In Lawnwood Medical Center, Inc. v. Samuel H. Sadow, M.D. Case No. 4D08-1968 (Fla. 4th DCA March 24, 2010) the Fourth District certified the following question to the Florida Supreme Court as one of great public importance: Are punitive damages of $5,000,000 arbitrary or excessive under the Federal Constitution where the jury awarded no compensation beyond presumed nominal damages but found that defendant intentionally and maliciously harmed plaintiff by slander per se?

by E. Patrick Buntz
May 11, 2010
Previously published by The Benchmark on Second Quarter 2010

A surgeon with staff privileges sued a hospital for breach of contract, and later added a claim for slander per se, seeking compensatory damages for both claims, as well as punitive damages for the slander. He alleged that the hospital had breached its contract with its medical staff, the Medical Staff Bylaws, by invalidly giving another surgeon exclusive privileges for cardiovascular surgery. The exclusive grant barred him from such surgery even though he had been approved to perform such surgery by the hospital’s credentialing committee and medical staff leadership. Statements identified as slander during the litigation by senior executive officers of the hospital included that the doctor was not even qualified to perform surgery on a dog.

The jury found the hospital liable on the breach of contract claim and fixed his total damages at $2,817,000. These were reduced to $1,517,000 by the court because he could have mitigated his losses. In separate proceedings on the slander per se claim, the jury found Lawnwood liable for the slander; that Lawnwood specifically intended to harm him by its per se slanderous statements; that, in fact, it had actually injured him by the statements. The jury found, however, that he suffered no compensable damages from the slander but that he was entitled nevertheless to punitive damages of $5 million from the hospital.

In the appeal of the slander per se claim, Lawnwood presented no appellate issues regarding liability or entitlement to punitive damages. Instead it appealed only the amount of punitive damages, confining its argument to the contention that $5 million is excessive under the United States Constitution.

The Fourth District Court of Appeal analyzed the U.S. Supreme Court’s decisions in State Farm Mutual Automobile Insurance Company v. Campbell, 538 U.S. 408 (2003) [State Farm], and BMW of North America Inc. v. Gore, 517 U.S. 559 (1996) [BMW]. Lawnwood argued that BMW and State Farm both hold that the Due Process Clause of the Fourteenth Amendment categorically bars any punitive damages exceeding a stated ratio with compensatory damages, usually 3:1 or 4:1. Dr. Sadlow argued that Lawnwood was incorrect as to the scope of these holdings. He contended that State Farm and BMW actually disclaim applying the ratio to all punitive damages awards, and that both decisions explicitly hold that the ratio may not apply in cases involving intentional and malicious conduct. In electing to agree with Dr. Sadlow’s interpretation of the State Farm and BMW decisions, the Fourth District Court of Appeal also cited to TXO Production Corporation v. Alliance Resources Corporation, 509 U.S. 443 (1993) [TXO], where the U.S. Supreme Court held that punitive damages of $10 million imposed for intentionally malicious misconduct are not improper even though actual losses were less than $20,000.

The 4th District also noted that under Florida Statute Section 768.73, as applied to intentionally malicious harm, punitive damages are tied to unusually reprehensible misconduct, rather than some ratio relating to compensable losses. Per the 4th DCA, this provision allowing punitive damages without proportionality for intentional, malicious harm satisfies any BMW and State Farm concern for fair notice and Due Process.

In the 32 page opinion, the appellate court came down hard on the hospital for the intentionally malicious defamation and for the attack against the doctor’s personal reputation. The judges even quoted the Ninth Commandment: “Thou shall not bear false witness against thy neighbor.” The appellate opinion noted that Lawnwood officials never offered to retract what was said about Dr. Sadow. The hospital’s attorneys called the words, “rhetorical hyperbole” and that the executive who made the remark was “Just kidding.”

The appellate court in Lawnwood Medical Center, Inc. v. Samuel H. Sadow, concluded that although no compensatory damages were awarded for the slander per se, the amount of punitive damages assessed conforms to applicable law and is neither excessive nor arbitrary so as to exceed federal Constitutional norms. Because the issues presented are of great public importance as to the imposition and assessment of punitive damages under Florida law for cases involving intentionally malicious, harmful defamation per se under TXO, BMW and State Farm, the Fourth District Court of Appeal certified the question to the Florida Supreme Court.