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2002 FINAL STATELEGISLATIVE PROGRAM CONTROVERSIAL ISSUE ISSUES: PUNITIVE DAMAGES SUMMARY: Punitive or exemplary damages are designed to punish a defendant and to deter others from similar conduct. During the past few years national media attention on punitive damages has increased due in part to recommendations of former President Bush's Council on Competitiveness to change the process for awarding punitive damages, and as a consequence of a U.S. Supreme Court decision on the issue, Pacific Mutual Life Insurance Co. v. Haslip, 111 S.Ct. 1032 (1991). The debate on the federal level was reflected in Maryland both in the courts and in the legislature. The Council on Competitiveness Recommendations 25-29 urged that punitive damages should be awarded rationally and consistently within a coherent system; that specific dollar amounts should not be assigned; that awards be established in a separate proceeding; that punitive damages be warranted only when "clear and convincing" evidence supports the award; that the trial judge determine the amount of the award; and, that the amount of punitive damages should not exceed the amount of compensatory damages. The American Bar Association through its ABA Blueprint for Improving the Civil Justice System objected to some of the Council's recommendations, referred some of the Council's points to various ABA sections and committees and has supported a few of the proposed changes. In general, the ABA favored greater flexibility than the Council in the punitive damage process. For example, whereas the Council favored entirely separate proceedings for the trial and the award, the ABA supported discretionary bifurcation. On one point, however, the Council and the ABA agreed: Punitive damages should be awarded when the evidence is "clear and convincing." In the courts, the U.S. Supreme Court focused attention on punitive damages when it announced a decision in the Pacific Mutual v. Haslip case. In that decision the Court said that in the future, due process may limit the amount of punitive damage awards, awards must be based upon articulated standards, a reasonable relationship must exist between the amount of compensatory and punitive damage awards, and punitive damages must be "reasonable in amount and rational in light of their purpose." Following the directives of Haslip, supporters of changes in the law of punitive damages proposed legislation in the 1992 General Assembly which they felt would bring state law into line with the principles espoused in the decision. Opponents of changing punitive damages law strongly disagreed that Maryland needed to pass a statute to comply with Haslip because present law already satisfied the requirements articulated in the case. The foes countered that the policy reason for the proposal (viz. the business climate of the state is harmed by the availability of excessive punitive damage awards) was bogus, and the legal directives were unnecessary in light of the Court of Special Appeals decision, Alexander & Alexander, Inc. v. Evander, 88 Md. App. 672, 599 A. 2d 687 (1991), that found Maryland practice to be consistent with the Supreme Court requirements. To a large extent, the punitive damages debate was simplified when the Maryland Court of Appeals issued its decision in mid-February 1992 in the Owens-Illinois, Inc. et al. v. William Zenobia, Sr. et al. case. The Court of Appeals decision in Zenobia established a "clear and convincing" standard of proof for the award of punitive damages, and that the standard of conduct, at least in products liability cases, must be characterized as "actual malice" or "actual knowledge of the defect and deliberate disregard of the consequences." With this action, the Court established in law one of the key objectives of the legislation, leaving only those sections of the bill that would effectively remove business owners and managers from liability for the harmful acts of subordinates. The debate on punitive damage awards in the 1993 session vaulted beyond the issues raised in the 1992 session to include the question of applying punitive damages in drunk and drugged driving cases. A bill was filed to overrule Zenobia by establishing an implied malice standard of conduct in actions involving negligent operation or entrustment of a conveyance (e.g., vehicles, vessels, locomotives, streetcars, trains, aircraft). Approval of this proposal would have meant that the standard of conduct for all common law non-intentional torts established in Zenobia would be replaced by the implied malice standard that had been in place for almost twenty years prior to that ruling [Smith v. Gray Concrete Pipe Co., 267 Md. 167 (1972)]. The General Assembly decided that delaying action on punitive damage bills until the Court of Appeals ruled on some important cases was the appropriate approach. Consequently, no action on the drunk driving/punitive damage issue was taken in 1993 because a case (Komornik v. Sparks) dealing with the subject was pending before the Court of Appeals. Although the Circuit Court decision in Komornik that juries in civil drunk driving cases cannot consider punitive damages was affirmed, plaintiff's lawyers decided to forego efforts to push bills to override the courts for the 1994 and 1995 sessions. Both supporters of greater restrictions on punitive damages and advocates of greater access to these awards accepted a truce on the issue in hopes that another pending appellate case (Charles Ellerin, et al., v. Fairfax Savings F.S.B.) would favor their respective views. In the middle of the 1995 session, the Ellerin case was announced in favor of the defendants. Not only did this opinion affirm that "actual malice" in fraud cases must be proven to allow punitive damages, but in a footnote the Court cited the cap on criminal fines ($1 million for drug kingpins, $500,000 for commercial crimes in the antitrust area, $10,000 for fraud) as a guide for legislative intent on punitive damage awards. Because of the timing of the decision, pro-plaintiffs advocates decided not to go to extremes in the General Assembly in any attempt to override this decision. With the focus of the punitives debate moving to Congress, the effort to override the Court’s views was half-hearted in 1996. General Assembly leaders appeared reluctant to engage in a bloody struggle over punitive damages, especially since neither side appeared to have the votes to pass a bill. This approach was repeated in the 1997 and 1998 sessions. The calm on the legislative front has not been reflected in the judicial arena. Two significant court rulings, one in the U.S. Supreme Court and the other in the Maryland Court of Appeals, have had an impact on the award of punitive damages in Maryland. In BMW of North America, Inc. v. Gore [ 116 S.Ct.1589 (1996)], the U.S. Supreme Court reversed the Alabama Supreme Court punitive damage award of $2,000,000 in a case involving an automobile purchaser who had not been informed by the foreign manufacturer, American distributor, and dealer that the car had been repainted after being damaged prior to delivery. In a five to four decision, the Court determined that the due process clause of the 14th Amendment prohibits a State from imposing a "grossly excessive" punishment on a tort-feasor, and that while each state may use punitive damages to protect its own consumers, it may not use this deterrent to regulate behavior in other states or the entire nation. The Maryland Court of Appeals in Bowden v. Caldor [350 Md. 4 (1998)], provided a comprehensive restatement of numerous rulings concerning punitive damages in prior cases, and significantly based its opinion on principles of Maryland common law. By doing the latter, the Court asserted that the question of punitive damages for excessiveness in Maryland is adequate and independent of any action in federal courts. Untouched by the opinion was any action in this area that may be taken by the Maryland General Assembly to either restrict or expand the availability of punitive damage awards in the state. Over the past few sessions, the MSBA has gone to great lengths to bring civility and reasonableness to the punitive damages debate, as competing interests have engaged in heated public relations and lobbying campaigns. In 1994, for example, when the punitive damages controversy was at its height, the MSBA brokered a "procedural cease fire" and convinced advocates for plaintiffs and defendants to withdraw support for their respective bills until the Maryland Court of Appeals had resolved a pending case involving punitive damages. In following sessions, the MSBA did not participate in the drafting of punitive damage bills, and urged proponents of these bills to focus their efforts on other issues that would pass the General Assembly rather than pursuing punitive damage bills that would create a great deal of anger with few results. This posture was modified somewhat in the 1999 session when the MSBA decided to support with amendments a bill that would enact an implied malice standard for punitive damages only in drunk driving cases. The MSBA’s proposed amendments would have expanded this principle to drugged driving and enraged driving cases by using a "driving behavior" standard rather than a "specific substance" standard. While these amendments were considered by some members of the House Judiciary Committee as reasonable in theory, political considerations dictated that any change in punitive damage law at this time was unwise and the bill was rejected. The bill was reintroduced in 2000 and was defeated. Owing to the failure of the measure the year before, the MSBA chose to remain neutral. In 2001, the MSBA also remained neutral on a bill that would have allowed crime victims to collect punitive damages. The legislation was withdrawn.MSBA 2002 POSITION: No position until legislation is available. SAMPLE LEGISLATION:
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