Kentucky Court of Appeals

NO. 2008-CA-000024-MR

MCDONALD'S CORPORATION
APPELLANT
v.
LOUISE OGBORN, DONNA J. SUMMERS, AND KIM DOCKERY
APPELLEES

OPINION

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A. Judgment Properly Apportioned Liability to McDonald's

McDonald's argues that the judgment must be reversed because it fails to follow the jury's verdict apportioning only 50 percent of the fault to McDonald's. Therefore, McDonald's argues, it should be liable for only 50 percent of all compensatory and punitive damages. We disagree.

The jury was presented with an apportionment instruction in both Ogborn's case and Summers' case against McDonald's.(14) The apportionment instructions are identical, in pertinent part, and to that extent state as follows:

If you have found for [Ogborn or Summers, respectively] against one or more of the parties, you shall apportion your verdict by deciding what percentage of the total fault was attributable to each, your total percentage to equal 100%. . . . [Y]ou shall consider both the nature of the conduct of the parties and the extent of the causal relationship between their conduct and the damages sustained. (emphasis supplied)

The emphasized language in these instructions comports with KRS 411.182(1), the apportionment statute, in that it contemplates apportionment only among "part[ies] to the action, including third-party defendants and persons who have been released[.]" KRS 411.182(1).

However, the verdict forms corresponding to these instructions did not comply with KRS 411.182(1); the verdict form allowed allocation of fault to "the Caller(s)," a non-settling non-party.(15) If the judgment drawn from those verdict forms actually had reflected an apportionment to a non-settling non-party, and assuming the error would have been preserved, we would have been compelled to reverse. See, e.g., Jones v. Stern, 168 S.W.3d 419 (Ky.App. 2005); Copass v. Monroe County Med. Found., Inc., 900 S.W.2d 617 (Ky.App. 1995); and Baker v. Webb, 883 S.W.2d 898 (Ky.App. 1994). Fortunately, the trial court's judgment stated:

In the case of Louise Ogborn vs. McDonald's Corporation . . . there shall be no allocation of fault under the sexual harassment count (Verdict Form 6) nor under the premises liability count (Verdict Form 3) and the Plaintiff Louise Ogborn shall be entitled to a full award of the compensatory damages without allocation.

In the case of Donna Summers vs. McDonald's Corporation . . . there shall be no allocation of fault under the Intentional Infliction of Emotional Distress count (Verdict Form 1) and the Cross-Claimant Donna Summers shall be entitled to a full award of the compensatory damages without allocation.

(Judgment entered November 15, 2007; emphasis in original). There are three reasons it was appropriate for the trial court to correct the potential error created by the erroneous verdict forms.

First, the instructions must be read as a whole. Bills v. Commonwealth, 851 S.W.2d 466, 471 (Ky. 1993). Ogborn's Instruction No. 8 and Summers' Instruction No. 3 allowed allocation only to parties. The errant corresponding verdict forms should not have included "the Caller(s)" because the caller was not a party. In the final analysis, the only party to which the jury allocated any fault was McDonald's.(16)

Second, even if the unidentified caller had been a party, the verdict forms still would have been improper. "Fault may not be properly allocated to a party, a dismissed party or settling non-party unless the court or the jury first finds that the party was at fault; otherwise, the party has no fault to allocate." Owens Corning Fiberglas Corp. v. Parrish, 58 S.W.3d 467, 471 n.5 (Ky. 2001). The jury never found the unknown caller was at fault because the instructions only provided for the possibility that McDonald's, Summers, Dockery or Ogborn were at fault. Consequently, no degree of fault could properly be allocated to the unidentified caller.

Third, Ogborn prevailed on causes of action for which fault could only be attributable, based on this record, directly or vicariously to McDonald's (negligent failure to supervise or train; premises liability; false imprisonment;(17) sexual harassment). The same can be said of the only cause of action on which Summers prevailed intentional infliction of emotional distress for failing to train or warn of the hoax.

McDonald's cited numerous cases in support of its argument regarding apportioning liability to the unknown caller. However, every case cited involved apportioned liability to a party or a settling non-party. The error of allowing apportionment to a non-settling non-party was fully corrected by the judgment in this case, and we cannot disturb that judgment on this ground. McDonald's also claims a note from the jury foreperson to the trial judge expresses the jury's intention that McDonald's be responsible for paying only 50 percent of the total damages awarded. The note states:

V 8 [Verdict Form No. 8] who pays or fault we understood yesterday that the allocation of fault was money paid.

It would be improper to give any weight to this note. All that can be said of the note is that it: (1) represented the jury's temporary perception that may or may not have changed before the verdict was rendered; (2) went appropriately unanswered; and (3) related to a verdict form we determined was technically erroneous, but was actually favorable to McDonald's.(18) Notwithstanding the existence and attributes of the note, a jury speaks only through its verdict. As Professor Wigmore stated:

The jurors' deliberations during retirement, their expressions, arguments, motives and beliefs represent that state of mind which must precede every legal act and is in itself of no jural consequence. The verdict as finally agreed upon and pronounced in court by the jurors must be taken as the sole embodiment of the jury's act. Hence it stands irrespective of what led up to it in the privacy of the jury room, precisely as the prior negotiations of the parties to a contract disappear from legal consideration when once the final agreement is reduced to writing and signed.

8 Wigmore on Evidence § 2348 (John T. McNaughton ed., 1961) (internal citation and emphasis omitted). To paraphrase Professor Wigmore, as an expression of "that [jury's] state of mind which must precede every [verdict, the jury's note to the judge in this case is] of no jural consequence."

Our decision regarding apportionment applies equally to the compensatory and punitive damages awarded in both cases. However, there is an additional reason why apportionment was not appropriate with regard to the punitive damages awarded. The punitive damages instructions in both Ogborn's and Summers' cases (Instruction No. 9 and Instruction No. 4, respectively) specifically state, "This instruction is only against McDonald's Corporation." With the exception of this sentence, the punitive damages instruction tendered by McDonald's is virtually identical to that presented to the jury. Both the tendered instruction and that submitted to the jury provided for punitive damages to be awarded only against McDonald's and no other party. McDonald's did not object to the trial court's addition of the clarifying sentence, and we see no error in limiting the award of punitive damages to McDonald's.

B. Punitive Damages Awards -- Generally

McDonald's argues the amount of punitive damages awarded is unconstitutionally excessive. With regard to the award of punitive damages against McDonald's in favor of Ogborn, we disagree. However, we agree that the punitive damages awarded to Summers are unconstitutionally excessive.

The standard of review of the constitutionality of punitive damages is de novo. Steel Technologies, Inc. v. Congleton, 234 S.W.3d 920, 931 (Ky. 2007), citing Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 436, 121 S.Ct. 1678, 1685-86, 149 L.Ed.2d 674 (2001). This review is guided primarily by BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d (1996), and its progeny.(19)

Gore tells us, "[s]tates necessarily have considerable flexibility in determining the level of punitive damages that they will allow in different classes of cases and in any particular case." Gore, 517 U.S. at 568, 116 S.Ct. at 1595. The purpose behind any award of punitive damages is "to further a State's legitimate interests in punishing unlawful conduct and deterring its repetition."(20) Id.; see Kentucky Farm Bureau Mut. Ins. Co. v. Rodgers, 179 S.W.3d 815, 826 (Ky. 2005). "Only when an award can fairly be categorized as 'grossly excessive' in relation to these interests does it enter the zone of arbitrariness that violates the Due Process Clause of the Fourteenth Amendment." Gore, 517 U.S. at 568, 116 S.Ct. at 1595, citing TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 456, 113 S.Ct. 2711, 2719, 125 L.Ed. 2d 366 (1993). The difficult question is, of course, "What constitutes a 'grossly excessive' award?"

Helping to answer this question, the Supreme Court offered three "guideposts," instructing courts "to consider (1) the degree of reprehensibility of the defendant's misconduct, (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award, and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases." State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. at 409, 123 S.Ct. at 1515, citing Gore, 517 U.S. at 575, 116 S.Ct. 1589. We consider the reasonableness of each of these punitive damages awards in the context of the three guideposts.

1. Degree of reprehensibility

"[T]he most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant's conduct." Gore, 517 U.S. at 575, 116 S.Ct. at 1599. "This principle reflects the accepted view that some wrongs are more blameworthy than others." Id. The Supreme Court stated that behaviors marked by violence, the threat of violence, trickery, or deceit were more reprehensible than those behaviors that did not exhibit these markers. Id. at 576, 116 S.Ct. at 1599. Furthermore, "[A] recidivist may be punished more severely than a first offender [because] repeated misconduct is more reprehensible than an individual instance of malfeasance." Id. at 577, 116 S.Ct. 1599-1600, citing Gryger v. Burke, 334 U.S. 728, 732, 68 S.Ct. 1256, 12581259, L.Ed. 1683 (1948) (explaining that though defendant in Gore was not a recidivist, a pattern of misconduct should be considered as adding to the reprehensibility of a tortfeasor's conduct).

As is too often true, applying these concepts to a specific fact pattern produces an imperfect fit. In isolation, McDonald's mere failure to provide its managers with information may not appear to constitute "behavior[] marked by violence, the threat of violence, trickery or deceit." But McDonald's personnel were trained to cooperate with police authority. They were not told there was a caveat to that training the widespread perpetration of a hoax by a caller pretending to be police authority. The Mt. Washington McDonald's restaurant employees were made vulnerable to "violence, the threat of violence, trickery or deceit" by McDonald's decision to refrain from training or providing information about the hoax caller. We believe the jury found such behavior reprehensible because the evidence supports a conclusion that McDonald's consciously placed a higher value on corporate reputation than on the safety of its own employees. And while McDonald's cannot be accurately called a recidivist, the evidence demonstrated that over a ten-year period McDonald's repeatedly made this choice.

While Ogborn and Summers were made equally vulnerable by McDonald's conduct, they were not equally affected by it. In determining reprehensibility, we must also consider the separate impact of McDonald's conduct on the two employees.Summers experienced extreme emotional distress upon learning she had been duped into serving as an unwitting accomplice to the hoax, but she was not exposed to physical violence, threat of violence, or restraint. In Ogborn's case, however, "the proofs show that threats, violence, and imprisonment, were accompanied by mental fear, torture, and agony of mind." Gore, 517 U.S. at 576 fn.24, 116 S.Ct. at 1599, quoting Blanchard v. Morris, 15 Ill. 35, 36 (1853). Reprehensibility exists in both cases; however, we cannot escape the fact that, in degree, the reprehensibility is clearly greater in Ogborn's case.

2. Disparity between actual or potential harm and punitive damages award

In Gore, the Supreme Court simply calls the second guidepost "Ratio" and notes that it is the "most commonly cited indicium of an unreasonable or excessive punitive damages award[.]" Gore, 517 U.S. at 580, 116 S.Ct. at 1601. Since Gore, guidance about "ratio" has been intentionally somewhat nonspecific. Citing Campbell, supra, the Supreme Court recently said, "the longstanding historical practice of setting punitive damages at two, three, or four times the size of compensatory damages, while 'not binding,' is 'instructive,' and that '[s]ingle-digit multipliers are more likely to comport with due process.'" Philip Morris USA v. Williams, 549 U.S. 346, 351, 127 S.Ct. 1057, 1061-62, 166 L.Ed.2d 940 (2007), citing Campbell, 538 U.S. at 425, 123 S.Ct. 1513. Even more recently, the Court, again citing Campbell, said,

Although "we have consistently rejected the notion that the constitutional line is marked by a simple mathematical formula," [Gore, 517 U.S.] at 582, 116 S.Ct. 1589, we have determined that "few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process," State Farm [v. Campbell], 538 U.S., at 425, 123 S.Ct. 1513[.]

Exxon Shipping Co. v. Baker, 128 S.Ct. 2605, 2626, 171 L.Ed.2d 570 (2008).

The Supreme Court in Exxon, addressing the "audible criticism in recent decades" that discretion to award punitive damages has "mass-produced runaway awards" said,

although some studies show the dollar amounts of punitive-damages awards growing over time, even in real terms, by most accounts the median ratio of punitive to compensatory awards has remained less than 1:1.

Exxon, 128 S.Ct. at 2624.(21) These studies should tell us that even when we factor in punitive awards of double, treble and quadruple the compensatory award, it is wisdom and common sense that, to quote the Supreme Court, "will cabin the jury's discretionary authority," at least in most cases. Philip Morris (USA), 549 U.S. at 352, 127 S.Ct. at 1062. In other words, if all punitive damages awards were plotted on a graph, the resulting bell curve would show the median ratio of 1:1 at the curve's apex; only the awards at the extremities of the curve would be deemed constitutionally improper solely as a consequence of their deviation from this median ratio.

The ratio of punitive damages to compensatory damages in Ogborn's case is approximately 4.5:1. In Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991), the Court assessed a 4.2:1 ratio, and "even though a punitive damages award of 'more than 4 times the amount of compensatory damages' might be 'close to the line,' it did not 'cross the line into the area of constitutional impropriety.'" Gore, 517 US at 581, 116 S.Ct. at 1602, citing Haslip, 499 U.S. at 23-24, 111 S.Ct. at 1046. On the other hand, the ratio in Summers' case is 10:1. The question becomes, is Summers' award one of those "few awards exceeding a single-digit ratio [that] will satisfy due process"? Campbell, 538 U.S. at 425, 123 S.Ct. at 1524.

Summers argues that "low awards of compensatory damages may properly support a higher ratio than high compensatory awards[.]" Gore, 517 U.S. at 582, 116 S.Ct. at 1602. While Ogborn recovered more than $1 million in compensatory damages, Summers recovered only $100,000. Although Summers' compensatory damages award is less than one-tenth the amount recovered by Ogborn, that award is not "low" as that term is used in the passage quoted from Gore.

Gore referred to low awards as those that "resulted in only a small amount of economic damages." Id. (emphasis supplied). In Exxon, the Court made it clear that it was referring to nominal damages. Citing Gore for this principle, Exxon supplements that citation with another to the Restatement (Second) of Torts, stating, "Thus an award of nominal damages . . . is enough to support a further award of punitive damages, when a tort . . . is committed for an outrageous purpose, but no significant harm has resulted." Exxon 128 S.Ct. at 2622, quoting Restatement (Second) of Torts § 908, Comment c, p. 465 (emphasis supplied).

Summers did not recover nominal damages. Therefore, her punitive damages award of ten times her award of compensatory damages is constitutionally suspect.

3. Sanctions for comparable misconduct

The third guidepost "calls for a broad legal comparison[.]" Cooper Industries, supra, 532 U.S. at 440, 121 S.Ct. at 1688. It compares the punitive damages awarded and the civil or criminal penalties that could be awarded for similar misconduct. Gore, 517 U.S. at 583, 116 S.Ct. at 1603. Once again, the impact of McDonald's misconduct upon Ogborn differed markedly from the impact it had on Summers. McDonald's concealment of information about the hoax calls facilitated all that Ogborn experienced; she was falsely accused of theft, threatened, subjected to a strip-search, and held against her will in a room with several men, one of whom sexually assaulted her. We must consider that both Summers and Nix were convicted of crimes, and Nix is currently serving a sentence on felony sexual assault charges. Considering that criminal convictions resulting in consequential sentences resulted from this case, the punitive damages awarded to Ogborn do not "raise a suspicious judicial eyebrow." Id., quoting TXO, 509 U.S. at 481, 113 S.Ct. at 2732 (O'Connor, J., dissenting).

By contrast, Summers' emotional distress was made manifest only when she realized she was not aiding law enforcement but was, instead, facilitating criminal activity. She experienced no violence, imprisonment, or assault. Indeed, a portion of the injury Summers experienced might be fairly attributed to lapses in her own judgment, however psychologically justified. In fact, the jury had already determined that a portion of Ogborn's injuries were attributable to those lapses.

All of Summers' injuries were nonphysical in nature; the award of $100,000 compensated her IIED claim only. The $1,000,000 punitive damages award is extraordinary when compared to other stand-alone IIED cases. For example, in Burgess v. Taylor, 44 S.W.3d 806 (Ky.App. 2001), the plaintiff was awarded $50,000 in compensatory damages and $75,000 in punitive damages after the individuals who promised to care for the plaintiff's prized and beloved Appaloosa horses immediately sold them to a slaughterhouse. Id. at 809-10. By contrast with the amount awarded to Summers, the punitive damages award was low both in amount and in its ratio to the compensatory damages. See also Childers Oil Co., Inc. v. Adkins, 256 S.W.3d 19 (Ky. 2008)($61,922 in compensatory damages, $50,000 in punitive damages; reversed because of improper jury instruction).

We are additionally struck by the disparity between the two punitive damages awards. Though the harm to Ogborn was greater by all measures, the punitive damages award to Ogborn is substantially smaller than that awarded to Summers, measured as a multiple of the compensation for that harm. Summers' award is out of all proportion to the harm she suffered relative to that suffered by Ogborn.

C. Punitive Damages Awarded to Ogborn Were Proper

Applying the guideposts set out in Gore, we hold that the punitive damages awarded to Ogborn are not constitutionally excessive.

D. Punitive Damages Awarded to Summers Were Constitutionally Excessive

Applying each of the Gore guideposts to Summers' punitive damages award shows that the $1,000,000.00 award is constitutionally excessive. The trial court should have granted McDonald's motion to reduce the punitive damages award in favor of Summers so as to comport with constitutional limitations. That task now falls to this Court.

While the United States Supreme Court has declined to "impose a bright-line ratio which a punitive damages award cannot exceed[,]" Campbell, 538 U.S. at 425, 123 S.Ct. at 1524, that Court has also said punitive damages exceeding "4 times the amount of compensatory damages' might be 'close to the line[.]'" Gore, 517 U.S. at 581, 116 S.Ct. at 1602, citing Haslip, 499 U.S. at 23, 111 S.Ct. at 1046. Therefore, we take as our starting point the upper limit of what the Supreme Court has deemed constitutionally acceptable under the second guidepost - a punitive damage award equal to four times the compensatory damages. That would equal $400,000.00 in Summers' case. Next, we reconsider the first and third guideposts. When the Supreme Court determined that punitive damages awards should be reviewed de novo, careful consideration was given to the relative abilities of the fact-finder and the reviewing court to make determinations under each of the three guideposts. Cooper Industries, 532 U.S. at 440, 121 S.Ct. at 1687-88. The Court said, "[W]ith respect to the first Gore inquiry[, reprehensibility,] the district courts [i.e., the fact-finders] have a somewhat superior vantage over courts of appeals, and even then the advantage exists primarily with respect to issues turning on witness credibility and demeanor." Id.

Regarding the reprehensibility of McDonald's actions, we are inclined to refrain from disturbing the jury's implicit determination that McDonald's actions were sufficiently reprehensible to justify a substantial punitive damages award. Therefore, reconsideration of the first guidepost does not result in our further reduction of the punitive damages award.

Unlike the first, "the third Gore criterion [sanctions for comparable misconduct], which calls for a broad legal comparison, seems more suited to the expertise of appellate courts." Id. Therefore, we allow no deference to the jury's determination. However, we have nothing directly and little indirectly with which to compare Summers' claim. Nothing has been presented on this point for us to consider, and we have no basis upon which to justify a further reduction in Summers' punitive damages award.

Therefore, this Court orders that the punitive damages award in favor of Summers be reduced to the constitutionally acceptable amount of $400,000.00.

The judgment of the Bullitt Circuit Court is affirmed, except as to the punitive damages awarded to Summers, which is reversed, and this case is remanded to the trial court for entry of an amended judgment in accordance with this opinion.

ALL CONCUR.

BRIEFS AND ORAL ARGUMENT FOR APPELLANT: Steven T. Catlett Chicago, Illinois Margaret E. Keane James W. Herr Louisville, Kentucky BRIEF AND ORAL ARGUMENT FOR APPELLEE, LOUISE OGBORN: Ann Oldfather Louisville, Kentucky BRIEF FOR APPELLEE, LOUISE OGBORN: Kirsten R. Daniel Vicki L. Buba Louisville, Kentucky BRIEF AND ORAL ARGUMENT FOR APPELLEE, DONNA J. SUMMERS: Glenn Cohen Louisville, Kentucky BRIEF FOR APPELLEE, DONNA J. SUMMERS: Paul J. Hershberg Cynthia L. Effinger Louisville, Kentucky BRIEF AND FOR APPELLEE, KIM DOCKERY: Frank Hampton Moore, Jr. Matthew P. Cook Bowling Green, Kentucky

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NOTES:
20 Additionally, because it is only one state's interest that comes into play, the 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. Sand Hill Energy, Inc. v. Smith, 142 S.W.3d 153, 156 (Ky. 2004), citing Campbell, 538 U.S. at 422-23, 123 S.Ct. 1513. In the case sub judice, the jury was effectively so instructed.
21 While Exxon applied maritime law, the quoted passage was not limited to punitive damages in maritime cases.

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