Supreme Court Decision Upholds Ind. Punitive Damage Statute

June 3, 2003

The Indiana Supreme Court last week reversed the Indiana Court of Appeals decision in Cheatham v. Pohle, upholding the judgement of the trial court, and a significant element of the Tort Reform Act of 1995. The decision held the Indiana punitive damage statute is constitutional.

The Insurance Institute of Indiana submitted the only Amicus Curiae brief in the case, supporting Indiana’s punitive damage statute. John Trimble, Anthony Eleftheri and Richard Blaiklock with the law firm of Lewis & Wagner wrote the Amicus Curiae for the Institute. The office of the Indiana Attorney General acted in the capacity of lead defense counsel for the statute. The Indiana Trial Lawyers Association submitted an Amicus Curiae brief opposing Indiana’s punitive damage statute.

The ruling by the Supreme Court held it is permissible to allocate 75 percent of a punitive damage award to the Violent Crimes Victims Compensation Fund, and no attorney fee is owed to Plaintiffs’ counsel on that amount. Justice Boehm wrote the majority opinion with Chief Justice Shepard and Justice Sullivan concurring. Justice Dickson wrote the dissenting opinion with Justice Rucker concurring.

In the opinion, the majority stated “The Indiana legislature has chosen to define the plaintiff’s interest in a punitive damages award as only twenty-five percent of any award, and the remainder is to go to the Violent Crimes Victims’ Compensation Fund. The award to the fund is not the property of the plaintiff.”

In presenting the defense of the punitive damage statute, the state focused on protecting the constitutionality of the law as enacted as part of the Tort Reform Act of 1995. The Institute’s Amicus Curiae brief added practical points of view to support the state’s arguments.

As the lead Amicus attorney, John Trimble said the court rendered the opinion, due in large part, based on the arguments submitted in the Institute’s Amicus brief. One of the key points the court cited was that the attorney for the plaintiff knew of the existence of the statute and was aware the client would be receiving 25 percent of the punitive damages.

The court opinion addressed the matter stating “The statute limits the amount of the client’s recovery. If the parties have a contingent fee contract that operates as a percentage of all amounts recovered by the plaintiff, it may serve to reduce the amount on which the attorney calculates the fee. But that presents no constitutional issue.”

Trimble said he was pleased the first constitutionality test on the Tort Reform Act was upheld by the court.

“As someone who assisted in the creation of the Tort Reform Act of 1995, it is gratifying that a key portion of the law was found constitutional,” Trimble said. “The trial bar claimed the elements of the Act would be found unconstitutional, and the court has found that is just not the case.”

The Insurance Institute of Indiana played an instrumental role in the passage of the Tort Reform Act of 1995, which is seen by many as one of the most comprehensive and necessary tort reform packages in the country. Institute President Stephen Williams said the Supreme Court decision is an important victory in the tort reform movement.

“The opinion of the Supreme Court is an exact interpretation of why the law was crafted in 1995,” Williams said. “The concept of punitive damages is to act as a deterrent to future wrongful actions, not to provide supplemental restitution or additional fees for the plaintiff attorney.”

The Indiana Code citation under scrutiny was IC 34-51-3-6. The statutes states that when punitive damage awards are granted, the person to whom the damages were awarded receives 25 percent of the award, while the Violent Crime Victims Compensation Fund receives 75 percent.

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