Montana Supreme Court sends back $52 million case, foregoes decision on punitive damages cap

MarketsAssociated Press

The Montana Supreme Court overturned a $52 million jury verdict in a breach-of-contract case, but justices did not rule on the constitutionality of the state's $10 million punitive damages cap.

The court on Wednesday sent the case back to District Court in Butte for a new trial, saying Masters Group International's lawsuit against Comerica Bank should have been tried under Michigan law, where Comerica previously was headquartered.

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The Supreme Court, therefore, did not rule on the question of whether Montana can rightfully limit jury decisions on punitive damages. They are awarded in addition to what is necessary to compensate losses so as to punish particularly malicious behavior.

The Silver Bow County jury had unanimously decided Comerica was in breach of contract and was liable for $52 million in damages to Masters Group for ultimately thwarting its effort to open an office supply distribution business in Butte. The award included $10.5 million in punitive damages — $500,000 over the limit established by the 2003 Montana Legislature to keep juries from awarding excessive damages.

For the mega-corporations of the world, "that's nothing," said Lawrence Anderson, who argued against the punitive damages cap.

Montana's cap is the lesser of $10 million or 3 percent of net worth. The Montana Trial Lawyers Association said the law is unconstitutional.

"We're in firm belief that juries possess novel facts and are in a better position to assess punitive damages than is a legislature," executive director Al Smith said of the 500-member association.

Smith compared the punitive damages cap to a limit established in 1995 to keep noneconomic damages in medical malpractice cases below $250,000.

"What we found with medical malpractice is they routinely settle above the cap limit simply so that it won't get to the Supreme Court," Smith said. "I'm afraid that's what's going to happen with the punitive damages, too."

More than half of states have enacted various punitive damage caps of certain dollar amounts or some multiple of compensatory damages, according to information from the American Tort Reform Association.