Cheatham v. Pohle

Decision Date30 May 2003
Docket NumberNo. 40S01-0209-CV-471.,40S01-0209-CV-471.
Citation789 N.E.2d 467
PartiesDoris CHEATHAM, Appellant (Plaintiff Below), v. Michael POHLE, Appellee (Defendant Below).
CourtIndiana Supreme Court

Thomas J. Lantz, David W. Paugh, Seymour, Indiana, Attorneys for Appellant.

Andrew M. Auersch, Timothy J. O'Connor, Indianapolis, Indiana, Attorneys for Appellee.

David W. Stone, Indiana Trial Lawyers Association, Anderson, Indiana, John C. Trimble, Anthony M. Eleftheri, A. Richard M. Blaiklock, Insurance Institute of Indiana, Indianapolis, Indiana, Attorneys for Amicus Curiae.

Steve Carter, Attorney General, Scott A. Kreider, David L. Steiner, James B. Martin, Deputy Attorneys General, Indianapolis, Indiana, Attorneys for State of Indiana.

ON PETITION FOR TRANSFER

BOEHM, Justice.

Indiana's punitive damages allocation statute provides that an award of punitive damages is to be paid to the clerk of the court, and the clerk is to pay seventy-five percent of it to the State's Violent Crime Victims' Compensation Fund and twenty-five percent to the plaintiff. We hold the statute does not create an unconstitutional taking of property. Nor does it place a demand on an attorney's particular services in violation of the Indiana Constitution.

Factual and Procedural Background

After Doris Cheatham and Michael Pohle divorced in 1994, Pohle retained photographs he had taken of Cheatham in the nude as well as photos of the two engaged in a consensual sexual act. In early 1998, Pohle made photocopies of the photographs, added Cheatham's name, her work location and phone number, her new husband's name, and her attorney's name, and proceeded to distribute at least sixty copies around the small community where both he and Cheatham still lived and worked. Cheatham sued, alleging invasion of privacy and intentional infliction of emotional distress, and the jury awarded her $100,000 in compensatory damages and $100,000 in punitive damages.

Indiana Code section 34-51-3-6, enacted in 1995, provides:

(a) Except as provided in IC XX-XX-X-XX, when a judgment that includes a punitive damage award is entered in a civil action, the party against whom the judgment was entered shall pay the punitive damage award to the clerk of the court where the action is pending.
(b) Upon receiving the payment described in subsection (a), the clerk of the court shall:
(1) pay the person to whom punitive damages were awarded twenty-five percent (25%) of the punitive damage award; and
(2) pay the remaining seventy-five percent (75%) of the punitive damage award to the treasurer of state, who shall deposit the funds into the violent crime victims compensation fund established by IC 5-2-6.1-40.

Ind.Code § 34-51-3-6 (1998).

Although Cheatham did not raise any constitutional issue in the trial court, she appealed the judgment on two grounds. She argues that the statute violates the Takings Clauses found in both the Indiana Constitution and the Fifth Amendment of the United States Constitution. She also contends that the statute demands an attorney's "particular services" without just compensation in violation of Article I, Section 21 of the Indiana Constitution and that the statute imposes a tax upon her and her attorney in violation of Article X, Section 1 of the Indiana Constitution.

Pohle cross-appealed, arguing that Indiana does not recognize the tort of Public Disclosure of Private Facts, and that the trial court erred when it allowed the jury to return a punitive damages award without instructing it to consider Pohle's financial condition.

The Court of Appeals addressed the merits of Cheatham's claims and found that there was no taking in violation of the Fifth Amendment, but concluded that the statute violates Article I, Section 21 of the Indiana Constitution by placing a demand on an attorney's "particular services" without just compensation. Cheatham v. Pohle, 764 N.E.2d 272, 277 (Ind.Ct.App. 2002). The Court of Appeals rejected Pohle's cross-appeal on the ground that the issues were first raised in a post-trial motion to correct error, and were not preserved for appeal. Id. at 274-75, n. 1. After the Court of Appeals decision, the State filed a motion to intervene, requested party status, and tendered a petition for rehearing. The Court of Appeals granted the motion to intervene, but denied rehearing. Cheatham v. Pohle, 2002 Ind.App. LEXIS 1110 (May 28, 2002). We granted the State's petition to transfer. We summarily affirm the Court of Appeals holding that Pohle preserved no issue for appeal. The only remaining issues are Cheatham's challenges to the constitutionality of the punitive damages allocation statute. These present only questions of law.

I. Punitive Damages in Indiana

In assessing the claim that the allocation statute takes property without just compensation, it is essential to understand the nature of a claim for punitive damages. The purpose of punitive damages is not to make the plaintiff whole or to attempt to value the injuries of the plaintiff. Rather, punitive damages, sometimes designated "private fines" or "exemplary damages," have historically been viewed as designed to deter and punish wrongful activity. As such, they are quasi-criminal in nature. Cacdac v. West, 705 N.E.2d 506, 510 (Ind.Ct.App.1999) (punitive damages may be awarded upon a showing of a "quasi-criminal" state of mind or willful and wanton misconduct); Mitchell v. Stevenson, 677 N.E.2d 551, 564 (Ind. Ct.App.1997); see also Smith v. Wade, 461 U.S. 30, 59, 103 S.Ct. 1625, 75 L.Ed.2d 632 (1983) (Rehnquist, J., dissenting) (citing Huber v. Teuber, 10 D.C. 484, 490 (1877)); Felix Forte, Joinder of Civil and Criminal Relief in Indiana, 7 Notre Dame Law. 499, 501 (1932).

As a matter of federal law, state legislatures have broad discretion in authorizing and limiting the award of punitive damages, just as they do in fashioning criminal sanctions. BMW of N. Am. Inc. v. Gore, 517 U.S. 559, 568, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996). Victims in a criminal case have no claim to benefit from criminal sanctions. United States v. Newman, 144 F.3d 531, 538 (7th Cir.1998) (criminal law imposes punishment on behalf of all of society, but equitable payments of restitution inure only to specific victims of criminal conduct and do not possess a similarly punitive character); Charlton T. Howard III, Note: Booth v. Maryland Death Knell for the Victim Impact Statement?, 47 Md. L.Rev. 701, 738, n. 93 (1988) (the purpose of criminal punishment is to vindicate the interests of society as a whole, not the individual victim) (citing Tison v. Arizona, 481 U.S. 137, 149, 107 S.Ct. 1676, 95 L.Ed.2d 127 (1987)); Linda Curtis, Damage Measurements for Bad Faith Breach of Contract: An Economic Analysis, 39 Stan. L.Rev. 161, 178 (1986) (for punishment and deterrence purposes, criminal sanctions are more appropriate since they cannot provide a windfall to victims). For the same reason, it has been consistently held that civil plaintiffs have no right to receive punitive damages. Durham v. U-Haul Int'l, 745 N.E.2d 755, 762 (Ind.2001); Reed v. Central Soya Co., 621 N.E.2d 1069, 1076 (Ind. 1993); Travelers Indem. Co. v. Armstrong, 442 N.E.2d 349, 362-63 (Ind.1982); Indiana & Michigan Electric Co. v. Terre Haute Industries, Inc., 507 N.E.2d 588, 611-12 (Ind.Ct.App.1987); Miller Pipeline Corp. v. Broeker, 460 N.E.2d 177, 185 (Ind. Ct.App.1984); Farm Bureau Mut. Ins. Co. v. Dercach, 450 N.E.2d 537, 541 (Ind.Ct. App.1983).

To the extent punitive damages are recoverable, they are a creature of the common law. Forte v. Connerwood Healthcare, Inc., 745 N.E.2d 796, 800 (Ind. 2001); Forte, 7 Notre Dame Law. at 501. As we have repeatedly held in other contexts, the legislature is free to create, modify, or abolish common law causes of action. McIntosh v. Melroe, 729 N.E.2d 972, 977 (Ind.2000); Martin v. Richey, 711 N.E.2d 1273, 1283 (Ind.1999). And, as a matter of federal constitutional law, no person has a vested interest or property right in any rule of common law. Munn v. Illinois, 94 U.S. 113, 134, 24 L.Ed. 77 (1876). As a result, the General Assembly is free to eliminate punitive damages completely, as other states have done, and also has wide discretion in modifying this "quasi-criminal" sanction. Indeed, several jurisdictions have chosen not to recognize punitive damages as an acceptable award in any form.1

Indiana, like several other states, has chosen an intermediate ground permitting juries to award punitive damages and thereby inflict punishment on the defendant, but placing restrictions on the amount the plaintiff may benefit from the award. The facts warranting punitive damages must be established by clear and convincing evidence. Ind.Code § 34-51-3-2 (1998). Whether punitive damages may be awarded is usually a question of fact. Reed, 621 N.E.2d at 1076.

In sum, Indiana law recognizes a right to assert a claim to be compensated for a cognizable wrong and to recover on that claim to the extent the law allows. But a number of consequences flow from the fundamentally different nature of a claim to punitive damages. The financial condition of the defendant is relevant, Hibschman Pontiac, Inc. v. Batchelor, 266 Ind. 310, 317, 362 N.E.2d 845, 849 (1977), which it would not be if the goal were to compensate the plaintiff, as opposed to deterring or punishing the defendant.2 Proof is required by a clear and convincing standard rather than a preponderance of the evidence standard. I.C. § 34-51-3-2 (1998). For our purposes, the essential point is that because punitive damages do not compensate the plaintiff, the plaintiff has no right or entitlement to an award of punitive damages in any amount. Unlike a claim for compensatory damages, the trier of fact is not required to award punitive damages even if the facts that might justify an award are found.3 Hibschman Pontiac, Inc., 266 Ind. at 317, 362 N.E.2d at 849.

II. Claims Under State and Federal Taking Clauses

Article I, Section 21 of the Indiana Constitution...

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