Doris Cheatham v. Michael Pohle (Ind.S.Ct. 5/30/03)
Boehm, J. (Shepard and Sullivan concur; Dickson dissents with separate opinion, in which Rucker concurs)
Indiana's punitive damages allocation statute, IC 34-51-3-6, provides that an award of punitive damages is to be paid to the clerk of the court, who is then to pay 75% to the State's Violent Crime Victims' Compensation Fund and 25% to the plaintiff. In this case the statute was challenged: (1) as an unconstitutional taking of property; and (2) as demanding an attorney's "particular services" without just compensation under Art. 1, Sec. 21 of the Ind. Const. and as imposing a tax upon the plaintiff and her attorney in violation of Art. X, Sec. 1 of the Ind. Const.
In his opinion, J. Boehm first reviewed punitive damages in Indiana:
In assessing the claim that the allocation statute takes property without just compensation, it is essential to understand the nature of a claim for punitive damages. The purpose of punitive damages is not to make the plaintiff whole or to attempt to value the injuries of the plaintiff. Rather, punitive damages, sometimes designated “private fines” or “exemplary damages,” have historically been viewed as designed to deter and punish wrongful activity. As such, they are quasicriminal in nature. * * * As a matter of federal law, state legislatures have broad discretion in authorizing and limiting the award of punitive damages, just as they do in fashioning criminal sanctions. * * * To the extent punitive damages are recoverable, they are a creature of the common law. * * * As we have repeatedly held in other contexts, the legislature is free to create, modify, or abolish common law causes of action. * * * And, as a matter of federal constitutional law, no person has a vested interest or property right in any rule of common law. * * * As a result, the General Assembly is free to eliminate punitive damages completely, as other states have done, and also has wide discretion in modifying this “quasi-criminal” sanction.The Court concluded this portion of its analysis by stating that because, unlike compensatory damages, "punitive damages do not compensate the plaintiff, the plaintiff has no right or entitlement to an award of punitive damages in any amount." As for the taking claim, the Court found that:
[A]ny interest the plaintiff has in a punitive damages award is a creation of state law. The plaintiff has no property to be taken except to the extent state law creates a property right. * * * The Indiana legislature has chosen to define the plaintiff’s interest in a punitive damages award as only twenty-five percent of any award, and the remainder is to go to the Violent Crime Victims’ Compensation Fund. The award to the Fund is not the property of the plaintiff. Nor is her prejudgment claim a property interest. Rather, the claim she had before satisfaction was, pursuant to statute, a claim to only one fourth of any award of punitive damages. As a result, there is no taking of any property by the statutory directive that the clerk transfer a percentage of the punitive damages award to the Fund.The Court observed that "[s]everal states have statutes that allocate punitive damages to the state in some form similar to the Indiana version."
Of the state courts that have addressed the issue, only the Colorado Supreme Court has found an unconstitutional taking of property, while statutes in Alaska, Oregon, Georgia, Florida and Iowa have been upheld.The Court dismissed the "uniform and equal taxation" claim on the basis that only the taxation of "property" is governed by the constitutional provison and "[f]or the reasons stated above, Cheatham has not property interest in the punitive damages award." Re the plaintiff's claim that under Ind. Const. Art. 1, Sec. 21, which provides that "no person's particular services shall be demanded, without just compensation," the Court said that "this provision applies only if both a 'person's particular services' are rendered and they have been 'demanded' by the State." Here, the Court concluded, "the attorney was free to accept or reject representing Cheatham on whatever terms the two would agree." In sum:
Section 34-51-3-6 does not exact a taking of private property or place a demand on any attorney to undertake any representation. As a result, any judgment for an amount awarded as punitive damages is subject to the allocation required by section 34-51-3-6. The judgment of the trial court is affirmed.Dickson, J. (dissenting):
In declaring that the allocation required by Indiana Code § 34-51-3-6 does not constitute a taking of private property in violation of the Takings Clauses of our federal and state constitutions, the majority relies primarily upon its contention that punitive damage plaintiffs have no property right in a judgment awarding punitive damages. I disagree. A person's property interest in a judgment vests upon the entry of that judgment by the trial court, not upon the eventual payment of the judgment by the judgment debtor.The dissent points to IC 34-51-3-3, which "requires that the statutory cap and allocation be concealed from every jury considering a claim for punitive damages." The dissent asserts that although plaintiff's prejudgment claim of punitive damages is not a property interest, it becomes a vested property interest upon the entry of a final judgment, and it is not within the power of a legislature to take away rights once they have been vested by a judgment.
At the conclusion of the trial in this case, the jury here returned a verdict in favor of Doris Cheatham awarding her $100,000 in compensatory damages and $100,000 in punitive damages. The trial court thereafter entered judgment "in favor of the Plaintiff Doris Cheatham and against the Defendant Michael Pohle in the amount of Two Hundred Thousand ($200,000.00) Dollars." Record at 88. Upon this entry by the trial court, the judgment became the property of Doris Cheatham. I am convinced that Indiana's statutory punitive damage scheme, which attempts thereafter to confiscate this property at the point the judgment is paid, inescapably violates the Takings Clauses in both the Fifth Amendment to the United States Constitution ("nor shall private property be taken for public use, without just compensation") and Article 1, Section 21, of the Indiana Constitution ("No person's property shall be taken by law").Posted by Marcia Oddi at June 2, 2003 08:10 PM