Opinion ID: 2546274
Heading Depth: 1
Heading Rank: 3

Heading: the overbeys' appeal of the punitive damages cap

Text: Section 510.265 states: 1. No award of punitive damages against any defendant shall exceed the greater of: (1) Five hundred thousand dollars; or (2) Five times the net amount of the judgment awarded to the plaintiff against the defendant. Such limitations shall not apply if the state of Missouri is the plaintiff requesting the award of punitive damages, or the defendant pleads guilty to or is convicted of a felony arising out of the acts or omissions pled by the plaintiff. 2. The provisions of this section shall not apply to civil actions brought under section 213.111 that allege a violation of section 213.040, 213.045, 213.050, or 213.070, to the extent that the alleged violation of section 213.070 relates to or involves a violation of section 213.040, 213.045, or 213.050, or subdivision (3) of section 213.070 as it relates to housing. § 510.265 (emphasis added). The Overbeys claim that the trial court's application of the $500,000 punitive damages cap contained in section 510.265 violates the separation of powers doctrine, violates their right to jury trial, violates equal protection and due process principles, and constitutes a special law prohibited by the Missouri Constitution. As explained above, this Court reviews such constitutional challenges de novo.
The Seventh Amendment to the United States Constitution provides that the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any Court of the United States, than according to the rules of the common law. As this Court noted in State ex rel. Diehl v. O'Malley, 95 S.W.3d 82, 84 (Mo. banc 2003), while the Seventh Amendment does not apply to the states, article I, section 22(a) of the Missouri Constitution provides an even more emphatic guarantee of the right to jury trial by providing that the right of trial by jury as heretofore enjoyed shall remain inviolate. Id. at 84-85. The use of the phrase heretofore enjoyed clarifies that the right to jury trial protected by article I, section 22(a) is that which existed at common law before the adoption of the first constitution in 1820. Id. The issue in Diehl was whether a plaintiff who sued under the Missouri Human Rights Act, sections 213.010 to 213.137 (MHRA), had a right to a jury trial when the MHRA was silent about that issue. 95 S.W.3d at 84-85. While this Court reaffirmed that there is no right to jury trial for claims for injunctive or other equitable relief, it noted that Ms. Diehl sought damages, not injunctive relief. Id. at 85-86. Such a claim is one at law and is analogous to claims for damages under the common law at the time article I, section 22(a) of the Missouri Constitution was adopted. Id. As such, Diehl noted that Ms. Diehl's action for damages sounded in tort and that she was entitled to a jury trial regarding these claims because under article I, section 22(a), [t]he right to trial by jury, where it applies, is a constitutional right, [that] applies `regardless of any statutory provision' and is `beyond the reach of hostile litigation.' Id. at 92, quoting Lee v. Conran, 213 Mo. 404, 111 S.W. 1151, 1153 (1908). Had Ms. Diehl brought her claim in federal court, she similarly would have been entitled to a jury trial under the Seventh Amendment because her claim is analogous to claims for which jury trials were allowed at the time the Seventh Amendment was adopted. Id. at 91. In Scott v. Blue Springs Ford Sales, Inc., 176 S.W.3d 140 (Mo. banc 2005), this Court made it clear that the right recognized in Diehl to have a jury determine damages is not limited to claims brought pursuant to the MHRA or only to actual damages. Both punitive and actual damages could be recovered in 1820, so if a statute, such as the MMPA, permits the recovery of punitive damages, then the plaintiff is entitled to have the jury determine her entitlement to them. Id. at 142. In other words, the legislature has the authority to choose what remedies will be permitted under a statutorily created cause of action such as the MMPA or the MHRA. For example, when the legislature first enacted the MHRA, it did not allow for the recovery of damages by private parties but instead permitted only injunctive relief by the attorney general. State ex rel. Martin-Erb v. Missouri Comm'n on Human Rights, 77 S.W.3d 600, 606-607 (Mo. banc 2002). The legislature later amended the MHRA to permit recovery of damages by injured parties, thereby changing the substantive rights of plaintiffs under that statute. Id. Having provided that such damages were available, the legislature could not then take from a plaintiff the right to have them determined by a jury. Scott said that the defendant's argument to the contrary: Confuses the judicial process by which claims are determined with the substance of the claims themselves. Though, in general, the legislature is free to establish the substance of a claim, as, for instance, to allow or disallow punitive damages, it is not free to establish a procedure for adjudicating that substantive claim if the procedure contravenes the constitution. In short, a statute is not valid that provides for punitive damages but precludes a jury trial to determine those damages. Scott, 176 S.W.3d at 142. Applying these principles here, the Overbeys chose to bring a statutory claim under the MMPA rather than a common law fraud claim. The substance of their claim, therefore, must be determined by reference to the MMPA rather than by reference to the common law. Scott teaches that the legislature could not take from the Overbeys their right to have the jury rather than a judge determine whether they had met their burden of proof as to actual or punitive damages once the legislature had provided that plaintiffs are permitted to recover such damages under the MMPA. Id. But the legislature did not permit unlimited recovery of such damages under the MMPA or under any statute. It chose instead to enact section 510.265, which limits the substantive right of recovery of punitive damages to a maximum of $500,000 or five times actual damages, whichever is greater. See § 510.265. The legislature, in so doing, at least in regard to a statutorily created cause of action such as the MMPA, did not intervene in the judicial process or establish a procedure for adjudicating a substantive claim in the manner prohibited by Scott but rather limited the substance of the claims themselves, Scott, 176 S.W.3d at 141-42, as it has a right to do in setting out the parameters of a statutory cause of action. Indeed, it could have precluded recovery of punitive damages altogether. For this reason, application of the limits in section 510.265 to the Overbeys' recovery of punitive damages under the MMPA does not violate their right to jury trial under article I, section 22(a) of the Missouri Constitution. [3] This result is in accord with federal decisions addressing similar issues under the Seventh Amendment. For instance, Madison v. IBP, Inc., 257 F.3d 780, 804 (8th Cir.2001), vacated on other grounds, 536 U.S. 919, 122 S.Ct. 2583, 153 L.Ed.2d 773 (2002), upheld a cap on punitive damages for suits brought under Title VII of the Civil Rights Act of 1964. In rejecting the plaintiff's claim that the cap violated her right to trial by jury, the court stated: Congress created the Title VII cause of action and has the power to set limits for recovery under it. The statute does not violate the Seventh Amendment because it does not impinge upon the jury's fact finding function. In applying a provision, a court does not `reexamine' the jury's verdict or impose its own factual determination as to what a proper award might be. Rather, it implements the legislative policy decision by reducing the amount recoverable to that deemed to be a reasonable maximum by Congress. Id. Hemmings v. Tidyman's Inc., 285 F.3d 1174, 1200-04 (9th Cir.2002), cited Madison with approval and succinctly restated its reasoning: what Congress can create, Congress can define. Title VII's damages cap ... does [not] offend the Seventh Amendment. Hemmings, 285 F.3d at 1200-04. This rationale applies here. [4]
The Overbeys argue that even if the imposition of a substantive limit on the amount of punitive damages that may be recovered under the MMPA does not violate their right to jury trial under article I, section 22(a), it does violate the separation of powers doctrine set out in article II, section 1 of the Missouri Constitution, which states: The powers of government shall be divided into three distinct departments the legislative, executive and judicial each of which shall be confided to a separate magistracy, and no person, or collection of persons, charged with the exercise of powers properly belonging to one of those departments, shall exercise any power properly belonging to either of the others, except in the instances in this constitution expressly directed or permitted. (emphasis added). This Court has recognized that the separation of powers doctrine is fundamental to our democratic system because it prevent[s] the abuses that flow from [the] centralization [of] power. State Tax Comm'n v. Admin. Hearing Comm'n, 641 S.W.2d 69, 73-74 (Mo. banc 1982). For this reason, each branch of government ought to be kept as separate from and independent from[] each other as the nature of free government will admit, or as is consistent with that chain of connection which binds the whole fabric of the Constitution in one indissoluble bond of union and amity. Mo. Coal. for the Env't v. Joint Comm. on Admin. Rules, 948 S.W.2d 125, 132-33 (Mo. banc 1997), quoting Rhodes v. Bell, 230 Mo. 138, 130 S.W. 465, 468 (1910) (citations omitted). The Overbeys claim that section 510.265 violates the separation of powers doctrine by restraining the judiciary's power to grant remittitur of judgments. Section 510.265 does not affect a court's ability to impose remittitur. Remittitur allows a court to reduce the damages awarded to the plaintiff if, after reviewing the evidence in support of the jury's verdict, the court finds that the jury's verdict is excessive because the amount of the verdict exceeds fair and reasonable compensation for plaintiff's injuries and damages. Gomez v. Constr. Design Inc., 126 S.W.3d 366, 375 (Mo. banc 2004), quoting § 537.068. Here, the reduction is not based on a finding that the damages are excessive but rather on a legislatively created limitation on punitive damages. When [the legislature] creates a statutory right, it clearly has the discretion, in defining that right, to create presumptions, or assign burdens of proof, or prescribe remedies .... Such provisions do, in a sense, affect the exercise of judicial power, but they are incidental to [the legislature's] power to define the right that it has created. N. Pipeline Constr. Co. v. Marathon Pipe line Co., 458 U.S. 50, 83, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) (emphasis added). [5] Section 510.265 does not violate the separation of powers doctrine.
Section 510.265 provides that three types of claims are exempt from its cap on punitive damages: (1) claims brought by the State of Missouri; (2) claims in which the defendant pleads guilty to or is convicted of a felony arising out of the acts or omissions pled by the plaintiff; and (3) claims brought for housing discrimination under the MHRA. § 510.265. The Overbeys claim that these three exemptions have no rational basis and that their presence violates the Overbeys' right to equal protection under both the Fourteenth Amendment and article I, section 2 of the Missouri Constitution. As the Overbeys recognize, these guarantees of equal protection do not mean that the legislature must make all laws equally applicable to all persons. Rather, equal protection of the laws must coexist with the practical necessity that most legislation classifies for one purpose or another, with resulting disadvantage to various groups or persons. Romer v. Evans, 517 U.S. 620, 631, 116 S.Ct. 1620, 134 L.Ed.2d 855 (1996). As a result, the state may treat individuals and groups differently as long as the disparate treatment is adequately justified. Doe v. Phillips, 194 S.W.3d 833, 845 (Mo. banc 2006). When the law does not disadvantage a suspect class or affect a fundamental right, it is properly analyzed under a rational basis test. Id. Under rational basis review, this Court will uphold a statute if it finds a reasonably conceivable state of facts that ... provide a rational basis for the classification[s]. Kansas City Premier Apartments, Inc. v. Mo. Real Estate Comm'n, 344 S.W.3d 160, 170 (Mo. banc 2011), quoting FCC v. Beach Commc'ns, Inc., 508 U.S. 307, 313, 113 S.Ct. 2096, 124 L.Ed.2d 211 (1993). Rational basis review is highly deferential, and courts do not question the wisdom, social desirability or economic policy underlying a statute. Comm. for Ed. Equal. v. State, 294 S.W.3d 477, 491 (Mo. banc 2009). Instead, all that is required is that this Court find a plausible reason for the classification[s] in question. Kansas City Premier Apartments, 344 S.W.3d at 170. [6] A rational basis exists for each of the exceptions enacted by the legislature.
The reason the State should not be subject to the cap is self-evident. It sues under the MMPA not for individual damages to itself but in its parens patrie role on behalf of its citizens. The legislature rationally could conclude that, because the State represents the interests of all citizens in seeking relief, an exemption from the punitive damages cap would help ensure that the State could obtain an award of sufficient size to punish and deter defendants for their conduct as to the many Missouri citizens the attorney general filed suit to protect. By contrast, the Overbeys are sue only on their own behalf and are not entitled to recover punitive damages based on alleged wrongs done to others. See State Farm, 538 U.S. at 419-23, 123 S.Ct. 1513; Philip Morris USA v. Williams, 549 U.S. 346, 356-57, 127 S.Ct. 1057, 166 L.Ed.2d 940 (2007). [7] Accordingly, the legislature had a rational basis for this exception.
Section 510.265 also exempts from the punitive damages cap cases in which the defendant pleads guilty to or is convicted of a felony arising out of the acts or omissions pled by the plaintiff. § 510.265. Plaintiffs of course recognize that those whose conduct was sufficiently egregious to constitute a felony are especially culpable and that a higher punitive damage award may be justified. Their argument is that this exemption is too narrow, as there may be others who could have been convicted of a felony but simply were not prosecuted. Plaintiffs believe that Mr. Franklin's conduct could fall into that category and that there is no rational basis to differentiate among such defendants. The legislature rationally could conclude that the state has limited resources and that prosecutors, therefore, will choose to bring felony charges in the most serious cases. While there may be some additional cases in which such charges could have been brought, relying on the choice of public authorities to bring charges and the finding of a jury beyond a reasonable doubt or the admission of a defendant in pleading guilty that the defendant, in fact, has committed the alleged egregious conduct is a rational basis on which the legislature could have chosen to categorize degrees of reprehensibility. The choice of the prosecutor to bring an action does not bar a plaintiff from coming into court but merely determines which cases are so reprehensible that they may justify an award greater than that the legislators otherwise believe to be the limit available to comport with due process. The reprehensibility of the defendant's conduct is a key factor in determining the amount of punitive damages to which a plaintiff is entitled. See State Farm, 538 U.S. at 419, 123 S.Ct. 1513. The legislature rationally could conclude that civil suits based on felonious criminal conduct warrant an exemption from the punitive cap because of the exceptional reprehensibility of the defendant's conduct.
The final exception to the damages cap is for civil actions alleging violations of the MHRA provisions barring discrimination in selling, leasing, renting or lending based on race, color, religion, national origin, sex, ancestry, age, ... disability, or familial status as it relates to fair housing. Our country has a long and unfortunate history of discrimination in housing. The legislature rationally could conclude that extra steps are necessary to eradicate such discrimination and to deter future misconduct when the victims fall into the traditionally suspect or vulnerable classes protected by the MHRA. State Farm and other cases recognize that additional punitive damages may comport with due process when conduct is directed at those who are particularly vulnerable and may have difficulty protecting themselves and whose individual damages may be small. 538 U.S. at 419-22, 123 S.Ct. 1513. The legislature had a rational basis for exempting housing discrimination claims brought under the MMPA. [8]
The Overbeys also claim that the existence of these three exemptions violates the prohibition against special laws contained in article III, section 40 of the Missouri Constitution, which states in relevant part: [t]he general assembly shall not pass any local or special law ... where a general law can be made applicable, and whether a general law could have been made applicable is a judicial question to be judicially determined without regard to any legislative assertion on that subject. Mo. Const. art. III § 40. A law [that] includes less than all who are similarly situated is special, but a law is not special if it applies to all of a given class alike and the classification is made on a reasonable basis. Ross v. Kansas City Gen. Hosp. and Med. Ctr., 608 S.W.2d 397, 400 (Mo. banc 1980). The applicable test for whether a statute is a special law because there is no reasonable basis for its classifications in this context is similar to the rational basis test used in equal protection analyses. Jefferson Cnty. Fire Protection Dists. Ass'n v. Blunt, 205 S.W.3d 866, 868 (Mo. banc 2006). The burden is on the party challenging the constitutionality of the statute to show that the statutory classification is arbitrary and without a rational relationship to a legislative purpose. Id. For the reasons stated earlier in rejecting the argument that these exemptions violate equal protection, this Court finds that they do not violate the special law prohibition.
Finally, the Overbeys claim that section 510.265 violates their due process rights by arbitrarily taking what they believe is their property right to the full $1 million in punitive damages the jury awarded them. The Overbeys' argument is based on the flawed premise that they had a property right in the full $1 million in punitive damages. As noted earlier, here the cause of action was statutory. The Overbeys' substantive right to recover under that statute was limited by section 510.275, both when they bought their SUV and at trial. They never had a right to recover more than the amount set out in the statute, so they had no property right that was limited or denied. [9]