January 5, 2010

Another Case Involving the Validity of Statutory Caps on Punitive Damages

The California Legislature has never imposed a cap on the amount of punitive damages awards a jury can award, and that's not likely to change any time soon. (See our post about the failed effort to enact a cap in California last year). In the rest of the country, however, roughly half of the states have adopted a statutory cap of some kind. According to this Daily Journal column, caps have been enacted in 22 of the 45 states that allow punitive damages.

One state with a cap is Nevada, which has a statute limiting punitive damages to three times the amount of compensatory damages, up to a maximum of $300,000. According to this article in the Las Vegas Review-Journal, a Las Vegas plaintiffs' lawyer is mounting a challenge to the constitutionality of that statute.

Similar issues have been raised in other states, with the result that caps have usually been upheld. For example, caps have been upheld in Alaska, North Carolina, Ohio, Texas, and Virginia, but overturned in Georgia, Illinois, and Indiana. The validity of the Georgia cap is currently pending before the Georgia Supreme Court.

The most common argument against statutory caps on punitive damages is that they violate the right to a jury trial. But creative plaintiffs' lawyers have also argued that the caps violate: (1) state constitutional provisions guaranteeing open courts, (2) separation of powers principles, (3) specific statutes governing punitive damages, and (4) state laws prohibiting special legislation.

Given the enormous sums of money at stake, we can expect to see a lot more litigation on this issue around the country (but not in California).