In a prior post, Andy Frey and I discussed the concern expressed by some defense lawyers that jurors in a bifurcated trial might bake punitive damages into their compensatory award because they are unaware that they will be able to impose punitive damages in a second phase.  We expressed the view that this concern can be readily addressed by instructing the jury before it deliberates in the first phase that, if it finds that the defendant acted with the requisite mental state, a second phase will commence to address the amount of punitive damages (if any).

The Missouri Court of Appeals’ decision last week in Advantage Buildings & Exteriors, Inc. v. Mid-Continent Casualty Co. confirms both that the concern about inflation of the compensatory damages is a real one and that the solution is proper instruction of the jury.

The case involved a so-called third-party bad-faith claim.  The historical facts are unimportant.  What matters is that, even though the trial court granted the defendant’s motion to bifurcate the trial, the court gave a pattern jury instruction in the first phase that indicated that punitive damages could be awarded if the jury found that the defendant had acted with an evil motive or reckless indifference to the rights of others.

After the jury returned a “damages” verdict of $3 million and found the mental state required for an award of punitive damages, the court informed the jury that trial would recommence for the setting of punitive damages.  The jury then awarded an additional $2 million in punitive damages.

The Court of Appeals reversed.  Citing an earlier decision admonishing that “the better practice would be to more fully instruct the jury as to the bifurcated proceedings,” the court explained that “not only would it have been the ‘better practice’ to properly instruct the jury, but instructing the jury that it could award punitive damages in the first stage of the trial was a blatant misstatement of the applicable substantive law.”

The court accordingly remanded for a new trial on both the amount of compensatory damages and the amount of punitive damages.  In addition, because Missouri law requires that the same jury determine liability for and amount of punitive damages, the court held that the issue of liability for punitive damages needs to be retried as well.

This decision should be useful precedent not just on the specific issue of how to instruct juries in bifurcated cases, but also on the more general principle that courts should not blindly adhere to pattern instructions that conflict with governing law and/or are inappropriate under the particular circumstances of the case.