A ruling from December 21, 2018 by the 6th Circuit Court of Appeals in Tennessee has ruled that the cap on punitive damages that a company can pay to a plaintiff is unconstitutional. The cap had been in place for more than eight years. The ruling on the punitive damages cap is the direct result of a case from 2013, filed by Memphis native Tamarin Lindenberg on behalf of her children who were minors at the time. The original case was filed against Jackson National Life Insurance Co.
The basics of the lawsuit
The lawsuit was initiated by Lindenberg when she claimed that the insurance company failed to pay the $350,000 life insurance policy her husband had. The lawsuit claimed breach of contract on the part of Jackson National Life Insurance Co.
The lawsuit filed by Lindenberg claimed the following:
- The insurance company misled the plaintiff regarding her rights
- The insurance company told the plaintiff that she waived her beneficiary status under the policy
- The insurance company had no basis for making such a claim
- The insurance company’s system to prevent such a claim is inadequate
The lawsuit wound up reaching federal court in Memphis, where in 2014 the jury ruled in favor of Lindenberg. She was awarded the amount of the life insurance policy along with $87,500 for bad faith damages and another $3 million in punitive damages. However, thanks to legislation from 2011, the punitive damages were reduced to a much smaller amount.
The Tennessee Civil Justice Act
The Tennessee Civil Justice Act was signed into law by Tennessee Governor Bill Haslam in 2011. This law limited monetary damages in an effort to make Tennessee more competitive and friendlier for businesses. In a press release from 2011 when announcing the measure, Haslam touted the following:
“Business recruitment is incredibly competitive, and Tennessee is not only competing against other states but against foreign countries as we go out and market ourselves as the best place for business. This tort reform legislation will help us attract and retain jobs by offering businesses more predictability and a way to quantify risk.”
When the law was approved by the state legislature it capped punitive damages at $500,000, or double the compensatory damages, whichever is greater. The cap is not placed on cases involving intentional misconduct, the destruction of records, or any conduct that involves being under the influence of alcohol or drugs.
Sixth Circuit Court rules in favor of Lindenberg
The Sixth Circuit Court ruled in favor of Lindenberg in this case by a 2-1 vote, claiming that the punitive damages cap is unconstitutional. United States Circuit Court Judge Eric Clay wrote the following in his opinion:
“Our review of historical evidence from Tennessee and North Carolina demonstrates that punitive damages awards were part of the right to trial by jury at the time the Tennessee Constitution was adopted. Upon our assessment of Tennessee law, we find that the punitive damages bar set forth in Tenn. 29-39-104 violates the individual right to a trial by jury set forth in the Tennessee Constitution. The Declaration of Rights in the Tennessee Constitution provides that ‘the right of trial by jury shall remain inviolate.”
The lone dissenting opinion from the court was issued by Judge Joan Larsen, who said that the issue of punitive damages caps should be sent to the Tennessee Supreme Court.
This is a TREMENDOUS win for plaintiffs throughout Tennessee, because as of now, the ruling by the 6th Circuit will stand as law: if you are awarded punitive damages, that award cannot be reduced. (Whether or not it stays this way is yet to be seen.)
There is another benefit, too – namely, that this could set a precedent that ALL damage caps are unconstitutional. Tort reform has done nothing but victimize people twice. We hope that, with this ruling, we’ll see an end to this awful practice once and for all.
Contact Shepherd and Associates, P.C. in Maryville if you need experienced legal representation. We represent clients all across Tennessee. Call the office to schedule an appointment today at 865-225-9655 or complete the contact form on the website.