Maryland's highest court has handed Alexander & Alexander Services Inc. a victory by striking down a punitive damage award that initially was one of the highest such legal awards in the state's history.
The opinion also lauds the virtues of business competition, acknowledging that aggressive marketplace tactics can intentionally hurt a competitor.
The Court of Appeals ruled unanimously that A&A;, a New York-based insurance brokerage, did not maliciously harm Hunt Valley insurance broker B. Dixon Evander by interfering with Mr. Evander's business relationship with another firm.
When the first trial of Evander vs. Alexander was finished in 1990, the jury awarded Mr. Evander $250,000 in compensatory damages, and $40 million in punitive damages, the second-highest such award in the state's history.
The latest ruling, handed down Thursday, could make it tougher to collect punitive awards in Maryland. It declared that aggressive business competition, even if accompanied by animosity, does not necessarily deserve to be punished, as long as the driving motivation was money and not malice.
"Participants in the economic marketplace are expected to act aggressively in seeking business and furthering their own position in the market," wrote Judge John C. Eldridge in a 33-page opinion. A footnote in the opinion even refers to other legal scholars who have argued "the law should at least tolerate, if not favor, breach of contract," assuming the victim is compensated.
The court ruled that while Alexander's action harmed Mr. Evander, if that harm was merely part of the course of business competition, it did not necessarily qualify as "wrongful interference with a business relationship," which was Mr. Evander's claim.
Further, the Hunt Valley broker failed to show Alexander acted with malice, according to the ruling.
The case dates to 1985, when a subsidiary of A&A; canceled a large longtime contract Mr. Evander had with the University of Maryland Medical Systems Corp. The subsidiary, acting at A&A;'s behest, also denied Mr. Evander a commission of roughly $265,000 from a final insurance sale to the medical system.
The Evander case was one of several high-profile verdicts that fueled a fierce campaign in Maryland's legislature aimed at limiting the award of punitive damages against businesses. The 1992 campaign failed after the U.S. Supreme Court restricted the awards, which are intended to punish wrongdoers and deter others.
Punitive damages have been blamed by some political conservatives for contributing to the decline of American competitiveness. But those opposed to tort reform, including plaintiffs' attorneys and consumer groups, have argued that punitive damages are the only effective way to prevent large corporations from acting badly in pursuit of a profit.
While the original jury awarded $40 million to punish A&A; for its actions, the trial judge immediately reduced that to $12.5 million. That verdict was overturned in 1992 by the Court of Special Appeals, which ordered a new trial. A second jury awarded Mr. Evander $5 million in 1993. (Alexander paid the $250,000 compensatory award after the second trial, so the Court of Appeals did not address that issue.)
Maryland's high court, in striking the $5 million award, said the plaintiff had failed to prove that Alexander had acted maliciously against Mr. Evander's firm, B. Dixon Evander & Associates Inc. "Actual malice," or ill will with an intent to commit harm, is the legal standard for awarding punitive damages.
"I think the court is saying that we did not act maliciously," said Al Skwiertz, A&A;'s vice president and general counsel. "I think that at the end of the day we always felt we had a defendable position."
Mr. Evander and his attorney could not be reached for comment yesterday.
Janelle Cousino, director of the Maryland Trial Lawyers Association, hadn't seen the opinion. But, she said, the result shows the existing law was strong enough to protect corporate defendants.
"The checks and balances of the judicial system work," Ms. Cousino said, adding that further changes to the law were not necessary.
This week's decision also directed Mr. Evander to pay Alexander's court costs, which the company estimated would exceed $10,000.