On April 1, 2016 the United States Court of Appeals for the Tenth Circuit issued a significant opinion in the personal injury case Amber Nicole Lompe, Plaintiff-Appellee, v. Sunridge Partners, LLC and Apartment Management Consultants, LLC, Defendants-Appellants, 10th Cir. No. 14-8082, vacating and reducing significant punitive damages awards against the owner and property manager, respectively, of a Casper, Wyoming apartment complex. In doing so, the Court further spelled out the legal “guideposts” that govern punitive damages awards, and brought more clarity to this controversial topic.

In February 2011, Ms. Lompe, a tenant in the Sunridge Apartments, suffered carbon monoxide poisoning from malfunctioning furnaces in her apartment building. She brought suit against Sunridge Partners, LLC (“Sunridge”), as the building owner and Apartment Management Consultants, LLC (“AMC”), as the property manager. At trial in Wyoming’s United States District Court, a jury found both defendants negligent and awarded Ms. Lompe compensatory damages totaling $3,000,000, and punitive damages totaling $25,500,000, of which $3,000,000 was apportioned against Sunridge and $22,500,000 against AMC. On appeal, defendants argued that the district court erred by failing to grant their motion for judgment as a matter of law (JMOL) as to punitive damages, and in the alternative, they contended that the district court’s jury instructions on punitive damages were incorrect and the amount of punitive damages awarded against each defendant was excessive under common law and constitutional standards.

The Tenth Circuit held the evidence at trial was insufficient even to present the issue of punitive damages to the jury as to Sunridge (as Sunridge’s conduct did not rise to the threshold level of “willful and wanton misconduct,” as required by Wyoming law), and accordingly vacated entirely the $3,000,000 award of punitive damages against Sunridge. The Court also held that, while Ms. Lompe presented sufficient evidence of AMC’s misconduct to send the question of punitive damages to the jury, the $22,500,000 punitive damages jury award against AMC was “grossly excessive and arbitrary in violation of the Due Process Clause of the Fourteenth Amendment,” and reduced that award to $1,950,000.

In reaching its decision, the Tenth Circuit provided a thorough and detailed discussion of Wyoming’s substantive law on punitive damages (e.g., what conduct amounts to “willful and wanton misconduct,” and what does not), along with a very thorough review and discussion of Tenth Circuit and United States Supreme Court precedent on punitive damages. In particular, the Court focused on “the ‘exacting de novo’ review the Supreme Court has mandated in reviewing constitutional challenges to punitive damages awards,” and then applied the Supreme Court’s “guidepost analysis” found in BMW of North America v. Gore, 517 U.S. 559 (1996). See also, State Farm Mut. Auto Ins. Co. v. Campbell, 538 U.S. 408 (2003) and Jones v. United Parcel Serv., 674 F.3d 1187, 1208 (10th Cir. 2012). The Court stated:

“Consequently, ‘the Due Process Clause of the Fourteenth Amendment prohibits the imposition of grossly excessive or arbitrary punishments on a tortfeasor.’ In reviewing a constitutional challenge to an award of punitive damages under the Due Process Clause of the Fourteenth Amendment, a federal court must ‘consider three guideposts: (1) the degree of reprehensibility of the defendant’s misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award [at times referred to as “the ratio” between the compensatory damages award and the punitive damages award]; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.’”

Applying this “guidepost analysis,” the Court determined that the $22,500,000 punitive damages award against AMC was excessive, as it was 11.5 times AMC’s share of the $3,000,000 compensatory damages award, which was $1,950,000 [the jury had assigned AMC 65% of the total fault, so 65% of $3,000,000 = $1,950,000], and that, under the facts of this case, a 1:1 ratio of punitive damages to compensatory damages was appropriate “[to] satis[fy] ‘the State’s legitimate objectives’ of punishing and deterring future misconduct”.

In sum, in the Lompe decision, it is encouraging that the Tenth Circuit has taken such a principled and disciplined approach to the review of punitive damages awards. The complete text of the Lompe opinion is available here. If you have questions about a specific legal matter that involves a possible punitive damages issue or claim, please contact Hampton O’Neill or any other WSMT attorney.