West Virginia has long been at or near the top of the Chamber of Commerce and American Tort Reform Association lists of judicial problem areas. However, in March 2015 the state took a major step towards changing its image, enacting a series of laws that aim to eliminate 'jackpot justice'. In particular, 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 2015, 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 rein in punitive damages.
For example, some states – most notably Montana, South Carolina 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 should instead apply the same 'substantial evidence' standard as applies to other factual issues. Thus, 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 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 as to why that is not so, it is clear that courts are more reluctant to order remittitur of a punitive award that is at or below a statutory cap. This 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.
For further information on this topic please contact Evan M Tager at Mayer Brown LLP by telephone (+1 202 263 3000) or email (firstname.lastname@example.org). The Mayer Brown International LLP website can be accessed at www.mayerbrown.com.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.