Wednesday, July 07, 2010

punitive damages - constitutional factors

Klein v. Weidner - ED Pa. - July 2, 2010

This case involved an award of punitive damages for defendant's violation of the Pennsylvania Uniform Fraudulent Transfer Act, 12 Pa. C.S. § 5101, et seq. Defendant fraudulently transfered monies from his corporation to himself and his wife, as tenants by the entireties, in an attempt to shield the money.

In awarding punitive damages, the Court had to consider the constitutional parameters of punitive damages awards. “The Due Process Clause of the Fourteenth Amendment prohibits the imposition of grossly excessive or arbitrary punishments on a tortfeasor.” State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 416 (2003). To determine the constitutionality of a punitive damages award, courts consider: “(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; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.” Id. at 418.

"The most important factor of these three is the reprehensibility element. Id. at 419. Analysis of reprehensibility for constitutional purposes requires a different test than the analysis required by Pennsylvania law. To determine degree of reprehensibility for constitutional purposes, courts must consider whether “the harm caused was physical as opposed to economic; the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; the target of the conduct had financial vulnerability; the conduct involved repeated actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident.” Id. at 419. No single factor is dispositive. Id."