Opinion ID: 6112663
Heading Depth: 2
Heading Rank: 2

Heading: Statutory Cap on Punitive Damages

Text: Target contends the court of appeals erred in holding it was required to plead the statutory cap on punitive damages pursuant to section 15-32-530 as an affirmative defense, and because Target did not do so, application of the damages cap was waived in this case. We agree. Section 15-32-530 provides in relevant part: (A) Except as provided in subsections (B) and (C), an award of punitive damages may not exceed the greater of three times the amount of compensatory damages awarded to each claimant entitled thereto or the sum of five hundred thousand dollars. (B) The limitation provided in subsection (A) may not be disclosed to the jury. If the jury returns a verdict for punitive damages in excess of the maximum amount specified in subsection (A), the trial court should first determine whether: (1) the wrongful conduct proven under this section was motivated primarily by unreasonable financial gain and determines that the unreasonably dangerous nature of the conduct, together with the high likelihood of injury resulting from the conduct, was known or approved by the managing agent, director, officer, or the person responsible for making policy decisions on behalf of the defendant; or (2) the defendant's actions could subject the defendant to conviction of a felony and that act or course of conduct is a proximate cause of the plaintiff's damages; If the trial court determines that either item (1) or (2) apply, then punitive damages must not exceed the greater of four times the amount of compensatory damages awarded to each claimant entitled thereto or the sum of two million dollars and, if necessary, the trial court shall reduce the award and enter judgment for punitive damages in the maximum amount allowed by this subsection. If the trial court determines that neither item (1) or (2) apply, then the award of punitive damages shall be subject to the maximum amount provided by subsection (A) and the trial court shall reduce the award and enter judgment for punitive damages in the maximum amount allowed by subsection (A). (C) However, when the trial court determines one of the following apply, there shall be no cap on punitive damages: (1) at the time of injury the defendant had an intent to harm and determines that the defendant's conduct did in fact harm the claimant; or (2) the defendant has pled guilty to or been convicted of a felony arising out of the same act or course of conduct complained of by the plaintiff and that act or course of conduct is a proximate cause of the plaintiff's damages; or (3) the defendant acted or failed to act while under the influence of alcohol, drugs, other than lawfully prescribed drugs administered in accordance with a prescription, or any intentionally consumed glue, aerosol, or other toxic vapor to the degree that the defendant's judgment is substantially impaired. S.C. Code Ann. § 15-32-530(A)–(C) (Supp. 2020). We find the language of subsection (A) unambiguously reveals the legislature's intent to require trial courts to reduce punitive damages awards in excess of the greater of three times the amount of compensatory damages . . . or the sum of five hundred thousand dollars, unless exempt under subsection (B) or (C). Id. § 15-32-530(A); see Media Gen. Commc'ns, Inc. v. S.C. Dep't of Revenue, 388 S.C. 138, 148, 694 S.E.2d 525, 530 (2010) (Where the statute's language is plain and unambiguous, and conveys a clear and definite meaning, the rules of statutory interpretation are not needed and the court has no right to impose another meaning. (quoting Hodges v. Rainey, 341 S.C. 79, 85, 533 S.E.2d 578, 581 (2000))); Ventures S.C., LLC v. S.C. Dep't of Revenue, 378 S.C. 5, 8–9, 661 S.E.2d 339, 341 (2008) (The statute's language is considered the best evidence of legislative intent.). Subsection (A) begins by stating [e]xcept as provided in subsections (B) and (C), indicating that the statute applies to all cases not specifically excluded by those subsections. S.C. Code Ann. § 15-32-530(A); see Hodges, 341 S.C. at 87, 533 S.E.2d at 582 (The enumeration of exclusions from the operation of a statute indicates that the statute should apply to all cases not specifically excluded. (quoting Norman J. Singer, Sutherland Statutory Construction § 47.23, at 227 (5th ed. 1992))). In addition, subsection (A) further provides an award of punitive damages may not exceed a particular sum of money, and the legislature's use of the phrase may not is generally construed as mandatory. S.C. Code Ann. § 15-32530(A) (emphasis added); see 82 C.J.S. Statutes § 494, at 648 (2009) (Negative or prohibitory words used in statutory provisions generally are construed as mandatory . . . .). Moreover, the paragraph at the end of subsection (B) reiterates the legislature's mandatory directive for trial courts to limit punitive damages awards to the amount outlined in subsection (A) if it finds that items (1) and (2) are not applicable. See S.C. Code Ann. § 15-32-530(B) (stating the trial court shall reduce the award and enter judgment for punitive damages in the maximum amount allowed by subsection (A) (emphasis added)); Wigfall v. Tideland Utils., Inc., 354 S.C. 100, 111, 580 S.E.2d 100, 105 (2003) (The term 'shall' in a statute means that the action is mandatory.). In fact, the only circumstance in which the legislature allows no cap on punitive damages is when the trial court determines that subsection (C) applies. See S.C. Code Ann. § 15-32-530(C) (providing three situations in which there shall be no cap on punitive damages). We further find the statutory cap on punitive damages is neither an affirmative defense nor an avoidance because it does not affect liability or require new matter to be asserted but instead limits the amount of damages a plaintiff can recover. See O'Neal v. Carolina Farm Supply of Johnston, Inc., 279 S.C. 490, 494, 309 S.E.2d 776, 779 (Ct. App. 1983) (An affirmative defense conditionally admits the allegations of the complaint, but asserts new matter to bar the action.); Avoidance, Black's Law Dictionary 136 (6th ed. 1990) (defining avoidance as the allegation or statement of new matter, in opposition to a former pleading, which, admitting the facts alleged in such former pleading, shows cause why they should not have their ordinary legal effect); see e.g., Parker v. Spartanburg Sanitary Sewer Dist., 362 S.C. 276, 281, 607 S.E.2d 711, 714 (Ct. App. 2005) (noting the statutory damages cap under the Tort Claims Act limits the amount of damages recoverable for any claim). We are not persuaded by the court of appeals' reference to opinions from other jurisdictions in support of its holding that the statutory cap on punitive damages falls within the residuary clause of Rule 8(c), SCRCP. Indeed, the cap lacks a common characteristic of the enumerated affirmative defenses—barring liability for the cause of action—and the inquiry required to be conducted by the trial court in subsections (B) and (C) of the statute does not affect the proof at trial. But see James v. Lister, 331 S.C. 277, 283, 500 S.E.2d 198, 201 (Ct. App. 1998) (recognizing a requirement of pleading matters which may prejudice the opposing party by introducing issues which may affect the proof at trial). Unlike the additional procedural requirements at issue in James—a special finding of gross negligence by the jury and joinder of additional parties—which fundamentally affected both the parties and the proof at trial, no such requirements are involved here. Id. at 282, 500 S.E.2d at 201. Instead, the statute requires the trial court to determine whether subsections (B) and (C) are applicable and does not create any issue for the jury to resolve. See S.C. Code Ann. § 15-32-530(B)–(C) (Supp. 2020) (requiring the trial court to determine whether an exception to the statutory cap applies); id. § 15-32-530(B) (providing the statutory cap on punitive damages may not be disclosed to the jury); cf. Broome v. Watts, 319 S.C. 337, 342, 461 S.E.2d 46, 49 (1995) (holding the statutory right to setoff was not an affirmative defense falling within the residuary clause of Rule 8(c), SCRCP, because setoff was required by statute and was not an issue for the jury). Moreover, affirmative defenses generally shift the burden of proof to the defendant, and we do not believe the legislature intended for section 15-32-530 to shift the burden to Target to prove the applicability of the statutory cap on punitive damages in this case. See Pike v. S.C. Dep't of Transp., 343 S.C. 224, 231, 540 S.E.2d 87, 91 (2000) (acknowledging the well-established rule that the party pleading an affirmative defense 'has the burden of proving it' (quoting Hoffman v. Greenville Cty., 242 S.C. 34, 39, 129 S.E.2d 757, 760 (1963))). The plain language of the statute does not impose a burden on the defendant to prove the cap applies. Rather, the legislature only directs trial courts to determine which level of the cap must be applied in a particular case. Therefore, we hold the statutory cap on punitive damages pursuant to section 15-32-530 must be applied by the trial court where the jury has rendered a verdict for punitive damages exceeding the amount outlined in subsection (A), and in such cases, the trial court is required to conduct the inquiry set forth in subsections (B) and (C), as applicable. Accordingly, we remand this case to the trial court to determine whether the Garrisons' punitive damages award must be reduced.2 C. Consideration of Potential Harm in Reviewing the Constitutionality of a Punitive Damages Award Target claims the court of appeals erred in instructing the trial court to consider on remand Denise's potential harm under Mitchell, Jr. v. Fortis Insurance Company, 385 S.C. 570, 686 S.E.2d 176 (2009) because the Garrisons presented no evidence supporting any potential harm and instead relied solely on the harm Denise could have suffered had she in fact become infected with a disease. Unlike the plaintiff in Mitchell, who presented testimony from a medical expert regarding his potential harm had he not been treated and the minimum expected costs it would take to care for him throughout his life, Target argues the Garrisons did not present any similar testimony, and as a result, the trial court properly refused to consider potential harm in evaluating the constitutionality of their punitive damages award. See id. at 581–82, 686 S.E.2d at 182. We disagree. 2 The Garrisons argue that if the statutory cap on punitive damages must be applied, they are entitled to a reduction of the award to two million dollars pursuant to subsection 15-32-530(B)(1) because Target's conduct was motivated primarily by unreasonable financial gain and was known or approved by . . . the person responsible for making policy decisions on behalf of the defendant. S.C. Code Ann. § 15-32-530(B)(1) (Supp. 2020). Indeed, the Garrisons arguably presented evidence to support this claim during direct examination of Target's property maintenance technician when they questioned him regarding Target's practice of letting employees leave work early to save payroll following a change in CEO in 2008. Consequently, there is evidence in the record the trial court may consider on remand to determine whether the Garrisons qualify for this reduction. We, however, express no opinion as to the merits of this argument. In Mitchell, we noted that in analyzing the constitutionality of punitive damages awards under Gamble v. Stephenson, 305 S.C. 104, 111–12, 406 S.E.2d 350, 354 (1991) and BMW of North America v. Gore, 517 U.S. 559, 574–75 (1996), the court should consider the disparity between the actual or potential harm suffered by the plaintiff and the amount of the punitive damages award. Id. at 587–88, 686 S.E.2d at 185. In reversing the trial court, the court of appeals in this case relied on the United States Supreme Court's decision in TXO Production Corporation v. Alliance Resources Corporation, 509 U.S. 443, 460 (1993), which noted, [i]t is appropriate to consider the magnitude of the potential harm that the defendant's conduct would have caused to its intended victim if the wrongful plan had succeeded, as well as the possible harm to other victims that might have resulted if similar future behavior were not deterred. (emphasis in original). In reaching this conclusion, the TXO Court reviewed its holding in Pacific Mutual Life Insurance Company v. Haslip, 499 U.S. 1 (1991), which expressly addressed the standard for evaluating the potential harm component of punitive damages. Specifically, the Court stated: In [Haslip] we endorsed the standards that the Alabama Supreme Court had previously announced, one of which was whether there is a reasonable relationship between the punitive damages award and the harm likely to result from the defendant’s conduct as well as the harm that actually has occurred[.] TXO, 509 U.S. at 460 (emphasis added by the TXO Court (quoting Haslip, 499 U.S. at 21)). Although Denise did not ultimately contract a disease from the syringe, the trial court erred in failing to consider any potential harm in the ratio calculation, including the harm likely to result to other customers due to Target's failure to maintain the parking lot in a reasonably safe condition. Accordingly, we remand the case to the trial court to conduct a thorough review of the constitutionality of the amount of the jury's punitive damages award, which includes consideration of potential harm. D. Award of Interest on Punitive Damages Under Rule 68, SCRCP Denise Garrison argues the court of appeals erred in holding she is not entitled to eight percent interest on the entirety of her damages, including punitive damages, because both Rule 68, SCRCP, and section 15-35-400 (Supp. 2020), which govern the award of interest in the offer of judgment context, specifically state the plaintiff is entitled to eight percent interest on the amount of the verdict or award from the date of the offer to the entry of judgment. We agree. Rule 68(b), SCRCP, provides in relevant part: If an offer of judgment is not accepted and the offeror obtains a verdict or determination at least as favorable as the rejected offer, the offeror shall recover from the offeree: . . . (2) if the offeror is a plaintiff, eight percent interest computed on the amount of the verdict or award from the date of the offer to the entry of judgment . . . . Similarly, section 15-35-400(B) states: If an offer of judgment is not accepted and the offeror obtains a verdict or determination at least as favorable as the rejected offer, the offeror shall be allowed to recover from the offeree: . . . (2) if the offeror is a plaintiff, eight percent interest computed on the amount of the verdict or award from the date of the offer . . . . S.C. Code Ann. § 15-35-400(B) (Supp. 2020). We find the language of both the rule and the statute clearly and unambiguously provides that Denise is entitled to eight percent interest on the entire amount of the verdict, including punitive damages. See Sonoco Prods. Co. v. S.C. Dep't of Revenue, 378 S.C. 385, 391, 662 S.E.2d 599, 602 (2008) (The court should give words their plain and ordinary meaning, without resort to subtle or forced construction to limit or expand the statute's operation.). Indeed, we do not perceive any restriction in the rule or statute which prohibits the award of interest on punitive damages, and we refuse to impose such limitation here. See Hodges v. Rainey, 341 S.C. 79, 87, 533 S.E.2d 578, 582 (2000) (When the language of a statute is clear and explicit, a court cannot rewrite the statute and inject matters into it which are not in the legislature's language, and there is no need to resort to statutory interpretation or legislative intent to determine its meaning.); id. at 85, 533 S.E.2d at 581 (Under the plain meaning rule, it is not the court's place to change the meaning of a clear and unambiguous statute.). We are not an outlier in reaching this conclusion. The court of appeals acknowledged that Connecticut also permits the award of interest on punitive damages in the offer of judgment context. See Kregos v. Stone, 872 A.2d 901, 906 (Conn. App. Ct. 2005) (holding the lower court properly interpreted the word 'recovered' [in Connecticut's offer of judgment statute] to include the entire verdict, both punitive and compensatory damages). Like Connecticut, we have both a prejudgment interest statute and a separate statute awarding interest in the offer of judgment context. See Boulevard Assocs. v. Sovereign Hotels, Inc., 861 F.Supp. 1132, 1141 (D. Conn. 1994) (distinguishing between section 37-3a, Connecticut's prejudgment interest statute, and section 52-192a(b), its offer of judgment interest statute). Compare S.C. Code Ann. § 34-31-20(A) (2020) (In all cases of accounts stated and in all cases wherein any sum or sums of money shall be ascertained and, being due, shall draw interest according to law, the legal interest shall be at the rate of eight and three-fourths percent per annum.), with S.C. Code Ann. § 15-35-400(B) (Supp. 2020) (providing that when a plaintiff's offer of judgment is not accepted and she obtains a verdict or determination at least as favorable as her offer, she is entitled to receive eight percent interest on the amount of the verdict or award from the date of the offer). In Boulevard Associates, the United States District Court for the District of Connecticut recognized that the award of interest under an offer of judgment statute serves the purpose of promoting 'fair and reasonable compromise of litigation without trial.' 861 F.Supp. at 1141 (quoting Crowther v. Gerber Garment Tech., Inc., 513 A.2d 144, 151 (Conn. App. Ct. 1986)); see also Majorowicz v. Allied Mut. Ins. Co., 569 N.W.2d 472, 481 (Wis. Ct. App. 1997) (The objective of [Wisconsin's offer of settlement interest statute] is to encourage pretrial settlement and avoid delays.). Here, however, the court of appeals relied on two cases from the Supreme Courts of Alaska and Nevada to hold the purpose of prejudgment interest is to compensate the plaintiff, while the purpose of punitive damages is to punish the defendant. See Haskins v. Shelden, 558 P.2d 487, 494 (Alaska 1976) (Prejudgment interest is in the nature of compensation for use by defendant of money to which plaintiff is entitled from the time the cause of action accrues until the time of judgment. It is not meant to be an additional penalty.); Ramada Inns, Inc. v. Sharp, 711 P.2d 1, 2 (Nev. 1985) (Prejudgment interest is viewed as compensation for use by defendant of money to which plaintiff is entitled from the time the cause of action accrues until the time of judgment; it is not designed as a penalty.). We find those cases are distinguishable because they considered prejudgment interest rather than interest awarded in the offer of judgment context. Therefore, we hold Denise is entitled to eight percent interest on the entirety of her damages award, including punitive damages, pursuant to Rule 68, SCRCP.