Mattison v. Dallas Carrier Corp.

• Decision Date: 21 November 1991
• Docket Number: No. 91-3008,91-3008
• Citation: 947 F.2d 95
• Parties: , 21 Fed.R.Serv.3d 15, 34 Fed. R. Evid. Serv. 369 Vivian MATTISON; Morty Ronald Mattison, Plaintiffs-Appellees, v. DALLAS CARRIER CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 95

947 F.2d 95

60 USLW 2281, 21 Fed.R.Serv.3d 15, 34

Fed. R. Evid. Serv. 369

Vivian MATTISON; Morty Ronald Mattison, Plaintiffs-Appellees, v. DALLAS CARRIER CORPORATION, Defendant-Appellant.

No. 91-3008.

United States Court of Appeals Fourth Circuit.

Argued June 5, 1991.

Decided Oct. 11, 1991.

As Amended Oct. 28 and Nov. 21, 1991.

George Kermit Lyall, Nelson, Mullins, Riley & Scarborough, Greenville, S.C., argued (Edwin L. Turnage, on brief), for defendant-appellant.

William Jeffry Weston, Code & Weston, P.A., Greenville, S.C., argued (Merl F. Code, on brief), for plaintiffs-appellees.

Before ERVIN, Chief Judge, NIEMEYER, Circuit Judge, and ELLIS, District Judge for the Eastern District of Virginia, sitting by designation.

OPINION

NIEMEYER, Circuit Judge:

Although punitive damages have been awarded in the United States in diverse circumstances for approximately two hundred years, only recently have they been awarded in such amount and with such frequency that the activity has awakened a constitutional conscience about them. In this case we hold that the South Carolina law for awarding punitive damages, applied by the district court whose jurisdiction was based on diversity of citizenship, denied the defendant due process in violation of the Fifth Amendment, because its lack of meaningful standards allowed the jury to exercise unconstrained discretion in making its awards. We reject the defendant's remaining assignments of error in this case. Accordingly, we affirm the award of compensatory damages, and with respect to punitive damages we reverse and remand for a new trial.

I

Morty Mattison and his wife, Vivian, were driving home in a downpour during the late afternoon of August 30, 1989, when they collided with the rear of an eighteen-wheel tractor trailer parked in the right-hand lane of South Carolina Secondary Road 107 in Greenville, South Carolina. Secondary Road 107 consists of four lanes divided by a median "emergency lane." Although the Mattisons were travelling slowly, at approximately 20 miles per hour, they were unable to see the parked tractor trailer in time to stop, even though the tractor trailer had its flashers operating, because the rain "virtually obscured visibility." The driver of the tractor trailer, who was returning to his office only a mile away, had stopped in the right travel lane to make a phone call to his dispatcher. As the result of the collision, Mr. Mattison sustained a broken arm, a broken finger, and an aggravation of his preexisting hip condition. Mrs. Mattison sustained pain and stiffness in her back and neck, numbness in her face, and problems with shortness of breath.

Relying on federal jurisdiction based on diversity of citizenship, the Mattisons sued Dallas Carrier Corporation, the owner of the tractor trailer, in federal court, alleging negligence, gross negligence, and recklessness in the operation of the tractor trailer by its driver. A jury awarded Mr. Mattison $100,000 in compensatory damages and Mrs. Mattison $25,000. It also awarded each of them $50,000 in punitive damages, for a total of $100,000. The net worth of Dallas Carrier Corporation at the time of the award was $6,428. The district court denied post-trial motions for judgment notwithstanding the verdict, a new trial, and a remittitur.

On appeal, Dallas Carrier Corporation contends that the law of South Carolina for awarding punitive damages violates the due process and equal protection clauses of the United States Constitution and the South Carolina Constitution. It also contends that (1) the district court erred in permitting a lay witness to give an opinion about the adequacy of emergency flashers, (2) the district court improperly instructed the jury, and (3) the evidence was insufficient to support the verdict.

II

The question of whether South Carolina punitive damages law denies the defendant due process becomes particularly entangled by the grounds of decision given by the Supreme Court in Pacific Mut. Life Ins. Co. v. Haslip, --- U.S. ----, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991), for upholding the Alabama punitive damages scheme against an alleged due process violation. In evaluating the Alabama scheme, where instructions to the jury were not significantly different from the schemes previously questioned by members of the Court for their lack of standards, see id. 111 S.Ct. at 1045 n. 10 (cases cited therein), the Supreme Court turned its attention to the post-verdict process, passing lightly over the pre-verdict process which gave rise to the verdict in the first place. The Supreme Court held that post-trial reviews of awards that are required by Alabama law, in which the trial court and the appellate court apply independent substantive criteria of review, even to the extent of considering evidence that was not before the jury, provide adequate constraints to satisfy due process.

This unusual approach of emphasizing post-verdict review to the extent of perhaps slighting a review of the pre-verdict process, cf. Giaccio v. Pennsylvania, 382 U.S. 399, 403-04, 86 S.Ct. 518, 521-22, 15 L.Ed.2d 447 (1966), raises significant questions when federal courts, sitting in diversity cases, are confronted with the proper application of state punitive damages. The legitimizing constraints provided by the quasi de novo review process practiced under Alabama state law cannot be applied by a federal district court. While a district court must apply the substantive law of the state when instructing the jury on punitive damages, see Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), it must also apply the Federal Rules of Civil Procedure and, therefore, must review the jury verdict under standards established by Rules 50(b) (directed verdict and j.n.o.v.) and 59 (new trial). Moreover, the review by a federal district court of a jury verdict is always subject to the Seventh Amendment constraints guaranteeing the right to a jury trial which are not imposed on any state-prescribed post-trial review. ¹ This division in the application of substantive state law and federal procedural law is specifically confirmed in Browning-Ferris Indus. of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 279, 109 S.Ct. 2909, 2922, 106 L.Ed.2d 219 (1989):

In reviewing an award of punitive damages, the role of the District Court is to determine whether the jury's verdict is within the confines set by state law, and to determine, by reference to federal standards developed under Rule 59, whether a new trial or remittitur should be ordered. The Court of Appeals should then review the District Court's determination under an abuse-of-discretion standard.

See also Defender Indus., Inc. v. Northwestern Mut. Life Ins. Co., 938 F.2d 502, 504-05 (4th Cir.1991) (en banc).

Because the reviews under Rules 50(b) and 59 are more deferential to jury verdicts than appears to be the process under the state law of Alabama and because the Seventh Amendment does not permit a federal court to substitute its judgment for that of a jury, as long as the jury operates within the constraints of the law and the evidence, the guidance provided by the holding in Haslip is of limited assistance. The Haslip methodology of analyzing both pre-verdict and post-verdict processes, however, instructs us to consider a hybrid scheme consisting of the substantive law of South Carolina for giving the jury its law on punitive damages and the post-trial review which applies federal standards.

III

The law of South Carolina permits a jury to award punitive damages to punish, deter, and vindicate the rights of the plaintiff whenever the conduct of the defendant is willful, wanton or reckless. Rogers v. Florence Printing Co., 233 S.C. 567, 106 S.E.2d 258, 261, 263 (1958). The plaintiff must prove by clear and convincing evidence that the conduct included a "consciousness of wrongdoing" at the time of the conduct. Rogers, 106 S.E.2d at 263; S.C.Code Ann. § 15-33-135 (Law. Co-op. Supp.1990) (punitive damages burden of proof). Punitive damages may be awarded only if actual damages are awarded. See Carroway v. Johnson, 245 S.C. 200, 139 S.E.2d 908, 910 (1965).

The amount of penalty is committed to the discretion of the jury. The Supreme Court of South Carolina has repeatedly announced that no formula applies in awarding punitive damages and their award and amount are "peculiarly within the judgment and discretion of the jury, subject to the supervisory power of the trial judge over jury verdicts." See, e.g., Hicks v. Herring, 246 S.C. 429, 144 S.E.2d 151, 154 (1965). Thus, in Rogers the court stated that there is no appropriate ratio between actual damages and punitive damages: "There would appear to be no sound reason for a rule requiring the one to be in definite ratio to the other; no such rule exists in this state." 106 S.E.2d at 262. Similarly, there is no requirement that punitive damages bear any specified relationship to the wealth of the defendant. While the court decisions state that the financial ability of the defendant is a relevant factor for consideration by the jury, it is apparently not limiting, and there is no requirement that the defendant have a means to pay. See Norton v. Ewaskio, 241 S.C. 557, 129 S.E.2d 517, 521 (1963) (punitive damages award upheld against a monk "whose wealth [was] known to be nonexistent"). Moreover, punitive damages awards would apparently be upheld in the absence of any evidence of the worth of the defendant. See Rogers, 106 S.E.2d at 263 (punitive damages question is best left to the jury to "arrive at a fair award of such damages whether or not evidence be offered as to the defendant's financial worth").

The only constraint on the award by the jury is provided by the discretion given to the trial court to review the award for excessiveness. Hicks, 144 S.E.2d at 154. The review by the appellate court is under an abuse-of-discretion standard. The appellate court will reverse a trial...