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*Note: The following opinion was edited by AudioCaseFiles' staff.
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Cheatham v. Pohle
789 N.E.2d 467
Supreme Court of Indiana, 2003

Opinion by: BOEHM, J.

Indiana's punitive damages allocation statute provides that an award of punitive damages is to be paid to the clerk of the court, and the clerk is to pay seventy-five percent of it to the State's Violent Crime Victims' Compensation Fund and twenty-five percent to the plaintiff. We hold the statute does not create an unconstitutional taking of property. Nor does it place a demand on an attorney's particular services in violation of the Indiana Constitution.

Factual and Procedural Background

After Doris Cheatham and Michael Pohle divorced in 1994, Pohle retained photographs he had taken of Cheatham in the nude as well as photos of the two engaged in a consensual sexual act. In early 1998, Pohle made photocopies of the photographs, added Cheatham's name, her work location and phone number, her new husband's name, and her attorney's name, and proceeded to distribute at least sixty copies around the small community where both he and Cheatham still lived and worked. Cheatham sued, alleging invasion of privacy and intentional infliction of emotional distress, and the jury awarded her $ 100,000 in compensatory damages and $ 100,000 in punitive damages.

Indiana Code section 34-51-3-6, enacted in 1995, provides:

(a) Except as provided in IC 13-25-4-10, when a judgment that includes a punitive damage award is entered in a civil action, the party against whom the judgment was entered shall pay the punitive damage award to the clerk of the court where the action is pending.

(b) Upon receiving the payment described in subsection (a), the clerk of the court shall:

(1) pay the person to whom punitive damages were awarded twenty- five percent (25%) of the punitive damage award; and

(2) pay the remaining seventy-five percent (75%) of the punitive damage award to the treasurer of state, who shall deposit the funds into the violent crime victims compensation fund established by IC 5-2-6.1-40.

[. . .]

Although Cheatham did not raise any constitutional issue in the trial court, she appealed the judgment on two grounds. She argues that the statute violates the Takings Clauses found in both the Indiana Constitution and the Fifth Amendment of the United States Constitution. She also contends that the statute demands an attorney's "particular services" without just compensation in violation of Article I, Section 21 of the Indiana Constitution and that the statute imposes a tax upon her and her attorney in violation of Article X, Section 1 of the Indiana Constitution.

[. . .]

I. Punitive Damages in Indiana

In assessing the claim that the allocation statute takes property without just compensation, it is essential to understand the nature of a claim for punitive damages. The purpose of punitive damages is not to make the plaintiff whole or to attempt to value the injuries of the plaintiff. Rather, punitive damages, sometimes designated "private fines" or "exemplary damages," have historically been viewed as designed to deter and punish wrongful activity. As such, they are quasi-criminal in nature. [. . .]

As a matter of federal law, state legislatures have broad discretion in authorizing and limiting the award of punitive damages, just as they do in fashioning criminal sanctions. [. . .] Victims in a criminal case have no claim to benefit from criminal sanctions. [. . .] For the same reason, it has been consistently held that civil plaintiffs have no right to receive punitive damages. [. . .]

To the extent punitive damages are recoverable, they are a creature of the common law. [. . .] As we have repeatedly held in other contexts, the legislature is free to create, modify, or abolish common law causes of action. [. . .] And, as a matter of federal constitutional law, no person has a vested interest or property right in any rule of common law. [. . .] As a result, the General Assembly is free to eliminate punitive damages completely, as other states have done, and also has wide discretion in modifying this "quasi-criminal" sanction. Indeed, several jurisdictions have chosen not to recognize punitive damages as an acceptable award in any form.

Indiana, like several other states, has chosen an intermediate ground-permitting juries to award punitive damages and thereby inflict punishment on the defendant, but placing restrictions on the amount the plaintiff may benefit from the award. The facts warranting punitive damages must be established by clear and convincing evidence. Ind. Code § 34-51-3-2 (1998). Whether punitive damages may be awarded is usually a question of fact. [. . .]

In sum, Indiana law recognizes a right to assert a claim to be compensated for a cognizable wrong and to recover on that claim to the extent the law allows. But a number of consequences flow from the fundamentally different nature of a claim to punitive damages. The financial condition of the defendant is relevant [. . .], which it would not be if the goal were to compensate the plaintiff, as opposed to deterring or punishing the defendant. Proof is required by a clear and convincing standard rather than a preponderance of the evidence standard. [. . .] For our purposes, the essential point is that because punitive damages do not compensate the plaintiff, the plaintiff has no right or entitlement to an award of punitive damages in any amount. Unlike a claim for compensatory damages, the trier of fact is not required to award punitive damages even if the facts that might justify an award are found.[. . .]

II. Claims Under State and Federal Taking Clauses

[. . .]

[A]ny interest the plaintiff has in a punitive damages award is a creation of state law. The plaintiff has no property to be taken except to the extent state law creates a property right. [. . .] The Indiana legislature has chosen to define the plaintiff's interest in a punitive damages award as only twenty-five percent of any award, and the remainder is to go to the Violent Crime Victims' Compensation Fund. The award to the Fund is not the property of the plaintiff. Nor is her prejudgment claim a property interest. Rather, the claim she had before satisfaction was, pursuant to statute, a claim to only one fourth of any award of punitive damages. As a result, there is no taking of any property by the statutory directive that the clerk transfer a percentage of the punitive damages award to the Fund.

A claim for punitive damages can be sustained only if it is accompanied by a viable claim for compensatory damages. [. . .] Cheatham thus claims that an award for punitive damages is "connected to" a claim for actual damages. From this, Cheatham reasons that because she has a right to compensatory damages, she must have a right to punitive damages as well. This confuses necessary preconditions with sufficient ones. To be sure, a claim for compensatory damages is a prerequisite to a claim for punitive damages, but it does not follow that it is adequate to confer a right to that claim.

Several states have statutes that allocate punitive damages to the state in some form similar to the Indiana version. [. . .]Of the state courts that have addressed the issue, only the Colorado Supreme Court has found an unconstitutional taking of property, while statutes in Alaska, Oregon, Georgia, Florida and Iowa have been upheld.

[. . .]

III. Uniform and Equal Taxation

Cheatham argues that the statute imposes a tax on her and her attorney in violation of Article X, Section 1 of the Indiana Constitution. We disagree. [. . .] Only the taxation of "property" is governed by this constitutional provision. For the reasons stated above, Cheatham has no property interest in the punitive damages award. [. . .]

IV. Demand on Particular Services

Unlike the Fifth Amendment, in addition to its Takings Clause, Article I, Section 21 of the Indiana Constitution also provides that "no person's particular services shall be demanded, without just compensation." This provision applies only if both a "person's particular services" are rendered and they have been "demanded" by the State. Cheatham contends that the effect of the statute is to demand her attorney's "particular services" without just compensation in violation of this provision. We agree that the attorney's services are "particular" as that term appears in the Indiana Constitution [. . .]. But we find no demand in this arrangement. Cheatham engaged her attorney and the attorney agreed to represent her, all with no state intervention of any kind. [. . .]
Conclusion

[. . .]
The judgment of the trial court is affirmed.

SHEPARD, C.J., and SULLIVAN, J., concur. DICKSON, J., dissents with separate opinion, in which RUCKER, J., concurs.

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