West Virginia long has been at or near the top of the Chamber of Commerce’s and American Tort Reform Association’s lists of judicial hellholes. Last month, the State took a big step toward changing its image, enacting a series of laws that aim to eliminate “jackpot justice.”
Most pertinent to readers of this blog, the Legislature passed and the Governor signed a punitive damages statute that comprehensively reshapes the manner in which this remedy is administered in West Virginia.
Due to become effective on June 8, the statute:
- adopts the clear-and-convincing-evidence standard of proof;
- limits punitive damages to cases in which the injury was the result of conduct “carried out by the defendant with actual malice toward the plaintiff or a conscious, reckless and outrageous indifference to the health, safety and welfare of others”;
- requires bifurcation of the trial—with issues relating to liability for the underlying tort and compensatory damages tried in the first phase, and issues relating to liability and amount of punitive damages tried in the second phase—at the defendant’s request; and
- caps punitive damages at the greater of $500,000 or four times the amount of compensatory damages.
As experience in other states has shown, there remains much room for mischief, despite the Legislature’s intent to cabin punitive damages.
For example, some states—most notably Montana and some divisions of the California Court of Appeal—have drained the clear-and-convincing-evidence standard of much of its force by holding that this standard does not govern the courts’ determination of the sufficiency of the evidence and that courts instead should apply the same substantial-evidence standard that applies to other factual issues. We will devote a separate post to this issue in the near future. For the time being, suffice it to say that defendants in West Virginia should advocate aggressively for application of the clear-and-convincing-evidence standard by the courts, not just juries.
Second, courts in a number of states have watered down the substantive standard for punitive liability established by their legislatures, and there is a risk that this could happen in West Virginia. Despite the reference to “actual malice,” the alternative basis for punitive liability—“conscious, reckless and outrageous indifference to the health, safety and welfare of others”—may be sufficiently malleable to allow West Virginia courts to permit punishment for relatively inoffensive conduct.
Third, while a cap undoubtedly will rectify many outlier punitive verdicts, courts generally have been less willing to deem excessive a punitive award that is within the cap. In fact, plaintiffs routinely argue that the existence of the cap fully satisfies the notice concern that underlies BMW. While there are good arguments why that is not so, there is no denying that courts are more reluctant to order remittitur of a punitive award that is at or below a statutory cap. That can be a real problem when, as has become increasingly common, the amount of compensatory damages reaches into the tens of millions of dollars and the cap is set at a multiple of the compensatory award.