Opinion
No. 09-03-568 CV
Submitted on March 22, 2007.
Opinion Delivered July 26, 2007.
On Appeal from the County Court at Law No. 2 Montgomery County, Texas Trial Cause No. 02-08-05341.
Before MCKEITHEN, C.J., GAULTNEY and KREGER, JJ.
MEMORANDUM OPINION
The Supreme Court remanded this case for reassessment of the jury's award of exemplary damages against Tony Gullo Motors I, L.P. and for determination of a constitutionally permissible remittitur of those damages. See Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006). For the reasons set out below, we suggest a remittitur of $200,000 of the exemplary damage award, thereby reducing the exemplary damages from $250,000 to $50,000.
Nury Chapa sued Tony Gullo Motors I, L.P. and its sales representative, Brien Garcia, for breach of contract, fraud, and DTPA violations. Chapa purchased a Toyota Highlander from Gullo Motors for $30,207.38. She alleged that Gullo Motors made fraudulent representations to her, delivered a lower-end model Highlander rather than a higher-end model, made promises it did not intend to keep, and forged various documents. The jury found in Chapa's favor on each of her liability theories and awarded compensatory and exemplary damages. The trial court's judgment awarded only economic damages.
In our prior opinion, this Court found the evidence supported the jury's findings of liability and damages. See Chapa v. Tony Gullo Motors I, L.P., No. 09-03-568-CV, 2004 WL 1902533, at *3-*9 (Tex.App. — Beaumont Aug. 26, 2004), rev'd, Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006). We concluded the amount of the exemplary damage award was excessive, and suggested a remittitur of $125,000 — thereby reducing the exemplary damage award from $250,000 to $125,000. See Chapa, 2004 WL 1902533, at *7-*9.
Chapa filed the suggested remittitur. The parties appealed from our judgment. See Tony Gullo Motors, 212 S.W.3d at 306. The Supreme Court found that Chapa proved more than breach of contract, and "she was entitled to assert fraud and DTPA claims as well." Id. Other than arguing Chapa could sue only in contract, Gullo Motors did not challenge the jury's DTPA and fraud liability findings. Id. The Supreme Court stated, "On this record, Gullo Motors' conduct merited exemplary damages," but the $125,000 remittitur "exceeds the constitutional limitations on exemplary damages[.]" Id. at 310. The Court remanded the cause to us to determine "a constitutionally permissible remittitur." Id. The Supreme Court explained that, after this Court determines the exemplary damages issue on the fraud claim against Gullo Motors, Chapa is entitled to elect her remedy. See id. at 305-06, 314-15.
There can be but one recovery for one injury. Tony Gullo Motors, 212 S.W.3d at 303. In the trial court, Chapa previously elected a fraud recovery against Gullo Motors. The Supreme Court stated that "she is not required to make that election until she knows her choices." Id. at 314.
In addition to the fraud and breach of contract damages, the jury also assessed additional damages for deceptive acts under the Texas Deceptive Trade Practices Act. Given the jury's findings on the questions submitted, the DTPA caps those additional damages at $21,639 (three times Chapa's $7,213 award). See Tex. Bus. Com. Code Ann § 17.50(b)(1) (Vernon Supp. 2006). A Texas statute also caps exemplary damages for the fraud claim. See Tex. Civ. Prac. Rem. Code Ann. § 41.008(b) (Vernon Supp. 2006) (capping exemplary damages at the greater of (1) two times the amount of economic damages, plus "noneconomic damages found by the jury, not to exceed $750,000; or (2) $200,000.")). In this case, the section 41.008 statutory cap would be $200,000. An exemplary damage award less than the section 41.008 statutory cap may still be constitutionally excessive. See Tony Gullo Motors, 212 S.W.3d at 307.
We address only the issue remanded to this Court. Courts consider three "guideposts" in reviewing the amount of an exemplary damage award for constitutionality: "(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 and the civil penalties authorized or imposed in comparable cases." State Farm Mut. Auto Ins. Co. v. Campbell, 538 U.S. 408, 418, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003) (citing BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 575, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996)). Appellate courts must consider the Gore factors to ensure that exemplary damages are "reasonable and proportionate to the amount of harm to the plaintiff and to the general damages recovered." Id. 538 U.S. at 426; see also Bunton v. Bentley, 153 S.W.3d 50, 54 (Tex. 2004). An appellate court conducts a de novo review of an exemplary damage award for constitutionality. Bunton, 153 S.W.3d at 54.
The degree of reprehensibility of a defendant's conduct is the most important factor in the determination of the reasonableness of a punitive damages award. Campbell, 538 U.S. at 419. In reviewing reprehensibility, we are to consider whether "the harm caused was physical as opposed to economic;" whether "the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others"; whether "the target of the conduct had financial vulnerability"; whether "the conduct involved repeated actions or was an isolated incident"; and whether "the harm was the result of intentional malice, trickery, or deceit, or mere accident." Id.
The harm here is not a physical harm, but is an economic one caused by fraud. See Tony Gullo Motors, 212 S.W.3d at 308. Though the jury found mental anguish damages, this is not a case involving death or grave physical injury. Id. at 308, 310. Gullo Motors' conduct does not evidence a reckless disregard of health or safety, and the evidence does not demonstrate extreme financial hardship or financial ruin for Chapa as a result of the conduct. Id. The jury found Gullo Motors committed fraud, but the fraud "did not involve repeated acts rather than an isolated incident." Id. The harm Chapa suffered was the result of deceit. Id. In discussing the "reprehensibility" factors, the Supreme Court stated that "[o]nly the last factor, that the conduct at issue was deceitful rather than accidental, points in Chapa's favor." Id.
The jury heard evidence of a fraudulent transaction involving multiple acts of trickery and deceit committed in furtherance of fraud. See Tony Gullo Motors, 212 S.W.3d at 305-06; Chapa, 2004 WL 1902533, at *2-*3. There is evidence signatures were forged on several documents, and some of the signatures were forgeries of Chapa's deceased husband's signature rather than her own. See Tony Gullo Motors, 212 S.W.3d at 305-06. Documents relating to the Highlander Limited were replaced with forged documents. See Chapa, 2004 WL 1902533, at *3. The jury heard that in response to Chapa's complaint, the sales manager made threatening remarks to Chapa. Id. Although the title to the vehicle had not actually been transferred and return of the car was still possible, the dealership misrepresented its ability to take the car back when Chapa and her attorney came to the dealership and requested that action. Tony Gullo Motors, 212 S.W.3d at 306. The evidence of several affirmative acts in pursuit of the scheme found to be fraudulent by the jury includes forgery, switching of contracts, threats, misrepresentation, and alteration of documents. Id. at 305-06; Chapa, 2004 WL 1902533, at *2-*3.
We also consider the disparity between the actual harm suffered and the exemplary damages awarded. Campbell, 538 U.S. at 418. The jury awarded $7,213 in economic damages, $21,639 in mental anguish damages, and $250,000 in exemplary damages on the fraud claim. Chapa, 2004 WL 1902533, at *4. The Supreme Court noted that the jury award of "precisely $21,639 for mental anguish — exactly three times [Chapa's] economic damages of $7,213 — supports the [United States] Supreme Court's observation that emotional damages themselves often include a punitive element." Tony Gullo Motors, 212 S.W.3d at 308. The Court held in this case that $125,000 in exemplary damages "exceeds constitutional limits." Id. at 310. The Court further explained that a multiplier of four should be reserved for those cases with facts demonstrating the most egregious level of reprehensibility — i.e., in cases "involving death, grievous physical injury, financial ruin, or actions that endanger a large segment of the public." Id. Chapa's claim has none of these characteristics.
Under the third factor, we are to compare the exemplary damages to civil penalties authorized in comparable cases. Id. at 309. In its opinion in this case, the Texas Supreme Court referenced the Texas Occupations Code, which provides for a maximum penalty of $10,000 for each statutory or regulatory violation by a motor vehicle dealer of rules, orders, or statutes pertaining to the sale or lease of motor vehicles. Id.; see Tex. Occ. Code Ann. § 2301.801 (Vernon 2004) ("Each act of violation and each day a violation continues is a separate violation."). An additional possible civil penalty under the Occupation Code is the revocation or suspension of the license of a dealer that "wilfully defrauds a purchaser[.]" Tex. Occ. Code Ann. § 2301.651(a)(6) (Vernon 2004). The Supreme Court stated that Chapa provided no proof a criminal sanction or loss of license "has ever been awarded in a case like this." Tony Gullo Motors, 212 S.W.3d at 309. The Texas Supreme Court also cited the civil penalty — at the time of this occurrence, not more than $10,000 — which the Attorney General "could collect" under the DTPA. Tony Gullo Motors, 212 S.W.3d at 309.
The applicable version of section 17.47(c) of the DTPA provided for a penalty of "not more than $2,000 per violation, not to exceed a total of $10,000[.]" Act of May 14, 1997, 75th Leg., R.S., ch. 388, § 1, 1997 Tex. Gen. Laws 1627, 1628 (current version at Tex. Bus. Com. Code Ann. § 17.47(c) (Vernon Supp. 2006)).
We examine the additional damages provision under the DTPA. See Tex. Bus. Com. Code Ann. § 17.50(b)(1) (Vernon Supp. 2006). Although not an administrative penalty like those noted above, the DTPA damages provision is instructive of comparable "additional damages" for misconduct under the Act. Under a knowing violation, the DTPA allows an additional award of three times the economic damages. See Tex. Bus. Com. Code Ann. § 17.50(b)(1) (Vernon Supp. 2006). Under an intentional-conduct finding, the DTPA allows an additional award of three times the sum of the economic damages plus the mental anguish damages. See id. In this case, the question submitted to the jury asks whether Gullo Motors committed deceptive acts "knowingly." Chapa did not submit an "intentional" conduct question under the DTPA.
We recognize there is no bright-line ratio between actual and exemplary damages. See Gore, 517 U.S. at 582. The United States Supreme Court stated in Gore that infliction of economic injury, especially when done intentionally through affirmative acts of misconduct, or when the target is financially vulnerable, can warrant a substantial penalty. Id. at 576. The jury in this case found that such misconduct is present here. The jury charge asked if Gullo Motors committed fraud and forgery. The jury answered "yes" to both. The focus of the fraud against Chapa was economic harm, yet Chapa also suffered mental anguish. As the Texas Supreme Court noted, the fraud is misconduct that merits exemplary damages.
Gore apparently involved a failure to disclose rather than deliberate false statements and acts of affirmative misconduct. See Gore, 517 U.S. at 579. The evidence in this case includes several acts involved in the course of committing the fraud: forgery, threats, misrepresentation, switching of contracts, and alteration of documents. We recognize that this case does not involve repeated conduct, which the Supreme Court characterizes as "recidivism," and that "all fraud cases" involve "deceitful conduct." See Tony Gullo Motors, 212 S.W.3d at 309-10.
In view of the misconduct involved, the actual harm caused, and the civil penalties for comparable misconduct, we conclude the evidence supports an exemplary damage award of $50,000. This amount is reasonable and proportional in light of the actual damages sustained and is sufficient to serve the purposes of punishment and deterrence. See generally Gore, 517 U.S. at 568; Transp. Ins. Co. v. Moriel, 879 S.W.2d 10, 27 (Tex. 1994) (citing Pac. Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 18, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991)). The amount of the suggested remittitur would reduce the ratio of exemplary and actual damages to less than 2:1. We conclude $200,000 is a constitutionally permissible remittitur under the circumstances of this case.
Because the jury's exemplary damage award is excessive, we suggest a remittitur of $200,000 of the jury's award of $250,000 in exemplary damages, resulting in an award of $50,000 in exemplary damages if Chapa elects a recovery based on fraud. See Tony Gullo Motors, 212 S.W.3d at 310. The suggested remittitur must be filed within fifteen days from the date of this opinion, or the cause is remanded to the trial court for a new trial on the fraud claim. See Tex. R. App. P. 46.3, 46.5. If Chapa files the suggested remittitur within fifteen days from the date of this opinion, the cause is remanded to the trial court for an election of remedies and entry of judgment on the fraud claim (to the exclusion of the DTPA and contract claims), should Chapa elect the fraud claim remedy. If Chapa elects recovery under the DTPA claim, the cause is remanded to the trial court for a new trial on attorney's fees and entry of judgment exclusively on the DTPA claim. See Tony Gullo Motors, 212 S.W.3d at 315.
REVERSED AND REMANDED.