Vasbinder v. Scott

• Decision Date: 30 September 1992
• Docket Number: D,No. 830,830
• Citation: 976 F.2d 118
• Parties: , 7 IER Cases 1401 Arnold R. VASBINDER, Plaintiff-Appellee, v. Basil Y. SCOTT and Richard M. Switzer, Defendants-Appellants. ocket 91-7884.
• Court: U.S. Court of Appeals — Second Circuit

Page 118

976 F.2d 118

61 USLW 2283, 7 IER Cases 1401

Arnold R. VASBINDER, Plaintiff-Appellee, v. Basil Y. SCOTT and Richard M. Switzer, Defendants-Appellants.

No. 830, Docket 91-7884.

United States Court of Appeals, Second Circuit.

Argued Jan. 30, 1992.

Decided Sept. 30, 1992.

Daniel Smirlock, Asst. Atty. Gen. of the State of N.Y., Albany, N.Y. (Robert Abrams, Atty. Gen., Peter H. Schiff, Deputy Sol. Gen., and Peter G. Crary, Asst. Atty. Gen. of the State of New York, of counsel), for defendants-appellants.

John Alden Stevens, Ithaca, N.Y. (Williamson, Clune & Stevens, of counsel), for plaintiff-appellee.

Before: WINTER, PRATT, and MAHONEY, Circuit Judges.

MAHONEY, Circuit Judge:

This appeal follows a jury trial solely on the issue of punitive damages. Defendants-appellants Basil Y. Scott and Richard M. Switzer appeal from a judgment of the United States District Court for the Northern District of New York, Thomas J. McAvoy, Judge, entered June 3, 1991 after a jury trial, that awarded plaintiff-appellee Arnold R. Vasbinder $150,000 in punitive damages against each defendant-appellant, and from a subsequent order of the district court entered August 27, 1991 that denied defendants-appellants' motion to reduce the awards of punitive damages. For the reasons that follow, we vacate the judgment and remand to the district court with the instruction to enter judgment in favor of Vasbinder in the amounts of $30,000 and $20,000 against Scott and Switzer, respectively, or at Vasbinder's option to conduct a new trial on the issue of punitive damages.

Background

The underlying facts of this litigation are set forth in our opinion deciding the initial appeal in this case, Vasbinder v. Ambach, 926 F.2d 1333, 1335-37 (2d Cir.1991). We summarize here only those facts necessary for resolution of the issue of punitive damages presented on this appeal.

At the outset of 1982, Vasbinder was a statewide coordinator of placement services for handicapped persons for the Office of Vocational Rehabilitation of the New York State Department of Education (the "OVR"). Id. at 1335. Switzer was Vasbinder's immediate supervisor; Switzer reported to Scott, the overall head of the OVR. Id. Up until that time, Vasbinder had always received excellent employment evaluations. Id.

In May 1982, while participating in an audit, Vasbinder discovered what he deemed to be improper duplicate billing and overcharging in the administration of a federally funded program. Id. at 1335-36. These apparent improprieties were thought by Vasbinder to involve individuals with close personal relationships to Switzer. Id. at 1336. In August 1982, Vasbinder reported his concerns to the Federal Bureau of Investigation ("FBI"), which opened an investigation into the matter. Id.

In October 1982, Vasbinder revealed his involvement with the FBI to Scott, and his relationship with Scott and Switzer became troubled. Id. at 1336-37. Vasbinder's performance evaluations by Scott and Switzer declined dramatically. Id. In December 1982, Vasbinder was stripped of some of his duties as statewide coordinator. Id. at 1337. On June 1, 1983, Vasbinder received a letter from the FBI reporting that "there is no indication of a violation of law which would merit federal prosecution." Id. Nine days later, Vasbinder was terminated as statewide coordinator and reassigned to a diminished position with a corresponding reduction in salary. Id.

Vasbinder then brought an action pursuant to 42 U.S.C. § 1983 (1988) against Scott and Switzer in the Northern District of New York, alleging that he had been discharged in violation of his First Amendment rights. Id. The matter was tried before a jury, which rendered a verdict in Vasbinder's favor for backpay (later determined by the court to amount to $32,529.49), $50,000 for emotional distress, and punitive damages in an undetermined amount. Id. at 1338-39. On defendants' motion, the trial court vacated the award of punitive damages, holding that defendants' conduct was not outrageous and thus did not warrant the imposition of such damages. Id. Vasbinder appealed the district court's decision regarding punitive damages, and Scott and Switzer cross-appealed the award of compensatory damages. Id. at 1339.

This court reversed the judgment of the district court only insofar as it had set aside the jury's award of punitive damages. Id. at 1344. With respect to that issue, we held that:

[I]t was not irrational or impermissible for the jury to infer that defendants' personnel actions toward Vasbinder were in callous disregard of his rights, and were intended both to deter other potential whistle-blowers and to disguise the retaliatory nature of their action from outsiders. It was surely within the jury's discretion to send a message, to Scott and Switzer and to others, that such retaliation is intolerable.

Id. at 1343. Because the district court had dismissed the punitive damages award without first having the jury make a finding as to the amount of punitive damages it would have awarded, the case was remanded for trial solely on the issue of punitive damages. Id. at 1344. The trial on remand consisted of a reading of the transcript of the prior trial and the introduction of additional evidence by the defendants concerning their personal wealth.

It was established at trial that Switzer was fifty-seven years old and employed as the executive director of the Bulova School in Queens, New York, an institution which offers vocational training to disabled adults. He receives a salary of $75,000 a year. Switzer also receives approximately $29,000 per year in retirement income from a state pension, which will be reduced to $27,000 at age sixty-two. At approximately that time, he will be eligible for an additional $30,000 per year from another pension source. Switzer's wife had recently been employed as a sales clerk at a department store, and her projected annual earnings were $7,500.

The Switzers' family assets include a $130,000 equity in their jointly owned family home and approximately $90,000 in savings. Mrs. Switzer also controls a bank account containing approximately $50,000. This money represents an inheritance received by Mr. Switzer that was transferred to his wife and is to be used to purchase property for the Switzers' children. The Switzers' liabilities include the mortgage on their home, $15,000 owed on an automobile, and an estimated $4,000 in annual real estate taxes. The Switzers anticipate the need to finance the remaining three years of their youngest child's college education.

The evidence as to Scott showed that he is sixty-six years old and hopes to retire in a year or two. He is currently employed as vice president for administration and finance at Kutztown University in Pennsylvania, where he earns approximately $77,000 a year. Scott also receives a New York State pension of approximately $44,000 a year, and has investments totalling approximately $360,000. Scott's wife has no retirement benefits. The Scotts jointly own, free from encumbrances, a condominium valued at $150,000 that is used as the family home.

After all the evidence was presented, the jury returned separate verdicts in the amount of $150,000 against both Scott and Switzer. Scott and Switzer then moved for judgment notwithstanding the verdict pursuant to Fed.R.Civ.P. 50(b) and 59 on the ground that the punitive damage awards were excessive and should be reduced. The trial court, while expressing sympathy for their position, denied the motion, deeming our opinions in Hughes v. Patrolmen's Benevolent Ass'n, 850 F.2d 876 (2d Cir.), cert. denied, 488 U.S. 967, 109 S.Ct. 495, 102 L.Ed.2d 532 (1988), and O'Neill v Krzeminski, 839 F.2d 9 (2d Cir.1988), to require that ruling.

This appeal followed.

Discussion

The defendants-appellants' liability for punitive damages having been decided by this court, Vasbinder, 926 F.2d at 1343-44, the only question on appeal is whether the amount of punitive damages awarded by the jury is excessive.

A. Punitive Damages.

An award of punitive damages should be reversed only if it is " 'so high as to shock the judicial conscience and constitute a denial of justice.' " Hughes, 850 F.2d at 883 (quoting Zarcone v. Perry, 572 F.2d 52, 56 (2d Cir.1978)). Although this is a stringent standard of review, we must remain cognizant that the purpose of punitive damage awards is to punish the defendant and to deter him and others from similar conduct in the future. Smith v. Wade, 461 U.S. 30, 54, 103 S.Ct. 1625, 1639, 75 L.Ed.2d 632 (1983). Thus, the function of appellate review of punitive damages is to make "certain that the punitive damages are reasonable in their amount and rational in light of their purpose to punish what has occurred and to deter its repetition." Pacific Mut. Life Ins. Co. v. Haslip, --- U.S. ----, ----, 111 S.Ct. 1032, 1045, 113 L.Ed.2d 1 (1991); see also Aldrich v. Thomson McKinnon Sec., Inc., 756 F.2d 243, 249 (2d Cir.1985) (punitive damages should not be awarded beyond amount reasonably necessary to secure purposes of such awards).

Accordingly, an award should not be so high as to result in the financial ruin of the defendant. Smith v. Lightning Bolt Prods., Inc., 861 F.2d 363, 373 (2d Cir.1988). Nor should it constitute a disproportionately large percentage of a defendant's net worth. Id. Thus, while a defendant's conduct is obviously germane to the damages issue, " 'even outrageous conduct will not support an oppressive or patently excessive award of damages.' " Brink's Inc. v. City of New York, 546 F.Supp. 403, 413-14 (S.D.N.Y.1982) (quoting Herman v. Hess Oil V.I. Corp., 379 F.Supp. 1268, 1276 (D.V.I.1974), aff'd, 524 F.2d 767 (3d Cir.1975)), aff'd, 717 F.2d 700 (2d Cir.1983). Further, because neither compensation nor enrichment is a valid purpose of punitive damages, an award should not be so large as to constitute "a windfall to the individual litigant." Aldrich, 756 F.2d at 249; see also Ramsey v....