Limitations on Punitive Damages Limits
In a published 2-1 opinion, the South Carolina Court of Appeals recently held that where a national corporation failed to assert the punitive damages caps articulated in Section 15-32-530 as an affirmative defense, the defense was waived. As a result, the Court of Appeal upheld a 45:1 ratio punitive damages to compensatory damages award.
In 2014, while in the parking lot of Target, Appellant’s daughter picked up a syringe from the parking lot and asked Appellant what it was. Appellant subsequently swatted the syringe from her daughter’s hand. When Appellant swatted the syringe, the syringe punctured her right palm. Appellant reported the incident to Target’s store manager, after which photographs were taken of the syringe lying in the parking lot, and incident report was completed, and the syringe was placed in a bag labeled “Do Not Touch.” Appellant was advised to seek medical treatment.
In seeking medical treatment, Appellant was referred to an infectious disease specialist, who collected a blood sample to have tested for HIV and hepatitis and Appellant was prescribed medications targeting at preventing HIV and hepatitis. Appellant suffered from dizziness and upset stomach as a result of the medication.
The case proceeded to trial and the jury subsequently returned a verdict in favor of Appellant, which included $100,000 in compensatory damages and $4.5 million in punitive damages, 45 times the compensatory damages award. Following trial, the trial court granted Target’s motion for a JNOV as to punitive damages. Appeal on this issue (as well as other issues) followed.
For purposes of this article, the Court of Appeals addressed the following issue: Did Target waive the application of the punitive damages cap set forth in Section 15-32-530?
Section 15-32-530 sets forth the following caps on punitive damages:
(A) Except as provided in subsections (B) and (C), an award of punitive damages may not exceed the greater of three times the amount of compensatory damages awarded to each claimant entitled thereto or the sum of five hundred thousand dollars.
(B) The limitation provided in subsection (A) may not be disclosed to the jury. If the jury returns a verdict for punitive damages in excess of the maximum amount specified in subsection (A), the trial court should first determine whether:
(1) the wrongful conduct proven under this section was motivated primarily by unreasonable financial gain and determines that the unreasonably dangerous nature of the conduct, together with the high likelihood of injury resulting from the conduct, was known or approved by the managing agent, director, officer, or the person responsible for making policy decisions on behalf of the defendant; or
(2) the defendant’s actions could subject the defendant to conviction of a felony and that act or course of conduct is a proximate cause of the plaintiff’s damages;
If the trial court determines that either item (1) or (2) apply, then punitive damages must not exceed the greater of four times the amount of compensatory damages awarded to each claimant entitled thereto or the sum of two million dollars and, if necessary, the trial court shall reduce the award and enter judgment for punitive damages in the maximum amount allowed by this subsection. If the trial court determines that neither item (1) or (2) apply, then the award of punitive damages shall be subject to the maximum amount provided by subsection (A) and the trial court shall reduce the award and enter judgment for punitive damages in the maximum amount allowed by subsection (A).
(C) However, when the trial court determines one of the following apply, there shall be no cap on punitive damages:
(1) at the time of injury the defendant had an intent to harm and determines that the defendant’s conduct did in fact harm the claimant; or
(2) the defendant has pled guilty to or been convicted of a felony arising out of the same act or course of conduct complained of by the plaintiff and that act or course of conduct is a proximate cause of the plaintiff’s damages; or
(3) the defendant acted or failed to act while under the influence of alcohol, drugs, other than lawfully prescribed drugs administered in accordance with a prescription, or any intentionally consumed glue, aerosol, or other toxic vapor to the degree that the defendant’s judgment is substantially impaired.
S.C. Code Ann. § 15-32-530 (emphasis added).
The statute makes clear that there are two applicable sections on punitive damages limits (either $500,000 or $2,000,000) and makes a singular exception (with proof of one of three circumstances) to no limitation on a punitive damages award.
The Court of Appeals initially emphasized Rule 8(c), of the South Carolina Rules of Civil Procedure, which outlines the mandatory pleading of affirmative defenses in a responsive pleading. Rule 8(c) provides, specifically, that a party shall plead affirmatively the defenses including “any other matter constituting an avoidance or affirmative defense.” The purposes of Rule 8(c) is to inform the court and the parties how the case will be tried. Because the rules contemplate the avoidance of surprise, the failure to plead an affirmative defense is deemed a waiver. In citing federal cases, the Court of Appeals stated that “courts will enforce the pleading requirement when a statutory liability limits such as section 15-32-530 affects the proof to be presented at trial.”
The Court of Appeals relied on South Carolina Jurisprudence which previously addressed the requirement that matters be pled when they “may prejudice the opposing party by introducing issues [that] may affect the proof at trial,” and specifically referenced a prior Court of Appeals case that concluded that a statutory recovery limit affecting the proof at trial constitutes an affirmative defense. Simply stated, a statute imposing a cap on recovery—while known to a Plaintiff—does not automatically place the plaintiff on notice that the defendant would invoke the cap as a defense.
In turning to the case before it, the Court of Appeals outlined the required special findings in each subsection of 15-32-530, requiring different proof by Plaintiff.1 The Court emphasized that the subsections of 15-32-530 set out when punitive damages are capped, and circumstances where there is no cap. Specifically, subsection (C) provides “there shall be no cap on punitive damages” when the court determines that one of three circumstances applies to the case. The Court again emphasized that the statute’s plain language to require the trial court to make the circumstantial findings based on the proof presented to the jury at trial. Accordingly, if a plaintiff is not made aware that defendant intends to rely on the statutory cap to punitive damages, the plaintiff will very likely avoid discovery and presenting evidence supporting a circumstance outlined in 15-32-530.
Further, in analyzing the opening language of 15-32-530—“Except as provided in subsections (B) and (C)”—the Court held that the legislature made it clear that it did not intend to make the cap automatic, summarily stating “By beginning the statute with a reference to circumstances supporting either a $2 million cap or no cap at all, the legislature made it clear that it did not intend to make the $500,000 cap automatically applicable.” The Court did not further elaborate.
In conclusion the court succinctly stated: “[T]he criteria of section 15-32-530 undoubtedly affect the proof at trial[.]” The Court concluded that Target was required to plead the recovery limits in section 15-32-530 or, at the very least, raise the defense prior to the conclusion of discovery so that Appellants would have had prior notice of the additional evidence they needed to lift the punitive damages limit.
While the majority has stated its opinion regarding application of 15-32-530, it is interesting to note it is Plaintiffs burden of proving its case for punitive damages, including—arguably—that an exception to the cap applies. The Court of Appeals’ opinion has seemingly implemented a role reversal of sorts, requiring that a Defendant take the affirmative steps to ensure that the cap applies. In a 2-1 opinion, we should expect Target to seek further review of the Court’s opinion by the South Carolina Supreme Court. In the meantime, we are sure to see a flurry of motions filed with the trial courts, requesting leave to amend pending Answers to assert this new affirmative defense mandated by this opinion.
1 The Court referenced and distinguished the statutory damages cap in the Tort Claims Act, noting that the TCA does not require any special findings that would affect the proof at trial. See Parker v. Spartanburg Sanitary Sewer District.