Senate Bill No. 421

(By Senators Trump, Carmichael, Blair and Gaunch)

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[Introduced February 5, 2015; referred to the Committee on the Judiciary.]

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A BILL to amend the Code of West Virginia, 1931, as amended, by adding thereto a new section, designated §55-7-27, relating generally to treatment of punitive damages; providing for limitations on punitive damages; providing for when punitive damages may be awarded; providing for a bifurcated trial, upon request, for civil actions involving punitive damages; providing that one third of all punitive damages awards made in the state be tendered to the State Treasurer; providing that those remittances be deposited into the Revenue Shortfall Reserve Fund; and providing that those funds be administered according to section twenty, article two, chapter eleven-b of this code.

Be it enacted by the Legislature of West Virginia:

            That the Code of West Virginia, 1931, as amended, be amended by adding thereto a new section, designated §55-7-27, to read as follows:

ARTICLE 7. ACTIONS FOR INJURIES.

§55-7-27. Limitations on punitive damages.

            (a) An award of punitive damages may only occur in a civil action against a defendant if a plaintiff establishes by clear and convincing evidence that the damages suffered were the result of the conduct that was carried out by the defendant with actual malice toward the plaintiff or a conscious, reckless, and outrageous indifference to the health, safety and welfare of others.

            (b) Any civil action tried before a jury involving punitive damages shall, upon request of any defendant, be conducted in a bifurcated trial in accordance with the following guidelines:

            (1) In the first stage of a bifurcated trial, the jury shall determine liability for compensatory damages, and the amount of compensatory damages, if any.

            (2) If the jury finds during the first stage of a bifurcated trial that a defendant is liable for compensatory damages, then the court shall determine whether sufficient evidence exists to proceed with a consideration of punitive damages.

            (3) If the court finds that sufficient evidence exists to proceed with a consideration of punitive damages, the same jury shall determine if a defendant is liable for punitive damages in the second stage of a bifurcated trial and may award such damages.

            (4) If the jury returns an award for punitive damages that exceeds the amounts allowed under subsection (c) of this section, the court shall reduce any such award to comply with the limitations set forth therein.

            (c) The amount of punitive damages that may be awarded in a civil action may not exceed the greater of two times the amount of compensatory damages or $500,000, whichever is greater.

            (d) The Legislature hereby finds that:

            (1) Punitive damages are a form of damages awarded to a plaintiff in a civil action which are not compensatory in nature, and which are intended solely for the punishment of defendants found liable for certain bad acts.

            (2) Punitive damages are a powerful incentive for certain plaintiffs, and plaintiffs' counsel, to institute and prosecute civil actions against certain defendants, resulting in a valuable check on the behavior of bad actors in the marketplace.

            (3) Punitive damages, by their nature as noncompensatory damages, result in a windfall to plaintiffs, and their counsel, which may be better applied to contribute to the fiscal stability of the state.

            (e) One third of all awards of punitive damages in civil actions adjudicated in the courts of the state, and in the courts of the United States of America sitting in the state, shall be paid into the Revenue Shortfall Reserve Fund and administered therefrom as provided in section twenty, article two, chapter eleven-b of this code.

            (f) For civil actions adjudicated in the courts of the state, payments made by defendants in compliance with a court order awarding punitive damages shall be to the circuit clerk of the county in which the civil action was maintained. The circuit clerk shall pay to the plaintiff in the civil action, or their designee, a sum equal to two thirds of the payment made to the circuit clerk by the defendant(s), after the deduction of any amounts due and owing the court from the plaintiff. The circuit clerk shall remit the balance of the payment made by the defendant(s) to the State Treasurer, and a statement showing any deductions made therefrom by the circuit clerk, together with a certified copy of the court order awarding punitive damages.

            (g) For civil actions adjudicated in the courts of the United States of America sitting in the state, a party to such action shall file, upon a form prescribed by the Secretary of Tax and Revenue, an informational return stating the amount of punitive damages awarded to a plaintiff, the filing of which will be accompanied by a certified copy of the court order making such award. A copy of this return, together with a copy of the court order, shall also be filed with the circuit clerk of the county of residence of the defendant(s), if a natural person, or the county of the principal place of business if a domestic entity. The defendant(s) shall thereafter make payments in compliance with any such order to the circuit clerk of such county. The circuit clerk shall pay to the plaintiff in the civil action, or their designee, a sum equal to two thirds of the payment made to the circuit clerk by the defendant(s), after the deduction of any amounts due and owing the court from the plaintiff. The circuit clerk shall remit the balance of the payment made by the defendant(s) to the State Treasurer, and a statement showing any deductions made therefrom by the circuit clerk, together with a certified copy of the court order awarding punitive damages.

            (h) The State Treasurer shall deposit any amounts collected or received under this section into the Revenue Shortfall Reserve Fund and any such deposits shall be administered pursuant to section twenty, article two, chapter eleven-b of this code.

            NOTE: The purpose of this bill is to clarify when punitive damages may be awarded in civil actions, and to limit the amount of punitive damages that may be awarded to comport with the due process rights of defendants. The bill also requires that one third of all punitive damages awards made in the state be paid to the State Treasurer and deposited into the Revenue Shortfall Reserve Fund.

            §55-7-27 is new; therefore, strike-throughs and underscoring have been omitted.