As readers undoubtedly are aware, concerns about upward spiraling punitive awards have prompted many state legislatures to enact caps on punitive damages. The plaintiff bar’s first line of attack on such statutes has been to challenge them under various provisions of state constitutions.
When that tactic has failed—as it has in most states—a second option in some plaintiffs’ playbook has been to assert in individual cases that the defendant forfeited the right to receive the benefit of the cap by not pleading it as an affirmative defense. For example, the plaintiff has invoked this argument in the Montana Supreme Court case about which Andy Frey and Rory Schneider blogged a couple of months ago.
The vast majority of courts to consider this contention have rejected it—for good reason.
First, and most obviously, there is no way of knowing at the pleading stage whether the jury will return a verdict that awards damages that exceed the statutory cap, any more than there is any way of knowing whether the jury will award damages that are subject to reduction or remittitur at that stage under traditional, common-law post-verdict judicial review. No one would suggest that the defendant waives the right to challenge a verdict as excessive under traditional common-law post-verdict remedies by failing to plead excessiveness and invoke remittitur prior to verdict, and there is no basis for treating statutory damages caps any differently.
Second, an affirmative defense, if successful, defeats an entire cause of action, while a cap merely limits the amount of damages. For this reason, a cap is different in kind from the various examples of affirmative defenses listed in Fed. R. Civ. P. 8 and its state cognates. Each and every one of those examples would defeat an entire claim, not merely limit the amount of damages for such a claim.
Third, affirmative defenses almost always present issues for decision by the fact finder. In contrast, the application of a cap is ordinarily a ministerial act performed by the court post-verdict. Indeed, in some states, the law precludes even informing the jury about the cap.
Fourth, and relatedly, the purpose of requiring that affirmative defenses be pleaded is to provide fair notice to plaintiffs of a factual issue to which they will need to respond. That purpose does not apply to a cap on punitive damages, at least not one that is based on either a ratio of punitive to compensatory damages or an absolute amount of punitive damages. That is so both because the statute itself provides the requisite notice and because there generally is no proof that can defeat the application of such a cap. (If the cap is based on the defendant’s net worth, this reason for not treating it as an affirmative defense would not apply, but the other reasons why a cap is not an affirmative defense may remain applicable.)
Of course, the fact that there are compelling reasons why defendants should not have to plead a cap statute as an affirmative defense does not mean that they shouldn’t do so in order to avoid the risk of an idiosyncratic finding of waiver. To be sure, pleading something as an affirmative defense could be taken as an admission that the defendant bears the burden of proof (which is why my colleagues and I generally advise against pleading the insufficiency of evidence of the requisite mental state as an affirmative defense). But in the case of a cap, there generally is nothing for either party to prove, so there would appear to be little downside to pleading it as an affirmative defense out of an abundance of caution.