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Appeals Court Upholds Cap on Punitive Damages
By Steve Tuttle
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 during a tort reform movement,
limits the amount of punitive damages that can be awarded to $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.”
“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.
The plaintiffs filed a complaint against Kmart and its two employees,
and a jury awarded compensatory damages of $8,255 for Mr. Rhyne and
$10,730 for Mrs. Rhyne. The jury then awarded them a combined $23
million in punitive damages. Citing the state law capping such
damages, Superior Court Judge Richard Boner reduced the punitive
damages awards to $250,000 per claimant.
State Goes Into Bond Market: Just days after having its Triple
A credit rating reaffirmed, the state went into the credit market with
$355 million in bonds and sold them using variable rate financing. It
was the first time the state has sold bonds at variable instead of
fixed interest rates.
The $355 million in higher education and clean water bonds initially
will have the same interest rate of 1.82 percent but that rate will
change weekly. State Treasurer Richard Moore, who last year pushed the
General Assembly to allow him to explore such financial alternatives,
said the variable rate structure of the bond debt could save the state
$45 million in interest over the life of the bonds.
Bank of America Securities LLC, Bear, Sterns and Co. Inc., Goldman,
Sachs & Co. and Wachovia Bank NA will serve as remarketing agents
for the bonds, which were sold in four equal blocks.
The state also tried something new in March when it sold $239.4
million in general obligation bonds using a competitive electronic
bidding process. Goldman Sachs won the competitive bidding by offering
an interest rate of 4.05 percent. A Goldman Sachs official said the
electronic bidding process “results in more aggressive bidding among
potential purchasers, which produces a lower true interest cost to
North Carolina.”
Moore said the lower rate obtained through electronic bidding saved
the state $14.7 million.
Survey Finds Lots of Jobs: Despite the state’s high
unemployment rate, there are nearly 6,782 jobs going begging at
companies all across the state, according to a recent survey by the
N.C. Employment Security Commission.
More than 40 percent of those job openings are in professional,
technical and managerial positions, the survey said. The 2,700 largest
employers in the state surveyed by the ESC said they anticipated
creating 4,731 new jobs in coming months. Officials said that the
total of more than 11,500 currently available or soon-to-be-created
jobs indicates a strong economic recovery ahead.
— Steve Tuttle
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