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Missouri Supreme Court strikes down state cap on punitive damages

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The Missouri Supreme Court has struck down the state’s cap on punitive damages, ruling unanimously in the case of a woman misled by an auto dealership in buying a car that the cap violates citizens’ right to a jury trial.

To generate additional sales, Chad Franklin, owner of Kansas City, Missouri-based Chad Franklin National Auto Sales North L.L.C., promoted a program that promised customers could purchase a vehicle for only $49, $69 or $89 a month, according to Tuesday’s ruling by the Missouri Supreme Court in Lillian M. Llewellyn v. Chad Franklin and Chad Franklin National Auto Sales North L.L.C.

Ms. Lewellen, a 77-year-old widow with $920 in monthly income, saw the ads and went to the dealership, stating she was interested in the $49-per-month payment plan.

She chose a 2002 Lincoln that qualified her for the program. A salesman explained the $49-a-month program was a five-year plan in which the auto dealership would send her a check for the difference between her monthly payment of $387.45 and her $49 obligation.

When Ms. Lewellen did not receive a check from National soon after the sale, she contacted the dealership several times and eventually received a check covering the difference for nine months. But she became unable to make full payments and a bank repossessed the vehicle and sued her for breach of contract.

Ms. Lewellen sued Mr. Franklin and the dealership, alleging fraudulent misrepresentation and unlawful merchandising practices under the Missouri Merchandising Practice Act.

A Liberty, Missouri jury awarded her actual damages of $25,000 and punitive damages of $1 million against Mr. Franklin and National on both counts. Under the state’s 2005 punitive damages cap, the trial court reduced the punitive damages awards against Mr. Franklin and National to $500,000 and $539,500 respectively.

Ms. Llewelyn appealed.

Missouri law provides that no punitive damages award against any defendant will exceed $500,000 or five times the net amount of the judgment to the awarded to the plaintiff against the defendant, whichever is larger.

The U.S. Supreme Court “has explicitly refused to establish a bright-line ratio that punitive damages awards cannot exceed due to the Supreme Court’s reluctance to recognize concrete limits imposed by due process,” the Missouri Supreme Court ruled.

Missouri’s cap “curtails the jury’s determination of damages, and, as a result, necessarily infringes on the right to a trial by jury when applied to a cause of action to which the right to a jury trial attaches at common law,” the court ruled in reinstating the $1 million in punitive damage award against Mr. Franklin.

Commenting on the ruling, Mark A. Behrens, a partner at law firm Shook, Hardy & Bacon L.L.P. in Washington, said, “The court has invalidated a key component of the Missouri civil justice system.”

Furthermore the ruling is an “outlier,” said Mr. Behrens, who was not involved in the case. “Virtually every court in the United States has said caps on punitive damages are constitutional, because punitive damages are different than ordinary damages intended to compensate someone for a loss.

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