Tamarin Lindenberg v. Jackson Nat'l Life Ins. Co.
912 F.3d 348 (2018)
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Rule of Law:
A state statute that imposes a cap on punitive damages violates the Tennessee Constitution's guarantee of an inviolate right to a trial by jury. The amount of punitive damages is a finding of fact within the exclusive province of the jury, and a legislative cap unconstitutionally invades that function.
Facts:
- Jackson National Life Insurance Company issued a $350,000 life insurance policy to Thomas A. Lindenberg.
- The policy designated Thomas's then-wife, Tamarin Lindenberg, as the primary beneficiary, and his 'surviving children equally' as contingent beneficiaries.
- In 2005, Tamarin and Thomas Lindenberg executed a Marital Dissolution Agreement (MDA) which contained conflicting provisions regarding life insurance beneficiaries.
- The MDA required Tamarin to pay the premiums on the policy, but also required Thomas to maintain life insurance with his children as 'irrevocable primary beneficiaries.'
- Thomas Lindenberg died on January 22, 2013.
- On February 6, 2013, Tamarin Lindenberg filed a claim to receive the $350,000 death benefit.
- Jackson National refused to pay the claim, demanding that Lindenberg first obtain waivers from other potential claimants, including the minor children, through a court-appointed guardianship process.
- Jackson National's refusal to pay within 60 days led to a dispute over its contractual obligations and whether it acted in bad faith.
Procedural Posture:
- Tamarin Lindenberg sued Jackson National Life Insurance Company in federal district court for breach of contract and bad faith refusal to pay an insurance claim.
- Jackson National filed an interpleader complaint, which the district court later dismissed, ordering Jackson National to pay the $350,000 policy benefit to Lindenberg.
- Lindenberg's claims for bad faith and punitive damages proceeded to a weeklong jury trial.
- The jury found for Lindenberg, awarding $350,000 in actual damages, $87,500 in statutory bad faith damages, and $3,000,000 in punitive damages.
- The district court, applying a Tennessee statute (T.C.A. § 29-39-104) over Lindenberg's constitutional objection, reduced the punitive damages award from $3,000,000 to $700,000.
- Jackson National appealed the judgment against it to the U.S. Court of Appeals for the Sixth Circuit, and Lindenberg filed a cross-appeal challenging the constitutionality of the statutory cap and the reduction of her punitive damages award.
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Issue:
Does Tennessee's statutory cap on punitive damages, T.C.A. § 29-39-104, violate the right to a trial by jury guaranteed by Article I, Section 6 of the Tennessee Constitution?
Opinions:
Majority - Clay, Circuit Judge.
Yes, Tennessee's statutory cap on punitive damages, T.C.A. § 29-39-104, violates the right to a trial by jury under the Tennessee Constitution. The court's reasoning is that the state constitutional right to a jury trial preserves the right as it existed at common law in North Carolina in 1796. Historical evidence from that period, found in cases like Carruthers v. Tillman, shows that juries had the authority to award punitive (or exemplary) damages. Furthermore, a long line of Tennessee Supreme Court cases, including Boyers v. Pratt and Southeastern Greyhound Lines, Inc. v. Freels, has consistently treated the determination of the amount of punitive damages as a 'finding of fact' that falls within the exclusive province of the jury. Because the statute requires a court to override the jury's factual finding and substitute a legislatively determined amount, it unconstitutionally invades the jury's core function and violates the state's 'inviolate' right to a jury trial.
Concurring-in-part-and-dissenting-in-part - Larsen, Circuit Judge.
No, the statutory cap on punitive damages does not violate the Tennessee Constitution, and the court should have upheld it. The majority errs by deciding a novel and unsettled question of state constitutional law that it should have certified to the Tennessee Supreme Court. There is also a significant question under Erie Railroad Co. v. Tompkins as to whether a state constitution's procedural jury trial right should even apply in a federal diversity case. Presuming the court should reach the merits, it fails to give the statute the strong presumption of constitutionality it deserves, resolving reasonable doubts against the legislature instead of for it. A damages cap does not re-examine or reject the jury's factual findings; it merely applies the law to those findings, which is a proper legislative function. The majority's historical analysis is also flawed because it fails to ask the correct, narrower question: whether juries in 1796 could award punitive damages specifically for breach of contract, which is highly doubtful.
Analysis:
This decision establishes that, under the Tennessee Constitution, the amount of a punitive damages award is a protected factual finding by the jury, not merely a legal remedy that the legislature can control. By striking down the statutory cap, the court invalidates a key piece of tort reform legislation in Tennessee and solidifies the jury's power in this area. This creates a significant split with the interpretation of the Seventh Amendment in federal courts and the law in many other states that have upheld similar caps. The ruling makes Tennessee a more favorable jurisdiction for plaintiffs seeking large punitive damage awards and will impact litigation strategy for defendants facing such claims in diversity cases applying Tennessee law.
