Lewellen v. Franklin - Missouri Supreme Court Declares the State Cap on Punitive Damages to be Invalid
The Missouri Supreme Court notes in this case that the right to a jury trial in 1820 included the right to have a jury determine the amount of punitive damages in an action for fraud. The Court reasons that, as a result, section 510.265's cap on punitive damages awards is unconstitutional because the statute imposes a legislative limit on the jury's assessment of punitive damages when such limits did not exist in 1820. The circuit court was found to have erred by reducing Lewellen's punitive damages award against Franklin pursuant to the caps identified in section 510.265.
A customer, an automobile dealership and its owner all appeal from the trial court’s judgment making the dealership and its owner liable for paying the customer a single actual damages award as well as for individually paying punitive damages awards that the court reduced, pursuant to a statutory cap on punitive damages, from the amount the jury awarded. In a unanimous decision written by Judge Patricia Breckenridge, the Supreme Court of Missouri affirms the judgment in part and vacates it in part. Because the statutory cap on punitive damages curtails the jury determination of punitive damages as it existed at the time the state’s constitution was adopted in 1820, it unconstitutionally infringes on the right to a jury trial. The trial court erred, therefore, in applying the statutory cap to reduce the punitive damages the jury awarded to the customer for her fraudulent misrepresentation claim against the dealership’s owner. This portion of the judgment is vacated, and the Court enters judgment awarding the customer the amount of punitive damages the jury assessed against the owner.
The trial court’s judgment is affirmed in all other respects. The trial court did not err in overruling the motion by the dealership and its owner to reduce punitive damages further, as the amounts did not violate their due process rights. The punitive damages awards assessed are not grossly excessive considering their intentional and flagrant trickery and deceit employed to target a financially vulnerable person, causing her to lose her means of transportation, subject her to suit and damage her credit. The trial court also did not abuse its discretion in imposing discovery sanctions against the dealership and its owner. Its order was not vague or ambiguous, the dealership and its owner do not specify what their counsel would have done differently had the order been more clear, and they are unable to show the court’s actions prejudiced them.
AFFIRMED IN PART, VACATED IN PART.
The Court holds:
(1) Because section 510.265 violates the right to a trial by jury, the trial court erred in applying this statutory cap to reduce the punitive damages the jury awarded to Lewellen for her fraudulent misrepresentation claim against Franklin. Section 510.265 provides that no award of punitive damages against any defendant shall exceed the greater of $500,000 or five times the net amount of the judgment the plaintiff is awarded against the defendant. Article I, section 22(a) of the Missouri Constitution provides that the right to a jury trial “shall remain inviolate.” In its 2012 decision in Watts v. Lester E. Cox Medical Centers, this Court held that this constitutional phrase means that any change in the right to a jury determination of damages as it existed when Missouri first adopted its constitution in 1820 is unconstitutional. In its 2005 decision in Scott v. Blue Springs Ford Sales Inc. and 2012 decision in Estate of Overbey v. Chad Franklin National Auto Sales North LLC, this Court recognized rights to jury trials on punitive damages that predate the constitution. Under Blue Springs Ford, Overbey and Watts, therefore, the cap on punitive damages imposed by section 510.265 “necessarily changes and impairs the right of a trial by jury ‘as heretofore enjoyed.’” At the time the constitution was adopted in 1820, assessing punitive damages always had been left to the jury’s discretion, juries tried fraud actions, and it was a jury function to determine the amount of punitive damages in such actions. Because section 510.265 changes that right to a jury determination of punitive damages as it existed in 1820, curtailing the jury’s determination of damages, it unconstitutionally infringes on Lewellen’s right to a jury trial. The trial court erred, therefore, in applying the statutory cap to reduce the punitive damages the jury awarded to Lewellen for her fraudulent misrepresentation claim against Franklin. This Court vacates only this portion of the judgment and enters judgment awarding Lewellen $1 million in punitive damages against Franklin.
(2) The circuit court did not err in overruling the motion by Franklin and the dealership to reduce punitive damages on the grounds that the awards violated their due process rights. Because the statute operates wholly independently of the facts of the case, section 510.265 does not codify due process. But this Court still has a duty to determine whether an award of punitive damages is grossly excessive or arbitrary in violation of federal and state constitutional due process. The United States Supreme Court requires courts to consider three guideposts in determining if an award of punitive damages comports with due process: the reprehensibility of the defendant’s misconduct; the disparity between the harm and the punitive damages award; and the difference between the punitive damages award and penalties authorized or imposed in similar cases.
(a) Franklin’s and the dealership’s repetitive use of intentionally deceptive business practices targeting financially vulnerable persons is reprehensible and weighs in favor of a higher punitive damage award. Because the United States Supreme Court has noted that repeated misconduct is more reprehensible than an individual instance of malfeasance, this Court finds that any sufficiently similar misconduct, regardless of when it occurred, is relevant in assessing the reprehensibility of a defendant’s conduct.
(b) The double-digit ratios between punitive and actual damages finally awarded – 40:1 against Franklin and 22:1 against the dealership – are warranted in this case and are not grossly excessive, as their conduct was particularly egregious. To bring in more business, Franklin created aggressive advertisements – including one bait-and-switch campaign targeting financially vulnerable customers – and then his dealership failed to live up to the advertised promise, leaving customers without their trade-in vehicle, with bills they could not afford to pay, repossession of the new vehicle, suits for defaulting on the loans, and bad credit. Franklin showed no remorse, made no attempt to rectify the consequences and then refused to respond to Lewellen’s discovery requests. The $25,000 amount of actual damages was relatively low, and courts in other cases have used actual damages awards not much larger to justify higher ratios.
(c) Although the punitive damages awarded are larger than the penalties authorized under the state’s merchandising practices act, this Court considers all three guideposts. The punitive damages awards assessed against Franklin and the dealership are not grossly excessive considering their intentional and flagrant trickery and deceit employed to target a financially vulnerable person, causing her to lose her means of transportation, subject her to suit and damage her credit.
(3) Because Franklin and the dealership fail to demonstrate how the trial court’s order was vague or how it prejudiced them, the trial court did not abuse its discretion when it imposed discovery sanctions against them after they twice failed to appear for depositions. The trial court’s sanctions order was not vague or ambiguous because it specifically informed counsel what counsel could and could not do. It was clear that documents Franklin and the dealership produced during discovery could be admitted only as evidence against them. In addition, it limited counsel’s participation in jury selection to asking appropriate questions not otherwise asked and permitted counsel to cross-examine witnesses only about the issue of damages. Statements the court made at the pretrial conference made clear counsel would be allowed to make objections to evidence counsel believed was improper. Franklin and the dealership do not specify what their counsel would have done differently to prepare for trial or during trial had the trial court’s sanctions order been clearer, nor are they able to show prejudice.