Supreme Court Affirms MMPA Damages Cap

In Overbey v. Chad Franklin Nat’l Auto Sales North, LLC, No. SC91369 (released January 31, 2011), the Supreme Court of Missouri affirmed the constitutionality of the punitive damages caps contained in the Missouri Merchandising Practices Act.

The plaintiffs in Overbey purchased a vehicle and entered into a contract with Chad Franklin Auto Sales for a “payment for life” program.  Plaintiffs paid a one-time joining fee of $500.00 in exchange for a monthly payment of $49.00.  Six months after entering into the contract, Plaintiffs returned to the dealership to attempt to trade for another vehicle.  The sales person denied the existence of the contract and informed Plaintiffs they owed a monthly payment of $719.52 for the next 65 months.

Plaintiffs filed suit under the Missouri Merchandising Practices Act (“MMPA”), alleging the dealer and dealership made fraudulent misrepresentations regarding the sale.  A jury awarded Plaintiffs $76,000.00 in actual damages and $250,000.00 in punitive damages against the dealership.  The jury also awarded Plaintiffs $4,500.00 in actual damages and $1 million in punitive damages against the dealer in his personal capacity.

The trial court, pursuant to the MMPA’s punitive damage caps, reduced the punitive damages award against the dealer to $500,000.00.  On appeal, the plaintiffs claimed the cap on punitive damages violated the right to trial by jury, Due Process and Equal Protection, the Separation of Powers Doctrine, and that the cap constituted a special law prohibited by the Missouri Constitution.

The Court rejected Plaintiffs’ jury right argument, noting that the MMPA was a statutory creation and that the legislature is permitted to choose what remedies are permitted under a statutorily created cause of action.  The Court analogized this position with similar conclusions reached concerning damages caps applied to claims and judgments under Title VII of the Civil Rights Act of 1964.

The Court rejected Plaintiffs’ argument that the trial court’s use of remittitur to reduce the punitive damages violated the separation of powers doctrine, finding that remittitur was merely incidental to the legislature’s power to define the right it created.  The reduction was not based on the trial court’s findings, but rather a legislative limitation on damages.

The MMPA exempts three types of claims from its cap on punitive damages: (1) claims brought by the State; (2) claims in arising from the same acts for which the defendant has been convicted of a felony; and (3) claims brought for housing discrimination.  The Court rejected Plaintiffs’ Equal Protection and Special Law argument, finding that a rational basis existed for all three exceptions.  The Court held there is a rational basis for claims brought by the State in that the State brings suits on behalf of all citizens.  The Court found a rational basis for felony convictions, noting that a felony conviction signifies reprehensible conduct.  The Court found a rational basis for housing discrimination claims in that housing discrimination victims fall into a traditionally suspect or vulnerable class of citizens.

Finally, the Court summarily rejected Plaintiffs’ Due Process claim.  The Court noted that Plaintiffs’ argument was based on the flawed premise that Plaintiffs’ had property rights in the damages award.  The Court held that Plaintiffs could not have property rights in the amount over the cap because they never had a right to the monetary amount over the cap.

Overbey leaves no doubt that damages caps are constitutional if enacted by the legislature for statutorily created causes of action.

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