Supreme Court precedents on damage limits remain intact

Missouri’s cap on punitive damages remains undisturbed following an April 5 ruling from the state Supreme Court. 

In a 6-1 decision, the court affirmed the post-trial reduction of a $6 million jury verdict to about $3.1 million. The plaintiff, All Star Awards & Ad Specialties, alleged that rival company HALO Branded Solutions gained proprietary information by hiring away All Star’s general manager.

In 2019, a Jackson County jury awarded $525,000 in actual damages and $5.5 million in punitive damages against HALO. After trial the judge applied the state’s cap on punitive damages, which limits such awards to five times the actual damages or $500,000, whichever is greater.

The Supreme Court previously has held that legislative limits on damages, such as the punitive damages cap, applies to causes of action created by statute but not those available under the common law at the time Missouri became a state in 1820. All Star had argued that its common-law claims — civil conspiracy to breach the duty of loyalty and tortious interference with a business expectancy — were the kinds of claims for which the earliest juries in Missouri would have been able to award punitive damages.

But Judge W. Brent Powell, writing for the majority, said it was necessary to examine how Missouri courts would have characterized the claims in 1820. Diving into English legal treatises and case law dating to the early 1700s, Powell said All Star’s claims weren’t sufficiently similar to the common-law claims available at the time of statehood.

Although employees did have a common-law duty of loyalty to their employers, Powell wrote, it was considered contractual in nature, and no punitive damages would have been available for a breach of that duty. 

“To do otherwise would permit litigants to use civil conspiracy as a Trojan horse, masking any common law claim created or substantially altered after 1820 to evade [the statutory] damages cap,” he wrote in a footnote.

And while some states recognized tortious interference claims as common-law, until 1953 the Missouri Supreme Court allowed such claims only if they were based on fraud, deceit or coercion, which HALO wasn’t alleged to have done.  

Judge George W. Draper III dissented from the ruling, but he didn’t write separately to explain his reasoning. 

The arguments in the case stem from a 2012 Supreme Court decision, Watts v. Cox Medical Centers, that struck down the state’s cap on noneconomic damages in medical malpractice cases. The Missouri Constitution guarantees that “the right of trial by jury as heretofore enjoyed shall remain inviolate,” which the court’s majority said prohibited lawmakers from imposing limits on common-law causes of action that existed at the time the state constitution was first adopted in 1820.

The court later extended that logic to Missouri’s punitive damage cap, at least as applied to common-law causes of action recognized in 1820. However, a parallel series of cases has upheld limits on damages for statutory causes of action, such as wrongful death. Last year, the court held in Ordinola Velazquez v. University Physician Associates that lawmakers also can transform common-law causes into statutory ones, allowing legislative limits to take effect.

In briefs filed with the Supreme Court last year, HALO, along with the Missouri Organization of Defense Lawyers, had urged the court to overturn Watts and the cases that followed it. The court, however, affirmed that line of cases.

Brent Coverdale of Scharnhorst Ast Kennard Griffin in Kansas City, an attorney for All Star, said that while the ruling doesn’t overturn any of those precedents, it also didn’t set a bright-line rule for determining whether a particular common-law cause of action was viable 200 years ago.

“Everybody’s going to have to crack out Blackstone,” he said. “That’s fine, but the issue even with this case is that two appellate courts did that and reached opposite conclusions.” Last year, the Court of Appeals Western District examined the same legal history and concluded that the punitive damage cap didn’t apply in All Star’s case.

HALO also had asked the court to further reduce the punitive award against it, saying it was excessive and violated due process even after the damage cap was applied. The Supreme Court declined, saying All Star “made a compelling demonstration” for the punitive award.

Coverdale said he was pleased that the Supreme Court didn’t agree with HALO’s argument that it was essentially a small business dispute.

“If nothing else, no court agreed with them on that,” he said.

Erin Murphy of Kirkland & Ellis in Washington, D.C., who argued for HALO, also didn’t return a call seeking comment.

The case is All Star Awards & Ad Specialties Inc. v. HALO Branded Solutions Inc., SC99007.