The opinion of the court was delivered by: Richard Mills, U.S. District Judge.
enormity of the wrong. Deal, 127 Ill.2d at 204, 537 N.E.2d at 272.
"While all acts which give rise to punitive damages are wilful and
wanton, some of those acts are clearly more reprehensible than others.
The egregiousness of the act should be reflected in the amount of the
award. Recognizing that punitive damages are in the nature of a criminal
sanction, we are simply saying that the punishment should fit the crime.
An award which is disproportionate to the wrong serves none of the
purposes of punitive damages and is excessive." See Hazelwood, 127
Ill. App.3d at 712-713, 450 N.E.2d at 1207.
Here, Plaintiff and Defendant entered into a joint venture in which
Plaintiff would procure w hey from dairies and Defendant would market
whey to hog farmers in the region east of the Mississippi River. The
jury indicated on the verdict form that they found Defendant's
president, Peter Ross, breached his fiduciary duty to the joint venture
when he ceased his marketing efforts by the summer of 1992. Evidence was
presented to the jury that once Peter Ross learned about the whey business
from Plaintiff's president, Jack Muse, he turned his back on the joint
venture and acted in a way that benefitted only himself. The Court sees
nothing improper about the jury's punitive damages award in light of this
II. Financial Status of Defendant
Defendant's motion focuses on the second prong of the punitive damages
award analysis: the financial status of defendant. Defendant's sole
argument is that the punitive damages award exceeds its net worth;
therefore, the award is excessive and must be reduced. Its motion is
rife with cases where courts have ordered remittiturs based on a
defendant's net worth.
In its response, Plaintiff argues Defendant's net worth was not
$217,628.30 as Defendant alleged, but that it was actually closer to $1
million and therefore, a punitive damages award of $300,000 was not
excessive but well within the appropriate range. Plaintiff arrives at
the $1 million figure by subtracting $431,886.81 (total liabilities) from
$1,407,321.30 (total assets without depreciation).*fn1 Plaintiff also
argues that goodwill should be added to Defendant's balance sheet which
would increase Defendant's net worth above the $1 million mark.
The Court asked the parties to brief two Seventh Circuit cases that
addressed arguments similar to those raised by Plaintiff. After reading
these briefs, the Court concludes that the normal definition of net worth
includes depreciation and excludes goodwill. See Continental Web Press,
Inc. v. National Labor Relations Board, 767 F.2d 321, 323 (7th Cir. 1985)
(holding that the normal definition of net worth requires that
depreciation be subtracted because that is consistent with generally
accepted accounting principles); Sanders v. Jackson, 209 F.3d 998, 1002
(7th Cir. 2000) (holding that because good will cannot be severed from
the company, and thus is not readily available for the payment of
judgments, it should not influence the calculation of net worth).
The Court finds Defendant's net worth is $217,628.30.
"Although an award so small that it would be only an ordinary item of
expense does not serve the purposes of retribution and deterrence, an
award which bankrupts the defendant is excessive. Punitive
damages should be large enough to provide retribution and deterrence but
should not be so large that the award destroys the defendant." Hazelwood,
114 Ill. App.3d at 713, 450 N.E.2d at 1207.
Defendant's strongest argument is that a punitive damages award that
exceeds its net worth will force it into bankruptcy. The Court does
believe that is an issue here. The jury awarded damages on both sides of
the aisle in this case. In Southwest Whey, Inc. v. Nutrition 101, Inc.,
155 F. Supp.2d 1003 (C.D.Ill. 2001), the Court entered judgment on the
jury's verdict and also divided assets of the joint venture. After the
jury verdict and the Court's accounting, Defendant was entitled to
$293,521.50 from Plaintiff and Plaintiff was entitled to $338,407.68 from
Defendant. This results in a net gain by Plaintiff of $44,886.18.
Defendant's net worth of $217,628.30 can adequately sustain a payment of
$44,886.18; therefore, bankruptcy is not a concern in this case.
"Evidence regarding the financial status of a defendant is simply one
relevant consideration to be weighed by the judge or jury in determining
an appropriate award of punitive damages." Deal, 127 Ill.2d at 204-205
537 N.E.2d at 272. The jury was presented with Defendant's balance sheet
detailing its assets and liabilities.
The Court instructed the jury on this issue:
If you determine an award of punitive damages is
appropriate against either or both parties to this
case, then in determining the amount of that punitive
damages award, you may consider the parties'
respective net worth. In considering the parties'
respective net worth, however, you should not consider
the amount of money that the party made from the sale
of whey, its gross income, or its net income.
There is a presumption that juries understand and abide by the
instructions they are given. See United States v. Madoch, 149 F.3d 596,
599 (7th Cir. 1998). "When the jury has received proper instruction and
otherwise has a reasonable basis for its award, a reviewing court will
not disturb the verdict." Lee v. Chicago Transit Authority,
152 Ill.2d 432, 470, 605 N.E.2d 493, 510 (1992). No one disputes the
jury instruction given to the jury in this case was proper. The Court
presumes the jury followed the Court's instructions, looked at Defendant's
balance sheet, and determined that a $300,000 punitive damages award was
the only way they could adequately punish Defendant's behavior.
III. Potential Liability of Defendant
The third factor to consider is the potential liability of defendant.
Deal, 127 Ill.2d at 205, 537 N.E.2d at 272. "It seems appropriate to
take into consideration both the punitive damages that have been awarded
in prior suits and those that may be granted in the future." Hazelwood,
114 Ill. App.3d at 714, 450 N.E.2d at 1207. There is no evidence that
Defendant has any other related suits on the horizon. The third factor
is not an issue in this case.
There is no evidence that the jury's punitive damages award was the
product "of passion and prejudice, or not rationally connected to the
evidence." See American Nat. Bank & Trust Co. of Chicago v. Regional
Transp. Authority, 125 F.3d 420, 437 (7th Cir. 1997). The jury was
presented with evidence of Defendant's actions and its net worth. Using
that information, it decided to send a message that Defendant would not
soon forget. Such is the purpose of a punitive damages award and this
Court will not second-guess the jury's decision. In addition, because
the bottom line in this case requires Defendant to pay
less than 20% of its net worth, the Court has no fear that such an award
will bankrupt Defendant.
Lastly, after exhaustive research, this Court could find no case with a
factual or procedural similarity to this cause of action. The standard
or typical remittitur case simply does not apply. Therefore, Defendant's
Motion for Remittitur is denied. See Haluschak v. Dodge City of
Wauwatosa, Inc., 909 F.2d 254, 256 (7th Cir. 1990) (holding that district
court has considerable discretion in deciding when punitive damages
should be set aside).
Ergo, Defendant's Motion for a New Trial or Remittitur is DENIED.
Because the Court determined that depreciation should be considered when
determining net worth, Defendant's Motion to Strike Material Outside of
the Record is ALLOWED.