                                                                                                                           Opinions of the United
2007 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


8-23-2007

CGB Occupational v. RHA Health Ser Inc
Precedential or Non-Precedential: Precedential

Docket No. 05-3409




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                                      PRECEDENTIAL

       UNITED STATES COURT OF APPEALS
            FOR THE THIRD CIRCUIT
                _______________

              Nos: 05-3409, 05-3586
               _______________

       CGB OCCUPATIONAL THERAPY, INC.
             d/b/a CGB REHAB, INC.

                        v.

 RHA HEALTH SERVICES, INC.; SYMPHONY HEALTH
                     SERVICES INC.;
     RHA PENNSYLVANIA NURSING HOMES, INC.,
  d/b/a PROSPECT PARK REHABILITATION CENTER
        d/b/a PROSPECT PARK NURSING CENTER
           d/b/a PROSPECT PARK HEALTH AND
              REHABILITATION RESIDENCE;
     RHA PENNSYLVANIA NURSING HOMES, INC.
 d/b/a PEMBROOKE NURSING AND REHABILITATION
                        CENTER
 d/b/a PEMBROOKE NURSING AND REHABILITATION
                       RESIDENCE
       f/k/a WEST CHESTER ARMS NURSING AND
                REHABILITATION CENTER;
SUNRISE ASSISTED LIVING, INC.; SUNRISE ASSISTED
               LIVING MANAGEMENT, INC.


              Sunrise Senior Living, Inc.
           Sunrise Senior Living Management Inc.,

                                Appellants in 05-3409

              CGB Occupational Therapy, Inc.,

                            Appellant in 05-3586
                    _______________

      On Appeal from the United States District Court
           for the Eastern District of Pennsylvania
                   (D.C. No. 00-cv-04918)
     District Judge: Honorable Clarence C. Newcomer
                      _______________

                 Argued March 26, 2007

  Before: FISHER, JORDAN and ROTH, Circuit Judges

                 (Filed: August 23, 2007)
                    _______________

Evan M. Tager [ARGUED]
Mayer, Brown, Rowe & Maw LLP
1909 K Street, NW
Washington, DC 20006
  Counsel for Appellants/Cross-Appellees




                            2
Andrew L. Frey
Lauren R. Goldman
Mayer, Brown, Rowe & Maw LLP
1675 Broadway
New York, NY 10019

David G. Concannon [ARGUED]
Suite 116
200 Eagle Road
Wayne, PA 19087
   Counsel for Appellee/Cross-Appellant

                      _______________

                 OPINION OF THE COURT
                     _______________

JORDAN, Circuit Judge.

        Before us are cross-appeals arising from the reduction
of a $30 million punitive damages verdict to $2 million. The
District Court ordered the reduction on the ground that the
verdict was constitutionally excessive. Defendants Sunrise
Assisted Living Management, Inc. and Sunrise Assisted
Living, Inc. (collectively, “Sunrise”) contend that the reduced
verdict is still unconstitutional and seek a further reduction.
In a cross-appeal, Plaintiff CGB Occupational Therapy, Inc.
(“CGB”) challenges the District Court’s reduction of the
verdict and seeks either reinstatement of the original verdict
or some enhancement of the reduced verdict. For the reasons
that follow, we will vacate the District Court’s remittitur order

                               3
and remand the case with instructions to enter a new judgment
for punitive damages in the amount of $750,000. CGB’s
cross-appeal will be dismissed.

                               I.

        This case is before us for the second time, following a
second jury trial. It is, as we said on the first go-around, a
case that “has been characterized by its contentious history.”
CGB Occupational Therapy, Inc. v. RHA Health Serv., Inc.,
357 F.3d 375, 379 (3d Cir. 2004) (“CGB I”). Since we have
previously set forth the facts in detail, the following factual
recitation is limited to the background necessary for our
ruling.
        CGB is a provider of rehabilitation therapy services in
long-term care and assisted-living facilities. Beginning in
1995, CGB contracted with a company known as RHA
Pennsylvania Nursing Homes (“RHA”) to provide physical,
occupational, and speech therapy to residents at two nursing
home facilities owned by RHA, the Pembrooke facility and
the Prospect Park facility. CGB’s agreements with RHA
contained an “anti-raiding” clause providing that, in the event
CGB was terminated as the provider of therapy services, the
Pembrooke and Prospect Park facilities would not, for a
period of twelve months, seek to hire or contract with
therapists employed by CGB.

       At all times relevant to this case, Sunrise managed
RHA’s Pembrooke and Prospect Park facilities. In 1998, the
federal Medicare program altered its process for reimbursing
care facilities for therapy services provided to residents.

                               4
Under the revised process, RHA claimed that it was more
difficult to pay CGB, and, on June 30, 1998, at RHA’s
direction, Sunrise notified CGB in writing that RHA intended
to terminate its contracts with CGB, effective September 30,
1998. Almost immediately after giving that notice, Sunrise,
again acting on behalf of RHA, executed agreements with
another provider of therapy services, Symphony Health
Services, Inc. (“Symphony”), to retain Symphony as the new
therapy provider at both the Pembrooke and Prospect Park
facilities, effective October 1, 1998.

       What followed is central to this bitter legal contest.
Sunrise’s Prospect Park Administrator, Marjorie Tomes, met
with certain CGB therapists at the end of July 1998. She did
so despite the anti-raiding clause in RHA’s contracts with
CGB and despite direct admonitions by both RHA and CGB
that no such meeting should occur. During that meeting,
Tomes informed the therapists that CGB’s contracts with
RHA had been terminated because CGB could not comply
with Medicare changes. She made that representation even
though CGB’s owner, Cindy Brillman, had repeatedly told her
that CGB could comply with the Medicare requirements and
could continue to be competitive in providing therapy
services. Tomes also told the therapists that Symphony would
replace CGB as the therapy contractor, and that they might
have employment opportunities with Symphony. She polled
the therapists for their interest in pursuing employment with
Symphony, wrote down the names of those who replied in the
affirmative, and proceeded to facilitate Symphony’s hiring of
CGB therapists.



                             5
        In September 2000, CGB brought this action against
Sunrise and other defendants, alleging claims under
Pennsylvania law for, among other things, tortious
interference with CGB’s contractual relationships both with
its therapists and with RHA. The jury in the first trial found
that Sunrise had indeed tortiously interfered with CGB’s
contractual relationship with its therapists, and returned a
compensatory damages verdict in the amount of $109,000 on
that claim. The jury also found that Sunrise had tortiously
interfered with CGB’s contractual relationship with RHA, and
returned compensatory damages in the amount of $576,000 on
that claim. The jury awarded punitive damages to CGB in the
amount of $1.3 million, but the verdict did not specify how
the punitive damages award was allocated between the two
claims of interference.

       On the first appeal, we affirmed the jury’s verdict
against Sunrise for tortious interference with CGB’s
contractual relationship with its therapists, but we reversed
the verdict of tortious interference with CGB’s contractual
relationship with RHA. See CGB I, 357 F.3d at 385-90.1
Because the jury had awarded $1.3 million in punitive

       1
         We reversed the verdict on the claim of tortious
interference with CGB’s contractual relationship with RHA
because we determined that Sunrise acted within the scope of
its authority as an agent for RHA, CGB I, 357 F.3d at 385-88,
and that, under Pennsylvania law, “[t]he actions of a
principal's agent are afforded a qualified privilege from
liability for tortious interference with the principal's contract.”
Id. at 385.

                                 6
damages without differentiating between the two acts of
interference by Sunrise, we noted that “it is impossible to
determine how punitive damages should be allocated in light
of our determination that Sunrise could not have interfered
with the contract between CGB and [RHA].” Id. at 390.
Consequently, we reversed the punitive damages
determination and remanded the case to the District Court for
“a new trial on the question of punitive damages.” Id. at 392.

        Sunrise evidently had a “watch what you wish for”
experience when, at the second trial, the jury awarded CGB
$30 million in punitive damages on the claim that Sunrise had
tortiously interfered with CGB’s contractual relationship with
its therapists. Sunrise thereafter moved to reduce the punitive
damages award, arguing that the $30 million penalty was
constitutionally excessive. After considering the guideposts
for judicial review of punitive damages as articulated in BMW
of N. Am., Inc. v. Gore, 517 U.S. 559 (1996), and as amplified
by State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408
(2003), the District Court reduced the award to $2 million.
These cross-appeals followed. The District Court exercised
diversity jurisdiction pursuant to 28 U.S.C. § 1332. We have
jurisdiction over the final judgment pursuant to 28 U.S.C. §
1291.

                              II.

        “The Due Process Clause of the Fourteenth
Amendment prohibits the imposition of grossly excessive or
arbitrary punishments on a tortfeasor.” Campbell, 538 U.S. at
416. In determining whether a punitive damages award

                               7
comports with due process,2 courts must “consider three

       2
         On the first appeal, Sunrise did not argue that the
$1,300,000 punitive damages award was constitutionally
excessive. Rather, it contended that the jury’s punitive
damages verdict should be overturned altogether because
CGB had failed to establish the necessary elements of its
tortious interference claims. CGB I, 357 F.3d at 383. Sunrise
now asserts that a punitive damages award of $2,000,000 is
constitutionally excessive, which raises the issue of whether it
is appropriate to address this argument even though a similar
argument was not made in the first appeal. Unlike our
dissenting colleague, we conclude that the constitutional issue
is unavoidable.
        The dissent argues that it was inappropriate for the
District Court to conduct a new trial to redetermine punitive
damages de novo. We cannot agree. In CGB I, we declared
that it was impossible to determine how the punitive damages
could properly be allocated between the surviving claim and
the claim we reversed. Id. at 390. Therefore, we also
“reverse[d] the punitive damages determination and
remand[ed] to the District Court for a redetermination of
punitive damages in accordance with [that] opinion.” Id.
While our dissenting colleague interprets our
“redetermination of punitive damages” instruction in CGB I to
require something short of conducting an entirely new trial on
the issue, we expressly clarified our intent later in CGB I by
stating that “the jury’s punitive damages determination must
be reversed and the case remanded for a new trial on the
question of punitive damages,” id. at 392 (emphasis added),
and we further noted that claims of juror misconduct raised by

                               8
Sunrise were rendered moot by that disposition. Id. Thus, the
District Court did what we instructed. It held a new jury trial
on punitive damages, resulting in a new determination of
those damages. See Litman v. Massachusetts Mut. Life Ins.
Co., 825 F.2d 1506, 1513-14 (11th Cir. 1987) (en banc)
(reversal of one claim on which unapportioned punitive
damages award was partially based had the effect of
"void[ing] the original judgment," and "the litigants were sent
back to the district court for a new determination of punitive
damages as if the first trial never occurred"); 5 C.J.S. Appeal
and Error § 1106 (2007) (the effect of a reversal of a
judgment “is to nullify it completely and to leave the case
standing as if such judgment ... had never been rendered,
except as restricted by the opinion of the appellate court”).
        Courts have “broad discretion” in their control and
management of a new trial. Cleveland by and through
Cleveland v. Piper Aircraft Corp., 985 F.2d 1438, 1449 (10th
Cir. 1993); see also 11 Wright, Miller, & Kane, Federal
Practice and Procedure: Civil § 2803 (2d ed. 1995). Courts
exercise that discretion in deciding whether to allow
additional witnesses and relevant proof in the new trial. See
Piper Aircraft Corp., 985 F.2d at 1450 (“[T]he court must
retain broad latitude and may with proper notice allow
additional witnesses and relevant proof [in a new trial.]”).
That discretion logically extends to making determinations of
whether parties may make additional arguments in a new trial
or in an appeal of that trial. Those decisions, and all others,
should be guided by “considerations of fairness and justice to
all parties.” Wright, Miller, & Kane, supra, at § 2803; see
also Piper Aircraft Corp., 985 F.3d at 1450 (stating that, in

                              9
guideposts: (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.” Id. at 418
(citing Gore, 517 U.S. at 575). We review the
constitutionality of the punitive damages award de novo, but
we must accept any findings of fact made by the District
Court, unless they are clearly erroneous. Cooper Indus., Inc.
v. Leatherman Tool Group, Inc., 532 U.S. 424, 440 n.14
(2001). We conclude that the $2 million award remains
constitutionally excessive and must be further reduced.


considering whether to allow a party to introduce additional
witnesses and relevant proof, a court should examine whether
the allowance would create a “manifest injustice” to the other
party).
        Thus, when the jury returned a $30,000,000 punitive
damages award against Sunrise, it is hardly surprising the
District Court determined that the parties were in an entirely
new region of liability exposure and that it was appropriate to
permit Sunrise to argue that the new and much larger award
was constitutionally excessive. In so ruling, the District Court
did not abuse its discretion. Significantly, CGB has not
contended it is unfair to permit Sunrise to raise a due process
argument regarding the new verdict in either its original form
or its reduced, $2,000,000 amount, although CGB has argued
it is “disingenuous” for Sunrise to complain about the
$2,000,000 verdict since it is “only $700,000 higher than the
first [$1.3 million] award ... .” (Appellee’s Br. at 71-72.)

                              10
Because we agree with the District Court that the third
guidepost set forth in the Gore and Campbell cases, i.e., the
disparity between the punitive damages award and
comparable civil penalties, is not instructive here, see Inter
Med. Supplies, Ltd. v. EBI Med. Sys., Inc., 181 F.3d 446, 468
(3d Cir. 1999) (finding third guidepost “unhelpful” in case
involving tortious interference and related common law tort
claims), our discussion is confined to the first two guideposts,
namely the degree of reprehensibility and the disparity
between the harm and the award.

                A.   Degree of Reprehensibility

       The Supreme Court has recognized that the degree of
reprehensibility of the defendant’s conduct is “[t]he most
important indicium of the reasonableness of a punitive
damages award.” Campbell, 538 U.S. at 419 (quoting Gore,
517 U.S. at 575). In evaluating the degree of Sunrise’s
reprehensibility in this case, we must consider whether: “[1]
the harm caused was physical as opposed to economic; [2] the
tortious conduct evinced an indifference to or reckless
disregard of the health or safety of others; [3] the target of the
conduct had financial vulnerability; [4] the conduct involved
repeated actions or was an isolated incident; and [5] the harm
was the result of intentional malice, trickery, or deceit, or
mere accident.” Id.

       The District Court found that three of the five
reprehensibility subfactors were present in this case: CGB
was financially vulnerable; Sunrise’s actions involved
repeated misconduct; and Sunrise acted intentionally. We

                               11
agree with the District Court that the financial vulnerability
subfactor weighs in favor of finding Sunrise’s conduct
reprehensible. CGB was a small company which operated out
of Ms. Brillman’s home and only employed approximately
twenty therapists. At the time Tomes met with CGB’s
therapists, she knew that CGB was in a financially vulnerable
position because RHA owed CGB $600,000 in back
payments. She also knew that her successful recruitment of
CGB’s therapists would further decimate CGB’s business.

        We also agree with the District Court that Sunrise
intentionally inflicted harm on CGB, which further increases
the culpability of Sunrise’s conduct. The evidence shows that
Tomes met with CGB’s therapists despite express warnings
from both Brillman and Sunrise’s own principal, RHA, not to
do so. At the meeting, Tomes told the therapists that CGB’s
contracts with RHA had been terminated because CGB was
unable to comply with Medicare changes and that CGB could
not compete with Symphony, even though Brillman had told
Tomes several times that CGB could, in fact, comply with the
Medicare changes and Tomes otherwise had no reason to
believe that CGB could not compete with Symphony. As a
result of Tomes’s misstatements, CGB’s therapists began to
fear for their jobs and distrust their employer, and they were
thus more inclined to respond favorably to Tomes’s
recruitment efforts. Although Brillman quickly confronted
Tomes about her misconduct, Tomes continued to assist
Symphony in its recruitment of CGB’s therapists, even
providing Symphony with access to a conference room at the
Prospect Park facility for the purpose of interviewing CGB’s
therapists. In sum, the evidence amply supports a finding that

                              12
Sunrise’s conduct was intentionally harmful, rather than
merely accidental.

        In considering the “repeated conduct” subfactor of the
reprehensibility analysis, the District Court observed that
Sunrise’s tortious conduct involved “repeated stalling and
dishonesty” (JA at 12), and that Sunrise “continually refused
to be held responsible for its actions, ignoring and rebuffing
Plaintiff ... .” (JA at 9.) Sunrise argues that the District Court
applied this factor wrongly. Relying on our statement in
Willow Inn, Inc. v. Pub. Serv. Mut. Ins. Co., 399 F.3d 224 (3d
Cir. 2005) that “[t]he ‘repeated conduct’ cited in Gore
involved not merely a pattern of contemptible conduct within
one extended transaction ..., but rather specific instances of
similar conduct by the defendant in relation to other
parties[,]” id. at 232, Sunrise contends that the “repeated
conduct” subfactor is not satisfied here because there is no
evidence that it committed similar tortious acts against other
entities.

       Contrary to Sunrise’s suggestion, we did not hold in
Willow Inn that the “repeated conduct” inquiry is so limited in
scope. We instead recognized that, while the “repeated
conduct” subfactor will necessarily have “less force” where
the defendant’s misconduct did not extend beyond his
dealings with the plaintiff , id. at 232-33, it may still be
“relevant” in measuring the reprehensibility of the




                               13
defendant’s conduct, based on the particular facts and
circumstances presented.3 Id. at 232-33.

       “[E]vidence that a defendant has repeatedly engaged in
prohibited conduct while knowing or suspecting that it was
unlawful” is highly indicative of reprehensibility. Gore, 517
U.S. at 576. In this case, within days of meeting with CGB’s
therapists over the protestations of both RHA and CGB,

       3
          Sunrise alternatively argues that the facts and
circumstances of this case are distinguishable from those
before us in Willow Inn. In Willow Inn, the defendant-insurer
employed various stonewalling tactics in processing the
plaintiff-insured’s property damage claim. We determined
that the defendant’s misconduct was probative of
reprehensibility because it “suggest[ed] that [the defendant’s]
actions were designed to achieve a fiscally beneficial result
for itself at odds with the Pennsylvania Supreme Court’s
long-time dictate that an insurer must act with the utmost
good faith toward its insured.” Id. at 233 (citation and
internal quotation marks omitted). Sunrise reads Willow Inn
to hold that a pattern of misconduct by the tortfeasor within a
single transaction is only relevant under the repeated conduct
subfactor if the tortfeasor owed a fiduciary duty to the victim.
Contrary to Sunrise’s assertion, Willow Inn imposes no such a
limitation, and for good reason. Repeated misconduct is
probative of reprehensibility when the tortfeasor knows or
suspects that his pattern of behavior is unlawful, regardless of
whether that knowledge stems from a special legal
relationship with the victim. While the weight to be given the
factor may vary, its relevance remains.

                               14
Tomes received a letter from CGB’s counsel suggesting that
her actions “appear[ed]” to constitute tortious interference.
(JA at 461.) Despite thereby having reason to believe that her
previous contact with CGB’s therapists may have been
unlawful, Tomes nevertheless continued to assist Symphony
in recruiting the therapists. She thus evinced not only an
intent to damage CGB but a willingness to act repeatedly on
that intent, with utter contempt for CGB’s interests and
disregard for the law. We therefore believe that “the
Gore/Campbell ‘repeated conduct’ subfactor applies to this
case in a way not captured in the ‘intent’ subfactor.” Willow
Inn, 399 F.3d at 233.

        While three of the five reprehensibility subfactors
support, to varying degrees, the award of substantial punitive
damages in this case, our consideration of the remaining two
subfactors counsels against the need for such a high award.
The harm suffered by CGB was economic, not physical, and
Sunrise’s tortious conduct did not demonstrate an indifference
to or a reckless disregard of the health or safety of others. We
have previously recognized that economic torts are “less
worthy of large punitive damages awards than torts inflicting
injuries to health or safety.” Inter Med., 181 F.3d at 467
(citation omitted). Based on our consideration of the
reprehensibility guidepost, it appears that Sunrise’s conduct
was not sufficiently egregious to warrant a punitive damages
award of $2 million. That conclusion is reinforced by our
analysis of the second Gore/Campbell guidepost, i.e., the
disparity between the punitive damages award and the harm
suffered by the plaintiff.



                              15
           B. Ratio of Punitive Damages to Harm

        “The second and perhaps most commonly cited
indicium of an unreasonable or excessive punitive damages
award is its ratio to the actual harm inflicted on the plaintiff.”
Gore, 517 U.S. at 580. The Supreme Court has been
“reluctant to identify concrete constitutional limits on the
ratio,” instead emphasizing that “[t]he precise award in any
case ... must be based upon the facts and circumstances of the
defendant’s conduct and the harm to the plaintiff.” Campbell,
538 U.S. at 424-425. It has cautioned, however, that “in
practice, few awards exceeding a single-digit ratio between
punitive and compensatory damages, to a significant degree,
will satisfy due process.” Id. at 425.

        Measuring the $2 million punitive damages award
against the $109,000 compensatory award in this case yields a
double-digit ratio of over 18:1, which immediately “alerts the
court[] to the need for special justification.” Williams v.
ConAgra Poultry Co., 378 F.3d 790, 799 (8th Cir. 2004). The
District Court opined that the ratio it permitted, which it
characterized as “roughly 19:1,” was not constitutionally
excessive because of “the facts of this case (including the
wealth of Defendant and the state’s interest in punishment and
deterrence).” (JA at 14.) The District Court also sought to
justify the high ratio by saying it “suspect[ed]” that “given the
hardships Defendant imposed on Plaintiff in its treatment of
Plaintiff after the interference took place, and given
Defendant’s antics leading up to the first trial, the true ratio,
could [the full extent of] the harm caused by Defendant be



                               16
expressed as a simple dollar value, would be closer to three to
one.” Id.

        The District Court’s “true ratio” justification cannot
withstand scrutiny. The Court effectively lowered the ratio by
inflating the denominator based on suspicions of unquantified
harm. We do not doubt that the District Court had reason to
believe that some unquantified harm inflicted by Sunrise
supports a substantial punitive damages award to CGB. But
suspicions and speculation alone will not suffice. We need
not reach the question of whether unquantified harm can ever
affect the denominator in a punitive damages-to-actual harm
ratio. It is enough to say that it does not affect it in this case.
The District Court did not point to evidence in the record, nor
did it articulate its reasoning for concluding that the
denominator ought to be something other than what the first
jury expressly held in its compensatory damages verdict was
the actual harm. With no evidence or articulated reason to
support the framing of a different denominator, the $109,000
compensatory award is the appropriate denominator under the
Gore/Campbell ratio analysis.4

       4
         This is not to say that the ratio’s denominator should
in all cases be limited to the amount of compensatory
damages awarded by the jury. See, e.g., Willow Inn, 399 F.3d
at 234-37 (measuring $150,000 punitive damages award
against $135,000 award in attorney fees and costs, rather than
against $2,000 compensatory award); Continental Trend
Resources, Inc. v. OXY USA Inc., 101 F.3d 634, 640 (10th
Cir. 1996) (considering expert testimony of potential loss to
plaintiffs in the amount of $769,895, in addition to

                                17
        Heeding the Supreme Court’s admonition that few
awards exceeding the single-digit threshold will satisfy due
process, we conclude that the 18:1 ratio in this case crosses
the line into constitutional impropriety. Pacific Mut. Life Ins.
Co. v. Haslip, 499 U.S. 1, 24 (1991). While the
reprehensibility of Sunrise’s conduct and the harm it inflicted
on CGB should not be minimized, there are no special
circumstances justifying the enormous disparity between the
punitive damages award and the compensatory damages
recovered by CGB in this case. The Supreme Court has
suggested that greater ratios may comport with due process in
cases where “a particularly egregious act has resulted in only
a small amount of economic damages,” or where “the injury is
hard to detect or monetary value of noneconomic harm might
have been difficult to determine.” Campbell, 538 U.S. at 425
(quoting Gore, 517 U.S. at 582); see Deters v. Equifax Credit
Info. Servs., Inc., 202 F.3d 1262, 1273 (10th Cir. 2000)
(“[W]here the injury is primarily personal, a greater ratio may
be appropriate.”). But this is not such a case. In short, a
further reduction of the $2 million award is required, in light
of our consideration of the Gore/Campbell guideposts.

                             III.
      As we stand in the “role as gatekeeper in reviewing an
award of punitive damages[,]” Inter Med., 181 F.3d at 468,


compensatory damages awarded for past harm, as part of
ratio’s denominator). We only conclude that District Court
was not free to arbitrarily quantify the value of any
uncompensated harm suffered by CGB for purposes of setting
the ratio’s denominator.

                              18
we turn next to our responsibility for determining the
constitutional limit on the award in this case. See id. (“[A]n
appellate panel, convinced that it must reduce an award of
punitive damages, must rely on its combined experience and
judgment.”). In making this determination, we must accord
“a measure of deference” to the jury’s award. Willow Inn,
399 F.3d at 231. We are obliged to “decrease the award to an
amount the evidence will bear, which amount must
necessarily be as high - and may well be higher - than the
level the court would have deemed appropriate if working on
a clean slate.” Id. (citing Dunn v. HOVIC, 1 F.3d 1371, 1381
(3d Cir. 1993) (en banc)). After carefully reviewing the
record and the parties’ arguments, we conclude that a punitive
damages award in the amount of $750,000 represents the
constitutional upper limit in this case.

        A punitive award of $750,000 bears a reasonable
relationship to the reprehensibility of Sunrise’s tortious
conduct and results in a punitive damages-to-harm ratio of
less than 7:1, within the single-digit range, as counseled by
the Supreme Court. In arriving at this figure, we have also
considered the evidence of Sunrise’s financial strength, which
the jury was appropriately permitted to take into
consideration, recognizing that what “may be awesome
punishment for an impecunious individual defendant ... [may
be] wholly insufficient to influence the behavior of a
prosperous corporation.” Continental Trend, 101 F.3d at 641;
see Campbell, 538 U.S. at 427-28 (observing that
consideration of defendant’s wealth is not “unlawful or
inappropriate” so long as it is not used to “make up for the
failure of other factors, such as ‘reprehensibility,’ to constrain

                               19
significantly an award that purports to punish a defendant’s
conduct”) (citation omitted).

        Wealth is also relevant because “[a] rich defendant
may act oppressively and force or prolong litigation simply
because it can afford to do so and a plaintiff may not be able
to bear the costs and the delay.” Continental Trend, 101 F.3d
at 642; accord Mathias v. Accor Economy Lodging, Inc., 347
F.3d 672, 677 (7th Cir. 2003) (Posner, J.) (“[W]ealth in the
sense of resources ... enable[s] the defendant to mount an
extremely aggressive defense against suits such as this and by
doing so to make litigating against it very costly ... . In other
words, the defendant is investing in developing a reputation
intended to deter plaintiffs.”). Informed by many decades of
experience as a trial judge and by the specific experience of
presiding over several years of pretrial proceedings and two
trials in this matter, the District Court Judge described
Sunrise’s litigation conduct as “tell[ing] a tale of repeated
stalling and dishonesty” (JA at 12), which included the
imposition of “countless obstacles to rapid resolution of
Plaintiff’s claims” (id. at 9), among other “antics.” (Id. at 14.)
Brillman testified about Sunrise’s abusive and dilatory
litigation tactics (JA at 156-61), including Sunrise’s initiation
of meritless collateral proceedings against CGB in RHA’s
bankruptcy case,5 and “constant[]” threats from Sunrise to


       5
       According to CGB, the Bankruptcy Court described
Sunrise’s claim as a “Machiavellian scheme” intended to
deprive CGB of a legitimate payment. (CGB Reply Br. at 11-
12.)

                               20
“keep litigation [going] forever.” (JA at 167.)6 Brillman
demonstrated tremendous fortitude. She took out a second
mortgage on her home and vowed to litigate CGB’s claims to
final resolution (JA at 166-67), but litigants should not have
to face something akin to medieval trial by combat to resolve
a basic business dispute. The mounting costs of this drawn-
out, no-holds-barred litigation might have forced many a
small business to accept an undervalued settlement or to
abandon its claims altogether. Indeed, the case history here
strongly implies that Sunrise had exactly that outcome in
mind.

       This was not, it should be emphasized, simply a hard-
fought case. No litigant, whether its resources are great or
small, is required to “make nice” by giving up legitimate legal
positions. What sets this case apart and makes it, we hope,
truly unusual is the repeated use of procedural devices to

       6
         One of Sunrise’s claims of error on the first appeal
was that the District Court abused its discretion in denying
Sunrise’s request for a continuance, on the second day of trial,
due to Tomes’s unavailability to testify. The District Court
noted that it had ordered Tomes to be available to testify on
an earlier date, before she became unavailable, but that
Sunrise failed to produce her without explanation. The
District Court concluded that Sunrise’s continuance request
was “clearly the product of bad planning and, mostly likely,
bad faith,” and we upheld that ruling. CGB I, 357 F. 3d at
391. On remand, the second jury was made aware of Tomes’s
failure to attend the first trial on the date ordered. (JA at 353-
59.)

                               21
grind an opponent down, without regard for whether those
devices advanced any legitimate interest. The District Court
Judge, the Bankruptcy Judge who waded through the
meritless adversary action, and a previous panel of this Court
have all, to one degree or another, commented negatively on
Sunrise’s litigation tactics.7 Under these literally remarkable
circumstances, a substantial punitive damages award is
warranted to prevent Sunrise from gaining the unfair
advantage of a reputation for bleeding legal adversaries to
death before they can vindicate their rights. Mathias, 347

       7
        We would ordinarily rather see parties and district
courts deal directly with litigation misconduct by the statutory
and procedural mechanisms set up for that purpose, see, e.g.,
28 U.S.C. § 1927; Fed. R. Civ. P. 11, than to see frustration at
such misconduct take the form of a punitive damages ruling
subject only to constitutional review. As already noted,
however, evidence of litigation misconduct can support an
award of punitive damages, and, in this case, we do not face
the very real concerns that would arise if a trial were diverted
from the merits and converted into bickering about litigation
tactics. Jurors typically are not well-positioned to sort out
discovery questions that can vex even talented and well-
meaning members of the bench and bar, but the concerns
about misconduct that inform our decision today are largely
founded on comments from the judicial officers who were
required to ride herd on the various phases of this case. To
the extent evidence of misconduct was presented to the jury in
this case, Sunrise has chosen not to challenge the District
Court’s evidentiary rulings on appeal. (See Appellant’s Br. at
11.)

                              22
F.3d at 677. There is a cost to abusive litigation tactics, and
Sunrise will pay it, at least to a degree. While the punitive
damages award here represents far more than litigation
misconduct, that misconduct is relevant to our analysis.

        In further considering the reasonableness of a reduced
award in the amount of $750,000, we find it significant that
Sunrise, in its first appeal, did not challenge the
constitutionality of the $1.3 million punitive damages verdict
that the first jury returned. Even considering that the $1.3
million punitive award was based on two verdicts for tortious
interference, one of which was subsequently overturned on
appeal, we think Sunrise’s past silence leaves it hard-pressed
to argue that the imposition of a six-figure penalty on the
surviving claim of tortious interference is grossly excessive.

       In sum, we conclude that the maximum
constitutionally permissible punitive award in this case is
$750,000.

                               IV.

       Punitive damages awards are “the product of
numerous, and sometimes intangible, factors ... . Because no
two cases are truly identical, meaningful comparisons of such
awards are difficult to make.” TXO Production Corp. v.
Alliance Resources Corp., 509 U.S. 443, 457 (1993) (plurality
opinion). We expect that will remain true of this abnormally
contentious case. For the foregoing reasons, we will vacate
the District Court’s punitive damages award and remand this
case with instructions to enter a new judgment for punitive

                               23
damages in the amount of $750,000. CGB’s cross-appeal is
dismissed.


CGB Occupational Therapy, Inc. v. RHA Health Service, Inc.
                 Nos. 05-3409, 05-3586

ROTH, Circuit Judge, dissenting:

             ‘It seems a shame,’ the Walrus said,
                   ‘To play them such a trick,
             After we've brought them out so far,
                 And made them trot so quick!’

          Lewis Carroll, Through the Looking-Glass

        This case was botched on remand. A litigant appealed to
our Court and won a partial reversal, and yet the judicial system
left that litigant worse off on remand than it had been before it
appealed. The proceedings before the District Court simply did
not comport with the mandate we had issued. For that reason
alone, the judgment of the District Court should be vacated, and
this case should be remanded for proceedings consistent with
our original mandate. We need not, and therefore should not,
reach the constitutional question of whether the remitted
punitive award was so excessive as to violate the Due Process
Clause of the Fourteenth Amendment. I therefore do not join
my colleagues in answering a question that should not be before
us, and so I respectfully dissent.

                               I.

                               24
        The first jury found in favor of CGB Occupational
Therapy, Inc., having determined that the defendants, Sunrise
Assisted Living Management, Inc. and Sunrise Assisted Living,
Inc. (collectively, Sunrise), tortiously interfered with CGB’s
contracts with two nursing home facilities and its own
therapists. The jury awarded CGB $576,000 in compensatory
damages for Sunrise’s interference with the nursing home
contracts, $109,000 in compensatory damages for Sunrise’s
interference with CGB’s therapist contracts, and $1.3 million in
punitive damages. It was not clear how the jury allocated the
punitive damages award between the two acts of interference,
because the verdict form did not specify.            See CGB
Occupational Therapy, Inc. v. RHA Health Serv., Inc., 357 F.3d
375, 382 (3d Cir. 2004).

        A panel of our Court considered this case and concluded
that, as a matter of law, Sunrise was entitled to judgment in its
favor on the claim of tortious interference with the nursing home
contracts. Id. at 385-88. We allowed the judgment to stand on
the other claim of tortious interference, regarding the therapist
contracts. Id. at 389-90. The effect of our holding on
compensatory damages was simple: CGB retained the $109,000
award on the affirmed claim, but lost the $576,000 award on the
reversed claim. The award of punitive damages posed a thornier
question because we had no way to know what part, if any, of
the $1.3 million punitive award was intended by the jury to
punish Sunrise for action underlying the claim we had reversed.
In recognizance of this difficulty, we wrote:

              [I]t is impossible to determine how punitive
              damages should be allocated in light of our

                               25
               determination that Sunrise could not have
               interfered with the contract between CGB and
               RHA/Pennsylvania. Consequently, we must
               reverse the punitive damage determination and
               remand to the District Court for a redetermination
               of punitive damages in accordance with this
               opinion.

Id. at 390. On remand, the sole task for the District Court was
to be a redetermination of punitive damages. Had we been able
to apportion the punitive award then, we would not be here
today.

        The District Court found our mandate for the remand to
be unclear. The court ruled that although “[t]he Third Circuit
ruling in this case has not, unfortunately, completely illuminated
the path that this Court must take[,] . . . [t]his Court’s reading of
the Third Circuit’s mandate is that the entire issue of punitive
damages, including whether or not they are appropriate given
Defendants’ conduct, must be retried.” Order of December 29,
2004. The District Court went on to hold that Sunrise was
entitled to argue that its conduct was not “sufficiently grievous
as to justify an award of punitive damages,” but that it could not
argue that its conduct was not wrongful or tortious because our
Court had affirmed the first jury’s finding that the conduct was
tortious. Under this ruling, the second jury was to consider
whether punitive damages should be awarded based on
Sunrise’s tortious interference with CGB’s therapist contracts,
and the jury was free to award any punitive award it saw fit,
from zero to infinity, subject to review for excessiveness.



                                 26
         At the end of the second trial, the jury considered the
issue of punitive damages and returned with the punitive award
that it saw fit: $30 million. The District Court determined that
this award was excessive and reduced it to $2 million. Needless
to say, neither the jury’s award nor the court’s remittitur reflects
an attempt to apportion the first jury’s punitive award of $1.3
million.

                                II.

        A longstanding and central principle of our judicial
system is that “an inferior court has no power or authority to
deviate from the mandate issued by an appellate court.” Briggs
v. Pa. R.R. Co., 334 U.S. 304, 306 (1948). See also Casey v.
Planned Parenthood of Se. Pa., 14 F.3d 848, 856 (3d Cir. 1994).
Where a reviewing court in its mandate states that the trial court
must proceed in accordance with the opinion of the reviewing
court, that opinion becomes a fully-merged part of the mandate.
See Bankers Trust Co. v. Bethlehem Steel Corp., 761 F.2d 943,
949 (3d Cir. 1985) (quoting Noel v. United Aircraft Corp., 359
F.2d 671, 674 (3d Cir. 1966)). Once the mandate is issued, “[a]
trial court must implement both the letter and spirit of the
mandate, taking into account the appellate court's opinion and
the circumstances it embraces.” Bankers Trust, 761 F.2d at 949.
The question we must answer is whether the District Court
violated the letter or the spirit of our Court’s mandate, looking
for guidance at the entirety of our opinion, which we expressly
stated to be part of our mandate.

       By our Court’s express language, the punitive award was
reversed, and the case was remanded for a “redetermination” of

                                27
punitive damages. The judgment was silent as to whether the
range of punitive awards available on remand would be limited
by the award determination of the first jury. The District Court
interpreted our silence as lack of direction and proceeded to
decide that the range was open. If we did not settle this issue on
the first appeal, then the District Court acted properly, as a trial
court on remand “is free to make any order or direction in
further progress of the case, not inconsistent with the decision
of the appellate court, as to any question not settled by the
decision.” Casey, 14 F.3d at 857 (quoting Bankers Trust, 761
F.2d at 950) (internal quotation marks omitted).

        The express language of the mandate was not, however,
the entirety of what the District Court should have considered.
As we explained in Bankers Trust, when a district court executes
a mandate issued by our Court, it must seek guidance not only
in the letter of mandate, but in its spirit, and it must look both to
the opinion and to the circumstances it embraces. 761 F.2d at
949.

        What it means to follow the “spirit” of a mandate,
however, is uncomfortably ambiguous. When we remand a case
for further proceedings, we of course cannot expect the court to
do what we mean, even when what we mean cannot reasonably
be understood from what we say. We do, however, expect that
the court will implement faithfully the mandate it receives.
When a case is remanded for a limited purpose, faithful
implementation of the mandate means that the district court will
narrowly tailor the proceedings to ensure that the proceedings do
not enlarge themselves beyond their narrowly mandated scope,
as they are wont to do. Faithful implementation of a mandate is

                                 28
often more art than science, and considerable discretion is owed
to the district court. This discretion, of course, has outer limits,
and at least one of those limits should be clear: When the
proceedings on remand result in an outcome that is grossly
incongruous with the purpose for which the remand was
ordered, the spirit of the mandate is violated.

        The purpose of our mandate in this case was clear. The
District Court had ordered Sunrise to pay compensatory and
punitive damages totaling $1,985,000, and Sunrise appealed the
judgment against it. We partially reversed the judgment and
therefore needed to reduce the $1,985,000 award. We struck the
$576,000 compensatory award, and sought to do the same to a
portion of the $1.3 million punitive award. In other words, the
punitive award needed to be reduced, and we ordered a
redetermination of punitive damages because, although we knew
that the original punitive award was too high, we did not know
by how much. Instead, the redetermination resulted in an
enlargement of the punitive award, to a figure that was higher
than the original punitive and compensatory awards together.
The procedural history can be reduced to this: The District
Court used the remand we had ordered to nullify the effect of
our holding and place Sunrise in a worse position than it had
been before it won its appeal. The spirit of our mandate was
violated.

       In a just legal system, such a result should not be
tolerated. If a victorious appellant is to be rewarded with a
higher award against it, then we as judges are little better than
the Walrus and the Carpenter, who beseech the Oysters to walk
with them, only to reward the Oysters by eating them. See

                                29
LEWIS CARROLL, Through the Looking-Glass and what Alice
found there, in THE COMPLETE WORKS OF LEWIS CARROLL 133,
185-88 (Vintage Books 1976) (1871). Litigants in federal court
deserve better treatment than that.8

                                III.

        “A fundamental and longstanding principle of judicial
restraint requires that courts avoid reaching constitutional
questions in advance of the necessity of deciding them.” Lyng
v. Nw. Indian Cemetery Protective Ass’n 485 U.S. 439, 445
(1988). The majority decides this case under the Due Process
Clause of the Fourteenth Amendment. I recognize that the law
on this subject is not clear and that litigants in our circuit would
benefit from what guidance they can receive from our Court.
The role of the court of appeals, however, is not to provide
guidance whenever we believe it will be helpful. Our job is to
decide cases, and the case before us today does not raise a
constitutional question. Had the District Court adhered to the
spirit of our mandate, the $2 million punitive award that the


       8
        Judge McConnell recently has voiced similar concerns in
the context of criminal resentencing, where sometimes a defendant
successfully challenges his or her sentence and nonetheless faces
an “appeal tax” in the form of a higher sentence. See United States
v. Medley, 476 F.3d 835, 840-43 (10th Cir. 2007) (McConnell, J.,
concurring). I express no view as to whether appellants in some
circumstances must risk unfavorable outcomes as a result of their
success on appeal. Our mandate in this case, however, should not
have placed Sunrise in such a dilemma, and because the
proceedings on remand did so, they undermined our holding.

                                30
majority considers never would have issued. I would ask the
District Court to correct the error, not use the error as a
springboard to constitutional analysis.

       The judgment of the District Court should be vacated as
to punitive damages and remanded with an explanation of what
our original mandate required. Punitive damages should be
capped at $1.3 million, the maximum amount attributable to
Sunrise’s interference with the therapist contracts under the first
jury’s award.

       I respectfully dissent.




                                 31
