BILL ANALYSIS
C.S.S.B. 25
By: Sibley
Economic Development
2-14-95
Committee Report (Substituted)
BACKGROUND
Punitive damages, also known as exemplary damages, serve to punish
defendants for certain types of behavior. Punitive damages can be
awarded where the defendant's wrongdoing has been intentional and
deliberate; where it indicates such a deliberate disregard of the
interests of others that the conduct may be called willful or
wanton; or where the conduct is "reckless," which means proceeding
with knowledge that the harm is substantially certain to occur.
Ordinary negligence does not warrant the imposition of punitive
damages.
Courts developed the theory of punitive damages to deter and punish
wrongdoing that might otherwise go unpunished and undeterred
because the wrongdoing did no compensable harm. The two central
purposes served by punitive damages are punishment and deterrence.
Courts sometimes stress the first--punishment, the retributive
purpose, and at other times the second--the preventative purpose of
the law. However, questions have been raised as to whether the
amount of current awards exceed these central purposes.
PURPOSE
As proposed, C.S.S.B. 25 limits the amount of and circumstances
under which a court may award exemplary damages.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not grant any
additional rulemaking authority to a state officer, institution, or
agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Chapter 41, Civil Practice and Remedies Code, as
follows:
CHAPTER 41. EXEMPLARY DAMAGES
Sec. 41.001. DEFINITIONS. Adds "clear and convincing" and
"economic damages" to the list of definitions. Deletes "gross
negligence." Redefines "exemplary damages" and "malice."
Sec. 41.002. APPLICABILITY. (a) Applies this chapter to any
action in which the claimant seeks exemplary damages.
(b) Provides that this chapter establishes the maximum
exemplary damages that may be awarded in certain actions,
including actions awarded under another state law. Provides
that this chapter does not apply if another law establishes
a lower maximum amount. Makes conforming changes.
(c) Makes conforming changes.
(d) Provides that notwithstanding any provision to the
contrary, this chapter does not apply to Section 15.21,
Business and Commerce Code (Texas Free Enterprise and
Antitrust Act of 1983).
Sec. 41.003. STANDARDS FOR RECOVERY OF EXEMPLARY DAMAGES.
(a) Authorizes exemplary damages to be awarded only if the
claimant proves by clear and convincing evidence that the harm
resulted from fraud or malice, except as provided in
Subsection (c). Deletes a provision including gross
negligence on the list of authorized damages for which a
claimant may receive exemplary damages.
(b) Requires the claimant to prove by clear and convincing
evidence the elements of exemplary damages as provided by
this section. Provides that the burden of proof for
exemplary damages lies with the claimant and may not be
shifted to the defendant or satisfied by evidence of
ordinary negligence, bad faith or deceptive trade practices.
(c) Authorizes exemplary damages to be awarded if a claimant
relies on a statute authorizing damages in specified
circumstances or in conjunction with a specified culpable
mental state only if the claimant proves by clear and
convincing evidence that the damages result from these
circumstances or culpable mental state.
Sec. 41.004. FACTORS PRECLUDING RECOVERY. (a) Makes
conforming changes.
(b) Authorizes a claimant to recover exemplary damages if
the claimant establishes by clear and convincing evidence
that the harm resulted from malice as defined in Section
41.001(7)(A). Prohibits exemplary damages from being
awarded to a claimant who elects to have the claimant's
recovery multiplied under another statute.
Sec. 41.005. HARM RESULTING FROM CRIMINAL ACT. (a) Prohibits
a court from awarding exemplary damages against a defendant
because of a criminal act in an action arising from harm
resulting from the criminal act.
(b) Provides that Subsection (a) does not apply if the
criminal act was committed by an employee of the defendant,
the defendant is a party to the criminal act, the criminal
act occurred at a location where the defendant was
maintaining a common nuisance and had not made reasonable
attempts to abate the nuisance, or the criminal act resulted
from the defendant's intentional or knowing violation of a
statutory duty and the act occurred after the statutory
deadline for compliance with that duty.
(c) Provides that the employer may be liable for punitive
damages in an action arising out of a criminal act committed
by an employee only if the principal authorized the doing
and the manner of the act, the agent was unfit and the
principal acted with malice, the agent was employed in a
managerial capacity and was acting in the scope of
employment, or the employer or the manager of the employer
ratified or approved the act.
Sec. 41.006. Redesignates existing Section 41.005.
Sec. 41.007. Redesignates existing Section 41.006.
Sec. 41.008. LIMITATION ON AMOUNT OF RECOVERY. (a) Requires
the trier of fact to determine the amount of economic damages
separately from the amount of other damages if a claimant
seeks recovery of exemplary damages.
(b) Prohibits exemplary damages from exceeding an amount
equal to the greater of two, rather than four, times the
amount of economic, rather than actual, damages plus an
amount equal to any noneconomic damages found by the jury
not to exceed $750,000; or $200,000.
(c) Provides that this section does not apply to
circumstances in which there was an intentional or knowing
felony offense as defined in Sections 19.02, 19.03, 20.04,
22.02, 22.011, 22.021, 22.04, 32.21, 32.43, 32.45, 32.46,
and 32.47 of the Penal Code.
(d) Provides that this section does not apply to
circumstances in which there was an intentional or knowing
third degree felony offense or greater as defined in Chapter
31, Penal Code (theft).
(e) Provides that "intentionally" and "knowingly" have the
same meanings assigned in Section 6.03(a) and (b) of the
Penal Code.
(f) Prohibits the provisions of Subsections (a) and (b) from
being made known to a jury by any means.
Sec. 41.009. BIFURCATED TRIAL. (a) Requires the court to
provide for a bifurcated trial on a motion by the defendant.
Requires a motion under this subsection to be made prior to
voir dire examination of the jury or at a time specified by a
pretrial court order.
(b) Requires the court to provide for a bifurcated trial on
the motion of any defendant in an action with more than one
defendant.
(c) Requires the trier of fact to determine the liability
for compensatory and exemplary damages and the amount of
compensatory damages in the first phase of a bifurcated
trial.
(d) Requires the trier of fact, if liability for exemplary
damages is found during the first phase of the bifurcated
trial, to determine the amount of exemplary damages to be
awarded in the second phase of the trial.
Sec. 41.010. CONSIDERATIONS IN MAKING AWARD. (a) Requires
the trier of fact to consider the definition and purposes of
exemplary damages under Section 41.001 before making an award.
(b) Provides that the determination of whether to award and
the amount of exemplary damages to be awarded is within the
discretion of the trier of fact.
Sec. 41.011. EVIDENCE RELATING TO AMOUNT OF EXEMPLARY
DAMAGES. (a) Requires the trier of fact, when determining the
amount of exemplary damages, to consider evidence relating to
the nature of the wrong; the character of the conduct
involved; the degree of culpability of the wrongdoer; the
situation and sensibilities of the parties; the extent such
conduct offends a public sense of justice and propriety; and
the net worth of the defendant.
(b) Provides that evidence that is relevant only to the
amount of exemplary damages that may be awarded is not
admissible during the first phase of a bifurcated trial.
Sec. 41.012. JURY INSTRUCTIONS. Requires the court to
instruct the jury with regard to Sections 41.001, 41.003,
41.010, and 41.011.
Sec. 41.013. JUDICIAL REVIEW OF AWARD. (a) Requires an
appellate court reviewing findings by a trier of fact
concerning exemplary damage liability or the amount of
exemplary damages awarded to state, in a written opinion, the
court's reason for upholding or disturbing the finding or
award. Requires the opinion to address the evidence or lack
of evidence, as it relates to the liability for or amount of
exemplary damages, with specificity and in reference to the
requirements of this chapter, except as provided for in
Subsection (b).
(b) Provides that this section does not apply to the supreme
court with respect to its consideration of an application
for writ of error.
Deletes existing Sections 41.008 and 41.009 to make conforming
changes.
SECTION 2. Effective date: September 1, 1995.
Makes application of this Act prospective.
SECTION 3. Emergency clause.