Arkansas Supreme Court declares punitive damages cap unconstitutional

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January 5, 2012

Arkansas Supreme Court declares punitive damages cap unconstitutional 

Matthew Malamud

What began as a case about negligent contamination of the domestic long-grain rice supply with genetically modified rice ended with the Arkansas Supreme Court striking down a blanket cap on punitive damages. That cap was approved by the state’s general assembly in 2003, but the court concluded that the cap conflicts with a state constitutional prohibition on the general assembly’s ability to enact laws limiting the amount plaintiffs can recover for tortious acts.

The Arkansas Supreme Court has struck down a blanket cap on punitive damages approved by the state’s general assembly in 2003, concluding that it conflicts with a constitutional prohibition on the general assembly’s ability to enact laws limiting the amount plaintiffs can recover for tortious acts. (Bayer CropScience LP v. Schafer, 2011 WL 6091323 (Ark., Dec. 8, 2011).)

In finding the cap unconstitutional, the court unanimously affirmed a jury’s $5.9 million compensatory damages award and $42 million punitive damages award to rice farmers in Arkansas. They alleged that Bayer CropScience and its predecessor, Aventis, devastated the rice industry by negligently contaminating the domestic long-grain rice supply with genetically modified rice, which is not approved for sale as food in the United States. Also, many countries that import American rice, including those in the European Union, prohibit genetically modified food. The U.S. Department of Agriculture discovered the contamination in 2006.

Before the case proceeded to trial, the plaintiffs asked the trial court judge to declare the cap on punitive damages unconstitutional. The judge granted from the bench the plaintiffs’ pretrial motion.

Bayer appealed, asserting that the punitive damages award should be reduced in accordance with Arkansas’s Civil Justice Reform Act of 2003, which states that a punitive damages award for each plaintiff cannot exceed $1 million.

The Arkansas constitution, however, provides that “no law shall be enacted limiting the amount to be recovered for injuries resulting in death or for injuries to persons or property” unless it pertains to compensation that employers pay for employees’ injury or death.

Nonetheless, Bayer insisted that the constitution prohibits lawmakers’ ability to impose caps only on compensatory damages, arguing that the purpose of punitive damages is not to compensate plaintiffs for injuries--it’s to punish defendants.

“Although compensatory and punitive damages serve differing purposes, an award of punitive damages is nonetheless an integrant part of ‘the amount recovered for injuries resulting in death or for injuries to persons or property,’” the court countered, clarifying the language of the state’s constitution.

Scott Powell of Birmingham, Alabama, who was lead counsel for the plaintiffs, said he thinks “cases shouldn’t be prejudged in terms of their merit or value, and the Arkansas constitution is very clear: No limits can be placed on jury awards outside of the context of the employer-employee setting.”

Powell called the court’s ruling a victory for consumers and small businesses. He also said it’s a tribute to his clients’ “tenacity to stand up to the very end and do what’s right.”

Powell represents thousands of other rice farmers who agreed to settle a class action against Bayer last summer. The company recently announced that the $750 million settlement has become binding now that the requisite number of farmers, representing at least 85 percent of U.S. long-grain rice acreage, has accepted the deal. (In re Genetically Modified Rice Litig., No. 4:06-md-01811 (E.D. Mo. July 4, 2011).)


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