The issue of punitive damages has vexed courts for years, nowhere more so than in the recent Second Circuit case, Payne v. Jones, 2012 WL 4513114 (2d Cir. Oct. 3, 2012), a case that raises interesting questions about the purposes of punitive damages, the appropriate appellate standard of review, and the proper role of appellate courts in reviewing a punitive damages award.

The Facts

James Edward Payne was a decorated Vietnam War veteran who suffered from severe post-traumatic stress disorder. On Sept. 11, 2007, Payne went to a hospital emergency room after accidentally cutting his thumb. Because Payne was combative and disoriented, Officer Brandon Jones and another officer in the Utica Police Department placed him under arrest pursuant to N.Y. Mental Hygiene Law §9.41, “which authorizes the arrest of a person who appears to be mentally ill and acts in a manner likely to result in serious harm to himself or others.”1

Events took a turn for the worse. “While a paramedic was examining Payne, Jones slapped the side of Payne’s head. After a struggle in which Payne resisted the officers’ efforts to handcuff him and place him on a gurney, Payne was loaded into the ambulance” to another hospital. There, “Payne resisted Jones’s efforts to move him from the ambulance gurney into an individual room in the emergency room’s mental health unit. Jones wrapped Payne in a bear hug and pushed him into the room. As Jones was placing Payne on the bed, he noticed Payne’s Marine Corps tattoos and said ‘Marines are pussies.’ In response, Payne kicked Jones in the groin area. Jones reacted by punching Payne in the face and neck seven to ten times and kneeing him in the back several times. Payne, who was still handcuffed, defended himself by putting his hands up to cover his face and rolling on the bed to turn his back toward Jones. A nurse rushed forward and grabbed Jones, who then stopped punching Payne. The attack lasted 30 seconds or less. A doctor examined Payne and found that his face was bloody and swollen, and that his upper back was reddened. Payne later testified at trial that the beating aggravated his existing back pain and his post traumatic stress disorder.”

The Utica Police Department’s Professional Standards Unit later “found that Jones had committed an egregious assault on Payne and had lied about the incident to police investigators. Ultimately, Jones was terminated.”2

Procedural History

Payne sued Jones in federal court, asserting a 42 U.S.C. §1983 excessive force claim and a state law battery claim. The jury found for Payne on both claims, and awarded $60,000 in compensatory damages. In the punitive damages phase, the jury heard from a witness who testified that he was waiting for a bus outside a restaurant when Jones “struck him in the face and knocked him to the ground, causing injuries that required four stitches.” The jury awarded Payne $300,000 in punitive damages.

Jones moved for judgment as a matter of law pursuant to Fed. R. Civ. P. 50(b), arguing that both damage awards were excessive. The district court, however, “found that the awards were within permissible bounds because the beating was ‘severe,’ the victim was defenseless and mentally ill, and the assailant was a police officer who had used excessive force in the past. With respect to the punitive damages award, the court added that ‘the five to one ratio of punitive to compensatory damages is reasonable.’”3

Punitive Damages Analysis

On appeal, the panel of the U.S. Court of Appeals for the Second Circuit first engaged in a disquisition on the potential dangers of punitive damage awards. Without reference to the jury instructions meant to guide the jury’s discretion, the panel stated: “When a jury undertakes to set the amount of such awards, it has nothing to rely on other than the instincts of the jurors and random, often inaccurate, bits of information derived from press accounts or word of mouth in the community about how such intangibles have been valued in other cases. Having no objective standards to guide them, and understandably outraged by the bad conduct of the defendant, jurors may be impelled to set punitive damages at any amount.”

The panel also stated that “judgments awarding unreasonable amounts as damages impose harmful, burdensome costs on society. As an initial matter, an excessive verdict that is allowed to stand establishes a precedent for excessive awards in later cases. The publicity that accompanies huge punitive damages awards…will encourage future jurors to impose similarly large amounts. Unchecked awards levied against significant industries can cause serious harm to the national economy. Productive companies can be forced into bankruptcy or out of business. Municipalities can be drained of essential resources. The threat of excessive damages, furthermore, drives up the cost of insurance premiums, deters both individuals and enterprises from undertaking socially desirable activities and risks, and encourages overspending on socially excessive precautions that cost[ ] more than the reduction of harm produced by [them].”4

Largely missing from the disquisition were the public benefits served by deterring wrongdoers from future wrongdoing, punishing wrongdoers for particularly outrageous or egregious misconduct, or imposing some cost (beyond compensatory damages) on a defendant—particularly one whose job is to uphold and enforce the law—who recklessly and maliciously violates the law.

The court also noted that “[a]t a societal level, the community benefits from the deterrent effect of the awards, but not from the actual money,” because the plaintiff himself receives the award. The court characterized this result as a “windfall,” leaving unanswered the extent to which a court can and should be able to divert punitive damage awards to “a fund that could then be applied to remedy some of the unredressed social harm stemming from the defendant’s conduct.”5 The panel also observed that “[t]he burden of punitive damages…does not even necessarily fall on the wrongdoer, who may benefit from a program of indemnification. When, as here, the wrongdoer is a public servant and receives indemnification for a court’s award of damages, it is the taxpaying public that bears the brunt of an excessive award, which compounds the injury done by the tortfeasor.”6

Of course, such awards—if paid by the employer— may induce the employer itself to take deterrent or punitive action against the wrongdoer, at least indirectly fulfilling the twin purposes of a punitive damages award. The decision to indemnify may also induce the taxpaying public to demand from their government that it not indemnify wrongdoers for outrageous conduct. Finally, the panel’s point raises the interesting question whether, to further the goals of punitive damages awards in a federal civil rights case, a court can prohibit government employers from indemnifying part or all of a punitive damages award.

Standard of Review

The court noted that “an appellate court reviewing a district court’s decision reviews for abuse of discretion” and that “[i]f the question of excessiveness is close or in balance, we must affirm…. We must give the benefit of every doubt to the judgment of the trial judge; but surely there must be an upper limit, and whether that has been surpassed is not a question of fact with respect to which reasonable men may differ, but a question of law.”

The court then noted: “The customary formulation of the question faced by the trial court in reviewing the jury’s verdict, and by an appellate court in reviewing the trial court’s decision on this matter, is whether the amount of the jury’s award is so high as to shock the judicial conscience and constitute a denial of justice.”7 But the panel then borrowed from the Supreme Court’s decision in BMW of North America. v. Gore, 517 U.S. 559 (1996), involving a due process “grossly excessive” review of a state court punitive damages award. Reasoning that federal appellate review of a federal district court’s decision should be less deferential than a federal court’s due process review of a state court’s decision, the panel stated that “shocks the conscience” must be a less deferential standard of review than “grossly excessive.”

Three Guideposts

The panel then applied the Gore due process analysis in this non-due process case, focusing on (i) the degree of reprehensibility of Jones’ conduct; (ii) the relationship between the harm Payne suffered and the punitive damages award; and (iii) other penalties imposed by law for Jones’s conduct giving rise to punitive damages.

As to the reprehensibility of Jones’ conduct, the panel stated: it “was reprehensible…. he gratuitously provoked Payne with a verbal taunt and lost his temper responding with violence when Payne reacted to the provocation by kicking him. It is also an aggravating factor that Jones recognized that Payne might be mentally ill. It is another aggravating factor that Jones had used excessive force once in the past, and that his conduct is criminalized in New York as a class ‘A’ misdemeanor.”

Almost recreating a debate the jury might have had during deliberations, the panel also reflected that “Jones’s violence was not unprovoked. Payne’s violent threats in the hospital had caused the officers to be summoned to control him. Payne struggled to resist the officers’ efforts to place him in handcuffs and on a gurney. Jones became violent only after Payne kicked him in the groin. While it is true that Payne’s kick in Jones’s groin was in response to Jones’s inappropriate verbal taunt, it was nonetheless a kick in the groin. While Jones’s violence was reprehensible, it was provoked, and that diminishes the degree of reprehensibility.” In the panel’s view, the “conduct was reprehensible,” but “the degree of reprehensibility was not all that high.”8

As to the relationship between the harm to Payne and the punitive damages award, the court noted the 5:1 ratio between the jury’s punitive and compensatory damage awards, but held that the ratio was essentially irrelevant. For example, “in cases of very small injury but very reprehensible conduct, the appropriate ratios can be very high,” even “75,000 to 1.” The panel stated that, in this case, a $100,000 punitive damages award based on a $10,000 compensatory award would not have been excessive, but a $300,000 punitive damages award based on a $300,000 compensatory award “would appear to us to be very high.”9

As to criminal penalties, the panel noted that “it appears that Jones’s conduct could support his prosecution in New York for a class ‘A’ misdemeanor of assault in the third degree,” which is “punishable by a prison sentence up to a maximum of one year,” but “we think it unlikely that a [New York criminal] court would have sentenced Jones to any very substantial part of the permissible one year of jail time.”10

The panel vacated the judgment awarding $300,000 in punitive damages, and ordered a new trial “limited to the issue of the amount of punitive damages unless Payne agrees to a remittitur reducing the amount of punitive damages to $100,000.”11

More Questions Than Answers

The Payne decision raises more questions than it answers. What is the appropriate standard of review: abuse of discretion, shocks the conscience, grossly excessive, almost grossly excessive? Is a due process analysis even appropriate when applying a standard excessiveness review? Is it appropriate for appellate judges to weigh the minutiae of “reprehensibility,” almost as fact-finders? Do punitive:compensatory award ratios have any relevance when a 75,000:1 ratio is appropriate in one case, and a 1:1 ratio is inappropriate in another? Should federal courts be speculating as to how a hypothetical New York criminal court judge might sentence a defendant in a hypothetical New York criminal proceeding?

Why remit and remand for a new trial (instead of simply reverse), where the appellate court has already held that any amount exceeding $100,000 is excessive? If a second jury awards $300,000 again, could a future panel—consistent with Payne—affirm under any circumstances? Can it truly be said that a $300,000 punitive damages award against a police officer who brutally, sadistically, and repeatedly punched a handcuffed, mentally ill hospital patient in the face until he was “bloody and swollen,” shocks the conscience? Finally, how will district courts reasonably anticipate what a given future appellate panel might determine is or is not excessive applying Payne, and would the more salutary approach simply be to defer to the fact-finder—the jury—and the district court who presided over the trial, unless a verdict truly shocked the conscience?

No doubt, courts will spend years addressing and answering these questions in this increasingly thorny area of the law.

Ilann Margalit Maazel is a partner at Emery Celli Brinckerhoff & Abady, which specializes in civil rights and commercial litigation.

Endnotes:

1. Payne, 2012 WL 4513114, at *1.

2. Id. at *1-2.

3. Id. at *4.

4. Id. at *7 (internal citations omitted).

5. Ciraolo v. City of N.Y., 216 F.3d 236, 247 (2d Cir. 2000) (Calabresi, J., concurring).

6. Payne, 2012 WL 4513114, at *8.

7. Id. at *9 (citing Zarcone v. Perry, 572 F.2d 52, 56 (2d Cir. 1978)).

8. Id. at *10.

9. Id. at *11-12.

10. Id. at *12-13.

11. Id. at *15.