Missouri Business and the Promise of Punitive Damages Reform
By Victor E. Schwartz, co-chair, Public Policy Group, Shook, Hardy & Bacon L.L.P.
Governor Mike Parson has significant legislation on his desk to improve justice with respect to punitive damage awards in Missouri. It is anticipated that he will sign the legislation, SB 591. The Missouri Chamber actively supported this legislation. The promise of the new law will only be achieved, however, if it is utilized by defense counsel and applied properly by courts. Defense attorneys will play a vital role in ensuring faithful compliance with the new law and curbing attempts to circumvent or limit its application in civil cases.
As business defendants in Missouri lawsuits can attest, these reforms could not have come soon enough. Missouri, and specific places such as the City of St. Louis, have an unfortunate national reputation for exhibiting unfairness to civil defendants, including with respect to punitive damages. Too often the threat of large, unpredictable punitive damage awards have been used as a litigation club to force settlements unrelated to the merits of a case. Missouri businesses have also been vilified in the media long before any trial proves that incendiary allegations in a complaint are not supported by evidence.
Missouri’s new law, if properly implemented by committed defense attorneys, can help put a stop to such punitive damages escapades. The new law promotes greater predictability and fairness with respect to punitive awards in several key ways:
First, the new law codifies a clear standard for liability for punitive damages. Punitive damages are now reserved for cases in which it is shown by “clear and convincing evidence that the defendant intentionally harmed the plaintiff without just cause or acted with a deliberate and flagrant disregard for the safety of others.” This standard returns punitive damages to their intentional tort origins.
As my casebook shows, punitive damages were originally allowed only in connection with intentional torts such as battery, assault, and false imprisonment. Over the years punitive damages broadened in scope, and in some jurisdictions such as Missouri, the line was blurred with respect to the type of conduct that merits punishment.
Missouri’s new law brings punitive damages back to their original quasi-criminal purpose. Defense attorneys should make use of this standard in explaining to lay jurors the very different purpose of punitive damages to punish and deter truly wicked acts, as compared to other types of damages that compensate for an injury.
Second, the new law changes the procedure for pleading punitive damages. Instead of including a punitive damage claim in an initial pleading, perhaps as a means to generate greater media attention to drive settlement discussions, plaintiff lawyers must wait and pursue the claim no later than 120 days before a final pretrial conference or trial. They must file a written motion to add a punitive damage claim that is supported by evidence demonstrating a reasonable basis for recovery under the new law’s punitive damages liability standard and burden of proof. Defense attorneys should make use of this requirement, where appropriate, to challenge the sufficiency of a proposed added punitive damage claim. The provision will help weed out improper claims.
Third, the new law protects employers from punitive damages liability for acts by rogue employees. Punitive damages can be awarded against an employer or other principal for an agent’s acts only if a managerial agent authorized, participated in, or ratified the outrageous conduct, or the agent was “unfit” for the job, making it “reckless” for the principal to employ the person. This requirement will curb unjust punitive damage claims against businesses or other employers that did not engage in any behavior deserving of punishment.
As many defense attorneys will recall, former U.S. Supreme Court Justice Sandra Day O’Connor expressed concern almost thirty years ago about punitive damages that “run wild.” Most states around the country have since sought to address this concern by adopting legislative reforms. Missouri initially did so in 2005 by enacting a cap on the amount of punitive damages that may be awarded. The Missouri Supreme Court, however, struck down the cap in 2014, finding it interfered with the jury’s determination as to the amount of punitive damages to be awarded.
Missouri’s new law responds to the absence of meaningful restraints on punitive damage awards by strengthening the standards and modifying procedures for awarding these damages. The law also takes the Missouri Supreme Court’s 2014 decision into account, leaving juries to decide whether to award punitive damages and the amount to be awarded. In this regard, the law establishes reasonable restraints on punitive awards that the legal community and public should embrace.
Business defendants and their attorneys must respond to attempts by plaintiff lawyers to circumvent or dilute the intended impact of the new legislation when it takes effect at the end of August. This is a critical job that defense interests must take seriously for the new law to achieve its goal of advancing justice.