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AMI 2218 Punitive Damages

Arkansas Supreme Court Committee On Jury Instructions-Civil

Ark. Model Jury Instr., Civil AMI 2218
Arkansas Model Jury Instructions-Civil
November 2021 Update
Arkansas Supreme Court Committee On Jury Instructions-Civil
Chapter 22. Damages
AMI 2218 Punitive Damages
In addition to compensatory damages for any actual loss that (plaintiff) may have sustained, [he][she] asks for punitive damages from (defendant). Punitive damages may be imposed to punish a wrongdoer and to deter the wrongdoer and others from similar conduct. In order to recover punitive damages from (defendant), (plaintiff) has the burden of proving by clear and convincing evidence [either, first]:
[That (defendant) knew or ought to have known, in the light of the surrounding circumstances, that [his][her][its] conduct would naturally and probably result in (injury)(damage) and that [he][she][it] continued such conduct (with malice or) in reckless disregard of the consequences from which malice may be inferred]
[Or, second]
[That (defendant) intentionally pursued a course of conduct for the purpose of causing (injury)(damage)]
[Or both].
[In arriving at the amount of punitive damages you may consider the financial condition of (defendant), as shown by the evidence.]
“Clear and convincing evidence” is proof that enables you without hesitation to reach a firm conviction that the allegation is true.
You are not required to assess punitive damages against (defendant) but you may do so if justified by the evidence.
[You may consider an award of punitive damages only if you found that (plaintiff) is entitled to recover compensatory damages.]
NOTE ON USE
This instruction may be used when the plaintiff seeks punitive damages against one or more defendants either for unintentional conduct or for intentional conduct or for both.
Use the bracketed references to clear and convincing evidence for all claims accruing on or after March 25, 2003.
Use the parenthesized reference to malice only when there is evidence to support a finding of express malice.
Use the bracketed reference to defendant's financial condition only if there is evidence of a defendant's financial condition.
The last bracketed sentence is to be for claims accruing on or after March 25, 2003, unless punitive damages proceedings are bifurcated from the compensatory damages proceedings.
When the underlying tort requires proof of malice, give the instruction regarding that malice element along with this instruction.
If the case involves evidence of out-of-state conduct that was lawful in the jurisdiction where it occurred, use AMI 2218A.
If evidence had been admitted or argument introduced that defendant's conduct has caused harm to non-parties, see AMI 2218A and its Note on Use.
COMMENT
Ark. Acts 2003, No. 649 (Ark. Code Ann. §§ 16-55-201 et seq. and §§ 16-114-206, 16-114-208 to 16-114-212, “The Civil Justice Reform Act of 2003”) govern the awarding of punitive damages and the amounts that may be awarded for claims accruing on or after March 25, 2003. Under Ark. Code Ann. §§ 16-55-206 and 207, to recover punitive damages a plaintiff must prove, by clear and convincing evidence, either or both of two aggravating factors: “(1) That the defendant knew or ought to have known, in light of the surrounding circumstances, that his or her conduct would naturally and probably result in injury or damage and he or she continued the conduct with malice or in reckless disregard of the consequences from which malice might be inferred; or (2) That the defendant intentionally pursued a course of conduct for the purpose of causing injury or damage.” Arkansas Code Ann. § 16-55-210 provides that nothing in the Act shall limit trial or appellate courts' duties to: scrutinize all punitive damage awards; ensure that such awards comply with applicable procedural, evidentiary, and constitutional requirements; and order remittitur where appropriate. It precludes admission in the compensatory-damages proceeding of evidence of defendant's financial condition and other evidence relevant only to punitive damages. Arkansas Code Ann. § 16-55-208, which had capped the amount of punitive damages in cases of unintentional wrongdoing, was held unconstitutional in Bayer Cropscience LP v. Schafer, 2011 Ark. 518 at 9–14. The court ruled that it violates art. 5, § 32 of the Arkansas Constitution, as amended by Amendment 26.
On February 26, 2015 in response to the recommendations of its Special Task Force on Practice and Procedure in Civil Cases, the Arkansas Supreme Court amended Ark. R. Civ. P. 42 (b) and superseded Ark. Code Ann. § 16-55-211, which required bifurcation of the entire punitive-damages claim on motion of a party.
Under the revised rule, the trial judge has the discretion in the first phase whether to allow the jury to decide if punitive damages are warranted (not the amount) or to defer the determination to the second phase. Upon the motion of any party and if warranted by the evidence, the amount of punitive damages, if any, must be decided in the second proceeding.
The court characterized AMI 2217, the predecessor to AMI 2218, as an “embodiment of the law on punitive damages” in Stein v. Lukas, 308 Ark. 74, 78, 823 S.W.2d 832, 834 (1992) (citing Dongary Holstein Leasing Inc., v. Covington, 293 Ark. 112, 732 S.W. 2d 465 (1987)).
The “first” element in this instruction has been held to apply only to negligence cases. The “second” element constitutes the modification of this instruction necessary to its use in an intentional tort case. See generally Ford Motor Credit Co. v. Herring, 267 Ark. 201, 589 S.W.2d 584 (1979) (conversion claim); Tandy Corp. v. Bone, 283 Ark. 399, 678 S.W.2d 312 (1984) (outrage claim). The Arkansas Supreme Court has ruled that it is not error to give both elements of the instruction in the alternative. Croom v. Younts, 323 Ark. 95, 104–05 913 S.W.2d 283, 288 (1996) (outrage claim).
It is error to give this instruction without including the scienter standard from the underlying tort when that standard requires proof of scienter greater than that stated in this instruction. Wal-Mart v. Binns, 341 Ark. 157, 164–65, 15 S.W.3d 320, 325 (2000) (underlying claim was for malicious prosecution; the court defined the scienter standard as requiring proof of “intent and a spirit of ill will, hatred, or revenge”). (Note that the malicious prosecution standard stated in Wal-Mart v. Binns appears to be inconsistent with that applied in other Arkansas cases. See AMI 413 and accompanying Comment.) It is not error, however, to give this instruction if the malice standard from the underlying tort is also included. Carr v. Nance, 2010 Ark. 497, at 25 (affirming the giving of this instruction in conjunction with an instruction on the underlying malice element derived from the Arkansas recreational use statute, Ark. Code Ann. § 18-11-307(1)).
Punitive damages have been held to be recoverable in several cases involving claims based on statutory causes of action, despite the absence of a statutory provision specifically enumerating punitive damages as a recoverable element. HCA Health Services of Midwest, Inc. v. Nat'l Bank of Commerce of El Dorado, 294 Ark. 525, 528–29, 745 S.W.2d 120, 122–23 (1988) (medical malpractice); Vickery v. Ballentine, 293 Ark. 54, 55–56, 732 S.W.2d 160, 161 (1987) (wrongful death) (citing Comment, The Arkansas Wrongful Death Statute, 35 Ark. L. Rev. 294, 306 (1981)); Fields v. Huff, 510 F. Supp. 238, 241–42 (E.D. Ark. 1981) (same); Forrest City Mach. Works, Inc. v. Aderhold, 273 Ark. 33, 43–44 616 S.W.2d 720, 726 (1981) (products liability). See also Airco, Inc. v. Simmons First Nat'l Bank, 276 Ark. 486, 492, 638 S.W.2d 660, 663 (1982) (upholding punitive damages award in products liability case). The court upheld an award of punitive damages under an exception to the statutory immunity to negligence liability set forth in the Arkansas recreational use statute, Ark. Code Ann. § 18-11-307(1). Carr v. Nance, 2010 Ark. 497, at 25.
Punitive damages have been held to be recoverable in a variety of other situations. See generally, e.g., Dixon Ticonderoga Co. v. Winburn Tile Mfg. Co., 324 Ark. 266, 920 S.W.2d 829 (1996) (deceit); Viking Ins. Co. of Wis. v. Jester, 310 Ark. 317, 836 S.W.2d 371 (1992) (bad faith refusal to settle insurance claim); Interstate Freeway Serv., Inc. v. Houser, 310 Ark. 302, 835 S.W.2d 872 (1992) (fraud in employment contract); Honeycutt v. Walden, 294 Ark. 440, 743 S.W.2d 809 (1988) (driving while intoxicated); Bruns v. Bruns, 290 Ark. 347, 719 S.W.2d 691 (1986) (spousal assault); Brown v. Chapman Farms, Inc., 289 Ark. 88, 709 S.W.2d 404 (1986) (trespass and intentional destruction of crops); Lou v. Smith, 285 Ark. 249, 685 S.W.2d 809 (1985) (pharmacist's intentional changing of physician's prescription for patient); DWB, LLC v. D&T Pure Trust, 2018 Ark. App. 283, 550 S.W.3d 420 (conversion).
Punitive damages are recoverable at common law against an employer under a theory of respondeat superior even absent proof that the employer knew of the employee's conduct, authorized it, or ratified it. Miller v. Blanton, 213 Ark. 246, 250–54, 210 S.W.2d 293, 296–97 (1948). See also Life & Cas. Ins. Co. of Tenn. v. Padgett, 241 Ark. 353, 355–56, 407 S.W.3d 728, 729–730 (1966) (holding employer liable for intentional torts committed within scope of employment).
Punitive damages are not recoverable against the at-fault driver of an automobile for failing to stop at the scene of the accident. Freeman v. Anderson, 279 Ark. 282, 286–87, 651 S.W.2d 450, 452 (1983) (quoting AMI 2217). Punitive damages are not recoverable for violation of a Federal Motor Vehicle Safety regulation requiring post-accident alcohol and drug testing of the driver when there was no indication that the violation contributed to the accident. Brumley v. Keech, 2012 Ark. 263, at 5–6 (rejecting punitive damages claim based on violation of 49 C.F.R. § 382.303).
In conversion actions, punitive damages are not recoverable “simply because the defendant intentionally exercised dominion or control over the plaintiff's property.” City Nat'l Bank of Fort Smith v. Goodwin, 301 Ark. 182, 188, 783 S.W.2d 335, 338 (1990). “Instead, the plaintiff must show that the defendant intentionally exercised dominion or control over the plaintiff's property for the purpose of violating his right to the property or for the purpose of causing damage.” Id., 783 S.W.2d at 338. See also Huffman v. Landers Ford North, Inc., 100 Ark. App. 159, 164, 265 S.W.3d 783, 786–87 (2007) (discussing City National Bank). The Eighth Circuit has read Arkansas law as generalizing this point to all intentional tort claims. Robertson Oil Co. v. Phillips Petroleum Co., 14 F.3d 373, 389–90 (8th Cir. 1993) (en banc) (“evidence of or the bare finding of an intentional tort is not sufficient to trigger deliberations on punitive damages”; instead, the punitive damages plaintiff must show a purpose to cause injury), overruled on other grounds by Cottier v. City of Martin, 604 F.3d 553, 557 (8th Cir. 2010) (en banc).
The Arkansas Supreme Court has ruled that “[w]here exemplary or punitive damages are recoverable, evidence of the wealth or financial condition of the defendant is admissible, and is a proper element for the jury to consider in finding such damages, for it is obvious that what would be of no consequence to a rich man might be ruinous to a poor man.” Porter v. Lincoln, 282 Ark. 258, 261B, 668 S.W.2d 11, 14 (1984) (quoting Hardy v. Raines, 228 Ark. 648, 310 S.W.2d 494 (1958)). To similar effect, the court in Holmes v. Hollingsworth, observed that the defendant's financial condition “may be considered by the jury in determining the amount of exemplary damages to be allowed.” 234 Ark. 347, 352, 352 S.W.2d 96, 99 (1961) (involving an impecunious defendant), (quoting 15 Am. Jur. § 346). An instruction concerning defendant's financial condition may not be given, however, in the absence of evidence about that issue. Bank of Cabot v. Ray, 279 Ark. 92, 94, 648 S.W.2d 800, 801 (1983). See also James v. Bill C. Harris Const. Co., Inc., 297 Ark. 435, 439, 763 S.W.2d 640, 642 (upholding trial court's refusal to admit evidence of defendant's net worth because there was not substantial evidence to satisfy the “malice” element).
When the issue of punitive damages, supported by proof of financial worth of any defendant, is improperly submitted to a jury, even an award of compensatory damages cannot be sustained. Berkeley Pump Co. v. Reed—Joseph Land Co., 279 Ark. 384, 402, 653 S.W.2d 128, 138 (1983); Life & Cas. Ins. Co. of Tenn, 241 Ark. at 356–57, 407 S.W.2d at 730. Where, however, there was no proof of any defendant's financial condition or other prejudice, erroneous submission of punitive damages issue to the jury is not reversible error. Robinson v. Abbott, 292 Ark. 630, 632, 731 S.W.2d 782, 783 (1987).
A defendant who has successfully objected to introduction of defendant's own financial worth at trial may not introduce such information at a post-trial hearing on excessiveness of a punitive damages award. Advocat, Inc. v. Sauer, 353 Ark. 29, 51, 111 S.W.3d 346, 358 (2003).
A plaintiff who claims punitive damages from several defendants waives the right to introduce evidence of the financial worth of one defendant. Dalrymple v. Fields, 276 Ark. 185, 189, 633 S.W.2d 362, 364 (1982); Life & Cas. Ins. Co. of Tenn.,241 Ark. at 356–57, 407 S.W.2d at 730. When compensatory damages are claimed from multiple defendants and punitive damages from only one, however, evidence of the financial worth of that one can be introduced only if his alleged misconduct is different from and more culpable than that of the other defendants. Berkeley Pump Co., 279 Ark. at 401, 653 S.W.2d at 137.
The court in Bayer v. CropScience LP, supra, stated that “we have observed that the issues of compensatory damages and punitive damages are so interwoven that an error with respect to one requires a retrial of the whole case.” 2011 Ark. 518, at 13 (citing Life & Cas. Ins. Co. of Tenn. v. Padgett, 241 Ark. 353, 407 S.W.2d 728 (1966)). Although the court did not confine its statement to the particular error in Life & Cas. Ins. Co. of Tennessee v. Padgett (admission of evidence of financial worth in punitive damages case against more than one defendant), it did not explicitly disapprove the general principle applied in Robinson that non-prejudicial error with respect to punitive damages does not require retrial of the entire case, which principle was not presented in Bayer.
While joint tortfeasors may be jointly and severally liable for punitive damages, “[w]here two or more defendants are alleged to have committed virtually identical wrongs, it would be unfair to allow the plaintiff to seek compensatory damages from all of them but punitive damages from only one.” Missouri Pac. R. Co. v. Ark. Sheriff's Boys' Ranch, 280 Ark. 53, 59–60, 655 S.W.2d 389, 392–393 (1983) (emphasis in original) (explaining Curtis v. Partain, 272 Ark. 400, 614 S.W.2d 671 (1981), overruled by, Lupo v. Lineberger, 313 Ark. 315, 855 S.W.2d 293 (1993)).
Gross negligence is not sufficient to justify punitive damages. Orsini v. Larry Moyer Trucking, Inc., 310 Ark. 179, 182, 833 S.W.2d 366, 367 (1992) (legal malpractice); Nat'l By—Products, Inc. v. Searcy House Moving Co., 292 Ark. 491, 494, 731 S.W.2d 194, 196 (1987) (negligent operation and maintenance of tractor-trailer). See also Potts v. Benjamin, 882 F.2d 1320, 1327 (8th Cir. 1989) (distinguishing National By—Products, Inc.).
For discussion of the distinction between willful and wanton conduct and gross negligence in the context of vehicle accident cases, see generally Justice Dudley's concurring opinion in National Bank of Commerce v. McNeill Trucking Co. Inc., 309 Ark. 80, 88, 828 S.W.2d 584, 588 (1992) (arguing for adoption of bifurcation and a “clear and convincing evidence” standard of proof in punitive damages cases).
While the election-of-remedies doctrine precludes recovery of both a restitutionary award based on rescission and a compensatory damages award based on deceit, an action for punitive damages may, upon sufficient proof of the elements of deceit, accompany an award for restitution in an action for rescission. Thomas Auto Co. v. Craft, 297 Ark. 492, 493–94, 763 S.W.2d 651, 652 (1989). See also, Stein v. Lukas, 308 Ark. 74, 80–81, 823 S.W.2d 832, 835–36 (1992) (ruling in deceit case that “the appellee's claim for punitive damages should not be negated by the fact that the jury did not specify whether the underlying cause of action supporting [the compensatory award] lay in tort or breach of warranty.”).
The degree of proof required to support a punitive damages instruction is substantial evidence of actual or inferred malice. Stein, 308 Ark. at 78, 823 S.W.2d at 834. Malice can be inferred either from a conscious indifference to or from a reckless disregard of the consequence of one's actions. Id., 823 S.W.2d at 834.
The definition of “clear and convincing evidence” in this instruction is a combination of two different formulations that have been recited by the Arkansas Supreme Court. In a number of cases and a variety of contexts, the court has stated the definition as: “proof that produces a firm conviction in you that the allegation is true.” E.g., Carter v. Four Seasons Funding Corp., 351 Ark. 637, 653, 97 S.W.3d 387, 395 (2003) (usury claim); Ward v. Williams, 354 Ark. 168, 181, 118 S.W.3d 513, 521 (2003) (oral contract for sale of land); Howell v. Scroll Techs., 343 Ark. 297, 304, 35 S.W.3d 800, 805 (2001) (workers' compensation); Baker v. Ark. Dept. of Human Servs., 340 Ark. 42, 48, 8 S.W.3d 499, 503 (2000) (termination of parental rights). The court does not, however, appear to intend this definition to mean something different than other language it has recited (“proof so clear, direct, weighty, and convincing as to enable you to come to a clear conviction of the matter asserted”) and in fact has sometimes included both formulations in the same opinion. See, e.g., Howell v. Scroll Techs., 343 Ark. at 304, 35 S.W.3d at 805; Kelly v. Kelly, 264 Ark. 865, 870, 575 S.W.2d 672, 675–676 (1979). The Committee combined language from both into a hybrid definition that appears to capture the essence of the principle.
The Committee added “the wrongdoer” to the second sentence of the instruction to recognize the notion that punitive damages can serve to deter similar conduct by the tortfeasor as well as others. Cf. Matthews v. Rodgers, 279 Ark. 328, 336, 651 S.W.2d 453, 458 (1983) (punitive damages “must be sufficient not only to deter similar conduct on the part of the same tortfeasor but they must be sufficient to deter any others who might engage in similar conduct.”). Similar language was upheld in Pacific Mutual Life Insurance Co. v. Haslip, 499 U.S. 1, 19 (1991), discussed below.
Punitive damages are not recoverable unless compensatory damages are also awarded. Bell v. McManus, 294 Ark. 275, 278A, 742 S.W.2d 559, 559 (1988). The Committee included an instruction for claims subject to Act 649 informing juries that punitive damages may be awarded only if the jury finds that plaintiff should recover compensatory damages. See Ark. Code Ann. § 16-55-206 (2004) (“In order to recover punitive damages from a defendant, a plaintiff has the burden of proving that the defendant is liable for compensatory damages”). Whether such an instruction is appropriate in pre-Act 649 cases is unclear. See generally Hale v. Ladd, 308 Ark. 567, 826 S.W.2d 244 (1992); Takeya v. Didion, 294 Ark. 611, 745 S.W.2d 614 (1988); Kroger Grocery & Baking Co. v. Reeves, 210 Ark. 178, 194 S.W.2d 876 (1946). Several other jurisdictions include such an instruction. E.g., Tenn. Pattern Jury Instructions—3 Civil 14.55 (2003) (“You may consider an award of punitive damages only if you find that the plaintiff has suffered actual damages as a legal result of the defendant's fault and you have made an award for compensatory damages.”); N.M. Stat. Ann. Civil Unif. Jury Instructions 13-1827 (2003) (“You may consider punitive damages only if you find that (party making claim) should recover compensatory [or nominal] damages.”).
The United States Supreme Court has recognized procedural and substantive constitutional limitations on the award of punitive damages. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 416 (2003); BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 568 (1996). The constitutionality of such awards in civil cases is evaluated under the Due Process Clause of the Fourteenth Amendment rather than the Eighth Amendment's Excessive Fines Clause. Browning-Ferris Indus. of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 266 (1989) (Excessive Fines Clause does not apply to punitive damages awards in civil cases between private parties).
The Due Process Clause requires judicial review of the amount of punitive damages awards. Honda Motor Co., Ltd. v. Oberg, 512 U.S. 415, 420 (1994). Jury instructions that “enlightened the jury as to the punitive damages' nature and purpose, identified the damages as punishment for civil wrongdoing of the kind involved, and explained that their imposition was not compulsory,” together with adequate post-trial and appellate judicial review of the jury's award, satisfy due process requirements. Haslip, 499 U.S. at 19 (1991) (upholding punitive damage award against insurance company under respondeat superior theory for fraudulent conduct of its agent). Arkansas's law concerning punitive damages has been held to satisfy the Haslip criteria. Smith v. Hansen, 323 Ark. 188, 200, 914 S.W.2d 285, 291 (1996) (discussing former AMI 2217); Robertson Oil Co., Inc. v. Phillips Petroleum Co., 779 F. Supp. 994, 997–98 (W.D. Ark. 1991), aff'd, 14 F.3d 373 (8th Cir. 1993) (en banc), overruled on other grounds by Cottier v. City of Martin, 604 F.3d 553, 557 (8th Cir., 2010) (en banc). Appellate review of trial courts' post-trial rulings on the constitutionality of punitive damages awards is de novo. Cooper Indus., Inc. v. Leatherman Tool Grp., Inc., 532 U.S. 424, 431 (2001).
As a substantive matter, “[t]he Due Process Clause of the Fourteenth Amendment prohibits the imposition of grossly excessive or arbitrary punishments on a tortfeasor.” State Farm, 538 U.S. at 415–418. The United States Supreme Court, in both State Farm and Gore, has articulated three factors or “guideposts” for courts to consider in determining whether a punitive damages award is “grossly excessive.” The Arkansas Supreme Court has ruled that these three guideposts are to be given equal weight. Advocat, Inc. v. Sauer, 353 Ark. 29, 54, 111 S.W.3d 346, 360 (2003). But see Jim Ray, Inc. v. Williams, 99 Ark. 315, 322, 260 S.W.3d 307, 311 (2007) (noting that reprehensibility is the most important guidepost) (citing Gore, 517 U.S. at 575).
The first guidepost is the degree of reprehensibility of the defendant's misconduct, which the Court has characterized as “the most important indicium of the reasonableness of a punitive damages award.” State Farm, 538 U.S. at 418–19. The Court has articulated several considerations regarding reprehensibility. These include whether the harm was physical or economic, whether defendant's conduct evinced reckless disregard for others' rights or intentional wrongdoing, whether the conduct was an isolated incident or involved repeated wrongdoing, and whether the target of the misconduct was financially vulnerable. The Court has also taken into account, both as a matter of substantive due process and federalism, the extent of the nexus between the defendant's misconduct and the state's interest in punishing misconduct within its own borders. The addition to the Note on Use regarding a defendant's lawful out-of-state conduct was necessitated by the Court's explicit mandate in State Farm, as discussed in the Comment to AMI 2218A.
As indicated above, the Arkansas Supreme Court has repeatedly held that the defendant's financial condition is an appropriate consideration for the jury in determining the amount of punitive damages. The United States Supreme Court, while not disapproving of an instruction to that effect, cautioned in its discussion of reprehensibility in State Farm that “[t]he wealth of a defendant cannot justify an otherwise unconstitutional punitive damages award.” 538 U.S. at 426–28.
The second guidepost is the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award. The Court has noted that, although no rigid benchmark exists, few awards exceeding a single-digit ratio between compensatory and punitive damages will survive due process scrutiny. Gore, 517 U.S. at 581–83; State Farm, 538 U.S. at 425–26.
The third guidepost is the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases. Gore, 517 U.S. at 584; State Farm, 538 U.S. at 416–30.
For examples of the United States Supreme Court's application of the three guideposts, see State Farm, 538 U.S. at 416–30 (striking down as “grossly excessive” a $145 million punitive damages award in bad faith action against an insurer involving $1 million in compensatory damages for emotional distress; much of the conduct complained of occurred out of state and was lawful where it occurred; maximum civil fine for conduct was $10,000); Gore, 517 U.S. at 576–586 (striking down as “grossly excessive” a $4 million punitive damages award, reduced on appeal to $2 million to eliminate that portion of the award based on lawful conduct that occurred outside of the forum state, for a BMW dealership's failure to disclose that a new car had been refinished, in which actual damages were only $4,000). See also TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443 (1993) (plurality) (upholding $10 million punitive damages award in case involving $19,000 in actual damages; jury could have reasonably found that defendant engaged in malicious and fraudulent course of action, which could have caused millions of dollars in losses, as part of a larger scheme of fraud, trickery, and deceit). For an application of State Farm to jury instructions in a case involving an exceptionally high punitive damages award, see generally In re the Exxon Valdez, 296 F. Supp. 2d 1071 (D. Alaska 2004) (on remand from the Ninth Circuit for reconsideration under State Farm), judgment vacated and remanded, 490 F.3d 1066 (9th Cir. 2007), judgment vacated, 554 U.S. 471, 128 S.Ct. 2605 (2008).
As noted in Routh Wrecker Service, Inc. v. Washington, “[s]tate appellate courts that have considered the punitive damages issue in light of Gore have adopted a two-step analysis. The first step is to determine whether the award of punitives is excessive under state law; the next is to consider the award in light of the due-process analysis in Gore.” 335 Ark. 232, 239, 980 S.W.2d 240, 244 (1998). As a matter of Arkansas law, the court first considers “the extent and enormity of the wrong, the intent of the party committing the wrong, all the circumstances, and the financial and social condition and standing of the erring party.” Id., 980 S.W.2d at 244. The standard of review on the issue of remittitur of punitive damages is “whether the verdict is so great as to shock the conscience of this court or to demonstrate passion or prejudice on the part of the trier of fact.” Id., 980 S.W.2d at 244. See also Advocat, Inc. v. Sauer, 353 Ark. 29, 11 S.W.3d 346, cert. denied, 540 U.S. 1012 (2003) (citing Routh Wrecker Service, Inc. and applying two-step process); Allstate Ins. Co. v. Dodson, 2011 Ark. 19 (same).
In Advocat, Inc., the Arkansas Supreme Court reversed as excessive under the third guidepost a $63 million punitive damages verdict—“far and away in excess of any other punitive damages award in this state.” 353 Ark. at 58, 111 S.W.3d at 362. (The highest punitive damages award upheld by the Arkansas Supreme Court is $3 million. See Airco, Inc. v. Simmons First Nat'l Bank, 276 Ark. 486, 638 S.W.2d 660 (1982). The highest affirmed by the Arkansas Court of Appeals is $4 million. See Arrow Int'l, Inc. v. Sparks, 81 Ark. App. 42, 98 S.W.3d 48 (2003)). The Advocat, Inc. court found that a remittitur of punitive damages to $21 million would be appropriate. Note that the court in Advocat, Inc. concluded, under the first two guideposts, that the reprehensibility of defendants' conduct was high and that a ratio of 4.2 times the amount of the compensatory damages (under the court's conclusion that a remittitur from $15 million to $5 million would be appropriate) was not “breathtaking.” 353 Ark. at 56, 111 S.W.3d at 361. For an Arkansas case upholding a 75:1 ratio under the Gore analysis, see generally Routh Wrecker Service, Inc. v. Washington, 335 Ark. 232, 980 S.W.2d 240 (1998) (upholding $75,000 punitive damages award in abuse of process case in which $1,000 compensatory damages were awarded). For a case in which the court of appeals modified the trial court's remittitur of punitive damages of $4,500 (4.37:1) by increasing the punitive award to $8,000 (8.77:1) because of the modest award of compensatory damages and the need to deter similar, future conduct, see generally Graves v. Bullock, 102 Ark. App. 197, 283 S.W.3rd 615 (2008). For application of all three guideposts, see generally Jim Ray, Inc., 99 Ark. 315, 260 S.W.3d 307.
Emphasizing the first two guideposts (reprehensibility and ratio) and acknowledging that the award would be excessive under the third (civil penalties authorized in comparable cases), the court reinstated a punitive damages award of $15 million, which the trial court had remitted to $6 million, in Allstate Ins. Co. v. Dodson, 2011 Ark. 19, at 33.
The “fair upper limit” of punitive damages awards in maritime cases is a 1:1 ratio. Exxon Shipping Co. v. Baker, 554 U.S. 471, 513 (2008). Justice Souter's opinion also includes a comprehensive general review of the history and purposes of punitive damages awards.
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