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IN THE SUPREME COURT OF FLORIDA CASE NO. SC19-1560 IN RE: STANDARD JURY INSTRUCTIONS IN CIVIL CASES — REPORT NO. 19-05 _____________________________________/ COMMENTS ON PROPOSED AMENDMENTS TO STANDARD CIVIL JURY INSTRUCTIONS ON PUNITIVE DAMAGES Walter J. Andrews, Esq., submits these comments on the proposed amendments to the Standard Jury Instructions in Civil Cases, instructions 503.1 and 503.2, on punitive damages. This Court should decline to adopt these proposed amendments for the following reasons. 1. The amendment incorrectly deletes “vicarious” from the title of the instruction on employer liability for punitive damages. The Court should not delete the word “vicarious” from the title of the instructions describing an employer’s liability for punitive damages for the actions of an employee or agent (instructions 503.1b(3), 503.1b(4), 503.2b(3), and 503.2b(4)). Section 768.72(3), Florida Statutes (2019), continues to impose vicarious liability for punitive damages.

Filing # 99647364 E-Filed 12/02/2019 03:00:06 PM

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The Committee proposed this change in response to a comment from attorney B. Richard Young (Report at 2-3; Appendix E-2 to E-3).1 Mr. Young claimed the 1999 amendment to section 768.72(3), Florida Statutes, eliminated vicarious liability as the standard to impose punitive damages on an employer for the actions of an employee or agent (Appendix E-2 to E-3). The Committee apparently agreed and considered this an “editorial” change (Appendix D-67; see Appendix C-500). This amendment is not editorial. This issue remains hotly disputed and is the subject of pending litigation involving Mr. Young’s client and my client. See Ranger Constr. Indus., Inc. v. Allied World Nat’l Assurance Co., Civil No. 17-81226-CIV, (S.D. Fla. 2017). A party should not be able to use a comment in a jury instructions proceeding to gain a tactical advantage in pending litigation without disclosing it to this Court. Here, Mr. Young failed to disclose the existence of the insurance coverage litigation involving our clients, and involving these issues, when he submitted his comment. Accordingly, we write to address the issues raised by Mr. Young and further explain the proposed change’s potential impact on the current law providing insurance coverage for punitive damages awards entered against insureds in the state of Florida. 1 This comment refers to the Appendix to the report as (Appendix [letter]-[.pdf page]).

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A brief explanation of this pending insurance coverage litigation demonstrates this change to the punitive damages instructions is potentially substantive and not merely editorial. The issue in our pending coverage litigation is whether commercial general liability insurance covers a jury’s award of $25 million in punitive damages against my corporate client based on its vicarious liability for the acts of a purported agent. There, plaintiff’s counsel stipulated that plaintiff was only pursuing a vicarious liability punitive damages theory. Jury instruction 503.1b(3), titled “Vicarious liability for acts of employee,” was given to the jury. The policy covers compensatory damages and punitive damages imposed for the corporation’s vicarious liability. The insurer, represented by Mr. Young, denied coverage, claiming that Florida public policy now precludes insurance coverage for all punitive damages awards. Mr. Young claims a corporation’s actions cannot be considered “vicarious” after the 1999 amendments to section 768.72(3), notwithstanding existing Florida Supreme Court precedent that has not been overruled either by the statutory amendments or case law. See U.S. Concrete Pipe Co. v. Bould, 437 So. 2d 1061 (Fla. 1983) (“…Florida public policy does not preclude insurance coverage of punitive damages when the insured himself is not personally at fault, but is merely vicariously liable for another’s wrong.”); see also First Specialty Ins. Co. v. Caliber One Indem. Co., 988 So. 2d 708, 714 (Fla. 2d DCA 2008) (recognizing “Bould’s general

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pronouncement that public policy permits insurance coverage of punitive damages when the insured is simply vicariously liable for the wrongdoing of another person,” but holding that Bould’s pronouncement was inapplicable to the case because the policy at issue in Caliber One, unlike the policy here, specifically limited the definition of “damages” to those damages that were “compensatory.”); Travelers Indem. Co. v. Despain, No. 05-cv-489, 2006 WL 3747318, at *3 (M.D. Fla. Dec. 18, 2006) (stating that “[h]ere, the Estate seeks punitive damages against Avante under a theory of vicarious corporate liability and, thus, Florida public policy does not preclude coverage,” but barring coverage because the policy limited coverage to only “compensatory” damages and excluded civil fines or penalties). This issue should be resolved in the underlying insurance coverage litigation, not in this proceeding to amend jury instructions. In addition, this Court should decline to adopt this amendment because it is legally incorrect. Before the 1999 amendment creating section 768.72(3), a corporation could be held liable for punitive damages under two theories: (1) “vicarious liability based on the willful and malicious actions of an employee with a finding of independent negligent conduct by the corporation”; or (2) “direct liability” for punitive damages “based on the willful and malicious actions” of the corporation’s “managing agent or [persons holding] a policy-making position.” Schropp v. Crown Eurocars, Inc., 654 So. 2d 1158, 1159-61 (Fla. 1995) (emphasis

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supplied). Only a showing of negligent conduct by the employer was required to impose vicarious punitive damages: Before an employer may be held vicariously liable for punitive damages under the doctrine of respondeat superior, there must be some fault on his part. . . . Although the misconduct of the employee, upon which the vicarious liability of the employer for punitive damages is based, must be willful and wanton, it is not necessary that the fault of the employer, independent of his employee’s conduct, also be willful and wanton. It is sufficient that the plaintiff allege and prove some fault on the part of the employer which foreseeably contributed to the plaintiff’s injury to make him vicariously liable for punitive damages. Mercury Motors Exp., Inc. v. Smith, 393 So. 2d 545, 549 (Fla. 1981) (emphasis supplied); Schropp, 654 So. 2d at 1160 (“It is sufficient if the plaintiff establishes ordinary negligence on the part of the corporate employer” to impose vicarious liability.). Section 768.72 was amended in 1999. See Ch. 99-225, § 22, Laws of Fla. (1999) (amending section 768.72, Fla. Stat.). The stated purpose of the 1999 amendment to section 768.72(3) was to clarify the standard for imposing vicarious punitive damages, not to eliminate it. HCA Health Servs. of Fla., Inc. v. Byers-McPheeters, 201 So. 3d 669, 670 (Fla. 4th DCA 2016) (“Under section 768.72(3), the legislature established a heightened standard for imposing punitive damages on an employer rather than adopting the common law rules of agency and vicarious liability.”). Indeed, even after the 1999 revisions to section 768.72, Florida courts

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continue to hold that an employer can be held vicariously liable for punitive conduct of an employee or agent under Mercury Motors and section 768.72(3). See, e.g., Estate of Williams ex rel. Williams v. Tandem Health Care of Fla., Inc., 899 So. 2d 369, 377 (Fla. 1st DCA 2005) (noting that section 768.72(3) “provides that an employer” can “be found vicariously liable for the egregious conduct of an employee” if the employer engaged in the type of conduct specified in subsections (3)(a)-(c) (emphasis added)).2 The legislative history makes clear that the Legislature intended for the 1999 amendment to clarify the holding in Mercury Motors and increase the threshold for imposing vicarious damages against an employer: Subsection (3) revises the common law threshold for holding an employer or other principal vicariously liable for punitive damages. This section specifies the criteria necessary to hold an employer, principal, corporation, or other legal entity liable for punitive damages based on the conduct of an employee or agent. The employee's conduct must rise to the level of gross negligence or intentional misconduct, and either: a) the employer, principal, corporation or other legal entity actively and knowingly participated in such conduct, b) the officers, directors, or managers knowingly condoned, ratified, or consented to such conduct; or c) the employer, principal, corporation, or other legal entity engaged in gross negligence contributing to the damages. 2 See also 2P Commercial Agency S.R.O. v. SRT USA, Inc., 2013 WL 3974668, at *5-6 (M.D. Fla. July 31, 2013) (“In order to recover for punitive damages under the doctrine of respondeat superior, there must be ‘some fault’ on the employer’s part.”).

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Fla. H.R., Comm. on Jud., Final Analysis, HB 775 Conf. Report, at 17 (June 2, 1999), available at http://www.flsenate.gov/Session/Bill/1999/775/?Tab=Analyses (last visited Nov. 21, 2019) (emphasis supplied).3 The Legislature did not intend to eliminate vicarious liability. Further, the Florida Supreme Court has made clear that Instruction 503.1b(3) is a vicarious-liability instruction, and section 768.72(3)—the subsection it tracks—is a vicarious-liability provision.4 So when a jury awards punitive damages against an employer under section 768.72(3) and pursuant to Florida Jury Instruction 503.1b(3), the punitive damages are based on the employer’s vicarious liability for 3 “Staff analyses of legislation should be accorded significant respect in determining legislative intent.” State, Dept. of Envtl. Regulation v. SCM Glidco Organics Corp., 606 So. 2d 722, 725 (Fla. 1st DCA 1992); see also GTC, Inc. v. Edgar, 967 So. 2d 781, 789 (Fla. 2007) (“Certainly, while not determinative of final legislative intent, [the staff analysis] is ‘one touchstone of the collective legislative will,’ White v. State, 714 So.2d 440, 443 n. 5 (Fla.1998).”). 4 The direct-punitive-damages instruction also shows that Subsection (3) is a vicarious-liability provision. Unlike Instruction 503.1(b)(3), which is titled “Vicarious liability for acts of employee,” Instruction 503.1(b)(2) is titled “Direct liability for acts of managing agent, primary owner, or certain others.” And unlike Instruction 503.1(b)(3), Instruction 503.1(b)(2) tracks Subsection (2) exactly, and mirrors the direct-liability standard set out in Bankers Multiple Line Insurance Co. v. Farish, 464 So. 2d 530 (Fla. 1985). See In re Standard Jury Instructions, 35 So. 3d 666, 791 (Fla. 2010). Thus, the Florida Supreme Court recognized in Instruction 503.1(b)(2) that the provision it tracks—Subsection (2)—is a modern rendition of the Bankers case, and is distinct from its vicarious liability counterpart—Subsection (3).

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the employee’s punitive conduct; not the employer’s direct punitive conduct, but on the employee’s punitive conduct. Florida judges, writing in academia, have rejected Mr. Young’s argument. As Fifth District Court of Appeals Judge Thomas Sawaya explains, Subsection (3) simply clarified the acts that constitute “some fault,” but kept vicarious liability entirely intact: Prior to enactment of the 1999 Tort Reform Act, the courts held that while an employer or principal may not be held liable for punitive damages unless there is some fault on his part which foreseeably contributed to the plaintiff’s injury, the conduct of the employer or principal did not have to rise to the level of willful and wanton misconduct. Since the courts spoke in terms of “some fault,” it was often difficult to determine what level of conduct must be established in order to meet that requirement. . . . [The courts’] examples seemed to indicate that at least simple negligence on the part of the employer must be established independent of the employee’s conduct to meet the “some fault” requirement. However, the 1999 Tort Reform Act revised Fla. Stat. § 768.72 to include specific provisions relating the types of misconduct the employer or principal must engage in to make him vicariously liable for punitive damages. Those provisions are found in Fla. Stat. § 768.72(3). . . . Therefore, punitive damages based on vicarious liability may not be recovered unless the plaintiff establishes that the employer, principal, corporation or other entity engaged in the type of conduct specified in Fla. Stat. § 768.72(3)(a) to (c). Judge Thomas D. Sawaya, Florida Personal Injury Law and Practice § 15:15 (2018-2019 ed.) (emphasis supplied) (footnotes omitted). Accord § 15:15, Liability for

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punitive damages based on the doctrine of vicarious liability, 6 Fla. Prac., Personal Injury & Wrongful Death Actions § 15:15 (2019-2020 ed.) (“The 1999 Tort Reform Act revised Fla. Stat. § 768.72 to include specific provisions that apply to punitive damage awards against employers, principals, corporations, or other legal entities based on the doctrine of vicarious liability. These new provisions are contained in Fla. Stat. § 768.72(3) and primarily elaborate on the fourth element required by the courts relating to independent fault on the part of the party held vicariously liable for punitive damages. Therefore, punitive damages based on vicarious liability may not be recovered unless the plaintiff establishes that the employer, principal, corporation or other entity engaged in the type of conduct specified in Fla. Stat. § 768.72(3)(a) to (c).”). Mr. Young’s proposed interpretation would also make Subsection (3) superfluous. As explained before, Subsection (2) states that a defendant is liable for punitive conduct if the “defendant was personally guilty of intentional misconduct or gross negligence.” § 768.72(2). Had the legislature wanted to limit punitive damages to those awarded for an employer’s direct liability, it would have rested on Subsection (2), the provision relating to a defendant’s “personal[]” conduct. Further, Mr. Young’s proposed interpretation makes Subsection (3)’s requirement of punitive conduct by the employee or agent superfluous. Indeed, Subsection (3) requires that the “conduct of the employee or agent meets the criteria specified in

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subsection (2) and” that (a) the employer actively and knowingly participate in that conduct, (b) the officers, directors, or managers knowingly condone, ratify, or consent to that conduct, or (c) the employer engaged in conduct that constituted gross negligence and that contributed to the loss or injury suffered by the claimant. § 768.72(3) (emphasis supplied). If, as Mr. Young suggests, the statute required only punitive conduct by the employer (because vicarious liability no longer exists), then there would be no need for the requirement that the employee or agent be “personally guilty of intentional misconduct or gross negligence.” Yet “[i]t is an elementary principle of statutory construction that significance and effect must be given to every word, phrase, sentence, and part of the statute if possible, and words in a statute should not be construed as mere surplusage.” Hechtman v. Nations Title Ins. of New York, 840 So. 2d 993, 996 (Fla. 2003). For all of these reasons, this Court should decline to adopt this proposed amendment to the standard jury instructions on punitive damages. It is incorrect to delete the word “vicarious” from the title of the instructions describing an employer’s liability for punitive damages for the actions of an employee or agent (instructions 503.1b(3), 503.1b(4), 503.2b(3), and 503.2b(4)).

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2. Reprehensibility is an issue only during phase 2 (amount of punitive damages); not during phase 1 (entitlement to punitive damages). In a pending appeal, my client is arguing that the trial court erred in admitting evidence during phase 1 of harm to non-parties as part of reprehensibility. This Court should reject the Committee’s suggestion to instruct the jury on evidence of harm to non-parties in both phases of a bifurcated trial. It is improper to instruct the jury on harm to non-parties during phase 1, which determines entitlement to punitive damages. The jury should receive an instruction on harm to non-parties only during phase 2, which determines the amount of punitive damages. At a minimum, it is premature for this Court to adopt a standard jury instruction on this issue. Fundamentally, the United States Supreme Court considers the “reprehensibility” of the defendant’s conduct when determining whether the amount of a punitive damages award is unconstitutional. See Philip Morris USA v. Williams, 549 U.S. 346, 353-55 (2007) (emphasis supplied); State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 418-19 (2003); BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 575 (1996). The “degree of reprehensibility” of the defendant’s conduct is one of three “guideposts” for courts to consider when determining whether the amount of punitive damages is “grossly excessive” or arbitrary in violation of due process. Gore, 517 U.S. at 568 & 574-75. Reprehensibility, or blameworthiness, includes whether the defendant’s conduct involved economic or

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physical harm, a reckless disregard for the health and safety of others, intentional conduct, or repeated actions. State Farm, 538 U.S. at 418-19; Gore, 517 U.S. at 575-76. In the context of reviewing the excessiveness of a punitive damages award, the Court in Williams explained, “Evidence of actual harm to nonparties can help to show that the conduct that harmed the plaintiff also posed a substantial risk of harm to the general public, and so was particularly reprehensible.” 549 U.S. at 355. The punitive damage award cannot, however, “punish a defendant directly on account of harms it is alleged to have visited on nonparties.” Id. Due process requires proper instructions to make sure “juries are not asking the wrong question; i.e., seeking not simply to determine reprehensibility, but also to punish for harm caused strangers.” Id. Decisions from this Court demonstrate that harm to non-parties relates to amount, not entitlement. See Schoeff v. R.J. Reynolds Tobacco Co., 232 So. 3d 294, 306-07 (Fla. 2017); Owens-Corning Fiberglas Corp. v. Ballard, 749 So. 2d 483, 484-89 (Fla. 1999). In both cases, this Court examined reprehensibility when determining whether the amount of a punitive damages award was excessive. Schoeff, 232 So. 3d at 306-07; Ballard, 749 So. 2d at 484-85. The Schoeff decision found the tobacco defendant’s conduct to be “among the most reprehensible.” 232 So. 3d at 307. The defendant intentionally “increased the addictive quality of

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cigarettes, concealed their health defects, and widely marketed their defective product for profit.” Id. As a result, the defendant acted “with reckless disregard for the health and safety of others.” Id. This Court held the punitive damages award was not unconstitutionally excessive and affirmed the trial court’s denial of remittitur. Id. at 306-09. This demonstrates that reprehensibility, including harm to others, relates to the amount of punitive damages instead of entitlement. Similarly, in Ballard, the trial judge properly instructed the jury during phase 2 to consider the “degree of reprehensibility of [the defendant’s] conduct, the duration of that harmful conduct, [the defendant’s] awareness, any concealment and the existence and frequency of similar past conduct.” 749 So. 2d at 484-87. This Court concluded the punitive damages were not excessive in light of evidence that the defendant intentionally concealed the danger of asbestos for more than 30 years, which amounted to “a flagrant disregard for the safety of those persons exposed” to asbestos. Id. at 488. This illustrates that harm to non-parties is an aspect of reprehensibility during phase 2, when determining the amount of punitive damages. At a minimum, a jury instruction on this issue is premature because the law is unsettled. The sole Florida appellate decision on this issue does not provide sufficient guidance to support a jury instruction. Philip Morris USA v. Ledoux, 230 So. 3d 530, 536 (Fla. 3d DCA 2017), review denied, No. SC17-2033, 2018 WL 1357456 (Fla. Mar. 16, 2018). Other decisions simply note the jury was instructed

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on harm to non-parties, without addressing whether the instruction was given during phase 1 or phase 2. See Philip Morris USA Inc. v. Boatright, 217 So. 3d 166, 172 (Fla. 2d DCA 2017) (rejecting argument that plaintiff’s counsel improperly argued that jury should punish defendant for harm to non-parties where the trial court instructed the jury that “it could not impose punitive damages to punish a defendant for harm caused to others”); 5 RJ Reynolds Tobacco Co. v. Townsend, 90 So. 3d 307, 313 n.7 (Fla. 1st DCA 2012) (reversing punitive damages award as constitutionally excessive, but observing jury had been properly “instructed on the permissible use of evidence of harm to nonparties” when determining reprehensibility). Before adopting a jury instruction, this Court should allow the other district courts to address this issue and resolve any resulting conflict in the district courts. When the law is unsettled, the standard jury instructions often include a note on use stating, “Pending further development in the law, the committee takes no position on” the issue. See, e.g., Fla. Std. Jury Instr. (Civ.) 403.7, n.3 & 4. At most, that is what the Committee should have done here. The Committee materials reflect a misunderstanding that proposing an instruction during both phases makes it unnecessary to resolve whether harm to non-parties should be considered in phase 1 or 2. The Committee materials explain, 5 Review denied, SC17-894, 2018 WL 3090430, cert. denied, 139 S. Ct. 1263 (2019).

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“Notably, this Subcommittee’s proposals do not require the Committee to take a position on whether evidence of harms caused to others is admissible in phase 1 or phase 2 of a bifurcated trial.”6 (emphasis supplied). During the meeting when the Committee adopted this amendment, one member suggested a revision to inform jurors that harm to non-parties can be considered “in deciding whether or not to award punitive damages.” (Appendix D-55) (some emphasis supplied). The Committee did not add this language because this issue “hasn’t been resolved” by the case law, so the Committee needed to “wait[] for more legal development before making this change.” (Id.) (emphasis supplied). Yet, the proposed instruction allows evidence of reprehensibility in phase 1. If this Court adopts a standard instruction on reprehensibility during phase 1, with a note citing Ledoux, evidence of harm to non-parties will be admissible during phase 1. Standard jury instructions “shall” be given in all cases, “unless the trial judge determines that an applicable Standard Jury Instruction is erroneous or inadequate.” Fla. R. Civ. P. 1.470(b). The proposed note on use also cites the Fourth District’s decision in Philip Morris USA Inc. v. Cohen, 102 So. 3d 11 (Fla. 4th DCA 2012), quashed on other 6 The Appendix to the report does not appear to include the materials from the Committee meeting on October 26, 2017 (Appendix C; Appendix D-42). For this Court’s convenience, attached please find the punitive damages subcommittee’s report and proposed instructions discussed during that meeting.

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grounds, 41 Fla. L. Weekly S113 (Fla. Jan. 29, 2016). Cohen, a tobacco case, involved a completely different type of bifurcation. In phase 1, the jury decided whether plaintiff was a member of the Engle class because addiction to cigarettes caused the death. Id. In phase 2, the jury decided “legal causation, comparative fault, compensatory damages, and punitive damages.” Id. at 14-15. Thus, during what Cohen referred to as “phase II,” the jury determined both entitlement to punitive damages and amount. Cohen sheds no light on whether evidence of harm to non-parties should be considered as part of entitlement or amount. This Court should reject the Committee’s suggestion to instruct the jury on evidence of harm to non-parties during phase 1 on entitlement to punitive damages. Instead, the jury should receive an instruction on harm to non-parties only during phase 2, on the amount of punitive damages. CONCLUSION This Court should not adopt the amendments proposed by the Committee on Standard Jury Instructions in Civil Cases, to instructions 503.1 and 503.2 on punitive damages. Respectfully submitted, /s/ Walter J. Andrews Walter J. Andrews (Fla. Bar No. 84863) HUNTON ANDREWS KURTH LLP

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1111 Brickell Avenue, Suite 2500 Miami, Florida 33131 Tel: (305) 810-6407 wandrews@HuntonAK.com CERTIFICATE OF SERVICE I HEREBY CERTIFY that on the 2nd day of December, 2019, I will electronically file this document using the Florida Courts E-Filing Portal, which will serve this filing on: Laura K. Whitmore Chair of the Supreme Court Committee on Standard Jury Instructions (Civil) Shook, Hardy & Bacon 100 N. Tampa Street, Suite 2900 Tampa, FL 33602 lwhitmore@shb.com Jeffrey Alan Cohen Vice Chair and Filing Subcommittee Chair, Supreme Court Committee on Standard Jury Instructions (Civil) Carlton Fields, P.A. 100 SE 2nd Street, Suite 4200 Miami, FL 33131-2113 jacohen@carltonfields.com Heather Telfer Staff Liaison (Civil Instructions) The Florida Bar 651 E. Jefferson Street Tallahassee, FL 32399-2300 htelfer@floridabar.org B. Richard Young Young, Bill, Boles, Palmer & Duke, P.A. PO Box 1070 Pensacola, FL 32591-1070 bryoung@flalawyer.net Benjamine Reid Carlton Fields, P.A. 100 SE 2nd Street, Suite 4200 Miami, FL 33131-2113 breid@carltonfields.com