Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

G.G. v. GRINDLE (November 23, 2011)

Nine female South Berwyn School District 100 students brought suit against their school principal, Karen Grindle, for failing to prevent the students' sexual abuse by their band teacher. Details of the abuse were presented at trial. Each student's story was different. One student, G.G., testified about two incidents of sexual contact when she was 10 years old. One involved the touching of her breast, the other the touching of her thigh. Other students testified of more prolonged and egregious conduct. G.G.'s counselor testified that the experience was very traumatic, that G.G. was diagnosed with post-dramatic stress disorder as a result of the abuse, and that the events caused severe emotional damage. A jury found in plaintiffs' favor and awarded compensatory damages ranging from $100,000-$750,000 per plaintiff. They awarded G.G. $250,000. The jury also awarded a collective $100,000 in punitive damages. After the jury award, all plaintiffs except G.G. settled. Grindle filed a motion for remittitur, arguing that the evidence did not support the verdict. She also asked that the punitive damages be stricken. Judge Hibbler (N.D. Ill.) denied the motion. Grindle appeals.

In their opinion, Seventh Circuit Judges Flaum, Kanne, and Wood affirmed. The Court first addressed the compensatory damage award. The Court applied a three-part test -- whether the verdict is monstrously excessive, whether there is a rational connection between the evidence and the verdict, and whether the amount of the verdict is comparable to other cases. Since neither party submitted circuit cases for comparison and since the monstrously excessive prong of the test is more properly considered within the rational connection prong, the Court focused on that prong. It rejected Grindle's contention that the two "innocuous" events testified to by G.G. did not support the verdict. First, it is not the number or nature of the events but, rather, the impact on the plaintiff that should be considered. G.G. was the youngest victim and suffered severe emotional harm. Second, the fact that the jury distinguished between each of the students and awarded damages amounts along a fairly large spectrum demonstrates their careful consideration of the individual evidence. Third, the Court rejected Grindle's contention that other factors (her drug use, sexual experimentation, attempted suicide) led to G.G.'s troubles. The Court noted the substantial evidence tying G.G.'s troubles back to the abuse. Finally, the Court did note that the damage award was at the lower end of the spectrum for the nine students. The verdict was reasonable in light of the evidence. The Court next considered the punitive damage award and whether it was excessive. It rejected Grindle's argument that the award was excessive because she was not directly involved in the abuse and jury must have been focusing on the abuse. There is evidence in the record that she knew or should have known of the abuse and did nothing. That is enough for a punitive damages award.

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KEELING v. ESURANCE INSURANCE COMPANY (September 26, 2011)

Esurance Insurance Company has issued over 50,000 automobile insurance policies with uninsured/underinsured motorist coverage. It has collected more than $600,000 in premiums and paid no claims. A class of policyholders brought suit for fraud against Esurance, alleging that the uninsured/underinsured coverage was worthless given the policy language. Esurance removed the action to federal court pursuant to the Class Action Fairness Act. Chief Judge Herndon (S.D. Ill.) concluded that the amount in controversy included the $600,000 in premiums, what little amount it would cost to amend the policy form as requested by the class, and punitive damages. Concluding that a $4.4 million punitive damage award was "legally impossible," he remanded the class action to state court on the ground that it did not meet the $5 million amount in controversy threshold. Plaintiffs appeal.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Cudahy and Kanne reversed and remanded. The Court noted that the district court stated the correct "legally impossible" standard but applied it improperly. First, the value of the injunctive relief is not simply the cost of changing a form. Esurance currently reports a $125,000 annual profit on the challenged coverage. Eliminating the coverage (and the profit) would cost Esurance $1.5 million (the present value of $125,000 for 20 years). Therefore, the question becomes whether it is "legally impossible" for the plaintiffs to be awarded $3 million in punitive damages. A $3 million punitive damage award, compared to the $600,000 in actual class injury, would only be a multiplier of five. Illinois courts have affirmed punitive damage awards with higher multipliers. The Supreme Court has suggested that such a multiplier would not be unconstitutional. Although such an award might be improbable, the Court concluded that it was not "legally impossible" and that the amount in controversy requirement was met.

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BOYD v. TORNIER, INC. (August 24, 2011)

Tornier, Inc. is a national medical goods manufacturer, particularly in the joint replacement field. In 2003, it entered into exclusive distribution agreements with Boyd Medical in Missouri and Addison Medical in Iowa. The agreements provided that Boyd and Addison had exclusive distribution rights in their respective areas, that they could not sell products that competed with Tornier products, that Tornier could set sales quotas, and that the failure to meet a sales quota was grounds for termination. Even when it entered into these agreements, however, Tornier was developing a plan to convert these distributorships into dedicated Tornier outlets. Tornier told both Boyd and Addison of its plan and represented to both that they would be exclusive distributors of its new and expanded product line. Boyd and Addison began preparing for that opportunity by dropping other product lines. The truth, however, was that Tornier was not satisfied with Boyd and Addison and had already found replacement distributors. When the time came, it increased the sales quotas for both distributors and terminated them when they failed to meet the new quotas. Both Boyd and Addison went out of business and sued Tornier for breach of contract, intentional misrepresentation, and negligent misrepresentation. Magistrate Judge Wilkerson (S.D. Ill.) dismissed the negligent misrepresentation count as to Addison pursuant to Iowa law limitations on such a claim and sent the other claims to the jury. The jury found against Tornier on all claims and awarded $1.4 million in compensatory damages to Boyd, $1.1 million in compensatory damages to Addison, and $2 million in punitive damages for each. The district court set aside the punitive damages but otherwise upheld the verdict. Both parties appealed.

In their opinion, Seventh Circuit Judges Bauer, Wood, and Sykes affirmed in part, vacated in part, and remanded. The Court first addressed the breach of contract claim, which was governed by Texas law under a choice of law clause. It found that the contract specifically excluded lost profits relief after termination. Texas law, however, provides that contractual limitations on damages are not enforced when there is a bargaining disparity between the parties. The district court allowed the jury to decide whether there was a disparity as a matter of fact. The Court disagreed and vacated the compensatory damage awards. Although Boyd and Addison were dependent on Tornier, they were so by choice. They were both sophisticated businesses and could have rejected Tornier's contract demands. The Court turned to the intentional misrepresentation claims, the elements of which are: a) a false, material representation, b) that the speaker knew was false, c) spoken with the intent to deceive, d) which was justifiably relied on, and e) causing damages. Tornier challenged both the justifiable reliance and the knowledge of falsity elements. The Court affirmed the district court, finding sufficient evidence of those two elements in the record to support the jury's verdict. On Boyd's negligent misrepresentation claim, Tornier argued that the same limitation that Iowa law imposed on Addison's claim (limiting it to professionals whose business is to give advice) should be imposed on Boyd's (which was governed by Missouri law). The Court found no Missouri case that imposed such a limitation and declined the invitation to expand state law. The Court turned to tort damages. The jury's actual damage award was based on six years of lost profits assuming a 20% annual growth rate. The Court had no difficulty with the six years of lost profits, even though the distributorship contracts were of a one-year duration. Both Missouri and Iowa allow tort damages beyond a contract term if there is an ongoing relationship. There was sufficient evidence of that relationship in the record for the jury's finding. On the other hand, the assumed 20% growth rate was not supported by anything other than conjecture and hope. The Court remanded for further damage calculation. Finally, the Court addressed the punitive damage award. An award of punitive damages requires a showing of actual or legal malice. It found that Tornier's behavior, although tortious, was not vindictive or so outrageous as to meet the punitive damages standard.

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PICKETT v. SHERIDAN HEALTH CARE CENTER (June 25, 2010)

Danielle Pickett was employed as a housekeeper at the Sheridan Health Care Center in Zion, Illinois. In 2005 and 2006, she was the victim of several incidences of inappropriate remarks and touching by nursing home residents. Although the Center responded to her complaints, the promised response never quite succeeded. In a June 2006 meeting with several Center staff members, the Center agreed to reassign Pickett from cleaning residents' rooms, although, according to Pickett, the Center's VP of Operations suggested that Pickett invited the inappropriate conduct. The next morning, Pickett had a very emotional conversation with the Center's Administrator. According to Pickett, the Administrator said some things that indicated that her job may be in jeopardy. The meeting ended with Pickett still upset and in tears. Instead of resuming her assigned tasks, she left the Center. She called the Administrator the next day to ask if she still was employed. He consulted with the VP of Operations and advised Pickett that she no longer had a job. Beginning about a month later, after Picket filed an EEOC claim, the Center offered on several occasions to reinstate Pickett. She refused several such offers but eventually returned to the Center in January of 2007. She brought suit against the Center for sexual harassment and for retaliatory firing under Title VII. Judge Pallmeyer (N.D. Ill) granted summary judgment to the Center on the harassment claim. The retaliation claim went to trial. The jury found for Pickett and awarded $15,000 in compensatory and $50,000 in punitive damages. The court awarded back pay and injunctive relief. The Center appeals.

In their opinion, Judges Flaum, Kanne, and Evans affirmed. The Court first rejected the Center's argument that Pickett could not prevail on the retaliation claim because she could not prevail on the harassment claim. In order to prevail on retaliation, a plaintiff need only show statutorily protected conduct, adverse action, and a causal link. The Court found that there was sufficient evidence of each of those elements in the record -- the jury was entitled to find in Pickett's favor. Each of the Center's other arguments was also rejected: a) counsel’s "send some message" language in closing argument was not improper, b) the compensatory damage award was not excessive and did not require corroborating evidence from a third party, and c) the court did not abuse its discretion in allowing the punitive award to stand in light of the evidence that supported a conclusion that the Center knew it might be retaliating when it terminated Pickett's employment.

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FOX v. HAYES (April 7, 2010)

Kevin and Melissa Fox and their children, six-year-old Tyler and three-year-old Riley, lived in a small town in Will County, Illinois, about 60 miles from Chicago. On June 6, 2004, Tyler woke his father up at about 8:00 a.m. and told him Riley was missing -- Melissa had spent the night in Chicago. Riley's lifeless body was found in a nearby forest preserve several hours later. Although the parties’ versions of the investigation vary wildly, the jury could have found the following. Will County detectives, including Scott Swearengen, conducted the investigation. At some point, Swearengen began to suspect Kevin. On October 26, the Foxes were asked to come to the station to talk about the case. Although they thought they were about to receive new information about the murder, they were mistaken. They were immediately separated. Melissa was locked in a waiting area and told that an officer would be with her shortly. Instead, she was left alone for almost 4 hours. Meanwhile, Kevin was taken to an interrogation room where Swearengen accused him of killing Riley. The officers falsely told Kevin that they had fiber evidence implicating him and a surveillance tape showing him driving his SUV during the night. Kevin took a polygraph examination, which the officers told him that he failed. When Melissa offered her love and support to Kevin, Detective Hayes started screaming. He screamed at his fellow officers to remove Melissa from the room, he screamed at Kevin that he was a "f***ing murderer," and he screamed at Melissa. Continuing to use a lot of profanity, he screamed at Melissa that Kevin was a liar and a murderer, that he never loved her, that he killed her daughter, and that she had to "get over it." After that episode, the detectives continued the interrogation of Kevin. Hayes told Kevin that if he did not confess, he would make sure that Kevin was raped every day he was in prison. At one point, Swearengen told Kevin that the state's attorney would give him a deal if he admitted that he accidentally killed his daughter. He told him he would be out on bond the very next day and wood only have to serve 3-5 years in prison. Kevin decided to go along with the story and "confessed." He immediately renounced the confession the next morning when he was allowed to meet with a lawyer. Months later, his defense team had the DNA evidence tested. The test results showed conclusively that the DNA found on Riley's body did not come from Kevin. Kevin was released the next day, after 243 days in jail. Kevin and Melissa brought suit under both § 1983 and Illinois law against several Will County detectives. Kevin's allegations included due process violations, false arrest, malicious prosecution, intentional infliction of emotional distress (IIED), and punitive damages. Melissa's claims include loss of consortium, IIED, and punitive damages. After a six-week trial, a jury awarded Kevin $9.3 million and Melissa $6.2 million. The trial judge struck some of the punitive damage award and dismissed the case against a detective whose estate had settled. The end result was an award of $12.2 million. The detectives appeal.

In their opinion, Judges Flaum, Evans, and Williams affirmed in part and reversed in vacated in part. The central issue on appeal is defendants' argument that they had probable cause to arrest Kevin and are therefore entitled to qualified immunity on all the counts except the IIED claim. In order to resolve that issue, the Court had to identify the earliest time that the jury could have found Kevin to be under arrest and then assess whether a reasonable jury could have found that the defendants lacked probable cause to arrest Kevin at that time. On the first question, the Court had little difficulty identifying a time early in the interrogation when Kevin tried to leave the room and was told to sit down. The fact that he did not specifically ask to leave is only one factor in the analysis. Here the other factors --whether he knew he was a suspect of a crime, whether his movement was limited, whether the officers were engaged in a course of conduct, and whether he was in a private location -- all support a conclusion that he was under arrest. With respect to the second issue, the Court examined the long list of facts that the defendants argued supported probable cause. After it eliminated from the list facts that were disputed, irrelevant, or mischaracterized, the Court concluded that a reasonable jury could have concluded that they fell short of probable cause. On the merits of the defendants' argument that the substantive due process claim could not stand, the Court agreed with the defendants. It is well settled that a substantive due process claim cannot prevail where state law provides an adequate post-deprivation remedy. The state law false arrest and malicious prosecution claims do exactly that here -- the jury verdict on the due process claim must be set aside. The Court next upheld the verdict on Melissa's IIED claim. Although it agreed that the evidence of Melissa's distress was weak, it concluded that Hayes' abuse of authority in a particularly emotional environment was enough to uphold the claim. Finally, the Court addressed certain damage awards. Although it upheld a $2.7 million award for Melissa's loss of consortium because it found a rational connection between the award and the evidence, it concluded that the $1 million award on the IIED claim was excessive because there it lacked such a connection. The Court also concluded that the $1.6 million false arrest award to Kevin was not supported by the evidence since the false arrest award only covered the period of time between his arrest and the first issuance of process (36 hours). Instead of a new trial, however, the Court ordered a remittitur to $150,000 on Melissa's IIED claim and $16,000 on Kevin's false arrest claim.

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