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.