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An Oregon law that allocates 60 percent of each punitive award to a state fund benefiting crime victims is constitutional, the Oregon Supreme Court has ruled. DeMendoza v Huffman, No. SC S48430 (Aug. 8, 2002). The en banc decision settles a question that has surrounded Oregon Statute 18.540 since its passage in 1995: Is the plaintiff entitled to the punitive-damages portion of the judgment, or are those damages a general penalty for wrongful behavior, independent of plaintiff winnings? The court concluded that the plaintiff has no legal entitlement to the punitive awards. “The bottom line is that this will continue to have a big impact,” said Kevin Neely, spokesman for state Attorney General Hardy Myers, whose office helped argue the state’s position as defendant-intervenor. The clarification, he said, will allow movement on settlements that have been stalled by the uncertainty, Neely said. Plus, pending tobacco suits could be a windfall for the state’s criminal injuries compensation cccount. In 1999, plaintiff Frank DeMendoza won a $1.7 million judgment from a federal jury in a suit against his ex-attorney, Bruce Huffman, for wrongful use of civil proceedings and fraudulent transfer of real property. The punitive damages portion was $1.1 million, later reduced to $550,000. DeMendoza objected to the state’s move to appropriate its $330,000 share, saying that the practice violated various articles of the state constitution, including one that guarantees remedies to those who have been wronged. The state’s highest court added another issue: whether the Legislature considered the law’s application to federal cases arising from state law. It then decided that the law “unambiguously” gives the state its 60 percent cut. “The absence of an exception is significant,” it wrote, “because we may not, as a general rule, ‘insert what has been omitted’ in a statute.” The bulk of the court’s opinion focused on the constitution’s “remedy” provision. To determine whether punitive damages are a remedy due the plaintiff, it turned to the 1840s debate between Simon Greenleaf and Theodore Sedgwick in their treatises on evidence and damages as well as other historical circumstances from the time the state constitution was drafted. The court determined that the purpose of punitive damages has been to punish or to deter, not to bolster compensatory damages. Quoting from its own 1984 ruling in Lane County v. Wood, the court said, “Punitive damages are not to compensate an injured party, but to give bad actors a legal spanking.” And even as they nodded toward arguments that plaintiffs should keep punitive awards because such potential gain prods them to pursue claims that the state otherwise would not, the justices nonetheless said, “This court never has recognized punitive damages as an entitlement or a right protected by the Oregon Constitution.” Plaintiff’s attorney Kathryn H. Clarke of Portland, Ore., said the court didn’t deal fully with the historical context of punitive damages, overlooking case law that defined them as remedial. “That’s what provoked the [Greenleaf-Sedgwick] debate, and they act as if Greenleaf won,” she said. “But he didn’t because he wanted to remove the remedy, and it is still there.” David Gilstrap, the plaintiff’s other attorney, also expressed disappointment. “I’m very sad,” he said. “It took some money out of a deserving person’s pocket. Not that the state is undeserving, I guess, but I don’t think it’s right to do that to folks.”

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