Rosener v. Sears Roebuck & Co.

Sears Roebuck & Co. (Sears) (defendant) began advertising a program in June 1970 called Sears Add a Room. Homeowners entered into contracts to have work on their homes done by contractors that had licensing agreements with Sears. The contractors paid Sears 10 percent of the contract price. In California, the Sears licensed contractor was United Remodeling Systems, Inc. (United Remodeling). United Remodeling had a performance-bond guaranty under a collateral suretyship arrangement with Commercial Standard Insurance Co. (CSI). United Remodeling failed in January 1973, leaving behind about 200 outstanding contracts. Sears sent a letter to the affected homeowners, telling them to file claims with CSI, despite CSI’s claim that Sears bore equal responsibility for the uncompleted contracts and CSI’s liability disclaimer. Several homeowners with uncompleted contracts, including Frederick A. Rosener (collectively, the homeowners) (plaintiffs), sued Sears for breach of contract and fraud. The homeowners testified that they had relied on Sears’s reputation and Sears’s assurances in its promotional campaign. The homeowners had paid the full contract price upon execution of the contract, many taking out second mortgages to do so. The homeowners suffered unreasonable delay, poor workmanship, indifference, and avoidance of responsibility from United Remodeling, Sears, CSI, and the replacement contractor, resulting in domestic problems, frustration, anger, and anxiety. The jury found for the homeowners, awarding them $158,000 in compensatory damages—for emotional distress and out-of-pocket losses—and $10 million in punitive damages. The court denied Sears’s motion for a new trial. Sears appealed, arguing in part that the punitive damages were excessive and the compensatory damages were not supported by the evidence and were excessive.