No. 13-0764 - Quicken Loans, Inc. v. Brown
                                                                             FILED
                                                                         November 25, 2014
                                                                        RORY L. PERRY II, CLERK
                                                                      SUPREME COURT OF APPEALS
                                                                          OF WEST VIRGINIA

LOUGHRY, Justice, concurring, in part, and dissenting, in part:


              A mere five months after mishandling a substantial punitive damages verdict

in Manor Care v. Douglas, ___ W.Va. ___, 763 S.E.2d 73 (2014), the majority has chosen

to ignore federal jurisprudence by affirming a punitive damage verdict that violates principles

of due process. I write separately not only to express my disagreement with the majority’s

decision to affirm the punitive damage award in the instant case, but to articulate my staunch

disagreement with the Court’s related decision in Quicken Loans, Inc. v. Brown, 230 W.Va.

306, 737 S.E.2d 640 (2012) (hereinafter “Quicken I”), to characterize attorney’s fees and

costs as compensatory damages. Therefore, while I agree with the majority’s conclusion that

the circuit court exceeded the mandate of Quicken I on remand and its commensurate

reduction of the damages and application of the off-set, I wholly reject the majority’s

decision to uphold the original award of punitive damages assessed in this matter.



       I.     Attorney’s Fees and Costs as Compensatory Damages under West
              Virginia Code § 46A-5-104

              As an initial matter, I recognize that the issue of attorney’s fees and costs as

compensatory damages was not before this Court in the instant appeal because this issue was

fully resolved in Quicken I–a decision issued before my term of office began. To avoid any


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confusion regarding my endorsement of the holdings of Quicken I, however, I feel compelled

to expose the analytical cracks in Quicken I’s conclusion that attorney’s fees and costs are

compensatory damages under West Virginia Code § 46A-5-104 (2006).



              In Quicken I, this Court held that when punitive damages were “available”1 in

a civil action where attorney’s fees and costs were awarded under West Virginia Code §

46A-5-104, such fees and costs must be included in the punitive damages ratio. See Syl. Pt.

11, Quicken I, 230 W.Va. 306, 737 S.E.2d 646. In conceding that attorney’s fees and costs

were not “specifically articulated” as compensatory under our consumer credit and protection

act, the Court was careful to recognize in Quicken I that fee-shifting statutes have been

considered compensatory “in general.” Id. at 331-32, 737 S.E.2d at 665-66. The Court then

proceeded to “cherry-pick” various language from fee-shifting statutes and a handful of cases

to suggest that attorney’s fees and costs should be considered compensatory because they

serve the general purpose of reimbursement and making plaintiffs whole.




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        The use of the term “available” in the holding in Quicken I was designed to obfuscate
the fact that punitive damages are not authorized by the statute under which the attorney’s
fees and costs were awarded. Accordingly, the Court “borrowed” discretionary, statutory
damages from one cause of action to justify the punitive damages awarded under a different
cause of action. Not surprisingly, rather than analyzing the intellectual dishonesty of this
procedure, the majority conveniently declared in a footnote that the petitioner provided no
legal authority in support of this observation and therefore it would not be addressed.
Quicken I, 230 W.Va. 306, 333 n.43, 737 S.E.2d at 667 n.43.

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              Addressing this issue with the imprecision of a buzz-saw, the Court in Quicken

I failed to examine the type and purpose of each fee-shifting statute and the nature of the

underlying cause of action–factors necessary to a determination of whether fees and costs are

compensatory in a given instance. If the Court had carefully examined the fee-shifting

statutes upon which it relied, it would have recognized that several of the cited statutes are

mandatory fee-shifting statutes. See, e.g., W.Va. Code § 29B-1-7 (providing for mandatory

fee-shifting in successful FOIA actions); Orndorff v. W.Va. Dept. Of Health, 165 W.Va. 1,

267 S.E.2d 430 (1980) (authorizing mandatory attorney’s fees for successful appeals of

adverse Civil Service Commission determinations).2 In clear and stark contrast, West

Virginia Code § 46A-5-104 is discretionary. Id. (providing that “the court may award all or

a portion of the costs of litigation, including reasonable attorney fees, court costs and fees,

to the consumer”). Logic suggests that recovery of such an award would have been

structured as mandatory if the Legislature had intended attorney’s fees and costs to be

deemed compensatory in nature under the consumer credit and protection act.



              Had the Court employed its analysis with greater care in Quicken I, it would

have been forced to acknowledge that even in those cases relied upon as authority for



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         Similarly, in Farley v. Zapata Coal Corp., 167 W.Va. 630, 281 S.E.2d 238 (1981),
we held that although the statutory fee-shifting language of the West Virginia Wage Payment
and Collection Act was permissive, an award of attorney’s fees and costs to a successful
litigant was essentially mandatory: “We feel that costs, including attorney fees, should be
awarded to prevailing plaintiffs as a matter of course. . . .” Id. at 639, 281 S.E.2d at 244.

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viewing fees and costs as permissive, it was the nature of the causes of action at issue that

justified characterizing the fees and costs as compensatory. More specifically, in the cases

cited by the Court in Quicken I, the underlying litigation was instituted to compel defendants

to honor existing statutory or contractual obligations, thereby making an award of fees and

costs plainly compensatory. See Farley, 167 W.Va. 630, 281 S.E.2d 238 (collection of due

and owing wages); Willow Inn, Inc. v. Public Service Mut. Ins. Co., 399 F.3d 224 (3d Cir.

2005) (bad faith claim requiring insurer to honor insurance contract). Where a citizen is

compelled to institute litigation and incur attorney’s fees and costs to force recalcitrant

defendants to comply with their legal or contractual obligations, there is no question that the

expenditure of attorney’s fees and costs have caused “actual harm” akin to special damages.



              In failing to judiciously examine the fee-shifting statutes relied upon, the Court

in Quicken I overlooked the fact that the conduct at issue herein is simply “bad behavior”–the

type of behavior that may warrant punishment in the form of attorney’s fees and costs and

thereby permits such an award to be properly characterized as punitive. The Court in

Quicken I utterly ignored this Court’s jurisprudence with respect to fraud or other “bad

behavior” wherein we have stated that the “obvious purpose of awarding attorney fees and

costs in a case involving fraud is that intentional conduct such as fraud should be punished

and discouraged. . . . [Defendant] has been sufficiently discouraged from future fraudulent

conduct by the sizable punitive damages awarded by the jury.” Boyd v. Goffoli, 216 W.Va.

552, 569, 608 S.E.2d 169, 186 (2004). Our leading case on punitive damages establishes that

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the “cost of litigation” is a factor in determining whether the punitive assessment is justified;

thereby signifying that such “costs” are more closely associated with deterrence than

compensation. Syl. Pt. 4, Garnes v. Fleming Landfill, Inc., 186 W.Va. 656, 413 S.E.2d 897

(1992). Using the rationale employed by the Court in Quicken I, a prevailing plaintiff could

always claim that his or her attorney’s fees and costs were necessary to make them “whole”

or provide “restitution” because such fees and costs would not have been incurred but for the

offending conduct. Critically, it is the nature of the conduct that gives rise to the attorney’s

fees and costs which must impel the inquiry as to whether the fees and costs are

compensatory.



                         II.   Excessiveness of Punitive Damages

              Even assuming for purposes of this case that attorney’s fees and costs should

be included in the punitive damage ratio, the majority has still improperly affirmed the

punitive damage verdict. Conforming to the errant analysis employed in Manor Care, the

majority has again chosen to brazenly ignore the United States Supreme Court’s

jurisprudence regarding punitive damages, virtually begging to be reversed by that body upon

certiorari. In this case, however, the majority now appears to be under the astonishingly

mistaken belief that federal punitive damage jurisprudence is not applicable to a punitive

damages review conducted by this Court.




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     A.    Punitive Damage Awards Must Be Reviewed for Due Process Violations

              Laboring under the misapprehension that a due process challenge is not before

this Court with respect to the punitive damages verdict, the majority has chosen to disregard

the United States Supreme Court’s recent directives set forth in BMW of North America, Inc.

v. Gore, 517 U.S. 559, 582 (1996), and State Farm Mutual Automobile Insurance Co. v.

Campbell, 538 U.S. 408 (2003). In reaching this conclusion, the majority is flatly wrong.



              First, there is no question that the petitioners plainly asserted a due process

challenge to the punitive damages award in both Quicken I and in the instant appeal. In

Quicken I, one of the petitioner’s most significant assignments of error was that the punitive

damages award was “grossly excessive and deprived Quicken Loans of due process.”

Without addressing the merits of the punitive damages challenge, the Quicken I Court merely

remanded for an order compliant with Garnes v. Fleming Landfill, Inc., 186 W.Va. 656, 413

S.E.2d 897 (1991). In its appeal from the order issued on remand, the petitioner reasserted

a substantive due process challenge: in fact, the petitioner made six separate assignments of

error directed at the various aspects of the substantive due process deprivation arising from

the punitive damages award.



              Regardless of how the petitioner framed its punitive damage challenge, this

Court’s review of such awards is necessarily constrained by due process considerations. The

entirety of our punitive damages jurisprudence is centered on the objective of eradicating the

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due process deprivation that excessive punitive damage awards represent. To the extent the

majority believes that a Garnes-based challenge is an independent, state-based challenge

unencumbered by the United States Supreme Court’s punitive damages jurisprudence, it is

seriously misguided and patently incorrect.



              It should not be overlooked that Garnes itself involved a due process challenge

to an excessive punitive damage award that was remanded to this Court from the United

States Supreme Court for reconsideration in light of Pacific Mutual Life Insurance Co. v.

Haslip, 499 U.S. 1 (1991), which held that the punitive damages award in that case did not

violate the Due Process Clause of the Fourteenth Amendment. In Garnes, the reversal of the

jury’s award was expressly “reverse[d] based on Haslip.” Garnes, 186 W.Va. at 659, 413

S.E.2d at 900. Moreover, in creating the “Garnes factors,” the Court prefaced that

“[f]ollowing the dictates of Haslip, we here set out a new system for the review of punitive

damages awards in West Virginia.” Id. at 667, 413 S.E.2d at 908. The import of Garnes,

therefore, is the establishment of factors that ensure adequate due process of law–under both

state and federal law.



              Thereafter, in TXO Production Corp. v. Alliance Resources Corp., 187 W.Va.

457, 474, 419 S.E.2d 870, 887 (1992), this Court sought to elaborate on the Garnes

requirement that punitive damages bear a “reasonable relationship to compensatory

damages.” We noted in TXO that the Garnes factors were created “to provide both

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procedural and substantive due process to defendants against whom punitive damages are

awarded in accordance with the U.S. Supreme Court’s directive in Haslip[.]” Id. (emphasis

added). While rejecting a “mechanical mathematical formula to use in all punitive damages

cases,” the Court in TXO created the 5:1 “outer limit” ratio for comparison of punitive

damages to compensatory damages. Syl. Pt. 15, TXO. Critically, the damages ratio review

is not a procedure independent of the Garnes factors, but rather, a means of evaluating one

of the most critical factors set forth in Garnes–the “reasonable relationship” factor. That

factor, like the Garnes factors, was adopted–to ensure adequate due process–under state and

federal principles. Syl. Pt. 3, Garnes.



              Subsequent to TXO, this Court further distilled the construct of a review of

punitive damages:

              Every post-trial analysis as to the amount of the punitive damage
              award should be conducted by the trial court exclusively within
              the boundaries of Syllabus Points 3 and 4 of Garnes v. Fleming
              Landfill, Inc., 186 W. Va. 656, 413 S.E.2d 897 (1991), and
              Syllabus Point 15 of TXO Production Corp. v. Alliance
              Resources Corp., 187 W. Va. 457, 419 S.E.2d 870 (1992).

Syl. Pt. 6, in part, Alkire v. First Nat’l Bank of Parsons, 197 W.Va. 122, 475 S.E.2d 122

(1996) (emphasis added). Further, in syllabus point six of Perrine v. E. I. Du Pont de

Nemours and Co., 225 W.Va. 482, 694 S.E.2d 815 (2010), this Court held:

              When this Court, or a trial court, reviews an award of punitive
              damages, the court must first evaluate whether the conduct of
              the defendant toward the plaintiff entitled the plaintiff to a
              punitive damage award under Mayer v. Frobe, 40 W. Va. 246,

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              22 S.E. 58 (1895), and its progeny. If a punitive damage award
              was justified, the court must then examine the amount of the
              award pursuant to the aggravating and mitigating criteria set out
              in Garnes v. Fleming Landfill, Inc. W. Va. 656, 413 S.E.2d 897
              (1992), and the compensatory/punitive damage ratio established
              in TXO Production Corp. v. Alliance Resources Corp, 187 W.
              Va. 457, 419 S.E.2d 870 (1992).

Perrine further clarified that even if a punitive damages award met the due process

protections of the ratio analysis under TXO, it could still be reduced under the Garnes

mitigating factors. What Perrine did not do was to establish a Garnes/TXO analysis as a

wholly independent manner of reviewing punitive damage awards separate from federal law.

Both holdings are steeped in due process; both cases emanate from and are inextricably

linked to the United States Supreme Court’s directives aimed at ensuring that adequate due

process is provided by state courts. Why this Court believes it may ignore the more recent

United States Supreme Court cases–namely Gore and State Farm–under the guise of

employing a state as opposed to federal due process review simply defies logic.



              It is axiomatic that state-level constitutional protections may not fall short of

those established by the federal constitution. In fact, this Court has previously observed that

West Virginia’s due process protections are more protective than those guaranteed by the

federal Constitution: “Although our due process clause does not significantly differ in terms

of its language from the Fifth and Fourteenth Amendments to the federal constitution, this

Court has determined repeatedly that the West Virginia Constitution’s due process clause is

more protective [] than its federal counterpart.” Women’s Health Center v. Panepinto, 191

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W.Va. 436, 441-42, 446 S.E.2d 658, 663-64 (1993). As a result, the majority’s stubborn

refusal to review the punitive damage award in this case against the edicts of Gore and State

Farm–decisions that enhance previously-adopted and clearly-applicable due process

protections–can only be viewed as decidedly misguided. Even worse, the majority’s decision

may forecast yet another West Virginia punitive damage award being accepted for review

by the United States Supreme Court.



                B.    The Punitive Damage Award Violates Due Process

              Had the majority applied the proper analysis, it would have realized that

approval of the punitive damage award simply because the multiplier fell below the 5:1

“outer limit” TXO ratio was improper under recent rulings addressing what satisfies due

process. “[W]e have consistently rejected the notion that the constitutional line is marked

by a simple mathematical formula, even one that compares actual and potential damages to

the punitive award.” Gore, 517 U.S. at 582. The United States Supreme Court has

admonished that where compensatory damages are substantial, only a 1:1 ratio will pass

constitutional muster:

              [T]he State Farm Court stated that “[w]hen compensatory
              damages are substantial, then a lesser ratio, perhaps only equal
              to compensatory damages, can reach the outermost limit of the
              due process guarantee.” Id. at 425, 123 S.Ct. 1513 (emphasis
              added). As such, it is clear that the United States Supreme
              Court has sanctioned, at most, a 1:1 ratio for cases where the
              compensatory damages are substantial.

Manor Care, ___ W.Va. at ___, 763 S.E.2d at 119 (Loughry, J., dissenting).

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              Given that the compensatory damages (as calculated by the majority) total

$613,676.61, there is little question that a 1:1 ratio is the maximum award allowed in the

instant case. Instead, the majority adds to the “stark unpredictability of punitive awards” by

implicitly endorsing the 3.53:1 ratio in the instant case despite the existence of a substantial

award of compensatory damages. Manor Care, ___W.Va. at ___, 763 S.E.2d at 120 (quoting

Exxon Shipping Co. v. Baker, 554 U.S. 471, 499-500 (2008)). While not as large as the

compensatory damage award in Manor Care, the more than $600,000.00 in “compensatory”

damages in this case are nevertheless “substantial.” See Jones v. United Parcel Serv., Inc.,

674 F.3d 1187, 1207 (10th Cir. 2012), cert. denied, 133 S.Ct. 413 (2012) (reducing punitive

damages from slightly more than 3:1 punitive-to-actual damages ratio to 1:1 ratio in part

because plaintiff's actual damages of $630,307 were substantial); Bridgeport Music, Inc. v.

Justin Combs Pub., 507 F.3d 470, 490 (6th Cir. 2007) (“Given the large compensatory

damages award of $366,939 . . . a ratio of closer to 1:1 or 2:1 is all that due process can

tolerate in this case.”); Bach v. First Union Nat. Bank, 486 F.3d 150, 156-57 (6th Cir. 2007)

(finding that where plaintiff had recovered $400,000 in compensatory damages, a 1:1 ratio

of compensatory to punitive damages was “the outer boundary of what the Constitution will

permit.”); Williams v. ConAgra Poultry Co., 378 F.3d 790, 799 (8th Cir. 2004) (concluding

that “large compensatory award” of $600,000 in racial harassment claim “is a lot of money”

and reducing punitive damages from 10:1 to 1:1 ratio); Burton v. Zwicker and Associates,

PSC, 2013 WL 5652646 (E.D. Ky. 2013) (reducing ratio to 1:1 due to “substantial” $350,000

compensatory damages); Thomas v. iStar Fin., Inc., 508 F. Supp.2d 252, 263 (S.D.N.Y.2007)

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(“[T]he Court believes the [3:1 to 4:1] ratio in this case is excessive because Thomas was

awarded a very substantial amount in compensatory damages [$443,500], making a punitive

award equal to the compensatory damage award more appropriate.”); see also Phelps v.

Louisville Water Co., 103 S.W.3d 46, 54 (Ky. 2003) (noting “the relatively small amount of

compensatory damages awarded” to determine appropriate ratio).



              Moreover, the fact that the Court felt the need to artificially inflate the

compensatory damages in Quicken I as a means of effectively reducing the ratio of punitive

to compensatory damages is further evidence of the majority’s misapprehension of the

manner in which punitive damages must be reviewed by this Court. A tortured inclusion of

attorney’s fees and costs under West Virginia Code § 46A-5-104 is entirely unnecessary to

ensure adequate compensation and behavior-deterring punishment. This is evident from the

following observation of the United States Supreme Court:

              Indeed, low awards of compensatory damages may properly
              support a higher ratio than high compensatory awards, if, for
              example, a particularly egregious act has resulted in only a small
              amount of economic damages. A higher ratio may also be
              justified in cases in which the injury is hard to detect or the
              monetary value of noneconomic harm might have been difficult
              to determine.

Gore, 517 U.S. at 582 (emphasis added). Rather than creating the artifice that attorney’s

fees and costs are compensatory damages in this case, the actual compensatory damage

award of $17,476.72 should have been used to examine the award in terms of an acceptable

multiplier.   Instead, the Court in Quicken I felt the need to artificially inflate the

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compensatory damages which in turn enabled it to sanction a single-digit multiplier and

simultaneously enhance the ultimate verdict.



              What all of the foregoing makes clear is that a majority of this Court fails either

to understand or properly apply United States Supreme Court precedent when reviewing

awards of punitive damages. Disturbingly reminiscent of the majority’s mishandling of the

Manor Care verdict, the majority again exhibits its decision to turn a blind eye to the United

States Supreme Court’s admonition that a reviewing court has a duty to “promot[e] systemic

consistency” with regard to punitive awards. Manor Care, ___ W.Va. at ___, 763 S.E.2d at

121 (quoting Exxon Shipping Co. v. Baker, 554 U.S. 471, 502 (2008) (Loughry, J.,

dissenting)). At this juncture, the only “consistency” to be found in this Court’s review of

punitive damage awards is its contumacious refusal to heed the United States Supreme

Court’s holdings and its insistence on a result-oriented analysis to uphold plainly-excessive

punitive damage awards. For these reasons, I respectfully concur, in part, and dissent, in

part.




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