Head, Catherine E.

English

University of Baltimore School of Law

University of Baltimore Law ForumVolume 22Number 2 Fall, 1991 Article 101991Recent Developments: Alexander & Alexander v.Evander & Assoc., Inc.: Court of Special AppealsVacates State's Largest Punitive AwardCatherine E. HeadFollow this and additional works at: http://scholarworks.law.ubalt.edu/lfPart of the Law CommonsThis Article is brought to you for free and open access by ScholarWorks@University of Baltimore School of Law. It has been accepted for inclusion inUniversity of Baltimore Law Forum by an authorized editor of ScholarWorks@University of Baltimore School of Law. For more information, pleasecontact snolan@ubalt.edu.Recommended CitationHead, Catherine E. (1991) "Recent Developments: Alexander & Alexander v. Evander & Assoc., Inc.: Court of Special AppealsVacates State's Largest Punitive Award," University of Baltimore Law Forum: Vol. 22 : No. 2 , Article 10.Available at: http://scholarworks.law.ubalt.edu/lf/vol22/iss2/10mary judgment claiming that the ex-clusivity provision ofsection 15 of the Workers' Compensation Act barred Le's action. Section 15 states in pertinent part that «an employer's I iabil ity for payment of workers' com-pensation provided for in this statute shall be the exclusive remedy." Id. at 1069. Federated additionally argued that although section 44 of the Mary-land Workers' Compensation Act pro-vides an exception to the exclusivity rule by permitting common law ac-tions against employers for deliberate torts, it did not apply to Le. Id. Federated cited Maryland case law for the proposition that an employee could sue only if the potential tort-feasor was the employer's «alter ego" or acted with its express authorization. Id. at 1 070 (citing Continental Casu-alty Co. v. Mirabile, 449 A.2d 1176 (Md. Ct. Spec. App. 1982)). Feder-ated argued that because Spahr was not its " alter ego," nor acting with its express authority, Le's only redress was governed by the terms of the Act. Accepting this interpretation, the cir-cuit court granted Federated's mo-tion. The court of special appeals re-versed, stating that because Le's case involved non-physical injuries, it did not fall within the provision of the Workers Compensation Act. Id. The intermediate appellate court distin-guished Le's case from earlier cases on the ground that the latter dealt with physical injuries while Le's injuries were non-physical, thereby allowing Le's action to proceed. Id. Federated appealed to the court of appeals which affirmed the intermediate court's de-cision on different grounds. The court of appeals began its analysis by interpreting the appropri-ate sections of the Workers' Compen-sation Act. Id. at 1071. The court first reiterated the basic principal that sec-tion 44 operates as an exception to the exclusivity requirement of section 15 and provides that an employee shall have the " option to take benefits under article or sue where injury or death 24 - The Law Forum/22.2 results from the deliberate intention of Alexander & Alexander v. Evander & employer. " Id. (quoting Md. Ann. Assoc. , Inc.: COURT OF SPECIAL Code art. 101 § 44 (1985 & 1990 APPEALS VACATES STATE'S Supp.)). The court held that the prior LARGEST PUNITIVE AWARD. decisions of the court of special ap- Acting in accordance with a recent peals construed the section too nar- United States Supreme Court opinion, rowly by requiring that the tort-feasor the Court of Special Appeals of Mary-be the employer's « alter ego" or act land recognized in Alexander & with its express authority. Id. at 1072. Alexander v. Evander & Assoc. , Inc. " The court of appeals declined to 596 A.2d 687 (Md. Ct. Spec. App. adopt the " alter ego" test and allowed 1991), an opportunity to review Le to bring the common law suit. Id. Maryland's system of awarding puni-In support of its broad application of tive damages. In holding that the section 44, the court cited decisions award in Alexander violated due pro-which support an employee's right to cess, the court vacated the award and sue his employer for "some inten- remanded for retrial the issues of tional torts based on the employer's whether, and in what amount, puni-vicarious liability for the conduct of a tive damages should have been ren-co-employee." Id. at 1073-74. The dered. court, however, decl ined to define the B. Dixon Evander & Associates, parameters of the section 44 excep- Inc. (" Evander"), an insurance bro-tion. Id. ker, secured medical malpractice in-The court in Federated Depart- surance for doctors at the University ment Stores v. Le has significantly of Maryland Hospital with an insurer, broadened the interpretation of sec- Mutual Fire, whose underwriter was tion 44 causes of action and the exclu- Shand, Morahan and Co. (" Shand" ). sivity exception in the Maryland Work- Shand was a subsidiary of another ers' Compensation Act. In so doing, broker, Alexander & Alexander (" A the court aligned Maryland with the & A"). Evander and Shand had a majority of other jurisdictions which contract whereby Evander was to be have similar exclusivity provisions Shand's exclusive representative for and exceptions in their respective professional malpractice coverage. Workers' Compensation Acts. Mary- In order to obtain less expensive land employers are now subject to malpractice coverage, the hospital se-increased liability for injuries to their cured A & A as its new exclusive employees. Potential plaintiffs may broker in 1985. This decision created now seek a common law action against a conflict with Shand's agreement to their employers for the deliberate ac- underwrite exclusively for A & A. tions of co-employees causing non- Aware of the conflict, Shand officials physical injury. In this respect, more refused to place any of the hospital's employers may have to defend them- insurance needs with its carrier except selves against claims arising from situ- through Evander. At trial, it was ations over which they have little revealed that A & A officials had control. Moreover, the small busi- pressured Shand officials to accept ness owner who, although able to hospital policies through A & A in exert some control over the situation, spite of Shand's promise to Evander. may not have the financial means to Evander claimed that A & A had afford the increased litigation costs of tortiously interfered with his contract actions now permitted. with Shand, thereby depriving him of commissions from that contract. - Steven B. Drucker Evander additionally alleged that A & A had conspired to harm his business reputation. Testimony at trial re-vealed that an A & A vice-president had a personal dislike for Evander and that the official held a grudge against Evander and had vowed to put him out of business. The jury awarded $250,052 in compensatory damages to Evander against all defendants as well as $40 million in punitive dam-agesagainstA&A. AlthoughEvander was also awarded $70,104 in punitive damages against Shand, he dismissed that claim. On A & A's motion, Baltimore City Circuit Judge Meyer Cardin reduced the punitive damages against A & A to $12.5 million, added to the compensatory damages, and left the rest of the verdict intact. A & A's appeal to the Court of Special Appeals of Maryland centered around the punitive damages award. Specifically, A & A complained that the award violated both federal and state requirements for due process of law, based on the amount of the award and the lack of relation to "proper standards." A & A premised its argument on the Supreme Court's re-cent decision in Pacific Mut. Life Ins. v. Haslip, 111 S. Ct. 1032 (1991). In Haslip, the justices turned back a broad-based challenge to punitive damages, pointing out that they have " long been a part of traditional state tort law." Alexander, 596 A. 2d at 705 (quoting Silkwood v. Kerr McGee, 464 U.S. 238 (1984». The Court, however, did note that punitive dam-age awards are subject to due process considerations and warned that states must provide sufficient standards to guide juries and judges in their deci-sions on when punitive damages should be awarded. These standards, the Court opined, must include proper jury instruction and sufficient judicial review of the award. Alexander, 596 A.2d at 705-06 (citing Haslip, 111 S. Ct. at 1044 (1991». The court took this opportunity to determine whether Maryland law on punitive damages complied with the implicit standards from Haslip: guidance for the jury's and the court's discretion and judicial review of jury verdicts. Because Maryland's highest court had never promulgated a list of stan-dards for punitive damages, the court turned to Maryland case law to deter-mine whether Maryland courts had ever articulated the principles of puni-tive damages. The court concluded that the principles expressed in Mary-land decisions were sufficient to guide juries and judges. The court first noted the court of appeals holding that punitive damages " are to punish the wrongdoer, to teach him not to repeat his wrongful conduct and to deter others from engaging in the same conduct," Alexander, 596 A.2d at 708 (citing Wedeman v. City Chevrolet Co., 366 A.2d 7, 12 (1976». With regard to when a court is to impose such damages, the court noted another court of appeals decision in which punitive damages would be imposed only where there is " outrageous con-duct." Id. at 708 (citing Nast v. Lockett, 539 A.2d 1113, 1116 (1988». As to judicial review of punitive damages, the court found that the circuit courts in Maryland have broad discretion to review jury verdicts for excessiveness. The court acknowl-edged, however, that" [a)s a general rule in Maryland, 'the question of whether a verdict is excessive is not open on appeal,''' Id. at 709 (citing Continental Gas Co. v. Mirabile, 449 A.2d 1176, 1184 (1982», and that the Maryland appellate courts have never tampered with the amount of an award. After reviewing Maryland proce-dures for punitive damage awards and deeming them sufficient, the court recognized that Haslip required courts to look further. The court stated the following: [i)ffaced with a punitive award that was entered upon proper procedure but which nonethe-less contravenes due process because it is all out of propor-tion to both the harm caused and the perniciousness of the conduct, we could not, on the ground of judicial impotence, allow the unconstitutional award to stand. Id. at 710. Armed with the additional power of review extended by Haslip, the court analyzed the award against A & A. The court was troubled by the fact that Evander had not presented evidence of A & A's net wealth and ability to pay, and that the jury had not been advised of the punishment and deterrent purposes of punitive dam-ages. Several other factors influenced the court's holding that the $12.5 million punitive award against A & A violated due process. The court first pointed out that the award against A & A was the largest ever rendered by a Maryland court. The nearest in amount was $7.5 million awarded in Potomac Electricv. Smith, 558A.2d 768 (1989). In addition, the court believed the award to be far in excess of the actual harm caused to Evander. The court noted that the award was nearly fifty times the essentially liquidated com-pensatory damages and observed that until the very end of the case, Evander himself had not sought more than $5 million. Finall y, the court decided that A & A's conduct, while" opprobrious, .. . excessive, ill-motivated, and . . . stupid," did not rate" high on the scale of reprehensibility." Alexander, 596 A.2d at 711. The court arrived at this conclusion after comparing A & A's case with Potomac Electric, where an electric utility had allowed a high voltage wire to remain downed in an area frequented by children, resulting in the electrocution of a child. The court in that case found that the utility company's wanton conduct justified a $7.5 million punitive award. Observ-ing that A & A had neither endangered public health or safety nor engaged in I ife-threatening activity, the court held that the award did not comport with due process. Alexander, 596 A.2d at 711. Following tradition, the court chose not to alter the award. While the court recognized that .. the occasion may arise where an appellate reduc-tion may be the most appropriate solu-22.2/The Law Forum - 25 tion," it declined to find that situation in Alexander. Id. at 711. The court instead vacated the punitive award and remanded for retrial the questions of whether, and in what amount, A & A's conduct justified a punitive damages . award. The court also suggested spe-cific instructions for the jury on re-mand. The Alexander opinion provides fresh insight on how the Maryland state courts should determine punitive damages. Though the court deter-mined that the standards set by case law were sufficient, it also acknowl-edged that Maryland courts in the past may have limited themselves too much in reviewing punitive damage awards. With the Haslip decision in mind, the court in Alexander gave appellate courts a green light for considering due pro-cess when examining punitive damage awards. The Alexander case also serves to remind attorneys and judges of the importance of jury instructions for punitive damage awards. Juries must be told that punitive damages serve to punish wrongdoers and deter others from similar conduct. Juries need to be aware of the standards for actual malice and other factors, such as the wrongdoer's net worth and ability to pay in order to make an informed decision. - Catherine E. Head embodied in Federal Rule of Evidence 801 (d) (2) (0) and abandoned the tradi-tional common law approach which required" speaking authority" before the statement was considered an ad-mission of the principal. B & K Rentals and Sales Co. (liB & K") stored equipment used in its business of renting scaffolding and seating for public gatherings in a por-tion of a warehouse owned by U niver-sal Leaf Tobacco Co. (" Universal "). B & K brought an action for damages against Universal, contending that the negligence of Universal and its em-ployees caused a fire which resulted in a substantial amount of damage to B & K's equipment. Only two Universal employees were present and working at the warehouse on the day of the fire, one of whom died in the fire. B & K never deposed or subpoenaed the sur-viving employee, Leonard Grimes. The parties disputed both the avail-ability of the surviving employee as a witness and B & K's efforts to locate him at the time of the trial. The case turned on the testimony of an expert witness, Lieutenant Ken-neth J. Klasmeier, a fire investigator with the Anne Arundel County Fire Department. Lt. Klasmeier based his testimony on a written report he re-ceived from another Anne Arundel Fire Department Investigator, Lieu-B & K Rentals and Sales Co. v. tenant James Stallings. Lt. Stallings Universal Leaf Tobacco Co. : MARY-based his report, regarding his inves-LAND ABANDONS SPEAKING tigations of the origin and cause of the AUTHORITY REQUIREMENT fire, primarily on Grimes' statements AND" RES GESTAE" APPROACH at the scene of the fire. Grimes told AND BINDS PRINCIPAL BY Lt. Stallings that: AGENT'SSTATEMENTSPURSU- 1) Johnson and he were the ANT TO F.R.E. 80Hd)(2l(D). only two people working at In B & K Rentals and Sales Co. v. the warehouse at the time of Universal Leaf Tobacco Co., 596 A.2d the fire; 640 (Md. 1991), the Court of Appeals 2) Grimes had lit an acetylene of Maryland held that a statement of a torch for Johnson a couple of party opponent's agent, which con- hours before the fire; cerns a matter within the scope of 3) Johnson was using the torch agency or employment and is made to burn strings caught in the during the existence of that relation- jack wheels of a wooden dolly; ship, may constitute an admission by 4) Grimes heard a popping the party opponent. By so ruling, the noise and saw smoke coming court of appeals adopted the principle from the area where Johnson 26 - The Law Forum/22.2 had just finished burning the string from the jack wheels; and 5) Grimes believed the cause of the fire was related to Johnson's use of the acetylene torch ... Id. at 641. The trial court excluded both Stallings' and Klasmeier's reports. The court ruled that the reports were inadmissible because each relied on Grimes' hearsay statements, and nei-ther qualified as admissions of a party opponent or as part of the res gestae exception. Id. at 642. The court of special appeals affirmed. The Court of Appeals of Maryland granted cer-tiorari to consider the laws under which evidence of admissions of party opponents were admissible. The court began its analysis by re-examining the development of Maryland's case law on vicarious ad-missions. The court noted that Mary-land courts traditionally implemented an evidentiary standard based on agency law. Under this traditional test, the court required an agent to have" speaking authority" before his statements qualified as an admission of the principal. Id. at 643 (citing Brown v. Hebb, 175 A. 602, 607 (Md. 1934». The court recognized the prob-lems inherent in the application of the traditional test of agency law as an evidentiary standard. The court pointed out that the narrow formula of admissibility under the traditional test was problematic because it" frequently caused courts to exclude the agent's highly probative statement on the theory that the employer had not au-thorized the agent to make damaging remarks about him ... Id. at 643. (quot-ing 4 J. Weinstein & M. Berger, Weinstein's Evidence, § 801(d)(2) (0)[01] at 219 (1988». The court next considered Maryland's expansion of the tradi-tionally narrow formula of admissibil-ity through the adoption of the res gestae exception to the hearsay rule. 

Recent Developments: Alexander & Alexander v. Evander & Assoc., Inc.: Court of Special Appeals Vacates State\u27s Largest Punitive Award

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Recent Developments: Alexander & Alexander v. Evander & Assoc., Inc.: Court of Special Appeals Vacates State\u27s Largest Punitive Award

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