Opinion
No. ED 85640
Filed: November 15, 2005.
Appeal from the Circuit Court of St. Charles County, Hon. Ronald R. McKenzie.
Gerald R. Ortbals, Walter Dellinger, John W. Moticka, Matthew D. Roberts, Gretchen Garrison, Washington, DC, St. Louis, MO, for Appellant.
Thomas P. Rosenfeld, Jeffrey, R. Curl, Michael A. Gross, St. Louis, MO, Hannibal, MO, St. Louis, MO, for Respondent.
This is the second time this case is before us on appeal. Robert Kaplan, trustee of Robert Kaplan Trust, and Doris O'Brien, representative of the estate of Leonard O'Brien, d/b/a Cloverleaf Properties, (collectively referred to as "Plaintiffs") brought a trespass and negligence action against U.S. Bank, N.A., f/k/a Mercantile Bank, N.A., ("Bank") and Southern Contractors ("Southern"), the contractor hired to dispose of contaminated concrete. A jury found Southern liable for trespass and negligence, Bank liable for Southern's conduct and its own negligence, and awarded actual and punitive damages against them. In the first appeal, Kaplan v. U.S. Bank, N.A., 166 S.W.3d 60 (Mo.App.E.D. 2003) ("Kaplan I"), the court found Bank could not be held responsible for Southern's conduct of trespass under the respondeat superior doctrine and set aside the trespass verdict against Bank and any actual or punitive damages based on that count. Because the court could not determine the amount of the punitive damage award based on the trespass count or the direct negligence count, the court remanded for a new trial on the issue of punitive damages as to Bank's direct negligence. After remand, the jury awarded $5,000,000 in punitive damages. The trial court also awarded Plaintiffs $3,200,000 in prejudgment interest. Bank appeals from this second judgment claiming the trial court erred in (1) giving instructions that contravened this court's opinion, (2) refusing to remit the punitive damages award because the award was excessive, (3) refusing to remit the punitive damages award because the award violated due process, (4) awarding prejudgment interest because Plaintiffs did not meet the requirements of Section 408.040.2, RSMo 2000, and (5) awarding prejudgment interest on the punitive damages award. We reverse and remand.
All further statutory references are to RSMo 2000 unless otherwise indicated.
Bank held a security interest in property where Gusdorf Corporation ("Gusdorf") operated a manufacturing plant. Gusdorf defaulted on its loan from Bank and shut down operations at the site. It was discovered that the property was contaminated with high levels of polychlorinated biphenyls, or PCBs. An agreement was reached to remediate the site where Bank was responsible for removing materials with PCB levels of less than 10 parts per million ("ppm"). The former owner responsible for introducing the PCBs on the site agreed to remove all the materials containing more than 10 ppm. A work plan was drafted describing the method for completing the remediation. The work plan mandated that the parties adhere to certain procedures to prevent "illegal or inappropriate disposal" of materials. All materials with less than 10 ppm of PCB were to be disposed of at permitted landfills or used on-site as backfill.
The United States Environmental Protection Agency and the Missouri Department of Natural Resources have set standards of permissible levels of PCBs. Under those standards, concrete containing PCBs in concentration of less than 10 ppm is non hazardous.
Bank entered into a contract with Southern to remove all materials from the site, including stockpiles of concrete. Under the contract, Southern was to dispose of PCB-contaminated materials with less than 10 ppm of PCB at one of two specified landfills. While working at the site, Southern was approached by several homeowners who saw the concrete stockpiles at the site and wanted to use it to fill a ditch behind their homes. The stockpiles of concrete were not tested for contamination before they were removed. Southern agreed and filled the ditch with 5900 tons of concrete removed from the site. Part of the ditch was owned by a mobile home park located across the ditch from the homeowners. The mobile home park was owned by Plaintiffs. Plaintiffs did not give Southern permission to dump the concrete on their property.
Southern did not tell Bank it was taking the concrete to this ditch, and Bank never asked where the concrete had been taken. Bank claimed not to have known about the concrete's disposal until Plaintiffs discovered the ditch had been filled and had caused the mobile home park to flood. Thereafter, Southern and Plaintiffs discussed testing and removal of the concrete. The concrete tested positive for PCBs but in levels lower than 10 ppm. Bank became involved in the discussions of the concrete removal from the ditch. Plaintiffs concluded that Bank was never going to agree to their demands for removal of the concrete and settlement of their claims and filed suit in federal court. The federal suit was voluntarily dismissed and Plaintiffs filed suit in the Circuit Court of St. Charles County. Plaintiffs asserted claims against Southern and its president for trespass, negligence, and ordinance violations. Plaintiffs assert Bank was vicariously liable for Southern's trespass and negligence under the doctrine of respondeat superior and that Bank also was directly negligent based on its duty under the work plan to properly dispose of the concrete.
The jury found Southern liable for trespass and negligence and found Bank liable for Southern's conduct as well as its own negligence. The jury assessed 80% of the fault to Bank and 20% to Southern. Plaintiffs were awarded $650,000 in compensatory damages, $7,000,000 in punitive damages against Bank, and $225,000 in punitive damages against Southern.
The jury found that Southern and its president did not violate any ordinances.
In Kaplan I, Bank appealed the finding that it could be held vicariously liable for Southern's conduct under the doctrine of respondeat superior and the finding that it owed a duty to Plaintiffs under the remediation work plan. Bank also challenged the award of punitive damages. On appeal, the court found Bank could not be held vicariously liable for Southern's conduct. Kaplan, 166 S.W.3d at 69. The court further found Bank had a duty to Plaintiff and there was no error in submitting Plaintiffs' claim that Bank was negligent in carrying out that duty to the jury and upheld Bank's liability for compensatory damages. Id. at 71, 77. The court also concluded Plaintiffs made a submissible case against Bank for punitive damages on the direct negligence count. Id. at 75. Because, however, the court could not determine from the jury's verdict what, if any, of the $7,000,000 in punitive damages was based on Bank's vicarious liability for Southern's conduct, and what part, if any, was based on Bank's direct liability for negligence, the court remanded for a new trial on the issue of punitive damages for Bank's negligence. Id. at 77.
On retrial, the jury awarded $5,000,000 in punitive damages. The trial court also awarded Plaintiffs $3,200,000 in prejudgment interest. Bank filed a combined motion for judgment notwithstanding the verdict, motion for a new trial, and motion for remittitur. The combined motion was subsequently denied by the trial court. This appeal follows.
Plaintiffs' motion to strike sections I and III of Bank's reply brief that was taken with the case is hereby denied.
In its first point, Bank contends the trial court erred in giving Instructions No. 2 and No. 7 because those instructions contravened our opinion and mandate ordering a new trial on the issue of punitive damages. Bank maintains the trial court erred in giving the instructions because it "took from the jury the question of the Bank's liability for punitive damages" and "skewed the jury's determination of the amount of those damages." We agree.
Over Bank's objection, the trial court instructed the jury by giving Instruction No. 2, which provided:
As the Court will instruct you at the end of this case you will be asked to decide only the amount, if any, of punitive damages that should be awarded against Defendant U.S. Bank. A previous jury and the Missouri Court of Appeals has already decided that[:]
1. 5900 tons of concrete containing a chemical compound known as polychlorinated biphenyls, or PCBs, were deposited into a creek owned by Plaintiffs.
2. Defendant U.S. Bank violated an environmental Work Plan and was therefore negligent by failing to properly dispose of the concrete at a landfill or at the Gusdorf site.
3. Southern Contractors, who deposited the concrete in the Plaintiffs' creek was also negligent.
4. Southern Contractors was not the agent of U.S. Bank and the Bank was not liable for the conduct of Southern Contractors.
5. U.S. Bank was 80% at fault and Southern Contractors was 20% at fault.
6. Plaintiffs were awarded their clean up costs, $650,000, as their actual or compensatory damages.
7. Defendant U.S. Bank's conduct was the equivalent of intentional wrongdoing and showed complete indifference to and conscious disregard for Plaintiffs' rights.
For purposes of this trial, therefore, you should not question these findings but must accept them as true.
Under Missouri law, [P]laintiffs have established all of the preconditions to an award of punitive damages. Your duty is to decide the amount, if any, of punitive damages that should be awarded against Defendant U.S. Bank.
The trial court also gave Instruction No. 7 over Bank's objection. That instruction stated:
In addition to the compensatory damages already awarded to Plaintiffs, you may award Plaintiffs an additional amount as punitive damages in such sum as you believe will serve to punish U.S. Bank and to deter U.S. Bank and others from like conduct.
Bank contends that in giving these instructions and taking the question of liability for punitive damages away from the jury, the trial court committed reversible error by not following the mandate from Kaplan I.
Plaintiffs contend the court in Kaplan I limited the issue on remand to the "amount" of punitive damages in part because Bank failed to raise the issue of "liability" for punitive damages where Bank's point on appeal was limited to the issue of "submissibility" of punitive damages. Plaintiffs assert that the Bank is barred from now asserting the liability issue. However, the issue of "liability" did not arise until after the court's decision to reverse the punitive damages award inKaplan I because of its determination that Bank could not be held vicariously liable and we cannot penalize Bank for failing to raise a claim that was not at issue prior to Kaplan I.
The law of the case doctrine governs successive appeals and applies appellate decisions to later proceedings in that case. Miller v. Missouri Dept. of Tranp., 97 S.W.3d 478, 481 (Mo.App.W.D. 2002). Pursuant to this doctrine, prior decisions of the appellate court become the law of the case in any subsequent proceedings, and the trial court has no authority to modify, alter, or otherwise depart from those prior decisions. Id. To determine whether the trial court acted in accordance with the law of the case, we look not only to the mandate, but also to the results contemplated in the appellate opinion. Id.
In Kaplan I, the court found Bank could not be held vicariously liable for Southern's conduct because Southern was not an agent of Bank.Kaplan, 166 S.W.3d at 69. The court also found Bank had a duty to Plaintiff and was negligent in failing to comply with the work plan. Id. at 71. Furthermore, the court held there was no error in submitting Plaintiffs' claim that Bank was negligent in carrying out that duty to the jury and upheld Bank's liability for compensatory damages. Id. at 71, 77.
In Kaplan I, the court also concluded Plaintiffs made a submissible case against Bank for punitive damages on the direct negligence count for failing to comply with the work plan. Id. at 75. In the opinion, the court stated to make a submissible case for punitive damages on a negligence claim, Plaintiffs were required to show by clear and convincing evidence that Bank knew or should have known that its conduct "created a high degree of probability of injury" and "thereby showed complete indifference to or conscious disregard for the rights of others." Id. (quoting Alcorn v. Union Pacific R.R. Co., 50 S.W.3d 226, 247 (Mo. banc 2001). The court determined the evidence supported the submission of the punitive damages request against Bank on the direct negligence claim. Kaplan, 166 S.W.3d at 75.
The jury was given separate punitive damages instructions for each claim, but given only one place on the verdict form to enter an amount of punitive damages for Bank based on a finding of liability on either vicarious liability for Southern's trespass or Bank's own negligence.Id. at 77. Because, however, the court could not determine from the jury's verdict what, if any, of the $7,000,000 in punitive damages was based on Bank's vicarious liability for Southern's conduct, and what part, if any, was based on Bank's direct liability for negligence, the court remanded for a new trial on the issue of punitive damages for Bank's negligence. Id. In directing the trial court on remand, the court stated:
Having concluded that there is a submissible case against the Bank for punitive damages on the direct negligence count, the trial court is directed at the new trial to submit the issue of punitive damages against the Bank on its direct negligence. In all other respects, the trial court has discretion as to what evidence from the first trial is admissible at the new trial, as long as that evidence is consistent with this opinion — namely, that the Bank cannot be held vicariously liable for Southern's conduct and that the amount of actual damages and allocation of fault are fixed.
Id.
We find the mandate of Kaplan I clearly required a new trial on the "issue of punitive damages," including a finding of liability for punitive damages and an amount, if any. Awarding punitive damages is essentially a three-step process. See Section 510.263. The first step is the legal determination by the court whether the case is submissible for punitive damages. The second step is a factual determination by the jury whether the defendant should be held liable for punitive damages, and the third step is the determination of the amount of punitive damages, if any. Section 510.263, see also MAI 10.02. Thus, in Kaplan I, the court held Plaintiffs claim for punitive damages based on Bank's direct negligence was submissible. In so doing, the court stated there was evidence that Bank's conduct was so egregious that a jury could find that the conduct amounted to a complete indifference or conscious disregard to the rights of others and the issue of punitive damages was properly submitted to the jury. However, by finding it impossible to determine what amount, if any, of the punitive damages award entered in the verdict form applied to Bank's direct negligence, the court remanded the issue of Bank's liability for punitive damages to be determined and to enter an amount, if any, upon such determination. Consequently, in Kaplan I, the court found the issue of punitive damages based on Bank's direct negligence was properly submitted to the jury, but reversed for a finding of liability and an amount of punitive damages, if any, because of the inability to determine a finding of liability and amount, if any, from the verdict form. The reversal of the punitive damages award in Kaplan I removed any basis for determining whether or not the first jury in fact found liability for punitive damages on the direct negligence claim. As a result, on remand, the second jury should have been required to determine liability for punitive damages prior to addressing the issue of amount of punitive damages.
Section 510.263 provides, in relevant part:
1. All actions tried before a jury involving punitive damages shall be conducted in a bifurcated trial before the same jury if requested by any party.
2. In the first stage of a bifurcated trial, in which the issue of punitive damages is submissible, the jury shall determine liability for compensatory damages, the amount of compensatory damages, including nominal damages, and the liability of a defendant for punitive damages. Evidence of defendant's financial condition shall not be admissible in the first stage of such trial unless admissible for a proper purpose other than the amount of punitive damages.
3. If during the first stage of a bifurcated trial the jury determines that a defendant is liable for punitive damages, that jury shall determine, in a second stage of trial, the amount of punitive damages to be awarded against such defendant. Evidence of such defendant's net worth shall be admissible during the second stage of such trial.
MAI 10.02 sets forth the verdict director for punitive damages in a negligence case and provides:
If you find in favor of plaintiff under Instruction Number ____ (here insert number of plaintiff's verdict directing instruction based on negligence), and if you believe the conduct of the of defendant as submitted in Instruction Number ____ (here insert number of plaintiff's verdict directing instruction based on negligence) showed complete indifference to or conscious disregard for the safety of others, then in addition to any damages to which you may find plaintiff entitled under Instruction Number ____ (here insert number of plaintiff's damage instruction) you may award plaintiff an additional amount as punitive damages in such sum as you believe will serve to punish defendant and to deter defendant and others from like conduct.
Therefore, the trial court erred in giving Instructions No. 2 and No. 7 because the instructions did not allow for the jury to make a determination of whether Bank was liable for punitive damages as a result of its direct negligence because that finding was mandated by the holding in Kaplan I. Accordingly, we must reverse the award of punitive damages and remand for a new trial on the issue of Bank's liability for punitive damages and an amount, if any, upon such a finding.
Because we are reversing the award of punitive damages and remanding for a new trial on the issue of punitive damages, we need not address any of Bank's remaining points on appeal. However, we address the question raised by Bank of whether Plaintiffs are entitled to prejudgment interest because the issue will arise on remand. Bank contends Plaintiffs did not satisfy the statutory requirements of Section 408.040.2 to be entitled to prejudgment interest. We agree.
We review the trial court's judgment on the application of a statute under the de novo standard because interpretation of a statute and whether a statute applies to a given set of facts are questions of law which we review de novo. Uxa ex rel. Uxa v. Marconi, 128 S.W.3d 121, 136 (Mo.App.E.D. 2003).
Section 408.040.2 allows prejudgment interest in a tort action when a claimant has made a demand for payment of a claim, or an offer of settlement, to the opposing party and the amount of the judgment exceeds the amount specified in the claimant's demand or settlement offer. Specifically, Section 408.040.2 provides:
In tort actions, if a claimant has made a demand for payment of a claim or an offer of settlement of a claim, to the party, parties or their representatives and the amount of the judgment or order exceeds the demand for payment or offer of settlement, prejudgment interest, at the rate specified in subsection 1 of this section, shall be calculated from a date sixty days after the demand or offer was made, or from the date of the demand or offer was rejected without counter offer, whichever is earlier. Any such demand or offer shall be made in writing and sent by certified mail and shall be left open for sixty days unless rejected earlier. Nothing contained herein shall limit the right of a claimant, in actions other than tort actions, to recover prejudgment interest as otherwise provided by law or contract.
This statutory provision serves two public policies. Brown v. Donham, 900 S.W.2d 630, 633 (Mo. banc 1995). First, it compensates claimants for the true cost of money damages they have incurred due to the delay of litigation. Id. Second, where liability and damages are fairly certain, it promotes settlement and deters unfair benefit from the delay of litigation. Id.
The demand required under Section 408.040.2 must be definite in its terms. Id. "'An offer must be so definite in its terms, or require such definite terms in the acceptance, that the promises or performances to be rendered by each party are reasonably certain.'" Id. (quoting Restatement, Contracts, Vol. 1, Section 32 quoted in Brown v. Childers, 254 S.W.2d 275, 280 (Mo.App. 1953)).
For a demand to be sufficiently definite, the amount due must be readily ascertainable. Id. While the demand need not always be expressed in dollars and cents, it must nonetheless be capable of ascertainment in a certain dollars and cents amount. Id. In this case, Plaintiffs' notice letter did not meet this standard.
In 1997, Plaintiffs sent a certified "Notice of Intent to File Citizen Suit." In the notice, Plaintiffs stated:
Kaplan will file the aforementioned lawsuit for purpose of obtaining a court order requiring Defendants to take corrective action to remove hazardous and solid wastes from a creek located on property owned by Kaplan in St. Charles County, Missouri. Kaplan will also seek to recover all costs expended in prosecuting this action, including, but not limited to, all litigation expenses, costs and attorneys fees, together with actual and punitive damages under Kaplan's state law claims.
Here, the notice letter did not constitute a demand under Section 408.040.2. The letter was the notice of intent to file a federal lawsuit as required by federal statutes. Plaintiffs did not make a "demand for payment" or an "offer of settlement" in the letter. The letter did request Bank to take corrective action to clean the concrete from the ditch. A demand for corrective action is not a substitute for the required demand for payment to meet the requirements of Section 408.040.2. In addition, the notice letter indicated that Plaintiffs would seek to recover all costs in addition to asking Bank to take corrective measures.
This notice was required by the Resource Conservation and Recovery Act, 42 U.S.C. Section 6972, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9653, the Federal Water Pollution Prevention and Control Act, 33 U.S.C. Section 1365, and the Toxic Substances Control Act, 15 U.S.C. Section 2619.
Furthermore, the notice letter was not definite. The notice letter did not specify a dollar amount demanded. Nor was an amount readily ascertainable. The letter did not indicate the nature of the state law claims or the damages Plaintiffs would seek based on those claims.
Plaintiffs maintain Bank could have determined the amount of the "demand." Plaintiffs argue prejudgment interest demands for unliquidated claims are capable of ascertainment so long as the claim can be reduced to a number using commercially reasonable and acceptable standards. Plaintiffs contend the amount could have been "liquidated" and would have been capable of ascertainment through commercial reasonable appraisals or bids. Plaintiffs assert Bank knew they wanted the concrete removed from the ditch, and Bank should have known the cost of removing based on a bid of $107,000 for that work. However, we are not persuaded by Plaintiffs' argument under the circumstances of this case. This bid for the work could not substitute as an amount demanded by Plaintiffs. Plaintiffs never presented this bid to Bank as their demand. Furthermore, Plaintiffs never indicated that the amount of the bid would resolve all their claims against Bank. The record makes it clear that Plaintiffs would not have been satisfied either by the $107,000 or the removal of the concrete. Plaintiffs rejected a remediation plan proposed by Bank, under which Bank placed $250,000 in escrow to fund the cleanup of the ditch. The proposal included excavation, transport, and disposal of the concrete, along with coordination with the MDNR and sampling in the ditch to ensure cleanup was successful. Plaintiffs rejected the proposal in part because it capped the cleanup amount at $250,000.
Plaintiffs cite to Lucent Tech, Inc. v. Mid-West Elec., Inc., 49 S.W.3d 236 (Mo.App.W.D. 2001) (awarding prejudgment interest in a quantum meruit suit where the amount due was ascertainable as the "price usually and customarily paid for such services or like services at the time and in the locality where the services were rendered"); Nangle v. Brockman, 972 S.W.2d 545 (Mo.App.E.D. 1998) (awarding prejudgment interest on a contingent fee award based on the disputed fair market value of the property recovered because the value could be established by appraisal); Unlimited Equip. Lines, Inc. v. Graphics Arts Centre, Inc., 889 S.W.2d 926 (Mo.App.E.D. 1994) (awarding prejudgment interest in a claim for diminution of value in the plaintiff's property, where the market value and liquidation value of certain equipment could be established by appraisal); Denton Constr. Co. v. Missouri State Highway Com'n, 454 S.W.2d 44 (Mo. 1970) (awarding prejudgment interest on an unliquidated claim for the reasonable value of construction work even though the plaintiff offered two different methods for calculating its damages); Whalen, Murphy, Reid, Danis, Garvin Tobben v. Estate of Roberts, 711 S.W.2d 587 (Mo.App.E.D. 1986) (reasonable value of law firm's services held "readily ascertainable" by a client even where the value was far less than the amount actually billed). We are not persuaded that this line of cases is applicable to the present factual circumstance.
The purpose of Section 408.040.2 is to encourage settlement. Brown, 900 S.W.2d at 634. Settlement can only occur by the unequivocal acceptance of a definite offer or demand, resulting in an enforceable contract. Id. Missouri courts require a clear demand because the purposes of the prejudgment interest statutes are only furthered when the demand is sufficiently precise that the defendant can make a judgment whether to settle or proceed to trial. Id. Here, from the notice letter, it cannot be determined that Plaintiffs were demanding anything other than corrective action from Bank and giving notice of their intent to file a federal lawsuit. Moreover, there was no ascertainable amount. Plaintiffs are not entitled to prejudgment interest because they did not meet the requirements of Section 408.040.2.
The award of punitive damages and prejudgment interest is reversed. The case is remanded to the trial court to conduct a new trial on the issue of Bank's liability for punitive damages and the amount of any punitive damages if liability is so found.
Reversed and Remanded.
Nannette A. Baker, P.J. and Sherri B. Sullivan, J., concur.