Ohio Jury Hits Landlord With $2 Million in Punitive Damages After Apartment Fire: Appeals Court Agrees

Published January 28, 2013 · Verdicts & Settlements · Ohio Appeals Courts

Tenants in a Beachwood apartment building had complained for years about flickering lights, power surges, water running inside the walls, and mildew. The city's housing inspector had told the owner not to rent the units until the violations were fixed. A fire in a sister building three years earlier had been traced to the same cause. On October 23, 2007, Building 8 burned, and eleven displaced families went to court. This month the Eighth District Court of Appeals affirmed every dollar the jury gave them, including $2 million in punitive damages.

The case is Sivit v. Village Green of Beachwood, L.P., 2013-Ohio-103 (8th Dist.), decided January 17, 2013. It is a Cuyahoga County case, so it is not binding on Montgomery County courts, but the rules it applies are statewide, and it is one of the clearest recent examples of what happens when a landlord consciously ignores a known danger.

What the jury heard

According to the court's opinion, the fire started in the space between the floors of two units and was caused by faulty electrical wiring contaminated by water leaking into the building. The same investigator had looked at a 2004 fire that destroyed another building in the complex and found the same thing.

The evidence of notice was overwhelming. Tenants had reported electrical problems and water in the walls. A former maintenance supervisor testified that he was not surprised by the fire because the building was, in his word, "waterlogged." When a new owner bought the complex in 2006, its own engineering executive inspected the buildings, saw that Building 8 needed a lot of work, and knew about the 2004 fire. The city of Beachwood then cited numerous violations and told the landlord in writing to stop renting until the problems were corrected. The landlord kept renting.

After a trial in December 2011, the jury awarded the tenants $582,328 in compensatory damages for their lost belongings and displacement and $2,000,000 in punitive damages. The trial court added $1,040,000 in attorney fees. The landlord appealed on eleven separate grounds. The court of appeals rejected all of them.

The Landlord-Tenant Act sets the duty

Ohio's Landlord-Tenant Act, R.C. 5321.04(A), requires every residential landlord to comply with building, housing, health, and safety codes that materially affect health and safety; to make all repairs needed to keep the premises fit and habitable; and to keep electrical, plumbing, heating, and similar systems in good and safe working order. Those duties are not optional and they cannot be waived in a lease.

When a landlord violates one of those statutory duties, Ohio courts treat the violation as negligence per se. That phrase means the tenant does not have to prove separately that the landlord owed a duty and breached it; the statute supplies both. The tenant still has to prove that the landlord knew or should have known about the condition and that the violation caused the harm. In Sivit, the complaints, the inspector's letter, and the 2004 fire made notice easy to prove.

I handle these claims under our premises liability practice, and the same statutory duties apply whether the harm is a fire, a collapsed stair, a broken railing, or a carbon monoxide leak.

Why punitive damages were allowed

Punitive damages are different from compensatory damages. Compensatory damages repay the injured person for what was lost. Punitive damages punish the wrongdoer and warn others. Under R.C. 2315.21(C), they are available only when the defendant's conduct shows malice, and the plaintiff must prove that by clear and convincing evidence, a higher standard than the usual "more likely than not."

Malice does not require hatred. As the Sivit court explained, Ohio law also finds malice in a conscious disregard for the rights and safety of others that has a great probability of causing substantial harm. The court held that the landlord "consciously ignored the severe state of disrepair of Building 8" despite "glaring evidence," and that this was enough. I explained the general framework last fall in Punitive Damages in Ohio: When a Defendant's Conduct Is Bad Enough; Sivit is a textbook application of it.

The cap argument, and why the court rejected it

The landlord's most important argument on appeal was that R.C. 2315.21(D)(2)(a) limits punitive damages to two times the compensatory award, which would have cut $2 million to roughly $1.16 million. The court of appeals disagreed. It reasoned that the punitive-damages statute applies to "tort actions" and, by its own definition, excludes actions for breach of "a contract or another agreement between persons." Because the tenants' rights arose from their rental agreements and the duties R.C. 5321.04 builds into every lease, the court held the cap did not apply and the full $2 million stands.

That is a significant ruling for tenants, and it is fair to say it will be debated. For now, it is the law of the Eighth District, and it means a landlord who treats code violations as a cost of doing business can face a punitive award that is not automatically shrunk by the cap.

Attorney fees on top

When a jury finds that punitive damages are warranted, Ohio law allows the court to award the plaintiff's attorney fees as well. The trial court awarded $1,040,000, which was 40 percent of the roughly $2.6 million recovered, and supported it with an hours-and-rate calculation that the landlord did not challenge. The court of appeals affirmed, noting the case involved years of litigation, 42 boxes of disorganized records the landlord produced, and a two-week trial. The fee award matters because it means the punitive damages went to the tenants rather than being consumed by the cost of winning them.

What this means for you

If you rent, your landlord owes you safe wiring, working systems, and compliance with the housing code. If you have been reporting a problem and nothing happens, keep a written record: dated emails, letters, photographs, and the names of the people you spoke to. If the city inspects, ask for a copy of the report. That paper trail is exactly what turned Sivit from a negligence case into a punitive-damages case.

If a fire, a fall, an electrical shock, or a carbon monoxide exposure has already happened, talk to a lawyer before you accept the landlord's or its insurer's version of events. The investigation that matters, including fire-marshal reports, maintenance logs, prior complaints, and city inspection files, has to be requested early, before records are lost. Our personal injury practice handles apartment and rental-property injury claims throughout the Dayton area, and because punitive-damages claims are tried in two stages under Ohio's bifurcation rule, which I discussed in this post on nursing home trials, they have to be planned from the start.