Gasperini v. Center for Humanities, Inc.
518 U.S. 415 (1996)

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No. 95-719. Argued April 16, 1996-Decided June 24, 1996

Under the law of New York, appellate courts are empowered to review the size of jury verdicts and to order new trials when the jury's award "deviates materially from what would be reasonable compensation." N. Y. Civ. Prac. Law and Rules (CPLR) § 5501 (c). Under the Seventh Amendment, which governs proceedings in federal court, but not in state court, "the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law." The compatibility of these provisions, in an action based on New York law but tried in federal court by reason of the parties' diverse citizenship, is the issue the Court confronts in this case.

Petitioner Gasperini, a journalist and occasional photographer, loaned 300 original slide transparencies to respondent Center for Humanities, Inc. When the Center lost the transparencies, Gasperini commenced suit in the United States District Court for the Southern District of New York, invoking the court's diversity jurisdiction. The Center conceded liability. After a trial on damages, a jury awarded Gasperini $1,500 per transparency, the asserted "industry standard" of compensation for a lost transparency. Contending, inter alia, that the verdict was excessive, the Center moved for a new trial. The District Court, without comment, denied the motion.

The Court of Appeals for the Second Circuit, observing that New York law governed the controversy, endeavored to apply CPLR § 5501 (c) to evaluate the Center's contention that the verdict was excessive. Guided by New York Appellate Division decisions reviewing damage awards for lost transparencies, the Second Circuit held that the $450,000 verdict "materially deviates from what is reasonable compensation." The court vacated the judgment entered on the jury verdict and ordered a new trial, unless Gasperini agreed to an award of $100,000.

Held: New York's law controlling compensation awards for excessiveness or inadequacy can be given effect, without detriment to the Seventh Amendment, if the review standard set out in CPLR § 5501(c) is applied by the federal trial court judge, with appellate control of the trial court's ruling confined to "abuse of discretion." Pp. 422-439.


(a) To heighten the judicial check on the size of jury awards, New York codified the "deviates materially" standard of review, replacing the judge-made "shock the conscience" formulation previously used in New York courts. In design and operation, § 5501(c) influences outcomes by tightening the range of tolerable awards. Although phrased as a direction to New York's intermediate appellate courts, § 5501 (c)'s "deviates materially" standard, as construed by New York's courts, instructs state trial judges as well. Pp. 422-425.

(b) In cases like Gasperini's, in which New York law governs the claims for relief, the Court must determine whether New York law also supplies the test for federal-court review of the size of the verdict. Federal diversity jurisdiction provides an alternative forum for the adjudication of state-created rights, but it does not carry with it generation of rules of substantive law. Under the doctrine of Erie R. Co. v. Tompkins, 304 U. S. 64, federal courts sitting in diversity apply state substantive law and federal procedural law. Classification of a law as "substantive" or "procedural" for Erie purposes is sometimes a challenging endeavor. Guaranty Trust Co. v. York, 326 U. S. 99, an early interpretation of Erie, propounded an "outcome-determination" test: "[D]oes it significantly affect the result of a litigation for a federal court to disregard a law of a State that would be controlling in an action upon the same claim by the same parties in a State court?" 326 U. S., at 109. A later pathmarking case, qualifying Guaranty Trust, explained that the "outcome-determination" test must not be applied mechanically to sweep in all manner of variations; instead, its application must be guided by "the twin aims of the Erie rule: discouragement of forum-shopping and avoidance of inequitable administration of the laws." Hanna v. Plumer, 380 U. S. 460, 468.

Informed by these decisions, the Court concludes that, although § 5501(c) contains a procedural instruction assigning decisionmaking authority to the New York Appellate Division, the State's objective is manifestly substantive. More rigorous comparative evaluations attend application of § 5501(c)'s "deviates materially" standard than the common-law "shock the conscience" test. If federal courts ignore the change in the New York standard and persist in applying the "shock the conscience" test to damage awards on claims governed by New York law, "'substantial' variations between state and federal [money judgments]" may be expected. See id., at 467-468. The Court therefore agrees with the Second Circuit that New York's check on excessive damages warrants application in federal court, for Erie's doctrine precludes a recovery in federal court significantly larger than the recovery that would have been tolerated in state court. Pp. 426-431.


(c) Nonetheless, when the Second Circuit used § 5501(c) as the standard for federal appellate review, it did not attend to "[a]n essential characteristic of [the federal court] system." Byrd v. Blue Ridge Rural Elec. Cooperative, Inc., 356 U. S. 525, 537. The Seventh Amendment, which governs proceedings in federal court, but not in state court, bears not only on the allocation of trial functions between judge and jury, the issue in Byrd; it also controls the allocation of authority to review verdicts, the issue of concern here. In keeping with the historic understanding, the Seventh Amendment's Reexamination Clause does not inhibit the authority of trial judges to grant new trials "for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States." Fed. Rule Civ. Proc. 59(a). In contrast, appellate review of a federal trial court's denial of a motion to set aside a jury's verdict as excessive is a relatively late, and less secure, development. Such review, once deemed inconsonant with the Seventh Amendment's Reexamination Clause, has not been expressly approved by this Court before today. See, e. g., Browning-Ferris Industries of Vt., Inc. v. Kelco Disposal, Inc., 492 U. S. 257,279, n. 25. Circuit decisions unanimously recognize, however, that appellate review, confined to abuse of discretion, is reconcilable with the Seventh Amendment as a control necessary and proper to the fair administration of justice. The Court now approves this line of decisions. Pp.431-436.

(d) In this case, the principal state and federal interests can be accommodated. New York's dominant interest in having its substantive law guide the allowable damages arising out of a state-law claim for relief can be respected, without disrupting the federal system, once it is recognized that the federal district court is capable of applying the State's "deviates materially" standard. The Court recalls, in this regard, that the "deviates materially" standard serves as the guide to be applied in trial as well as appellate courts in New York. Within the federal system, practical reasons combine with Seventh Amendment constraints to lodge in the district court, not the court of appeals, primary responsibility for application of § 5501 (c)'s check. District court applications of the "deviates materially" standard would be subject to appellate review under the standard the Circuits now employ when inadequacy or excessiveness is asserted on appeal: abuse of discretion. Pp. 436-439.

(e) It does not appear that the District Court checked the jury's verdict against the relevant New York decisions. Accordingly, the Court vacates the judgment of the Court of Appeals and instructs that court to remand the case to the District Court so that the trial judge, revisiting his ruling on the new trial motion, may test the jury's verdict against CPLR § 5501 (c)'s "deviates materially" standard. P. 439.

66 F.3d 427, vacated and remanded.


GINSBURG, J., delivered the opinion of the Court, in which O'CONNOR, KENNEDY, SOUTER, and BREYER, JJ., joined. STEVENS, J., filed a dissenting opinion, post, p. 439. SCALIA, J., filed a dissenting opinion, in which REHNQUIST, C. J., and THOMAS, J., joined, post, p. 448.

Full Text of Opinion

Primary Holding
A federal court sitting in diversity jurisdiction, where the Erie doctrine applies, should try to apply the law in a way that serves both federal and state interests if it is possible to harmonize them. If it is necessary to administer justice, the federal court can use state procedural law for a substantive purpose if it does not undermine federal interests.
Gasperini sent the original color transparencies of 300 slides that he had taken in Central America to the Center for Humanities so that it could use them in an educational film. After the Center finished the film, it could not find the transparencies, so it failed to return them to Gasperini as the parties had agreed. Gasperini brought state law claims involving breach of contract, conversion, and negligence, but they were heard in federal court under diversity jurisdiction. A jury reviewed the issue of damages after the Center admitted liability, and it awarded $450,000 after hearing evidence that each transparency would be valued at $1,500 according to industry standards.

The Center's motion for a new trial was denied, but the appeals court found that this evidence on the price of transparencies under the industry standard was an insufficient basis for the damages calculation. It gave Gasperini the choice between a new trial and an award of $100,000. The case reached the Supreme Court because it raised the issue of how a federal appellate court should determine whether a jury's damages award in a state law claim is excessive.



  • Ruth Bader Ginsburg (Author)
  • Sandra Day O'Connor
  • Anthony M. Kennedy
  • David H. Souter
  • Stephen G. Breyer

The Seventh Amendment permits appellate review for abuse of discretion because it is a necessary and proper control on the power of the jury. Federal courts can give effect to the procedural rule in this area, which furthers an important state interest, without undermining the purposes of the federal system. The federal district court was capable of checking the jury's damages award under New York state law, so the appellate court is capable of reviewing it.


  • John Paul Stevens (Author)

The Seventh Amendment does not restrict the power of a federal appellate court sitting in diversity jurisdiction to review a jury award of damages in an effort to determine whether it complies with limits set by state law.


  • Antonin Scalia (Author)
  • William Hubbs Rehnquist
  • Clarence Thomas

Historically, federal appellate courts were not permitted to reconsider facts found by the jury at trial, and thus they could not reverse a district court's decision to refrain from setting aside a verdict that is contrary to the weight of the evidence. This new interpretation of the Seventh Amendment has no basis in its text, related laws, or case precedents. It undermines the important federal interest in promoting uniformity of outcomes when judges review jury verdicts, as well as the important federal interest in protecting the judge-jury relationship in federal courts from being disrupted by the application of state procedural rules.

Case Commentary

This is an application of the Erie doctrine that focuses more on the policy reasons behind it than on a strict legal test for separating substance from procedure.

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