21 Apr Punitive Damages Caps — Are they Unconstitutional?
You might have heard about the huge Butte jury verdict a couple months ago. Over $52 million, to be more precise. The award was against Comerica, a bank. Essentially, a start-up business was given promises by a bank that reneged on its promises. Several times. I’m not an expert on this jury verdict or the ins-and-outs of what the trial was all about. What I’m writing about is an opinion we will be seeing from the Montana Supreme Court arising from this case: whether the current cap on punitive damages is constitutional.
Part of the large jury verdict was $10.5 million in punitive damages.
The idea behind punitive damages is to punish the Defendant for its wrongdoing. In court, usually it’s not about punishing someone, but balancing the scales i.e. the plaintiff got hurt in a car wreck and couldn’t work, so the jury verdict should balance the scales by including an amount to for the Plaintiff’s lost wages. These kinds of “balance the scales” damages are called compensatory damages. Punitive damages are about punishment, telling the Defendant s/he or it should never. do. that. again.
In Montana, a jury is only allowed to decide whether punitive damages should be assessed in certain cases; essentially, where the Defendant did it on purpose. And, even in those cases, the legislature has determined that the jury can’t award whatever it wants to — instead, it may award $10 million or 3% of the company’s net worth, whichever is less (see the statute here). Now, I’m not going to try to tell you that $10 million isn’t a lot of money. But, if the whole point behind punitive damages is to make it sting a little bit for a Defendant — $10 million or 3% of a company’s net worth might not be enough.
So, the jury in Butte awarded half a million dollars more than the Montana legislature says it can in punitive damages.
Enter the Butte judge in this case. The judge in this case found that the legislature’s cap on punitive damages is unconstitutional. “It overrides the fundamental right of trial by jury … by taking a verdict for punitives and arbitrarily cutting it to fit into the cap that has no relationship to the facts of the case the jury just decided or the wealth of the defendant which ‘must be considered.'” He found that, “while 3% or $10 million may be an effective deterrent to similar conduct to some defendants, $10.5 million is miniscule and likely provides minimal or no deterrent to a party like Comerica with its substantial wealth.”
I hope the Supreme Court agrees with the Butte judge here. Montanans generally know the value of a dollar. I think that a Montana jury should be able to do what they believe is right in punishing a defendant, when that defendant has done something for which it should be punished.