A few weeks ago we reported that a proposed bill to cap punitive damages in California (AB X8 40) was dead. As it turns out, the reports of that proposal’s death were greatly exaggerated.

That particular bill is indeed dead, but the substance of it has been added to another pending bill (AB 2740) through a gut-and-amend procedure, by which the contents of one bill are stripped out and replaced with something new. The original version of AB 2740 dealt with benefits for National Guard veterans, but now it contains three entirely different proposals: (1) cap punitive damages to three times compensatory damages, (2) prohibit punitive damages against product manufacturers who comply with federal or state regulations, and (3) limit non-economic damages in negligence cases to $250,000. We will continue to follow the status of this bill as it moves through the legislative process.

We previously posted about a pending bill that would have a significant effect on California punitive damages appeals by reducing the rate of postjudgment interest, currently set at 10 percent. The bill, SB 1117, is set for a hearing before the judiciary committee of the California Senate on April 30. (See the status page for this bill on the legislature’s website.)

Last month we blogged about a proposed bill to cap punitive damages in California at three times the amount of compensatory damages (AB X8 40). According to the state legislature’s bill tracking website, the current status of that bill is: “Died at Desk.”

It appears that South Carolina is joining the ranks of states that have a statutory cap on the amount of punitive damages. That state’s House of Representatives has passed the Comprehensive Tort Reform Bill (H. 3489) which, among other things, limits punitive damages to three times the amount of compensatory damages or $350,000 whichever is greater.

The limitation, however, would not apply in cases where “the defendant pursued an intentional course of conduct that the defendant knew or should have known would cause injury or damage.” That exception would seem to open the door for plaintiffs in many cases to argue that the cap does not apply, given that punitive damages cannot even be awarded unless the defendant engaged in “willful, wanton, or reckless conduct.”

The bill also provides that the limitations shall not be disclosed to the jury.

Hat tip: South Carolina Statehouse Blog

Earlier today I blogged about a proposed bill that would change California punitive damages law. Here’s a proposed bill that doesn’t directly address punitive damages, but would also have a significant effect on punitive damages litigation in California.

Senator Mimi Walters (R-Laguna Niguel) has introduced a bill to change the rate of postjudgment interest in California. Currently, the postjudgment interest rate in California is fixed at 10 percent. Unlike in federal court, the rate is not tied to any market rate. As a result, judgment creditors have been able to earn a greater return than they could get by investing their money almost anywhere else. SB 1117 would change that, reducing the rate to the federal short-term rate plus 2%.

The accrual of postjudgment interest can play a huge rule in punitive damages litigation. In City of Hope v. Genentech, for example, a lengthy appeal culiminated with the California Supreme Court eliminating a $200 million punitive damages award, but the $300 million compensatory damages award accrued roughly $180 million in postjudgment interest during the appellate process, nearly offsetting the benefit of appealing the punitive damages.

As noted by CJAC, which is sponsoring the bill, a similar bill introduced last year was not adopted.

Assemblyman Roger Niello (R-Fair Oaks) has introduced a bill to cap punitive damages in California. Assembly Bill X8 40 would limit punitive damages to three times the amount of compensatory damages. It would also preclude punitive damages in product defect cases if the product complied with applicable regulatory standards, and it would limit non-economic damages to $250,000 in all negligence cases.

Many other states have adopted similar restrictions on punitive damages, but the idea hasn’t caught on in California. A similar bill was introduced in the California Senate two years ago and never got past the Senate Judiciary Committee. This proposal is not likely to fare any better. The Civil Justice Association of California (CJAC), which sponsored this bill, is probably using it more as an opportunity to spread its message about the problem of excessive punitive damages in California.

The proposed $250,000 cap on non-economic damages will draw heavy criticism from the Consumer Attorneys of California, who have been mounting an attack on the existing $250,000 cap on non-economic damages in medical negligence cases, a cap that was adopted as part of the Medical Injury compensation Reform Act of 1975 (MICRA). The MICRA cap has already withstood several legal challenges.

Hat tip: CJAC

Governor Schwarzenegger has issued a press release listing his proposals for getting California’s economy back on track. One of those proposals is a cap on punitive damages. The press release doesn’t explain exactly where the cap would be set, but it hardly matters. As I mentioned in my previous post, the California Legislature shot down a proposed cap last year and they’re not likely to change course in the near future. The consumer attorneys won’t let that happen.

The California Legislature has never imposed a cap on the amount of punitive damages awards a jury can award, and that’s not likely to change any time soon. (See our post about the failed effort to enact a cap in California last year). In the rest of the country, however, roughly half of the states have adopted a statutory cap of some kind. According to this Daily Journal column, caps have been enacted in 22 of the 45 states that allow punitive damages.

One state with a cap is Nevada, which has a statute limiting punitive damages to three times the amount of compensatory damages, up to a maximum of $300,000. According to this article in the Las Vegas Review-Journal, a Las Vegas plaintiffs’ lawyer is mounting a challenge to the constitutionality of that statute.

Similar issues have been raised in other states, with the result that caps have usually been upheld. For example, caps have been upheld in Alaska, North Carolina, Ohio, Texas, and Virginia, but overturned in Georgia, Illinois, and Indiana. The validity of the Georgia cap is currently pending before the Georgia Supreme Court.

The most common argument against statutory caps on punitive damages is that they violate the right to a jury trial. But creative plaintiffs’ lawyers have also argued that the caps violate: (1) state constitutional provisions guaranteeing open courts, (2) separation of powers principles, (3) specific statutes governing punitive damages, and (4) state laws prohibiting special legislation.

Given the enormous sums of money at stake, we can expect to see a lot more litigation on this issue around the country (but not in California).