may 2002

Legal Issues

Appeals Court upholds state's cap on punitive damages
The North Carolina Court of Appeals has upheld the constitutionality of the state’s cap on punitive damages in a case involving a Gaston County couple’s lawsuit against Kmart. The law, which NCCBI prodded the General Assembly to adopt in 1995 when it led a major tort reform movement, limits the amount of punitive damages that can be awarded at $250,000 or three times the compensatory damages, whichever is larger.

In its April 18 ruling, the appeals court rejected the plaintiffs’ argument that the legislative restriction on punitive damage awards is unconstitutional. Writing for the majority, Judge Albert S. Thomas Jr. said that “the General Assembly acted within the bounds of the North Carolina Constitution and in accordance with its legislative prerogative” in setting a cap on punitive damages. Judge Robert Hunter concurred.

Judge K. Edward Greene concurred in part and dissented in part, writing that he believes the punitive damages cap “impermissibly infringes on a party's constitutional right to a jury trial on the determination of punitive damages.” On the other hand, Judge Greene also said he thought the $23 million in punitive damages originally levied by the trial jury was “grossly excessive.” The case is NO. COA00-1516.

“Six years ago, the General Assembly took a reasonable, commonsense approach to limit excessive jury awards,” said James C. Grant, head of the appellate team in the trial practice group at Alston & Bird, who successfully argued for the defendant in the appeal. “We’re pleased that the judges have affirmed this approach.”

Grant added: “We were happy to hear that even the dissenting judge wrote that he believed the jury’s $23 million punitive damages award transcended the constitutional limits of the federal Due Process Clause. It’s refreshing to note that in this case, common sense prevailed.”

The case was the first challenge of North Carolina’s damage-cap law in appellate court, and may be appealed to the North Carolina Supreme Court. Several other states have passed similar laws dating back to the 1980s. Since 1989, courts have upheld punitive damage-cap limits in Georgia, Virginia and Idaho while rejecting those in Illinois, Washington State, Oregon, Alabama and Ohio.

The case involved husband and wife Dan and Alice Rhyne, who were confronted by two Kmart employees when they were walking near the store on April 28, 1998. The employees, accusing the couple of rummaging through the store’s garbage, grabbed Mr. Rhyne and restrained Mrs. Rhyne when she tried to help.