Legal Alerts

In Missouri, Inevitable Revisions to Punitive Damages Statutes and Standards - Part I

St. Louis, Mo. (June 11, 2020) - Last month, the Missouri legislature passed Senate Bill 591 (SB 591), making important changes to the state’s punitive damages laws, civil procedure, improper healthcare laws, and its consumer protection statute, the Missouri Merchandising Practices Act (MMPA). Governor Mike Parson is expected to sign SB 591. The new law will apply to all cases filed on or after August 28, 2020, and is expressly not retroactive.

In Part I of this two-part alert, we discuss the reforms SB 591 makes to punitive damages in Missouri, including its definition, the standard of proof, new procedural safeguards, impacts on discovery, and more. In Part II, we review the effects of the bill on the MMPA and actions based on improper healthcare.

Reforms to Punitive Damages

SB 591 is just the latest in a series of other recent reforms attempting to improve the legal climate in the State of Missouri. One of the main concerns addressed by SB 591 is the idea that punitive damages that have “run wild.” See Pacific Mutual Life Insurance Co. v. Haslip, 499 U.S. 1, 18 (1991).

In 2005, the legislature enacted a cap on punitive damages after years of state court decisions diluting the standard for punitive damages and blurring the line between ordinary negligence and the type of conduct originally required for punitive damages. Concerns arose again when the Missouri Supreme Court struck down this cap in 2014 for tort actions that existed at common law. See Lewellen v. Franklin, 441 S.W.3d 136 (Mo. banc 2014).

This concern is not unfounded, as research shows excessive tort litigation in Missouri results in a loss of $2 billion in personal income annually and a loss of 32,205 jobs. The excess costs result in a “tort tax” of $505.21 per person. SB 591 attempts to tackle this issue. (See The Perryman Group for CALA: Economic Benefits of Tort Reform: An assessment of excessive tort costs in Missouri and potential economic benefits of reform, November 2019, pp.2, 13).

Clarified Mental-State Standard and Definition of Punitive Damages

SB 591 returns to the original intent and purpose of punitive damages found at common law. The Missouri Supreme Court first allowed an award of punitive damages in the State of Missouri in Klingman v. Holmes, 54 Mo. 304 (1873). Therein the court cited Greenleaf’s infamous evidentiary treatise to show that exemplary damages are only appropriate “where an evil intent has manifested itself in acts. . . (2 Greenl. Ev., §§ 268, 271.)” Id. (emphasis added). Under the common law there must have been intent, or “positive proof of malice,” to warrant punitive damages. Id.

This bill enacts an entire new section of the Missouri Rules of Civil Procedure, RSMo §510.261. This new section adopts the original common law, clarifies the mental state of the defendant, and cleans up the definition of punitive damages. For punitive damages to be awarded in a case, a defendant now must have “intentionally harmed the plaintiff without just cause or acted with a deliberate and flagrant disregard for the safety of others.” RSMo §510.261(1) (emphasis added).

Clear and Convincing Burden of Proof Standard Codified

The bill codifies the “clear and convincing evidence” evidentiary standard for punitive damages that was adopted by the Missouri Supreme Court in Rodriguez v. Suzuki Motor Corp., 936 S.W.2d 104 (Mo. 1996). Under the new RSMo §510.261(1) “except as otherwise provided by statute, punitive damages shall not be awarded unless the claimant proves by clear and convincing evidence that the defendant intentionally harmed the plaintiff . . .” This burden of proof standard takes a middle ground between the ordinary civil burden of proof standard (“preponderance of the evidence”) and the criminal law standard (“beyond a reasonable doubt”).

Nominal Damages Insufficient and Non-Party Damages Disallowed

The new RSMo §510.261(2) makes nominal damages insufficient to support punitive damages. This is subject to exception in cases that “invoke privacy rights, property rights, or rights protected by the Constitution of the United States or the Constitution of the State of Missouri.” Id. As to non-party damages, RSMo §510.261(6) mandates that the amount of punitive damages shall not be based in whole or in part on harm to nonparties. This codifies the holding of the United States Supreme Court in Philip Morris USA v. Williams, 549 U.S. 346, 353 (2007).

Procedural Safeguards: Punitive Damages Only Pleaded After Evidence Adduced

SB 591 provides procedural safeguards to uphold these new standards. Before punitive damages may be pleaded, a court must determine based on the evidence to be admitted at trial that a trier of fact could reasonably conclude that the burden of proof and standard of liability for punitive damages have been met. RSMo §510.261(5). Thus, this bill will weed out meritless claims earlier in litigation, saving time and money for all litigants involved, and preventing unnecessary discovery. The new law follows an approach used in about a dozen states to require a meaningful review of the evidence before allowing a claim for punitive damages.

Procedurally, claimants may file a claim for punitive damages only with leave of court after a written motion for leave to amend by the claimant. RSMo §510.261(5). This motion must be filed 120 days prior to the final pretrial conference or trial. Id. In the motion, the claimant must present admissible evidence establishing a reasonable basis for recovery of punitive damages. Id.

Any parties may oppose the motion, and may also present evidence showing why punitive damages should not be allowed. Id. 45 days after the hearing on the motion, or if there is no hearing then 45 days after the last reply filing, the court shall rule on the motion and decide whether the standards and burden of proof have been met. Id.

If leave is granted, and the pleadings are amended, “The responsive pleading shall be limited to responding to the newly amended punitive damages claim.” Id.

Employers, Principals Must Be Complicit for Liability to Attach

The new law incorporates a “complicity rule” to limit vicarious liability for punitive damages. It protects employers and principals from punitive damages liability for acts by rogue employees or agents. Punitive damages can be awarded against an employer or other principal for an agent only if: the agent was authorized or later ratified by the principal or employer both to do an act and to do it in a certain manner; a managerial agent authorized, participated in, or ratified the conduct; or the agent was “unfit” for the job, making it “reckless” for the principal to employ the person.

Discovery Limited

Previously, discovery as to a defendant's assets was allowed after a finding by the trial court that it is more likely than not that the plaintiff will be able to present a submissible case to the trier of fact on the plaintiff's claim of punitive damages. This meant invasive discovery could occur with very little evidence or basis to do as such.

SB 591 abrogates this and now requires the plaintiff to first go through the procedure in accordance with subsection RSMo §510.261(5) (detailed above) and successfully meet the criteria to plead punitive damages. Then and only then is discovery of assets allowed.

The new law limits scorched-earth or dragnet discovery even further in cases where “an employer admits liability for the actions of an agent in a claim for compensatory damages.” RSMo §510.261(4). (emphasis added). If an employer admits such liability “the court shall grant limited discovery consisting only of employment records and documents or information related to the agent's qualifications.” (emphasis added). This prevents expansive discovery into a business prior to a plaintiff proving that they meet the criteria for punitive damages.

Exclusive Route for Punitive Damages

The legislature smartly prevents any judicial erosion to these new standards and safeguards by making this new law the exclusive route for a claimant to obtain punitive damages. Subsection 7 dictates that “No judgment that includes a punitive damage award shall be entered in any civil action in any court of this state . . . unless the requirements and procedures for a punitive damage award contained in this section and sections 510.263 and 537.675 are met.” RSMo §510.261(7). The legislature also extends this exclusive route to “any court in which claims are asserted based on the constitution, statutes, or common law of this state, . . .” Id. Thus, claims that are removed to federal court, or out-of-state courts applying Missouri law, must also follow the procedures and meet the standards under the new statute.

Credits for Amounts Previously Paid, Clarified and Expanded

RSMo § 510.263(4) has allowed for credits to punitive damage awards for amounts previously paid by the defendant for punitive damages arising out of the same conduct. SB 591 amends this statute to clarify that credits can be for amounts paid in any other state court or any federal court, expanding the potential for credits.

Takeaway

While not voluminous, SB 591 is a hefty bill that does a lot of leg work in the area of punitive damages. The bill returns punitive damages to their original use, intent, and purpose found at common law. It raises the burden of proof to prove punitive damages, limiting the possibility of punitive damage verdicts in civil cases. It disallows punitive damages for actions where there are nominal damages, and does not consider damages of non-parties.

The bill also enacts procedural safeguards to ensure that a plaintiff can show they actually have a case for punitive damages before they plead it. This in turn limits the invasive discovery process related to punitive damages and weeds out cases before such discovery can start. It limits vicarious liability to employers and principals for rouge employees or agents. Even if liability is admitted, it limits discovery to only employment records and documents regarding qualifications until punitive damages are proven. Further, it requires Missouri courts and courts applying Missouri law to follow the new punitive damages law, and makes itself the exclusive path for punitive damages in Missouri.

As noted at the top of this alert, Part II reviews the effects of SB 591 on the Missouri Merchandising Practices Act and actions based on improper healthcare. For more information on this bill, contact the author or editors of this alert.

Author:

Grace E. Shemwell, Associate

Editors:

Jeffrey Bash, Managing Partner - Madison County, IL

Matthew J. Morris, Partner

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