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Gasperini v. Center for Humanities, Inc.

    Brief Fact Summary
    A federal circuit court heard a case on diversity jurisdiction and let a jury verdict of $450,000 stand for lost photographic slides; the court of appeals applied New York law governing excessive damage awards and set the verdict aside.

    Synopsis of Rule of Law
    A state law governing the excessiveness or inadequacy of compensation awards does not violate the Seventh Amendment’s prohibition against reexamination of a fact tried by a jury if the state standard is applied by the federal trial court judge and appellate control of the trial court ruling is limited to review for abuse of discretion.

    Facts
    Gasperini (Plaintiff), a journalist, agreed to provide his original color transparencies to The Center for Humanities, Inc. (Defendant), for use in an educational videotape.  He chose 300 slides, and the Center (Defendant) used 110 of them in the video.  The Defendant agreed to return the slides, but at the end of the project could not locate them.  Gasperini (Plaintiff) filed suit in the U.S. District Court for the Southern Division of New York, invoking the court’s diversity jurisdiction and alleging several state law claims.  Defendant admitted liability, and the issue of damages was tried before a jury.  The jury awarded Plaintiff $1,500 for each of the 300 slides, a total of $450,000 in compensatory damages.  Defendant filed a motion for a new trial, attacking the verdict on grounds of excessiveness.  The district court denied the motion, however, the court of appeals vacated the jury’s verdict.  The court applied New York’s CPLR § 5501(c), which permits the ordering of a new trial when an award deviates materially from “reasonable compensation,†and concluded that evidence at trial was not adequate to support the damage award of $450,000.  The appellate court ordered a new trial unless Plaintiff accepted an award of $100,000.  Gasperini (Plaintiff) appealed to the Supreme Court.

    Issue
    Does a state law governing the excessiveness or inadequacy of compensation awards violate the Seventh Amendment’s prohibition against reexamination of a fact tried by a jury?

    Held
    (Ginsburg, J.)  No.  A state law governing the excessiveness or inadequacy of compensation awards does not violate the Seventh Amendment’s prohibition against reexamination of a fact tried by a jury if the state standard is applied by the federal trial court judge and appellate control of the trial court ruling is limited to review for abuse of discretion.  The Seventh Amendment governs proceedings in federal court, not in state court, and provides that “no fact tried by a jury shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.â€Â  When a federal court hears a case under diversity jurisdiction, the court applies state substantive law and federal procedural law.  The “deviates materially†standard of CPLR § 5501(c) includes a procedural instruction, but it is substantive law to the extent that it is outcome effective.  Therefore, the district court has the responsibility to apply state laws governing excessive damage awards, and the appellate court must review for abuse of discretion.  In the present case, the district court should have applied § 5501(c) to determine whether the award deviated materially from reasonableness.  The appellate court was forced to review for abuse of discretion only.  The judgment of the appellate court is vacated, and that court is instructed to remand so that the trial judge may test the jury’s verdict against CPLR § 5501(c)’s “deviates materially†standard.

    Dissent
    (Stevens, J.)  The Seventh Amendment does not in any way limit the power of a federal appellate court sitting in diversity to decide whether a jury’s award of damages exceeds a limit established by state law.
    (Scalia, J.)  The majority believes that allowing the district court to review jury verdicts under the “deviates materially†standard will give effect to state purposes without disrupting the federal system.  However, changing the standard trial judges use to review jury verdicts does disrupt the federal system.

    Discussion
    The influential case, Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), first specified the “substantive†versus “procedural†distinction mentioned in this case.  The goal of Erie was to prevent forum-shopping between state and federal court.  However, Justice Scalia argued that by adopting different standards of appellate review between state and federal courts, the incentive to forum-shop was increased.  It remains to be seen just how influential a deviation in appellate review standards will be when parties are selecting the forum to litigate claims.


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