In a case that reads like an episode of “Dallas,” the Texas Supreme Court reiterated the rules for recovery of punitive damages.  Bennett v. Grant, No. 15-0338 (April 28, 2017).

The range war began fifteen years ago when thirteen of Reynolds’ cattle moseyed over to Bennett’s adjoining ranch.  Bennett told his ranch hand, Grant, to round up the strays and sell them.  Grant did as he was told but took photographs of the cattle.  Bennett claimed that Grant then tried to blackmail him.

After Grant gave the photos to the police, Bennett was indicted for cattle theft, tried and acquitted.

After his acquittal, Bennet brought blackmail charges against Grant in four separate counties to put “Grant in prison . . . for what he’s done to me.”  District attorneys in three counties refused to charge Grant.  The district attorney in the fourth county told Bennett that attempted theft charges were barred by the two-year statute of limitations.  He nevertheless presented the case to the grand jury.  The grand jury, however, refused to indict Grant.  Undeterred, Bennett petitioned for appointment of a special prosecutor.  Concerned that Bennett’s petition drive “wasn’t helping” his reelection campaign, the district attorney appointed a special prosecutor, leading to Grant’s indictment.  But nine months later, the indictment was quashed because the charges were barred by limitations.

After Grant was cleared of criminal charges, he sued Bennett and his company for malicious prosecution.  A jury found for Grant.  The trial court awarded Grant $10,703 in actual damages ($5,000 for mental anguish and $5,703 in attorney’s fees) and $1 million each against Bennett and his company in exemplary damages.  Bennett appealed.

The court of appeals reduced the exemplary damages to $512,109 each against Bennett and his company because the ratio between actual and exemplary damages “likely exceeded constitutional limits.”  The court reasoned that if Grant had been wrongfully imprisoned for two years, the statutory minimum for this crime, the State would pay him $160,000 under a statutory compensation scheme available to wrongfully-convicted defendants.  Therefore, counting the actual and potential damages would total $170,703, making the ratio 5:1.  The court concluded that this exceeded the constitutional limit so reduced the exemplary damages to $512,109 per defendant, resulting in a 3:1 ratio.

The Texas Supreme Court held that the exemplary damages award was unconstitutionally excessive compared to the $10,703 in actual damages.

First, the court reiterated the three-part test for constitutional exorbitancy:

• the degree of reprehensibility of the misconduct;
• the disparity between the exemplary-damages award and the actual harm suffered by the plaintiff or the harm likely to result; and
• the difference between the exemplary damages awarded and the civil or criminal penalties that could be imposed for comparable conduct.

Evaluating reprehensibility requires consideration of whether:

• the harm inflicted was physical rather than economic;
• the tortious conduct showed an indifference to or reckless disregard for the health or safety of others;
• the target of the conduct had financial vulnerability;
• the conduct involved repeated actions; and
• the harm resulted from intentional malice, trickery or deceit.

The court found that the conduct satisfied at least the four latter factors supporting an award of exemplary damages.  The court also agreed with the court of appeals’ analysis of the third guidepost:  comparing the exemplary damages with legislatively authorized civil penalties in comparable cases.  Because there was no analogous civil penalty for Bennett’s actions, the court looked to potential criminal penalties, including tampering with or fabricating physical evidence, aggravated perjury before a grand jury, execution of a document by deception, and making a false report to a peace officer or law enforcement employee.  These crimes could result in $46,000 in fines and up to twenty-two years of imprisonment.

But the court disagreed with the court of appeals’ analysis under the second guidepost:  analyzing the ratio between actual and exemplary damages.  The compensatory damages were $10,703, and the exemplary damages were $512,109 against each defendant, giving a ratio of nearly 48:1.

The court said the exemplary damages must be evaluated in light of the harm likely to result from the defendant’s conduct.  Because the indictments against Grant were thrown out as time-barred, there was “zero likelihood of imprisonment.”  Thus, the court of appeals was wrong to consider the consequences of wrongful imprisonment in assessing punitive damages.  Therefore, the court remanded the exemplary damages award to the court of appeals for a more substantial remittitur.