DTCI: Indiana high court upholds punitive damage caps

The Indiana Supreme Court recently upheld caps on punitive damages and the procedure for allocating punitive damage awards. In State v. Doe, 987 N.E.2d 1066 (Ind. May 14, 2013), the court upheld the statute capping punitive damage awards at the greater of three times the amount of compensatory damages or $50,000. Ind. Code § 34-51-3-4. The court also upheld the statute requiring the plaintiff receive 25 percent of the punitive damages award while 75 percent goes to the Violent Crime Victim Compensation Fund. Ind. Code § 34-51-3-6. The punitive damages statute provides that the jury not be apprised of the caps or the 25-75 allocation. Ind. Code § 34-51-3-3.

The suit alleged childhood sexual abuse by a priest affiliated with the Archdiocese of Indianapolis. The jury awarded the plaintiff $5,000 for compensatory damages and $150,000 in punitive damages. The Indiana Supreme Court ruled the punitive award should be reduced to $50,000 (which was the maximum amount recoverable for punitive damages because it was greater than three times the $5,000 compensatory award) and that the plaintiff receive 25 percent of the $50,000 ($12,500). By upholding the punitive damages statute, the Indiana Supreme Court determined the plaintiff’s recovery would be $5,000, plus $12,500, totaling $17,500.

The punitive damages statute obviously resulted in the plaintiff recovering far less than the $155,000 verdict. This may explain why the Marion County trial judge ruled the punitive damages statute violated the Indiana Constitution’s right to a jury trial and separation of powers doctrine.

The case proceeded directly to the Indiana Supreme Court under Ind. App. R. 4(A)(1)(B), which provides for a mandatory direct appeal of a final judgment declaring a state or federal statute unconstitutional in whole or in part.

A unanimous Supreme Court reversed the lower court’s ruling and thereby upheld the punitive damages cap and the 25-75 apportionment. The court relied on its earlier decision upholding caps on compensatory damages in medical malpractice cases. Johnson v. St. Vincent Hosp., Inc., 404 N.E.2d 585, 602 (Ind. 1980). The court also noted it had previously upheld the allocation of punitive damages to the victim compensation fund when the allocation was attacked on a different legal theory. Cheatham v. Pohle, 789 N.E.2d 467, 473 (Ind. 2003).

The state of Indiana intervened in the case to protect the allocation to the victim compensation fund and thus the archdiocese was not involved in the appeal. This unanimous decision shows the Indiana Supreme Court gives great deference to statutes enacted by the General Assembly and that punitive damages will be capped in Indiana for the foreseeable future.•

The DTCI thanks Randall Graff, a shareholder in Kopka Pinkus Dolin & Eads, for sending this update to the association. The opinions expressed are those of Mr. Graff.