Orkin Exterminating Co., Inc. v. Traina

• Decision Date: 26 March 1984
• Docket Number: No. 4-782A193,4-782A193
• Citation: 461 N.E.2d 693
• Parties: ORKIN EXTERMINATING COMPANY, INC., Appellant (Defendant Below), v. Charles TRAINA and Michelle Traina, Appellees (Plaintiffs Below).
• Court: Indiana Appellate Court

Page 693

461 N.E.2d 693

ORKIN EXTERMINATING COMPANY, INC., Appellant (Defendant Below), v. Charles TRAINA and Michelle Traina, Appellees (Plaintiffs Below).

No. 4-782A193.

Court of Appeals of Indiana Fourth District.

March 26, 1984.

John P. Price, Jon D. Krahulik, Robin L. Babbitt, Bingham Summers Welsh & Spilman, Indianapolis, John D. Proffitt, Campbell Kyle & Proffitt, Noblesville, for appellant.

Robert W. York, Albert George, Buth, George, York & Kuster, Indianapolis, Michael A. Howard, Smith Pearce & Howard, Noblesville, for appellees.

CONOVER, Presiding Judge.

Orkin Exterminating Co., Inc. (Orkin) appeals a judgment rendered against it upon a jury verdict in favor of Charles Traina (Charles) and Michelle Traina (Michelle) awarding them $400,000 in punitive damages. It does not take issue with a $65,000 award to Charles for compensatory damages, or a $2,500 award to Michelle for loss of consortium.

We affirm.

ISSUES

This appeal presents the following issues:

1. Whether an employer's failure to discharge or closely supervise an employee it discovers carrying an illegal firearm on company property constitutes wilful and wanton misconduct when such employee's subsequent negligence involving the firearm results in serious injury to one of the employer's customers.

2. Whether the trial court erred in giving a punitive damages instruction which advised the jury,

a. punitive damages could be awarded for mere wantonness,

b. punitive damages were appropriate if an employee were "unfit" and the employer "reckless" in employing or retaining

him, and contained statements which were internally inconsistent.

FACTS

Charles and Michelle, newlyweds, purchased a home in northern Indianapolis in June of 1979. Shortly after moving, they discovered a number of flying ants. Because of Orkin's billboard and television advertising, Charles contacted Orkin's Indianapolis office. After a visit by an Orkin representative, Charles signed a one year service contract.

On September 22, 1979, one of Orkin's pest control technicians, Jesse James Coleman (Coleman), came to the Traina home to apply pest spray in the basement. As Coleman bent over to do his work, a tear gas gun (pen gun) Coleman had modified to fire a .25 caliber bullet, fell from his shirt pocket and discharged when it hit the concrete floor. The bullet struck Charles in the right forearm, severely injuring him. He was standing in a basement doorway watching Coleman work when the weapon discharged.

Orkin, the world's largest termite and pest control company, has more than 330 offices in the United States and Canada. Its pest control technicians enter the homes of Orkin's customers and perform their work without supervision, sometimes when the owners are absent. Orkin has developed extensive written policy statements describing the procedures to be followed by its supervisory personnel when hiring and training new employees. It hired Coleman as a pest control technician on August 27, 1979.

As to Coleman, Orkin's Indianapolis management personnel failed to follow Orkin's hiring and training procedures by failing to

(a) adequately train management trainee Hinkley, who hired Coleman, in its hiring procedures,

(b) check Coleman's work history and reputation with the required five of his former employers rather than with the only one it did, the Indiana University, Purdue University at Indianapolis (I.U.P.U.I.) security department,

(c) interrogate him regarding the "gaps" in his prior employment history revealed by his employment application, and

(d) train him for his position as a pest control technician in the required manner and for the required length of time.

However, an exhaustive background check only would have revealed an unremarkable employment history in Coleman's case, that is, no facts which would have put Orkin on notice a catastrophic event such as is here involved was likely to occur as a result of Orkin's proposed employment of Coleman. ¹

In September, 1979, two days before Charles was shot, Hinkley discovered Coleman at the office working on his pen gun. Coleman had both read and understood Orkin's company policy prohibiting the carrying of firearms either on its property or in a customer's home. He told Hinkley he carried the pen gun to protect himself from "big loose dogs", one of which had chased him to the top of his truck. He had, however, reduced the shell's powder charge so as not to kill any dogs. Orkin did not give its pest control technicians dog protection Hinkley strongly told Coleman not to carry the weapon, it was against company policy. He told Coleman to stand still with palms outstretched toward any threatening dog and greet him so he wouldn't bite, substantially the same advice he had given Coleman previously. Coleman agreed not to carry the weapon, saying he understood the reasons why he should not.

training. Coleman had discussed his dog problem with Hinkley on two previous occasions.

Upon that understanding, Hinkley dropped the subject. He assumed Coleman would obey him, and made no further effort to check whether Coleman was complying with his order, either by visual observation or by asking Coleman if he was carrying the weapon, and failed to report the matter to his superiors. Coleman returned to his duties, again unsupervised.

Violation of Orkin's firearms policy was grounds for immediate termination. Coleman was terminated two days later after he drove Charles to the hospital.

Orkin's net worth at the end of 1981 was $48,836,000. It appeals only the jury's exemplary damage award of $400,000.

DISCUSSION AND DECISION

I.

A. The Armstrong Rule

Our supreme court recently decided the case of Traveler's Indemnity Co. v. Armstrong, (1982) Ind., 442 N.E.2d 349, a tortious breach of contract case where the jury awarded punitive damages. This case changed the quantum of evidence which must be presented before a jury may return an award of punitive damages in such cases from a "preponderance of the evidence" to a "clear and convincing" standard.

In Armstrong, Justice Prentice said:

[P]unitive damages should not be allowable upon evidence that is merely consistent with the hypothesis of malice, fraud, gross negligence or oppressiveness. Rather some evidence should be required that is inconsistent with the hypothesis that the tortious conduct was the result of a mistake of law or fact, honest error of judgment, over-zealousness, mere negligence or other non-iniquitous human failing.... [A] requirement of proof by clear and convincing evidence furthers the public interest when punitive damages are sought.

Armstrong, 442 N.E.2d at 362-363.

B. Armstrong Rule Applies to "Pure" Tort Cases

Armstrong has retrospective as well as prospective application in tortious breach cases. Don Medow Motors, Inc. v. Grauman, (1983) Ind.App., 446 N.E.2d 651. It applies retroactively to all cases involving punitive damages whether on appeal or otherwise. Farm Bureau Mutual Ins. Co. v. Dercach, (1983) Ind.App., 450 N.E.2d 537. Cases decided since Armstrong which reversed and remanded punitive damage awards for re-trial under Armstrong's clear and convincing evidence rule are Lloyd's of London v. Lock, (1983) Ind.App., 454 N.E.2d 81; Peoples Trust and Savings Bank v. Humphrey, (1983) Ind.App., 451 N.E.2d 1104; Grauman, supra; and Tuthill Corp., Fill-Rite Division v. Wolfe, (1983) Ind.App., 451 N.E.2d 72. The case before us, however, does not present a "tortious breach of contract" case. Breach of the service contract between Orkin and the Trainas was neither alleged nor proved. Only a "pure tort" right-duty relationship independent of that contract was established at trial.

Does the Armstrong "clear and convincing" evidence rule also apply to pure tort punitive damage cases? We believe it does. In Armstrong, Justice Prentice said

The propriety of the clear and convincing evidence standard is particularly evident in contract cases, because the breach itself for whatever reason, will almost invariably be regarded by the complaining party as oppressive, if not out right fraudulent.... (Emphasis supplied.)

Armstrong, 442 N.E.2d at 363. By implication, Justice Prentice tells us the new Armstrong clear and convincing evidence rule applies to all punitive damage cases whether they are tortious breach of contract or pure tort cases. Because of its retrospective application, Grauman, supra, Armstrong applies here.

C. Standard of Review

Our standard of review is changed, however, only in that we now review punitive damage cases on appeal with the clear and convincing evidence standard in mind. Otherwise, our standard of review remains the same. In reviewing a jury's award of punitive damages, we will neither weigh the evidence nor determine the credibility of witnesses. Our inquiry is limited to determining whether the verdict is sustained by substantial evidence of probative value. Riverside Insurance Co. v. Pedigo, (1982) Ind.App., 430 N.E.2d 796, 803. We consider the evidence and reasonable inferences arising therefrom in the light most favorable to appellees and will reverse only if the evidence leads to but one conclusion and an opposite conclusion was reached below. Woodard Insurance, Inc. v. White, (1982) Ind., 437 N.E.2d 59, 67; Riverside Insurance, Inc., supra, 430 N.E.2d at 804. To be substantial and of probative value as to a punitive damages award, the evidence must be clear and convincing, that is, there must be some evidence (a) of malice, fraud, gross negligence or oppressive conduct mingled in the breach in tortious breach of contract cases or of malicious, reckless, or wilful and wanton misconduct in pure tort cases, and (b) the tortious conduct is inconsistent with a hypothesis of mere negligence, mistake of law or fact, over-zealousness, or other noniniquitous human failing. If a jury determines both these elements are present in the evidence and assessment thereof is in the public interest, it is warranted in awarding...