LaPlante v. Honda North America, Inc.

• Decision Date: 08 July 1997
• Docket Number: No. 96-62-A,96-62-A
• Citation: 697 A.2d 625
• Parties: Arthur H. LaPLANTE, v. HONDA NORTH AMERICA, INC. ppeal.
• Court: Rhode Island Supreme Court

Page 625

697 A.2d 625

Arthur H. LaPLANTE, v. HONDA NORTH AMERICA, INC.

No. 96-62-Appeal.

Supreme Court of Rhode Island.

July 8, 1997.

Mark Decof, Providence, Kevin B. Howard, for Plaintiff.

Gerald C. DeMaria, Providence, for Defendant.

Before WEISBERGER, C.J., and LEDERBERG, BOURCIER and FLANDERS, JJ.

OPINION

BOURCIER, Justice.

This matter is before the Court on a certified question from the United States District Court for the District of Rhode Island pursuant to Article I, Rule 6, of the Supreme Court Rules of Appellate Procedure. ¹ The question comes to us from civil litigation currently pending in the Federal Court in which the plaintiff seeks to enforce the provisions of G.L.1956 § 9-1-50, alleging that the defendant has violated that statute by failing to make a settlement payment within thirty days of the date the release was sent by the plaintiff. The District Court found the statute to be unclear and has asked us to interpret its language by way of a certified question.

The certified question asks, "Does Rhode Island General Law § 9-1-50 provide for the recovery of compensatory interest based upon the unpaid settlement amount independent of a possible recovery of punitive damages for wilful or wanton conduct?"

I

The facts, which are taken from the District Court's Order of Certification and the briefs of the parties, show that on March 11, 1989, the plaintiff, Arthur H. LaPlante (LaPlante), was seriously injured while operating an all-terrain vehicle (ATV) designed, manufactured, and distributed by companies related to the defendant, Honda North America, Inc. (collectively Honda). LaPlante commenced a personal injury action against Honda in the United States District Court for the District of Rhode Island. A jury trial commenced in that court and resulted in a substantial verdict in favor of LaPlante upon which the trial judge entered final judgment. Honda timely appealed.

On appeal, the United States Court of Appeals for the First Circuit reversed the trial court's judgment on the ground that the trial judge had improperly instructed the jury on the law of product alteration and modification. See LaPlante v. American Honda Motor Co., 27 F.3d 731, 737 (1st. Cir.1994). The Court of Appeals remanded the matter for a new trial.

Following the remand, the parties began negotiations that resulted in a settlement agreement. On January 19, 1995, LaPlante executed a release in return for Honda's promise to pay $600,000. The release was sent to Honda's corporate counsel in California that same day. However, according to counsel for Honda, due to some administrative confusion and oversight, payment was not made until thirty-four days after execution of the release.

On the day following receipt of payment, February 24, 1995, LaPlante filed a complaint in the Rhode Island Superior Court against Honda, alleging a violation of § 9-1-50, because of the fact that Honda had not made payment within thirty days of the sending of the release. LaPlante sought both punitive damages and interest calculated at 12 percent on the settlement award of $600,000 from the date of the accident, March 11, 1989.

The matter was removed to the United States District Court for the District of Rhode Island on the basis of diversity of citizenship. See 28 U.S.C. § 1446. The case was initially referred to United States Magistrate Judge Robert W. Lovegreen for "preliminary review, findings and recommended disposition."

LaPlante filed a motion for partial summary judgment, claiming that as a matter of law under § 9-1-50 he was entitled to interest on the settlement amount of $600,000 at the rate of 12 percent from the date of the accident. He did not move for summary judgment on the issue of punitive damages, apparently for the reason that there were relevant unresolved factual questions. Honda objected to LaPlante's motion for summary judgment and also filed its own motion for summary judgment, claiming that as a matter of law it was not liable for punitive damages. In support of its objection Honda offered affidavits from members of both branches of the General Assembly who sponsored the bill in 1991 that led to § 9-1-50.

On October 18, 1995, Magistrate Judge Lovegreen issued his report and recommendation. He concluded that the statute did not permit interest to be calculated upon the settlement amount but rather that it only permitted a cause of action for punitive damages with interest to be calculated thereon. He therefore recommended that LaPlante's motion for summary judgment be denied and also that Honda's motion for summary judgment be denied but without prejudice to permit LaPlante to conduct discovery into the issue of Honda's willful or wanton conduct.

Thereafter the issue came before United States District Court Judge Mary M. Lisi. On January 30, 1996, she prepared an order of certification for this Court.

II

Section 9-1-50 provides that:

"Settled claims not paid within thirty (30) days.--

Whenever any claim is settled, the insurance company, adjusting company, or any other person, firm or corporation responsible for paying the settlement, shall make payment within thirty (30) days from the date the claimant or his or her attorney sends the release. Failure to make payment within thirty (30) days shall raise a presumption that failure to do so was a wilful and wanton disregard for the rights of the claimant. In addition to all other remedies, the payor shall be liable to the claimant in a separate cause of action for punitive damages and interest which shall be computed at the rate of twelve percent (12%) per annum from the date the cause of action giving rise to the settlement occurred until the judgment on the claim brought pursuant to this section is entered.

"Any claim brought under the provisions of this section shall be given a priority on the trial calendar."

The certified question asks, in essence, whether this statute creates two causes of action, one for interest to be computed on the settlement amount as well as an action for punitive damages or solely a cause of action for punitive damages with interest computed thereon.

LaPlante suggests that in enacting this statute, the General Assembly intended to create two distinct causes of action as remedies against the threat of tardy settlement payment. He contends that the General Assembly intended (1) to permit recovery of interest on the settlement amount computed from the date of the underlying cause of action and, (2) to permit a cause of action for punitive damages.

LaPlante suggests that the statute has both a compensatory component as well as a punitive component. In his view the compensatory component is derived from a strict-liability award of interest computed upon the settlement amount from the date of the underlying cause of action. Under LaPlante's theory, because a tortfeasor's obligation to compensate a victim arises from the moment the victim is injured, including compensation for interest, and because a settlement represents the amount of a victim's claim liquidated to a sum certain, by allowing interest on the settlement amount, the General Assembly intended to compensate victims for the interest that they would have received had the case not settled. Additionally, according to LaPlante, ...