Lead Opinion
ON PETITION FOR TRANSFER
Indiana's punitive damages allocation statute provides that an award of punitive damages is to be paid to the clerk of the court, and the clerk is to pay seventy-five percent of it to the State's Violent Crime Victims' Compensation Fund and twenty-five percent to the plaintiff. We hold the
Factual and Procedural Background
After Doris Cheatham and Michael Pohle divorced in 1994, Pohle retained photographs he had taken of Cheatham in the nude as well as photos of the two engaged in a consensual sexual act. In early 1998, Pohle made photocopies of the photographs, added Cheatham's name, her work location and phone number, her new husband's name, and her attorney's name, and proceeded to distribute at least sixty copies around the small community where both he and Cheatham still lived and worked. Cheatham sued, alleging invasion of privacy and intentional infliction of emotional distress, and the jury awarded her $100,000 in compensatory damages and $100,000 in punitive damages.
Indiana Code section $4-51-38-6, enacted in 1995, provides:
(a) Except as provided in IC 13-25-4-10, when a judgment that includes a punitive damage award is entered in a civil action, the party against whom the judgment was entered shall pay the punitive damage award to the clerk of the court where the action is pending.
(b) Upon receiving the payment described in subsection (a), the clerk of the court shall:
(1) pay the person to whom punitive damages were awarded twenty-five percent (25%) of the punitive damage award; and
(2) pay the remaining seventy-five percent (75%) of the punitive damage award to the treasurer of state, who shall deposit the funds into the violent crime victims compensation fund established by IC 5-2-6.1-40.
Ind.Code § 34-51-3-6 (1998).
Although Cheatham did not raise any constitutional issue in the trial court, she appealed the judgment on two grounds. She argues that the statute violates the Takings Clauses found in both the Indiana Constitution and the Fifth Amendment of the United States Constitution. She also contends that the statute demands an attorney's "particular services" without just compensation in violation of Article I, Seetion 21 of the Indiana Constitution and that the statute imposes a tax upon her and her attorney in violation of Article X, Section 1 of the Indiana Constitution.
Pohle cross-appealed, arguing that Indiana does not recognize the tort of Public Disclosure of Private Facts, and that the trial court erred when it allowed the jury to return a punitive damages award without instructing it to consider Pohle's financial condition.
The Court of Appeals addressed the merits of Cheatham's claims and found that there was no taking in violation of the Fifth Amendment, but concluded that the statute violates Article I, Section 21 of the Indiana Constitution by placing a demand on an attorney's "particular services" without just compensation. Cheatham v. Pohle,
I. 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 quasi-criminal in nature. Cacdac v. West,
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. BMW of N. Am. Inc. v. Gore,
To the extent punitive damages are recoverable, they are a creature of the common law. Forte v. Connerwood Healthcare, Inc.,
Indiana, like several other states, has chosen an intermediate ground permitting juries to award punitive damages and thereby inflict punishment on the defendant, but placing restrictions on the amount the plaintiff may benefit from the award. The facts warranting punitive damages must be established by clear and convincing evidence. Ind.Code § 34-51-3-2 (1998). Whether punitive damages may be awarded is usually a question of fact. Reed,
In sum, Indiana law recognizes a right to assert a claim to be compensated for a cognizable wrong and to recover on that claim to the extent the law allows. But a number of consequences flow from the fundamentally different nature of a claim to punitive damages. The financial condition of the defendant is relevant, Hibschman Pontiac, Inc. v. Batchelor,
II Claims Under State and Federal Taking Clauses
Article I, Section 21 of the Indiana Constitution includes a prohibition against the taking of property without just compensation. The Fifth Amendment to the United States Constitution includes the same proscription, and applies to the states through the Fourteenth Amendment. Chicago, Burlington & Quincy RR. Co. v. City of Chicago,
Both Article I, Section 21 of the Indiana Constitution and the federal Takings Clause provide that "no person's property shall be taken by law, without just compensation." Only "property" is protected from taking under either clause. It has long been recognized that an ac-erued cause of action may be a property right. Dague v. Piper Aircraft Corp.,
Specifically, any 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. Board of Regents v. Roth,
A claim for punitive damages can be sustained only if it is accompanied by a
Several states have statutes that allocate punitive damages to the state in some form similar to the Indiana version. BMW of N. Am., Inc.,
Evans v. State,
Cheatham relies on Kirk v. Denver Pub. Co.,
We also disagree with the underlying rationale of Kirk, which cited Webb's Fabulous Pharmacies, Inc. v. Beckwith,
Finally, Cheatham contends that the statute has the following "deficiencies" and therefore constitutes a taking for four different reasons:
(1) the statute does not expressly address the issue of whether or how a punitive damages award may be compromised;
(2) it does not address how payments of a judgment in installments are to be allocated between compensatory and punitive damages;
(3) it does not address whether the plaintiff is the only mechanism to enforce a judgment, and if that occurs, whether or how the plaintiff is to be compensated; and,
(4) it encourages an attorney to break obligations to the client by reducing the fee incentive.
The first three of these are answered by the absence of any property right in the judgment. If there is none, there is no unconstitutional taking, irrespective of the resolution of these other issues. The last contention presents no issue of substance. Many legal doctrines serve to reduce the potential recovery by a civil plaintiff. The lawyer and the client get to play the hand the legislature deals them, no more and no less. If the claim is for compensatory damages plus one fourth of any punitive damages award, the fee agreement and the expectations of both lawyer and client must adjust accordingly.
III. Uniform and Equal Taxation
Cheatham argues that the statute imposes a tax on her and her attorney in violation of Article X, Section 1 of the Indiana Constitution. We disagree. Arti
IV. Demand on Particular Services
Unlike the Fifth Amendment, in addition to its Takings Clause, Article I, Section 21 of the Indiana Constitution also provides that "no person's particular services shall be demanded, without just compensation." This provision applies only if both a "person's particular services" are rendered and they have been "demanded" by the State. Cheatham contends that the effect of the statute is to demand her attorney's "particular services" without just compensation in violation of this provision. We agree that the attorney's services are "particular" as that term appears in the Indiana Constitution. Bayh v. Sonnenburg,
There is no express or implied requirement in the statute that any attorney represent any specific plaintiff. Nor does Cheatham have a right to an attorney in any case where punitive damages may arise. Sholes,
In Gorka v. Sullivan,
In sum, section 34-51-3-6 became effective in 1995. Cheatham and her attorney had notice of this statute when the suit against Pohle was filed in 1998. The attorney's fees were subject to that obstacle just like all other potential barriers to success in a contingent fee contract.
Conclusion
Section 84-51-3-6 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 seetion 34-51-3-6. The judgment of the trial court is affirmed.
Notes
. In Nebraska punitive damages are constitutionally prohibited. Distinctive Printing and Packaging Co. v. Cox,
. Taber v. Hutson,
. Consistent with the view that punitive damages are quasi-criminal in nature, punitive damages in Indiana were long viewed as imposing impermissible double jeopardy. Eddy v. McGinnis,
. See Richardson v. State,
Dissenting Opinion
dissenting.
The punitive damages scheme enacted in 1995 sought to modify Indiana's common law regarding punitive damages by capping the maximum amount of a punitive damage award at three times the amount of compensatory damages or $50,000, whichever is greater, and by requiring seventy-five percent of the final award to be allocated for use by the Violent Crime Victims' Compensation Fund. Ind.Code §§ 34-51-3-5, -6. To facilitate these objectives, this scheme requires that the statutory cap and allocation be concealed from every jury considering a claim for punitive damages. I.C. § 34-51-3-8. There is no statutory requirement that the state pay any legal fees related to its share of the punitive damage award.
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.
A judgment is a court's "final determination of the rights and obligations of the parties in a case." Bmack's Law DictioNary 846 (7th ed. 1999). A judgment for money is property. Wilson v. Brookshire,
It is not within the power of a legislature to take away rights [that] have been onee vested by a judgment. Legislation may act on subsequent proceedings, may abate actions pending, but when those actions have passed into judgment the power of the legislature to disturb the rights created thereby ceases.
McCullough v. Virginia,
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, ineseapably 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").
Because I disagree with the majority's belief that Cheatham's judgment is not property, I likewise reject its resulting conclusion that the Indiana punitive damage statute does not violate the Uniform and Equal Taxation Clause, Article 10, Section 1 of the Indiana Constitution. With respect to the Cheatham's claim that the statutory scheme violates Article 1, Section 21, of the Indiana Constitution, which prohibits the State from demanding the particular services of her attorney without just compensation, I agree and would adopt the analysis and conclusions of Judges Najam, Sharpnack, and Riley of our Court of Appeals. Cheatham v. Pohle,
RUCKER, J., concurs.
