International Union of Operating Engineers Local 150 v. Lowe Excavating Company ( 2006 )

Docket Nos. 101231, 101347 cons..
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
INTERNATIONAL UNION OF OPERATING ENGINEERS,
LOCAL 150, Appellant and Cross-Appellee, v. LOWE
EXCAVATING COMPANY, Appellee and Cross-Appellant.
Opinion filed November 30, 2006.
JUSTICE FITZGERALD delivered the judgment of the court,
with opinion.
Justices Freeman, Kilbride, Karmeier, and Burke concurred in the
judgment and opinion.
Justice Garman dissented, with opinion.
Chief Justice Thomas took no part in the decision.
OPINION
This case involves litigation spanning 18 years between plaintiff,
Lowe Excavating Company (Lowe), and defendant, International
Union of Operating Engineers, Local 150 (the Union). In 1988, Lowe
filed a multicount complaint against the Union in the circuit court of
McHenry County, generally alleging that the Union picketed a Lowe
work site with placards containing false information. After a bench
trial, the trial court ruled in favor of the Union. The appellate court
reversed, concluding that Lowe proved a cause of action for trade
libel because the evidence showed that the Union made false
statements and the statements were made with actual malice. On
remand, the trial court awarded Lowe $4,680 in compensatory
damages and $525,000 in punitive damages. The appellate court
reduced the punitive damages award to $325,000. 358 Ill. App. 3d
1034. We granted the parties’ petitions for leave to appeal. For the
reasons that follow, we reverse the judgment of the appellate court.
BACKGROUND
Lowe is an Illinois corporation that performs excavating and site-
preparation services. In February 1988, Lowe was performing
excavation work at the Canterbury Place Retirement Community in
McHenry County. Specifically, Lowe was working on a portion of the
project known as Ballashire Hall, which was funded by the federal
government through the Department of Housing and Urban
Development (HUD). In order to obtain the contract on this project,
Lowe had to certify its payroll with the federal government, and thus
had to demonstrate that it was paying its employees prevailing wages
and benefits established by the United States Secretary of Labor. 40
U.S.C. §276a (1982).
On February 15, 1988, the Union began picketing the Ballashire
Hall site with placards stating:
“NOTICE TO THE PUBLIC
LOWE EXCAVATING DOES NOT PAY THE
PREVAILING WAGES AND ECONOMIC BENEFITS FOR
OPERATING ENGINEERS WHICH ARE STANDARD IN
THIS AREA
OUR DISPUTE CONCERNS ONLY SUBSTANDARD
WAGES AND BENEFITS PAID BY THIS COMPANY
LOCAL 150
International Union of Operating Engineers, AFL-CIO.”
Lowe was ordered off the project by the general contractor as a
result of the Union’s picketing. On that same day, Lowe filed a
complaint in the McHenry County circuit court seeking a temporary
restraining order (TRO), preliminary and permanent injunctions, and
damages. The complaint alleged a cause of action for tortious
interference with a prospective economic advantage. The Union
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promptly filed a petition for removal of the matter to federal court,
asserting that Lowe’s complaint sought relief for an unfair labor
practice, which was a federal law issue. The federal court found that
it did not possess subject matter jurisdiction over Lowe’s cause of
action and returned the cause to the circuit court.
Lowe subsequently amended its complaint to allege causes of
action for trade libel, tortious interference with a contractual
relationship, tortious interference with a prospective economic
advantage and negligent interference with a contract. Lowe also
continued to seek a TRO and further injunctive relief. The trial court
granted Lowe’s request for a TRO, but denied Lowe’s request for
other injunctive relief as being preempted by federal law. Lowe then
filed an interlocutory appeal of the trial court’s judgment. The
appellate court concluded that the cause of action was not preempted
by federal law and thus remanded the matter for the circuit court to
review Lowe’s motion for a preliminary injunction. Lowe Excavating
Co. v. International Union of Operating Engineers Local No. 150,
180 Ill. App. 3d 39 (1989) (Lowe I). The Union filed a petition for
leave to appeal to this court, which was denied. Lowe Excavating Co.
v. International Union of Operating Engineers, 126 Ill. 2d 560 (1989)
(table). The Union then filed a petition for a writ of certiorari to the
United State’s Supreme Court, which was likewise denied.
International Union of Operating Engineers, Local 150 v. Lowe
Excavating Co., 493 U.S. 975, 107 L. Ed. 2d 502, 110 S. Ct. 499
(1989).
The matter proceeded to a bench trial in April 2000. At trial, the
relevant evidence demonstrated that Lowe has been in business since
1969. Prior to 1988, Lowe employees were not unionized. In 1987,
Colin Darling, a business agent for the Union, received information
about the wages and benefits paid to Lowe employees from two
individuals who were then employed with the company. That same
year, the Union, at the invitation of Lowe’s president, Marshall Lowe,
met with Lowe employees, seeking to represent them for collective-
bargaining purposes. Negotiations between the Union and Lowe
stalled. Several months later, in February 1988, the Union decided to
picket Lowe because it believed that the company was not paying
area-standard wages. The decision to picket was made by Darling and
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another Union employee without any further investigation into Lowe’s
wage or benefit packages.
On Friday, February 12, 1988, the Union sent Lowe a mailgram
indicating that it would be picketing at Ballashire Hall because Lowe
was not paying its operating engineers area-standard wages. Lowe
sent a telegram back to the Union which stated: “We are paying area
standards.” The Union nevertheless began picketing the Ballashire
Hall work site on the following Monday, February 15, 1988, at 6 a.m.
The Union claimed that it did not know that Ballashire Hall was
a federally funded project when it began picketing. However, the
evidence presented at trial demonstrated that the Union was quickly
advised of this fact by Bradley Brei, the president of FAMCO, the
company serving as the general contractor of the Canterbury Place
project. Brei testified that, when the picketing started, he approached
Darling and “I asked Mr. Darling why they were even there, that
Ballashire Hall was a HUD project and that I had already filed
certified payrolls with HUD that Lowe Excavating was paying the
prevailing wage rates and I could not understand on what bases ***
he was there or why the pickets were there.” Despite this information,
the Union continued picketing and did not cease until Brei ordered
Lowe to discontinue its work and Lowe’s equipment was removed
from the site.
Lowe remained off the Ballashire Hall project until September
1988, when employees returned to do finishing work. Although the
Union knew at that point, through Colin Darling, that Ballashire Hall
was a federally funded project, it nevertheless picketed the work site.
Lowe was removed a second time from the Ballashire Hall project by
Bradley Brei. According to Marshall Lowe, the company suffered lost
profits of $4,680 as a result of its removal from the Ballashire Hall
project. Additionally, FAMCO declined to do business with Lowe for
five to six years. Brei testified that he did not want to work with Lowe
because he felt the company did not have its “house in order.”
At trial, Lowe presented testimony from Frank Stampler, a
certified public accountant, who stated that an audit of Lowe’s wages
and benefits for the period of January 13, 1988, through February 16,
1988, demonstrated that Lowe employees at the Ballashire Hall
project were actually being paid more than the federal prevailing wage
rate. Additionally, John O’Hagan, president of Human Resources
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Planning Associates, a business which provides compensation, benefits
and insurance planning services, testified that he compared Lowe’s
benefits with those of the Union in 1987 and 1988 at the request of
Marshall Lowe. O’Hagan determined that Lowe’s health and life
insurance plans were superior to the those of the Union.
Marshall Lowe, however, admitted that, prior to August 1988,
Lowe did not pay its employees prevailing wages and was not meeting
the area standards for wages and employee benefits. Marshall Lowe
specified that between 1969 and 1986, Lowe was not paying contract
wage rates received by Union employees and did not offer a
retirement plan for its employees. This practice changed when Lowe
and the Congress of Independent Unions (CIU) entered into a
collective-bargaining agreement in 1988, which provided that Lowe
would pay prevailing wages at all times retroactive to April 15, 1988.
Marshall Lowe added that the Ballashire Hall project was one of the
first prevailing wage projects that Lowe ever worked on and,
therefore, was one of the first times Lowe paid its employees the
prevailing wage.
After hearing the evidence, the trial court ruled in favor of the
Union on all counts. Lowe appealed, and the Union cross-appealed.
The appellate court reversed the judgment of the trial court. Lowe
Excavating Co. v. International Union of Operating Engineers, Local
No. 150, 327 Ill. App. 3d 711 (2002) (Lowe II). The appellate court
concluded that the statement appearing on the placards used by the
Union in picketing Lowe constituted defamation per quod. Lowe II,
327 Ill. App. 3d at 722. The court determined that, after being told by
Brei that Ballashire Hall was a federally funded project, that Lowe’s
payroll had been certified, and that Lowe was paying prevailing
wages, “Darling at least should have entertained serious doubts as to
the truth of the statements contained on the picket signs.” Lowe II,
327 Ill. App. 3d at 723. Because the Union continued to picket even
after possessing this information, the court determined that the Union
acted with reckless disregard for the truth and, therefore, the
defamatory statements made were made with actual malice. The
appellate court rejected the Union’s claim on cross-appeal that Lowe’s
defamation claim was preempted by federal law. Lowe II, 327 Ill. App.
3d at 723.
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The appellate court then concluded that punitive damages could
be appropriate in this case in light of its finding that the Union acted
with actual malice. Lowe II, 327 Ill. App. 3d at 724. The appellate
court thus directed the trial court to consider evidence of Lowe’s
attorney fees in the event that it decided to award punitive damages.
Lowe II, 327 Ill. App. 3d at 725. The court cautioned, however, that
attorney fees could not “be awarded as a separate entity distinct from
punitive damages.” Lowe II, 327 Ill. App. 3d at 725.
The Union sought leave to appeal from this court, and leave to
appeal was denied. Lowe Excavating Co. v. International Union of
Operating Engineers, Local No. 150, 199 Ill. 2d 557 (2002) (table).
The Union then filed a petition for a writ of certiorari to the United
States Supreme Court, which was likewise denied. International
Union of Operating Engineers, Local 150 v. Lowe Excavating Co.,
537 U.S. 1028, 154 L. Ed. 2d 442, 123 S. Ct. 555 (2002).
Upon remand, the trial court first entered a judgment in favor of
Lowe in the amount of $4,680 for actual damages sustained as a result
of the Union’s conduct. Lowe then filed a motion for punitive
damages wherein it asserted that attorney fees plus expenses
amounted to $506,659.78, and ultimately sought punitive damages of
$5 million. The trial court accepted briefing from both parties on the
issue of punitive damages and awarded punitive damages against the
Union in the amount of $325,000. In doing so, the trial court
specifically stated that punitive damages were appropriate in light of
the appellate court’s finding of actual malice. The court added that
punitive damages were necessary to deter the Union from similar
conduct in the future. The court then noted that, while the actual
damages in this case were small, Lowe “incurred substantial attorney’s
fees and expenses in this protracted litigation.” The court specified,
however, that it was “not awarding attorney’s fees.”
The record shows that the court initially considered the fees of
Lowe’s attorney, Gerard C. Smetana, which, according to his
affidavit, totaled $304,101.62. The trial court did not consider the fees
of Smetana’s cocounsel, Michael E. Avakian of the Center on
National Labor Policy, Inc., as it did not appear that Lowe was
responsible for payment of the $194,350 in fees and expenses incurred
by Avakian and his organization. Lowe moved for reconsideration of
the trial court’s punitive damages award, asserting that the trial court
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improperly ignored the fees incurred by Avakian. The trial court
reconsidered and increased the punitive damages award to $525,000.
Both parties appealed. Neither party challenged the compensatory
damages awarded, but both parties took issue with the award of
punitive damages. The Union initially argued that punitive damages
were inappropriate in this case. The appellate court disagreed, holding
that punitive damages are available in defamation actions; that they
were proper in this case because the Union acted with actual malice;
and that the trial court imposed punitive damages for appropriate
purposes, namely, punishing the Union for its malicious conduct and
dissuading the Union from engaging in similar conduct in the future.
358 Ill. App. 3d at 1040-41 (Lowe III).
The Union next raised a common law challenge asserting that the
punitive damages awarded were excessive. The appellate court
rejected this claim, stating that “[n]othing in the record suggests that
the trial court’s award was the product of passion, partiality, or
corruption.” Lowe III, 358 Ill. App. 3d at 1041. The appellate court
added that the trial court carefully considered the nature and enormity
of the Union’s misconduct and attempted to impose a sanction
sufficient to deter the Union from similar offenses, while mindful of
the amount of attorney fees incurred by Lowe. Lowe III, 358 Ill. App.
3d at 1041.
The Union further argued that the punitive damages awarded were
unconstitutionally excessive in violation of the due process clause. The
appellate court agreed, finding that the ratio of punitive damages to
compensatory damages was approximately 115 to 1 and was therefore
“exceedingly disproportionate.” Lowe III, 358 Ill. App. 3d at 1044.
The appellate court thus reduced the punitive damages award from
$525,000 to $325,000, finding that “[s]uch an award *** results in a
constitutionally acceptable ratio of approximately 75 to 1.” Lowe III,
358 Ill. App. 3d at 1046. As a result of this finding, the appellate court
did not address Lowe’s contention that the amount of punitive
damages awarded was insufficient. Lowe III, 358 Ill. App. 3d at 1046.
We allowed the parties’ petitions for leave to appeal, and now
consider whether the award fashioned by the appellate court was
unconstitutionally excessive as urged by the Union, or whether the
award was deficient, as urged by Lowe.
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ANALYSIS
At the outset, we make clear that neither party contests the
compensatory damages awarded in this case. Further, neither party is
raising a common law challenge to the award of punitive damages.
The issue in this case is whether the punitive damages awarded violate
the due process clause of the fourteenth amendment, which prohibits
the imposition of grossly excessive or arbitrary punishments on a
tortfeasor. See State Farm Mutual Automobile Insurance Co. v.
Campbell, 538 U.S. 408, 416, 155 L. Ed. 2d 585, 600, 123 S. Ct.
1513, 1519-20 (2003).
I. Standard of Review
The parties disagree as to the proper standard of review that
should be used in reviewing this constitutional claim. Lowe asserts
that an abuse of discretion standard should be applied and, in support,
cites to Franz v. Calaco Development Corp., 352 Ill. App. 3d 1129,
1138 (2004).
Lowe misstates the holding of Franz. Contrary to Lowe’s
assertions, the Franz court never used an abuse of discretion standard
of review, under any circumstances, to determine the propriety of a
punitive damages award. The Franz court did, however, provide a
clear directive regarding the standard of review that should be used
with respect to the constitutional claims raised herein. Citing Cooper
Industries , Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 149
L. Ed. 2d 674, 121 S. Ct. 1678 (2001), the court explicitly stated:
“The standard of review for the constitutional question of whether a
punitive damages award is excessive in violation of due process is
indeed de novo ***.” Franz, 352 Ill. App. 3d at 1147.
Also relying on the Supreme Court’s decision in Cooper, as well
as statements made by the Court in State Farm, the Union maintains
that de novo review is proper in this case. In Cooper, the Supreme
Court considered the proper standard of review in cases where
punitive damages were alleged to be constitutionally excessive. In
doing so, the Court acknowledged that the assessment of punitive
damages was a form of punishment upon the wrongdoer and thus
looked to jurisprudence in all areas of the law where “constitutional
violations were predicated on judicial determinations that the
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punishments were ‘grossly disproportional to the gravity of ...
defendant[s’] offense[s].’ ” Cooper, 532 U.S. at 434, 149 L. Ed. 2d
at 686, 121 S. Ct. at 1684, quoting United States v. Bajakajian, 524
U.S. 321, 334, 141 L. Ed. 2d 314, 329, 118 S. Ct. 2028, 2036 (1998).
The Court noted that cases of this ilk required “an independent
examination” of the relevant information by reviewing courts. Cooper,
532 U.S. at 435, 149 L. Ed. 2d at 686, 121 S. Ct. at 1685. The Court
further noted that the question of whether a punishment is
constitutionally excessive “ ‘calls for the application of a constitutional
standard to the facts of a particular case, and in this context de novo
review of that question is appropriate.’ ”
The Cooper Court explored the reasons why de novo review was
necessary under these circumstances. The Court explained that the
concept of gross excessiveness is a “fluid concept[ ]” that cannot be
precisely articulated. Cooper, 532 U.S. at 436, 149 L. Ed. 2d at 687,
121 S. Ct. at 1685, quoting Ornelas v. United States, 517 U.S. 690,
696, 134 L. Ed. 2d 911, 918, 116 S. Ct. 1657, 1661 (1996). Concepts
of this nature acquire “ ‘content only through application’ ” and are
best controlled and clarified through independent review. Cooper, 532
U.S. at 436, 149 L. Ed. 2d at 687, 121 S. Ct. at 1685, quoting
Ornelas, 517 U.S. at 697, 134 L. Ed. 2d at 919, 116 S. Ct. at 1662.
De novo review, under such circumstances, serves to “ ‘unify
precedent’ ” and “ ‘stabilize the law.’ ” Cooper, 532 U.S. at 436, 149
L. Ed. 2d at 687, 121 S. Ct. at 1685, quoting Ornelas, 517 U.S. at
697-98, 134 L. Ed. 2d at 919-20, 116 S. Ct. at 1662. Finally, the
Cooper Court explained that de novo review is beneficial because it
provides citizens notice of conduct that will result in punishment and
serves to assure the uniform treatment of individuals engaged in
similar conduct:
“ ‘Requiring the application of law, rather than a
decisionmaker’s caprice, does more than simply provide
citizens notice of what actions may subject them to
punishment; it also helps to assure the uniform general
treatment of similarly situated persons that is the essence of
law itself.’ ” Cooper, 532 U.S. at 436, 149 L. Ed. 2d at 687,
121 S. Ct. at 1685, quoting BMW of North America, Inc. v.
Gore, 517 U.S. 559, 587, 134 L. Ed. 2d 809, 834, 116 S. Ct.
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1589, 1605 (1996) (Breyer, J., concurring, joined by
O’Connor and Souter, JJ.).
In State Farm, the Supreme Court reiterated some of the
principles set forth in Cooper and stated that de novo review was
“mandated” when considering whether a punitive damage award was
unconstitutionally excessive. State Farm, 538 U.S. at 418, 155 L. Ed.
2d at 601, 123 S. Ct. at 1520.
Lowe argues that Cooper and State Farm, and the cases upon
which they relied, do not require that this court utilize a de novo
standard of review because those cases involved punitive damages
awarded by a jury instead of a judge after a bench trial. We find this
distinction to be of no consequence. Whether punitive damages were
awarded by a judge or jury has no impact on the reasons articulated
in Cooper for applying a de novo standard, such as unification of
precedent and stabilization of the law. Accordingly, we review the
constitutional question before us de novo.
II. Constitutionality of Punitive Damages Award
A. Excessiveness
The Union first argues that the appellate court erred in affirming
the trial court’s punitive damages award, as the damages imposed are
unconstitutionally excessive in violation of due process. Lowe
counters that the appellate court erred in reducing the punitive
damages award and asserts that it is entitled to a greater amount of
punitive damages. Lowe adds that the reduced award is deficient
because it will not serve to adequately punish the Union for its
misconduct against Lowe or deter the Union from similar misconduct
in the future.
The parties agree that the relevant test to determine whether
punitive damages awarded are excessive was set forth in the United
States Supreme Court’s opinion in BMW of North America, Inc. v.
Gore, 517 U.S. 559, 134 L. Ed. 2d 809, 116 S. Ct. 1589 (1996), and
recently reiterated in State Farm. In those cases, the Supreme Court
instructed that three guideposts should be considered in reviewing an
award of punitive damages: “(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
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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, 538 U.S. at 418, 155 L. Ed. 2d at 601, 123 S. Ct.
at 1520, citing Gore, 517 U.S. at 575, 134 L. Ed. 2d at 826, 116 S.
Ct. at 1598-99. We now consider each of these guideposts in
reviewing the punitive damages award presently in dispute.
1. Degree of Reprehensibility
In Gore, the Supreme Court stated: “Perhaps the 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, 134 L. Ed. 2d at 826, 116 S. Ct. at 1599. Courts are instructed
to consider the following factors when determining reprehensibility:
(1) whether the harm caused was physical as opposed to economic;
(2) whether the tortious conduct evinced an indifference to or a
reckless disregard for the health and safety of others; (3) whether the
target of the conduct was financially vulnerable; (4) whether the
conduct involved repeated actions or was an isolated incident; and (5)
whether the harm was the result of intentional malice, trickery, or
deceit, or mere accident. State Farm, 538 U.S. at 419, 155 L. Ed. 2d
at 602, 123 S. Ct. at 1521. Courts are further instructed that:
“The 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. It should be presumed a plaintiff has been
made whole for his injuries by compensatory damages, so
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.” State Farm, 538 U.S.
at 419, 155 L. Ed. 2d at 602, 123 S. Ct. at 1521.
The appellate court considered the factors set forth in Gore and
State Farm in determining the Union’s degree of reprehensibility. The
court concluded that the reprehensibility of the Union’s conduct was
heightened by facts demonstrating that Lowe was financially
vulnerable because it is a small business with only 16 employees and
its reputation is very important to its continued success. The appellate
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court specifically found that the Union’s false allegations against
Lowe were “potentially devastating” to Lowe’s reputation and “could
have financially ruined the company.” Lowe III, 358 Ill. App. 3d at
1043. Further, the appellate court concluded that the Union’s conduct
was not isolated, because the Union picketed on more than one
occasion and continued to picket even after learning that Ballashire
Hall was a federally funded project and Lowe was required to pay
prevailing wages. Lowe III, 358 Ill. App. 3d at 1043. Finally, the court
reiterated its previous holding that the Union’s conduct was the
product of intentional malice. The court stated that the finding of
malice was the “law of the case,” and it declined to alter the holding
in light of evidence demonstrating that the Union knew Lowe’s
payrolls had been certified by the Department of Labor. Lowe III, 358
Ill. App. 3d at 1043.
The Union maintains that the appellate court’s findings were
erroneous because none of the factors required to demonstrate
reprehensibility were proven. Lowe disputes the Union’s claim, but
agrees that the first two reprehensibility factors do not weigh in its
favor. Lowe concedes that the Union’s conduct created a harm that
was economic rather than physical and that the Union’s conduct did
not evince a reckless disregard or indifference to the health and safety
of others. A dispute arises, however, with respect to the third
reprehensibility factor–financial vulnerability. The Union maintains
that the evidence presented at trial was insufficient to demonstrate that
Lowe was financially vulnerable. Lowe asserts that the evidence
demonstrated that it is a small business and this fact proves its
financial vulnerability. Lowe also argues that evidence in the record
demonstrates that the company had to “engage in odd jobs in the
winter to stay afloat until it was recalled for work in the Spring.”
Contrary to Lowe’s contentions and the appellate court’s findings,
we conclude that the record in this case is devoid of evidence
demonstrating that Lowe was financially vulnerable. Lowe claims that
the record shows that it was forced to “engage in odd jobs” after the
picketing. However, the portion of the record Lowe cites merely
demonstrates that, some four to six years after the Ballashire Hall
project, FAMCO contacted Lowe to perform snow removal work.
Lowe cites to nothing in the record indicating that it was required to
do such work to “stay afloat,” as it now contends.
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Further, the fact that Lowe is a “small business” does not, by
itself, prove financial vulnerability. While we agree with the appellate
court that small businesses often rely on reputation to maintain and
attract customers, the evidence presented in this case demonstrated
that Lowe temporarily lost only one customer, FAMCO, as a result of
the Union’s conduct. The evidence also demonstrated that Lowe
operated as a nonunion company paying less than the prevailing wage
rate for the area without incident from 1969 until 1988 when the
Union picketed the Ballashire Hall site. There is no evidence that
Lowe lost any other business as a result of the Union’s conduct.
Moreover, the only financial loss proven was the $4,680 in lost profits
stemming from the Ballashire Hall project. Lowe provided no other
financial information which would demonstrate its vulnerability.
We acknowledge that the United States Court of Appeals for the
Third Circuit affirmed a finding by the United States district court that
a “modest family-run business” was financially vulnerable without any
evidence of its financial circumstances. See Willow Inn, Inc. v. Public
Service Mutual Insurance Co., 399 F.3d 224 (3d Cir. 2005). In
Willow Inn, the court awarded punitive damages to the plaintiff after
evidence demonstrated that the defendant insurer acted in bad faith
and withheld payment on Willow Inn’s property damage claim. In
determining reprehensibility, the court found that Willow Inn was
financially vulnerable based on evidence demonstrating that after being
damaged by a tornado, the bar/restaurant was unable to afford
professional help to clear away the rubble and initiate repairs. Instead,
for 36 hours following the tornado, the owner and neighborhood
volunteers worked to protect the building from further damage and
clear away debris to make the surrounding area less hazardous.
Willow Inn, 399 F.3d at 232. Lowe provided no evidence akin to that
presented in Willow Inn which would demonstrate its financial
vulnerability. Accordingly, we find that case to be readily
distinguishable.
Lowe cites to Planned Parenthood v. American Coalition of Life
Activists, 422 F.3d 949 (9th Cir. 2005), to support its assertion that
it was financially vulnerable. In that case, the defendants threatened
and attempted to intimidate several doctors who performed abortions.
The federal appeals court for the Ninth Circuit held that the
defendant’s conduct was reprehensible in light of the physician’s
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financial vulnerability. Specifically, the court determined that the
physician’s livelihoods depended on their practices, and the defendants
intentionally tried to scare the doctors into suspending their practices.
In fact, one doctor stopped practicing because he feared for his life.
Planned Parenthood, 422 F.3d at 958. Lowe argues that its livelihood
and that of its employees depended on its ability to work, just as the
doctors in Planned Parenthood. We find Lowe’s comparison to be
unpersuasive. In Planned Parenthood, the doctors’ entire practice was
negatively affected by the conduct of the defendants, and the doctors
were afraid to perform a medical procedure which was the focus of
their practices. In this case, Lowe was prohibited from working at one
job site and temporarily lost the business of one customer. The record
contains no evidence that Lowe lost other contracts or was unable to
perform excavating work at other locations as a result of the Union’s
conduct. Accordingly, we conclude that the appellate court erred in
finding that Lowe was financially vulnerable.
We now turn to the fourth reprehensibility factor–whether the
Union’s conduct constituted an isolated incident or a repeated act of
misconduct. The appellate court concluded that the Union’s conduct
was repeated, finding that the Union picketed with false information
from February 15, 1988, until June 30, 1988, and then again from
September 28, 1988, until October 11, 1988. Lowe III, 358 Ill. App.
3d at 1043.
The Union asserts that the appellate court erred in considering
picketing conducted at any time other than February 15, 1988. The
Union maintains that in Lowe II, it was held liable for its conduct in
February 1988 only and, therefore, its conduct on other dates should
not have been part of the appellate court’s determination in Lowe III.
Lowe appears to agree that the appellate court’s finding in Lowe III
regarding periods of time between February and June 1988 and
September and October 1988 was not based on the evidence, as Lowe
discusses only two instances of defamation in its briefs. Specifically,
Lowe cites to the Union’s conduct beginning on February 15, 1988,
and its conduct in September 1988 as evidence of repeated acts of
misconduct.
A review of the appellate court’s findings in Lowe II, as well as the
evidence presented in the record and the parties’ representations in
their briefs, demonstrates that the Union falsely picketed Lowe at the
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Ballashire Hall project on February 15, 1988. The Union then returned
to the site on February 16, 1988, and picketed again for some portion
of the day. There was testimony presented which indicated that the
Union returned for a third time on February 17, 1988, but that
testimony was not corroborated and was contradicted. Significantly,
in their briefs, the respective parties do not treat the February
picketing incidents as separate encounters, and Lowe does not argue
that the Union’s act of picketing on at least two, back-to-back days
demonstrates recidivist conduct. Rather, Lowe points to the Union’s
act of returning to Ballashire Hall in September 1988 for picketing as
evidence of the Union’s repeated conduct. We note that there is no
indication in the record, nor do the parties represent that the
September picketing lasted for more than one day.
We also note that there is no indication in the record, nor do the
parties argue, that the Union falsely picketed Lowe on any other
occasions that those previously identified. Although the Union admits
in its brief to picketing Lowe repeatedly at various work sites
throughout 1988, there is no evidence suggesting that picketing at
sites other than Ballashire Hall was false.
With these facts in mind, we are left to determine whether the
Union’s false picketing in February and September 1988 constitutes
repeated conduct supporting a reprehensibility finding.
The Union argues that two instances of picketing falsely in
February and September 1988 do not constitute a pattern of repeated
malfeasance. In support, the Union points to federal jurisprudence
which suggests that “repeated conduct” under the reprehensibility
analysis is “not merely a pattern of contemptible conduct within one
extended transaction ***, but rather specific instances of similar
conduct by the defendant in relation to other parties.” Willow Inn, 399
F.3d at 232. The Union maintains that no evidence was presented to
demonstrate that it falsely picketed anyone other than Lowe and,
therefore, its conduct cannot be construed as repeated malfeasance.
Lowe counters that the Union’s conduct was repeated because it
occurred on more than one occasion. Lowe maintains that the Union’s
“subsequent misconduct in September 1988” should be “counted” as
evidence of recidivist behavior.
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The repeated conduct factor of the reprehensibility test is
grounded in the Supreme Court’s opinion in Pacific Mutual Life
Insurance Co. v. Haslip, 499 U.S. 1, 113 L. Ed. 2d 1, 111 S. Ct. 1032
(1991), one of the precursors to Gore and State Farm. In that case,
the Supreme Court adopted certain factors that should be considered
when determining whether a punitive damage award was excessive or
inadequate. These factors include “the degree of reprehensibility of the
defendant’s conduct, the duration of that conduct, the defendant’s
awareness, any concealment, and the existence and frequency of
similar past conduct.” Haslip, 499 U.S. at 21, 113 L. Ed. 2d at 22,
111 S. Ct. at 1045.
In Gore, the Supreme Court considered whether BMW engaged
in repeated misconduct when it routinely sold cars in the state of
Alabama that had been slightly damaged and repaired as “new”
without disclosing the damages and repairs to the customer. The
Court determined that BMW could not be labeled a recidivist even
though it engaged in similar conduct in other states because its
disclosure policy was not considered fraudulent in those other states.
Gore, 517 U.S. at 577-78, 134 L. Ed. 2d at 827-28, 116 S. Ct. at
1599-1600. Significantly, the Court reached this conclusion despite
evidence demonstrating that a jury in a similar lawsuit had previously
found that BMW’s failure to disclose was fraudulent under Alabama
law and awarded compensatory damages. Gore, 517 U.S. at 565, 134
L. Ed. 2d at 820, 116 S. Ct. at 1594. However, the Court stated:
“Certainly, evidence that a defendant has repeatedly engaged
in prohibited conduct while knowing or suspecting that it was
unlawful would provide relevant support for an argument that
strong medicine is required to cure the defendant’s disrespect
for the law. [Citations.] Our holdings that a recidivist may be
punished more severely than a first offender recognize that
repeated misconduct is more reprehensible than an individual
instance of malfeasance.” Gore, 517 U.S. at 576-77, 134 L.
Ed. 2d at 827, 116 S. Ct. at 1599-1600.
Gore’s treatment of the repeated conduct factor demonstrates that
recidivist conduct is to be considered reprehensible, and further
demonstrates that court’s may look outside the misconduct committed
toward the plaintiff in question to other, similar conduct, when
considering the recidivism factor.
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In State Farm, the Supreme Court reaffirmed these principles.
There, the Court considered whether the defendant insurer, which was
found to have engaged in fraudulent insurance practices by improperly
capping claim payments, was a repeat offender. The Court declined to
label State Farm a recidivist for reprehensibility purposes because the
plaintiffs were unable to present sufficient evidence of other conduct
similar to that which injured them. State Farm, 538 U.S. at 423, 155
L. Ed. 2d at 604-05, 123 S. Ct. at 1523. Looking to Gore, the Court
acknowledged that consideration of a defendant’s similar, past
conduct towards others was relevant to a determination of
reprehensibility, but, where evidence of repeated misconduct of the
sort that injured the plaintiffs in question is “scant,” the conduct that
actually harmed the plaintiffs “is the only conduct relevant to the
reprehensibility analysis.” State Farm, 538 U.S. at 423-24, 155 L. Ed.
2d at 605, 123 S. Ct. at 1523-24. The lesson gleaned from the analysis
in State Farm is that courts may look externally, to a defendant’s
similar past conduct with respect to other parties, as well as internally,
to a defendant’s conduct towards the plaintiff in question, when
considering recidivism.
Relying on Gore and State Farm, the United States District Court
for the Third Circuit put this guideline into practice in Willow Inn
when it looked to evidence of the defendant’s similar misconduct in
relation to other parties as well as the defendant’s repetitive conduct
towards the plaintiff in question to determine whether the defendant
should be labeled a recidivist. In that case, the defendant insurance
company was found to have improperly withheld insurance claim
payments from the plaintiff. Although the court was disinclined to
label the defendant a recidivist because there was no evidence
presented which demonstrated that the defendant withheld payment
of claims from other persons whom it insured, the court nevertheless
gave some weight to the repeated conduct subfactor in determining
punitive damages. The court stated: “[W]e consider this subfactor to
be relevant, but with less force, insofar as the series of actions and
inaction by PSM which delayed settlement of the claim *** implied a
concerted effort to lessen PSM’s expected payment on the claim.”
Willow Inn, 399 F.3d at 232-33.
Similarly, in Williams v. ConAgra Poultry Co., 378 F.3d 790 (8th
Cir. 2004), the Eighth Circuit found the defendant to have engaged in
repeated racial discrimination against the plaintiff. In doing so, the
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court looked to the plaintiff’s testimony concerning instances in which
he experienced racism, as well as the testimony of other ConAgra
employees who described instances of discrimination that were
factually similar to those described by the plaintiff. ConAgra, 378 F.3d
at 798; see also United States v. Veal, 365 F. Supp. 2d 1034, 1039
(W.D. Mo. 2004) (where court found the defendant’s conduct was
recidivistic after evidence demonstrated that the defendant engaged in
sexual harassment and discrimination against 11 different women and
that the harm suffered by each woman was “severe and persistent”).
Our appellate court’s decision in O’Neill v. Gallant Insurance
Co., 329 Ill. App. 3d 1166 (2002), also provides guidance. The facts
demonstrate that the defendant refused to even consider an offer to
settle a claim resulting from an automobile accident where the
policyholder was clearly negligent and the victim of the accident
suffered severe and permanent injury. The defendant’s conduct
“turned $20,000 worth of contractual duty into a $3,010,063
judgment for a bad-faith refusal to settle” and exposed the
policyholder to financial ruin. O’Neill, 329 Ill. App. 3d at 1168.
In determining whether the punitive damages awarded for the
defendant’s bad-faith refusal to settle were unconstitutional, the court
considered the repetitive nature of the defendant’s conduct. The court
first looked to the defendant’s conduct towards the policyholder and
concluded that there was evidence of repetitive misconduct. The facts
showed that defendant refused to respond to a settlement demand;
ignored repeated advice and pleas from the policyholder, her attorneys
and claims adjusters within the company to settle; employed
unnecessary legal tactics to avoid paying the claim; and lied to and
threatened the policyholder. O’Neill, 329 Ill. App. 3d at 1182-83. As
the court summarized, “Gallant blatantly ignored its policyholder’s
financial security and did virtually nothing to protect her.” O’Neill,
329 Ill. App. 3d at 1183. The court then looked to conduct that
extended beyond the policyholder’s case, and considered evidence
revealing a pattern of conduct, over a five-year period, where the
defendant’s Illinois customers suffered excess judgments based on the
defendant’s refusal to settle within policy limits. O’Neill, 329 Ill. App.
3d at 1172, 1183. In light of this evidence, the court concluded that
defendant’s conduct was reprehensible and ultimately found that the
punitive damages awarded were not unconstitutionally excessive.
O’Neill, 329 Ill. App. 3d at 1185.
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These cases demonstrate that courts are permitted to consider a
defendant’s conduct towards the plaintiff in question, as well as
similar conduct extending beyond the plaintiff’s case, when
determining whether a defendant can be labeled a recidivist for
reprehensibility purposes. Contrary to the Union’s contentions herein,
a court’s consideration of recidivism should not be restricted to
misconduct involving other parties unrelated to the case before the
court. Thus, in applying the relevant analysis to the instant case, we
find that the Union engaged in repeated acts of misconduct where the
evidence demonstrated that it falsely picketed Lowe on more than one
occasion in 1988. However, like the court in Willow Inn, “we consider
this subfactor to be relevant, but with less force.” Willow Inn, 399
F.3d at 232-33. While we certainly do not condone the Union’s
decision to continue to picket Lowe at Ballashire Hall after being
advised that Lowe was paying the prevailing wage on the project, the
fact remains that the Union falsely picketed Lowe at Ballashire Hall on
two days in February 1998 and once in September 1988. There is no
evidence before this court demonstrating that the Union falsely
picketed Lowe, or anyone else, as a matter of course.
The defendants labeled recidivists in the cases reviewed herein
each had a “pattern” of misconduct that typified the manner in which
they did business. There is no evidence of a similar pattern of
misconduct in this case. Accordingly, while we conclude that the
Union’s conduct was repeated for purposes of the reprehensibility
analysis, we afford this factor little weight in our overall assessment
of reprehensibility.
We now turn to the final reprehensibility factor and consider
whether the harm to Lowe was the result of intentional malice,
trickery or deceit, or mere accident. Before addressing the parties’
arguments, we look again to the judgments of the appellate court on
this issue. In Lowe II, the appellate court considered whether the
Union published the defamatory statements about Lowe with actual
malice, i.e., “ ‘with knowledge of their falsity or with reckless
disregard of whether they were true or false.’ ” Lowe II, 327 Ill App.
3d at 722, quoting Linn v. United Plant Guard Workers of America,
Local 114, 383 U.S. 53, 65, 15 L. Ed. 2d 582, 591, 86 S. Ct. 657,
664 (1966). The appellate court recognized that “[r]eckless disregard
for the truth means that the defendant published the statements while
entertaining serious doubts as to the truth of the statements.”
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(Emphasis omitted.) Lowe II, 327 Ill. App. 3d at 722-23. The court
then looked to the facts which demonstrated that Darling was told by
Brei that Ballashire Hall was a federally funded project, that Lowe’s
payroll had been certified and sent to the Department of Labor, and
that Lowe was paying prevailing wages. The court concluded that
“Darling at least should have entertained serious doubts as to the truth
of the statements contained on the picket signs,” and later reiterated
that “the defendant committed a tort with actual malice.” Lowe II, 327
Ill. App. 3d at 723-24. In Lowe III, the appellate court stated that it
“decline[d] to alter the law of the case with regard to the malice
finding.” Lowe III, 358 Ill. App. 3d at 1043.
Lowe now argues that we are bound by the law of the case, and
therefore, must find that the Union acted with intentional malice. The
Union agrees that we are bound by the law of the case, but asserts that
the appellate court did not properly find actual malice. Instead,
according to the Union, the appellate court made a finding of
negligence by stating that “Darling at least should have entertained
serious doubts as to the truth of the statements contained on the
picket signs.” Thus, the Union asserts that if we follow the law of the
case, we must conclude that Darling’s conduct was negligent rather
than the product of intentional malice.
We disagree with the parties’ interpretation of the law of the case
doctrine. As this court explained in Relph v. Board of Education of
De Pue Unit School District No. 103, 84 Ill. 2d 436, 442 (1981):
“Even if the appellate court were bound by the law of the
case it had announced in the first appeals, that limitation
would not apply to this court. Although this court denied
petitions for leave to appeal in both of the previous appeals of
these cases, such action has no precedential effect and in no
way amounts to a consideration of the merits of the cases. Nor
does it indicate approval of the appellate court’s action.
[Citation.]. Therefore, this is the first time these cases have
been before us on the merits. Our review may cover all
matters properly raised and passed on in the course of
litigation. [Citation.]”
See also Garibaldi v. Applebaum, 194 Ill. 2d 438, 447-48 (2000).
Although this case has run the gamut of the appellate process in the
past 18 years, this is our first opportunity to substantively review the
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appellate court’s finding of actual malice. Accordingly, we are not
bound by the law of the case doctrine.
However, having reviewed the issue on the merits, we
nevertheless agree with the appellate court’s conclusion that the
Union acted with intentional malice. The facts of this case
demonstrate that Darling either knew that the statements contained on
his picket signs were false or, at the very least, seriously doubted their
veracity. Nevertheless, he chose to picket Lowe at the Ballashire Hall
project, on two occasions, demonstrating a reckless disregard for the
truth or falsity of the statements. We thus find that the Union acted
with intentional malice and, therefore, its conduct can be characterized
as reprehensible.
We note that our overall finding of reprehensibility rests mostly on
only one of the five factors set forth in Gore, because, as previously
explained, the repeated conduct factor lends marginal weight to a
finding of reprehensibility based on the facts of this case. We are thus
reminded of the Supreme Court’s cautionary statement in State Farm:
“The existence of any one of these factors weighing in favor of a
plaintiff may not be sufficient to sustain a punitive damages award.”
State Farm, 538 U.S. at 419, 155 L. Ed. 2d at 602, 123 S. Ct. at
1521; see also Turner v. Firstar Bank, N.A., 363 Ill. App. 3d 1150,
1163-64 (2006) (where the court found that the presence of only one
reprehensibility factor was insufficient to sustain a punitive damages
award 20 times higher than the compensatory damages award); Clark
v. Chrysler Corp., 436 F.3d 594, 605 (6th Cir. 2006) (where court
held that the presence of only one reprehensibility factor was
insufficient to sustain a large punitive damages award).
2. Disparity Between Actual Harm and the Punitive Damages Award
Turning to the second Gore guidepost, we must consider the ratio
between the actual harm suffered by Lowe and the punitive damages
awarded. See Gore, 517 U.S. at 580, 134 L. Ed. 2d at 829, 116 S. Ct.
at 1601; State Farm, 538 U.S. at 418, 155 L. Ed. 2d at 601, 123 S.
Ct. at 1520. Lowe suffered $4,680 in actual damages and was
awarded punitive damages of $325,000. The ratio between the actual
harm and the punitive damages is approximately 75 to 1. The Union
argues that this ratio is unconstitutional and unreasonable and, in
support, cites several cases from other jurisdictions where punitive
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damages exceeding a single-digit ratio were deemed unconstitutionally
excessive and thus reduced. Lowe counters that the double-digit ratio
was not excessive because the Union’s conduct was particularly
egregious and the monetary value of the noneconomic harm was hard
to detect and difficult to determine. In fact, Lowe asserts that the
punitive damages awarded by the appellate court were deficient, and
urges that the amount of punitive damages awarded should be
increased.
In considering whether a punitive damages award is constitutional,
courts are instructed to consider whether there is a reasonable
relationship between the punitive damages award and the potential and
actual damages resulting from the defendant’s conduct. Gore, 517
U.S. at 581, 134 L. Ed. 2d at 830, 116 S. Ct. at 1602. The Supreme
Court has “consistently rejected the notion that the constitutional line
is marked by a simple mathematical formula” (Gore, 517 U.S. at 582,
134 L. Ed. 2d at 830, 116 S. Ct. at 1602) and has declined “to impose
a bright-line ratio which a punitive damages award cannot exceed.”
State Farm, 538 U.S. at 425, 155 L. Ed. 2d at 605, 123 S. Ct. at
1524. Nevertheless, the Court has cautioned that “in practice, few
awards exceeding a single-digit ratio between punitive and
compensatory damages, to a significant degree, will satisfy due
process.” State Farm, 538 U.S. at 425, 155 L. Ed. 2d at 605-06, 123
S. Ct. at 1524. The Court has also said that a punitive damages award
of “ ‘more than 4 times the amount of compensatory damages’ might
be ‘close to the line.’ ” Gore, 517 U.S. at 581, 134 L. Ed. 2d at 830,
116 S. Ct. at 1602, quoting Haslip, 499 U.S. at 23-24, 113 L. Ed. 2d
at 23, 111 S. Ct. at 1046. The Court has, however, recognized that
“because there are no rigid benchmarks that a punitive damages award
may not surpass, ratios greater than those we have previously upheld
may comport with due process where ‘a particularly egregious act has
resulted in only a small amount of economic damages.’ ” State Farm,
538 U.S. at 425, 155 L. Ed. 2d at 606, 123 S. Ct. at 1524, quoting
Gore, 517 U.S. at 582, 134 L. Ed. 2d at 831, 116 S. Ct. at 1602.
In this case, the trial court originally awarded Lowe $325,000 in
punitive damages. The trial court then reconsidered the award and
raised it to $525,000 after being persuaded to consider additional
attorney fees. Although the trial court stated on the record that it was
not awarding attorney fees, the punitive damages award is very close
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to the amount of attorney fees and expenses incurred by Lowe, which
was reported to be $506,659.78.
The appellate court reviewed the award and found it to be
unconstitutionally excessive. It thus reduced the award to $325,000,
the amount originally granted by the trial court. In doing so, the
appellate court acknowledged that the ratio between actual and
punitive damages was in the double-digit range, but concluded that the
ratio was appropriate because Lowe’s reputation was injured and a
small amount of compensatory damages was awarded. Lowe III, 358
Ill. App. 3d at 1044-45. The appellate court relied on three cases to
support the proposition that higher ratios in the double-digit range are
appropriate where the amount of compensatory damages is minimal.
In Routh Wrecker Service, Inc. v. Washington, 335 Ark. 232, 980
S.W.2d 240 (1998), the court approved a 75 to 1 ratio where the
plaintiff was awarded only $1,000 in compensatory damages.
Similarly, in Deters v. Equifax Credit Information Services, Inc., 202
F.3d 1262 (10th Cir. 2000), the court upheld a 59 to 1 ratio where the
plaintiff was awarded $5,000 in compensatory damages. Finally, in
Jones v. Rent-A-Center, Inc., 281 F. Supp. 2d 1277 (D. Kan. 2003),
the court upheld a 29 to 1 ratio where the plaintiff was awarded
$10,000 in punitive damages.
We find the court’s reliance on these cases to be misplaced. A
review of the facts of those cases demonstrates that the high, double-
digit ratios awarded to the parties were less the result of small
compensatory damages awards and more the result of particularly
egregious conduct which caused the plaintiffs great personal harm.
For example, in Routh, the court awarded punitive damages that were
75 times higher than compensatory damages after hearing evidence
demonstrating that the defendant wrongfully accused the plaintiff of
stealing a car from the defendant’s business and then swore out an
affidavit for an arrest warrant knowing that the plaintiff did not steal
the car. The plaintiff was subsequently arrested at his place of
employment, handcuffed, booked and placed in a cell. The defendant
did not drop the charges, but pursued them until they were ultimately
dropped by the prosecution. Routh, 335 Ark. at 236, 980 S.W.2d at
242. The plaintiff was not only humiliated, he also suffered emotional
and physical distress, including headaches and dramatic weight loss.
Routh, 335 Ark. at 241, 980 S.W.2d at 244. The court concluded that
the ratio of compensatory damages to punitive damages of 75 to 1
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was appropriate in that case because the defendant’s egregious and
reprehensible conduct resulted in “extreme psychological pressure and
turmoil.” Routh, 335 Ark. at 242, 980 S.W.2d at 245.
Likewise, in both Deters and Jones, the plaintiffs were victims of
extreme acts of sexual harassment in their respective workplaces. The
Deters court found the 59 to 1 ratio of compensatory to punitive
damages to be appropriate in light of the “particularly egregious”
conduct of the defendants. Deters, 202 F.3d at 1273. The court added
that a greater ratio is appropriate in cases where the injury suffered is
“primarily personal” and noted that punitive damages awards are
available in sexual harassment cases even in the total absence of
compensatory damages. Deters, 202 F.3d at 1273. Relying on the
rationale in Deters, the Jones court upheld a ratio of 29 to 1, citing the
“personal” nature of the injury sustained by the plaintiff. Jones, 281 F.
Supp. 2d at 1289-90.
The Union’s conduct in the instant case is not comparable to the
conduct of the defendants in Routh, Deters and Jones. Here, Lowe did
not suffer a physical or emotional injury, and the injury sustained was
not of a personal nature, as a corporation cannot be personally
affronted. Lowe’s injury cannot be compared to the humiliation
suffered by individuals who endure sexual harassment in the
workplace, and is also not comparable to the injury sustained by an
individual who is arrested at his workplace for a crime he did not
commit, handcuffed, and placed in a cell. While ratios ranging from 75
to 1 to 29 to 1 may have been appropriate under those circumstances,
we cannot conclude that a ratio in that range is appropriate here where
the Union’s conduct was much less egregious.
We recognize that low compensatory damages awards may
support higher ratios where a particularly egregious act has resulted
in a small amount of economic damage, or where an injury is hard to
detect and the harm is difficult to determine. See Gore, 517 U.S. at
582, 134 L. Ed. 2d at 831, 116 S. Ct. at 1602; State Farm, 538 U.S.
at 425, 155 L. Ed. 2d at 606, 123 S. Ct. at 1524. In our estimation,
the best way to determine whether a given ratio is appropriate is to
compare it to punitive damages awards in other, similar cases. See
Romanski v. Detroit Entertainment, L.L.C., 428 F.3d 629, 646 (6th
Cir. 2005). The parties have not cited a case squarely on point with
the one before us, but we have found cases which provide some
guidance on this issue.
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In Argentine v. United Steel Workers of America, 287 F.3d 476
(6th Cir. 2002), the plaintiffs were elected officers of their union. They
stridently criticized the defendant’s conduct during contract
negotiations and were thus removed from their positions by the
defendant without due process. The defendant accused the plaintiffs
of mishandling the union’s funds and usurped the plaintiffs’ elected
authority without proper notice and hearing. The plaintiffs were
awarded $9,406 in compensatory damages and $400,000 in punitive
damages. The defendant argued that the punitive damages award was
excessive under Gore. The court determined that the defendant’s
conduct was reprehensible because the defendant acted deliberately to
violate the plaintiffs’ free speech rights and harm their reputations for
the defendant’s own benefit. The court concluded that, although the
compensatory damages were small “and without a ready monetary
value,” a ratio of 42.5 to 1 was reasonable. Argentine, 287 F.3d at
488.
In Turner, a case recently decided by our appellate court, the
plaintiff was awarded $25,000 in compensatory damages for property
stolen from her when her car was wrongfully repossessed by the
defendant and $500,000 in punitive damages. The facts demonstrated
that the defendant had a “systemwide” problem in its bill tracking
system, and that it ignored the problem despite being aware that the
system was only 50% accurate. The defendant’s conduct resulted in
“multiple wrongful repossessions” throughout a one-year period.
Turner, 363 Ill. App. 3d at 1155. The plaintiff’s car was wrongfully
repossessed and she lost $25,000 worth of equipment which she
stored in her car as a result. The plaintiff tried, with assistance of
counsel, to obtain reimbursement from the defendant for these stolen
items for nearly two years before she filed suit. During that time, even
though plaintiff was able to provide documentation showing that she
had paid off her car loan in full, the defendant reported her to three
major credit bureaus and continued to report her for 3½ years.
3. Sanctions for Comparable Misconduct
Gore instructs us to consider the difference between the punitive
damages awarded by the jury and the civil penalties authorized or
imposed in comparable cases. See Gore, 517 U.S. at 583, 134 L. Ed.
2d at 831, 116 S. Ct. at 1603; State Farm, 538 U.S. at 428, 155 L.
Ed. 2d at 607-08, 123 S. Ct. at 1526. The purpose of this guidepost
-25-
is to “ ‘accord substantial deference to legislative judgments
concerning appropriate sanctions for the conduct at issue.’ ” Gore,
517 U.S. at 583, 134 L. Ed. 2d at 831, 116 S. Ct. at 1603, quoting
Browning-Ferris Industries of Vermont, Inc. v. Kelco Disposal, Inc.,
492 U.S. 257, 301, 106 L. Ed. 2d 219, 254, 109 S. Ct. 2909, 2934
(1989) (Brennan, J., concurring, joined by Marshall, J.). It is
uncontested that no comparable Illinois law imposes a civil penalty,
such as a fine, for defamation. As the legislature has not spoken on
this issue, it is not necessary for us to further consider this guidepost.
See State Farm, 538 U.S. at 428, 155 L. Ed. 2d at 608, 123 S. Ct. at
1526; see also Turner, 363 Ill. App. 3d at 1164-65 (“Neither party has
presented any cases or statutes regarding this factor that are
comparable in a meaningful sense to this case, nor is this court aware
of any such cases or statutes. Accordingly, this guidepost is of
minimal value in our assessment”).
Before fashioning a punitive damages award in this case, we take
note of the observations of the Seventh Circuit set forth in Mathias v.
Accor Economy Lodging, Inc., 347 F.3d 672 (7th Cir. 2003). There,
the court pointed out several considerations that should be made in
determining an appropriate compensatory to punitive damages ratio
that are relevant to the case at bar. Specifically, the court cautioned
that compensatory damages do not always “do the trick” in cases
where the harm is largely dignatory because these damages may be
too slight to give the victim an incentive to sue and are insufficient to
deter and punish the defendant. Mathias, 347 F.3d at 677. Further, the
court noted that an award of punitive damages can prevent a
defendant from profiting from wrongful conduct. Mathias, 347 F.3d
at 677. Finally, the court considered whether a defendant’s wealth
enables it to mount an extremely aggressive defense, making litigation
too costly for a plaintiff and making it difficult for a plaintiff to find a
lawyer willing to handle an involved case for modest stakes. Mathias,
347 F.3d at 677.
In addition to these considerations, we acknowledge that we are
permitted to take into account the amount of the attorney fees
expended in a case when assessing a punitive damages award. Lowe
II, 327 Ill. App. 3d at 724-25, citing E.J. McKernan Co. v. Gregory,
252 Ill. App. 3d 514, 535-36 (1993). We also consider the need to
achieve the goals of punishment and deterrence. Gore, 517 U.S. at
568, 134 L. Ed. 2d at 822, 116 S. Ct. at 1595; State Farm, 538 U.S.
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at 416, 155 L. Ed. 2d at 600, 123 S. Ct. at 1519; O’Neill, 329 Ill.
App. 3d at 1178-79.
With all of these principles in mind, we hold that a punitive
damages award of $325,000, at a ratio of approximately 75 to 1, is
unconstitutionally excessive in light of the Union’s conduct in the
instant case. We find that an award of punitive damages against the
Union in the amount of $50,000, for a double-digit ratio of
approximately 11 to 1, would be reasonable and constitutional. As our
analysis demonstrates, the Union’s conduct was minimally
reprehensible, and the appellate court’s award of punitive damages far
exceeded awards given in other cases where the conduct exhibited
was much more egregious. Furthermore, Lowe did not present
evidence demonstrating that it sustained any injury to its reputation
that extended beyond its strained and ultimately reconciled
relationship with FAMCO. We cannot presume such damage, as the
evidence does not warrant it. Indeed, the evidence shows that Lowe
was a nonunion company paying less than the prevailing wage from
1969 until 1988. While Lowe’s business decisions in this regard have
no bearing on the issue before us, it stands to reason that companies
that did business with Lowe were aware of its practices, and remained
Lowe customers nonetheless.
We recognize that the $50,000 awarded here does not come close
to covering the attorney fees and costs which were incurred
throughout the duration of this protracted litigation. While attorney
fees can be considered when awarding punitive damages, it is not
within the purview of this court to award such fees outright, nor
should they be awarded under the guise of a punitive damages award.
E.J. McKernan Co., 252 Ill. App. 3d at 546; Anderson v. Ferris, 128
Ill. App. 3d 149, 156 (1984). We have considered the cost of the
litigation, as well as the goals of punishment and deterrence in
fashioning the punitive damages award, and even after making those
considerations, we find an award of $50,000 to be appropriate.
B. Fairness
The Union argues that any amount of punitive damages awarded
to Lowe in the instant case are unconstitutional because the Union
lacked notice that it was at risk for such a severe punishment. The
Union maintains that no other court has imposed liability for
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defamation based on false picketing and, therefore, the Union did not
have fair notice that its conduct could result in a punitive damages
award. The Union failed to raise this claim of unfairness below, and
raises it for the first time in this appeal. Accordingly, it is forfeited.
Marshall v. Burger King Corp., 222 Ill. 2d 422, 430-31 (2006).
However, we note that, even if we were to consider this claim, it
would be deemed meritless, as it is well established that punitive
damages can be awarded in defamation cases where a party, acting
with actual malice, publishes false information about a person or
entity. Bryson v. News America Publications, Inc., 174 Ill. 2d 77,
109-10 (1996); Edward v. Paddock Publications, Inc., 327 Ill. App.
3d 533, 566 (2001); Krasinski v. United Parcel Service, Inc., 208 Ill.
App. 3d 771, 773 (1991); Winters v. Greeley, 189 Ill. App. 3d 590,
599 (1989).
III. Lowe’s Claims
As previously stated, Lowe asserts in its cross-appeal that the
punitive damages award of $325,000 fashioned by the appellate court
was deficient and should be increased. We decline to address this
claim in light of our decision herein.
CONCLUSION
For the reasons stated, we reverse the judgment of the appellate
court and affirm the judgment of the circuit court as modified by a
reduction in the award of punitive damages from $325,000 to
$50,000.
Appellate court judgment reversed;
circuit court judgment affirmed
as modified.
CHIEF JUSTICE THOMAS took no part in the consideration or
decision of this case.
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JUSTICE GARMAN, dissenting:
Because I believe the majority’s decision in this case does not
adequately vindicate the goals of punitive damage awards, I
respectfully dissent. While the majority cites the goals of punishment
and deterrence as informing its punitive award against the union, the
resulting award of $50,000 does not achieve the purpose of those
goals.
I agree with the majority’s analysis and consideration of the
guideposts for reviewing the constitutionality of an award of punitive
damages set forth in Gore and further developed in State Farm. State
Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408,
418, 155 L. Ed. 2d 585, 601, 123 S. Ct. 1513, 1520 (2003), citing
BMW of North America, Inc. v. Gore, 517 U.S. 559, 575, 134 L. Ed.
2d 809, 826, 116 S. Ct. 1589, 1598-99 (1996). These guideposts are
“(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,
538 U.S. at 418, 155 L. Ed. 2d at 601, 123 S. Ct. at 1520. In
considering these guideposts courts must keep in mind the underlying
goals of punitive awards.
An award of punitive damages serves “to further a State’s
legitimate interests in punishing unlawful conduct and deterring its
repetition.” Gore, 517 U.S. at 568, 134 L. Ed. 2d at 822, 116 S. Ct.
at 1595; State Farm, 538 U.S. at 416, 155 L. Ed. 2d at 600, 123 S.
Ct. at 1519. Punitive damages have been described as “private fines,”
intended to deter future wrongdoing as well as punish a defendant.
Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S.
424, 432, 149 L. Ed. 2d 674, 684, 121 S. Ct. 1678, 1683 (2001). Not
surprisingly, fashioning appropriate punitive awards in furtherance of
these goals can be difficult in certain situations.
Here, defendant’s conduct was reprehensible based upon the fact
that it was intentional and malicious. However, defendant’s conduct
of false picketing, while malicious, was not nearly as egregious as
sexual harassment or wrongful prosecution. Deters v. Equifax Credit
Information Services, Inc., 202 F.3d 1262 (10th Cir. 2000) (sexual
harassment); Jones v. Rent-A-Center, Inc., 281 F. Supp. 2d 1277 (D.
Kan. 2003) (sexual harassment); Routh Wrecker Service, Inc. v.
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Washington, 335 Ark. 232, 980 S.W.2d 240 (1998) (defendant
wrongfully accused and swore out an arrest warrant against plaintiff
for a crime he did not commit). Moreover, the award by the appellate
court would result in disparity between the compensatory damages
suffered by plaintiff and the punitive damages awarded at a ratio of
almost 75 to 1. These facts do not end the analysis, however. In fact,
the majority acknowledges that there is no bright-line ratio to follow
when considering the disparity between the actual harm suffered by a
plaintiff and the punitive damages awarded and explains that courts
have considered a variety of other factors in fashioning punitive
awards. Slip op. at 20-21, 25. Despite this, the majority focuses too
greatly on the size of the ratio, fails to adequately utilize the other
factors courts consider in fashioning punitive awards, and loses sight
altogether of the underlying goals of punitive damages.
While the United State Supreme Court has stated that “few
awards exceeding a single-digit ratio between punitive and
compensatory damages *** will satisfy due process,” there is no
bright-line ratio and courts consider a variety of factors when
departing from single-digit ratios. State Farm, 538 U.S. at 425, 155
L. Ed. 2d at 605-06, 123 S. Ct. at 1524. Where compensatory
damages are inadequate to give victims any incentive to sue and thus
insufficient to deter and punish defendants, punitive awards with high
ratios are more appropriate. Mathias v. Accor Economy Lodging,
Inc., 347 F.3d 672, 676-77 (7th Cir. 2003). Such awards are also
more appropriate where a defendant’s wealth enables it to mount such
an extremely aggressive defense that plaintiffs never bring suits in the
first place. Mathias, 347 F.3d at 677. In these situations the extreme
litigation costs imposed by the defendant’s practices and the potential
difficulty these costs impose on a plaintiff’s ability to find a lawyer
willing to fight in a case of modest stakes make high-ratio punitive
awards more appropriate. Mathias, 347 F.3d at 677. Similarly, high-
ratio awards are more appropriate where the attorney fees expended
in a case are especially great. Lowe Excavating Co. v. International
Union of Operating Engineers Local No. 150, 327 Ill. App. 3d 711,
724-25 (2002), citing E.J. Mckernan Co. v. Gregory, 252 Ill. App. 3d
514, 535-36 (1993).
While the majority identifies these factors, it does not appear to
actually utilize them in concluding that a punitive damages award of
$325,000, at a ratio of approximately 75 to 1, is unconstitutionally
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excessive, while an award of $50,000, at a ratio of 11 to 1, is
reasonable and constitutional. Although the majority’s analysis and
resulting 11 to 1 ratio award make clear its belief that this is a
situation where an award exceeding a single-digit ratio between
punitive and compensatory damages meets the requirements of due
process, the majority’s $50,000 award is not sufficient to achieve the
punishment and deterrence purposes of punitive awards. Simply
providing any double-digit ratio does not prove, in and of itself, an
appropriate consideration of all the factors courts must utilize in
finally setting an award.
This case has been going on since February 17, 1988, when
plaintiff first filed suit. The compensatory damages plaintiff was able
to establish amounted to only $4,680. Its attorney fees were much
greater. When plaintiff filed its original motion for punitive damages
on August 15, 2003, it attached affidavits of its company president as
well as its attorneys. The company president’s affidavit provided that
plaintiff had, at that point, paid $225,925.83 in fees and expenses on
the case. The attorneys’ affidavits provided that fees and expenses
actually totaled over $500,000.
These facts make evident that this is a situation where, under
similar circumstances, compensatory damages may be too inadequate
to give a victim an incentive to sue in the first place, and thus
insufficient to punish and deter a defendant. Additionally, this case
provides a strong example of a situation where, without a significant
punitive award, extreme litigation costs could make it difficult for a
plaintiff to find a lawyer willing to fight for such modest stakes. In
fact, in making its findings concerning punitive awards, the trial court
in this case specifically stated that it considered “the small amount of
actual damages awarded to the Plaintiff, the additional harm to the
Plaintiff caused by the Defendant’s actions which caused the Plaintiff
to be involved in protracted litigation and to expend substantial
amounts for attorney’s fees.” Finally, the attorney fees expended by
plaintiff in this case are unquestionably high.
Considering the above, and despite the flaws identified by the
majority in the appellate court’s analysis of the Gore and State Farm
factors, I do not feel that a punitive award of $50,000 goes far
enough. While an award of $325,000 leads to a high ratio between
punitive and compensatory damages, it does provide an amount truly
informed by the facts of this case and the underlying goals of punitive
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damages. Like the majority, I would therefore not strictly adhere to a
single-digit ratio. Having found this a situation appropriate for a
double-digit award ratio, I would go further than the majority to
appropriately punish defendant for its intentionally malicious conduct
as well as deter it and others from considering similar courses of
conduct in the future. Similarly situated potential plaintiffs must know
that they will receive adequate compensation to justify filing suit in
these types of cases, or to offset the extreme litigation costs
occasioned by overly and wrongfully aggressive defendants.
Upholding the appellate court’s punitive damages award of $325,000
would accomplish these tasks and truly reflect a consideration of the
factors which courts utilize in fashioning high-ratio punitive to
compensatory awards.
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