Mo. SC has chance to strike limit on punitive damages

Jessica M. Karmasek Nov. 14, 2011, 1:20pm


Hulting

ST. LOUIS (Legal Newsline) - The Missouri Supreme Court may end up deciding the fate of the state's punitive damages cap, one St. Louis attorney says.

Earlier this month, the state's high court heard arguments in Estate of Max E. Overbey and Glenna J. Overbey v. Franklin.

In the case, the Overbeys alleged that defendants Chad Franklin and National Auto Sales misled them to enter into an agreement to buy a 2007 Suzuki for $45 a month for six months, instead of paying the non-discounted $719 a month car payment.

When they purchased the vehicle, the plaintiffs were given a check from the dealership to make up the difference. Supposedly, at the end of the six months, they could trade in the Suzuki for another vehicle with the same $45 a month payment.

When the Overbeys returned at the end of the six months, the National Auto personnel who assisted them were no longer with the dealership, and the dealership, including Franklin, denied any knowledge of the deal.

The Overbeys were then stuck with a $719 a month car payment with an interest rate of more than 11 percent.

Consequently, the plaintiffs sued both National Auto and Franklin for violating the Missouri Merchandising Practice Act, or MMPA.

After a four-day jury trial, a Clay County jury returned a verdict in favor of the Overbeys against National Auto for $76,000 actual damages and $250,000 punitive damages, and against Franklin for $4,500 actual damages and $1 million punitive damages.

However, after various post-trial motions, that $1 million award later was decreased to $500,000 pursuant to the state's punitive damages cap.

Under Missouri law, punitive awards are currently limited to the greater of five times the actual damages or $500,000.

The Overbeys, in their appeal to the state Supreme Court, argue the award against Franklin should be reinstated. They also contend that Missouri's punitive damages cap is unconstitutional.

Jessica J. Hulting, an associate in the litigation department at St. Louis law firm Gallop, Johnson & Neuman LC, says the question is whether a low actual damage award against a defendant could ever -- statutory cap or not -- support a large punitive award, even considering the reprehensibility of the defendant's conduct.

The Gallop firm does not represent either party involved in the case.

The Overbeys' counsel argued before the Court on Nov. 2 that the cap violates the constitutional separation of powers, their right to trial by jury, their right to equal protection, the prohibition against special legislation, the due process clause, and their right to open courts.

"Plaintiffs' counsel argued that the statute usurps the judiciary's power by permitting the legislature to enact a procedural statute that contravenes the constitution by depriving a plaintiff his/her right to a jury trial," Hulting explained.

"The arguments also focused on the fact that the actual damages awarded stemmed from a legislatively created cause of action -- the MMPA -- and that the cap was also legislatively created."

However, the Court has concerns about what would happen in the future if, without a statutory cap, it approved a very high punitive damages award, says Hulting, who specializes in general litigation and administrative law matters.

Still, it has many options, she says.

One, the Court could decide to avoid the constitutional punitive damages issue altogether and find that Franklin did not violate the MMPA, she says.

Second, it could affirm the trial court's rulings and reduced award under the cap.

Alternatively, Hulting says, it could find that any one of the seven constitutional arguments presented by the plaintiffs should prevail.

Again avoiding the constitutional issue, the Court also could order the trial court to consider further reduction of the punitive award, she says.

"The Missouri Supreme Court has an interesting opportunity to decide the fate of the Missouri statutory punitive damages cap," Hulting said.

"The oral argument elicited intelligent and balanced questions from the Court, which did not suggest any clear consensus or direction on the outcome."

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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