Gasperini v. Center for Humanities, Inc.

1996-06-24

Headline: Federal trial judges must use New York’s stricter “deviates materially” test to review large jury damage awards in diversity cases, while appeals courts may only reverse those rulings for abuse of discretion.

Holding: The Court held that in diversity trials governed by New York law, the federal trial judge should apply New York’s "deviates materially" test to claims of excessive damages, and appeals courts may only overturn such rulings for abuse of discretion.

Real World Impact:

Requires federal trial judges to apply New York’s stricter damages-review standard.
Limits federal appeals courts to abuse-of-discretion review on verdict size.
May reduce unusually large jury damage awards in New York diversity cases.

Topics: damage awards, jury verdicts, state law in federal court, Seventh Amendment, diversity cases

Summary

Background

A photographer and journalist, William Gasperini, sued a New York educational group after the group lost 300 original photographic slides. A federal jury awarded him $450,000 (about $1,500 per slide). The federal district judge denied a new-trial motion, but the Second Circuit set the verdict aside under New York’s post-1986 review rule that an award is excessive if it “deviates materially” from reasonable compensation.

Reasoning

The Court considered whether federal courts in diversity cases must follow New York’s “deviates materially” standard and how that requirement fits with the Seventh Amendment’s protection against reexamining jury facts. The Court concluded federal trial judges should apply New York’s standard when state law governs damages. To protect the federal trial system and the jury’s role, the Court limited appellate review of the trial judge’s decision to the familiar “abuse of discretion” standard.

Real world impact

The case is sent back to the federal trial judge so the judge can re-evaluate the $450,000 award under New York’s test. Practically, federal trial judges hearing state-law claims must look to state decisions about reasonable awards, and federal appeals courts will defer to the trial judge unless its ruling was plainly unreasonable. This ruling does not finally set the amount owed; the trial judge must reconsider damages under state law.

Dissents or concurrances

Justice Stevens would have affirmed the Second Circuit’s decision instead of remanding. Justice Scalia, joined by the Chief Justice and Justice Thomas, dissented, arguing the opinion weakens the Seventh Amendment’s bar on appellate reexamination.