P was a journalist who took pictures in Central America. D contacted P to use some of P's pictures in a documentary. P provided D with 300 pictures.
After the documentary was made, D was supposed to give the photos back, but they lost them.
P sued D in federal court (diversity); expert at court said that the value of each pictures was $1500.
Trial jury awarded P $450k (300 x $1500). D moved for a new trial under FRCP 59.
Procedural History:
District court denied D's motion for new trial.
2nd Cir COA reversed, vacated the jury's verdict on damages, applied NY state law on judicial review of damages, ordered $100k damages or new trial.
SCOTUS reversed, remanded to district court for new trial, NY state law on judicial review of damages must apply.
Issues:
Should state law govern the way a federal judge sitting in diversity determines whether an award for damages is excessive and should be subject to remittitur?
What standard of review should the federal appellate court use in evaluating diversity cases where state law permits de novo review?
Holding/Rule:
State law should govern the way a federal judge sitting in diversity determines whether an award for damages is excessive and should be subject to remittitur.
Federal appellate courts should use the abuse of discretion standard in evaluating diversity cases where state law allows de novo review.
Reasoning:
Concerning matters covered by FRCP, the characterization question is usually unproblematic; it is settled that if the Rule in point is in line with the Rules Enabling Act and the Constitution, the Federal Rule applies regardless of contrary state law.
NY state law's check on excessive damages implicates Erie's twin aims (from Hanna); Erie precludes a recovery in federal court significantly larger than the recovery that would have been tolerated in state court since this would encourage forum-shopping.
Appellate review for abuse of discretion is reconcilable with the 7th Amendment as a control necessary and proper to the fair administration of justice. Thus, in reviewing excessiveness determinations (even if done through state law), appellate courts should use the abuse of discretion standard.
There is no direct conflict between state and federal interests in this case; NY's dominant interest can be respected since the district court can apply the state's "deviates materially" standard.
Dissent:
Changing the standard by which trial judges review jury verdicts does disrupt the federal system and is plainly inconsistent with the strong federal policy against allowing state rules to disrupt the judge-jury relationship in federal court (Byrd).
From Browning-Ferris, "Federal law will control on those issues involving the proper review of the jury award by a federal district court and court of appeals."
Outcome determination was never intended to serve as a talisman and does not have the power to convert the most classic elements of the process of assuring that the law is observed into the substantive law itself.
The standard to be applied by a district court in ruling on a motion for a new trial is set forth in Rule 59 of FRCP. This is a federal standard and should control. The Federal Rule is sufficiently broad to cause a direct collision with the state law.
Notes:
The "shocks the conscience" test for excessiveness is a federal common law test (NY approach was whether award "materially deviates" from reasonable compensation) and makes this track 3.
