Judge Rules against Cap on Punitive Damages

By Jon Murray
Indianapolis Star
March 3, 2009

Ruling: State-imposed limit on civil awards unconstitutional

A Marion County judge has ruled that state lawmakers violated the Indiana Constitution when they set a limit on monetary damages juries could impose to punish defendants in lawsuits.

For now, Marion Superior Court Judge David Dreyer's ruling won't directly affect other cases. Limits on punitive damages -- to three times the compensatory damages or $50,000, whichever is greater -- likely will stand until Indiana's appeals court weighs in.

Some legal experts think the ruling will be overturned. They say lawmakers exercised a valid power when they restricted punitive damages and did not infringe on the authority of the courts. While Indiana law restricts punitive damages, it doesn't limit damage awards that compensate a plaintiff for actual losses or pain and suffering.

The ruling came Friday in case where a jury had awarded a Greene County man $5,000 in compensatory damages in his sexual abuse lawsuit against a priest. Jurors also added $150,000 in punitive damages, which would have to be reduced under the cap to $50,000.

But when the priest's attorneys asked Dreyer to reduce the award, he ruled the limits were unconstitutional.

Andrew Klein, a professor at Indiana University School of Law-Indianapolis, said Dreyer's 20-page decision reflects serious analysis that courts in other states have used to strike down similar laws.

"It's a really interesting case," Klein said. "It certainly reads to me like it's a well-researched ruling."

As his rationale, Dreyer cited the separation of powers between the legislative and judicial branches as well as the right to a trial by jury that is among the core values of the state constitution.

"The Statute's two provisions . . . interpose the will of the General Assembly to supersede otherwise valid jury verdicts," Dreyer wrote in the decision.

Several studies, including those by Cornell University Law School Professor Theodore Eisenberg, have shown only about 5 percent of verdicts in a plaintiff's favor include punitive awards. Yet a perception that juries have readily handed out huge punitive awards sparked reform efforts across the country over the past two decades.

"The evidence to support (the need for reform) is largely zero," Eisenberg said.

The state's cap is one reason businesses see Indiana as having a friendly legal climate. Last year, the state ranked fourth in that attribute in a survey of corporate attorneys for the U.S. Chamber Institute for Legal Reform. Indiana ranked second when the attorneys were asked to rate the appropriateness of punitive damages.

Many states have set similar caps on punitive damages, with some upheld and others struck down as violations of those states' constitutions. Advocates see the caps as similar to sentencing guidelines for crimes such as rape or homicide.

The Indiana Supreme Court hasn't ruled directly on the punitive damage limits the General Assembly approved in 1995. But it has addressed another part of the law, upholding in a 3-2 ruling in 2003 a provision requiring successful plaintiffs to cede 75 percent of punitive damage awards to the state. The Indiana Violent Crime Victim Compensation Fund gets those funds.

The supreme courts of Illinois and Ohio are among those that have nixed caps, though Ohio's Legislature later enacted a law limiting punitive damages. It was upheld in 2007 by the Supreme Court of Ohio; some justices had been replaced since the earlier decision.

Some states' legal framework may allow limits on punitive damages, Dreyer's ruling says, but Indiana's does not.

If Dreyer's ruling stands, it would not affect past cases where punitive damage limits had kicked in if plaintiffs had already exhausted their appeals.

The U.S. Supreme Court has rarely waded into disputes over the amount of punitive damages. But in June, the justices reduced a punitive award against Exxon to $508 million for the 1989 Exxon Valdez tanker spill off Alaska.

An appeals court had earlier reduced the award from $5 billion to $2.5 billion. The Supreme Court opinion, written by Justice David Souter, said a one-to-one ratio of punitive to compensatory damages was more appropriate.

Call Star reporter Jon Murray at (317) 444-2752.


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