There are two types of damages that can be awarded in a civil case: punitive and compensatory. Compensatory damages are those designed to reimburse you for your actual losses.
Punitive damages are those intended to punish the wrongdoer. For example, in 2015, a California jury awarded a woman over $400 million in her case against Johnson & Johnson.
In 2014, Tennessee lawmakers passed a law that put a cap on punitive damages. The law states that punitive damages cannot be higher than twice the amount of compensatory damages or $500,000, whichever is higher.
That law recently came under attack in a case involving a life insurance policy. A federal jury in Tennessee awarded a widow $350,000 for actual damages, $87,500 for bad faith damages, and $3 million in punitive damages in her case against a life insurance company. Tamarin Lindenberg filed her case against Jackson National Life Insurance when the company refused to pay her the death benefit on her husband’s life insurance benefit after he passed away. While punitive damages in breach of contract cases are rare, juries are permitted to award punitive damages in breach of contract cases if they feel the defendant acted fraudulently.
Constitutionality of Tennessee State Law
After the jury made its award, the State of Tennessee intervened citing its own cap on punitive damages. The federal judge in the case immediately complied with the state’s request, and he lowered the punitive damage award from $3 million to $700,000 (twice the amount of the actual damages). Lindenberg appealed the judge’s decision, and the case eventually found its way to the Sixth Circuit Court of Appeals in Cincinnati.
Lindenberg’s attorneys alleged that the state cap on punitive damages was unconstitutional for two reasons. First, punitive damages are a question of fact and are to be decided by the jury. Thus, putting a cap on the jury’s ability to decide how much should be awarded violates the plaintiff’s right to a jury trial. Secondly, they alleged that the statute also violates the separation of powers doctrine by allowing the legislature to intervene on the powers of juries, which function as a part of the judicial branch of government.
In a 2-1 vote, the Sixth Circuit Court of Appeals agreed with Lindenberg and declared that the Tennessee statute passed in 2014 was unconstitutional as it violated an individual’s right to a jury trial. In its majority opinion, written by Judge Clay, the Six Circuit quoted Tennessee case law from the 1800s, which stated: “Punitory damages cannot be claimed as a matter of right; but it is always a question for the jury, within its discretion, no matter what the facts are.”
The Tennessee Assistant Attorney General had no comment on the ruling. The State does have the right to appeal to the U.S. Supreme Court, but there’s no guarantee the Supreme Court would hear its case. So, for now, it looks like Tennessee will need to strike the 2014 statute from its books.