One unfortunate lawsuit can cause outsized trouble for any business. To soften the blow for small businesses, many states have passed tort reform laws that limit the damages a plaintiff may recover. In Tennessee, there is a statutory cap on noneconomic damages (such as pain and suffering, and punitive damages) of $750,000, with some exceptions for particularly bad actors. This law came under fire recently when plaintiffs challenged the validity of the statute, hoping to cash in by collecting more than the $750,000 authorized by law. In a decision released on February 26, 2020, the Tennessee Supreme Court disagreed with the plaintiffs and upheld the statute.
Specifically, the plaintiffs argued that the Tennessee damages cap was unconstitutional under state law for three reasons: (1) the statute violated the right to trial by jury; (2) the statute violated the separation of powers between the legislative branch and the judicial branch; and (3) the statute discriminated disproportionately against women. The Tennessee Supreme Court disagreed on all three counts.
First, although determining the amount of damages is properly the function of a jury, the Tennessee Supreme Court held that the statute did not affect the jury’s role as the finder of fact. Under the noneconomic damages cap, the jury was still allowed to determine the amount of noneconomic damages. After the jury made their determination, the judge would apply the damages cap to limit the plaintiff’s recovery to $750,000 if the jury determined that the noneconomic damages were greater. As a result, the Tennessee statute did not interfere with the jury’s role as finder of fact. Instead, the Tennessee Supreme Court held that the statute merely limited a plaintiff’s recovery as a matter of law – a power well within the discretion of the Legislature.
Similarly, the Tennessee Supreme Court also rejected the plaintiff’s argument that the noneconomic damages cap violated the separation of powers by imposing a legislative restraint on the operation of the judiciary. While the legislature is prohibited from directly interfering in the procedural rules of the court system, the legislature does have the power to enact substantive law. The court held that the noneconomic damages cap was substantive law, and therefore there was no violation of the separation of powers.
Finally, the Tennessee Supreme Court was asked whether the noneconomic damages cap violated the equal protection guarantees of both the Tennessee and United States constitutions. The plaintiffs claimed that the statute had a disparate impact on women. The Court quickly dismissed this claim because the plaintiffs failed to allege that there was any discriminatory motive behind the statute.
With all three of the plaintiffs’ arguments disposed of, the Tennessee Supreme Court upheld the noneconomic damages cap. The NFIB Legal Center applauds the decision, which reached a result that the Legal Center had argued for previously (insert link here). The decision is a positive result for small business owners, who can sleep a bit easier at night knowing that there is a limit to their liability.