Originally published by David Fowler Johnson.
In Davis v. White, a lawyer sued his former partner over the application of a receivable. No. 02-13-00191-CV, 2016 Tex. App. LEXIS 3075 (Tex. App.—Fort Worth March 24, 2016, no pet. history). A jury awarded the plaintiff over $300,000 in actual damages and $2.8 million in exemplary damages. The trial court awarded the plaintiff his actual damages, but applied the exemplary damages cap, and limited that award to around $550,000. The plaintiff appealed, arguing that the cap should not have been applied because he pleaded and proved that the defendant’s actions fell within the “misapplication of fiduciary property” exception to the cap listed in Texas Civil Practice and Remedies Code section 41.008(c)(10). The court of appeals disagreed, holding that the plaintiff did not plead facts in support of the capbuster “in relation to his punitive damages claim.” The plaintiff also argued that he would have pled the capbuster and would have introduced proof of a violation of Penal Code section 32.45 if the defendant had pled the punitive damages cap. Following Texas Supreme Court precedent, the court of appeals held that the defendant did not need to plead the cap to be entitled to its application. Moreover, the court of appeals held that in light of the plaintiff’s concession that he did not plead and prove the capbuster, the trial court did not err in applying the cap and reducing the jury’s exemplary damages award.
Interesting Note: The author has previously written on the issues highlighted in this opinion. Click here to read my previous article. Misapplication of fiduciary property or property of a financial institution is a charge that has been in existence in Texas for over forty years. Tex. Penal Code Ann. § 32.45. A person commits the offense of misapplication of fiduciary property by intentionally, knowingly, or recklessly misapplying property he holds as a fiduciary in a manner that involves substantial risk of loss to the owner of the property. Id. at § 32.45(b). Plaintiffs in civil litigation involving fiduciaries often seek punitive or exemplary damages. One important protection for defendants is the statutory cap on the amount of exemplary damages. The Texas Civil Practice and Remedies Code permits exemplary damages of up to the greater of: (1) (a) two times the amount of economic damages; plus (b) an amount equal to any noneconomic damages found by the jury, not to exceed $750,000; or (2) $200,000. Tex. Civ. Prac. & Rem. Code Ann. § 41.008(b). As shown above, this cap need not be affirmatively pleaded as it applies automatically and does not require proof of additional facts. Zorrilla v. Aypco Constr., II, LLC, 469 S.W.3d 143 (Tex. 2015).
These limits do not apply to claims supporting misapplication of fiduciary property or theft of a third degree felony level if “the conduct was committed knowingly or intentionally.” Tex. Civ. Prac. & Rem. Code Ann. § 41.008(c)(10). Accordingly, if a defendant is found liable for one of these crimes with the required knowledge or intent, it cannot take advantage of the statutory exemplary damages caps. It is important to note that even though a defendant does not have to plead the cap, a plaintiff must plead and prove “the defendant intentionally or knowingly engaged in felonious conduct under criminal statutes expressly excluded from the cap under section 41.008(c).” Zorrilla, 469 S.W.3d at 157. The Texas Pattern Jury Charge has a form question that a plaintiff can use to submit this capbusting question to the jury.
In the end, as the Davis case illustrates, it is very important for a plaintiff who wants to bust the exemplary damages cap to: (1) plead a capbusting provision in relation to its punitive damages claim, (2) introduce evidence regarding the capbusting offense, (3) request a question on the capbusting provision in the charge, and (4) secure findings that support its application. If all of these things are done, a trial court should apply the capbuster and award a jury’s full finding of exemplary damages.
Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.
from Texas Bar Today http://ift.tt/260V7Zx
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