Punitive / Exemplary Damages in Texas

What Are Punitive / Exemplary Damages?

Punitive or exemplary damages are “[s]uch damages ... given the plaintiff over and above the full compensation of his injuries for the purposes of punishing the defendant, of teaching him not to do it again, and of deterring others from following his example.” (Lavender v. Hofer (1983) 658 S.W.2d 812, 815 citing Law of Torts Fourth Addition (1971) Section 2 at 9.) “Both 22 Am.Jur.2d, Damages § 237 (1965) and 25 C.J.S., Damages § 117(1) (1966) follow Professor Prosser's analysis that exemplary damages are awarded for the purpose of punishing the defendant and making an example of the defendant to deter others.” (Id.) “Likewise, the Restatement (second) of Torts § 908 (1977) states the purposes of punitive damages are punishment of the wrong-doer and to set an example for others.” (Id.)

How to Structure the Motion

Texas Civil Practice and Remedies Code Sec, 2C 41 provides the standards for recovery of exemplary damages and states in relevant part under Sec. 41.003:

Except as provided by Subsection (c), exemplary damages may be awarded only if the claimant proves by clear and convincing evidence that the harm with respect to which the claimant seeks recovery of exemplary damages results from:

fraud;
malice; or
gross negligence.

The claimant must prove by clear and convincing evidence the elements of exemplary damages as provided by this section. This burden of proof may not be shifted to the defendant or satisfied by evidence of ordinary negligence, bad faith, or a deceptive trade practice.
If the claimant relies on a statute establishing a cause of action and authorizing exemplary damages in specified circumstances or in conjunction with a specified culpable mental state, exemplary damages may be awarded only if the claimant proves by clear and convincing evidence that the damages result from the specified circumstances or culpable mental state.
Exemplary damages may be awarded only if the jury was unanimous in regard to finding liability for and the amount of exemplary damages.
In all cases where the issue of exemplary damages is submitted to the jury, the following instruction shall be included in the charge of the court: "You are instructed that, in order for you to find exemplary damages, your answer to the question regarding the amount of such damages must be unanimous."

Sec. 41.004 (a) addresses factors precluding recover and provides in relevant part:

“Except as provided by Subsection (b), exemplary damages may be awarded only if damages other than nominal damages are awarded.”

Tex. Gov't Code § 437.416 also addresses punitive damages in the employment context and provides in relevant part:

On finding that a respondent engaged in an intentional unlawful employment practice under Section 437.204 as alleged in a complaint, a court may, as provided by this section, award:

compensatory damages; and
punitive damages.

A complainant may recover punitive damages against a respondent, other than a respondent that is a governmental entity, if the complainant demonstrates that the respondent engaged in an unlawful employment practice under Section 437.204 with malice or with reckless indifference to the state-protected rights of an aggrieved individual.
Compensatory damages awarded under this section may not include:

back pay;
interest on back pay; or
other relief authorized under Section 437.415(b).

Discovery

“Information regarding net worth is discoverable ‘in cases in which punitive or exemplary damages may be awarded.’” (Al Parker Buick Co. v. Touchy (1990) 788 S.W.2d 129, 131 citing Lunsford v. Morris (1988) 746 S.W.2d 471, 473.) “In Lunsford v. Morris, the supreme court held that a party seeking discovery of ‘any 'relevant' matter’ need not cross any evidentiary threshold, e.g., by making a prima facie showing of entitlement to punitive damages, before discovery is permitted.” (Touchy, Id. citing Lunsford, 746 S.W.2d at 473.)

The Court’s Decision

Fraud

“The court reviews the excessiveness of an exemplary damages award under state law as a factual sufficiency challenge.” (Citizens National Bank v. Allen Rae Investments Inc. (2004) 142 S.W.3d 459, 484.) “[The court] may only reverse if the exemplary damages award is so against the great weight and preponderance of the evidence as to be manifestly unjust.” (Id.)

“Exemplary damages are recoverable where...a plaintiff proves by clear and convincing evidence that the harm for which he seeks exemplary damages resulted from fraud.” (Id.) “No set rule or ratio between actual and exemplary damages exists to determine whether an exemplary damages award is excessive.” (Id.) “Factors we consider in determining the reasonableness of an award include:

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 concerned; and
the extent to which conduct offends a public sense of justice and impropriety.”

(Id.)

“[P]unitive damages may not be sustained where one of the theories of recovery on which punitive damages were disjunctively awarded does not support punitive damages.” (Lesikar v. Rappeport (2000) 33 S.W.3d 282, 311.)

Fiduciary Duty

A defendant's intentional breach of fiduciary duty is a tort for which a plaintiff may recover punitive damages. (See Int'l Bankers Life Ins. Co. v. Holloway, 368 S.W.2d at 583-84; Hawthorne v. Guenther, 917 S.W.2d at 936; InterFirst Bank Dallas, N.A. v. Risser (1987) 739 S.W.2d 882, 907.) While it is a general rule that Texas courts allow the recovery of punitive damages where the defendant, in committing a tort, acted willfully, maliciously, or fraudulently, where punitive damages are awarded for breach of fiduciary duty the actual motives of the defendant and whether the defendant acted with malice are immaterial. But something more than a simple breach is required for the recovery of punitive damages; the acts constituting the breach must have been fraudulent, or at least intentional. (See Int'l Bankers Life Ins. Co. v. Holloway, S.W.2d at 584; InterFirst Bank of Dallas, N.A. v. Risser, 739 S.W.2d at 907.) An intentional breach may be found where the fiduciary intends to gain an additional benefit for himself. (See Int'l Bankers Life Ins. Co. v. Holloway, 368 S.W.2d at 583-84.)

“In Texas Bank Trust Co. v. Moore, 595 S.W.2d 502, 507 (Tex. 1980), the Supreme Court held that exemplary damages are proper when self-dealing by a fiduciary has occurred.” (Lesikar v. Rappeport (2000) 33 S.W.3d 282, 311.) “Where a fiduciary in fact gains a benefit by breaching her fiduciary duty, willful and fraudulent acts may be presumed.” (Id.)