We recently reported on a case against Hyundai in which a Montana trial judge ruled that Montana’s cap on punitive damages is unconstitutional.  In that post, we noted that the Montana Supreme Court would make the ultimate decision about the cap’s constitutionality. 

As it turns out, the Montana Supreme Court may be addressing that issue sooner than we thought.  The issue is already teed up in Masters Group International v. Comerica Bank.  The Bozeman Daily Chronicle reports that the Masters Group case was argued in the Montana Supreme Court just last Friday.  The story notes, however, that the Supreme Court might not decide the constitutionality of the cap because the court could dispose of the case on other grounds. 

Incidentally, the plaintiffs’ counsel in Masters Group also represents the plaintiffs in the Hyundai case.

Earlier this year we reported that a Montana jury awarded $240 million in punitive damages against Hyundai for a crash that killed two teenagers.  We noted that Montana has a statute that prohibits punitive damages in excess of $10 million.  (The statute actually limits the award to the lesser of $10 million or 3 percent of a defendant’s net worth.)

The Associated Press reports that the trial judge in that case has declared Montana’s cap on punitive damages unconstitutional.  The story doesn’t reveal why the judge thought the statute unconstitutional.  Most courts have rejected constitutional challenges to punitive damages caps, but this ruling comes closely on the heels of a recent decision by the Missouri Supreme Court striking down a cap in that state.  This is just a trial court decision; the Montana Supreme Court will be the ultimate arbiter of the propriety of the cap in Montana.

After striking down the cap, the judge nonetheless concluded that the $240 million awarded by the jury was excessive.  She reduced the award to $73 million, nine times the compensatory damages of $8.1 million.

Presumably Hyundai will appeal to the Montana Supreme Court and will argue not only that the statutory cap is valid, but also that the punitive damages cannot exceed the amount of the already substantial compensatory damages award.

Last week, Missouri’s high court issued a unanimous opinion holding that a statutory cap on punitive damages violates the Missouri Constitution.

The statute in question provides that a punitive damages award against a single defendant cannot exceed $500,000 or five times the amount of actual damages, whichever is greater.  The Missouri Supreme Court, relying on an earlier decision in which it invalidated a cap on noneconomic damages, struck down the punitive damages cap based on the provision in the Missouri constitution guaranteeing the right to a jury trial.

The opinion rests on the premise that, prior to the adoption of the Missouri constitution in 1820, juries in Missouri had discretion to award punitive damages.  When the state constitution was adopted, the clause preserving the right to a jury trial was intended to guarantee the then-existing common law jury trial rights.  Therefore, according to the court, the punitive damages statute is unconstitutional because it takes away a plaintiff’s right to have a jury award an uncapped amount of punitive damages.

As we have noted in prior posts, most state courts have rejected arguments like this in cases challenging the legality of statutory caps on punitive damages.  Typically, courts rule that caps do not violate the right to a jury trial because such a right does not include unlimited punitive damages—the right only ensures that a jury must resolve any underlying factual disputes.

For a list of other states that have disagreed with the approach of the Missouri Supreme Court, see this post by Mark Behrens on the WLF Legal Pulse blog.