this case, the jury awarded
Ms. Foster $1 million in punitive damages; the jury in this
case awarded the plaintiff $15 million. Such disparate
awards give some credence to the claims frequently made
by defendants that the system of awarding punitive damages
in Alabama is much like a lottery.
It would have been helpful to me in reviewing the
excessiveness-of-the-verdict claim to have the decision of
Supreme Court of the United States in BMW; that case
contains some of the same legal questions that are present
here, or similar ones. Even without the benefit of that
decision, I know that this Court has said that the award of
punitive damages is a civil punishment and is for the
purpose of altering the behavior of wrongdoers. See, e.g.,
Pitt v. Century Il, Inc., 631 So.2d 435 (Ala. 1993), Lozier
Corp. v. Gray, 624 So.2d 1034 (Ala. 1993, Reserve Nat'l
Ins. Co, v. Crowell, 614 So. 2d 1005 (Ala. 1993), cert.
denied, U.S. _, 114 S. Ct. 84 (1993), General
Motors Corp. v. Johnston, 592 So.2d 1054 (Ala. 1992),
and Maryland Casualty Co. v. Tiffin, 537 So.2d 469 (Ala.
1988). The Supreme Court of the United States has said
that the awarding of punitive damages for wrongful actions
is a form of state regulation that can be as effective as
Statutory regulations designed to protect consumers and the
general public from similar wrongful actions. See San
52a
Diego Building Trades Council v. Garmon, 359 U.S. 236,
247 (1959).
When businesses are involved in interstate commerce and
punishment is rendered against them, additional questions
are raised. During the oral arguments in BMW, one or
more of the Justices asked whether “interstate commerce
enter[ed] the calculus" of determining whether a particular
punishment was prohibited; however, the Court has not yet
answered the question. The Supreme Court, in BMW,
could very well hold as it held in Healy v. Beer Institute,
Inc., 491 U.S. 324, 336 (1989):
"{[T]he ‘Commerce Clause
precludes the application of a state statute to
commerce that takes place wholly outside of
the State's borders, whether or not the
commerce has effects within the State,'
[A] statute that directly controls
commerce occurring wholly outside the
boundaries of a State exceeds the inherent
limits of the enacting State's authority and is
invalid regardless of whether the statute's
extraterritorial reach was intended by the
legislature. The critical inquiry is whether
the practical effect of the regulation is to
control conduct beyond the boundaries of the
State.”
Even though I have some reservations because I do not
have the latest expression from the United States Supreme
Court, I concur in the conditional affirmance based on the
law that the Supreme Court has set out in several of its
opinions, and without benefit of an opinion in the BMW
appeal. In some respects this case is similar to TXO, but in
another respect it is similar to BMW. Factually, it is most
similar to Haslip, except that, in Haslip, as I recall, the
53a
plaintiff did not present as much evidence of a pattern and
practice of misconduct as was presented here against this
defendant. !6
Il.
I concur with the majority's decision to require a
bifurcated proceeding in all cases, except wrongful death
cases, where a punitive damages verdict is returned; but, I
would have preferred that the Court not adopt the
procedure by caselaw. I would have followed our usual
procedure of drafting a proposed rule, giving notice to the
bench and bar and other interested citizens, and setting a
time within which any person could file comments, pro or
con, about the rule. The Court, by setting the effective
date of the new procedure as three months after the
certificate of judgment issues in this case, does offer the
bench and bar, and possibly the Legislature, a limited
opportunity to address the new procedure; that opportunity
is better than none. I do believe such a procedure will be
beneficial to juries and to courts that are called upon to
review their findings. I have been concerned for some time
about allowing juries to fix an amount of exempiary
damages and giving them standardless discretion in doing
so. In criminal cases, this State took the power to fix
penalties from the jury several years ago and vested the
power to sentence in the trial judges. Even in capital cases,
161m the present case, evidence of four incidents, including
that against the plaintiff, Ms. Johnson, which could constitute evidence
of pattern and practice, was presented before the jury, before the trial
court in the Hammond/Green Oil review, and before this Court.
However, evidence of one of these incidents was presented by Mattie
Foster, the plaintiff in Foster v. Life Insurance Co. of Georgia, 656
So.2d 333 (Ala. 1994). In that case, this Court reinstated a jury award
for $1 million in punitive damages against Life of Georgia.
54a
the jury can only recommend a sentence to be imposed,
after hearing evidence of aggravating and mitigating
circumstances; the trial judge is not bound by that
recommendation.
I make one further observation. The rule established by
the majority opinion excepts wrongful death cases, where
only punitive damages can be awarded. Personally, I
believe that the Legislature should amend the wrongful
death statute to provide for the recovery of compensatory
damages, which other jurisdictions allow, but the
Legislature, even when adopting the so-called “Tort
Reform" package, did not address this issue.
Ti.
I now come to the portion of the opinion with which I
must respectfully disagree. The majority quotes from a
special concurrence in BMW, 646 So.2d at 629, and now
holds that a plaintiff has no right to recover punitive
damages. ____ So.2d at ___. While I agree, in principle,
with the Court's holding that punitive damages, in a civil
case, are for punishment and that it might be desirable that
a portion of the award be paid into the State treasury, I do
not believe that this Court has the power, or that it should
assume the power, of determining that a portion of an
award of punitive damages must be distributed to the State.
I believe that the power to collect revenue for the State
treasury is a plenary power of the Legislature, and is
beyond the powers of this Court.
At least three sections of Alabama's Constitution seem to
address this question. Section 42 provides:
"The powers of the government of
the State of Alabama shall be divided into
three distinct departments, each of which
shall be confided a separate body of
magistracy, to wit: Those which are
55a
legislative, to one; those which are
executive, to another; and those which are
judicial, to another.
Section 43 provides:
"In the government of this state,
except in the instances in this Constitution
hereinafter expressly directed or permitted,
the legislative department shall never
exercise the executive and judicial powers,
either of them; the executive shall never
exercise the legislative and judicial powers,
or either of them; the judicial shall never
exercise the legislative and executive powers,
or either of them; to the end that it may be a
government of laws and not of men.”
Furthermore, § 70 provides, in part, that "[aJll bills for
raising revenue shall originaie in the house of
representatives." It is axiomatic that the judiciary declares
what the law is, the Legislature what it shall be. Alabama
Life Ins. & Trust Co. v. Boykin, 38 Ala. 510 (1863);
Lindsay v. United States Sav. & Loan Ass'n, 120 Ala. 156,
24 So. 171 (1898); Champion v. McLean, 266 Ala. 103,
95 So. 2d 82 (1957) (the power to make the law has been
committed to the legislature by the Constitution, and the
only power of the court is to declare the law as enacted by
the legislative branch of government).
This Court has addressed the power of courts to deal with
fines in Ellis v. State, 502 So. 2d 694 (Ala. 1986).
Although I did not agree, this Court held that where a
district judge, by court order, imposed a traffic fine of
$50.00 over the normal fine because the defendant had a
radar detector in the automobile, the judge was legislating,
even though the fine was within the statutory limits of § 32-
5A-8, in that the judicial action created an additional fine,
56a
which, under § 43 of the Constitution, could be enacted
only by the Legislature. !7
As I stated earlier, I personally would favor a procedure
whereby a portion of punitive damages could be paid into
the State treasury, because it would address the troublesome
issue of a single plaintiff's receiving a “windfall” or
winning a "lottery." I would point out that only a few
states have adopted a procedure for requiring the prevailing
party in a civil case who recovers punitive damages to pay
part of the award to the state general fund. Although the
majority opinion states that four states have adopted this
practice, my research shows that nine states have adopted
statutes requiring the payment of a portion of an award of
punitive damages to the state government. The states with
such punitive damages legislation are: Colorado (Colo.
Rev. Stat. § 13-21-102(4) (1987)), Florida (Fla. Stat. §
768.73(2)(b) (1993 Supp.)), Georgia (Ga. Code Ann.§ 51-
12-5.1(e)(2) (1993)), Illinois (735 ILCS 5/2-1207), Iowa
(lowa Code § 668A.1(2) (1993)), Missouri (Mo. Rev. Stat.
§ 537.675(2) (1992 Supp.)), New York (N.Y. Civ. Prac.
L. & R. § 8701 (McKinney 1993 Supp.)), Oregon (Or.
Rev. Stat. § 18.540(1) (1991)), and Utah (Utah Code Ann.
§ 78-18-1(3) (1992)). However, the Colorado statute has
been held unconstitutional by the Colorado Supreme
Court,!8 the Florida statute has been repealed by the
17in Ellis, I opined that the trial judge had sentenced the
defendant for speeding, not for possession of a radar detector.
18See, Kirk v. Denver Publishing Co., 818 P.2d 262 (Colo.
1991). The Colorado Supreme Court held in this opinion that the
statute mandating that a portion of punitive damages awards be paid to
the state, Colo.Rev.Stat. § 13-21-102(4), was unconstitutional as
violating the Taking Clause of the Fifth Amendment of the United
States Constitution.
57a
Florida legislature, and a federal district court has declared
Georgia's statute unconstitutional.!9 In addition, when
Colorado and Florida had such laws in effect, they did not
allow the attorney for plaintiff to take a contingency that
was to be allocated to the state.2°
I would point out that some recent decisions of the United
States Supreme Court suggest that if a state is the recipient
of punitive damages awards, such awards may be subject to
judicial scrutiny under the Eighth Amendment's Excessive
Fines Clause. The Eighth Amendment states that
“excessive bail shall not be required, nor excessive fines
imposed, nor cruel and unusual punishments inflicted."
(Emphasis added.) Although the majority is correct in its
assertion that in Browning-Ferris Industries _v. Kelco
Disposal Inc., 492 U.S. 257 (1989), the Supreme Court
held that the Eighth Amendment did not apply to the award
of punitive damages in a civil case between private parties,
in my opinion this case suggests that the Excessive Fines
Clause might apply to punitive damages awards where the
State receives the proceeds of such awards. Specifically,
the Court stated:
"To decide the instant case, however, we
need not go so far as to hold that the
Excessive Fines Clause applies just to
criminal cases. Whatever the confines of the
Clause's reach may be, we now decide only
that it does not constrain an award of money
19McBride_v. General Motors Corp., 737 F.Supp. 1563
(M.D. Ga. 1990).
20See, Schenck v. Minolta Office Systems, 873 P.2d 18
(Colo. App. 1993); Gordon v. State, 608 So. 2d 800 (Fla. 1992).
58a
damages in a civil suit when the government
neither has prosecuted the action nor has any
iol ; F the d
awarded. To hold otherwise, we believe,
would be to ignore the purposes and
concerns of the Amendment, as illuminated
by its history.”
Browning-Ferris__Industries, 492 U.S. at 263-64.
(Emphasis added.)
As indicated by the Court in Browning-Ferris, the history
behind the development and adoption of the Eighth
Amendment plays an important role in in determining its
applicability to awards of punitive damages in cases.?!
“The Eighth Amendment was based directly on Article I §
9, of the Virginia Declaration of Rights of 1776, which had
in turn adopted verbatim the language of § 10 of the
English Bill of Rights." Browning-Ferris, 492 U.S. at 266.
In 1689, Parliament required William of Orange to accept
the provisions of the Bill of Rights as a condition precedent
to offering him the throne. Section 10 of the English Bill
of Rights had been adopted in order to curb the excessive
use of amercements, which had been generously levied by
previous English monarchs. Amercements “were payments
to the Crown, and were required of individuals who were
‘in the King's mercy,’ because of some act offensive to the
Crown." 492 U.S. at 269. History suggests that the use of
these amercements was to impose penalties for both civil
21See, Massey, 1V i ive
Damages: Some Lessons from History, 4G Santee nee. Same Simeon
Jefferies, mr On { Sti na: ' rr
Va.L.Rev. 139 (1986), for a further discussion of the historical
development of the Eighth Amendment.
ee |
59a
and criminal wrongs committed, and it seems clear to me
that Browning-Ferris would have been decided differently
had a portion of the civil fine in that case been paid to the
government, because the civil fine then would have been
similar, in nature, to “amercements," which were defined
in Browning-Ferris as follows:
"Amercements were an ‘all-purpose’ royal
penalty; they were used not only against
plaintiffs who failed to follow complex rules
of pleadings and against defendants who
today would be liable in tort, but also against
an entire township which failed to live up to
its obligations, or against a sheriff who
neglected his duties."
492 U.S. at 269.
History suggests that because of the numerous abuses that
occurred from the use of amercements both Magna Carta
and the English Bill of Rights placed restraints on their
imposition. Based on the historical development of the
Eighth Amendment, the Supreme Court, in Browning-
Ferris ruled that the amendment's primary purpose was to
curb governmental action, rather than to place restraints on
the awards given in civil actions between private parties.22
22The narrowness of the holding in ing-Ferris seems
apparent from a statement made by Justice O'Connor in her
concurring/dissenting opinion in that case, where she cites a Florida
statute (Fla. Stat. § 768.73(2)(b), which has since been repealed by the
Florida Legislature, effective July 1, 1995), which mandated that 60%
of any punitive damages awarded be allocated to the state. In reference
to this statute, Justice O'Connor stated:
I also note that by relying so heavily on the distinction
between governmental involvement and purely private
[Footnote continued on next page]
60a
492 U.S. at 268. In addressing "governmental" versus
“private” action, the Court stated that “the text of the |
[Eighth] Amendment points to an intent to deal with the |
Browning-Ferris, 492 U.S. at 275. (Emphasis added.) |
The Court held that the Excessive Fines Clause did not |
apply to the punitive damages award in the civil case before
it, because the state had not "used its civil courts to extract
large payments or forfeitures for the purpose of raising
revenue or disabling some individual." 492 U.S. at 275. 4
(Emphasis added.) The Court warned, however, that the |
Excessive Fines Clause might apply in cases where punitive |
damages were awarded and a state government either has
“prosecuted the action” or “has any right to receive a share
of the damages awarded." 492 U.S. at 264. (Emphasis
added.) Consequently, there is little doubt in my mind that
the decision the Court makes today means that future
attacks on punitive damages awarded in this state in civil
cases after the effective date of the allocation procedure
established by this opinion, will probably be subject to an
analysis under the Excessive Fines Clause of the Eighth
Amendment. In summary, it appears to me that the
decision in Browning-Ferris suggests that where a sovereign
“has [a] right to receive a share of the damages awarded,”
even in a civil case, an Eighth Amendment analysis night
be appropriate. 492 U.S. at 264. I am of this opinion
[Footnote continued from previous page]
suits, the Court suggests that the Excessive Fines
Clause will place some limitations awards of
punitive damages that are recovered by a
governmental entity.”
492 U.S. 298-99. {
ila
6la
because the Court observed, in holding that the Eighth
Amendment was intended only to restrain governmental
action, that when the Eighth Amendment was adopted the
word “fine” was “understood to mean payment to the
sovereign as punishment for some offense." Browning-
Ferris, 492 U.S. at 265.
By analyzing the holding in Browning-Ferris, I do not
mean to suggest that the Legislature of Alabama could not
require the payment of a portion of punitive damages to the
State General Fund, because I believe that it could;
however, whether the fine is paid to the State by court
order or by statute, I believe the amount of any fine in any
given case would be subject to an analysis under the
Excessive Fines Clause of the Eighth Amendment.
Although the Double Jeopardy Clause of the United
States Constitution probably will not be held to apply to a
purely civil case, that rule might change if a portion of a
punitive damages award is paid to the state. Cf. United
States v. Halper, 490 U.S. 435 (1989), where the Court
held that the constitutional prohibition of double jeopardy
required the reduction of a civil award rendered in favor of
the United States against a defendant who had previously
been subject to criminal sanctions for the same conduct.
The Court in Halper discussed whether a civil award could
be construed as placing a defendant in double jeopardy, and
said:
"[I}n determining whether a particular civil
sanction constitutes criminal punishment, it
is the purposes actually served by the
sanction in question, not underlying nature
of the proceeding giving rise to the sanction,
that must be evaluated."
Halper, 490 U.S. at 447, n. 7. The Court announced that
the purpose of the award is controlling under this analysis,
62a
ratner than whether the action was pursued in a civil or in a
criminal context:
"In making this assessment, the labels
‘criminal’ and ‘civil’ are not of paramount
importance. It is commonly understood that
civil proceedings may advance punitive as
well as remedial goals, and, conversely, that
both punitive and remedial goals may be
served by criminal penalties. The notion of
punishment, as we commonly understand it,
cuts across the division between the civil and
the criminal law, and for purposes of
assessing whether a _ given sanction
constitutes multiple punishment barred by the
Double Jeopardy Clause, we must follow the
notion where it leads. To that end, the
determination whether a given civil sanction
constitutes punishment in the relevant sense
requires a particularized assessment of the
penalty imposed and the purposes that the
penalty may fairly be said to serve. Simply
put, a civil as well as a criminal sanction
constitutes punishment when the action as
applied in the individual case serves the goal
of punishment."
490 U.S. at 448.
Some of the questions I raise about punishing a defendant
more than once may be answered by the Supreme Court in
BMW, which is now pending before it, but, whether that
Court answers these questions or not, it appears to me that
punitive damages are penal in nature and that all the
safeguards of both the Alabama Constitution and the United
States Constitution would apply. I do know that the
Supreme Court of the United States has elected to grant
63a
certiorari review, and to write opinions, in at least three
cases from this state in the past few years in which the
question of excessive punitive damages awards was
addressed. I would also point out that my suggestion of
adopting a rule that would provide for the recovery of
extracontractual damages in insurance cases, including
attorney fees, would be preferable and fairer to the
litigants, and would not result in the possibility that the
attorney for the plaintiff might recover more than the
plaintiff and the state, if 50% of the award (after expenses
and attorney fees) went to the State, as the majority opinion
allows. Another reason why I think compensatory
damages, including extracontractual damages, would be
preferable to a rule that permits the recovery of punitive
damages, is that such a rule would eliminate problems
about "windfalls" to one plaintiff and would remove most
of the legal problems that could develop when questions of
double punishment arise.23 I know further that in its most
recent expression on punitive damages, that Court stated in
Honda Motor Co., Lid. v. Oberg, __* U.S. _, 114 S.Ct.
2331 (1994), the following:
"Punitive damages pose an acute danger of
arbitrary deprivation of property. Jury
23The attorney for the plaintiff in this case argued to the jury
in the Foster case, and again to the jury in this case, that Life of
Georgia should be punished for selling these policies to elderly people.
The question arises: How many times can a defendant be punished
through exemplary damages? In BMW, the Justices, during oral
arguments, made specific inquiry about the “multiplier” effect of
permitting several plaintiffs to argue similar claims to separate juries.
Cf., Dennis Neil Jones, et al., Multiple Punitive Damages Awards for a
ingle WwW uct: Need fe Nati licy to
Protect Due Process, 43 Ala.L.Rev. 1 (1991).
64a
instructions typically leave the jury with
wide discretion in choosing amounts, and the
presentation of evidence of a defendant's net
worth creates the potential that juries will use
their verdicts to express bias against big
businesses, particularly those without strong
local presences. Judicial review of the
amount awarded was one of the few
procedural safeguards which the common
law provided against that danger."
__U.S.at___, 114 S.Ct. at 2340-41.
Summary
On several occasions I have suggested that the Legislature
should consider adopting legislation that would protect both
the consumer and the insurer in these noncommercial
insurance cases. If the statistics appearing in Appendix A
are correct, and I have no reason to doubt them, the State
of Alabama seems to be out of line with neighboring states
in regard to the amount of punitive damages awarded. It
appears to me that the legislative branch ~ the proper
forum for addressing any problem that does exist and for
making the policy choices that must be made. This
suggestion on my part is not new. I first suggested it in my
dissenting opinion in Kountz, where I stated that “in our
scheme of government, policy questions like [those
presented in a bad- faith-failure-to-pay case], especially
since they involve the heavily regulated insurance industry,
should properly be addressed by the Legislature." 461
So.2d at 812. In that dissent, I also stated why I thought
this Court should consider a rule allowing extracontractual
damages, suggesting that there very well might be instances
when insurance companies pay claims that factually should
have been denied, but the company opted to pay the claim
rather than face the possibility of a lawsuit. I also
65a
suggested that if punitive damages awards in those instances
do occur, then premiums for all other policyholders
necessarily rise to offset these added costs. On the other
hand, I also stated that the proliferation of lawsuits and the
size of the jury verdicts suggested consumer dissatisfaction
with some practices that were occurring. No doubt, there
are instances when companies require policyholders to
resort to a lawsuit, even though the insurer's factual basis
for denying a claim is questionable. I have previously
stated that “[t]he fairest rule, ... in view of these two
policy considerations, would be [a procedure] which would
allow any party to a noncommercial insurance contract,
who is forced to go to court in order to recover his contract
claim, to recover his consequential damages as well,
including reasonable attorneys’ fees.” Kountz, 461 So.2d
at 813.
Although the imposition of punitive damages can punish
and deter, it would appear to me that ideally the legislative
branch should make the regulations, and that the executive
branch should enforce them fairly, to effect the regulatory
purpose of protecting the public welfare. See my opinion
in Aetna Life Ins. Co. v. Lavoie, 505 So. 2d 1050, 1056
(Ala. 1987), where I specially concurred and suggested the
Legislature should address the public policy concerns
relating to punitive damages.
nts di i ion
application for rehearing
On original deliverance, I concurred in that portion of the
majority opinion affirming the judgment conditionally upon
the plaintiff's agreement to remit all but $5,000,000 of the
punitive damages awarded, and in that portion of the
opinion that adopted a procedure requiring a bifurcation of
trials in cases in which claims for punitive damages are
presented to a jury. I did so even though I pointed out that
66a
this Court generally gives notice to the Bench and Bar
before adopting such a substantial change in civil
procedure. I still concur as to those two holdings.
However, I dissented from that portion of the opinion that
establishes the policy of allocating 50% of all punitive
damages awards, less attorney fees, to the state's general
fund, and I expressed concerns over the constitutional
implications raised by this decision. I still dissent in that
regard. Because I believe that the rehearing applicants and
the amici curiae have raised many meritorious arguments in
their applications and briefs in support thereof, I must
respectfully dissent from the majority's refusal to address
many of the important issues raised on rehearing.
Life of Georgia applied for a rehearing on December 1,
1995, and it has been supported in its position by amicus
curiae briefs from the Alabama Defense Lawyers
Association; the State of Alabama; Blue Cross and Blue
Shield of Alabama; Alabama Gas Corporation; Alfa
Insurance Company; the Chamber of Commerce of the
United States; the Product Liability Advisory Council, Inc.;
USX Corporation; the University of Alabama Health
Services Foundation, P.C.; Amerex Corporation; and the
Wausau Insurance Companies. Life of Georgia and the
amici raise several substantial questions, and they point out
why the procedure adopted in this case is not only
confusing, but also violates Life of Georgia's constitutional
rights, both state and federal.
The plaintiff has also filed an application for rehearing.
Her application is supported by amicus briefs from the
AM ainsi ocala Miah th
ee a raid anal
67a
Alabama Trial Lawyers Association and an individual
named Mary Lambeth?4.
Although the majority, no doubt persuaded by the
excellent and well-reasoned arguments advanced by both
the parties and the amici curiae, has modified the opinion to
change the effective date of this caselaw and has cleared up
some of the confusion in the original opinion regarding
when the new procedure would take effect and ‘vhich cases
would be affected, the majority has not addressed some of
the basic constitutional arguments pertaining to separation
of powers of government and the legal effect of paying into
the general fund of the state a portion of the punitive
damages.
I do not separately address the arguments that Life of
Georgia and the amici make, but they include substantial
legal issues, especially regarding federal constitutional law.
I set out some of these concerns in the main portion of my
dissent and I do not restate them here.
There is now pending before the United States Supreme
Court a case from this Court styled BMW_of North
America, Inc. v. Gore, 646 So. 2d 619 (Ala. 1994), cert.
granted, U.S. ___, 115 S.Ct. 932 (1995), in which the
petitioner has raised some of the same arguments that are
made by Life of Georgia in its application for rehearing. I
would have preferred to have the United States Supreme
Court's latest expression on the federal constitutional issues
raised in BMW before acting on this application for
rehearing. My views are that the Eighth Amendment could
be implicated where a portion of the punitive damages
24Mary Lambeth is the plaintiff in a federal action based on
the Alabama Wrongful Death Act. Her federal claim involves alleged
asbestos exposure.
68a
award goes to the state and that there could be federal
constitutional violations where multiple penalties are
imposed against a corporation for the same wrongful
conduct, where, as here, the wrongful conduct has already
been considered in setting the penalty in another case; the
wrongful conduct dealt with in this case was considered in
Foster v. Life of Georgia, 656 So. 2d 333 (Ala. 1993) (this
Court reinstated a $1 million punitive damages judgment
against Life of Georgia for the same conduct complained of
in this case). Having read the opinions rendered by the
United States Supreme Court and having considered the
questions the Justices of that Court are asking during oral
arguments in cases involving punitive damages and multiple
parties, some of whom may be located outside the forum
state, I believe that the judgment in this case presents
serious constitutional questions that should be “1
answered. See, Honda Motor Corp. v. Oberg, ___
,» 114 S. Ct. 2331 (1994); ye
Alliance Resources Comp., __ U.S. 113 S.Ct. 271i
(1993); Browning-Ferris Industries v. Kelco Disposal, Inc.,
492 U.S. 289 (1989). Cf.
Young v. United States ex rel.
Vuitton et Fils S.A., 481 U.S. 787, 804-08 (1987) (the
United States Supreme Court held that counsel for a party
that benefits financially from a federal court order may not
be appointed as prosecutor in a contempt action alleging a
violation of that order). See also, Kennedy v. Mendoz-
Martinez, 372 U.S. 144 (1963), which addresses the issue
of quasi-criminal statutes.
For these reasons and those stated in the main part of this
opinion, I must respectfuliy dissent from the majority's
refusal to address most of the issues raised in the
applications for rehearing.
> SPI Sa
ine Ma
PUNITIVE DAMAGE AW
$7,489,023
$0 iz .
GEORGIA
Source: Lexis, Westlaw, Southern Reporter 2d and Statistic
Abstract of the United States 1993
RDS AFFIRMED BY STATE COURTS
ITAL AMOUNT
1987 - 1993
$101,300,144
$3,750,268 $5,086,020
AISSISSIPPI TENNESSEE ALABAMA
Note: Awards affirmed by Georgia Apeliate Courts,
Alabama Supreme Court, Mississippi Supreme
Court, Tennessee Appellate Courts. Population
figures are as or 1990.
PUNITIVE DAMAGE AV
$10 +
$1.16 :
°° {_ sa
GEORGIA MIS
Source: Lexis, Westlaw, Southern Reporter 2d and Statistice
Abstract of the United States 1993
/ARDS AFFIRMED BY STATE COURTS
PER CAPITA
1987 - 1993
$25.09
$1.46 $1.04
SISSIPPI TENNESSEE ALABAMA
a Note: Awards affirmed by Georgia Apeliate Courts,
Alabama Supreme Court, Mississippi Supreme
Court, Tennessee Appellate Courts. Population
figures are as or 1990.
TOTAL AMOUNT
AFFIRMED BY A
Source: Laxts, Westlaw, Southern Reporter 2d
DOF PUNITIVE DAMAGE AWARDS
LABAMA APPELLATE COURTS
1974 - 1993
$90,366,527
$35,257,497
$4,239,766
1979-1983 1984-1988 1989-1993
Note: Total dose not include general awards that did not differentiate
between compensatory and punitive damages
NUMBER OF PUNITIVE DAMAGE AWARDS
AFFIRMED BY ALABAMA APPELLATE COURTS
1974 - 1993
1974-1978 1979-1983 1984-1988 1989-1993
Source: Lexis, Westlaw, Southern Reporter 2d
NUMBER OF PI
AFFIRMED BY AI
1974 1975 1976 1977 1978 1979 1980 198
Source: Lexis, Westlaw, Southern Reporter 2d
TIVE DAMAGE AWARDS
AMA APPELLATE COURTS
74 - 1993
2 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
AMOUNT OF
AFFIRMED BY |
$30,000,000 T
$25,000,000 +
$20,000,000 +
+
$15,000,000 -
$0 +—+-—-— ae ee
1974 1975 19% 1977 1978 1979
Source: Laxis, Westlaw, Southern Reporter 2d
-UNITIVE DAMAGE AWARDS
LABAMA APPELLATE COURTS
1974 - 1993
Note: Total does not include general awards that did not differentiate
between compensatory and punitive damages
75a
Life Insurance Company of Georgia v. Johnson
BUTTS, JUSTICE (concurring in part and dissenting in
part).
L.
I concur in the establishment of a bifurcated trial in cases
where a plaintiff seeks punitive damages from a defendant.
I believe such a procedural change is within this Court's
authority, pursuant to Ala. Code 1975, § 12-2-7. See
Hammond vy. City of Gadsden, 493 So.2d 1374 (Ala.
1986); Green Oil Co. v. Homsby, 539 So.2d 218 (Ala.
1989). However, I would add several caveats.
The majority's opinion states that in the punitive damages
portion of the trial, the jury is to be informed of the factors
set forth in Ala. Code 1975, § 6-11-23, Hammond, Green
Oil, and other case law. ___ So.2d at __—'.-~«sAAs a former
circuit court judge, I believe that submitting facts and
information from other cases, perhaps in an attempt by
opposing attorneys to establish the amount of punitive
damages awarded by other juries in “comparable cases,”
will be more confusing and time-consuming than it will be
helpful.
Further, taking the Green Oil rule, the majority will have
the jury informed of the plaintiff's costs of litigation,
including attorney fees. I would either delete this
requirement or require that the jury also be informed of the
defendant's costs of litigation, including attorney fees.
Il.
I respectfully dissent from the majority's holding
requiring apportionment of a punitive damages award
between the plaintiff and the State. It is for the legislature
to determine whether a portion of a punitive damages award
should be paid to the State and, if so, what percentage of
76a
the award the State should receive, and it is for the
legislature to determine the State fund or agency to which
the monetary award should be allotted.
Iii.
As the majority notes, lawsuits and jury awards of
punitive damages have become virtually the only effective
weapon people have to deter powerful entities from
conducting tortious activities within this State. This
condition has arisen because the State of Alabama lacks
strong consumer protection laws and because the State
agencies whose duty it is to enforce the existing body of
laws are woefully underfunded. For example, Alabama's
Insurance Department, with a scant budget of less than $2
million, a staff of fewer than 30 professional employees,
including only 4 consumer protection specialists, is
responsible for regulating Alabama's $6 billion insurance
industry, composed of 1100 companies.25
It is clear that Alabama needs stronger consumer
protection laws and a realistic means to enforce them. The
majority has now established that that portion of punitive
damages allocated to the State will be paid into the General
Fund. Common sense dictates, however, that the
apportionment should be used to attack the underlying
problem at its source. I believe that, if there is to be an
apportionment to the State, it should be used to expand and
Strengthen the department or agency that polices the
industry being punished. For example, in a case such as
this, where an insurance company is found guilty of
consumer fraud, the apportionment should be paid to the
25jerry Underwood, “Big Money Fight,” Birmingham News,
November 5, 1995, at 8A.
77a
Alabama Department of Insurance. The punitive damages
award would then become a meaningful investment in
deterrence, rather than an unconditional gift to the State's
General Fund.
WL961930.029/12
78a
Notice: This opinion is subject to formal revision before
publication in the advance sheets of Southern Reporter.
Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts. 300 Dexter Avenue,
Montgomery. Alabama 36104-3741 ((334) 242-4621), of
any typographical or other errors, in order that corrections
may be made before the opinion is printed in Southern
SUPREME COURT OF ALABAMA
OCTOBER TERM, 1995-96
1940357
Life Insurance Company of Georgia
v.
Daisey L. Johnson
Appeal from Mobile Circuit Court
(CV-93-969)
SHORES, JUSTICE.
Daisey L. Johnson sued Life Insurance Company of
Georgia ("Life of Georgia"), alleging that it had engaged in
intentional and reckless fraud and fraudulent suppression by
selling her a Medicare supplement insurance policy that was
worthless to her because she was eligible for Medicaid.
The jury returned a verdict in favor of Ms. Johnson,
assessing compensatory damages at $250,000 and punitive
damages at $15,000,000. Life of Georgia moved for a new
trial or for a remittitur of damages. The trial judge held a
79a
hearing pursuant to Hammond v. City of Gadsden, 493 So.
2d 1374 (Ala. 1986), and Green Oil Co. v. Hornsby, 539
So. 2d 218 (Ala. 1989). Following the hearing, the trial
judge reduced the punitive damages award to $12,500,000,
pursuant to Ala. Code 1975, § 6-11-21, and this remittitur
was accepted by the plaintiff. Life of Georgia appeals.
Daisey Johnson, a resident of Grove Hill, Alabama, is an
84-year-old woman who went through the third grade in
school and who spent her life as a domestic worker.
Because Ms. Johnson had dealt with Life of Georgia for
over 25 years, paying premiums on nine different policies,
she trusted its agents. Sometime before January 8, 1990, a
Life of Georgia agent, Barbara Holt, came to
Ms. Johnson's home to collect the monthly premiums on
her existing policies. Ms. Holt recommended _ that
Ms. Johnson purchase a Medicare supplement policy. The
next week Ms. Holt returned and again discussed the
Medicare supplement policy with Ms. Johnson, who agreed
to purchase the policy. Ms. Johnson testified that Ms. Holt
told her that the Medicare supplement policy would protect
her. She testified: "If I got in the hospital, you wouldn't
have to worry about your doctor bill, you could stay in
there because they would pay your doctor bill, and I got
it." Ms. Holt filled out the application for Ms. Johnson.
At first, Barbara Holt testified that she asked
Ms. Johnson for her social Security card; later, she testified
that she asked Ms. Johnson for her Medicaid card and that
she asked the questions on the application, one of which
was whether Ms. Johnson was on Medicaid. At trial,
Ms. Johnson disputed Ms. Holt's testimony that she was
asked whether she was on Medicaid. Ms. Johnson showed
the jury how she gave her cards to Ms. Holt by pulling a
vinyl holder out of her purse. She testified that she always
80a
kept her cards in this vinyl holder, which contained her
Medicaid, Medicare, and Social Security cards.
Despite the fact that Ms. Holt knew that it was illegal
and against company policy to sell a Medicare supplement
policy to Ms. Johnson because she was on Medicaid,
Ms. Holt completed the application and collected the
premiums on the policy. Initially the premiums were $71
per month; by 1992, they had risen to $103 -- almost one-
third of Ms. Johnson's fixed income. Over almost a three-
year period from 1990 through 1992, Ms. Johnson paid a
total of $3,132 in premiums.
Life of Georgia first argues that it was entitled to a
directed verdict or to a judgment notwithstanding the
verdict, with respect to the award of punitive damages
because, it argues, the plaintiff failed to prove by clear and
convincing evidence that the company “consciously or
deliberately engaged in oppression, fraud, wantonness, or
malice" as is required by § 6-11-20, Ala. Code 1975, for
the award of punitive damages. The statute provides:
"§ 6-11-20. Punitive damages not to be
awarded other than where clear and
convincing evidence proven; definitions.
"(a) Punitive damages may not be
awarded in any civil action, except civil
actions for wrongful death pursuant to
Sections 6-5-391 and 6-5-410, other than in
a tort action where it is proven by clear and
convincing evidence that the defendant
consciously or deliberately engaged in
oppression, fraud, wantonness, or malice
with regard to the plaintiff. | Nothing
contained in this article is to be construed as
creating any claim for punitive damages
8la
which is not now present under the law of
the State of Alabama.
"(b) As used in this article, the
following definitions shall apply:
"(1) Fraud. An _ intentional
misrepresentation, deceit, or
concealment of a material fact the
concealing party had a duty to
disclose, which was gross,
oppressive, or malicious and
committed with the intention on the
part of the defendant of thereby
depriving a person or entity of
property or legal rights or otherwise
causing injury.
"(2) Malice. The intentional
doing of a wrongful act without just
cause or excuse, either:
"a. With an intent to injure
the person or property of
another person or entity, or
"b. Under such circumstances
that the law will imply an evil
intent.
"(3) Wantonness. Conduct
which is carried on with a reckless or
conscious disregard of the rights or
safety of others.
"(4) Clear and convincing
evidence. Evidence that, when
82a
weighed against evidence in
opposition, will produce in the mind
of the trier of fact a firm conviction
as to each essential element of the
claim and a high probability as to the
correctness of the conclusion. Proof
by clear and convincing evidence
requires a level of proof greater than
a preponderance of the evidence or
the substantial weight of the
evidence, but less than beyond a
reasonable doubt.
The standard of review applicable to a directed verdict or
to a denial of a motion for a directed verdict is whether the
nonmoving party presented substantial evidence in support
of his or her position. If not, then a directed verdict is
proper. Bailey v. Avera, 560 So. 2d 1038, 1039 (Ala.
1990). A verdict is properly directed only where there is a
complete absence of proof on a material issue or where
there are no disputed questions of fact for the jury to
determine. Woodruff v. Johnson, 560 So. 2d 1040, 1041
(Ala. 1990); K.S. v. Carr, 618 So. 2d 707, 713 (Ala.
1993). Life of Georgia argues strenuously that the
evidence was not sufficient to meet this clear and
-convincing standard; however, it admits that the evidence
was in sharp conflict.
In this case, the trial judge denied Life of Georgia's
motion for a directed verdict because he was satisfied that
the plaintiff had presented a jury question with regard to the
issue of punitive damages. He stated in his Hammond
order:
"Clear and convincing evidence was
presented at trial that Life of Georgia was
aware of the fraudulent sale of these
83a
Medicare supplement policies. ... Plaintiff
further produced clear and convincing
evidence through the testimony of three live
pattern witnesses that Life of Georgia's
conduct in selling these policies to elderly,
uneducated, single black women was not an
isolated event and had not ceased and these
people were paying a very substantial portion
of their fixed income for useless policies.
Evidence was presented at trial that Life of
Georgia was aware of the unfitness of its
agent in selling this specialized type policy.
Eric Peek testified that he trained Barbara
Holt for Life of Georgia yet gave her no
training relative to the Medicare Supplement
policies because he himself did not receive
training to enable him to understand and
properly sell these policies. Evidence was
presented at trial that Life of Georgia began
marketing the Medicare supplement policies
in 1986 and that continuing through the date
of the verdict in June of 1994, Life of
Georgia had done nothing to ferret out and
correct the problem. In fact, Life of
Georgia's corporate officers testified during
the Plaintiff's presentation of her case that
Life of Georgia had done nothing to try to
prevent the sale of Medicare supplement
policies to unqualified persons, even though
in 1992 Life of Georgia had been faced with
trial in Mobile County and experienced an
adverse verdict. ..."
The trial judge then instructed the jury that, pursuant to
§ 6-1-20, it must be satisfied by “clear and convincing
evidence” of the plaintiff's allegations before it could return
84a
a punitive damages award. In the Hammond order, the
trial judge recited the proof presented by the plaintiff as to
her dealings with agent Barbara Holt in regard to the
Medicare supplement policy:
"Plaintiff proved that Life of Georgia's
agent, Barbara Holt, misrepresented to her
that she needed health insurance under a
Medicare supplement policy in order to pay
her hospital and medical bills should she
become sick. There was ample and
substantial evidence that Plaintiff showed
Barbara Holt her Medicaid card and that
Barbara Holt knew or should have known
that Plaintiff did not qualify for the insurance
since she was a Medicaid recipient. Plaintiff
proved that Barbara Holt was not properly
trained to be aware of circumstances where
elderly persons living on low fixed income
such as Daisey Johnson have coverage under
both Medicare and Medicaid. This lack of
awareness permeated Life of Georgia's entire
corporate structure as the vice president in
charge of marketing and training, Robert
Hayes, gave uncontradicted testimony that he
too would ‘assume’ that if someone was on
Medicare they did not have Medicaid.
Plaintiff proved that over 116,000
Alabamians have both Medicare and
Medicaid. This lack of training and
awareness fostered both intentional and
reckless misconduct on behalf of its agents,
including Barbara Holt. Plaintiff
discovered, after hearing about a similar
situation involving Mattie Foster and Life of
Georgia, that she had been sold a Medicare
85a
supplement policy she did not need and was
useless to her. Plaintiff's proof that Life of
Georgia was aware of the situation where
unqualified elderly people living on fixed
income were sold this Medicare supplement
policy yet did nothing to prevent or detect
such wrongful conduct distinguishes this case
from ‘renegade agent’ cases. Life of
Georgia played an active role in allowing
Barbara Holt to sell the policy in question
and continue to collect the premiums."
When the evidence meets the "sufficiency" test, jury
verdicts are presumed correct, and this presumption is
strengthened by the trial court's denial of a motion for new
trial. Therefore, a judgment based upon a jury verdict and
sustained by the denial of a post-judgment motion for a new
trial will not be reversed on the ground that it is against the
weight of the evicence unless, it is plainly and palpably
wrong. Alpine Bay Resorts, Inc. v. Wyatt, 539 So.2d 160,
162 (Ala. 1988); Ashbee v. Brock, 510 So.2d 214 (Ala.
1987); Jawad v. Granade, 497 So.2d 471 (Ala. 1986).
Having carefully studied the lengthy record, we conclude
that there was substantial evidence before the jury to
support the plaintiff's claim.
Life of Georgia next contends that the trial court erred in
admitting what it calls “highly improper, prejudicial and
inflammatory evidence" with respect to the plaintiff's claim
that Life of Georgia was negligent and wanton in its
training of its agents. The company contends that the only
reason the plaintiff pursued the negligent and wanton
training claim was to introduce evidence that would
prejudice and bias the jury against the company. This
argument disregards the Alabama statute on vicarious
liability, § 6-11-27, Ala. Code 1975, and the strong proof
86a
required under this statute. The common law rule of
vicarious liability is modified by § 6-11-27; this Code
section requires a higher degree of proof of culpability on
the part of the principal before punitive damages can be
imposed against the principal for the conduct of its agent.
Northwestern Mut. Life Ins. Co. v. Sheridan, 630 So. 2d
384, 390 (Ala. 1993). This Court noted this modification
in Sheridan and commented: "Thus, as a logical matter, if
plaintiffs can meet the statutory requirement for vicarious
liability, they will, in many cases, also have established the
elements of their claims for wantonness in the hiring and
supervision of the agent." Id. In this case, the plaintiff's
evidence relating to her claim that Life of Georgia
negligently and wantonly trained its agents was direcily
related to her fraud claim. Because the plaintiff was
required to prove a higher degree of culpability on the part
of Life of Georgia to bind it for the acts of its agent, the
trial court did not err in admitting this evidence. Id.
Next, Life of Georgia argues that it is entitled to a
remittitur of the $250,000 compensatory award, on the
grounds that the award grossly exceeds plaintiff's "mental
anguish" damages and her $3,132 out-of-pocket loss. Life
of Georgia contends that the only evidence presented by the
plaintiff concerning her mental state, upon learning that the
insurance policy she had paid on for almost three years was
worthless, was "that it made her angry" and that it
"worried" her. The record reflects that this is not an
accurate picture of her testimony. Ms. Johnson testified
that after she learned that she had been paying the
premiums on a worthless insurance policy, she could not
sleep and her meal schedule was disrupted. Her testimony
that she ran two insurance agents off her property, telling
them "to leave -- leave out of my yard and don't come
back" is evidence from which the jury could conclude that
Ms. Johnson was distressed to learn that she had been
a
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87a
paying for a worthless policy and that she had suffered
mental anguish as a result. The jury listened to her
evidence and concluded that she had suffered emotionally
as a result of the company's conduct. "[T]Jhere [is no]
yardstick to measure the amount of recompense which
should be awarded for. . . mental suffering.” Birmingham
Electric Co. v. Thompson, 251 Ala. 465, 466, 37 So. 2d
633, 634 (1948).
The trial judge also reviewed the evidence presented by
the plaintiff concerning her claim for mental anguish. He
concluded: “Ample evidence was presented at trial which
supports the total compensatory damages award of
$250,000 against Life of Georgia." This Court has said
that the trial judge has much discretion in determining
whether to grant a new trial and whether to require a
remittitur of damages for mental anguish. Crown Life Ins.
Co. vy. Smith, 657 So. 2d 821 (Ala. 1994); Fields v.
Parker, 361 So. 2d 356 (Ala. 1978). We find no abuse of
discretion on his part in denying the motion for a new trial
and in refusing to remit the award for compensatory
damages, based upon the evidence before him. Pitt _v.
Century II, Inc., 631 So. 2d 235, 239 (Ala. 1993).
Finally, we come to the question of the imposition of
punitive damages. Life of Georgia, a tortfeasor that has
been found by this jury to be guilty of conduct for which
the law permits the imposition of punitive damages, argues
that its rights have been unconstitutionally impinged upon
by the imposition of such damages. Over the years the
constitutional arguments advanced in effurts to eliminate or
to cap punitive damages awards have taken different forms.
It has been argued that the excessive fines provisions of the
state and federal constitutions forbid the imposition of
punitive damages. Kumar v. Lewis, 561 So. 2d 1082 (Ala.
1990); Industrial Chemical & Fiberglass Corp. v.
88a
Chandler, 547 So. 2d 812 (Ala. 1988); Alabama Power Co
y. Turner, 575 So. 2d 551 (Ala. 1991) cert. denied 500
U.S. 953 (1991). This argument was rejected by the
United States Supreme Court in Browning-Ferris Industries
of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. 257,
109 S. Ct. 2909, 106 L.Ed.2d 219 (1989), and has largely
been abandoned. See Ingraham v. Wright, 430 U.S. 651,
97 S.Ct. 1401, 51 L.Ed.2d 711 (1977). More recently, the
due process provisions of the Fourteenth Amendment have
been the basis of constitutional challenges, as in this case,
where Life of Georgia argues that the award of punitive
damages is so grossly excessive and fundamentally unfair
that it contravenes Alabama law and the Due Process
Clause of the Fourteenth Amendment of the United States
Constitution. See Intercontinental Ins. Co. v. Lindblom,
571 So. 2d 1092 (Ala. 1990). It is also frequently argued
that, under Alabama law, juries are provided too few
standards for determining a verdict appropriate both to
punish the defendant, whose conduct inflicted harm upon
the victim, and also to deter others from engaging in
similar conduct, without completely destroying the
defendant financially. Aetna Ins. Co. v. Lavoie, 475 U.S.
813, 106 S. Ct. 1580, 89 L.Ed.2d 823 (1986).
These arguments have been carefully considered by this
Court. The standards set forth in Hammond v. City of
Gadsden, 493 So. 2d 1374 (Ala. 1986), and Green Oil Co.
vy. Hornsby, 539 So. 2d 218 (Ala. 1989), were adopted
partly in response to these concerns. These cases require
the trial court, after the jury returns a verdict that the
defendant claims to be excessive, to consider all relevant
factors bearing on the issue of excessiveness when viewed
from the perspective of the defendant. The factors set out
in Hammond and Green Oil are not intended to be all-
inclusive. Trial judges are encouraged to consider any
a a eS a ee
ee ee ow ey -
89a
evidence that has any relevance to the question of the
fairness and justness of the jury verdict.
In this case, a jury found that Life of Georgia had
defrauded an elderly Alabama citizen, and there was
evidence that she was not the only Alabama victim of such
fraud. The evidence established, and a jury has found, that
the conduct of Life of Georgia justifies requiring it to pay a
substantial sum of money as punitive damages. The trial
judge has considered evidence offered in a post-verdict
hearing pursuant to Hammond and Green Oil. After that
hearing, the trial judge ordered a remittitur and explained
his order, remitting the $15,000,000 punitive damages
award to $12,500,000, as follows:
"This Court is mindful that this verdict is
large. Yet this Court finds that a punitive
damages award of $12,500,000 bears a
reasonable relationship to the harm that is
likely to occur from Life of Georgia's
conduct as well as to the harm that actually
has occurred. The harm which was
committed is even more egregious because
Life of Georgia refuses to admit or concede
any wrongdoing whatsoever and merely
[attributes] the sale of this policy [to] a
‘miscommunication.' Life of Georgia has
profited from such 'miscommunications. '
"This Court finds that the economic
impact of the verdict on Defendant Life of
Georgia is slight. In 1993, the company had
assets exceeding $2.3 billion. Investment
income alone totaled $173 million for 1993
and the company has over billion in reserve.
The company has testified that it has
sufficient resources to pay the judgment if it
90a
should be affirmed. The financial position
of Life of Georgia does not support any
reduction in this verdict.
"The Court finds that the verdict
should be high in order to encourage a
plaintiff such as this, and her attorneys, to
pursue this type of case. The Court is of the
opinion that there are many people situated
such as Plaintiff who are unable due to
sickness, age, infirmity or whatever to
pursue such a case. The Court has
considered whether the cost of this litigation
favors remittitur and is of the opinion that
this factor does not weigh in favor of
reducing this verdict.
"The Court has compared this verdict
to other verdicts affirmed by the Alabama
Supreme Court, including Northwestern
Mutual Life Insurance Co. v. Sheridan, [630
So. 2d 384 (Ala. 1993)]. The Court is
mindful that the $15 million punitive award
is $2,500,000.00 larger than that amount
affirmed in Sheridan, which is the largest
punitive damages award in a fraud case ever
affirmed by our Supreme Court. The Court
has compared the facts of the Sheridan case,
as set forth in the Supreme Court's opinion,
and the facts of this case. The Court is
clearly convinced that the wrongful conduct
in this case is much worse. The class of
plaintiffs Life of Georgia preyed upon were
from a group of citizens that need the most
protection: elderly, uneducated, and low
income. Life of Georgia knew that these
9la
types of individuals were easily persuaded,
and used sales techniques such as ‘fear’ to
sell these policies. The Court further
compared this verdict to other verdicts
similar in nature. Nevertheless, although
this Court is of the opinion that the facts in
this case are much worse than those in the
Sheridan case, the Court is of the opinion
that the punitive award in this case should be
reduced by $2.5 million so as to not exceed
the largest punitive award affirmed by our
Supreme Court.
"Next, the president of Life of
Georgia testified that Life of Georgia ceased
doing business in Alabama and would never
return. He also testified that if any
policyholder of Life of Georgia had been
sold a Medicare supplement policy who had
received Medicaid benefits, that person's
premiums would be immediately refunded.
He further stated that Life of Georgia had
undertaken a program in Alabama to
determine whether there were any
policyholders situated such as Daisey
Johnson. However, the Court is aware that
following the testimony of Life of Georgia's
president, a witness testified by deposition
for Plaintiff that her 91-year-old father was
on Medicaid, had been sold a Medicare
supplement policy, and that she had
demanded Life of Georgia to return his
premiums. Ms. Pernell, the daughter of the
person sold the Medicare supplement policy,
was informed by Life of Georgia that they
would not refund the premiums. This
92a
testimony contradicts that of the president
and concerns the Court as to the qualify of
Life of Georgia's assertion that it would
refund premiums once an _ unqualified
policyholder came forward.
"It is the conclusion of this Court that
the verdict was not based upon bias, passion,
prejudice, corruption, or other improper
motive, but instead was the product of the
jury's careful and studious consideration of
the evidence and applicable law. This
conclusion is based in part on this Court's
observing . . . all of the parties to the trial,
the respective attorneys, and the jury and its
reaction to all of the others. The jury was
justified in awarding these damages to punish
Life of Georgia and to prevent similar
wrongs in the future. The imposition of
these damages in this case creates a strong
incentive for vigilance on the part of all
insurance companies doing business in this
state. The jury arrived at an amount that it |
considered necessary to vindicate the public
interest by eliminating the reprehensible
conduct of this defendant and in punishing it ;
appropriately. This verdict is not so large
that goes beyond an amount necessary to
accomplish these goals. This verdict will
have little, if any, impact upon Life of
Georgia and other insurance companies
unless it is substantial... ."
The trial judge's order demonstrates that he focused on
the conduct of Life of Georgia to determine whether the
punishment was excessive in relationship to that conduct.
93a
The trial judge also considered the public policy upon
which punitive damages are based: to eradicate intentional
conduct by the particular defendant before the court and to
deter others from similar conduct. The trial court remitted
the award to an amount that it determined, from an
examination of the facts specific to the defendant, was not
excessive; the court determined that the reduced award is
not so large as to destroy the defendant, but is large enough
to serve the public policy of punishment and deterrence.
Alabama citizens who become the victims of fraud have
little recourse other than through litigation. The record in
this case is replete with expert testimony to the effect that
the State Insurance Department has little power to regulate
agents, and we judicially know that litigation is often the
only weapon defrauded citizens have. Punitive damages
have historically part of the remedy for such victims, and
to get that remedy they must prove that the defendant
intentionally inflicted the injury for which punishment is
sought. As Jonathan Massey, writing recently in Trial
magazine explained, punitive damages have been used "to
help equalize the playing field between the powerful and
the powerless -- whether between king and subject, railroad
and passenger, or corporation and consumer." “Why
Tradition Supports Punitive Damages: and How the
Defense Bar Misreads History," Trial, September 1995 p.
19. Massey continues:
"Punitive damages awards in
consumer fraud and products liability cases
are within the historical tradition of tort law
for an even more fundamental reason:
Punitive damages have traditionally been
used as a populist weapon to help level the
playing field between powerless plaintiffs
94a
and powerful defendants. As the U.S.
Supreme Court observed in an 1886 case,
"'The dignity and value of the
right assailed, and the power
and authority of the source
from___which___the _assault
proceeds, are elements to be
considered in the computation
of damages, if they are to be
not only compensation for the
direct loss inflicted, but a
remedy and prevention for the
greater wrong and _ injury
involved in the apprehension
of its repetition. [Barry v.
Edmunds, 116 U.S. 550, 556
(emphasis added)].'
"In common law England, punitive
damages were often employed against the
crown and the aristocracy. In 19th-century
America, they were frequently used against
railroads and robber barons. As_ the
Pennsylvania Supreme Court observed in
1886, ‘The liability of railway and other
corporations to exemplary damages for gross
negligence is well settled.' [Lake Shore &
Michigan S. Ry. v. Rosenzweig, 113 Pa.
510, 544, 6 A. 545 (1886)].
"The modern-day heir of this populist
legacy is the consumer plaintiff suing a large
corporate defendant. Using punitive
damages to redress the imbalance in the
relationship between consumer and
eee ny ny See Se
95a
corporation is squarely within their historical
tradition."
Id. at pp. 24-27.
Attorneys who represent victims of fraud, such as the
fraud practiced upon this plaintiff, bear all of the expense
of the litigation and carry all of the risk of failure. They
are reimbursed only if the victim recovers from the
wrongdoer. The lawyer takes a significant risk in such
cases. According to Business Week magazine,! plaintiffs
today are losing a greater proportion of cases that go to trial
than in past years; in 1988 plaintiffs won 63% of the cases
that went to trial, but in 1992 plaintiffs won only 54%.
This Business Week statistic is supported by a United States
Justice Department Survey? the country's 75 most populous
counties, which concluded that in 1992 only 2% of the
762,000 cases disposed of in those counties were decided
by juries, and that plaintiffs won in only 52% of cases.3
Statistics indicate that most cases produce no money
damages at all for plaintiffs or their lawyers. For example,
here in Alabama, the overwhelming majority of the civil
cases decided by this Court in 1994 (345 cases) were cases
"Corporate America's fear of juries may be overblown,"
Business Week, November 8, 1993.
2"Civil Jury Cases and Verdicts in Large Counties" is a joint
project of the Bureau of Justice Statistics and the National Center
for State Courts.
3Richard C. Reuben, “Plaintiffs Rarely Win Punitives,
Study Says,” A.B.A. Journal, p. 26, October 1995.
96a
in which monetary damages were sought, but not awarded.
Monetary damages had been awarded in only 114 cases
taken on direct appeal to this Court. This is only 7% of the
total number of cases that this Court handled.
On a national level, American Bar Association statistics
show that personal injury claims represent only 9% of the
civil caseload in this country. Since 1986, personal injury
cases have remained essentially flat on the scale, while
domestic relations matters have increased by 43% .4
There are also many cases that are concluded by the
entry of a summary judgment for the defendant. Cases
decided by summary judgments formed the largest category
of civil cases decided by this Court in 1994, 47.6%.
Eighty-three percent of those cases were affirmed by this
Court, either in whole or in part. In all of these cases, the
plaintiff's lawyer loses the amount she or he has expended
in filing the action and in preparing for trial.
Litigation is slow and costly and carries no guarantee of
success. Victims of fraud bear the burden of proving to the
satisfaction of a jury of 12 citizens that they have been
victimized by the defendant. It is a heavy burden, and
litigation is an inefficient way to stop fraudulent conduct --
one lawsuit at a time, brought by one victim at a time -- but
it provides the only recourse a defrauded citizen of
Alabama has.
4Statistics according to the State Court Caseload Statistics
Annual Report 1992 published February report is a joint project
of the Conference of State Court Administrators, the State
Justice Institute, and the National Center for State Courts Court
Statistics Project.
97a
The question whether setting standards for post-trial
review of a jury's verdict is sufficient to provide due
process, while allowing the jury discretion to determine
punitive damages, has been much discussed. Under our
present procedure, the jury, before rendering its verdict,
never hears whether the amount it selects as the appropriate
amount for punishing the defendant and deterring others
from similar conduct is actually an appropriate amount,
considering the factors that trial courts and appellate courts
must consider in reviewing jury verdicts (i.e., the
Hammond and Green Oil factors). In some cases, the
plaintiff or defendant may offer evidence that the acts
complained of resulted in profit to the defendant in a
specific amount. In some cases the evidence might show
how much or how little it would have cost the defendant to
remedy a defect in a product or to change its method of
doing business, but, in most cases, it could be argued that
the jury has incomplete information from which to
determine with certainty the amount that is appropriate to
serve the ends for which punitive damages were intended.
Under our present procedure, much evidence relevant to
reaching a decision as to an appropriate amount to punish
the particular defendant is withheld from the jury. To
reach a verdict and to fix an amount of punitive damages,
the jury may consider only the character of the defendant's
conduct and the degree of wrong as shown by the evidence
in the case. These strictures on the evidence that the jury
may consider in awarding punitive damages result from
concern that both evidence of the defendant's wealth or the
defendant's lack of wealth and also other evidence that is
relevant, if not critical, to the issue the jury is asked to
decide must be excluded because such evidence could
potentially influence the jury to the prejudice of one party
or another. We have concluded, after much deliberation,
that the need for more guidance for the jury in these cases
outweighs the concern that such evidence might prejudice
98a
the jury. Juries are presumed to follow the law as
instructed by the trial court. There is no reason to assume
that the jury would disregard the trial court's instructions
on this issue.
Separating the fact-finding process for adjudging liability
and compensatory damages from the damages-assessment
process in a punitive damages case and, at the same time,
improving the reliability of the punitive damages-
assessment process is a procedural goal that was recognized
by Justice Jones in his special concurrence in Ridout's-
Brown Service, Inc. v. Holloway, 397 So.2d 195 (Ala.
1981), as adopted by this Court in Green Oil Co, v.
Hormsby, supra. Justice Houston, concurring specially in
Charter Hosp. of Mobile, Inc. v. Weinberg, 558 So.2d 909
(Ala. 1990), expressed his opinion that the due process
provisions of the constitution are violated when the jury is
“given the unbridled discretion to award no punitive
damages or to award an unlimited amount of punitive
damages, taking into consideration only the character and
the degree of the wrong as shown by the evidence in the
case and the necessity of preventing similar wrongs in the
future.” 558 So. 2d at 917. Justice Houston then set out a
procedure providing for a bifurcated trial as a way to
ensure due process:
"Therefore, I would recommend that
the following procedure be applied in all jury
cases involving claims for punitive damages
and as to which claims a party had a right to
trial by jury at common law prior to the
adoption of the first Alabama Constitution
"A jury will determine the issues of
liability, the amount of compensatory
damages, and whether the defendant's
iii,
99a
conduct warrants the imposition of punitive
damages. In addition to other jury verdict
forms, in common law cases involving
punitive damages the following jury verdict
form should be given to a jury for each party
against whom punitive damages are sought:
""In accordance with
the instructions given to us by
the trial court, we find that
punitive damages (should)
(should not) be assessed
against (name of party against
whom punitive damages are
sought).'
"In the event that the jury determines
that punitive damages should be imposed
against one or more defendants, the trial
will resume; and evidence of the following,
which was not admissible in the trial in
chief, shall be admissible upon an offer by
any party in accordance with the rules of
evidence. *
"Evidence of the harm that was likely
to occur from the defendant's conduct as
well as the harm that actually has occurred
is relevant. The jury should be instructed
that, it finds that the actual and likely harm
is slight, the punitive damages (subject to
the other factors hereinafter set out) should
be relatively small. If the actual harm
and/or likely harm was grievous, the
punitive damages (subject to the other
factors hereinafter set out) should be much
greater.
100a
"The duration of the defendant's
conduct, the degree of the defendant's
awareness of any hazard that his conduct
has caused or is likely to cause, any
concealment or ‘cover-up’ of that hazard,
and the existence and frequency of similar
conduct of the defendant are relevant. The
jury should be instructed that if it finds that
the defendant's offensive conduct was of
long duration or was frequently repeated;
that the defendant acted with awareness that
his conduct was causing or was likely to
cause the hazard by which the plaintiff was
in fact damaged; or that the defendant
concealed or covered up that hazard, then
such a finding should increase the amount
of punitive damages.
"The profitability of conduct to the
defendant is relevant. The jury should be
instructed that the punitive damages should
remove all profit from the wrongful conduct
and should be in excess of the profit, so that
the damages would ‘sting.’
"The financial position of the
defendant is relevant. The jury should be
instructed that the amount of punitive
damages should ‘sting’ the defendant,
considering his financial condition.
"All costs of the litigation, including
the attorney fees to be paid to the plaintiff's
attorney, are relevant; and the jury should be
instructed that its award should include all
reasonable costs of litigation, so as to
10la
encourage injured parties to bring
wrongdoers to trial.
"If criminal sanctions have been
imposed on the defendant for his conduct,
this is relevant; and the jury should be
instructed that such criminal sanctions should
be taken into account in mitigation of the
punitive damages award.
“If there have been other civil actions
against the defendant based on the same
conduct and if punitive damages have been
assessed against the defendant in those civil
actions, this is relevant; and the jury should
be instructed that it should consider this in
mitigation of the punitive damages award.
"I believe that, if these factors are
considered by a jury in assessing the amount
of punitive damages a defendant should pay,
this will improve the reliability of the
punitive damages assessment process and
will fit the punishment to the offensive
conduct of the offender. I believe that by
doing this in a bifurcated trial the court could
preserve the reliability of the fact-finding
process for adjudging liability, thereby
accomplishing the goal we set in Green Oil
Co. v. Hornsby, supra, when we adopted
Justice Jones's special concurrence in
Ridout's-E service } Holl '
(397 So.2d 125, 127-28 (Ala. 1981)]
1024
“"A bifurcated trial is also
recommended by the American College of
Trial Lawyers, ‘Report on Punitive Damages
of the Committee on Special Problems in the
Administration of Justice’ (March 3, 1989),
pp. 18-19."
558 So.2d at 917-18.
lL._ Bifurcation
We hold that hereafter in all cases where punitive
damages are sought, excluding actions based upon wrongful
death, in which a trial is commenced three months or more
after the certificate of judgment issues in this case, the trial
shall be bifurcated in accordance with the procedure set out
in Justice Houston's special concurrence in Charter
Hospital v. Weinberg, supra. The trial court shall charge
the jury on the appropriate law, and the jury shall first
determine liability and the amount of compensatory
damages, if any. The jury will also decide by special
verdict whether the evidence justifies the imposition of
punitive damages. If the jury answers the special verdict in
the affirmative, the trial shall resume.
In the second part of the bifurcated trial, the parties shall
be permitted to introduce all evidence, financial or
otherwise, that is relevant to the question of what amount
the verdict should be to accomplish the purpose punitive
damages were designed to serve. All evidence presently
admissible at a post-verdict Hammond/Green Oil hearing
may be introduced before the jury retires to consider its
punitive damages verdict. The jury is to be guided not only
by the factors set forth in Hammond and Green Oil, but
also by those factors stated in the statute and in other case
law. Davis Carr, writing in the Alabama Lawyer, has
103a
offered the following compilation of factors, drawn from
both case law and statute, that can be considered:
"From the statute [§ 6-11-23, Ala. Code
1975 1989)}:
» * Nature, extent and ‘economic
impact’ of verdict on plaintiff or defendant.
"2. Amount of compensatory
damages.
"3. | Whether defendant has been
guilty of similar acts in_ the past.
"4. The nature and extent of any
effort by defendant to remedy the wrong.
"From Green Oil:
"1. Does the punitive damages
award bear a reasonable relationship to the
harm likely to occur from the defendant
This text is long and has been trimmed here. Open the source document for the complete record.
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