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7th Cir. Holds Trial Court Erred in Reducing Punitive Damages Without New Trial

The U.S. Court of Appeals for the Seventh Circuit held that the trial court erred when it reduced the plaintiff’s punitive damages award without giving him the option of a new trial on damages.

Accordingly, the Seventh Circuit reversed the ruling of the trial court, and remanded the matter for the court to offer the plaintiff the option of a new trial on damages.

A copy of the opinion in Beard v. Wexford Health Sources, Inc. is available at:  Link to Opinion.

An inmate plaintiff filed a complaint against members of a prison’s medical staff and administrative team alleging they were indifferent to his serious medical need in violation of the Eighth Amendment.  The plaintiff subsequently added the defendant health care company, which provided medical care to inmates in Illinois prisons.

Following a trial, the jury awarded the plaintiff $10,000 in compensatory damages and $500,000 in punitive damages.

However, the defendant argued that the punitive damages award violated the Fourteenth Amendment’s prohibition on excessive or arbitrary punishment.  The trial court agreed and reduced the punitive damages to $50,000.

Initially, the trial court also gave the plaintiff a choice between retrying the issue of punitive damages and accepting the reduced award, but later withdrew the option and entered a judgment that awarded only $50,000 in punitive damages (plus the jury’s compensation award).

The plaintiff appealed, arguing that the trial court erred in reducing the jury’s award of punitive damages without offering him a new trial.

In analyzing the issue, the Seventh Circuit first noted that “excessive punitive-damages awards violate the Due Process Clause.”  Further, the Supreme Court of the United States has “instructed courts to review whether an award of punitive damages exceeds the Due Process Clause’s bounds by considering the reprehensibility of the defendant’s conduct, the ratio between punitive and compensatory damages, and any civil penalties that punish similar behavior.”

The Seventh Circuit then observed that the trial court applied these guidelines to conclude “that an award of punitive damages equal to fifty times compensatory damages violates the Due Process Clause and must be reduced.”  The Court noted that this was “consistent with the Supreme Court’s caution that few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.”

However, although the trial court’s ruling was consistent with the Supreme Court guidelines, “[t]he decision to limit punitive damages to five times compensatory damages was arbitrary,” and the trial court did not explain why it “chose a multiplier of five, rather than seven, or three, or nine and one-half.”

Thus, “[t]he prudent course when a district court reduces a punitive-damages award is to offer the plaintiff a choice between the reduced award and a new trial, for the jury rather than the judge has the principal responsibility for factual evaluations.”

Because the trial court did not offer the plaintiff a new trial, the Seventh Circuit held that its “judgment must be vacated and the case remanded for the court to offer [plaintiff] the option of a new trial.”

However, the Court further clarified that it did “not decide whether the Seventh Amendment prohibited the court from unilaterally reducing [plaintiff’s] award on constitutional grounds.”

Instead, the Seventh Circuit noted that the Supreme Court has “not resolved that issue, and the district court should not have addressed it either.  Neither party asked the district court to decide whether the Seventh Amendment allows a judge to reduce punitive damages without offering a new trial as an alternative.”

Thus, the trial court should not have created that issue, but instead the plaintiff “must be given the option of a new trial as a matter of sound procedure, not constitutional law.”

The Seventh Circuit further explained that if the plaintiff chose a new trial on remand, “the jury must be allowed to consider both compensatory and punitive damages,” but “a second jury need not consider [defendant’s] liability.”

The plaintiff also asked the Seventh Circuit to “decide whether he is entitled to punitive damages exceeding five times the compensatory award.”  However, “because the district court held that the jury’s award of punitive damages violated the Due Process Clause, reviewing the merits of the district court’s decision to cap punitive damages at five times compensatory damages would require unnecessary constitutional analysis, which is to be avoided.”

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Jeffrey Karek practices in Maurice Wutscher's Commercial Litigation, Consumer Credit Litigation, and Appellate groups. He has substantial experience in defending consumer finance lawsuits in both state and federal trial courts, and on appeal. Such litigation includes allegations brought under TILA, HOEPA, RESPA, FDCPA, TCPA, FCRA, and state consumer protection statutes, including in the defense of putative class actions. Jeff received his Juris Doctor from the University of Michigan Law School, and graduated magna cum laude with a Bachelor of Business Administration degree from Western Michigan University.

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