This is the final installment of my six-part series on defenses that every inside counsel should know (Part 1, Part 2, Part 3, Part 4 and Part 5). This column focuses on the defenses now available to dismiss or limit claims for punitive damages. Claims for punitive damages often can be disposed of by summary judgment or a motion to dismiss based upon restrictions on the award of punitive damages provided by the statutes of many states, or a lack of evidence necessary to meet the high evidentiary standards for an award of punitive damages that many states now require. Further, if punitive damages ultimately are awarded, then the amount may be capped or reduced under the laws of many states or based upon recent decisions of the U.S. Supreme Court.
Currently, approximately 45 states either prohibit the award of punitive damages or have enacted some limitations on their recovery. More than 30 states require that a plaintiff prove entitlement to punitive damages by an evidentiary standard that is higher than the usual “preponderance of the evidence” standard. Typically, these states require “clear and convincing” evidence of conduct such as gross negligence, fraud or malice in order to support an award of punitive damages. Many states now allow a defendant to request a bifurcated trial in which evidence of the entitlement to punitive damages or the amount of punitive damages is held over to a second trial phase. Using this method, evidence that is relevant only to the award or amount of punitive damages, such as evidence of the defendant’s net worth, is not revealed to the jury during their deliberations on liability and actual damages. More than 25 states now cap or limit by statute the amount of punitive damages that can be awarded. Approximately 10 states now require that any award of punitive damages be shared with the state or some state entity.