In a repeat performance, the defendant Elena Whitby a/k/a Jennifer Ross, and three corporate defendants who owned and operated the WRMF-FM radio station, 1 appeal a final judgment entered in favor of the plaintiff Infinity Radio, Inc., who owns and operates the WEAT-FM radio station. 2 The defendants challenge the enforceability of a non-compete provision, the sufficiency of the evidence on the claim for lost profits, and the propriety of injunctive relief and punitive damages awarded. For the reasons that follow, we reverse.
Whitby entered into an employment agreement with OmniAmerica Group in 1995 and later entered into a 1999 amendment that incorporated the terms of the original agreement. The original agreement provided a five-year term and gave WEAT two options to renew for five years each, with a right of first refusal. The 1995 agreement contained a non-compete provision, which prohibited Whitby from appearing on radio or television and from working for any competing business within 125 miles of WEAT for 12 months. It also contained an exclusivity provision, preventing Whitby from discussing or entering into any agreement with any other entity concerning her present or future services during the term of her employment.
In January 2000, the plaintiff exercised its option to renew the agreement. Once exercised, the agreement provided for Whitby to negotiate in good faith exclusively with WEAT for ninety (90) days. On September 21, 2000, four days prior to the agreement’s expiration, a corporate defendant (James Crystal Holdings) executed a three-year employment agreement with Whitby, in which she agreed to broadcast on the WRMF morning show. On September 25, 2000, Whitby ceased her employment with WEAT. Later that day, she began broadcasting on WRMF.
The plaintiff sued Whitby and the corporate defendants seeking injunctive relief.
3
After a jury trial, the trial court entered final judgment against each defendant in the amount of $575,000, severally, for a total of $2.3 million in compensatory damages. The judgment also assessed punitive damages of $13.2 million against James Crystal Licenses. On appeal, we again reversed and remanded for a new trial.
Whitby v. Infinity Radio, Inc. (Whitby I),
In the second jury trial, the factual background testimony remained the same, but the damages testimony changed. Instead of using an expert witness, the plaintiff relied on its employees and a recently compiled summary of lost accounts.
Lee Strasser, the plaintiffs former general manager, testified that Whitby was the spokesperson for Borton Volvo, Roth-child Eye Institute, Culligan Water, and Palm Beach Zoo. These accounts were either cancelled or their advertising greatly reduced after Whitby departed. However, he had not spoken directly with these advertisers as to why this had occurred. He also testified that other factors could also affect the station’s advertising revenue namely: a change in a customer’s advertising budget, the radio station’s sales department, sales manager, ratings, image in the marketplace, community involvement, and rates.
WEAT account executives, Judy Larson and Jody Goldstein, and the plaintiffs regional sales manager, Janice Banken, testified about their respective accounts. Larson testified that Whitby performed live testimonials for Rothchild and the Palm Beach Princess. According to her, the accounts were “a direct result of Ms. Whit-by’s presence at WEAT.” She testified that Rothchild substantially reduced its advertising contract on September 25, 2000, and the Princess did not advertise on WEAT because they went to WRMF. The Princess returned to WEAT in July 2001.
Goldstein testified that TLC Laser Eye Institute’s marketing director was interested in placing advertisements with WEAT because of Whitby. She had no doubt that TLC cancelled when Whitby left. TLC cancelled all of its contracts in October 2000.
Banken testified that “Cingular didn’t know Jennifer Ross from Adam” and she “dealt with the ad agency, not Cingular directly.” She lost the account when Cin-gular/Bellsouth switched from a regional to a national advertising agency.
Julie Caracciola, the plaintiffs market controller, used an accounts receivable analysis report to prepare the Summary of WHEAT Top 7 Lost Accounts. The summary was a “compilation of data for the seven accounts listed that indicates all billing, payments, and expenses, sales com
The plaintiffs general sales manager, Jeffrey Greenwald, testified that he wrote a memorandum on August 3, 2001, entitled “Lost Business Due to Jennifer Ross,” in which he indicated that Rothchild immediately pulled its advertising, and Volvo did not spend a dime in advertising after Whit-by left. He admitted, however, that the advertisers were the only ones who could truly answer whether the ads were can-celled because of Whitby’s departure. 6
In closing, the plaintiff requested just over $300,000 in lost profits. The jury awarded the plaintiff $126,511.48 in compensatory damages against all defendants, exclusive of interest. In a bifurcated trial, the jury then awarded $2.3 million in punitive damages against each of the three corporate defendants. The trial court entered a final judgment. From this judgment, the defendants appeal.
The defendants raise numerous reasons why the compensatory damages award cannot be sustained. 7 The corporate defendants further argue that the plaintiff elected its remedy when it obtained the temporary injunction. We are able to resolve this appeal by analyzing the evidence, or lack thereof, in support of damages.
We have
de novo
review of the court’s failure to direct a verdict on damages.
RKR Motors, Inc. v. Associated Unif. Rental & Linen Supply, Inc.,
In Whitby I, we stressed that
[wjhen a party seeks lost future profits based upon a breach of contract or other wrong, the party must prove that the lost profits were a direct result of the defendant’s actions and that the amount of the lost profits can be established with reasonable certainty. Difficulty in proving damages or uncertainty as to the amount will not prevent recovery as long as it is clear that substantial (rather than merely nominal) damages were suffered as a result of the wrong, and the competent evidence is sufficient to satisfy the mind of a prudent, impartial person as to the amount. However, an award of lost profits cannot be based on mere speculation or conjecture.
We reversed the original compensatory damages award because the ex
(1) the fact that Whitby’s longtime co-host, Kevin Kitchens, died suddenly on February 3, 1999, (2) the competence and performance of Joe Martelle, Whit-by’s replacement, (3) the introduction of a new morning team at WOLL (another morning show competitor), (4) whether advertisers decreased their expenditures as a result of Whitby going to WRMF and transferred their advertising to WRMF, and (5) ranking reports showing that both WRMF and WEAT declined in audience share after Whitby left AVE AT and joined WRMF, and that another station, AVKGR, won the number one rated position in the market by 2003 and 2004.
Id. at 898. We stressed the importance of considering the impact of these external variables. And yet, we find those factors conspicuously absent from the damages testimony in the second trial.
The plaintiffs attempt to link its lost advertising to AVhitby’s breach of the non-compete provision and the corporate defendants’ wrongdoing consisted of nothing more than hearsay statements from its account executives. No one was able to properly link WEAT’s damages with the defendants’ actions. This void leads to but one conclusion: the judgment must be reversed.
In this trial, the plaintiff relied heavily on the summary. While the plaintiff introduced evidence of the loss or reduction in receivables after Whitby departed, there was no testimony that the loss was due to Whitby’s violation of the non-compete provision or the corporate defendants’ affirmative steps to secure Whitby for WRMF. This could have been achieved by demonstrating that those advertisers increased their advertising at WRMF because she broadcasted within the one-year prohibition. It could have also been achieved by having the seven advertisers testify that they followed Whitby to WRMF because she now broadcasted on that station.
The reduction in advertising revenue alone was insufficient to directly link her violation of the non-compete provision to the lost revenue. These advertisers may very well have stopped advertising on WEAT when AVhitby left, regardless of whether she violated the non-compete provision. Her contract expired, and she was entitled to leave. She simply was not entitled to broadcast for another year within the mileage radius defined by the court.
There was no proof that AVhitby or the corporate defendants enticed these advertisers to switch to WRMF or that the reduced advertising resulted from these advertisers switching to WRMF because AVhitby began broadcasting prior to the end of the non-compete provision. There was no proof that the lost profits were not the result of the more competitive advertising costs at WRMF, the level of competence of her replacement at WEAT, the introduction of a new morning team at WOLL, or the improved ratings of WKGR, all factors we enumerated in our prior opinion.
In fact, the plaintiffs own testimony revealed that AVhitby could not be the WRMF spokesperson for TLC Laser because she was the spokesperson for a competitor Rothchild, who advertised on WRMF before AVhitby left WEAT. The Princess did not advertise on WEAT for
Further, the corporate defendants argue, and we agree, that the only testimony linking the losses to Whitby’s departure constituted inadmissible hearsay. Section 90.701, Florida Statutes, requires a lay witness to base his or her opinion upon facts the witness has “perceived.” A lay witness may not rely on hearsay in forming an opinion. Here, both Larson and Goldstein based their opinion that the accounts were lost due to Whitby’s departure because they either “believed so” or were “told so” by the advertiser’s agent. Stras-ser and Greenwald then testified about what the account representatives, like Larson and Goldstein, had reported.
We also agree with the defendants on the issue of general overhead expenses. A percentage of overhead expenses should have been deducted from the projected lost profits. On this issue, three cases are worth discussion:
Boca Developers, Inc. v. Fine Decorators, Inc.,
Both
Boca Developers
and
RKR Motors
require a plaintiff to account for overhead expenses. “Requiring a deduction of a share of fixed costs related to the performance of a contract allows for a true measurement of the amount the non-breaching party would have earned on the contract had there been no breach, which is the proper measure of damages.”
RKR Motors,
The plaintiffs rely on
Knight Energy
to argue that as long as there was testimony that the overhead expenses would have been realized anyway, there was no need to deduct them. However,
Knight Energy
preceded our opinion in
Boca Developers
and the Third District’s decision in
RKR Motors.
Further, the
Knight Energy
court based its decision not to require a deduction of overhead expenses on the defendant’s inability “to demonstrate that some overhead expense must have been required to perform” the contract.
For all of these reasons, we find the plaintiffs second attempt to prove lost profits falls short of the burden it carried to provide competent substantial evidence that the losses were directly linked to the defendants’ alleged wrongdoing. We therefore reverse the compensatory damages award,
This brings us to the punitive damage award. We also have
de novo
review of whether a punitive damages award exceeds the boundaries of due process as guaranteed by the United States Constitution.
Engle v. Liggett Group, Inc.,
In
Morgan Stanley,
we reviewed our supreme court’s decisions in
Ault v. Lohr,
We distinguished Ault, which permitted punitive damages absent a compensatory damage award. Unlike the fraud claim in Morgan Stanley, “actual injury or compensatory damages are not essential to stating a cause of action for assault and battery.” Id. We then read Engle “as addressing the order of proof in determining entitlement to punitive damages,” and not as supporting an award of punitive damages where there is no nominal or compensatory damage award. Id. at 1133.
The plaintiffs claim against the corporate defendants was tortious interference with a business relationship. Such a claim requires proof of the following elements: “(1) the existence of a business relationship, not necessarily evidenced by an enforceable contract, under which the plaintiff has legal rights; (2) the defendant’s knowledge of the relationship; (3) an intentional and unjustified interference with the relationship by the defendant; and (4) damage to the plaintiff as a result of the interference.”
Palm Beach County Health Care Dist. v. Prof'l Med. Educ., Inc.,
Like the fraud claim in
Morgan Stanley,
the tortious interference claim here “cannot stand where ... no legally cognizable damage was shown as a result of the alleged [wrongdoing].”
We next review the punitive damage award for excessiveness. Unlike our recent opinion in
Lawnwood Medical Center, Inc. v. Sadow,
“The modern Anglo-American doctrine of punitive damages dates back at least to 1763, when a pair of decisions by the Court of Common Pleas recognized the availability of damages ‘for more than the injury received.’ ”
Exxon Shipping Co. v. Baker,
— U.S. —, —,
The three-part analysis articulated in State Farm and BMW requires us to review:
(1) the degree of reprehensibility of the defendant’s misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.
Engle,
I. Reprehensibility
To sustain an award of punitive damages, the character of negligence must be of a
gross and flagrant character, evincing reckless disregard of human life, or of
the safety of persons exposed to its dangerous effects, or there is that entire want of care which would raise the presumption of a conscious indifference to consequences, or which shows wantonness or recklessness, or a grossly careless disregard of the safety and welfare of the public, or that reckless indifference to the rights of others which is equivalent to an intentional violation of them.
Air Ambulance Prof'ls, Inc. v. Thin Air,
the harm caused was physical as opposed to economic; the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; the target of the conduct had financial vulnerability; the conduct involved repeated actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident.
State Farm,
The requisite level of reprehensibility is simply not present here. In
Whitby I,
we rejected the plaintiffs argument that the corporate defendants did anything more than merely induce Whitby to breach her employment agreement.
The evidence established that WRMF’s president instructed his execu
The harm here was economic; not physical. As Judge Farmer wrote in
Lawn-wood,
economic cases provide a low “disapproval quotient,” are missing the enormity factor, and reprehensibility is dubious at best.
See Lawnwood,
In
Lawnwood,
Judge Farmer recognized the “almost trivial, ... minor economic injuries” at issue in
State Farm
and
BMW
“pale into insignificance next to the calumnies proven [in
Lawnwood
].”
Lawnwood,
This is not the first time we have reviewed a punitive damages award in a tortious interference claim. In
Imperial Majesty Cruise Line, LLC v. Weitnauer Duty Free, Inc.,
Imperial essentially sought to preclude competition in the sale of duty-free goods. To that end, Imperial barricaded and prevented its passengers from shopping at WDF’s store. The trial court found that Imperial’s “actions were calculated, predatory, and excessive”; however, such conduct fails to rise to the degree of reprehensibility required for a punitive damages award. Although Imperial’s interference was not justified, the nature, extent, and enormity of the wrong warrant against punitive damages. Imperial’s conduct did not rise to truly culpable behavior, for which damages are tenable to “express society’s collective outrage.” Finding Imperial’s conduct not sufficiently egregious, we reverse the punitive damages award.
Id. at 708 (citations omitted). As in Imperial Majesty, the conduct here did not reach the level of reprehensibility required for a punitive damage award.
Next, we consider the proportionality of the punitive damages award to the compensatory damages.
See Engle,
“Single-digit multipliers are more likely to comport with due process, while still achieving the State’s goals of deterrence and retribution, than awards with ratios in range of 500 to 1.... ”
Id.
at 1264-65 (quoting
State Farm,
When we examine the ratio of punitive to compensatory damages, we find the award exceeds the single-digit gauge for proportionality and fails to bear the reasonable relationship required by the Due Process Clause. The jury found compensatory damages of $126,511.48. It subsequently awarded $2.3 million in punitive damages against each of the three corporate defendants, for a total of $6.9 million. However, having reversed the compensatory damages award, the ratio is now 0 to 6.9 million.
Even if we were to consider the $126,511.48 in compensatory damages awarded, we would find the punitive damage award, that is approximately 55 times larger than the compensatory damage award, exceeds reasonable predictability. It exceeds the level that a “bad man” would be on notice of so as to avoid the punishment.
Exxon,
3. Comparable Civil Penalty
Florida law does not provide a comparable civil penalty for tortious interference with a contract. We are therefore unable to make this comparison.
Having concluded the three part analysis, we find the punitive damages award unsustainable. 9
This case provides the perfect juxtaposition of the punitive damage analysis in negligence and economic loss cases against the shortened analysis applied in
Lawn-wood
for the unique claim of slander per se. Judge Farmer carefully distinguished the conduct in
BMW
and
State Farm
resulting in economic loss from the “despicable” conduct resulting in the “malevolent destruction” of a doctor’s personal reputation in
Lawnwood. Lawnwood,
We thus acknowledge the limited reach of Lawnwood and embrace its clear line of demarcation for evaluating negligence and economic loss cases differently than slander per se cases. We adhere to the full three-part analysis for punitive damage awards in economic loss and negligence cases developed in BMW and State Farm, and adopted by our supreme court in En-gle. The judgment is reversed and the case remanded for entry of a judgment in favor of the defendants.
Reversed and remanded to vacate the judgment.
Notes
. James Crystal Licenses is a Delaware corporation, which formerly held the license to WRMF-FM, James Crystal Holdings is a Delaware corporation, which formerly operated WRMF-FM, and James Crystal Enterprises is a Delaware corporation, which formerly held the assets for WRMF.
. OmniAmerica sold WEAT to Chancellor Broadcasting, which in turn sold the station to American Radio Systems. American Radio then mei'ged with CBS Radio, which has since changed its name to Infinity.
. The injunction was entered seven months after Whitby left WEAT and expired twelve months from the date of its entry. Whitby remained off the air for one year.
. On remand, the trial court held an eviden-tiary hearing on the enforceability of the non-compete provision. The court found the covenant enforceable, but limited the area to a 100-mile radius. All defendants continue to claim the covenant is unenforceable; we disagree.
. Tim Reever, an employee of WRMF, testified that he had a relationship with the Palm Beach Princess and Cingular/Bellsouth before Whitby began working there, and that TLC Laser stopped advertising on the radio altogether before Whitby began working for WRMF.
. They argue the court erred in denying the motion for directed verdict because the damages were not supported by competent substantial evidence. First, there was no evidence tying the alleged losses directly to Whitby. Second, Greenwald's testimony constituted inadmissible hearsay. Third, the summary was improperly admitted because the plaintiffs failed to give the required timely written notice and provide documentation, and because the summary was hearsay. Fourth, the methodology employed to determine lost profits was unacceptable because the plaintiff used a time period that exceeded Whitby’s violation of the non-compete provision. WEAT also failed to account for overhead expenses.
. The corporate defendants produced testimony that they acted on advice of counsel, who had advised that the non-compete provision was unenforceable.
. We have not overlooked state law on punitive damages. We have relied, however, on our supreme court's decision in Engle in deciding this case. As recognized in Lawnwood, section 768.73(l)(c), Florida Statute provides no cap on punitive damages when the jury makes a finding of “specific intent to harm.” Nevertheless, the ultimate decisive factor is the United States Constitution.
