Punitive damages can be a tough sell. Juries award these kinds of damages to hold reckless companies and others accountable for outrageous misconduct. Yet (or so), they are easy rhetorical targets. “Huge” “arbitrary” and “costly to society" are how Big Business groups like to describe punitive damages. But do the facts tell a different story? Actually, they tell a very different story.
Punitive damages are rarely awarded and are modest in amount: awarded in only about 3 percent of successful tort cases. And the median punitive award to tort plaintiff winners isn't in the millions – it's only about $55,000. (See more here.) What's more, appellate judges are cutting them back left and right. Just this week, the 7th Circuit severely reduced a jury award against ConAgra Foods, saying it “does not have to pay nearly $100 million in punitive damages stemming from the explosion at an Illinois grain bin that severely burned three workers.”
Even in the case against BP for causing the 2010 Deepwater Horizon explosion and oil spill in the Gulf, while the court just found BP to be reckless and grossly negligent, he said, “based on previous rulings in the U.S. Fifth Circuit Court of Appeals, which includes Louisiana, BP cannot be held liable for punitive damages under maritime law.” He also noted, however, that “in other circuit courts, BP could be held liable for punitive damages, in addition to compensation for losses.” (Here we go, U.S. Supreme Court!)
But like a phoenix rising from the ashes comes the Missouri Supreme Court, with a wonderful, unanimous decision this week striking down that state's $500,000 punitive damages cap as it applies to any common law claim. Here's the case, as described by the Court:
When Ms. Lewellen, a 77-year old widow, needed a new vehicle after the transmission on her van went out, she visited National because she had seen several of National's advertisements for vehicles with a $49-per-month payment plan. Upon arriving at the dealership, Ms. Lewellen told one of National's employees that she was interested in the $49-per-month payment plan, and she picked out a 2002 Lincoln that qualified for the program. Throughout her visit, Ms. Lewellen repeated that she could afford to pay only $49 per month for a vehicle.
Well, you can just guess what happened. After a few months, she started being hit with monthly bills of $387 - almost 8 times what she was promised. Writes the Court,
When the money from National was expended and Ms. Lewellen became unable to make her payments in full, she contacted Harris Bank to explain the situation and continued to make the $49 monthly payments. Harris Bank eventually repossessed Ms. Llewellyn's vehicle and sued her for breach of contract.…
Ms. Lewellen presented evidence of 73 complaints against National and Mr. Franklin's other dealership filed with the Missouri attorney general and numerous similar complaints filed with the Kansas attorney general.
Based on these reprehensible facts, a jury ordered Franklin to pay her $1 million in punitive damages, but a lower court judge cut them in half because of the cap. The state Supreme Court said that was wrong. The cap violated the right to trial by jury - firmly established in Missouri's constitution for well over a century.