Find Legal Information

Filed: January 11, 2001

MARK PARROTT,

Petitioner on Review,

and

CHARLES FORSHEY,

Plaintiff,

v.

CARR CHEVROLET, INC.,
an Oregon corporation,

Respondent on Review.

__________________________________________________________________

MARK PARROTT,

Respondent on Review,

and

CHARLES FORSHEY,

Plaintiff,

v.

CARR CHEVROLET, INC.,
an Oregon corporation,

Petitioner on Review.

On review from the Court of Appeals.*

Argued and submitted September 8, 1999.

Kathryn H. Clarke, Portland, argued the cause for petitioner-cross respondent on review Parrott. With her on the briefs were Maureen Leonard and Michael C. Baxter, Portland.

Barbee B. Lyon, of Tonkon Torp LLP, Portland, argued the cause and filed the briefs for respondent-cross petitioner on review Carr Chevrolet, Inc.

Megan A. Flynn and Kevin Keaney, Portland, and James S. Coon, of Swanson, Thomas & Coon, Portland, filed briefs on behalf of amicus curiae Oregon Trial Lawyers Association.

Craig A. Nichols, of Nichols & Associates, Portland, filed a brief on behalf of amicus curiae Oregon Automobile Dealers Association.

Before Carson, Chief Justice, and Durham, Kulongoski, and Leeson, Justices.**

KULONGOSKI, J.

The decision of the Court of Appeals is affirmed in part and reversed in part. The judgment of the circuit court is affirmed in part and reversed in part, and the case is remanded to the circuit court with instructions to reinstate the jury's $1 million punitive damages award.

* Appeal from Washington County Circuit Court, Michael J. McElligott, Judge. 156 Or App 257, 965 P2d 440 (1998).

** Gillette, Riggs, and De Muniz JJ., did not participate in the consideration or decision of this case. Van Hoomissen, J., retired on December 31, 2000, and did not participate in the consideration or decision of this case.

KULONGOSKI, J.

Parrott (plaintiff) (1) brought this civil action against Carr Chevrolet, Inc. (defendant), arising from defendant's sale of a used 1983 Chevrolet Suburban to plaintiff. Plaintiff alleged, inter alia, that defendant had violated certain provisions of the Unlawful Trade Practices Act (UTPA), ORS 646.608(1)(e), (g), and (t). (2) The jury returned a verdict in plaintiff's favor and awarded $11,496 in compensatory damages and $1 million in punitive damages. After the verdict, defendant filed motions for a judgment notwithstanding the verdict (JNOV) under Oregon Rule of Civil Procedure (ORCP) 63 or, in the alternative, for a new trial under ORCP 63 C and ORCP 64. One of the grounds that defendant asserted in support of its motion for a new trial was that the jury's punitive damages award was excessive. Although the trial court denied defendant's JNOV and new-trial motions, it ruled that the punitive damages award was excessive and reduced it to $50,000. The trial court then entered judgment for plaintiff in the amount of $11,496 in actual damages and $50,000 in punitive damages. The trial court also rejected plaintiff's attorney fees request for $55,468.75, awarding, instead, fees of $15,000. Both plaintiff and defendant appealed.

On appeal, plaintiff assigned error to the trial court's reduction of the punitive damages award from $1 million to $50,000 and to the trial court's rejection of plaintiff's attorney fees request. Defendant cross-appealed, contending, generally, that plaintiff had failed to state a claim under the UTPA, that the trial court had erred in awarding any punitive damages, and that the trial court's $50,000 punitive damages award was excessive. The Court of Appeals affirmed on defendant's cross-appeal. On plaintiff's appeal, it reversed the trial court's reduction of the jury's punitive damages award and remanded with instructions to enter judgment allowing defendant's motion for new trial unless plaintiff filed a remittitur of punitive damages in the amount of $300,000. Parrott v. Carr Chevrolet, Inc., 156 Or App 257, 965 P2d 440 (1998). (3) Both parties petitioned for review, challenging the Court of Appeals' analysis in its review of the punitive damages award and whether the punitive damages award was unconstitutionally excessive. (4) We allowed both petitions.

The primary issue on review is the appropriate standard for post-verdict judicial review of a punitive damages award in Oregon in light of BMW of North America, Inc. v. Gore, 517 US 559, 116 S Ct 1589, 134 L Ed 2d 809 (1996). For the reasons that follow, we hold that the rational juror inquiry in Oberg v. Honda Motor Co., 320 Or 544, 888 P2d 8, cert den 517 US 1219 (1996) (Oberg (state)), (5) remains the standard of post-verdict judicial review of punitive damages in Oregon for excessiveness under the federal constitution and that Gore's set of nonexclusive guideposts are factors that the reviewing court should consider as part of the Oberg (state) review. Applying the Oberg (state) standard and the Gore guideposts to the record before the jury in this proceeding, we hold that the jury's $1 million award of punitive damages is within the range that a rational juror would be entitled to award.

The following facts are taken from the record. We view the evidence, and the reasonable inferences to be drawn therefrom, in the light most favorable to plaintiff, the party in whose favor the jury returned the verdict. Northwest Natural Gas Co. v. Chase Gardens, Inc., 328 Or 487, 490, 982 P2d 1117 (1999).

Defendant operated a budget lot for used vehicles advertised as "quality checked used cars." The vehicles on that lot were sold "as is" and had been driven at least 100,000 miles. In December 1992, defendant acquired a 1983 Suburban as a trade-in from Myers. Defendant sent the Suburban to the budget lot, priced at $5,995. Two weeks after defendant had acquired the Suburban, plaintiff went to defendant's budget lot in search of a three-quarter ton truck. A salesperson directed him to the Suburban. After examining the Suburban, plaintiff noticed that someone had polished, cleaned and serviced it, and that the radiator, batteries, tires, and upholstery looked new. The engine was painted blue, and plaintiff assumed that it had been replaced. He commented: "It looks like quite a lot of recent work was done on this vehicle," to which the salesperson replied, "[y]eah." Plaintiff also noticed that the Suburban's air cleaner was missing, but the salesperson assured him that defendant would replace it.

The following week, plaintiff purchased the Suburban. After trading in his two vehicles as a down payment toward the purchase price of the Suburban, plaintiff signed a credit agreement through defendant for the balance of the Suburban's purchase price, $2,892.17. Plaintiff also signed the sales documents to complete the transaction, which included a "Special Disclaimers and Conditions" form and a "Buyer's Order."

Included in the Special Disclaimers and Conditions form was a section stating that the dealership visually had inspected the vehicle and that there were no apparent deficiencies in the installation of emission control devices. When plaintiff pointed out that that statement was inconsistent with the missing air cleaner, defendant gave him a "we owe" statement for that missing piece of equipment. The Buyer's Order, in contrast, included a typewritten section stating that the dealership had not inspected the vehicle and had no knowledge of the vehicle's condition, the accuracy of the odometer, or Department of Environmental Quality (DEQ) certification. After he had completed all the paperwork, plaintiff drove the Suburban home.

Shortly thereafter, plaintiff discovered multiple problems with the Suburban, including several missing pieces of emission control equipment, not only the air cleaner. (6) Through his own investigation, plaintiff also discovered that it was impossible to bring the Suburban into DEQ compliance because of the missing equipment and a difference in age between the Suburban and its engine. Plaintiff noticed that the Vehicle Identification Number (VIN) located on the door, which should have matched with the VIN in the glove box, had been removed. He also noticed that there were white lines between the numbers on the odometer. Plaintiff conducted his own title search and learned through the Department of Transportation, Driver and Motor Vehicle Services (DMV), that the Suburban previously had been damaged in California and that it had a "title brand," which meant that the Suburban's title had a notation indicating that it had been damaged severely, totaled, or stolen. Once plaintiff's insurer learned about the branded title, it no longer would provide comprehensive insurance for the Suburban.

When plaintiff complained to defendant, defendant's employees told plaintiff that repair was his problem because he had purchased the Suburban "as is." They also told him that the Suburban's engine did not require DEQ equipment and that, regardless of that fact, he should not worry about DEQ compliance, because the registration was valid for another two years. At one point, a salesperson told plaintiff that defendant would replace the engine, but with junkyard parts. Ultimately, negotiations between plaintiff and defendant for a replacement vehicle failed when one of defendant's salespeople yelled at plaintiff, telling him that the Suburban was "unfixable" and that he would have to "learn to live with it" unless he agreed to a refund of $3,100 -- an amount equivalent to his down payment but that did not include reimbursement for the value of his trade-ins or his loan and insurance fees. Negotiations between plaintiff and defendant's attorney for rescission of the transaction also failed.

As a result, plaintiff filed this action against defendant, alleging, among other things, that defendant had violated the UTPA by willfully selling the Suburban:

"1) Falsely claiming it was equipped with proper emission controls;

"2) Falsely representing it had been driven 100,608 miles;

"3) With defaced or missing VIN numbers in violation of Oregon law;

"4) Without disclosing that the emission control equipment had been removed; and

"5) Selling the vehicle without disclosing it had previous out of state damage."

At trial, plaintiff proved that defendant had known about the condition of the Suburban when defendant sold it to plaintiff. When defendant had acquired the Suburban as a trade-in from Myers, Myers had provided defendant with a temporary registration form as proof of ownership. It was clear from examining Myers's temporary registration form that someone had altered it in an attempt to conceal that it had expired. Plaintiff's experts testified that no used car dealership would accept the expired document as proof of ownership without confirmation from DMV. The Monday after Myers had brought the Suburban to defendant, someone had requested and received a Basic Vehicle Information sheet from a DMV field office. That document confirmed that Myers was the registered owner of the Suburban, that the Suburban had an odometer discrepancy, and that the Suburban had received "out-of-state damage - CA."

Preble, co-owner and chairman of the board of Carr Chevrolet, acknowledged at trial that, as proof of ownership, Myers's temporary registration form was a "flimsy document" and that, consequently, defendant had asked Myers to sign a "Secure Power of Attorney." A Secure Power of Attorney is a DMV form that dealers use when the owner of a vehicle has lost a title or the title is in the possession of a security interest holder. The form authorized defendant to transfer title from Myers to the new owner, in this case, plaintiff. One purpose of the form is to protect customers, like plaintiff, from an odometer discrepancy. Although Myers had filled out Part A of the Secure Power of Attorney, defendant never completed Parts B and C. Had defendant completed the Secure Power of Attorney when it sold the Suburban to plaintiff, plaintiff would have learned about the odometer discrepancy before completing the transaction.

In addition to the Secure Power of Attorney, Myers also had filled out, albeit incompletely, a "Secure Odometer Disclosure/Reassignment" form for his trade-in vehicles. Plaintiff's expert testified that the only reason that a dealership would fill out both a Secure Power of Attorney and an incomplete Secure Odometer Disclosure/Reassignment form for the same vehicle was so that it could "try to sell [the vehicle] at a later date without proper disclosure of the mileage." Plaintiff's evidence demonstrated that the incorrect use of title transfer forms was a regular part of defendant's business practice. For its part, defendant acknowledged that it routinely asked customers to sign blank, undated, or otherwise incomplete title transfer forms, but it denied that it used incorrect, extra, or incomplete forms for any wrongful purpose.

When plaintiff purchased the Suburban, defendant had represented to plaintiff that it had possession of the Suburban's title, when, in fact, it had only Myers's expired temporary registration. Defendant subsequently obtained the replacement title that stated that the odometer reading "exceed[ed] mechanical limits" and that the car had received "previous damage - California." However, defendant did not disclose that information to plaintiff. When completing the documents to transfer title from Myers to plaintiff, defendant's title clerk had failed to notice that the mileage indicated on the front of the title, 107,497 miles as of July 1992, was greater than defendant's odometer reading when it acquired the Suburban from Myers, 100,608 miles as of December 1992. She testified that defendant had not trained her to check for such a discrepancy and that she never had done so. Referring to the discrepancy between the odometer statements on the front and back of the replacement title, Preble testified: "We would have been as alarmed as you were, had we paid attention to that fact." Claiming ignorance of DMV vehicle transfer requirements, Preble declined to identify anyone in the company with sufficient knowledge and authority to be responsible for what had happened, stating: "Our management style doesn't cause us to have final authority [for that] type of thing. That's not the style of management we have."

Defendant claimed that it had no knowledge of the Suburban's physical and mechanical defects before selling the Suburban to plaintiff and was equivocal about whether it had inspected the Suburban when it accepted it in trade. Defendant ultimately conceded, however, that, to accept the Suburban in trade, defendant had appraised it and performed a "minimal" inspection as part of that appraisal. Defendant's used car manager testified that a "minimal" inspection included a visual inspection of the physical condition of the Suburban, including the body, paint, glass, upholstery, and carpet, a check of specific equipment on the Suburban, such as the transmission and brakes, and a test drive of the Suburban "to make sure that the engine runs [and that] the transmission shifts."

Plaintiff's experts testified that, even without a detailed inspection of the Suburban, any minimally trained dealership employee would have recognized the following "red flags" indicating that someone had "altered" the Suburban: (1) the driver's door was misaligned and was a different color; (2) the VIN was missing from the door and from the transmission; (3) several pieces of the emission control equipment were missing; (4) the engine was not the original engine that had come with the Suburban; and (5) "very visible" white lines were present between the odometer numbers -- a clear indication that someone had tampered with the odometer and, therefore, that the mileage indicated likely was inaccurate. One of plaintiff's experts opined that there was "no question" that defendant knew that the mileage on the Suburban was not accurate, that the VIN had been removed, and that the Suburban was missing its emission control equipment and could not pass DEQ inspection.

As noted, the jury found for plaintiff on his UTPA claim, awarding him compensatory and punitive damages. Defendant challenged the jury's award of punitive damages on several grounds, including excessiveness under the Fourteenth Amendment to the United States Constitution. (7) The trial court noted that the record supported what was "an extraordinarily egregious violation" of the UTPA, but, on defendant's motion for elimination or reduction of the punitive damages award, lowered plaintiff's punitive damages award to $50,000, finding that $50,000 "is the number which is the top of the range which * * * a rational factfinder could award on this * * * record."

On appeal, the Court of Appeals followed Blume v. Fred Meyer, Inc., 155 Or App 102, 963 P2d 700 (1998), which held that, after Gore, the Oberg (state) rational juror standard for post-verdict judicial review of punitive damages for excessiveness under the federal constitution no longer is applicable. Parrott, 156 Or App at 274-75. Both defendant and plaintiff petitioned for review, seeking clarification of the appropriate standard for post-verdict judicial review of a punitive damages award in Oregon in light of Gore. We allowed review to consider that issue.

Before we reach that issue, however, we turn to the additional issue raised in defendant's petition for review, which is whether, in light of ORS 72.3160(3)(a), which permits "as is" sales, plaintiff failed to state a claim under ORS 646.608(1)(t). (8) We have considered and, for the reasons explained by the Court of Appeals, Parrott, 156 Or App at 270-71, reject without additional discussion defendant's arguments relating to that issue.

We turn, then, to the primary issue on review: What is the appropriate standard of post-verdict judicial review of a punitive damages award in Oregon following Gore? In Honda Motor Co. v. Oberg, 512 US 415, 114 S Ct 2331, 129 L Ed 2d 336 (1994) (Oberg (federal)), the United States Supreme Court held that the Due Process Clause requires the availability of post-verdict judicial review of punitive damages awards. In that opinion, however, the Court did not "address the more difficult question of what standard of review is constitutionally required." Id. at 432 n 10. On remand, this court held:

"[T]he standard for post-verdict judicial review of an award of punitive damages is as follows: A jury's award of punitive damages shall not be disturbed when it is within the range that a rational juror would be entitled to award in the light of the record as a whole; the range that a rational juror would be entitled to award depends, in turn, on the statutory and common law factors that allow an award of punitive damages for the specific kind of claim at issue."

Oberg (state), 320 Or at 549 (footnote omitted).

Approximately one year after this court's decision in Oberg (state), the United States Supreme Court in Gore decided to address the question it previously had left unanswered in Oberg (federal) and "illuminate the character of the standard that will identify unconstitutionally excessive awards of punitive damages[.]" 517 US at 568 (internal quotation marks omitted). The plaintiff in Gore filed an action against BMW for fraud after he discovered that BMW had failed to disclose that his new automobile had been repainted due to damage during delivery. The jury awarded the plaintiff $4,000 in compensatory damages and $4 million in punitive damages. The trial court denied BMW's post-trial motion to set aside the punitive damages award, holding, among other things, that the award was not excessive. On appeal, the Alabama Supreme Court applied its state law criteria for judicial review (previously endorsed by the Supreme Court in Pacific Mutual Life Insurance Co. v. Haslip, 449 US 1, 21-22, 111 S Ct 1032, 113 L Ed 2d 1 (1991)), and concluded that the jury's punitive damages award did not exceed the constitutionally permissible amount. The Alabama Supreme Court, however, reduced that award to $2 million, because it found that the jury improperly had computed the amount of punitive damages by multiplying the plaintiff's compensatory damages by the number of similar sales in jurisdictions other than Alabama.

The United States Supreme Court reversed. Gore, 517 US at 586. Although the Court acknowledged the legitimacy of a state's interests in "punishing unlawful conduct and deterring its repetition" through punitive damages awards, it emphasized that the Due Process Clause prohibits states from imposing "grossly excessive" punishment on a tortfeasor. Id. at 568 (citing TXO Production Corp. v. Alliance Resources Corp., 509 US 443, 456, 113 S Ct 2711, 125 L Ed 2d 366 (1993)). The Court explained that an award that the Court can characterize as "grossly excessive" in relation to the state's interests is one that is arbitrary and, therefore, violates due process. Id. Accordingly, review of a punitive damages award for excessiveness begins with identification of the state interests that a punitive damages award is designed to serve. Id.

The Court also held that "a person [must] receive fair notice not only of the conduct that will subject him to punishment, but also of the severity of the penalty that a State may impose." Id. at 574. The Court identified three "guideposts" to consider when evaluating whether a defendant has received fair notice of the magnitude of the punitive damages award that might be imposed: (1) the degree of reprehensibility of the defendant's conduct; (2) the disparity between the punitive damages award and the actual or potential harm inflicted; and (3) the civil and criminal sanctions provided for comparable misconduct. Id. at 574-85. The Court then analyzed the facts of Gore in light of those guideposts and concluded that the punitive damages award in that case was "grossly excessive," in violation of the Due Process Clause. (9) It then remanded the case to the Alabama Supreme Court. Id. at 586.

In this proceeding, defendant argues that the Oberg (state) rational juror standard of post-verdict judicial review "has been effectively overruled" by Gore and that the Gore guideposts alone should guide post-verdict review of punitive damages awards in Oregon. Defendant contends that, under the Gore guideposts, the jury's $1 million punitive damages award and the Court of Appeals' $300,000 punitive damages award both are "grossly excessive" in violation of the Fourteenth Amendment.

In response, plaintiff disputes whether Gore superseded Oberg (state). According to plaintiff, Oberg (state) announced a "state law review process" that the court must apply before applying Gore's substantive due process review under the federal constitution. Citing Oberg (state), 320 Or at 549, plaintiff argues that, by focusing solely on the Gore guideposts, defendant has "abandoned its state law prong of its challenge" and conceded that the jury's verdict was rational "in light of the record as a whole," based on "the statutory and common law factors" governing the proceeding. Plaintiff also argues that, under the Gore guideposts, the evidence before the jury in this proceeding "fully supports" the reasonableness of the jury's $1 million punitive damages award and, therefore, that award does not violate the Fourteenth Amendment.

Although defendant's challenge to the jury's punitive damages award arises under the federal constitution, we begin by addressing plaintiff's characterization of the Oberg (state) rational juror standard as a "state law standard." See State v. Kennedy, 295 Or 260, 262, 666 P2d 1316 (1983) (court must resolve all questions of state law before reaching federal constitutional arguments). As mentioned above, the court in Oberg (state) responded to the Supreme Court's holding that the Due Process Clause of the Fourteenth Amendment requires post-verdict review for excessiveness. There is, however, no "state law excessiveness challenge" under the Oregon Constitution. (10) See Or Const, Art VII (Amended),