Dr. Joseph Baram (plaintiff) paid $3,000 for a racehorse. Baram hired Dennis Fredella as the horse’s trainer. Fredella came into possession of the horse’s Certificate of Foal Registration. Fredella owed Robert Farugia (defendant) money. In satisfaction of this debt, Fredella gave the horse to Farugia, complete with a certificate containing Baram’s forged signature. As part of a resulting state-court criminal proceeding against Fredella, Fredella paid Baram $3,000, representing the value of the horse. Baram accepted this payment. Subsequently, Baram sued Farugia for conversion. The district court ruled in favor of Baram and awarded him $3,000 in compensatory damages for the value of the horse and $5,000 in punitive damages. Farugia appealed.