Steinke v. Beach Bungee, Inc.

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
MARY STEINKE, Individually and as
Personal representative of the Estate
of Zachary Steinke; MIKE STEINKE,
Individually and as Personal
representative of the Estate of
Zachary Steinke,
Plaintiffs-Appellees,
v.
BEACH BUNGEE, INCORPORATED;
CAROLINA LANE HOLDING COMPANY
OF LITTLE RIVER, INCORPORATED; No. 96-1105
CHARLES VEREEN; HAROLD MORRIS;
BILLY PLAYER,
Defendants-Appellants,
and
MARSHALL BEAM; RECREATIONAL
STRUCTURES, INCORPORATED;
INGERSOLL-RAND COMPANY; MASTER
MECHANIC MANUFACTURING
COMPANY,
Defendants.
Appeal from the United States District Court
for the District of South Carolina, at Florence.
William B. Traxler, Jr., District Judge.
(CA-93-2679-21-4)
Argued: December 5, 1996
Decided: January 29, 1997
Before WILKINSON, Chief Judge, and ERVIN and HAMILTON,
Circuit Judges.
Affirmed in part and vacated and remanded in part by published opin-
ion. Chief Judge Wilkinson wrote the opinion, in which Judge Ervin
and Judge Hamilton joined.
_________________________________________________________________
COUNSEL
ARGUED: Thomas Casey Brittain, HEARN, BRITTAIN & MAR-
TIN, P.A., Myrtle Beach, South Carolina, for Appellants. John Daniel
Kassel, SUGGS & KELLY, Columbia, South Carolina, for Appellees.
ON BRIEF: Scott B. Umstead, HEARN, BRITTAIN & MARTIN,
P.A., Myrtle Beach, South Carolina, for Appellants.
_________________________________________________________________
OPINION
WILKINSON, Chief Judge:
Beach Bungee, Carolina Lane Holding Company, and the owners
of these two companies appeal from a large verdict for the wrongful
death of Zachary Steinke. Owners Charles Vereen and Billy Player
contend that their motion for judgment as a matter of law should have
been granted because they are shielded from individual liability by the
corporate form. All of the appellants argue that their motion for remit-
titur should have been granted because the $12 million jury verdict
for emotional damages was excessive. We affirm on the issue of Ver-
een and Player's individual liability, holding that the evidence in this
case supports the jury's finding that Vereen and Player participated
directly in the tortious activity that led to Zachary Steinke's death. We
remand the issue of remittitur for reconsideration in light of Gasperini
v. Center for Humanities, Inc., 116 S. Ct. 2211 (1996).
I.
On August 10, 1993, Zachary Steinke ("Zack"), the 17-year-old
son of Mike and Mary Steinke, was killed at an attraction called
Beach Bungee near Myrtle Beach, South Carolina. While his parents
watched, Zack and an employee of Beach Bungee were lifted from
the ground in a steel cage pulled by a single cable attached to an elec-
2
tric winch. The ride operator, owner Harold Morris, became distracted
and failed to stop the cage when it reached the top. The winch contin-
ued to pull, the cable snapped, and the cage plummeted 160 feet kill-
ing both Zack and the Beach Bungee employee. Zack's parents
attempted to perform artificial respiration but were unable to revive
their battered and bleeding son. The evidence showed that both par-
ents were profoundly shaken by the event.
Later investigations revealed that the system used by Beach
Bungee was neither safe nor properly licensed. It contained no device
which would have shut down the winch in the event of over-travel;
it had no safety cables; and it had no controls which would have
allowed individuals in the cage to shut down the winch. Despite the
fact that the Beach Bungee owners had recently secured a license for
another bungee jump lift, the winch and cable device which caused
Zack's death was never licensed by the South Carolina Department
of Labor. Even though the equipment was not licensed, Beach Bungee
displayed a South Carolina Department of Labor inspection plate that
had been issued for a previous device. Furthermore, the equipment
that lifted Zack had a warning label which stated,"Caution: not suit-
able for lifting or lowering persons."
Much of the evidence at trial concerned how Beach Bungee had
come to use the unsafe device. A hydraulic lift or"crawlevator" that
originally lifted patrons of the bungee jump was never satisfactory to
Morris, Player, and Vereen. It often broke down and was apparently
underpowered. Link Davis, the crawlevator manufacturer representa-
tive, testified that he had spoken to Vereen about the problems, and
Vereen had expressed a preference of going to a winch and single
cable device. Davis explicitly warned Vereen that this would not be
a safe system, and testified that his warnings were"as emphatic as I
could [give] without cussing and hollering and walking off the job."
Forrest Davidson, a contractor and former Beach Bungee
employee, testified that he had conversations with Vereen and Morris
regarding the installation of a new winch and cable system. He
informed them that it would require six to eight weeks to find an engi-
neer and have the system installed safely. Link Davis also testified
that he told Morris and Vereen that they should hire an engineer for
the project. Despite these warnings, and the fact that Beach Bungee's
3
own operating manual called for inspection by a professional engi-
neer, the Beach Bungee owners rejected hiring a professional engi-
neer because they wanted to have a system in place quickly so that
they would not miss the peak tourist season.
Billy Player thus sought out Marshall Beam, a shrimp boat repair-
man, to help find and install a winch system. Beam was not only not
a professional engineer, he had no licenses or certifications, and had
no experience in designing or installing amusement devices or eleva-
tors. Player and the other owners made a joint decision to hire Beam.
Beam testified that no one asked for his qualifications and that it was
the owners' idea to use a winch and single cable system. Beam prom-
ised to get the job done quickly, and at the bargain rate of $25 an
hour.
Morris bought the winch for the project. When it arrived on the
site, Beam, Morris, and Player were present. Beam pointed out the
winch's warning that it was not suitable for lifting persons, but neither
Morris nor Player raised any objections. In fact, at some point some-
one attempted to scratch out the word "persons" on the warning.
Beam installed the winch system, and it began carrying people
approximately ten days before Zack was killed in August 1993.
After Zack fell to his death, Mr. & Mrs. Steinke brought the instant
wrongful death action. Since Zack was only 17, there was no allega-
tion that the parents suffered monetary damages or loss of support.
Instead, they sought emotional damages as allowed under South Caro-
lina law, including damages for grief, shock, sorrow, wounded feel-
ings, and loss of companionship and society. See Zorn v. Crawford,
165 S.E.2d 640, 645 (S.C. 1969). At the close of evidence, the district
court ruled that Beach Bungee, Carolina Land Holding Company,
Harold Morris, and Marshall Beam were negligent as a matter of law.
Vereen and Player moved for judgment as a matter of law, arguing
that they were shielded from personal liability. The district court
denied this motion and submitted special verdict forms to the jury.
The jury was asked to determine whether Vereen and/or Player had
personally participated in one or more of three acts which, in the
court's opinion, would have rendered them individually liable. These
acts included:
4
1. The use of a lift system with only one cable with no
safety control;
2. The hiring of Marshall Beam; and
3. The use of the system without a license by the South
Carolina Department of Labor.
The jury found that Vereen and Player had participated in each of
the acts enumerated on the special verdict forms, and returned a ver-
dict of $12 million in actual damages for Mr. & Mrs. Steinke. The
jury also found that Vereen, Player, Morris, Beach Bungee, and Caro-
lina Land Holding Company had acted recklessly. Vereen and Player
then filed a post-trial motion under Fed. R. Civ. P. 50 contesting their
individual liability. In addition, all of the defendants except Beam
moved jointly for remittitur, contending that the verdict was exces-
sive. Both motions were summarily denied, and this appeal followed.
II.
Charles Vereen and Billy Player maintain that they are protected
from personal liability for Zack's death by the fact of Beach Bungee's
and Carolina Lane Holding Company's incorporation. In South Caro-
lina, there is a strong presumption that "an officer or a director of a
corporation is not, merely as a result of his standing as such, person-
ally liable for torts" of the corporation. Hunt v. Rabon, 272 S.E.2d
643, 644 (S.C. 1980). However, in those rare cases where a corporate
director has "in some way participated in or directed the tortious act,"
personal liability will attach. Id.; Rowe v. Hyatt, 468 S.E.2d 649, 650
(S.C. 1996); see also Tillman v. Wheaton-Haven Recreation Associa-
tion, Inc., 517 F.2d 1141, 1144 (4th Cir. 1975). The jury here found
that Vereen and Player had "participated in or directed" the tortious
act that led to the death of Zachary Steinke in three different ways:
(1) each director had participated in the decision to use a clearly
unsafe lift system with only one cable and no safety devices; (2) each
had participated in the decision to hire an unqualified individual to
install this dangerous system; and (3) each had participated in the
decision to use the system without having it properly licensed by the
South Carolina Department of Labor.
5
There was ample evidence to support the jury's findings that Ver-
een and Player were personally involved in the tortious conduct that
led to Zachary Steinke's death. See Charleston Area Medical Center,
Inc. v. Blue Cross and Blue Shield of Ohio, Inc., 6 F.3d 243, 247-48
(4th Cir. 1993). Vereen proposed the idea of switching to a single
cable and winch system to Link Davis, and persisted in pursuing this
plan despite Davis's emphatic warning that it would be unsafe. Player
was present when the winch arrived, and Marshall Beam alerted
Player to the warning on the winch that it was not suitable for lifting
persons. Player, however, chose to support the use of the system.
Both Player and Vereen were aware of the hazards of using a single
cable lift. In 1992, they had operated a bungee jump with a crane and
single cable but abandoned that system due to safety concerns when
they noticed the single cable had become badly frayed. None of the
Beach Bungee owners, however, required the installation of even
basic safety devices on the lift system despite the fact that Beam had
alerted Morris that such devices were lacking. Furthermore, Walt
Flowers, an OSHA investigator who interviewed Morris following
Zack's death, testified that Morris admitted that the winch system
"was a temporary system and that after Labor Day they were going
to get an engineer to come in and certify something to go into it."
Beam testified that Player and Morris told him to build something that
would "just get through the season." Given these facts, the jury could
reasonably have concluded that the owners took a calculated risk with
the lives and safety of their patrons in order to realize profits at peak
season.
Furthermore, both Player and Vereen were instrumental in hiring
an unqualified individual to install this unsafe system. Forrest David-
son and Link Davis both testified that they warned Vereen that the
project would require a professional engineer to be done properly.
The Beach Bungee owners, however, rejected this advice because
they concluded that it would take too long to find an engineer and
develop the engineering plans. Instead, Billy Player sought out a
shrimp boat repairman to do the job. Ignoring the warning in their
own operations manual that failure to have work inspected by a
licensed engineer could have potentially fatal consequences, the
Beach Bungee owners did not inquire into Marshall Beam's qualifica-
tions.
6
There was also sufficient evidence for the jury to conclude that
Vereen and Player were aware that the single cable and winch system
should have been licensed by the South Carolina Department of
Labor. The owners had just completed the licensing process for the
crawlevator lift in May 1993, and Davis had specifically warned Ver-
een that changes to the lift system would have to be approved by the
state. The owners nonetheless failed to have the winch and cable sys-
tem approved or inspected. However, they displayed the old inspec-
tion plate from the crawlevator on the door of the cage used in the
winch and cable system. The jury could easily have inferred that the
owners were aware of the South Carolina licensing requirements but
chose not to follow them because they realized that the winch and sin-
gle cable system would never have been approved by the state.
Despite the ample evidence supporting the jury's decision, Vereen
and Player attempt to avoid liability by analogizing their case to the
circumstances considered by the South Carolina Supreme Court in
Hunt v. Rabon. Their reliance on Hunt is misplaced. In that case, the
court rejected the plaintiffs' theory that the directors of a hospital
should have been individually liable for failure to properly oversee
the installation of a defective medical gas system. Unlike the instant
case, however, Hunt included no allegation that the hospital directors
actively promoted the installation of what they knew positively was
a patently dangerous system. See Hunt, 272 S.E.2d at 644.
A corporation is created to limit personal liability. We emphasize
that the finding of personal liability for a corporate officer or director
is an unusual and extraordinary event. But this case is not, as Vereen
and Player would have us believe, an instance in which corporate
directors reasonably relied on the competency of an employee to do
a task. The facts tell a far different story. The three owners of Beach
Bungee personally directed the use of a lift system they knew to be
dangerous, and chose to have the device installed on the cheap by an
unqualified shrimp boat mechanic so that they would not lose money
during the busy summer tourist season. Their every action flew in the
face of warnings that the lives of others would be endangered. This
reckless conduct led directly to the death of Zachary Steinke. The
jury's finding of individual liability against Vereen and Player, and
the further finding of recklessness, were fully justified. We therefore
7
affirm the denial of Vereen and Player's post-trial motion for judg-
ment as a matter of law.
III.
We turn next to appellants' contention that the district court
allowed an impermissibly excessive verdict to stand when it denied
their motion for remittitur. In Gasperini v. Center for Humanities, 116
S. Ct. 2211 (1996), the Supreme Court addressed the proper standards
for considering a motion for remittitur. Finding that the principles of
Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938), preclude "a recovery
in federal court significantly larger than the recovery that would have
been tolerated in state court," Gasperini, 116 S. Ct. at 2221, the Court
held that a district court sitting in diversity must apply state law stan-
dards to determine whether a verdict is excessive. Id. at 2224-25.
Nothing in the record indicates whether the district court referred to
South Carolina standards when it considered the motion for remittitur.
Because the Supreme Court has now definitively established that state
law must govern the disposition of such a motion, we must remand
this case so that the district court may apply the standards set forth
in South Carolina law.
The Supreme Court's mandate requires the district court to apply
the substantive component of a state's law concerning the excessive-
ness of a verdict. Thus, in Gasperini, the Court held that the district
court was obliged to apply New York law to determine if the verdict
would "deviate materially" from damage awards in similar circum-
stances. Id. at 2224-25. Under South Carolina's common law stan-
dard, "[i]f the trial judge, in the exercise of his discretion, is
convinced that the amount awarded is over-liberal, he has the author-
ity and corresponding duty to reduce the verdict by order nisi." Hicks
v. Herring, 144 S.E.2d 151, 154 (S.C. 1965) (citations omitted). Fur-
thermore, "[i]f the verdict appears so excessive as to indicate that it
was the result of caprice, passion or prejudice, both the trial judge and
[reviewing courts] are under a duty to set it aside." Fennel v.
Littlejohn, 125 S.E.2d 408, 414 (S.C. 1962).
Gasperini also addressed the proper role of federal appellate courts
when reviewing a district court's decision on a motion for remittitur.
Prior to Gasperini, the Supreme Court had not resolved the issue of
8
whether the Seventh Amendment prohibited appellate review of a dis-
trict court's refusal to grant a remittitur. Gasperini, 116 S. Ct. at 2223.
In Gasperini, the Court approved the practice of excessiveness review
in the courts of appeal, and held that a district court's decision on the
question of remittitur should be reviewed under an"abuse of discre-
tion" standard. Id. at 2225; see also Johnson v. Hugo's Skateway, 974
F.2d 1408, 1414 (4th Cir. 1992) (en banc) (reviewing trial judge's
determination that a jury's award of compensatory damages was not
excessive under an abuse of discretion standard); Defender Industries
v. Northwestern Mutual Life Insurance Co., 938 F.2d 503, 507 (4th
Cir. 1991) (en banc) (reviewing district court's determination on
whether or not to set aside a verdict as excessive under an abuse of
discretion standard).
In order to review the district court's ruling for abuse of discretion,
however, we must have some idea of the basis for the exercise of that
discretion. In this case, the district court simply ruled the remittitur
motion "denied." Given that a verdict of great magnitude is at issue,
the single word "denied" sheds too little light on the reasoning of the
trial judge. The $12 million verdict in this case was based entirely on
compensatory damages for emotional distress in a case where no
pecuniary loss was claimed. While we might be able to speculate as
to the reasons for the district court's decision, this would deprive us
of the perspective that led the Supreme Court to"lodge in the district
court, not the court of appeals, the primary responsibility" of applying
state standards to motions for remittitur. Gasperini, 116 S. Ct. at
2225.
Accordingly, in determining on remand whether the jury's verdict
was rendered in accordance with South Carolina law, the district court
should look to South Carolina cases to determine the range of dam-
ages in cases analogous to the one at hand. See Imbrogno v.
Chamberlin, 89 F.3d 87, 90 (2d Cir. 1996); Douglass v. Delta Air-
lines, Inc., 897 F.2d 1336, 1339 (5th Cir. 1990). If the court believes
that a departure from that range is justified, it should provide the rea-
soning behind its view. If the court determines that there are no com-
parable cases under South Carolina law, it should explain this
determination as well. Such a decision by the district court will reduce
the risk of caprice in large jury awards and will assure a reviewing
9
court that the trial court exercised its considered discretion under the
applicable state law.
IV.
We affirm the judgment of the district court on the issue of Charles
Vereen and Billy Player's individual liability for the death of Zachary
Steinke. We vacate the damage award and remand this case to the dis-
trict court for consideration of appellants' motion for remittitur under
South Carolina law.
AFFIRMED IN PART, VACATED AND REMANDED IN PART
10