Target Media Partners Operating Company, LLC, and Ed Leader v. Specialty Marketing Corporation d/b/a Truck Market News ( 2014 )

Rel: 08/29/2014
Notice: This opinion is subject to formal revision before publication in the advance
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before the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
SPECIAL TERM, 2014
_________________________
1091758
_________________________
Target Media Partners Operating Company, LLC,
and Ed Leader
v.
Specialty Marketing Corporation d/b/a Truck Market News
Appeal from Calhoun Circuit Court
(CV-07-900201)
On Return to Remand
PER CURIAM.
The defendants, Target Media Partners Operating Company,
LLC ("Target Media"), and Ed Leader, appealed from a judgment
entered in favor of the plaintiff, Specialty Marketing
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Corporation d/b/a Truck Market News ("Specialty Marketing").
Specialty Marketing had sued Target Media and Leader, alleging
breach-of-contract claims against Target Media and fraudulent-
misrepresentation and promissory-fraud claims against Target
Media and Leader. Target Media had filed a counterclaim
alleging breach-of-contract claims against Specialty
Marketing. A jury returned verdicts in favor of Specialty
Marketing on its breach-of-contract claim, awarding
compensatory damages of $851,552; in favor of Target Media on
its breach-of-contract counterclaim, awarding compensatory
damages of $48,800; in favor of Specialty Marketing and
against Target Media on Specialty Marketing's promissory-fraud
claim, awarding compensatory damages of $210,000 and punitive
damages of $630,000; in favor of Leader on Specialty
Marketing's promissory-fraud claim; and in favor of Specialty
Marketing and against Target Media and Leader on Specialty
Marketing's fraudulent-misrepresentation claim, awarding
compensatory damages of $167,800 and punitive damages of
$503,400. The trial court entered a judgment on that verdict.
This Court affirmed the judgment as to the compensatory-
damages awards but remanded the cause with instructions for
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the trial court to hold a hearing on the question whether the
punitive-damages awards are excessive. See Target Media
Partners Operating Co. v. Specialty Marketing Corp., [Ms.
1091758, September 6, 2013] ___ So. 3d ___ (Ala. 2013) (Parker
and Wise, JJ., concurred; Moore, C.J., and Shaw and Bryan,
JJ., concurred in the result; Murdock, J., concurred in the
rationale in part and concurred in the result; and Stuart,
Bolin, and Main, JJ., concurred in part and dissented in
part). Pursuant to our instructions, the trial court, on
January 17, 2014, held a hearing pursuant to Hammond v. City
of Gadsden, 493 So. 2d 1374 (Ala. 1986), and Green Oil Co. v.
Hornsby, 539 So. 2d 218 (Ala. 1989), at the conclusion of
which the trial court reaffirmed the punitive-damages awards.
The trial court made its return to this Court on March 24,
2014. The only issue now before this Court is whether the
punitive-damages awards are, as Target Media and Leader
contend, excessive.
The trial court entered the following thorough and well
reasoned order on remand:
"This matter comes before the court on remand
from the Supreme Court of Alabama. Pursuant to the
Court's opinion of September 6, 2013, a
Hammond/Green Oil hearing was held on January 17,
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2014, to review the punitive damages awarded by the
jury in this cause and to consider the arguments
made by defendant Target Media Partners Operating
Company, LLC (hereinafter 'Target [Media]'), and
defendant Ed Leader in their motions for remittitur.
The punitive damages were returned by the jury on
[Specialty Marketing]'s claims of fraudulent
misrepresentation as to Target [Media] and Leader
and on [Specialty Marketing]'s promissory-fraud
claim as to defendant Target [Media]. Specifically,
the jury returned a verdict against defendant Target
[Media] on the claim for promissory fraud in the
amount of $210,000 in compensatory damages and
$630,000 in punitive damages. The jury returned a
verdict against defendant Target [Media] and
defendant Leader on the claim for fraud[ulent]
misrepresentation in the amount of $167,800 in
compensatory damages and $503,400 in punitive
damages.
"This was a well-tried case on behalf of all
parties. The court has carefully considered the
briefs and arguments submitted by the parties as
well as the evidence presented at the Hammond/Green
Oil hearing held on January 17, 2014. This court
has thoughtfully considered the testimony of each
and every witness who testified during this almost
two-week trial as well as the attentive jury who
decided the case. With regard to [Target Media's
and Leader's] motions for remittitur, the court has
analyzed the Hammond/Green Oil factors, which the
court is duty-bound to consider. The court, after
careful consideration of all the Hammond/Green Oil
factors, finds that there is no legal basis
justifying remittitur of the punitive damages
verdict returned by the jury in this case. The
court finds that there was substantial evidence
justifying and supporting the verdict as to all of
the named defendants. There is no compelling
justification for this court to remit the award in
this case. The jury's award in this case is
consistent with, and in line with, judgments that
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have been affirmed by the Alabama Supreme Court in
recent years.
"In assessing the appropriateness of the amount
of a punitive damages verdict and judgment, the
Alabama Supreme Court and the United States Supreme
Court have provided certain guidelines or factors
for a trial court to consider. In BMW of North
America, Inc. v. Gore, 517 U.S. 559 (1996), and
Green Oil Co. v. Hornsby, 539 So. 2d 218 (Ala.
1989), most of these guidelines are set forth. The
factors to be considered under Green Oil and the
associated case of Hammond v. City of Gadsden, 493
So. 2d 1374 (Ala. 1986), as stated in Green Oil, are
as follows:
"'(1) Punitive damages should bear a
reasonable relationship to the harm that is
likely to occur from the defendant's
conduct as well as to the harm that
actually has occurred. If the actual or
likely harm is slight, the damages should
be relatively small; if grievous, the
damages should be much greater.
"'(2) The degree of reprehensibility
of the defendant's conduct should be
considered. The duration of this conduct,
the degree of the defendant's awareness of
any hazard which his conduct has caused or
is likely to cause, and any concealment or
"cover-up" of that hazard, and the
existence and frequency of similar past
conduct should all be relevant in
determining this degree of
reprehensibility.
"'(3) If the wrongful conduct was
profitable to the defendant, the punitive
damages should remove the profit and should
be in excess of the profit, so that the
defendant recognizes a loss.
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"'(4) The financial position of the
defendant would be relevant.
"'(5) All the costs of litigation
should be included, so as to encourage
plaintiffs to bring wrongdoers to trial.
"'(6) If criminal sanctions have been
imposed on the defendant for his conduct,
this should be taken into account in
mitigation of the punitive damages award.
"'(7) If there have been other civil
actions against the same defendant, based
on the same conduct, this should be taken
into account in mitigation of the punitive
damages award.'
"Green Oil, 539 So. 2d at 223-24.
"The three BMW 'guideposts' are here numbered as
factors (8), (9), and (10):
"(8) Reprehensibility. The U.S. Supreme Court
majority stated that the most important factor in
the analysis is 'the degree of reprehensibility of
the defendant's conduct.' BMW, [517 U.S. at 575].
"(9) Ratio. The second 'guidepost' is the
relationship between compensatory and punitive
damages. Id. at [580].
"(10) Legislative Penalties. The third 'guidepost'
is a comparison to comparable legislative fines and
penalties for comparable misconduct. Id. at [583-
84].
"At the hearing on January 17, 2014, [Target
Media and Leader] presented evidence almost
exclusively in regard to their respective financial
positions. However, in their brief, [Target Media
and Leader] argued other factors which they felt
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were relevant. The court has given de novo review
to each of the factors, and herein states the
court's conclusions:
"1. Punitive damages should bear a reasonable
relationship to the harm that is likely to occur
from the defendants' conduct as well as to the harm
that actually has occurred. The evidence presented
at trial made clear that [Specialty Marketing] was
significantly injured as a result of [Target Media
and Leader's] conduct. As stated by the Supreme
Court in its opinion, 'the jury heard ample evidence
from which it could have found harm' to [Specialty
Marketing] as a result of [Target Media and
Leader's] conduct. Target Media Partners Operating
Co. v. Specialty Marketing Corp., [Ms. 1091758,
September 6, 2013] ___ So. 3d ___, ___ (Ala. 2013).
The Court went on to say that the evidence before
the jurors in this case was sufficient to find that
[Specialty Marketing] 'lost business and profits.'
Id. [at ___]. In addition to the $400,000 paid to
Target [Media], the evidence indicated that
[Specialty Marketing]'s expenses were in excess of
$1,500,000 in printing and shipping costs, much of
which was lost due to [Target Media and Leader's]
fraudulent conduct. This factor weighs in favor of
[Specialty Marketing].
"2. The degree of reprehensibility of the
defendants' conduct should be considered. The
relation of this conduct, the degree of the
defendants' awareness of any such conduct and any
concealment or cover-up, and the existence and
frequency of similar past conduct should all be
relevant in determining this degree of
reprehensibility. The degree of reprehensibility
here is extremely high in that the evidence
established that [Target Media and Leader] entered
into their relationship with [Specialty Marketing]
and continued that relationship for over four (4)
years--all the while knowing they never intended to
perform the services which had been promised.
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"The most important factor the Court should
consider in determining whether a remittitur is
warranted is the relative degree of the defendants'
culpability. 'Perhaps the most important indicium
of the reasonableness of a punitive damages award is
the degree of reprehensibility of the defendants'
conduct.' BMW v. Gore, 517 U.S. at 575. Given the
facts presented in this case, it is clear that the
evidence supported a finding by the jury that
[Target Media and Leader's] conduct was highly
reprehensible.
"In its opinion, the Supreme Court found:
"'It cannot be disputed in this case that
the jurors reasonably could have found that
Target Media and its principals made
fraudulent misrepresentations, that those
misrepresentations involved material facts,
and that those misrepresentations damaged
Speciality Marketing.'
"Target Media, [___ So. 3d at ___].
"Mobile Infirmary Association v. Tyler, 981 So.
2d 1077 (Ala. 2007), makes it clear that
reprehensibility is not a mathematical formula based
on a number of wrongful acts. However, the number
of wrongful acts can aggravate the reprehensibility
factor. The evidence here is that [Target Media]
engaged in this same conduct prior to entering into
the relationship with [Specialty Marketing] as well
as at the time it was negotiating to distribute
[Specialty Marketing]'s magazines.
"The evidence shows that [Target Media] never
intended to fulfill the promises that it made to
[Specialty Marketing]. The evidence here
established that in addition to the $400,000 paid
directly to [Target Media], [Specialty Marketing]
paid approximately $900,000 in printing costs,
approximately $200,000 of which the jury could have
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found was attributed solely to magazines that were
thrown away in Oxford, Alabama, and that [Specialty
Marketing] lost business and profits as a result of
[Target Media and Leader's] conduct. This court
agrees with the statement made by [Specialty
Marketing] in its brief that 'in the context of the
relationship between [Specialty Marketing] and
[Target Media] in this case, there can be no more
reprehensible conduct than to lie and defraud the
other party and to utterly fail--intentionally--to
perform the duties promised.' The evidence here was
clear and convincing that [Target Media and
Leader's] conduct was consistent and continuous
throughout the relationship between the parties.
This factor weighs heavily in favor of [Specialty
Marketing].
"3. If the wrongful conduct is profitable to the
defendant, the punitive damages should remove the
profit and should be in excess of the profit so that
the defendant recognizes a loss. Ex parte Vulcan
Materials Co., 992 So. 2d 1252 (Ala. 2008). In this
case, the total amount of punitive damages given by
the jury was $1,133,400. The evidence was that
[Specialty Marketing] paid [Target Media] $400,000
for services that were not performed. [Target Media
and Leader] committed themselves to defrauding
[Specialty Marketing] and coerced employees to
ensure that the fraud was accomplished. The
evidence clearly established that [Target Media and
Leader] did so to create a profit by placing Target
[Media]'s own books ahead of [Specialty
Marketing]'s, by destroying [Specialty Marketing]'s
books, and by pocketing $400,000 in contract
proceeds without working for that money. Moreover,
as noted by the Supreme Court, [Target Media and
Leader] did this never intending to fulfill the
promises made to [Specialty Marketing].
"This Court believes that the jury provided
punitive damages in excess of the profits gained by
[Target Media and Leader] so that [Target Media and
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Leader have] recognized a loss which is reasonable
in the context of [their] conduct.
"[Target Media and Leader argue] that there is
no evidence that defendant Leader profited from the
conduct underlying the punitive damages in this
case. Evidence at the hearing established that
Leader earned between $100,000 and $150,000 each of
the years of the contractual relationship between
Target [Media] and [Specialty Marketing]. This
would total between $400,000 and $600,000 during the
time frame that [Specialty Marketing] was actively
being defrauded. The Court finds that profit gained
by Target [Media] should be imputed, at least in
part, to defendant Leader, an officer of the
company. This is true not only with regard to
moneys paid by [Specialty Marketing] directly to
[Target Media], but also by distributing and
displaying [Target Media]'s books in place of
[Specialty Marketing]'s books. This is especially
true since Leader was established to be one of the
point men in accomplishing the fraud. This factor
weighs against remittitur.
"4. The financial position of the defendant
would be relevant. This is the factor argued most
vehemently by [Target Media and Leader]. The
evidence presented at the Hammond/Green Oil hearing
was almost exclusively with regard to this factor.
[Target Media] presented financial statements/audits
showing that Target Media lost tens of millions of
dollars between the years 2008 and 2012, and that
Target Media currently has a negative net worth of
millions of dollars. Similarly, [Target Media and
Leader] offered evidence at the hearing that Ed
Leader has made between $100,000 and $150,000 per
year in his employment with Target [Media] since
2001; that Leader is 'underwater' in his home and
has a 'modest retirement plan.' The evidence at the
hearing was that his retirement plan has a few
hundred thousand dollars in it.
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"[Target Media and Leader] argued that the
imposition of $1,133,400 against Target [Media] 'may
very well destroy it.' [Target Media and Leader]
further argued that the imposition of any punitive
damages against Leader will have the effect of
destroying him.
"The Alabama Supreme Court has stated that
'punitive damages should sting, but should not
destroy a defendant.' Green Oil [539 So. 2d] at
222. The court has performed its own de novo
examination of the amount of the verdict, and the
court can find no valid basis for any remittitur.
A review of [Target Media's] financial statements
reveals that the financial health of Target Media is
not likely to depend or be largely affected by the
relatively small punitive damages award from this
case. The company continues to generate several
million dollars in revenue each year. In fact, the
only witness who testified on behalf of Target Media
at the Hammond/Green Oil hearing was the individual
defendant and officer of the corporation, Ed Leader.
When asked directly whether this punitive damages
award would cripple or destroy Target Media, Leader
testified that he had no information that that would
be true, and further testified that he doubted the
size of this verdict would have much of an effect in
the context of the company's current financial
condition. From the evidence before this court, it
is evident that the jury award, while inflicting a
sting on Target Media, is not significant in terms
of that company's size and operations.
"[Target Media and Leader's] argument with
regard to Leader is effectively that the punitive
damages award against him should be reduced to
'zero.' This position shocks the conscience of the
court. All of the evidence regarding the deceptive
and fraudulent conduct of [Target Media] as it
relates to the fraud/misrepresentation claim is also
applicable to Ed Leader. While the evidence showed
that the conduct was carried out by many of [Target
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Media's] employees, that conduct was ordered and
overseen by Ed Leader. The court finds that a
remittitur (especially to zero) would fail to do
justice and would fail to serve the law's twin aims
of specific and general deterrence. Contrary to
[Target Media and Leader's] argument, a judgment
lien, no matter how large, is not a financial death
penalty. Present Alabama law limits the percentage
of wage garnishment and limits the effective range
of a judgment to a maximum of 20 years.
"With regard to both Target Media and Leader,
the court notes that collectibility of this judgment
is not the sole issue in a punitive damages case.
The fact that this judgment may be difficult to
collect is not the sole interest or relevant factor.
An equally central purpose of punitive damages is
general deterrence--the amount of the verdict is
intended as a warning to all potential corporate and
individual defendants not to engage in intentional,
fraudulent behavior. A remittitur in this case
would mitigate the efficacy of this verdict's value
to general deterrence. A remittitur would also
disrespect this jury's work. This factor weighs
against remittitur.
"5. All the costs of litigation should be
included, so as to encourage plaintiffs to bring
wrongdoers to trial. This factor has not been
argued by the parties herein, so the court finds
that this is a neutral factor in this case.
"6. If criminal sanctions had been imposed on
[Target Media or Leader] for [their] conduct, this
should be taken into account in litigation of the
punitive damages award. This factor is not
applicable.
"7. If there had been other civil actions
against the same defendants, based on the same
conduct, this should be taken into account in
litigation of the punitive damages award. There is
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no evidence before this court of any actions based
on the same conduct. ... This factor weighs in favor
of [Specialty Marketing].
"8. Reprehensibility. This United States
Supreme Court BMW 'guidepost' is already discussed
in No. 2 above.
"9. Ratio. The second BMW 'guidepost' is the
relationship between compensatory and punitive
damages. In this case, the jury returned a verdict
for compensatory damages in the amount of $377,800
in the fraud and promissory-fraud claims. The
punitive damages given were in the amount of
$1,133,400. The ratio of punitive to compensatory
damages here is 3:1.
"The Alabama Supreme Court has approved a 3:1
ratio 'benchmark.' The 3:1 'benchmark' approved by
the Alabama Supreme Court has been held to be
'presumptively reasonable.' Prudential Ballard
Realty Co. v. Weatherly, 792 So. 2d 1045 (Ala.
2000). The Supreme Court has further held that a
ratio of 3:1 weighs against a remittitur, without
some special justification. 'Only in the most
extraordinary situations would the award be deemed
excessive when the [punitive damages award] is at or
below the benchmark.' Weatherly [792 So. 2d] at
1053; see also Southern Pine Electric Cooperative v.
Burch, 878 So. 2d 1120 (Ala. 2003). The Court finds
that this case does not present a 'most
extraordinary' situation that would dictate reducing
the punitive damages in this case. This factor
weighs heavily in favor of [Specialty Marketing].
"10. Legislative penalties. The third BMW
'guidepost' is a comparison to comparable
legislative fines and penalties for comparable
misconduct. Here, the jurors awarded punitive
damages that do not exceed three times the amount of
the compensatory damages awarded. These punitive
damages are no more than the monetary penalties
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[Target Media and Leader] could suffer under the
Alabama Deceptive Trade Practices Act, Ala. Code
1975 § 8-19-1 et seq. That act prescribes (1)
fines, (2) treble compensatory damages, and (3) an
award of costs and attorney fees. The comparable
legislative penalty is virtually equivalent to the
jury's verdict in this case. This factor weighs in
[Specialty Marketing]'s favor and against
remittitur.
"Therefore, for all these reasons, the request
for remittitur by defendant Target Media Partners
Operating Company, LLC, and defendant Ed Leader is
denied. The court finds that the jury's punitive
damages verdict against Target Media Partners
Operating Company, LLC, in the amount of $630,000 on
[Specialty Marketing]'s claim of promissory fraud
and the jury's verdict for punitive damages against
defendant Target Media Partners Operating Company,
LLC, and defendant Ed Leader on [Specialty
Marketing]'s claim of fraud[ulent misrepresentation]
in the amount of $503,400 [were] fair, reasonable
and justified."
We need add nothing to the trial court's detailed
analysis of the BMW of North America, Inc. v. Gore, 517 U.S.
559 (1996), and Hammond/Green Oil factors in this case. After
reviewing that analysis, we agree that, based on the level of
reprehensibility of the misconduct evidenced in this case, a
$630,000 punitive-damages award against Target Media on the
promissory-fraud claim and a $503,400 punitive-damages award
against Target Media and Leader on the fraudulent-
misrepresentation claim are sufficient to punish Target Media
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and Leader and to deter them from further misconduct, without
compromising their due-process rights. The judgment entered
on the punitive-damages awards of $630,000 and $503,400 is
hereby affirmed.
AFFIRMED.
Moore, C.J., and Parker, Murdock, Shaw, Wise, and Bryan,
JJ., concur.
Stuart, Bolin, and Main, JJ., dissent.
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