ATTORNEY FOR APPELLANTS
Robert T. Sanders III
ATTORNEYS FOR APPELLEES
John D. Ulmer
Bodie J. Stegelmann
SUPREME COURT OF INDIANA
MATTHEW W. STROUD, )
and MARGARET A. STROUD, )
Appellants (Defendants Below), ) Indiana Supreme Court
) Cause No. 20S04-0306-CV-275
) Indiana Court of Appeals
TREVOR A. LINTS, DANIEL M. )
Cause No. 20A04-0010-CV-458
LINTS, and VICKI LINTS, Individually )
and as Parents/Natural Guardians of )
TREVOR A. LINTS )
Appellees (Plaintiffs Below). )
APPEAL FROM THE ELKHART CIRCUIT COURT
The Honorable Terry C. Shewmaker, Judge
Cause No. 20C01-9806-CT-038
ON PETITION TO TRANSFER
June 25, 2003
Factual and Procedural Background
Following a bench trial, the trial court in this personal injury case awarded
approximately $1.4 million in compensatory and $500,000 in punitive damages against the defendant.
The defendant appealed the $500,000 punitive damages award, claiming the amount was
excessive, and the Court of Appeals affirmed, finding that the award was not
an abuse of the trial courts discretion. We grant transfer in this
case and hold that the amount of punitive damages awarded by a trial
court is subject to appellate review de novo. Applying that standard, and
given the circumstances in this case, the trial courts $500,000 punitive damages award
is clearly excessive. We vacate the judgment, and remand this case to
the trial court for entry of a new award.
Seventeen-year-old Matthew Stroud was driving a vehicle at excessive speed while intoxicated, ran
a stop sign, and collided with another vehicle. Strouds passenger, Trevor Lints,
was severely and permanently injured, and the occupants of the other vehicle were
killed. Stroud pleaded guilty to criminal charges and in 1997 was sentenced
to eight years imprisonment. Lints and his parents sued Stroud and, after
a bench trial, Lints was awarded $1,381,500 in compensatory damages
See footnote and $500,000 in
punitive damages. Stroud appealed the punitive damages award, contending it was excessive
because, given his financial situation and prospects, there was no possibility he could
ever pay it. The Court of Appeals, applying an abuse of discretion
standard, affirmed the trial court.
Stroud v. Lints, 760 N.E.2d 1176, 1185
(Ind. Ct. App. 2002). Stroud petitioned this Court for transfer, contending: (1)
the Court of Appeals should have reviewed the trial courts punitive damages award
under a de novo standard; and (2) the punitive damages award was excessive.
I. Standard of Review of Punitive Damages
It is clear that a state is required, as a matter of federal
constitutional law, to provide appellate review of the amount of a punitive damages
award. Honda Motor Co. v. Oberg, 512 U.S. 415, 421 (1994); Pacific
Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 15 (1991). Stroud
contends that, in light of the United States Supreme Courts decision in Cooper
Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424 (2001), review of
the trial courts punitive damages award must be conducted de novo. Cooper
Industries held that when a defendant contends a punitive damages award by a
jury is excessive under the Due Process Clause of the Fourteenth Amendment, appellate
courts are to review de novo a trial courts decision not to order
a remittitur or new trial. Id. at 436. However, as the
Court of Appeals correctly noted, the Court in Cooper Industries also noted that
when no constitutional claim is made, the role of the appellate court, at
least in the federal system, is merely to review the trial courts determination
under an abuse-of-discretion standard. Id. at 433 (quoting Browning Ferris Indus. of
Vt., Inc. v. Kelco Disposal, Inc. 492 U.S. 257, 279 (1989)); see also
Fine v. Ryan Intl Airlines, 305 F.3d 746, 755 (7th Cir. 2002) (Since
Ryan is not alleging a constitutional violation, we review this decision only for
an abuse of discretion.).
After the Court of Appeals decision in this case, the United States Supreme
Court handed down its decision in State Farm Mut. Auto. Ins. Co. v.
Campbell, 123 S. Ct. 1513 (2003). State Farm, like Cooper Industries, addressed
a claim that the amount of punitive damages awarded constituted deprivation of property
without due process of law in violation of the Fourteenth Amendment. State
Farm made clear that, in reviewing such a claim, all courts, state and
federal, are required to consider: (1) the degree of reprehensibility of the defendants
misconduct; (2) the disparity between the actual or potential harm suffered by the
plaintiff 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. Id. at 1520. (citing BMW of N. Am. v.
Gore, 517 U.S. 559, 575 (1996)). State Farm reaffirmed that an appellate
court is required to review de novo a trial courts ruling on a
due process challenge to a punitive award. Id.
Under these federal authorities, there is no federal constitutional requirement that a state
law challenge to the amount of an award be reviewed de novo.
Stroud raises no federal constitutional claim. Rather, he contends only that the
trial court incorrectly failed to consider his ability to pay a $500,000 punitive
damages award. Thus, we must resolve the standard Indiana courts are to
apply in reviewing a claim of an excessive punitive damages award under state
law. We conclude as a matter of state law that review of
the amount of a punitive damage award should be de novo.
The punitive damages award in this case was assessed by the trial court
after a bench trial. Trial Rule 52(A) states, in relevant part, On
appeal of claims tried by the court without a jury or with an
advisory jury, at law or in equity, the court on appeal shall not
set aside the findings or judgment unless clearly erroneous. The decision to
award punitive damages must be based on facts that are supported by clear
and convincing evidence. Ind. Code § 34-51-3-2 (1998). In this case,
the trial court did not enter any specific findings of fact, but merely
found that punitive damages were appropriate.
The trial courts findings of historical factfor example what the defendant did and
what its motive wasand its conclusion that the evidence warrants imposition of punitive
damages are reviewed on appeal just as other sufficiency issues. Both of
these are subject to review on appeal under the standard established in Bud
Wolf Chevrolet, Inc. v. Robertson, 519 N.E.2d 135, 137 (Ind. 1988). They
are to be affirmed if considering only the probative evidence and the reasonable
inferences supporting it, without weighing evidence or assessing witness credibility, a reasonable trier
of fact could find such damages proven by clear and convincing evidence.
Id. These conclusions of the jury or the trial judge in a
bench trial are qualitatively different from the decision that those findings warrant imposition
of a specified amount of punitive damages. The former are the result
of a traditional fact-finding exercise. But unlike compensatory damages, there is no
entitlement to punitive damages, even if the facts support them.
Due process limitations on punitive damages awards are grounded in concerns
for excessive punishments, unevenly administered justice, and arbitrary results. State Farm, 123
S. Ct. at 1520-21. As Justice Breyer put it in a phrase
adopted by the full Court in State Farm, de novo review is required
to assure that an award is an application of law, rather than a
decisionmakers caprice. Id. These same considerations apply in our state law
regime, and require appellate review of the amount of punitive damages. The
Indiana statutory limitation on an award to three times the amount of compensatory
damages will usually alleviate the specific issue addressed in State Farm of punitive
awards that are excessive in relation to compensatory damages. But concerns remain
that the amount of punitive damages may be arbitrarily imposed, or inappropriate in
relation to compensatory damages or criminal penalties for similar conduct, or grounded on
the wrong factors, including the improper consideration given to the defendants wealth.
In short, for the same reasons the amount of a punitive award is
reviewed de novo in a due process challenge, Indiana appellate courts are to
review de novo state law challenges to the amount of the award.
Practical considerations also dictate de novo review of a punitive damage award.
Under State Farm, appellate courts are to review de novo constitutional challenges to
punitive damages. Plainly in the future all competently represented parties who challenge
a punitive damage award will present constitutional claims as well as state law
issues. The factors identified by the Supreme Court in evaluating a federal
constitutional challenge to a punitive award are for all practical purposes the same
as those relevant to a state law review. For reasons of consistency
and judicial economy, Indiana state courts should apply the same standard of review
to state law issues.
De novo review of the amount of a punitive award is consistent with
Indiana precedent as well as federal law under State Farm. Bud Wolf
addressed the propriety of awarding punitive damages, not whether the amount was excessive.
Bud Wolf went on to agree explicitly with the Court of Appeals
in distinguishing the issue of whether the jury could have awarded punitive damages
from whether the amount of damages awarded was excessive. Bud Wolf, 519
N.E.2d at 138 (With respect to Bud Wolfs argument that punitive damages were
excessive, we agree with the Court of Appeals analysis and resulting conclusion .
. . .). The Court of Appeals ruling on this point was:
Because we have concluded that the jurys award was supported by evidence, we
must now consider whether the damages were excessive. Bud Wolf, 508 N.E.2d
567, 571 (Ind. Ct. App. 1987). The Court of Appeals then analyzed
whether the amount awarded was appropriate by looking at the nature of the
tort, the extent of actual damages, and the economic wealth of the defendant.
Id. at 572. After undertaking that exercise, the Court of Appeals
came to the conclusion that the amount awarded was not excessive, all without
deference to the jury or the trial court ruling.
Similarly, in the order of this Court denying transfer in Budget Car Sales
v. Stott, 662 N.E.2d 638 (Ind. 1996), this court pointed out that the
standard recited by the Court of Appeals had been superseded by Bud Wolf.
The Court of Appeals had observed that a defendant is cloaked with
the presumption that tortious conduct was a noniniquitous human failing and recited the
standard of review as whether the evidence excluded every reasonabl[e] hypothesis of
innocent conduct. Id. Both of these statements plainly relate to review
of the decision whether punitive damages should be awarded at all, not to
the amount. Erie Ins. Co. v. Hickman, 605 N.E.2d 161
(Ind. 1992), also addressed these issues, and never discussed the issue of an
By contrast, in Hibschman Pontiac, Inc. v. Batchelor, 266 Ind. 310, 362 N.E.2d
845 (1977), which was cited in Bud Wolf, this Court also drew the
distinction the dissent between review of the propriety of a punitive award and
review of its amount. Hibschman stated that Indiana has followed
a rule that punitive damages in a proper case may be assessed by
the jury within their sound discretion guided by proper instructions given by the
court. Id. at 317, 362 N.E.2d at 849. However, while finding
the decision to award punitive damages within the province of the jury, this
Court then determined that the award itself was too high, without further explanation
and without any mention of deference to the jury or trial court, both
of which had considered the award appropriate. Id. at 317-18, 362 N.E.2d
De novo review of punitive damages is also consistent with our state constitutional
right to jury trial in civil cases. In Cooper Industries, the Supreme
Court pointed out that [u]nlike the measure of actual damages suffered, which presents
a question of historical or predictive fact, the level of punitive damages is
not really a fact tried by the jury. Cooper Indus., Inc., 532
U.S. at 437 (quoting Gasperini v. Center for Humanities, Inc., 518 U.S. 415,
459 (1996) (Scalia, J., dissenting)). For that reason, among others, the Court
concluded that appellate review of a district courts determination that a jurys punitive
damages award is consistent with federal due process does not implicate the Seventh
Amendment right to a jury trial. In order to assure consistency with
the requirements established in BMW for a punitive award, courts of appeal are
required as a matter of federal constitutional law to review those determinations de
novo. Id. at 436-37. If, as the Supreme Court has held,
a jurys decision as to the amount of punitive damages is not a
finding of fact for purposes of its conformity to due process, then neither
is it a fact when examined under state law, and appellate review de
novo presents no issue under our state constitutional right to a jury trial.
Applying an abuse of discretion standard, the Court of Appeals held that the
$500,000 award in this case was permissible. For the reasons given above,
we review that amount under a de novo standard. The decision of
the trial court comes to an appeal cloaked with the presumption that it
is correct. Otherwise stated, even under de novo review, a tie at
the appellate level goes to the winner in the trial court, even if
that party had the burden of proof or persuasion in the trial court.
Under de novo review, no deference is owed to the result reached
by the trial court, and if the record shows error in the judgment
of the trial court, modification of the trial courts award is proper.
Although this case, following State Farm, applies a de novo standard, for the
reasons given below we would find the award excessive under any standard of
II. Considering the Defendants Wealth
Given Strouds financial circumstances, we conclude that the $500,000 award is far beyond
the appropriate amount. We base that conclusion largely on what the law
is trying to do in allowing punitive damages awards. First, and most
importantly, it is not to compensate the victim or the victims attorney.
Neither the plaintiff nor the plaintiffs counsel has a right to an award
of punitive damages in addition to compensatory damages. Cheatham v. Pohle, 789
N.E.2d 467 (Ind. 2003); Durham v. U-Haul Intl, 745 N.E.2d 755, 762 (Ind.
2001); Reed v. Central Soya Co., 621 N.E.2d 1069, 1076 (Ind. 1993); Miller
Brewing Co. v. Best Beers of Bloomington, Inc., 608 N.E.2d 975, 983 (Ind.
1993); Travelers Indem. Co. v. Armstrong, 442 N.E.2d 349, 362-63 (Ind. 1982).
Only in recent times have requests for punitive damages become commonplace. Indeed,
until 1988 Indiana common law precluded punitive damages under a theory, now rejected
by statute, that the threat of criminal prosecution for the same acts barred
punitive action by the State. Eddy v. McGinnis, 523 N.E.2d 737, 741
(Ind. 1988). Current law recognizes that punitive damages may serve the societal
objective of deterring similar conduct by the defendant or others by way of
example. For that reason, if punitive damages are appropriate, the wealth of
the defendant has for many years been held relevant to a determination of
the appropriate amount. Hibschman, 266 Ind. at 317, 362 N.E.2d at 849.
As the Supreme Court recently noted, a defendants wealth cannot justify an
otherwise unconstitutional punitive damages award. State Farm, 123 S. Ct. at 1525.
But it is nevertheless appropriate consideration. Id. (quoting BMW, 517 U.S.
at 591 (Breyer, J. concurring)).
Ten thousand dollars is a significant sum to some and a trivial amount
to others. Because one legislative goal is deterring others as well as
the defendant, an assessment of the group of likely similar offenders is appropriate.
This in turn depends on the nature of the conduct to be
deterred. Thus, the perpetrator of a financial crime or a mass tort
will usually be a person of substantial resources, and a sizeable award may
be the only meaningful penalty. This wrong, however, required only an automobile.
Stroud, and others whom we might seek to deter, frequently have no
meaningful economic resources. Under these circumstances, ignoring the defendants financial condition is
Stroud is a 17-year-old sentenced to eight years in prison for the criminal
charges stemming from this case. His sole source of income at the
time of trial was as a participant in the Elkhart County work release
program. He plainly has no ability to pay now or in the
short to intermediate future. Interest compounded at eight percent per annum on
one-half million dollars will dig him into an increasingly deeper hole. Most
significantly, he will be unable to discharge this liability through bankruptcy. 11
U.S.C. § 523(a)(9) (2000); In re Reese, 91 F.3d 37, 38 (7th Cir.
The defendants wealth is ordinarily cited as a reason to escalate a punitive
award, and that is consistent with the goal of deterrence. But that
door swings both ways. An award that not only hurts but permanently
cripples the defendant goes too far.
See footnote A life of financial hopelessness may
be an invitation to a life of crime. Perpetual inability to get
the financial burden of a judgment off his back leaves a defendant with
few alternatives. The wisdom of rendering an award of punitive damages undischargeable
is for the Congress. But given that that decision has been made,
courts of our state should consider punitive awards with that legal fact in
mind. Stroud has no significant assets today and will have none for
some time. Although some portion of Strouds future wages may be exempt
from execution, this award is of dubious benefit to the plaintiff and its
present value in dollars is close to zero. But a staggering punitive
damages award is not merely a useless act. It also traps the
plaintiff and defendant forever in a creditor-debtor relationship that offers little if any
financial reward to the plaintiff and seems far more likely to lead to
nothing but travail for both.
The trial court provided no findings of fact to indicate, first, why a
punitive damages award was appropriate, and second, why that award should be set
at $500,000. In reviewing the award, the Court of Appeals considered helpful
the factors first articulated in
BMW, and recently reaffirmed in State Farm, 123
S. Ct. at 1520. Those factors are: the reprehensibility of conduct; the
disparity between the harm suffered and the punitive damages awarded; and the difference
between the punitive damages awarded and the civil and criminal penalties authorized or
imposed in comparable cases. BMW, 517 U.S. at 575. As the
Court of Appeals noted, the BMW factors are persuasive, but not dispositive, indicia
of whether a particular award is appropriate under Indiana common law. Stroud,
760 N.E.2d at 1181. This is so because BMW concerned a due
process challenge to an award and did not address whether the award violated
any common law theory of excessiveness. In addition, the factors were used
to review a trial courts decision as to the constitutionality of a jury
award, not to review an award made by a court following a bench
In any case, the Court of Appeals also acknowledged that Indiana common law
has historically regarded the defendants wealth as an important factor in determining whether
a punitive damages award is excessive. Stroud, 760 N.E.2d at 1181; see
also Hibschman, 266 Ind. at 317, 362 N.E.2d at 849; Executive Builders, Inc.
v. Trisler, 741 N.E.2d 351, 360 (Ind. Ct. App. 2000); Ford Motor Co.
v. Ammerman, 705 N.E.2d 539, 561 (Ind. Ct. App. 1999); Bright v. Kuehl,
650 N.E.2d 311, 316 (Ind. Ct. App. 1995); Archem, Inc. v. Simo, 549
N.E.2d 1054, 1061 (Ind. Ct. App. 1990); Ind. & Mich. Elec. Co. v.
Stevenson, 173 Ind. App. 329, 341, 363 N.E.2d 1254, 1263 (1977). Stroud
is incorrect to suggest that the plaintiff is required to offer proof of
the defendants ability to pay a punitive damages award. That point was
settled by Hibschman. 266 Ind. at 317; 362 N.E.2d at 849.
However, if there is evidence bearing on ability to pay, we disagree with
the view of the Court of Appeals that Strouds inability to pay this
award is inconsequential.
We do not doubt the severity of the injuries caused by Stroud.
But the judge awarded Lints compensation for his injuries in the amount of
$1,381,500.00 after allowing for comparative fault. We agree that punitive damages are
intended both to deter others and to punish the wrongdoer. However, the
common law has long held that the ability of a defendant to pay
a punitive damages award is an important consideration. This doctrine is grounded
in sound policy. It not only justifies upholding high awards when the
defendants resources render a lesser amount inconsequential, it also means that in cases
such as this, where the defendant is a teenager with no assets and
no apparent ability to pay in the future, an award this substantial must
be modified. As the Court of Appeals put it in Ramada Hotel
Operating Co. v. Shaffer, 576 N.E.2d 1264, 1267-68 (Ind. Ct. App. 1991):
Inasmuch as this Court should review the defendants economic wealth in the situation
where punishment and deterrence are the stated purposes, the economic wealth of the
defendant is material to the issue of punitive damages so that these objectives
will be fulfilled. The economic wealth of a defendant tends to show
. . . the point at which an award of punitive damages becomes
an amount which will deter and punish the defendant.
In Strouds case, the punitive damages award passed the point of deterrence and
punishment long before it reached the $500,000 mark.
We affirm the judgment insofar as it awards compensatory damages. We grant
transfer and vacate the trial courts award of punitive damages. We remand
so that the trial court may enter an award of punitive damages in
an amount reflecting proper consideration of the defendants financial status.
SHEPARD, C.J., and DICKSON, SULLIVAN, and RUCKER, JJ., concur.
Lints award of $1,842,000 was reduced twenty-five percent for comparative fault.
Footnote: Courts in other states have reached the same conclusion.
Hollins v. Powell, 773 F.2d 191, 198 (8th Cir. 1985) (remittitur of jurys
$500,000 punitive damage award to $2,000, observing that the defendant lost his position
as mayor and appeared to be under severe financial constraints); City Stores Co.
v. Mazzaferro, 342 So. 2d 827, 828 (Fla. Dist. Ct. App. 1977) (punitive
damages should hurt, but not bankrupt, the defendant); Klimek v. Hitch, 464 N.E.2d
1272, 1276 (Ill. App. Ct. 1984) (punitive award should send a message loud
enough to be heard, but not so loud as to deafen the listener).