Punitive Damages

Punitive Damages

In the case of The Bert Co. v. Turk, No. 817 WDA 2019 (Pa. Super. May 5, 2021), in a case of first impression, the Pennsylvania Superior Court, rejected the defendants’ claim that a punitive damage verdict violated the Due Process Clause. U.S. Const. amd. XIV, § 1, and was therefore unconstitutional.  

In 2016, insurance broker Matthew Turk engaged in a civil conspiracy with F.N.B. Corp., First National Bank, and First National Insurance Agency (collectively referred to as “First National Family,”) against his then-employer, the Bert Company, d.b.a. Northwest Insurance Services (NWI). More specifically, through months of meetings and strategizing, the First National Family offered Mr. Turk a new position and made him its undercover agent to undermine NWI’s relationship with its customers and other employees. Stated otherwise, the First National Family plotted to “lift out” Mr. Turk and his colleagues, and transplant them into its own corporate structure. The First National Family anticipated these new hires would bring their NWI clients with them and, thereby, hollow out NWI, which in turn, would potentially force NWI to sell its entire clientele to the First National Family.

After NWI determined the extent of Mr. Turk’s betrayal, rather than selling its remaining business to First National Family, it filed claims for breach of contract, breach of fiduciary duty, civil conspiracy and unfair competition against Mr. Turk, the employees who departed with him, and the First National Family. The case proceeded to a jury trial. While the jury exonerated Mr. Turk’s colleagues, it found Mr. Turk liable for breach of contract, breach of fiduciary duty, and civil conspiracy and the First National Family liable for civil conspiracy and unfair competition. The jury awarded NWI $250,000 in compensatory damages and imposed punitive damages as follows: $300,000 against Mr. Turk, $1,500,000 against FNIA, $500,000 against First National Bank, and $500,000 against F.N.B. Corp.

Post-trial, the court granted NWI’s request for attorney’s fees in the amount of $361,093.74 pursuant to its non-solicitation agreement with Mr. Turk. Mr. Turk and First National Family filed post-trial motions requesting various forms of relief, including a reduction of the punitive damage verdict, arguing that the punitive damage verdict was cumulatively 11.1 times the compensatory verdict, which was unconstitutional pursuant to the United States Supreme Court’s decision in State Farm Mutual Automobile Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003), wherein the Court determined that the single-digit ratio of punitive damages to compensatory damages most likely comported with due process. Here, the trial court, instead of using an 11:1 ratio representing the full judgment, the trial court broke down the award for each defendant into punitive-to-compensatory-damages ratios that were 1.8:1 for Mr. Turk; 2:1 for First National Bank; 2:1 for F.N.B. Corp.; and 6:1 for FNIA. By individually calculating the ratios, the court deemed them constitutionally sound, and not so outrageous as to shock the trial court’s conscience.

Mr. Turk and the First National Family appealed to Pennsylvania Superior Court, raising seven claims of error, six of which are not discussed herein. With respect to those issues, the Superior Court affirmed the trial court’s determinations. Again, the defendants challenged the jury’s award of punitive damages under the Due Process Clause. U.S. Const. amd. XIV, § 1. Specifically, the defendants believed the Due Process Clause of the Fourteenth Amendment to the Constitution of the United States prohibits an aggregate, punitive-damages award against them of 11.2 times the aggregate, compensatory damages. The Superior Court noted that this issue presented a question of first impression in Pennsylvania — namely, how should courts calculate the ratio(s) of damages when multiple defendants claim the punitive damages against them are unconstitutionally excessive?

After examining the historical context of punitive damages generally (dating back to ancient Rome through the ratification of the Fourteenth Amendment and subsequent United Supreme Court cases), the Court determined that the United States Supreme Court had not established a bright-line for excessive punitive damage verdicts, nor did it consider the multiple-defendants-ratio in its analysis.  Moreover, the court examined how various Pennsylvania courts have approached this due process question and did not find any controlling precedent. Therefore, the court conducted an examination of cases in other states. Some state/federal courts adopted views consistent with both sides of the argument. Ultimately, the Superior Court determined, “[g]iven the total disregard for the rule of law that these four tortfeasors displayed, the punitive damages that the jury awarded are light years away from the outer limits of the Due Process Clause;” and, held the calculation of punitive damages on a per-defendant basis was appropriate.

In the case of The Bert Co. v. Turk, the Pennsylvania Superior Court permitted punitive damages eleven times greater than compensatory damage verdict. Ty Smith explains.