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In Memoriam
Reneau Almon’s Vindication
Remembering the justice who helped Alabama escape “tort hell.”
Reneau Almon, who served as an Associate Justice of the Alabama Supreme Court for 24 years, died earlier this month. Justice Almon began his service on the Alabama appellate court in 1969 and was first elected to the Alabama Supreme Court in 1974. He retired from that court in 1999.
In the late 1980s and early 1990s, Alabama had a reputation as a “tort hell.”
As Michael DeBow, a professor at Cumberland Law School, has explained: “The Alabama Supreme Court of 1994 was identified in the minds of many with a litigation climate that was hostile to defendants — particularly corporate defendants.” Whoppingly disproportionate punitive damage awards helped contribute to that reputation. In one case, confronted with the buyer of a car who claimed that he was defrauded because he wasn’t told that it had been partially repainted, which lowered the car’s resale value by $4,000, the Alabama Supreme Court cut a jury’s punitive damage award of $4 million to $2 million — still, an award-to-injury ratio of 500-1. After the U.S. Supreme Court got hold of the case, and there was modest change in the Alabama Supreme Court’s personnel, the punitive damage award was reduced to $50,000.
The road out of “tort hell” began with the 1994 elections, when Chief Justice Sonny Hornsby was unseated. But Justice Almon also contributed to the transformation.
One place that high punitive damages were being awarded was in cases of consumer fraud. In order to prove fraud, one must prove reliance on false or misleading information received or not conveyed. But, what kind of reliance is enough? Can a consumer simply rely on what he or she is told, or must the consumer read the documents he or she receives? The difference may not sound like much, but it means a great deal.
In 1991, over a dissent by Justice Almon, the Alabama Supreme Court allowed a consumer to rely on what she said she was told. The buyer claimed she was told that, if she were hospitalized, the insurance policy she was buying would pay 80 percent of her hospital and doctor bills, with no deductible; but the policy plainly stated that it was not a major medical policy. After receiving a copy of the policy, she put it into a desk drawer without reading it. As a result, after the buyer had surgery, the policy didn’t cover what she said she thought it would. The court held that a jury could have found that she justifiably relied on what she was told, the policy’s terms notwithstanding.
In his dissent, Justice Almon pointed out the difference between a “reasonable reliance” standard and a “justifiable reliance” standard. Almon explained that the “traditional” reasonable reliance standard was “flexible” and could take differences in relative “sophistication and bargaining power” into account. Under that standard, the consumer acted unreasonably. Almon wrote, “I do not think it is reasonable for a college-educated person to simply drop an insurance policy into a drawer without even a cursory look at it and later claim she has been defrauded.” He added that the buyer could have understood she was not buying major medical coverage “if she had simply glanced at” the policy. In contrast, the justifiable reliance standard the court applied “gives to parties claiming fraud undue leeway to ignore written contract terms.”
Justice Almon lost that battle. But, in 1997, the Alabama Supreme Court changed the standard back to reasonable reliance. Justice Gorman Houston wrote that, since the decision to apply justifiable reliance to consumer and commercial transactions, there had been “tension” on the court. As he put it, the justifiable reliance standard “basically eliminated a person’s duty to attempt to understand the contents of a document or documents received in connection with a particular transaction (consumer or commercial).”
Pointing to Justice Almon’s dissent, Houston concluded that the court would no longer apply the justifiable reliance standard to consumer fraud cases, but would instead apply reasonable reliance to all newly filed cases.
Justices Almon, Janie Shores, and Harold See all filed concurring opinions making important points. Almon pointed to his earlier opinion and noted that the justifiable reliance rule, which allowed for “continuous disputation,” made commerce almost impossible. Justice Shores acknowledged that she had joined in making the change, but was willing to reconsider. She wrote that the court made a “mistake in departing from a standard in fraud cases that had served well.”
Justice See, who joined the court in 1996, pointed to what happened when a buyer’s right to rely on a representation was not tied to a duty to act reasonably. As he explained, changing the rule “discouraged buyers from reading their contracts” and reduced their risk in not doing so. Second, the number of potential plaintiffs in fraud lawsuits grew from those who might have reasonably relied to include those who might have justifiably relied. Third, because justifiable reliance rests on the plaintiff’s testimony alone, cases which would have been thrown out of court because the plaintiff did not act reasonably went to a jury, which could award punitive damages.
Changing the reliance standard and getting punitive damages under control helped change the business climate in Alabama. In recent years, companies like Honda, Hyundai, and ThyssenKrupp have opened plants in the state, and it’s unlikely they would have done so if it were still seen as a “tort hell.” Justice Almon’s vindication is in having helped to bring about that change in the state’s business climate.
About the Author
Jack Park is an attorney with the Atlanta law firm Strickland Brockington Lewis LLP.
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Appleby| 5.15.12 @ 7:17AM
In the legal community where I worked, these were called "Jackpot Juries" and almost every one of their awards was overturned on appeal, although nobody heard about this part.
My all time favourite is the suit by the woman from Philadelphia who sued because she claimed an MRI had destroyed her psychic powers.
In my former life I worked as a claims adjuster for a major insurance company in California, and believe me, NOBODY reads his or her policy or knows what it covers, and they all become angry to the point of heart failure when the adjuster points them to the paragraph that states in clear American English that what they are claiming isn't covered. I currently work in Insurance Defence, and the same thing is still true: the terms the people are contesting are spelled out in plain Engish that anyone with a fourth grade education can read -- if they once took the trouble to read them.
I must add parentheically that the reverse also occasionally is true: I recall the delight of a customer who discovered with one call to her agent that mildewed camping equipment was in fact covered under Household Effects.
Bob K.| 5.16.12 @ 10:38PM
Philadelphia is still Happy land for Plaintiffs Lawyers. Take out a free on line subscription for Philadelphia's "The legal Intelligencer." (The oldest legal newspaper in the USA.) You will find that out just by reading the headlines on the restricted access cases and there are also enough free articles to access that will nonplus you.
Cabermon| 5.15.12 @ 10:16AM
"It's "Remembering" not Remebering" in the title block.
Good article on a good man.
richard ryan| 5.15.12 @ 10:51AM
People in this country have no idea how much our tort system costs them. Everything they buy, every silly regulation, the nonsense in our schools- behind every one of these problems is a lawsuit.
One doctor can easily waste 100,000 in one ER shift due to defensive medicine.
But the rules of this nation were written by lawyers, so who is surprised?
Appleby| 5.15.12 @ 11:14AM
There used to be a sign on the escalator at the Decatur subway station in Atlanta that said DO NOT BREAKDANCE ON THIS ESCALATOR, because some brat broke his leg attempting to do just that, and his Mama sued because there was nothing saying not to.
Occam's Tool| 5.15.12 @ 1:05PM
$100,000 would be hard to do in an ER, but I suppose possible.
I remember supporting and voting for Judge See---a very good man. Alabama was a nightmare tort state for MDs in the early 1990s. I left in 2000, and will probably live there during the winters when I retire (and Minnesota in the Summers).
It is a terrible thing when rule of law depends on the frivolous actions of a Liberal judge. It is good that Alabama submits its judges to the vote of the people.
cicero| 5.15.12 @ 2:53PM
We have had the so-called "tort reform" in Michigan for at least the lasst 20 years or so. While the ability of injured people to collect for negligently caused harm done to them has decreased, the incidence of harm has stayed static, as has the high premiums for all types of insurance, from automobile to medical malpractice. Michigan never had punitive damages. In my opinion, what we have had in this country is and was an insurnace crisis, not a law suit crisis. The egregious actions that may have been occasionally brought were, and currently can, be cured by judges and juries with common sense. Nuisance suits are not economical from either the plaintiff's or the defendant's standpoint. Over the years the insurance industry has convinced everyone that they are going to be sued whatever happens. This is false, but provides the industry with products galore to sell. In the meantime, doctors, manufacturers, property owners, erc., have been scared out of their wits, and convinced that only by purchasing expensive insurance policies can they avoid perdition.
In the meantime, the insurance industry has managed to get legislation passed either in the legislature or through the courts that make it so they don't have to pay for the very acts that they say you need insurance for. In Michgigan, I point you to the "open and obvious" rule. In Michigan, try to collect on your 1sr party no-fault auto policy. That is the portion that is supposed to pay for your medical and wage loss damages. They deny coverage, or legitimacy, and if they can get past the one year limit, they are home free.
While there may have been, and may still be, some abuses in the system, it has been my experience (I have represented both plaintiff and defendants), that you are not, in fact, in good hands with All State, and that the University of Farmers is a joke. I have had 1st party cases where we have sued the carrier, won, and hadd to sue them again and again just to get them to pay what they owe. A suit a year is not unusual.
Seek| 5.15.12 @ 4:48PM
This is vindication of Justice Learned Hand's view that jurists, first and foremost, must be trained to make educated judgments. Semi-literate backward juries, filled with populist fury, made Alabama into tort hell for free enterprise. Judge Almon, R.I.P., showed there was a way out.
mike daniels| 5.15.12 @ 6:23PM
I was general counsel of a company that had a 50 million dollar punitive damage award entered against it in Barbour county Alabama in the mid 90's. The plaintiff sued the company that financed the car he bought because he claimed failure to disclose how much the finance company paid the dealer for the installment contract was "suppression of a material fact". The plaintiff had no evident injuries but testified that "after my attorney told me I paid too much for the car, I was unhappy and quit hanging out". The jury gave him $90,000 in actual damages for that and $50,000,000 to "send a message". We settled after some interesting negotiations for $2,000,000 but that is a hell of an award for being "unhappy" and not hanging out. Cudos to the the Alabama judiciary for cleaning up that mess and to the pro-business climate the state developed. We could use some of that up north
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