In this week’s Alabama Law Weekly Update, we present for your consideration two decisions released by Alabama courts.  In the first, the Supreme Court of Alabama considered the appropriateness of large punitive damage awards against two defendants in an action involving a dispute over a commercial contract between two publishers of truck-driver magazines.  In the second, the Alabama Court of Civil Appeals addressed evidentiary standards applicable to an employee’s action for disability benefits pursuant the Alabama Workers’ Compensation Act.

Target Media Partners Operating Co., LLC v. Specialty Mktg. Corp. d/b/a Truck Market News, No. 1091758 (Ala. Aug. 29, 2014)

Specialty Marketing Corporation d/b/a Truck Market News (“Specialty”) sued Target Media Partn1ers Operating Company, LLC (“Target”) and Ed Leader (“Leader”), a Target vice president, alleging breach of contract by Target Media, and fraudulent-misrepresentation and promissory-fraud by Target Media and Leader.  A jury returned several verdicts against the defendants, including (1) a compensatory damage award of $851,552 against Target on the breach of contract claim, (2) a compensatory damage award of $210,000 and $630,000 punitive damages award against Target on the promissory-fraud claim, and (3) a compensatory damages award of $167,800 and a punitive damages award of $503,400 against Target and Leader on the fraudulent misrepresentation claim.  Thus, each of the punitive damages awards represented 3x the underlying compensatory damages.

The Supreme Court of Alabama held that the conduct of the defendants warranted the punitive damages awards and were sufficient to punish Target and Leader, and to deter future misconduct without compromising due-process rights.  In arriving at this holding, the Court simply adopted, without alteration, the opinion of the lower court.

As noted by the lower court, in determining the appropriateness of a punitive damage award courts consider several factors, including, (1) the relationship of the award to the harm, (2) the reprehensibility of the defendant’s conduct, (3) whether the defendant profited from the conduct, (4) the financial position of the defendant, (5) the costs of litigation, (6) whether criminal sanctions have been imposed on the defendant, (7) other related civil actions against the same defendant, based on the same conduct.  (The court highlighted the importance of the reprehensibility of the defendant’s conduct.)  In addition, the courts also consider, as a “guideposts,” (1) the relationship (ratio) between a compensatory and punitive damages, and (2) any comparable legislative fines and penalties applicable to similar misconduct.   The court noted that perhaps the most important factor was the culpability and reprehensibility of the defendant’s conduct.  Here, evidence indicated the defendants’ sought to defraud Specialty for their own profit and had even engaged in similar conduct in the past.  Considering these factors, as well as the others listed above, the court found an award of punitive damages of 3x the compensatory damages to be warranted.

Fab Arc Steel Supply, Inc. v. Timothy Michael Dodd, No. 2121061 (Ala. Civ. App. Aug. 29, 2014)

Timothy Dodd (“Dodd”) brought an action against Fab Arc Steel Supply, Inc. (“Fab Arc”) for disability benefits pursuant to the Alabama Workers’ Compensation Act (“Act”).  Dodd asserted that, on June 23, 2010, while working for Fab Arc, a “C-clamp” (attached to a steel beam weighing 1,500 pound) hit him in the chest and abdomen.  Dodd continued working until September 1, 2010, when Fab Arc terminated his employment for alleged insubordination.   The treating physician concluded that Dodd was at maximum medical improvement (“MMI”) as of February 24, 2011 and suggested 6 weeks of gradual increase of work (without restriction).  Later, in January 2012, Dodd indicated experiencing problems with his arms and left leg.  A few months later, a neurosurgeon diagnosed Dodd with a herniated disk.  The neurosurgeon could not conclude (nor rule-out the possibility) that the work-related accident caused the herniated disc.  The neurosurgeon offered Dodd “surgical intervention” to treat the lumbar-spine injury and indicated that he believed treatment may improve his back problem.  Though Dodd asserted that he was willing to have the surgery, he explained that this was not possible because Fab Arc denied liability for the herniated disc and refused to cover the cost.  Despite a lack of direct evidence or medical opinion, the trial court found that Dodd suffered permanent nerve damage as a result of the accident.  The trial court further found, through inference, that Dodd’s herniated disc related to the work-place accident, despite manifesting nearly 2 years later.  Noting that Fab Arc’s purported purpose for terminating Dodd (insubordination) was without merit, the court awarded Dodd temporary total disability benefits from September 1, 2010 through February 24, 2011 (the date Dodd reached MMI) and permanent total disability benefits thereafter.  Fab Arc appealed each of the findings and the awards, arguing they were unsupported by evidence.

The Court of Civil Appeals first addressed the finding that Dodd sustained permanent nerve damage in his stomach and chest.  Here, the court noted that medical causation may be found even without the testimony of experts (or that lay testimony could combine with expert testimony) because a “totality of the evidence” standard applies in workers’ compensation cases.  The Court further explained that a workers’ compensation claimant was not required to present evidence directly linking a workplace accident a particular injury.  Instead, such a finding may be based solely on circumstantial evidence (even if it could not be objectively or scientifically verified).  The Court of Civil Appeals upheld the trial court’s holding that the accident caused permanent nerve damage in Dodd’s stomach and chest as supported by “substantial evidence” (even without a definitive medical opinion or verifiable connection, and despite drawing from Dodd’s own testimony).

The Court of Civil Appeals next addressed the herniated disc (in light of the late onset of symptoms), which Fab Arc argued was not proven to be linked to the accident.  Again, the Court of Civil Appeals set out the proper evidentiary standards.  The Court began by noting that it is nearly axiomatic that medical causation may be inferred from circumstantial evidence consisting of a sudden appearance of symptoms immediately following a workplace accident.  The Court continued by explaining that a long delay in the appearance of the symptoms only weakens that inference, it does not defeat it.  This is particularly true, where there is no intervening event.  Since, circumstantial evidence showed the possibility of a link between the herniated disc and the accident, and since Fab Arc presented no evidence of an intervening event following the accident, the trial court properly inferred the workplace accidence caused the herniated disc.

Nevertheless, the Court of Civil Appeals agreed with Fab Arc that Dodd had not reached MMI.  An injured employee reaches MMI when he/she has recovered as much as medically possible and no further medical treatment could be reasonably anticipated to lessen the disability.  Since the neurosurgeon indicated that Dodd may improve with surgery, the evidence showed that Dodd had not yet reached MMI.  Recognizing that Fab Arc’s own denial of benefits foreclosed Dodd from obtaining the surgery, the Court found no authority indicating that an employer could not argue that an employee failed to reach MMI as a result of the employee’s failure to submit to treatment for which the employer denied benefits.  As a result, while Dodd was entitled to temporary total disability benefits, since he had not yet reached MMI, he was not entitled to an award of permanent total disability benefits pursuant to the Act.