September 24, 2014

Montana trial judge declares state's cap on punitive damages unconstitutional, but reduces award against Hyundai from $240 million to $73 million

Earlier this year we reported that a Montana jury awarded $240 million in punitive damages against Hyundai for a crash that killed two teenagers.  We noted that Montana has a statute that prohibits punitive damages in excess of $10 million.  (The statute actually limits the award to the lesser of $10 million or 3 percent of a defendant's net worth.)

The Associated Press reports that the trial judge in that case has declared Montana's cap on punitive damages unconstitutional.  The story doesn't reveal why the judge thought the statute unconstitutional.  Most courts have rejected constitutional challenges to punitive damages caps, but this ruling comes closely on the heels of a recent decision by the Missouri Supreme Court striking down a cap in that state.  This is just a trial court decision; the Montana Supreme Court will be the ultimate arbiter of the propriety of the cap in Montana.

After striking down the cap, the judge nonetheless concluded that the $240 million awarded by the jury was excessive.  She reduced the award to $73 million, nine times the compensatory damages of $8.1 million.

Presumably Hyundai will appeal to the Montana Supreme Court and will argue not only that the statutory cap is valid, but also that the punitive damages cannot exceed the amount of the already substantial compensatory damages award.