Mathias v. Accor Economy Lodging, Inc.

Brief Fact Summary.

Guests who had been bitten by bedbugs (Plaintiffs) sued Accor Economy Lodging, Inc. (Defendant), the owner/operator of a Red Roof Inn alleging willful and wanton conduct that warranted punitive damages.

Synopsis of Rule of Law.

1) Defendant’s conduct was wanton and willful, and so punitive damages are allowed. 2) When punitive damages are warranted, the amount must be proportional to the wrongfulness of the defendant’s conduct.

Facts.

Defendant was the owner and operator of a Motel 6 chain and a Red Roof Inn. In 1998, the exterminator for the Red Roof Inn told the manager that several rooms were infested with bedbugs. He offered to treat each room for a total of $500, but the manager declined. The exterminator was hired again in 1999 to treat one room. By 2000, the number of room refunds had increased and guests were complaining of ticks and bugs. One guest was moved to three different rooms, all infested. The Inn management acknowledged the problem but would still not allow the motel to close for a thorough treatment. Instead the management flagged rooms as not to be rented until treated, but those flags were routinely ignored. Desk clerks were told to tell complaining guests that the bugs were ticks. Eventually, Plaintiffs, guests who had been bitten by bedbugs, brought suit alleging wanton and willful conduct and asking for compensatory and punitive damages. Defendant claimed that its conduct was, at most, negligent, and that punitive damages were not warranted. The jury awarded compensatory damages of approximately $5000 and punitive damages of $186,000 per plaintiff. Defendant appealed, arguing that punitive damages were not appropriate and, if appropriate, excessive. The court of appeals granted review.

Issue.

1) Was Defendant’s conduct wanton and willful, allowing for the award of punitive damages?

  2) When punitive damages are warranted, must the amount be proportional to the wrongfulness of the defendant’s conduct?

Held.

(Posner, J.) 1) Yes. Defendant’s conduct was wanton and willful, and so punitive damages are allowed. Here, the evidence clearly showed that Defendant recklessly and unjustifiably failed to correct a known risk. Defendant’s failure to either warn its guests or to take steps to treat the rooms and exterminate the bedbugs amounted to fraud and possibly battery. This conduct was willful and wanton and warranted an award of punitive damages.

2) Yes. When punitive damages are warranted, the amount must be proportional to the wrongfulness of the defendant’s conduct. [Federal constitutional cases suggest that trial judges consider an award of punitive damages in light of the conduct warranting the award of punitive damages.] Punitive damages are given as punishment and general penal principles should be applied. The punishment should generally fit the crime, the defendant should have reasonable notice of the punishment for unlawful actions, and the punishment should be based upon the wrongful conduct. Reasonably clear standards for determining punitive damages for specific wrongful actions should be adopted. Punitive damages awarded in a tort action may provide a civil redress for minor criminal acts. For example, in a case involving a minor criminal assault of spitting, compensatory damages would likely be relatively small. However, a civil fine awarded as punitive damages could provide an appropriate deterrent to such behavior. Here, Defendant may have profited from its refusal to treat its bedbug infestation. If Defendant only had to pay a nominal amount in compensatory damages, it might be able to hide its misconduct and continue in its refusal.

The jury cannot base punitive damages solely on a defendant’s ability to pay because that is discriminatory. Defendant’s net worth is relevant, however, because it informs the resources it would have to mount a zealous defense and increase plaintiffs’ expenses. Although the amount awarded here is arbitrary, it cannot be considered excessive because without standards for determining punitive damages for specific wrongs, all awards are arbitrary. The court is to ensure the range is appropriate, not the specific amount awarded. The parties did not present evidence of any regulatory or criminal penalties that Defendant could have been subject to based on its conduct, but the court takes judicial notice that the deliberate exposure of guests to the health risks associated with bedbugs could lead to state or municipal sanctions comparable to the amount of punitive damages awarded. Affirmed.

Discussion.

Juries can consider a defendant’s net worth when determining the amount of punitive damages required to serve as a deterrent to future wrongful behavior. Some wealthy corporations or individuals may not be deterred from continuing in tortious conduct if the punitive damages are a negligible amount of their net worth. The punitive damages must still be related to the extent of the misconduct itself. If guidelines requiring this relationship were not in place, juries in similar cases could award wildly different amounts in punitive damages.