United States: Review Of Punitive Damages: Spoliation Of Evidence

In Gomez v. Cabatic, 159 A.D.3d 62 (2d Dept., Jan. 17, 2018), the court held that "[w]here * * * a plaintiff recovers compensatory damages for a medical professional's malpractice, a plaintiff may also recover punitive damages for that medical professional's act of altering or destroying medical records in an effort to evade potential medical malpractice liability." Id. at 76.

Gomez arose from the death of the plaintiff's daughter, who developed a fatal chemical imbalance after the defendant Dr. Mercado failed to diagnose the child's type 1 diabetes. During her deposition in the ensuing action for medical malpractice and wrongful death, Dr. Mercado testified that, after receiving a medical records request from the plaintiff's attorney, she destroyed certain notes memorializing two office visits with the child. At the trial, the court instructed the jury that it could award punitive damages against Dr. Mercado if the plaintiff established, by clear and convincing evidence, that she had "maliciously" destroyed her records. Finding for the plaintiff, the jury in Gomez awarded damages of $400,000 for the child's pain and suffering and $100,000 for monetary loss sustained as a result of the child's death. The jury also found that the plaintiff was entitled to a punitive award. Following a separate trial to determine the amount of punitive damages, the jury returned a punitive award of $7,500,000. Upon the defendant's post-trial motion, the trial court held that the plaintiff was entitled to recover punitive damages, but conditionally reduced the award on the ground of excessiveness to the sum of $1,200,000.

On appeal, the Second Department concluded that punitive damages were recoverable based upon the defendant's destruction of evidence, even though this conduct did not cause or contribute to the child's death and did not prevent the plaintiff from successfully prosecuting the action. See 159 A.D.3d at 76. Next, the court determined that the plaintiff had adduced legally sufficient evidence to support the jury's verdict on punitive damages, and the jury's verdict awarding punitive damages was not against the weight of the evidence. Id. at 78. Finally, the court further conditionally reduced the punitive award for excessiveness to the sum of $500,000, which matched the aggregate compensatory award. Id. at 80.

Due Process Framework

The Fourteenth Amendment bars states from depriving "any person of life, liberty, or property, without due process of law." U.S. Const., amend, XIV. The U.S. Supreme Court has held that due process principles require states "to ensure that punitive damages are not imposed in an arbitrary manner." See Honda Motor Co. v. Oberg, 512 U.S. 415, 420 (1994). Judicial review of punitive awards therefore must include consideration of due process concerns.

In a series of incremental decisions, the Supreme Court has recognized procedural due process constraints on the manner in which juries assess punitive damages and courts review such awards. See Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 20 (1991) (due process mandates a "meaningful individualized assessment of appropriate deterrence and retribution"); Oberg, 512 U.S. at 432 (due process requires review of "the amount awarded"); Cooper Industries v. Leatherman Tool Group, 532 U.S. 424, 436 (2001) ("courts of appeals should apply a de novo standard of review when passing on district courts' determinations of the constitutionality of punitive damages awards"); State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 422 (2003) ("jury must be instructed * * * that it may not use evidence of out-of-state conduct to punish a defendant for action that was lawful in the jurisdiction where it occurred"); Philip Morris USA v. Williams, 549 U.S. 346, 353 (2007) ("Due Process Clause forbids a State to use a punitive damages award to punish a defendant for injury that it inflicts upon nonparties").

Principles of substantive due process place constitutional limits on the size of punitive damages awards since "[t]he Due Process Clause of the Fourteenth Amendment prohibits the imposition of grossly excessive or arbitrary punishments on a tort-feasor." State Farm, 538 U.S. at 416. In view of these concerns, the court in BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (1996), established three guideposts for reviewing punitive awards for excessiveness: (1) the degree of reprehensibility of the defendant's conduct; (2) the ratio of the punitive award to the actual or potential harm to the plaintiff; and (3) the disparity between the punitive award and civil penalties applicable to comparable misconduct. See 517 U.S. at 574-85; see also State Farm, 538 U.S. at 418.

'Reprehensibility' Guidepost

Turning to Gomez, the court held that "[a]llowing an award of punitive damages for a medical professional's act of altering or destroying medical records in an effort to evade potential medical malpractice liability will serve to deter medical professionals from engaging in such wrongful conduct, punish medical professionals who engage in such conduct, and express public condemnation of such conduct." See 159 A.D.3d at 76. But this begs the threshold question of whether the defendant's conduct was so reprehensible as to warrant the imposition of punitive damages, in addition to a substantial compensatory damages award, to achieve punishment or deterrence. See State Farm, 538 U.S. at 419 ("because a plaintiff has been made whole for his injuries by compensatory damages * * * punitive damages should only be awarded if the defendant's culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or deterrence") (emphasis added).

The Supreme Court has instructed courts to determine the reprehensibility of a defendant's conduct by considering "whether * * * the harm caused was physical as opposed to economic; the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; the target of the conduct had financial vulnerability; the conduct involved repeated actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident." Id. at 419. Furthermore, "[t]he existence of any one of these factors weighing in favor of a plaintiff may not be sufficient to sustain a punitive damages award; and the absence of all of them renders any award suspect." Id. Insofar as appears from the decision in Gomez, none of these factors applied. True, the jury inferentially found that the defendant had acted with malice in destroying her records, but "the harm" suffered by the plaintiff's decedent (bodily injury and death) was the result of medical malpractice, not malice.

The court in State Farm also suggested that a punitive award must be premised upon the same conduct for which compensatory damages were awarded. Specifically, the court stressed that "[a] defendant's dissimilar acts, independent from the acts upon which liability was premised, may not serve as the basis for punitive damages. A defendant should be punished for the conduct that harmed the plaintiff, not for being an unsavory individual or business." 538 U.S. at 422-23 (emphasis added). While implicitly acknowledging that the defendant's destruction of records did not harm the decedent in the sense of causing her injuries or death, the court in Gomez nevertheless rejected the argument that this conduct was unconnected to the malpractice: "The award of compensatory damages for Mercado's departure from the standard of care that was a substantial factor in causing injury that resulted in [the child's] death served as a foundation for the award of punitive damages for Mercado's attempt to evade liability for that malpractice by destroying original records of her treatment of the child." See 159 A.D.3d at 76-77. Again, this holding arguably stretches the BMW "reprehensibility" guidepost by conflating "the harm" giving rise to tort liability—in Gomez, bodily injury and death—with post hoc attempts to avoid liability for such harm.

Given the increasing frequency and severity of punitive awards, see, e.g., W. Kip Viscusi, "The Blockbuster Punitive Damages Awards," 53 Emory L.J. 1405, 1412 (2004), as well as the frequency of claims of record destruction or alteration in litigation, we suspect Gomez will not be the last word on this issue.

'Ratio' Guidepost

The Supreme Court has been "reluctant to identify concrete constitutional limits on the ratio between harm, or potential harm, to the plaintiff and the punitive damages award." See State Farm, 538 U.S. at 419. In Haslip, the court concluded that a ratio of 4:1 (punitive to compensatory damages) was "close to the line" of constitutionality. See 499 U.S. at 23-24. In TXO Production v. Alliances Resources Group, 509 U.S.443, 462 (1993) (plurality op.), the court upheld a ratio of punitive damages to potential harm that was "not more than 10 to 1" and more likely in the range of 2.5:1 to 5:1. See BMW, 517 U.S. at 581 & n.34. Citing to the 4:1 ratio again, the court in BMW declined to sustain a $2 million punitive damages award that accompanied a verdict of only $4,000 in compensatory damages. See 517 U.S. at 581. And in State Farm, the court stated that "few awards exceeding a single-digit ratio between punitive and compensatory damages * * * will satisfy due process," and reiterated that a punitive award of four times compensatory damages was likely "close to the line of constitutional impropriety." See 538 U.S. at 425.

State Farm holds that a higher ratio may be permissible where "a particularly egregious act has resulted in only a small amount of economic damages," such as where "the injury is hard to detect or the monetary value of non-economic harm might have been difficult to determine." See 538 U.S. at 425. Conversely, "[w]hen compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee." Id. at 425. "In sum, courts must ensure that the measure of punishment is both reasonable and proportionate to the amount of harm to the plaintiff and to the general damages recovered." Id. at 426.

"[O]n consideration of the [BMW] guideposts," the court in Gomez reduced the punitive award for excessiveness to the sum of $500,000. See 159 A.D.3d at 80. This reduction, which produced a 1:1 punitive to compensatory ratio, presumably reflected the substantial $500,000 compensatory award and was in line with recent cases ordering a remittitur of punitive damages to achieve a 1:1 ratio or less. See, e.g., In re 91st Street Crane Collapse Litigation, 154 A.D.3d 139 (1st Dept., 2017) (1:1 ratio); Aracamone-Makinano v. Britton Property, 156 A.D.3d 669 (2d Dept., 2017) ($325,000 compensatory award and $250,000 punitive award).

Thomas R. Newman is of counsel to Duane Morris and author of "New York Appellate Practice" (Matthew Bender). Steven J. Ahmuty Jr. is a partner at Shaub, Ahmuty, Citrin & Spratt.

This article originally appeared in the New York Law Journal and is republished here with permission from law.com.

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