Watson v. Johnson Mobile Homes

• Decision Date: 27 February 2002
• Docket Number: No. 00-60768.,00-60768.
• Citation: 284 F.3d 568
• Parties: Elnora Chaney WATSON, Plaintiff-Appellee, v. JOHNSON MOBILE HOMES; et al., Defendants, Johnson Mobile Homes; William P. Johnson, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

284 F.3d 568

Elnora Chaney WATSON, Plaintiff-Appellee, v. JOHNSON MOBILE HOMES; et al., Defendants, Johnson Mobile Homes; William P. Johnson, Defendants-Appellants.

No. 00-60768.

United States Court of Appeals, Fifth Circuit.

February 27, 2002.

G. Daniel Evans (argued), The Evans Law Firm, Birmingham, AL, William Emmett Ready, Jr., Ready Law Firm, Meridian, MS, for Plaintiff-Appellee.

Ronnie L. Walton (argued), Glover, Young, Walton & Tucker, Meridian, MS, for Defendants-Appellants.

Appeal from the United States District Court for the Southern District of Mississippi.

Before JOLLY and PARKER, Circuit Judges, and MILLS,^* District Judge.

ROBERT M. PARKER, Circuit Judge:

Defendants-Appellants Johnson Mobile Homes and William P. Johnson ("Defendants") appeal the district court's refusing to set aside the jury's award of punitive damages as not supported by the evidence or to remit as constitutionally excessive. They also argue that Plaintiffs' claim for intentional breach of contract against Johnson must fail as a matter of law. We conclude that the evidence in this case supports the jury's awarding punitive damages, but we agree that the amount awarded is constitutionally excessive. We therefore reverse in part the district court's denial of Defendants' motion for judgment as a matter of law and remit the jury's punitive damages award. In all other respects, we affirm.

BACKGROUND

This case arises from Elnora Watson's aborted purchase of a mobile home from Johnson Mobile Homes, a Mississippi company with its principal place of business there. Watson, a resident of Alabama, appeared on Defendants' lot in Meridian, Mississippi, and agreed to buy a mobile home for $22,995, to be financed over a number of years. The purchase required a credit application and a deposit of $4,000. Under the terms of the written purchase agreement, if the financing company refused Watson's application she was entitled to the immediate return of her deposit. If she was approved yet did not go through with the purchase, however, she would forfeit the $4,000. Watson's daughter, Michelle, cosigned the application and provided the deposit.

Several days later, Watson learned that her application had been rejected. About the same time, Johnson Mobile Homes' salesman Daniel Johnson called Michelle to see if she would be willing to pay another $3,000. This concession, along with several others, was necessary to meet the financing company's requirements in light of Watson's poor credit history. After considering the new deal for two days, Watson and Michelle went to Defendants' lot to get their deposit back. The company refused to return it. A few days later, Watson's son tried to secure return of the deposit, but he too was unsuccessful. A third attempt was made, this time by Michelle with Watson's daughter-in-law. At the lot, Michelle confronted Bill Johnson, co-owner of Johnson Mobile Homes, who refused to return the deposit, telling Michelle "to go get herself a lawyer."

Watson filed suit in Alabama state court, naming Johnson Mobile Homes, Johnson Mobile Homes of Alabama, Inc., and Bill and Daniel Johnson as defendants. The suit was removed to federal district court, the Alabama company having been dismissed, and was thereafter transferred to the Southern District of Mississippi. The case proceeded to trial, during which the jury heard evidence of 45 other applicants whose deposits were also forfeited. At the end of evidence, the jury was charged on three theories of recovery: intentional breach of contract, fraud, and conversion. The jury found Bill Johnson and Johnson Mobile Homes liable on each theory, but found Daniel Johnson not responsible. Watson was awarded $4,000 in actual damages and $700,000 in punitive damages. Defendants' subsequent motion for judgment as a matter of law or new trial and for remittitur was denied.

On appeal, Defendants argue that the evidence is insufficient to sustain an award of punitive damages and further that the amount awarded cannot withstand constitutional scrutiny. Defendants also argue that the district court's submission of a general verdict form may have permitted the jury to find Bill Johnson responsible for intentional breach of contract, a finding that cannot be sustained because Johnson was not himself a party to the purchase agreement.

DISCUSSION

I.

When reviewing a district court's refusal to set aside an award of punitive damages, we will reverse only upon determining that "no legally sufficient evidentiary basis" exists for making such an award, the same standard applied by the district court in the first instance. See FED.R.CIV.P. 50(a)(1); Wallace v. Methodist Hosp. Sys., 271 F.3d 212, 218-19 (5th Cir.2001). Under Mississippi law, punitive damages may be had for each of the three theories of recovery submitted in this case. To sustain an award of punitive damages for intentional breach of contract, "the plaintiff must prove by a preponderance of the evidence that the defendant acted with (1) malice or (2) gross negligence or reckless disregard for the rights of others." See Paracelsus Health Care Corp. v. Willard, 754 So.2d 437, 447 (Miss.2000). Meeting this burden requires proof of "an intentional wrong, insult, or abuse" or "such gross negligence as constitutes an independent tort." See id. "[O]rdinary torts, the product of forgetfulness, oversight, or the like, do not rise to the heightened level of an independent tort." Andrew Jackson Life Ins. Co. v. Williams, 566 So.2d 1172, 1187 (Miss.1990)(internal quotations omitted). Conversion and fraud, Watson's other theories of recovery, are independent torts. See West v. Combs, 642 So.2d 917, 921 (Miss.1994)(conversion); Andrew Jackson, 566 So.2d at 1187 (fraud). Thus, Watson's proving Defendants' perpetrated conversion or fraud will also establish an independent tort, which in turn is needed to sustain an award of punitive damages for breach of contract.

Showing fraud or conversion will not by itself secure an award of punitive damages, however. Not all independent torts are committed with malice, gross negligence, or reckless disregard for the rights of others.¹ This precept goes with the rule that punitive damages are disfavored under Mississippi law and are reserved for extreme cases and even then should be narrowly applied. See Tideway Oil, 431 So.2d at 460 n. 1. Thus, the propriety of awarding punitive damages in this case depends on our concluding that there is a sufficient evidentiary basis to find that Defendants (1) committed an independent tort and (2) in so doing perpetrated conduct that shows malice, gross negligence, or recklessness. Because Defendants do not challenge the jury's finding each responsible for fraud and conversion, we look only for evidence of the latter element.

The jury heard that compared to the 45 other applicants who forfeited their deposits during a seven-year period, Watson's was excessive. With the exception of one other amounting to $3,100, Watson's deposit was eight times the next highest ($500) and over 25 times the average ($154). Further, and remembering that what she paid was essentially an application fee, not a down payment, the amount was 17 percent of the mobile home's purchase price. Watson claims that requiring such an amount just to make an application is indefensible; she alleges that not returning the payment immediately after the application was refused is gross misconduct. Defendants attempt to justify their actions by arguing that the finance company had made an "initial conditional acceptance" of her application, and that therefore Watson was not entitled to the return of her deposit. Defendants leave out that the conditions of the acceptance included Watson's paying an additional $3,000, making more payments at a higher interest rate, and agreeing to an arbitration provision. These terms are hardly "more favorable" to Watson, as Defendants contend. Defendants' also tried to tie Watson to a third deal, offering her a $4,000 "credit" toward the purchase of a different, less expensive mobile home. Never once did Defendants offer to return Watson's deposit, despite Watson's and her family's several requests. Viewing this evidence, we conclude that it readily provides a legally sufficient basis for upholding the jury's awarding punitive damages in this case.

II.

We review de novo a challenge to the constitutionality of the size of a punitive damages award. See Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 121 S.Ct. 1678, 1683, 149 L.Ed.2d 674 (2001). The imposition of punitive damages under state law is constrained by the Eighth and Fourteenth Amendments, the first proscribing excessive fines and cruel and unusual punishment, the second making grossly excessive punishments unlawful under its Due Process Clause. See id. at 1684. In BMW of North America, Inc. v. Gore, 517 U.S. 559, 575-86, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996), the Supreme Court articulated three factors that courts should consider in determining whether an award of punitive damages is constitutionally excessive. They are "the defendant's reprehensibility or culpability; the relationship between the penalty and the harm to the victim caused by the defendant's actions; and the sanctions imposed in other cases for comparable misconduct." Cooper, 121 S.Ct. at 1684-85 (citations omitted). We consider each factor in turn.

"Perhaps the most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant's conduct." BMW, 517 U.S. at 575, 116 S.Ct. 1589. Reprehensibility depends on the nature of the conduct itself and the context in which it occurred. Reprehensibility does not ask whether Defendants' conduct warrants punishment; we have already determined that there is sufficient evidence to conclude that it does. Instead, the first BMW factor is concerned with where Defendants' conduct fits on a scale of outrageousness. Conduct...