Missouri Law On Punitive Damages

In Missouri, there are two general types of damages which a person filing a lawsuit can seek.  The first is called “compensatory” damages.  Compensatory damages, as its name implies, are designed to compensate the person for their actual losses.  Examples of compensatory damages include the cost of repairing a vehicle involved in a crash.  In a lawsuit involving a personal injury, examples of compensatory damage items include medical bills, lost wages, and compensating the person for their “pain and suffering” caused by the injury.

The second type of damages is called “punitive” damages.  Punitive damages are designed to punish the wrongdoer for their conduct.  Punitive damages are not designed to compensate the injured person.  Instead, their purpose is to make an example of the wrongdoer both (i) to prevent that person from repeating that conduct in the future, and (ii) to make it known to the entire community that this type of conduct will not be tolerated, and deter others from doing the same type of thing.

Punitive damages have a long history, going all the back to the Bible, and earlier.  The award of punitive-type damages was common in early legal systems, and was mentioned in religious law.  Punitive damages were provided for in Babylonian law nearly 4,000 years ago in the Code of Hammurabi, the Hittite Laws of about 1,400 B.C., the Hebrew Covenant Code of Mosaic Law of about 1,200 B.C., and in the Hindu Code of Manu of about 200 B.C. See Owen, Punitive Damages in Product Liability Litigation, 74 Mich. L. Rev. 1257, 1262 n17 (1976).

For example, the Bible says, at Exodus 22:1:

“If a man steals an ox or sheep and slaughters it or sells it, he is to repay five oxen for the ox and four sheep for the sheep.”

That’s punitive damages – making the wrongdoer pay back more than what they took.

The vast majority of lawsuits don’t involve claims for punitive damages.  Though punitive damages tend to get a lot of attention in the press, they are in fact rarely assessed, which is why it’s newsworthy when it happens.

In Missouri, a person who’s suing can get punitive damages only when they prove that the defendant intentionally committed a wrongful act without just cause or excuse.  If the defendant intentionally does a wrongful act and knows at the time the act is wrongful, it is done wantonly and with a bad motive.  Evil intent may also be implied from reckless disregard of another’s rights and interests.

Missouri has several laws specifically dealing with punitive damages in lawsuits.  For instance, one law (Section 510.265) says the courts must reduce the dollar amount of the jury’s decision on punitive damages to a number which is no more than five times the amount of compensatory damages, or $500,000, whichever is higher.   The Missouri Supreme Court has held that because Section 510.265 requires the court to ignore the jury’s decision on the amount of punitive damages, that law is unconstitutional in some situations because it deprives the plaintiff of a jury trial.  The rationale is that the Constitution’s right to a jury trial is meaningless if the jury’s decision is going to be ignored or modified.

In Missouri, the plaintiff does not get to keep all of the punitive damages paid by the defendant.  Missouri law requires that 50% of punitive damages paid by a defendant be turned over to the State of Missouri.  See Section 537.067.3.

The following is a summary of an actual court case where punitive damages were assessed.   The case is Lewellen v. Franklin, Missouri Supreme Court Case No. SC 92871, 2014 Mo. LEXIS 211 (Mo. banc Sept. 9, 2014).

A Kansas City used car dealer aggressively advertised that it would sell cars for a fixed payment of $49 per month.  A 77-year-old widow went to the car dealership.  She specifically told the dealer that she could only afford the $49 per month car payment, and that her income was $920 per month.  They assured her that the total payment was going to be $49 per month, for five years.  The dealership then created fraudulent bank loan papers in her name saying that her income was $18,000 per month, and tricked her into signing papers that contained very different terms from what they promised her.

After less than a year, her payments went up to $387.45 a month. Because she couldn’t afford to pay that, she fell behind in her payments and the bank repossessed her vehicle.  She sued the car dealership for fraud, seeking both compensatory and punitive damages.

At trial, the widow testified about her dealings with this car dealership. She also had two other people testify who were similarly misled by the car dealership.  She also presented evidence of 73 complaints against this car dealer in both Kansas and Missouri.

The jury was apparently outraged at the car dealership based on the evidence it heard, because it issued a verdict of $25,000 in compensatory damages for the widow, and an additional $1 million in punitive damages.

It was clear that under the facts of this case, the jury believed that the car dealership had defrauded many, many people.  Only one of them sued the dealership and went all the way through trial. There are a lot of reasons why so few cases reach trial.  One of the biggest is the fact that people who have been defrauded are embarrassed when they realize they’ve been tricked, and they’re reluctant to bring attention to it by filing a lawsuit. Additionally, very few people are willing or able to take all of the time off work necessary to do everything they need to for a lawsuit. By the time a case gets to trial, the person has missed many days from work, even before the trial starts.  Also, many lawyers are afraid or reluctant to take cases like this against a well-financed defendant who will get defense attorneys to try to drag things out, make things more labor-intensive than they should be, and generally throw up roadblocks at every possible turn.

If the car dealer in this case  had only been required to pay $25,000 to the widow (the full amount of her compensatory damages), then the dealer would in essence have come out way ahead, and still would have profited by their fraud.   They would’ve had a financial incentive to continue cheating people.  If you rob 100 banks and only have to pay back one bank, why stop?

In a situation like this, assessing punitive damages is the only way to stop this type of  fraud, whether by this car dealer or other car dealers.  Punitive damages verdicts like this stand as a significant warning to both this dealership and other car dealerships that they cannot defraud our community.

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