Over 60 Years Of Combined Experience

How Does the Montana Supreme Court Treat Punitive Damage Awards

On Behalf of | Jul 24, 2015 | Firm News

One question sometimes posed by our new clients regards the applicability of punitive damage awards in Montana. Punitive damages are awarded by juries after the trial of a case. The Montana Supreme Court has often upheld these awards.

Punitive damages are intended to punish a party for particularly bad behavior. Montana law specifically provides that “reasonable punitive damages may be awarded when the defendant has been found guilty of actual fraud or actual malice”. They may not be awarded in contract cases.

If the parties go to a jury trial, the jury must decide whether punitive damages should be assessed against the wrongdoer. The parties may not put on any evidence about the wrongdoer’s ability to pay or financial condition at this trial. It is only after the jury has decided that punitive damages should be imposed that a separate proceeding is held to set the amount of these damages. At this point, the jury will hear evidence about the wrongdoer’s ability to pay. If the trial is in front of a judge, the judge may make a punitive damage award.

When punitive damages are imposed, Montana law sets forth several factors that must be considered in the setting the amount. These factors include but are not limited to the following:

  • the nature and reprehensibility of the wrongdoing;
  • the extent of wrongdoing;
  • the defendant’s intent in committing the wrong;
  • the profitability of the defendant’s wrongdoing;
  • the amount of actual damages awarded to the injured party;
  • the wrongdoer’s net worth;
  • any previous awards of punitive damages against the same defendant for the same conduct; and
  • any potential or prior criminal sanctions against the defendant based upon the same wrongful act.

The trial judge must review the punitive damage award in light of these legal factors and may adjust the award if he provides a proper discussion of the reasons for doing so. The adjustment may be upward or downward. Under current Montana law, a punitive damages award may not exceed $10 million or three percent of a wrongdoer’s net worth, whichever is less.

Sometimes, when a very large punitive damage award has been made, the party against whom it was assessed will challenge it under the United States Constitution, arguing that it is “grossly excessive” under the BMW v. Gore case issued by the United States Supreme Court. Because this issue relates to the federal Constitution, it is examined under federal law. Federal case law mandates that three factors be considered in reviewing an award for excessiveness: (1) the reprehensibility of the wrongdoer’s conduct; (2) the ratio of the injured party’s actual damages to the punitive damages award; and (3) the difference between the award and the penalties imposed in similar cases. In most cases, punitive damages awards are not overturned when this three-part test is applied.

On the other hand, Montana’s $10 million limitation on punitive damages has recently been under review. On July 1, 2015, the Montana Supreme Court decided a case (Masters Group International, Inc. v. Comerica Bank, 2015 MT 192) where the jury had rendered a verdict that exceeded Montana’s $10 million punitive damages cap. The Montana Trial Lawyers Association argued that the law is unconstitutional and that juries are in a “better position to assess punitive damages” than the legislature. (Read more: Washington Times article).

The attorneys at Tipp & Buley have extensive experience in all areas of personal injury law, and we understand all of the law applicable to punitive damage awards. Let us put our 55 years of combined litigation experience to work for you. Please call our Missoula law office at 406-389-4215 or visit us online to learn more.