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South Carolina Cap on Punitive Damages: Statutory Right or Affirmative Defense?

On January 15, 2020, the South Carolina Court of Appeals issued its opinion in Garrison v. Target Corporation, and sent civil defense attorneys into a frenzy.  The landmark decision rocked the civil litigation world, as the three-judge panel held that the cap on punitive damages found in S.C. Code Ann. § 15-32-530 was an affirmative defense, rather than a statutory right.  As an affirmative defense, the cap must be plead in a party’s first responsive pleading or it is deemed waived.  The holding was especially startling to civil defense attorneys, as losing out on the cap could leave clients with substantial punitive damage exposure.  When this decision was issued, defense attorneys all around the state began the process of amending their answers to include the statutory punitive damage cap.

A Mother’s Nightmare

Denise Garrison visited a Target store with her eight-year-old daughter.  While the pair was in the parking lot, Mrs. Garrison’s daughter picked up a syringe with a needle in it and asked Mrs. Garrison what it was. Mrs. Garrison “immediately reacted” by swatting the syringe out of her daughter’s hand.  When Mrs. Garrison swatted the syringe, the needle punctured her hand.  Mrs. Garrison went inside the store to wash her hands several times. She also called her husband who advised her to report the incident.  Mrs. Garrison reported the incident to the store manager who took possession of the syringe and completed a “Guest Incident Report” form.  The store manager advised Mrs.. Garrison to get medical treatment and give the bill to her.  The next day, Mrs. Garrison visited a local emergency room where she was referred to an infectious disease specialist at AnMed Health Specialty Clinic.  At the clinic, Mrs. Garrison was tested for HIV and hepatitis and was prescribed a number of medications targeted at preventing HIV and hepatitis.  The medication caused complications and discomfort, and Mrs. Garrison had to have her blood tested every three months for approximately one year.

After Target refused to pay for the medical bills, Mrs. Garrison and her husband filed an action against Target seeking damages for negligence, violation of the South Carolina Unfair Trade Practices Act, and loss of consortium.

The Jury Awards Mrs. Garrison $100,000 in Compensatory Damages and $4.5 Million in Punitive Damages

At the conclusion of the trial, an Anderson County jury returned a verdict for Mrs. Garrison that included $100,000 in compensatory damages and $4.5 million for punitive damages.  The jury also awarded her husband $3,500 for lost wages and $5,000 for loss of consortium.  The presiding judge, Circuit Court Judge Keith Kelly, set aside the jury’s $4.5 million punitive damages award finding that (1) there was no evidence that Target “engaged in a pattern of reckless, willful, or wanton conduct that is sufficient reprehensible to justify the punitive damages award, (2) the ratio between the punitive damages award and the actual damages award was “in excess of 45:1,” and (3) that the award violated Target’s due process rights.  The Garrisons appealed the trial court’s order setting aside the punitive damage award.

The Appeal and Waiver of Statutory Punitive Damages Cap

The Plaintiffs argued on appeal that Target waived application of the punitive damages caps in S.C. Code Ann. § 15-32-530.  They argued that by failing to raise the statutory cap as an affirmative defense in its responsive pleadings, Target waived the application of the cap, and that because the statute’s language as a whole necessarily affects the proof at trial, they would have presented more evidence concerning Target’s prioritization of profits over safety had they known that Target was going to invoke the caps.

I. The Court Relies on Policy of Avoiding Unfair Surprise

The Court pointed to Rule 8(c) of the South Carolina Rules of Civil Procedure (SCRCP), which provides:

In pleading to a preceding pleading, a party shall set forth affirmatively the defenses: accord and satisfaction, arbitration and award, assumption of risk, condonation, contributory negligence, discharge in bankruptcy, duress, fraud, illegality, injury by fellow servant, laches, license, misrepresentation, mistake, payment, plene administravit or the administration of the estate is closed, recrimination, release, res judicata, statute of frauds, statute of limitations, waiver, and any other matter constituting an avoidance or affirmative defense.

The Court also referenced a note to Rule 8(c) which states that its aim is to “avoid the ‘surprise’ defense permissible under the old general denial answer.”  The Court went on to analyze federal cases interpreting the same provision from the federal rules.  The Court noted that “the purpose of the federal rule ‘is to inform the court and the parties how the case will be tried’” and that “some federal courts treat an issue as an affirmative defense if requiring the defendant to plead the issue is necessary to avoid unfair surprise to the plaintiff.”  See Simon v. United States, 891 F.2d 1154, 1158 (5th Cir. 1990) (quoting Morris v. Homeco International, 853 F.2d 337, 342 (5th Cir. 1988)); see also In re ZAGG Inc. S’holder Derivative Action, 826 F.3d 1222, 1231 (10th Cir. 2016).

The Court relied heavily on the underlying principles of helping parties, particularly Plaintiffs, avoid unfair surprise when it noted that courts will enforce a defendant’s requirement to plead an affirmative defense “when a statutory liability limit such as section 15-32-530 affects the proof to be presented at trial.”  The Court stated that “[a] plaintiff lacking notice that a defendant will rely on such a statute is unlikely to conduct the discovery or other investigation necessary to obtain proof overcoming the statutory limit.”

Target sought to apply the exceptions to the damages cap found in S.C. Code Ann. § 15-32-530 (B) and (C), which provide:

(B) The limitation provided in subsection (A) may not be disclosed to the jury. If the jury returns a verdict for punitive damages in excess of the maximum amount specified in subsection (A), the trial court should first determine whether:

(1) the wrongful conduct proven under this section was motivated primarily by unreasonable financial gain and determines that the unreasonably dangerous nature of the conduct, together with the high likelihood of injury resulting from the conduct, was known or approved by the managing agent, director, officer, or the person responsible for making policy decisions on behalf of the defendant; […]

If the trial court determines that either item (1) or (2) apply, then punitive damages must not exceed the greater of four times the amount of compensatory damages awarded to each claimant entitled thereto or the sum of two million dollars and, if necessary, the trial court shall reduce the award and enter judgment for punitive damages in the maximum amount allowed by this subsection. If the trial court determines that neither item (1) or (2) apply, then the award of punitive damages shall be subject to the maximum amount provided by subsection (A) and the trial court shall reduce the award and enter judgment for punitive damages in the maximum amount allowed by subsection (A).

(C) However, when the trial court determines one of the following apply, there shall be no cap on punitive damages:

(1) at the time of injury the defendant had an intent to harm and determines that the defendant’s conduct did in fact harm the claimant; […]

Subsections (B) and (C) require special findings relating to, inter alia, unreasonable financial gain as a motivation for the wrongful conduct or the defendant’s intent to harm.  The Garrison Court held that evidence of these facts “may or may not be introduced at trial in the absence of the defendant’s pre-trial assertion of the punitive damages cap.”  Therefore, the Court found it unfair and unrealistic to assume that such evidence will always be introduced in any given case, and pointed to both South Carolina precedent and persuasive federal case law that “disregard[ed] the fiction that a plaintiff is automatically on notice that a defendant will invoke a statutory damages cap to limit a jury’s award.”

II. The Court Rejects Texas Case Placing Burden on Plaintiff

Despite its “logical appeal,” the Court chose to disregard Zorrilla v. Aypco Construction II, LLC, a Texas Supreme Court case offered by Target, which held that the state’s statutory cap on punitive damages “did not bear the characteristics of an affirmative defense or avoidance” because it did not “require proof of any additional fact to establish its applicability.”  469 S.W.3d 143, 157 (Tex. 2015).  The Zorilla Court placed the burden on the plaintiff to show that a case fell within one of the exclusions, and that because the statute did not place the burden of proof on the defendant, it was not an affirmative defense or avoidance that the defendant was required to plead.  See id.

The Garrison Court held that because the criteria of S.C. Code Ann. § 15-32-530 “undoubtedly affected [the] proof at trial,” it involves “more than just a pure issue of law” and that “[to] develop the evidence necessary to invoke one of the two alternatives of the $500,000 cap, a plaintiff must first obtain the evidence through extra discovery or other investigative measures—measures that are less likely to unfold without prior notice that the defendant will raise the cap as an issue before the circuit court.”  The Court noted that “section 15-32-530 does not provide for a separate post-trial evidentiary hearing to submit evidence pertaining to the factors set forth in subsections (B) and (C),” leading the Court to believe that S.C. Code Ann. § 15-32-530 requires “the circuit court to make a determination under subsections (B) or (C) based on the evidence presented to the jury at trial.”

III. Ultimate Holding

The Court concluded that in this case, Target was required to plead the cap in S.C. Code Ann. § 15-32-530 or, at the very least, “raise the defense prior to the conclusion of discovery so that the Garrisons would have had prior notice of the additional evidence they needed to lift the punitive damages limit.”

Implications

The Garrison decision has wide-reaching implications for civil litigation attorneys on both sides of the aisle.  For defense counsel, it means that they must plead the statutory cap on punitive damages in their responsive pleadings or risk it being deemed waived, leaving clients with potentially millions in punitive damages exposure.  For plaintiffs’ counsel, it means going the extra mile in discovery to be sure that they have sufficient evidence to contest the cap, if timely asserted by defense counsel.  It is likely that this case will be heard by the South Carolina Supreme Court within its upcoming terms of court.  Until then, attorneys across the state will continue to adjust to the post-Garrison landscape.

About the Author: Meagan Allen is an associate with Martineau King PLLC and focuses the majority of her practice on personal injury and construction litigation defense. Comments and feedback are welcome.  Meagan can be contacted by email at [email protected]

Important Disclaimer: The above is not legal advice and is made available for educational purposes only.  You should not act upon this information without seeking advice from a lawyer licensed in your own state or jurisdiction.  This article should not be used as a substitute for competent legal advice from a licensed professional attorney in your state or jurisdiction.  The presentation of this information does not form a lawyer/client relationship.

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