January 14, 2008

California Senate Judiciary Committee to Hold Hearing on Proposed Punitive Damages Cap

The California Senate Judiciary Committee will conduct a hearing tomorrow, January 15, on a proposal to cap punitive damages in California. The bill, SB423, was introduced by Senator Tom Harman (R-Huntington Beach) and is sponsored by the California Chamber of Commerce. The bill would limit punitive damages to no more than three times compensatory damages. 22 other states already have caps, including 13 states that impose a cap of 3-to-1 or smaller. Nevada, for example, caps punitive damages at a ratio of 3-to-1, with a fixed limit of $300,000.

According to the Chamber, adoption of this bill would address California's reputation as hostile litigation environment for businesses; California's punitive damages system ranked ranks 48th out of 50 states in the 2007 U.S. Chamber/Harris nationwide survey of in-house counsel and senior attorneys representing businesses. Only Mississippi and West Virginia ranked worse.