Articles Posted in Punitive Damages

When a trial court awards punitive damages, it must engage in sufficient analysis on the relevant factors, and its “order must clearly demonstrate how each factor impacted the court’s decision.”

In Cox v. Cox, No. E2016-01097-COA-R3-CV (Tenn. Ct. App. Dec. 29, 2017), plaintiff husband filed suit against defendant wife for both a divorce and an assault tort claim. Prior to the lawsuit, wife had “entered the marital residence and stabbed husband twice in the neck.” Wife stipulated to the divorce and assault, so the only issue was damages.

In the trial court, husband testified that “as a result of his injuries, he missed one month of work and lost approximately $20,000 in income,” but later admitted that “he had never reported $20,000 in business income in previous years.” He also testified that since the stabbing, he had been forced to reduce his work hours as a mechanic. Husband did not submit any medical bills or expert testimony during the proof portion of the case, but the court allowed him to submit invoices from his doctor after the hearing. The trial court ultimately awarded husband $15,000 in compensatory damages and $10,000 in punitive damages on his tort claim.

            In Overton v. Westgate Resorts, LTD., L.P., No. E2014-00303-COA-R3-CV (Tenn. Ct. App. Jan. 30, 2015), the Court of Appeals recently affirmed a punitive damage award in a fraud and misrepresentation case. Plaintiffs had traveled to Gatlinburg to look for and purchase a timeshare. Their primary concern was being able to accommodate their extended family for a trip the same week each December. While in downtown, they saw a Westgate booth and made arrangements to attend a presentation. According to plaintiffs, the presentation was “high pressure” and salespeople spent almost eight hours with plaintiffs on the relevant day. Plaintiffs found a unit that would fit their needs and decided to purchase the timeshare from Westgate.

            Plaintiffs asserted that their decision to purchase was based on assurances from the Westgate salespeople. Specifically, the Westgate representatives stated that plaintiffs would be able to retain the unit they looked at for the same week in December each year; that they would be able to book unlimited additional nights at any Westgate resort at a promotional price; that the two salespeople they worked with would refund part of their commission; and that the salespeople would purchase a foosball table to be kept at the resort for plaintiffs to use during their stays. The agreements regarding the commission and foosball table were put in writing, but the other two were not. Plaintiffs closed on the timeshare at 11:00 pm that night and were given copies of their closing documents and three CD-ROMs. The purchase price was just under $40,000.

            After closing, plaintiffs tried to confirm their December reservation, and after some unsuccessful attempts were informed that the booking would not be guaranteed for the unit they had looked at and that units were not assigned until a few days before arrival. After speaking to several customer service individuals, they also found out that they did not have the ability to book unlimited nights at other resorts as described during the presentation. Plaintiffs retained counsel, who realized that plaintiffs had not been given a current copy of the Westgate’s public offering statement, as required by the Tennessee Consumer Protection Act. Instead, plaintiffs had received an old version on CD-ROM which was extremely difficult to access and navigate. Plaintiffs sought to rescind the contract based on the TCPA, but Westgate refused. Plaintiffs then brought this action. 

 In Tennessee, punitive damages may be awarded only if a defendant has acted intentionally, fraudulently, maliciously, or recklessly.  This must be proven by clear and convincing evidence.  Several factors shall be considered, which are set out in the leading case Hodges v. S.C. Toof & Co., 833 S.W.2d 896 (Tenn. 1992):

(1) The defendant’s financial affairs, financial condition, and net worth;

            (2) The nature and reprehensibility of defendant’s wrongdoing, for example

The Senate Judiciary Committee has just voted to reject a bill that would have allowed corporations and other employers to escape responsibility for punitive damages based on the reckless conduct of their employees.

SB2637 by Republican Senator Brian Kelsey (House version by Republican Rep. Vance Dennis), Tennessee would have held employers responsible for punitive damages only if (a) the reckless act was committed by someone employed in a management capacity; (b) the employer recklessly hired, retained, supervised or trained the reckless employee; or (c) the employer authorized, ratified or approved the reckless act or omission with knowledge or conscious disregard for the loss or injury.

The Bill defined "someone employed in a management capacity" as a management-level employee with the stature and authority to set policy and exercise control, discretion, and independent judgment over a significant scope of the employer’s business and where the alleged act or omission warranting punitive damages by such management-level employee was directly within the scope of such authority.

Missouri has a  cap on punitive damages.  The cap is $500,000 or five times compensatory damages, whichever is greater.

Kansas City Star reports that on November 2, 2011, the Missouri Supreme Court heard oral arguments in Estate of Max E. Overbey and Glenna J. Overbey v. Franklin,  Case No. SC91369 that challenges the punitive damages cap.  The Overbeys contend that a $1 million dollar punitive award against former car dealer Chad Franklin, which was decreased to $500,000.00 pursuant to the state’s punitive damages cap, should be reinstated because the statute is unconstitutional.  They argue  that the cap violates the constitutional separation of powers; the Overbeys’ right to trial by jury; the Overbeys’ right to equal protection; the prohibition against special legislation; the due process clause; and the Overbeys’ right to open courts.

According to one firm’s press release:

The Supreme Court of Iowa has ruled that punitive damages cannot be recovered from the estate of a dead tortfeasor.

The thinking goes that punitive damages cannot punish a dead person.  In addition, the Court held that in such cases the actor’s state of mind is important and direct evidence of the state of mind is unavailable after death.

The excellent dissent points out the opposing view.

The Social Science Research Network has an article available that is of interest to tort lawyers: The Decision to Award Punitive Damages: An Empirical Study. Here is the abstract:

Empirical studies have consistently shown that punitive damages are rarely awarded, with rates of about three to five percent of plaintiff trial wins. Using the 2005 data from the Bureau of Justice Statistics Civil Justice Survey, this article shows that knowing in which cases plaintiffs sought punitive damages transforms the picture of punitive damages. Not accounting for whether punitive damages were sought obscures the meaningful punitive damages rate, the rate of awards in cases in which they were sought, by a factor of nearly 10, and obfuscates a more explicable pattern of awards than has been reported. Punitive damages were surprisingly infrequently sought, with requests found in about 10% of tried cases that plaintiffs won. Punitive damages were awarded in about 30% these trials. Awards were most frequent in cases of intentional tort, with a punitive award rate of over 60%. Greater harm corresponded to a greater probability of an award: the size of the compensatory award was significantly associated with whether punitive damages were awarded, with a rate of approximately 60% for cases with compensatory awards of $1 million or more. Regression models correctly classify about 70% or more of the punitive award request outcomes, Judge-jury differences in the rate of awards exist, with judges awarding punitive damages at a higher rate in personal injury cases and juries awarding them at a higher rate in nonpersonal injury cases. These puzzling adjudicator differences may be a consequence of the routing of different cases to judges and juries.

Thanks for Torts Prof Blog for informing me about the article.