Dan Berexa's Tennessee Law Blog

Part 2 - Review of Two Years of Tennessee Tort Reform - Cap on Punitive Damages

Part 2 in this series, reviewing the significant developments in Tennessee tort reform over the last two years, addresses the punitive damages cap enacted as Tenn. Code Ann. § 29-39-104. The statute codifies many aspects of Tennessee Supreme Court’s 1992 decision in Hodges v. S.C. Toof & Co., which limited the availability of punitive damages to instances where the defendant is found, by clear and convincing evidence, to have engaged in intentional, reckless, malicious or fraudulent conduct which caused injury to the plaintiff. 

The cap generally limits punitive damages awards to two times the compensatory damages awarded to the plaintiff, or $500,000, whichever is greater. Like the cap on non-economic damages, there are exceptions were the cap does not apply, such as where the defendant intended serious physical injury; the defendant’s conduct resulted in a felony conviction; the defendant intentionally concealed or destroyed evidence; or the defendant was under the influence of alcohol, drugs or other intoxicant or stimulate. The statute also contains provisions limiting the availability of punitive damages against product manufacturers and requires that the culpability of a defendant, whose liability for punitive damages alleged to be vicarious, be determined separately from that of any agent or employee.

The punitive damages cap was enacted as part of the Tennessee Civil Justice Act of 2011 and applies to causes of action accruing on or after October 1, 2011, meaning that the provisions apply if the incident which is the subject of the lawsuit occurred on or after the effective date. 

Dan Berexa
Nashville, Tennessee

 

Related articles

Recap of Two Years of Tennessee Tort Reform - Part 1- Caps on Non-Economic Damages

Recap of Two Years of Tennessee Tort Reform - Part 1- Caps on Non-Economic Damages

The last two sessions of the Tennessee General Assembly have brought about significant tort reform, beginning with the "Tennessee Civil Justice Act of 2011" which was a legislative priority during Governor Bill Haslam’s first year in office. The next several posts provide an overview of the significant tort reforms enacted over the last two years. This summary is not meant to be exhaustive and the text of the statutes must be consulted in connection with analyzing a particular claim.

Non-Economic Damages in Most Civil Actions Capped at $750,000 Per Injured Plaintiff

Pursuant to Tenn. Code Ann. § 29-39-102, non-economic damages are broadly defined to include pain and suffering, physical impairment, mental anguish, emotional distress, loss of enjoyment of life and loss of consortium. The $750,000 cap applies per claimant, and is not increased if a claim is brought against multiple defendants. Nor is the cap increased for derivative claims brought by a spouse, or child, for loss of consortium or other noneconomic damages. There are exceptions, which increase the cap to $1,000,000 per plaintiff, in cases where the injured party sustains a catastrophic injury such as paraplegia, multiple amputations, severe burns, or the claim involves the wrongful death of a parent of one or more minor children.

 Note that the cap does not apply to economic damages such as medical expenses, lost earnings or earning capacity, property damage, loss of business or employment opportunities or other objectively verifiable monetary losses. The cap is also removed when the injury is intentional; where the defendant intentionally conceals or destroys evidence; or for injuries resulting from the defendant’s intoxication. Effective June 12, 2012, the cap is also removed if the defendant is convicted of a felony for the actions which caused the injury or damage to the plaintiff.

Part 2 of this series will discuss the cap on punitive damages.

Dan Berexa
Nashville, Tennessee

 

Overhaul of Tennessee Post Judgment Interest Statute

Prior to the enactment of Public Chapter No. 1043, the "default" interest rate on judgments was 10% per annum, pursuant to Tenn. Code Ann. § 47-14-121. Effective July 1, 2012, the interest rate applicable to judgments will be based on the prime rate, minus 2%, unless there is a statute, note or contract that fixes the rate of interest at a specific rate. Of course, the rate set by a note or contract cannot exceed the maximum rates permitted by Tenn. Code Ann. § 47-14-103 and the maximum "default" rate is 10%.

As long as low interest rates prevail, accruing post judgment interest will not be a significant concern for judgment debtors who are considering appeal. The Tennessee Administrative Office of the Courts will post rates on its website and the applicable rate will be based on the date of the judgment.

Given current prime rates, the post judgment rate announced in July should be approximately 1.5%.   

Dan Berexa
Nashville, Tennessee

 

Don't Count on Tennessee Courts to Limit Ratio of Punitive to Compensatory Damages to a Fixed Number

For those looking for a mathematical bright line rule to determine an acceptable ratio of punitive to compensatory damages, the Tennessee Supreme Court recently backed away from employing a strict ratio based analysis. Prior decisions indicated that a punitive award that was more than 4 times the compensatory award may not withstand constitutional scrutiny (See November 23, 2008 post). In Goff v. Elmo Greer & Sons Construction Co. (November 3, 2009), the Tennessee Supreme Court reduced what was originally a $2,000,000 punitive award to $500,000. While the reduction was significant, the compensatory damage award for the conduct that supporting the punitive award was only $3,305. Thus, even after the reduction, the punitive to compensatory damages ratio was 150:1.

 

Goff is another decision in the growing body of Tennessee Supreme Court precedent addressing the sufficiency of evidence necessary for a punitive damage award and the factors utilized in determining whether the size of the award violates the defendant’s due rights under the 14^thAmendment. In connection with determining whether a punitive award is grossly excessive and violates due process, the court is to focus on the degree of reprehensibility of the defendant's conduct; the disparity between the harm (or potential harm) and the award; and, the difference between the punitive damages and other available penalties. The bottom line is that Goff gives the court a great deal of discretion when reviewing a punitive award and a high punitive to compensatory damage ratio alone will not be enough to make the award suspect.  

 

Dan Berexa

Nashville, Tennessee

Tennessee Court of Appeals Affirms $7.5 Million Wrongful Death Award and Reduces $48 Million Punitive Award to $13.8 Million in Accordance with Recent Tennessee Supreme Court Decision, Flax v. DaimlerChrysler

Mohr v. DaimlerChrysler Corp., is a significant recent decision since the Court of Appeals reviewed a punitive damages award in accordance with the standards set forth in the Tennessee Supreme Court’s July 2008 decision in Flax v. DaimlerChrysler Corp. In Mohr, the Court of Appeals reduced the jury's punitive award from over $48,000,000 to $13,800,000. The reduction brought the award within a compensatory to punitive damages ratio of 1:4, which the United States Supreme Court has indicated may be the maximum constitutionally permissible ratio.

 

Mohr is also significant in that the court did not disturb the jury’s $7,500,000 wrongful death award, for one of the two people killed in the subject accident. The majority of the compensatory award was apparently attributable to loss of consortium. Although the opinion does not contain a breakdown of the award, there was proof of loss of earning capacity of between $500,000 and $1,000,000, and some conscious pain and suffering at the accident scene. The portion of the opinion addressing the reasonableness of the award is relatively brief and reflects that the appellate court will rarely disturb the jury’s determination, once the award is approved by the trial judge court, in the capacity as thirteenth juror. Commenting on the proof supporting the consortium element of the award, the Court merely acknowledged the close relationship between the decedant and her surviving family.

 

See my July 31 post for discussion and links to the Flax opinion. Recently, DaimlerChrysler's petition to rehear Flax was denied by the Tennessee Supreme Court.

Dan Berexa
Nashville, Tennessee

Tennessee Supreme Issues Long Awaited Punitive Damages Decision in Flax v. Daimler Chrysler. Sustains $13 million of $98 million punitive award.

The plaintiffs brought suit for the wrongful death of their infant son and the mother's emotion distress resulting from the death of the child. The child died when the seat back in a Chrysler Caravan broke, in a rear-end impact, and the head of an adult occupant collided with the head of the child sitting behind the adult. After a jury verdict that included a $98 million punitive damages award against Chrysler, the case made it's way to the Tennessee Supreme Court. By that time the verdict had been whittled down, leaving only the $5 million wrongful death award, one-half of which was apportioned to Chrysler and the other half against the driver that caused the collision. The entire punitive award and the negligent infliction of emotional distress claim were thrown out by the Court of Appeals.

The Tennessee Supreme Court held that filing a wrongful death suit did not prevent the mother from filing a separate "stand alone" negligent infliction of emotional distress claim. However, a negligent infliction of emotional distress claim brought under those circumstances must be supported by expert medical or scientific proof of a severe emotional injury in accordance with Camper v. Minor, 915 S.W.2d 437 (Tenn. 1996). The bottom line is that when the negligent infliction of emotional distress claim arises from the plaintiff witnessing the death or injury of another, as opposed to the emotional distress arising from the plaintiff's own physical injuries, the plaintiff absolutely needs expert proof of the emotional injury. 

In a lengthy analysis of the law applicable to punitive damages claims, and the review of such awards, the court affirmed the punitive damages award of $13 million associated with the wrongful death of the infant. This was the amount the award had been reduced to by the trial judge. The court did address Chrysler's due process challenges and the issue of the ratio of the compensatory award to the punitive award. In Flax the ratio was 1 to 5.35, which exceeded the 1 to 4 ratio which the U.S. Supreme Court has indicated approaches the outer limit of constitutionality. The portion of the punitive award applicable to the negligent infliction of emotional distress claim did not stand since the underlying claim was dismissed. If you have a case that has a punitive damages claim you need to read this opinion. It is the most significant Tennessee decision since Hodges v. S.C. Toof & Co.

The Court also held that the trial court erred in recognizing the plaintiffs' "post-sale failure to warn" claim. The court did not consider the merits of recognizing "post-sale failure to warn" in Tennessee on the basis that the proof did not support such a claim. However, the court deemed the trial court's error harmless. 

Below are links to the various opinions:  

The opinion of the court, by Justice Holder, in which Chief Justice Barker joined. 

Justice Wade's separate concurring opinion.

Justice Clark's separate concurring and dissenting opinion, concurring on all issues except that Justice Clark would reverse the judgment awarding punitive damages for the wrongful death claim and remand the case for a new trial on that issue.

Justice Koch's separate concurring and dissenting opinion, arguing that the judgment should be reversed and the case remanded for a new trial on the issue of compensatory damages only.

Dan Berexa
Nashville, Tennessee

Who Has the Formula for Calculating Wrongful Death Consortium Awards?

In consortium claims, should the court consider awards from other similar cases? Should there be a mathematical formula for evaluating the reasonableness of consortium awards? In a recent decision, Arpin v. U.S., the 7th Circuit answered both questions in the affirmative.

54 year old Ronald Arpin died after a medical resident failed to diagnose a rare muscular infection that was caused by a fall. A malpractice action was brought under the Federal Tort Claims Act since the medical clinic Arpin visited was jointly operated by the U.S. Air Force and St. Louis University. Following a bench trial, Arpin's estate was awarded over $8 million, including a $4 million consortium award for the widow and $750,000 for each of Arpin's four adult children. 

On appeal, Judge Posner cited the requirement under Fed. R. Civ. P. 52(a) that the trial judge explain the grounds for his decision. Posner concluded that the amounts awarded were apparently "plucked out of the air," and that the trial Judge should have considered awards in other similar cases. He then went on to suggest that, on remand, prior consortium awards should be analyzed to develop a ratio between the consortium element of damages and the remainder of the damages awarded in the cases. The ratio could then become a starting for setting the consortium award, with adjustments made based on the particularities of the case. 

The problem is with "ratios" is the unique nature of a consortium claim and the fact that the value of such a claim often has nothing to do with the other more certain, and quantifiable, elements of a death award. For example, the amount of medical expenses, or size of the loss of earning capacity claim, has no direct bearing on the issue of consortium.

The use of ratios artificially ties the range of acceptable consortium awards to elements such as medical expenses and loss wages. For example, consider two mothers of young children who are killed in motor vehicle accidents. One, a full-time homemaker, who dedicates every waking hour to her children, dies instantly. The other, a non-custodial parent, who rarely sees her children, barely clings to life for 6 weeks, resulting in the accumulation of $1 million dollars in medical expenses prior to death.  Judge Posner’s ratios are clearly problematic under such a scenario. Using a formula, the acceptable range for the consortium award for the first mother will be greatly limited, in comparison to the second mother, due to factors which have no bearing on the quality of the relationships which form the basis of the consortium claim.

While appellate courts may establish the outer limits for acceptable consortium awards, ratio based formulas won't work.

Dan Berexa