Missouri Supreme Court Holds Punitive Damage Cap on Common Law Claims Unconstitutional

On September 9, 2014, the Missouri Supreme Court held that a punitive damages cap on a civil judgment to be unconstitutional. The offending statute, R.S.Mo. § 510.265, caps punitive damages  at the greater of $500,000 or five times a net judgment. The statute and its limited actual-to-punitive damage ratio has been Missouri’s status quo since its passage during the height of tort reform in 2005.

In Lewellen v. Franklin, MO Sup. Ct. No. SC92871 (2014), plaintiff Lillian Lewellen brought claims against Chad Franklin and Chad Franklin National Auto Sales North, LLC, alleging common law fraudulent misrepresentation and unlawful merchandising practices under the Missouri Merchandising Practices Act, R.S.Mo. § 407.010, et seq. The claims arose after the defendants failed to provide Mrs. Lewellen with advertised and agreed upon car payments of $49 per month. Ultimately, Ms. Lewellen was charged $387.45  per month, had her vehicle repossessed and suffered damage to her good credit.

At trial, the jury awarded Ms. Lewellen $25,000 actual damages and $1,000,000 punitive damages against both Chad Franklin and his dealership for each claim. Pursuant to § 510.265, the circuit court reduced punitive damages to $500,000 and $539,050, respectively. On appeal, Ms. Lewellen claimed that the damages cap on her common law fraudulent misrepresentation claim violated her right to jury trial, her equal protection rights, her right to due process and that §510.265 violated the separation of powers doctrine.

The Missouri Supreme Court agreed with Ms. Lewellen’s position that the punitive damages cap on common law claims “divests the jury of its function in determining damages and, thereby, deprives her of a right to a trial by jury guaranteed by article I, section 22(a) of the Missouri constitution.” The Court explained that “[i]n accordance with Watts v. Lester E. Cox Medical Centers, 376 S.W.3d 633, 638 (Mo. Banc 2012), this Court holds that the mandatory reduction of Ms. Lewellen’s punitive damages award against Mr. Franklin under section 510.265 violates Ms. Lewellen’s right to a trial by jury as guaranteed by article I, section 22(a) of the Missouri Constitution.” Looking to due process rights as they existed at the time the Missouri Constitution was adopted, the Court felt that the damages cap “necessarily changes and impairs the right of a trial by jury as heretofore enjoyed.”   

The Court did not go so far as to find §510.265 unconstitutional in and of itself and this decision is limited to the facts of this case. The Court explained that generally, a single digit ratio between punitive damages and compensatory damages will satisfy due process. However, where a common law claim is based on a defendant’s “particularly egregious” conduct which results in minimal actual damages, double digit ratios are warranted.

This is an important decision for transportation companies. When an accident goes to litigation it is almost always brought under a negligence theory of liability (common law). Therefore, a key provision of Missouri’s trust reform effort will not apply.  

If you have any questions regarding this alert or any other transportation and logistics legal issues, please contact one of our Transportation Law attorneys at 816.931.2700.