Gasperini v. Center for Humanities, Inc

Brief Fact Summary.

Plaintiff sued Defendant in federal court in New York and a verdict was rendered for Plaintiff. The District Court denied Defendant’s motion to review the verdict as excessive and Defendant appealed. The Court of Appeals reviewed the jury’s verdict under a standard for review based on New York law, which Plaintiff appealed.

Synopsis of Rule of Law.

In a federal district court sitting under diversity jurisdiction, the standard the judge uses to determine whether a jury’s itemized verdict is excessive is that of state law, and is only subject to appellate review for “abuse of discretion.”

Facts.

Gasperini (Plaintiff) sued Center for Humanities (Defendant) in federal court based on diversity of citizenship. The jury returned a verdict for Plaintiff of $450,000 in compensatory damages. Defendant moved for a new trial, arguing that the verdict was excessive. The District Court denied the motion. The Second Circuit vacated the judgment based on a New York law allowing the New York Appellate Division to determine that an award is excessive or inadequate if it “materially deviates from what is reasonable compensation.” The Second Circuit reasoned that the standard used to determine the verdict was not sufficient, and ordered a new trial unless Plaintiff accepted a lower amount. Plaintiff appealed.

Issues.

Should the trial court have used the state law standard when reviewing the jury’s verdict for excessiveness?
Should the appellate court use the state law standard when reviewing the trial court’s decision as to whether the jury’s verdict was excessive?

Held.

First issue: Yes. Second issue: No. Reversed and remanded in order for the District Court to determine if the jury’s verdict was excessive under the “deviates materially” standard as required by state law.
Under New York law, the Appellate Division can review a verdict for excessiveness under the “deviates materially” test, which requires more scrutiny then the “shocks the conscience” test employed as the federal standard. The law is both substantive and procedural: substantive in providing the “deviates materially” test and procedural in granting the review to the New York Appellate Division.

The analyses under the Erie doctrine focus on whether application of the federal standard cause discrimination against non-diverse parties and whether application of the federal standard would encourage individuals to file in federal court.

In the event that the federal standard is applied, there would be substantial variations between state and federal money judgments. The situation is analogous to the issue in Guaranty Trust Co. v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945), where this Court would not permit an action to survive longer in federal court than it would have in state court.

In addition, a trial judge can reverse the verdict in this situation so long as reversal is consistent with the Seventh Amendment. Appellate courts, however, cannot reverse the trial court’s decision to uphold or reverse a jury’s verdict unless there was an “abuse of discretion” by the District Court. This is a matter of law, not of fact. In Byrd v. Blue Ridge Rural Electric Cooperative, Inc., 356 U.S. 525, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958), involving the first clause of the Seventh Amendment (trial by jury), the Court emphasized the importance of not disturbing the province of the jury. With that policy in mind, appellate review of the trial court’s decision regarding jury verdicts under the second clause (re-examination) should be restricted to an abuse of discretion standard.

To avoid disrupting New York’s substantive law, the trial judge must use the “deviates materially” test. The Appellate Court can only determine whether the trial judge abused her discretion if the verdict is appealed for excessiveness.

Dissents. Justice Stevens: The Court of Appeals judgment should have been affirmed. Although the Seventh Amendment does not bar appellate review of jury verdicts, it does not “command” that federal appellate courts review a district court’s application of state law damage standards for “abuse of discretion.” Byrd only dealt with the first clause of the Seventh Amendment, so there is no need to apply Byrd here.
Justice Scalia: At common law, review of judgments was only by writ of error and limited to questions of law. Appeals based on an excessive verdict are a question of fact. At common law, reexamination of the facts could only be done by the trial court. Determining what standard a trial court judge should use by basing it on state law does disrupt the federal system, because it goes against the judge-jury relationship embodied in the federal court system. The controlling case should be Browning-Ferris Industries of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. 257 (1989), holding that how damages are calculated is controlled by state law, but whether a new trial or remittitur should be ordered is controlled by federal law.

Discussion.

The majority’s analysis focuses on the policies of the Erie doctrine (non-discrimination and uniformity) in order to determine what law to apply.