ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE VIRGIN ISLANDS
Before: GIBBONS, SLOVITER and BECKER, Circuit Judges
In the absence of contrary authority and coupled with the common law, the restatements of law approved by the American Law Institute provide the rules of decision in the Virgin Islands. V.I. Code Ann. tit. 1, § 4 (1967). This case presents the important question whether Virgin Islands law permits the award of punitive damages against defendants who have been found strictly liable under section 402A of the Restatment (Second) of Torts for having marketed defective products. We hold that punitive damages may be awarded against such defendants, but only when the plaintiff proves the requisite outrageous conduct by clear and convincing evidence. Because we find that plaintiff did not adduce such proof as to the conduct of any of the defendants, we will affirm the district court's order granting the motion of American Honda Motor Co., Inc. ("American Honda") for judgment n.o.v. on that issue, and we will reverse the denial of similar motions on behalf of defendants Honda Motor Co., Ltd. ("Honda") and Daido Kogyo, Co., Ltd. We find no merit, however, in defendants' challenges to the award of compensatory damages, and we will affirm that aspect of the judgment. Finally, in light of our disposition of the punitive damages claim, we will remand for reconsideration the district court's order awarding attorneys fees pursuant to Virgin Islands law.
In early 1976, plaintiff purchased a used Honda CB750 motorcycle. At that time the motorcycle was six years old; plaintiff was its third owner. Approximately two months after he bought the motorcycle, plaintiff was injured when he was thrown from the motorcycle while riding at night on a lighted road in St. Thomas. According to his testimony, he was driving at approximately 30-35 miles per hour when he saw in the road a repair ditch approximately four inches deep and ten feet long. He testified that he slowed down, retained control of the motorcycle, and maneuvered it straight through the ditch. As he was exiting the ditch, however, the motorcycle's rear wheel hit the back edge of the ditch and collapsed. Despite plaintiff's efforts to maintain control, the collapsed rear of the motorcycle jerked into the air, tossing him to the ground. Plaintiff sustained multiple injuries, including four fractured vertebrae, a broken femur, and a punctured liver.
Plaintiff subsequently brought this action in the District Court for the District of the Virgin Islands against defendants Honda, the manufacturer of the motorcycle; Daido Kogyo, the company responsible for manufacturing and assembling the rear wheel; and American Honda (a wholly-owned subsidiary of Honda), the motorcycle's distributor. The complaint, which stated causes of action in negligence, strict product liability under section 402A of the Restatement (Second) of Torts, and breach of implied warranty of merchantability, see V.I. Code Ann. tit. 11A, § 2-314 (1965), alleged defective design and manufacture of the rear wheel, as well as a failure to warn that the wheel was too weak to withstand contact with the rim of the ditch.
At the conclusion of the trial, the court instructed the jury on negligence and strict liability,*fn1 as well as on the availability of punitive damages. Pursuant to an agreement between counsel, the jury was given lengthy special interrogatories which, among other things, directed it to consider the strict liability count first, and, if it found the defendants liable thereon, to disregard the negligence count.
The jury found the defendants liable on the strict liability count and awarded the plaintiff $175,000 in compensatory damages. The jury also assessed punitive damages of $210,000 against each defendant. Defendants subsequently moved for judgment notwithstanding the verdict on the ground that there was insufficient evidence to support either compensatory or punitive damages. Noting that it was "taken aback, slightly, that the award was in such a modest amount," the court affirmed the award of compensatory damages. The court also stated, without elaboration, that the evidence disclosed sufficiently "outrageous or reckless conduct" on the part of Honda and Daido to warrant sustaining the punitive damages against them. The court confessed error, however, in having allowed the jury to consider punitive damages against American Honda and granted the judgment n.o.v. motion as to that aspect of the verdict. The court also awarded Acosta costs and attorneys fees pursuant to 5 V.I.C. § 541 (1967). Plaintiff then appealed from the grant of judgment n.o.v. for American Honda; defendants Honda and Daido Kogyo cross-appealed from the court's denial of their motions for judgment n.o.v. and attorney's fees.
The first issue that we must address is plaintiff's contention that, under Fed. R. Civ. P. 50, defendants' failure to make a sufficiently specific motion for a directed verdict at the close of all the evidence foreclosed the district court from considering, much less granting, a motion for judgment n.o.v. Plaintiff points to two rules. Rule 50(a) requires that a "motion for a directed verdict shall state the grounds therefor." Rule 50(b) allows only a party who has moved for a directed verdict to more after an adverse jury verdict to have "the judgment entered in accordance with his motion for a directed verdict." Although a liberal (and perhaps literal) reading of Rule 50(b) could imply that any motion for a directed verdict, no matter how vague, could satisfy the Rule 50(b) prerequisite provision, an understanding of the purpose behind the specificity requirements of Rule 50 shows the impropriety of such a construction. See Huddell v. Levin, 395 F. Supp. 64, 80-81 (D.N.J. 1975); vacated on other grounds, 537 F.2d 726, 741 (3d Cir. 1976).
Rule 50(b) is essentially a notice provision that, among other functions, protects the important seventh amendment right of trial by jury. A motion for a judgment n.o.v. must be preceded by a motion for a directed verdict sufficiently specific to afford the party against whom the motion is directed an opportunity
to cure possibly technical defects in proof which might otherwise make his case legally insufficient. A motion for judgment notwithstanding the verdict made after trial, in the absence of prior notice of the alleged defect, comes too late for possible curative action, short of a completely new trial. Thus, whether or not the Constitution compels the rule forbidding a party to advance by judgment notwithstanding the verdict motion a ground not first advanced in a motion for directed verdict, the rule is certainly consistent with the general spirit animating the Federal Rules of Civil Procedure. That spirit suggests avoidance of surprises and tactical victories at the expense of substantive interests.
Wall v. United States, 592 F.2d 154 (3d Cir. 1979); accord 5A J. Moore, Moore's Federal Practice, P50.08 (2d ed. 1982).
We agree with plaintiff's observation that defendants' counsel could (and should) have stated the basis of their motion for a directed verdict with considerably greater specificity. The sole statement made by defendants' counsel in this regard was less than illuminating:
I move for a directed verdict on Counts I and the remaining counts, . . . under 402(1) [sic] theory which is . . . strict liability . . . and the negligence count which I believe are the only remaining counts in all of the complaints. . . .*fn2
Ordinarily, and standing alone, this motion might not have served as a valid prerequisite to a motion for judgment n.o.v. as to punitive damages. But the communicative content, "specificity" and notice-giving function of an assertion should be judged in context. See Huddell v. Levin, 395 F. Supp. at 80, vacated on other grounds, 537 F.2d 726 (3d Cir. 1976). In this case, a close examination of the record shows that, despite the imprecision of the sentences uttered by defendants' counsel at the time of his Rule 50(a) motion for a directed verdict, plaintiff's counsel and the court understood and responded to defendants' counsel as well as if he had been more specific at the time.*fn3 Immediately after defendants' counsel made the motion, plaintiff's counsel described the counts to which his adversary had referred. The court then stated that [the defendants have], in effect, moved for a directed verdict as to Counts I [negligence], II [strict liability], and IV [punitive damages]; plaintiff's attorney responded, "I think we proved all the elements of both [the strict liability and negligence] counts." Specifically, plaintiff's counsel contended that the record contained evidence sufficient to sustain a finding that defendants were negligent because of inadequate testing of the rear wheel. This colloquy, coupled with the rest of the exchange that preceded the denial of the motion, leads us to conclude that, taken in context, defendants' motion was sufficiently specific to satisfy Rule 50.*fn4
Defendants' principal contention on appeal is that the evidence was insufficient as a matter of law to sustain the award of punitive damages and that the district court erred in submitting the issue to the jury in the first place.*fn5 Before turning to that question, however, we first must address their argument that punitive damages are unavailable in this case because, no matter what the evidence, punitive damages are fundamentally inconsistent with a regime of strict products liability in general and with section 402A in particular.
A. The Availability of Punitive Damages in the Strict Liability Context
Although this question is one of first impression in the Virgin Islands, we do not lack guidance. Many courts, both state and federal, have already considered the issue, and the overwhelming majority have concluded
that there is no theoretical problem in a jury finding that defendant is liable because of the defectiveness of a product and then judging the conduct of the defendant in order to determine whether punitive damages should be awarded on the basis of "outrageous conduct" in light of the injuries sustained by the plaintiff. Hoffman v. Sterling Drug, Inc., 485 F.2d 132, 144-47 (3d Cir. 1973); Thomas v. American Cystoscope Makers, Inc., 414 F. Supp. 255, 263-267 (E.D. Pa. 1976). Punitive damage awards provide a useful function in punishing the wrongdoer and deterring product suppliers from making economic decisions not to remedy the defects of the product. Neal v. Carey Canadian Mines, Ltd., 548 F. Supp. 357 (E.D. Pa. 1982) (Bechtle, J.) (construing Pennsylvania law).*fn6
In addition, this court already has held that the existence of strict products liability in the Virgin Islands does not preclude all examination of fault in the formulation of tort doctrine. In Murray v. Fairbanks Morse, 610 F.2d 149, 158 (3d Cir. 1979), we considered whether "comparative fault principles can be applied effectively" in "strict products liability actions, where the focus is on the product defect and not on the defendant's personal misconduct." Although defendants in that case argued that the two notions were fundamentally incompatible, we held that "[a] system of comparative fault which proceeds to apportion damages on the basis of causation in no way disturbs the plaintiff's burden of proof. The plaintiff still need only prove the existence of a defect causally linked to the injury." Id. at 161. The same rationale applies here: as long as a plaintiff can carry his burden of proof under section 402A, there is no inconsistency in his also being permitted to offer proof regarding the nature of the manufacturer's conduct.
The Restatement (Second) of Torts does include a generally applicable provision regarding punitive damages. Section 908(2) declares:
Punitive damages may be awarded for conduct that is outrageous, because of the defendant's evil motive or his reckless indifference to the rights of others. In assessing punitive damages, the trier of fact can properly consider the character of the defendant's act, the nature and extent of the harm to the ...