Minnesota: Appellate Court Overturns Punitive Damages Award for Bad Faith Participation (Web)

Fred M. Soucie v. DuWayne E. Hess, 2005 WL 1432262 (Court of Appeals of Minnesota, June 21, 2005).  A Minnesota appeals court overturned an award of punitive damages for bad faith participation in mediation.  The court held that in Minnesota, the decision was an abuse of discretion because mediating in bad faith is not a statutorily provided basis for an award of punitive damages. 
 
Hess, the appellant, built a fence and infringed upon the land of Soucie, the appellee.  Despite Soucie’s efforts to discourage, Hess continued to infringe by building a second fence and cutting down trees.  Both parties entered into mediation.  Both then sued for trespass.  The trial court found in favor of Soucie.  Among other damages, the court granted punitive damages in the amount of $5,000.00.  Hess appealed. 
 
Minn.Stat. §549.20, subd. 1(a) (2004) states that “punitive damages are allowed only if clear and convincing evidence indicates that a defendant’s acts showed deliberate disregard for the rights of others.  A defendant who intentionally disregards facts that create a high probability of injury to the rights of others acts with deliberate disregard for those rights.” Minn.Stat. §549.20, subd. 3 (2004) states that punitive damages may be awarded if certain factors are present, including:  seriousness of hazard arising from misconduct, 2) profitability of misconduct, 3) duration of misconduct, 4) awareness and excessiveness of misconduct, 5) the attitude of defendant upon awareness of misconduct, 6) financial condition of defendant. 
 
The District Court had awarded punitive damages in the amount of $5000.00 based on Hess’s assets, Hess’s engagement in self-help remedies, the duration of the misconduct, and his hostility when confronted.  All of these were valid justifications for punitive damages. 
 
However, the District Court had also listed Hess’s bad faith participation in mediation as a reason for punitive damages, which was not a valid justification for punitive damages.  The Court stated, “mediating in bad faith is not among the statutory factors provided to measure punitive damage awards…”  The Court would not make bad faith mediating a factor in the statute.  Therefore, the District Court’s decision was an abuse of discretion and the Appellate Court reversed and remanded back to the District Court to recalculate the punitive damages. 
 
 
Find this decision at: 2005 WL 1432262