The Ohio Supreme Court today upheld a jury’s verdict finding the owner and the property manager of a Beachwood apartment complex responsible for a 2007 fire. However, the jury’s $2 million punitive damages award was more than the amount allowed by state law and must be reduced, the Supreme Court concluded.

The decision, written by Justice Paul E. Pfeifer, affirms the Eighth District Court of Appeal’s ruling except for the amount of the punitive damages award.

Two Fires, Three Years Apart
In 2004, a building at the Village Green Apartments was destroyed by fire. An investigator found that the fire was caused by construction defects.

Another fire in October 2007 damaged a different building, which had to be demolished as a result. The same investigator looked into this fire and discovered several code violations in the electrical wiring between floors, the same location where the 2004 fire had originated. He testified that faulty wiring contaminated by water leaks led to the 2007 fire.

Carlos Sivit and other tenants affected by the second fire sued the complex owner, Village Green of Beachwood, and the property manager, Forest City Residential Management. A jury found Village Green and Forest City liable. It awarded $582,146 in compensatory damages, $2 million in punitive damages, and $1.04 million in attorney fees. Compensatory damages are given to the injured party for actual injury or loss. Punitive damages are designed to punish and deter certain conduct.

On appeal, the Eighth District agreed with the verdict and awards. The landlords appealed.

Punitive Damages Must Be Reduced
While the landlords and the tenants in this case have a contract, the harm from the fire was not caused by a breach of that contract, Justice Pfeifer explained. Instead, he reasoned, Village Green and Forest City violated the statute in the Ohio Landlord-Tenant Act setting forth landlord obligations. Given that violating a statute imposes negligence per se, the court concluded that this lawsuit is a tort action.

Amounts granted for punitive damages in a tort are capped at two times the compensatory damages award. In this case, the jury awarded compensatory damages of $582,146, and the parties agreed to an additional $186,632 if the landlords were found liable.

Because $2 million in punitive damages is more than twice the compensatory damages, the Supreme Court determined that the punitive damages award was contrary to state law and ordered that the punitive award be reduced to the appropriate amount.

Other Claims
Justice Pfeifer also concluded that the trial court did not abuse its discretion when it allowed the jury to consider the tenants’ punitive damages claim.

“The fire in 2007 had substantially the same cause as the fire in 2004,” he wrote. “The circumstances attendant to both fires — the conscious disregard of code violations that affected health and safety — were more than enough for the jury to conclude that Village Green had acted with ‘ ‘a conscious disregard for the rights and safety of other persons that has a great probability of causing substantial harm.’ ‘ ”

He added that the jury also had enough evidence to find that Village Green and Forest City “were aware of the potential, indeed likelihood, of a fire” in the building before October 2007.

The case returns to the trial court to order the adjustment to the punitive damages amount.

Votes
Justices Terrence O’Donnell, Judith Ann Lanzinger, and William M. O’Neill joined Justice Pfeifer’s opinion. Chief Justice Maureen O’Connor and Justices Judith L. French and Sharon L. Kennedy agreed only with the court’s judgment.

2013-0586. Sivit v. Village Green of Beachwood, L.P., Slip Opinion No. 2015-Ohio-1193.

View oral argument video of this case.

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