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Once More unto the Breach: the Missouri Supreme Court Again Takes Up the Question of Constitutional Limits on Missouri's Statutory Punitive Damages Cap

ABSTRACT: In All Star Awards v. HALO Branded Solutions, the Supreme Court will once again decide whether a lower court ruling applying Missouri's cap on punitive damages (Mo. Rev. Stat. Sect. 510.265) should be nullified on state Constitutional grounds.

In 2012 and 2014, the Missouri Supreme Court sent shudders down the spine of defense lawyers throughout the state, via its decisions in Watts v. Lester E. Cox. Medical Centers and Lewellen v. Franklin, which refused to apply statutory limitations on noneconomic damages (Watts) and punitive damages (Lewellen), on the grounds that the statutes abridged the Missouri Constitution’s right to trial by jury. Those cases reversed decades of Supreme Court authority to the contrary. The legal theory goes as follows: (1) if a case has been brought under a common law cause of action (e.g., fraud); (2) that same cause of action existed at the time the state Constitution was enacted in 1820; (3) and that cause of action included the right to a jury trial back in 1820; then the application of a statutory limit on punitive damages or noneconomic damages abridges the right to a trial by jury.

This same legal theory has been tested in 31 states. And as the New Mexico Supreme Court wrote earlier this year, “Of the thirty jurisdictions to consider whether a statutory cap on damages violated the constitutional right to a trial by jury, twenty-four have applied such caps, reasoning that a statutory limit on recovery is a matter of law within the purview of the state legislature”. (The New Mexico court’s ruling made the score 25 to 6 in support of the legislative caps.)

The Missouri Supreme Court has since re-examined this issue, each time attempting to carefully circumscribe its holdings in Watts and Lewellen. In Dodson v. Ferrara, decided in 2016, the plaintiffs challenged the application of the statutory noneconomic damages cap in a wrongful death case, attempting to analogize a common law claim that existed in 1820, for the loss of services of a child whose death was wrongfully caused. The Court rejected plaintiff’s argument, reasoning that a wrongful-death claim and a common-law “loss of services” claim based on a wrongful death “may both be civil actions for monetary damages” arising out of a wrongful death, “but they arise from completely different principles of law.” The Court accordingly found the analogy too strained to support an argument that wrongful-death claims are analogous to claims that were tried to a jury in 1820.

Then, earlier this year, in Ordinola v. University Physician Associates, the Court similarly rejected a plaintiff’s attempt to broadly construe the Watts decision. In Ordinola, the plaintiff brought statutory claims for medical negligence, and argued that because medical negligence claims were triable to juries at common law in 1820, the damages caps could not be applied. The Supreme Court disagreed, holding that the legislature had the authority to abolish common law causes of action, and replace them a statutory cause of action, which may in turn include limitations on what measure of damages can be recovered. That is what the state legislature did with medical negligence claims, and the statutory damages caps were therefore held to be enforceable.

In the current All Star Awards case, the plaintiff company’s (All Star) general manager terminated his employment with All Star and went to work for the defendant (HALO), a competitor. He allegedly diverted substantial amounts of business to HALO. Plaintiff brought claims against the manager for breaching his duty of loyalty, and against HALO under two legal theories: tortious interference with business expectancy, and civil conspiracy to breach a duty of loyalty. At trial, the jury rendered a verdict against HALO that included punitive damages of well beyond five times the total compensatory damages award, and the Circuit Court judge applied Missouri’s statutory damages cap and reduced the punitive damages award from $5.5 million to $2,627,709.40.

On appeal, the Western District Court of Appeals reversed the trial court’s application of the damages cap, essentially holding that plaintiff’s causes of action against HALO would have been cognizable under common law and triable by jury in 1820, because they involved “wrongs to the person or property for which money damages are claimed.” On appeal to the Supreme Court, HALO has argued – convincingly, in our view – that Missouri common law claims for tortious interference with business expectancy did not exist in 1820, and in fact were not recognized until 1953; and that claims for breach of duty of loyalty (let alone conspiracy to breach that duty) did not exist until 1966. The Dodson case certainly appears to stand for the principle that the 1820 common law claim must be either the same or very closely analogous to claim in the case currently before the court, and that broad generalizations will not carry the day for a plaintiff. (In Lewellen, the plaintiff’s claim was for consumer fraud, and such claims were recognized at common law in 1820.)

On the damages cap issue, HALO has made a twofold argument to the Supreme Court: that it should at very least reinstate the trial court’s holding that the damages cap applies in a case like this, but that more properly, the Court should reconsider its holdings in Watts and Lewellen. And given the very strong consensus among courts across the nation that damages caps are enforceable and can withstand state constitutional challenge, there is much to be said for the latter approach. We believe that in accepting this case for review, the Supreme Court, at minimum, is thinking that this case bears some resemblance to Dodson.  

In its appeal, HALO has argued several other legal points: that there was insufficient evidence to support a claim for tortious interference; that the award in plaintiff’s favor was based on inadmissible damages testimony from a lay witness, who incorrectly calculated lost profits; and that the punitive damages award was so disproportionate to actual damages that it violated due process. But we believe the reason the Supreme Court accepted this case is to weigh in once again on the damages cap, and that is where the action is.  The case has been docketed for oral argument in early December 2021. Stay tuned.