United States: The Sixth Circuit Declares Tennessee's Punitive Damages Cap Unconstitutional

Last Updated: February 15 2019
Article by Autumn L. Gentry

In December 2018, the U.S. Court of Appeals for the Sixth Circuit held that Tennessee's cap on punitive damages was unconstitutional. This cap came into effect when Tennessee Governor Bill Haslam signed the Tennessee Civil Justice Act (the "Act") which, among other things, capped the amount of punitive damages a plaintiff can recover in civil lawsuits to two times the amount of any compensatory damages awarded, or $500,000, whichever is greater. Tenn. Code Ann. § 29-39-104.

The Sixth Circuit's Decision

The Sixth Circuit's holding resulted from the case of Lindenberg v. Jackson National Life Insurance Company, Case Nos. 17-6034/6075 (6th Cir. Dec. 21, 2018), where Taramin Lindenberg filed suit after the insurer failed to pay her, the primary beneficiary, $350,000 from her ex-husband's life insurance policy following his death. Her claims against the insurer included breach of contract, statutory and common law bad faith, and punitive damages.

The district court permitted Lindenberg to proceed to trial only on her claims for statutory bad faith, common law breach of contract, and common law punitive damages based on breach of contract. Following trial, a jury awarded her $87,500 for the insurer's bad faith refusal to pay; $350,000 for breach of contract; and $3 million in punitive damages on the grounds that the insurer's refusal to pay her was intentional, reckless, malicious, or fraudulent.

Following trial, the insurer argued that the punitive damages award should be reduced based upon Tennessee's cap. In response, Lindenberg argued the punitive damages cap violated the Tennessee Constitution and moved to certify the issue to the Tennessee Supreme Court. The district court agreed to provide an opinion on the issue and, thereafter, denied Lindenberg's constitutional challenge to the punitive damages cap, reducing the insurer's liability for punitive damages from $3 million to $700,000 (or twice the $350,000 award for breach of contract) in line with the statutory cap.

On appeal, the Sixth Circuit held that Tennessee's punitive damages cap violated the individual right to a trial by jury set forth in the Tennessee Constitution. While the Tennessee Constitution does not guarantee the right to a jury trial in every case, the Sixth Circuit held that its adoption guarantees "the right to trial by jury as it existed at common law under the laws and constitution of North Carolina," the language of which was heavily borrowed by the drafters of the Tennessee Constitution.

The Sixth Circuit further held that case law "demonstrate[s] that North Carolina juries were awarding punitive damages at the time the Tennessee Constitution was drafted and that the practice continued uninterrupted in Tennessee thereafter. Accordingly, 'the right to trial by jury as it existed at common law' in 1796 would have included the right to have the jury award punitive damages in appropriate cases," and "the proper measure of punitive damages is historically a 'finding of fact' within the exclusive province of the jury." As a result, the Sixth Circuit held that the Act is unenforceable to the extent that it purports to cap punitive damage awards which "constitutes an unconstitutional invasion of the right to trial by jury under the Tennessee Constitution."

Effects on Tennessee Federal and State Cases

The Sixth Circuit's decision, of course, affects those lawsuits filed in federal district courts throughout the Sixth Circuit which require the application of Tennessee law. These lawsuits would include those in the employment arena, considering that punitive damages are available under Title VII, which prohibits employment discrimination base on race, color, religion, sex and national origin. In addition, while punitive damages are generally not recoverable in breach of contract cases, Tennessee does permit a plaintiff to recover punitive damages for breach of contract when he or she shows "fraud, malice, gross negligence, or oppression." Therefore, should such facts be proven in an employment contract dispute, an employer no longer has the comfort of knowing that any punitive damages a plaintiff may seek and be ultimately awarded will be capped in a federal court lawsuit.

The Sixth Circuit's decision in Lindenberg is not binding on Tennessee state courts; however, its holding may still have far reaching effects in Tennessee state court cases, as plaintiffs will certainly have more ammunition, as well as persuasive authority, to argue that Tennessee's cap on punitive damages in civil cases is unconstitutional.

The insurer and the State of Tennessee, who intervened in the case, have 90 days from the date of the Lindenberg decision to petition the U.S. Supreme Court for review of the Sixth Circuit's decision. Such a review is based on judicial discretion and a petition to the Supreme Court will be granted only for compelling reasons.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions