On December 8, 2011, the Arkansas Supreme Court handed down its decision in Bayer Cropscience LP v. Schafer, 2011 Ark. 518. The Court’s decision is significant for a number of reasons, not the least of which are a couple of procedural issues that might be easily overlooked upon first glance in light of the Court’s holding overruling Arkansas’s punitive damages caps.
Punitive Damages Cap Declared Unconstitutional
“We hold that section 16-55-208 is unconstitutional under article 5, section 32 as it limits the amount of recovery outside the employment relationship.”
In a decision that affirmed a $48 million dollar judgment in favor of Arkansas rice farmers, the Arkansas Supreme Court ruled that the punitive damage limitations contained in Arkansas Code Annotated section 16-55-208 are unconstitutional. Schafer, 2011 Ark. 518, at 12.
That statute, passed by the Arkansas General Assembly as part of the Civil Justice Reform Act of 2003, provided for each plaintiff a cap on punitive damages in the amount of $250,000 or three times the amount of compensatory damages (not to exceed $1,000,000). See Ark. Code Ann. § 16-55-208.
In its opinion, the Arkansas Supreme Court observed that the Arkansas Constitution gives the Arkansas General Assembly the power to limit the amount of recovery “only in matters arising between employer and employee.” Schafer, 2011 Ark. 518, at 12. Article 5, section 32 of the Arkansas Constitution, as amended by amended 26, provides the following:
The General Assembly shall have the power to enact laws prescribing the amount of compensation to be paid by employers for injuries to or death of employees, and to whom said payment shall be made. It shall have power to provide the means, methods, and forum for adjudicating claims arising under said laws, and for securing payment of the same. Provided that otherwise no law shall be enacted limiting the amount to be recovered for injuries resulting in death or for injuries to persons or property; and in case of death from such injuries the right of action shall survive, and the General Assembly shall prescribe for whose benefit such action shall be prosecuted.
Ark. Const art. 5, § 32.
On appeal, Bayer argued that article 5, section 32 of the Arkansas Constitution referred only to compensatory damages and not to punitive damages. The Arkansas Supreme Court, however, disagreed: “Although compensatory and punitive damages serve differing purposes, an award of punitive damages is nonetheless an integrant part of ‘the amount recovered for injuries resulting in death or for injuries to persons or property.’” Schafer, 2011 Ark. 518, at 12 (quoting Ark. Const art. 5, § 32). Accordingly, the Arkansas Supreme Court held that section 16-55-208 is unconstitutional under the Arkansas Constitution because it limits the amount of recover outside the employment relationship, which is expressly prohibited by article 5, section 32.
Possible Departure from Arkansas’s Strict Preservation Rules?
The ruling on the punitive damages caps is monumental in and of itself, but what makes it even more interesting is the Court’s analysis of how it was able to reach the merits of that decision, which was an issue that split the Court 6-1.
In her concurring opinion, Justice Karen Baker explained that while she agrees with the outcome reached by the majority, she would not have reached the merits of the constitutionality of Arkansas Code Annotated section 16-55-208 because she did not believe that issue was preserved for appellate review. Schafer, 2011 Ark. 518, at 24–25 (Baker, J., Concurring). Justice Baker argued that because the circuit court ruled on the constitutionality of that statute from the bench and entered no written opinion concerning that issue, it was not preserved for appellate review. Id. In support of her opinion, Justice Baker cited to a number of cases in which the Arkansas Supreme Court has previously declined to rule on constitutional issues that had been ruled on from the bench only and that had not been included in the written orders. See, e.g., Boellner v. Clinical Study Ctrs., LLP, 2011 Ark. 83, at 23, ___ S.W.3d ___, ___ (holding that the constitutional issue presented in that case was not preserved for appellate review because “[a]lthough the circuit court ruled on this issue from the bench, the final, written order did not address this issue.”).
In footnote 5, Justice Courtney Hudson Goodson, writing for the majority, responded to Justice Baker’s concurring opinion concerning the issue of the constitutionality of the punitive damages cap: “Despite the concurring justice’s protestations to the contrary, it is without question that the issue concerning the constitutionality of the statutory cap on punitive damages is preserved for appeal.” Schafer, 2011 Ark. 518, at 14 n.5. In this case, the constitutional issue was raised in a pretrial motion and discussed in a hearing, at which time the circuit court orally declared from the bench that the statute in question was unconstitutional. According to the Arkansas Supreme Court, its preservation rules “require nothing more.” Id.
The majority went on to explain that “[a]lthough considered the better practice for a circuit court to explain its decision, findings of fact and conclusions of law are not necessary with regard to decisions on motions.” (emphasis added). Id. In footnote 5, the majority further explained that if the concurrence was correct in its view, then the Court would also have been precluded from reaching the merits of the circuit court’s decisions in a couple of other issues regarding motions in this appeal, as the circuit court also disposed of those other motions by ruling from the bench. Id. The Court’s conclusion is that “the circuit court’s failure to specify the ground upon which it found the statute unconstitutional does not deter us from performing our duty to review the circuit court’s decision.” Id.
Although couched as a decision rooted in precedent, Justice Baker seemed to view the Arkansas Supreme Court’s decision to reach the merits of the constitutional issue in this case as a departure from the Court’s strict preservation rules. It will be interesting to see whether the Schafer preservation rule is followed by the Court in decisions to come. Regardless of whether it is cited in future decisions, there can be no doubt that it will be cited in numerous appellant’s briefs in the months and years to come.
Perfecting the Notice of Appeal in Light of Posttrial Motions
“A notice of appeal must be judged by what it recites and not what it was intended to recite.”
Among other arguments on appeal, Bayer also challenged the $42,000,000 punitive damages award as excessive under the U.S. Constitution. The Arkansas Supreme Court refused to reach this issue because it held that it was not preserved for appellate review. Schafer, 2011 Ark. 518, at 23.
Bayer made its arguments to the circuit court concerning the excessiveness of the damages award in its posttrial motion for new trial and remittitur. Id. Because the circuit court did not take action on the posttrial motion within the 30-day window allowed pursuant to Rule 4(b)(1) of the Arkansas Rules of Appellate Procedure—Civil, that motion was deemed denied at the expiration of the 30-day period. Id. at 23–24. When the Bayer defendants filed their notices of appeal (all of which were identical), they failed to state in the notices of appeal that the appeal was being sought from both the judgment that was entered as well as the denial of the motion for new trial and remittitur. Id. The Arkansas Supreme Court held that it is necessary to file a notice of appeal from the denial of the posttrial motion in order to appeal from the issues raised therein. Id. at 24. According to the Court, unless the notice of appeal references both the final judgment and the deemed-denied ruling, the only appealable matter will be the original order. Id.
The following is a timeline of the post-trial procedural events that occurred in this case:
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May 5—Judgment Entered
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May 19—Bayer timely filed motions for judgment notwithstanding the verdict, new trial, and remittitur.
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June 18—Motions deemed denied.
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July 19—Each Bayer defendant filed separate and timely notices of appeal from the judgment entered on May 5, 2010.
See Schafer, 2011 Ark. 518, at 8.
To have preserved this issue for appeal, each of the Bayer defendants could have explained in their notices of appeal that they were appealing from both the May 5th judgment and the lower court’s denial of its motion for new trial and remittitur in the notice of appeal it filed on July 19th. Another option would have been to file a notice of appeal within 30 days of the date the judgment was entered in this matter. Then, following the deemed-denied date of June 18th, Bayer could have filed an amended notice of appeal within 30 days of June 18th that indicated that it was appealing from both the May 5th judgment and the denial of its motion for new trial and remittitur.
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