Hey Now, You're an All Star, Get Your Punitives, Get Paid. Missouri Court of Appeals Finds Punitive Damages Cap Unconstitutional
The Missouri Court of Appeals, Western District, recently held, in a case involving an employee’s breach of his duty of loyalty to his employer, that a statutory cap on punitive damages was a violation of the prevailing plaintiff’s constitutional right to trial by jury. Referring back to the establishment of the Missouri Constitution, the court of appeals reexamined the constitutionality of the punitive damages cap.
All Star Awards v. Halo involved an employee at All Star who decided to leave his employer to work for a competitor. Before leaving All Star, however, the employee poached a few clients from his former employer by telling the clients that All Star was experiencing cash flow and ownership issues. Finding this behavior reprehensible, the trial court stated that “taking business from a small mom-and-pop awards and promotions shop with supposed cash-flow issues while its sales manager was still in its employ is the definition of evil motive and reckless indifference.” The jury, like the trial court, also upset with the defendants, awarded actual damages of $512,000, and punitive damages of $5.5 million. However, the trial court reduced the punitive damages by almost half ($2,627,709) on the basis of Section 510.265, which imposed a punitive-damages cap, because All Star’s claims “were not common law claims.”
On appeal, All Star contended that the trial court misapplied the section on the punitive-damages cap, violating All Star’s right to a jury. Citing the case of Lewellen, the court of appeals stated that they would review constitutional challenges de novo, without regard to the trial court’s decision.
The Missouri Constitution states that the right to a jury trial “as heretofore enjoyed shall remain inviolate.” In other words, any changes to the rights to a jury as existed when the constitution was adopted in 1820 are unconstitutional. Halo contended that there were no claims like the breach of duty of loyalty in Missouri before the Constitution was signed and, therefore, it would not have been recognized. All Star argued to the contrary that it does not matter if Missouri recognized the cause of action in 1820, but rather whether this claim for relief existed in English common law prior to the signing of the Missouri constitution.
The Court of Appeals agreed with All Star finding these types of loyalty and tortious interference claims have been recognized under English common law since at least 1621. Therefore, the date that the Missouri courts recognized a particular common law cause of action is irrelevant. Rather, the more important question to ask is, “did the action or an analogous action exist at common law when our constitution was adopted?” Finding the answer in the affirmative here, the court found the punitive damage cap to be unconstitutional.
Although Halo raised a concern that this ruling could radically expand Lewellen, the Court disagreed, concluding that Missouri’s common law is based on the common law of England as of 1607 - the common law claims of England became a part of Missouri common law when the state constitution was adopted; and that its refusal to apply the damages cap was therefore consistent with Lewellen. In the back and forth on the application of a cap on punitive damages, this is a win for the “no-cap” folks. Whether this Court of Appeals decision is the last word on this subject remains to be seen.
* Avery Goodman, a summer law clerk in the firm's St. Louis office, assisted in the research and drafting of this post. Goodman is a rising 3L student at Washington University School of Law.