Business & Commercial Newsletter
Is a Friendlier Business Climate on the
Horizon in South Carolina
In 2010, South Carolina's litigation climate was ranked 39th in the United States, meaning 38 other states had friendlier litigation-related climates for businesses. However, there is hope that South Carolina's ranking will improve with the recent passage of what is known as the "tort reform bill." On July 26, 2011, Governor Nikki Haley signed into law the "South Carolina Fairness in Civil Justice Act of 2011" which was passed by the South Carolina State Legislature earlier this year. This legislation, modeled after legislation passed by the State of Florida, addresses punitive damage awards. Most significantly, it imposes new requirements upon a jury before it can award punitive damages and places a cap on the amount of punitive damages which can be awarded.
This law provides that an award of punitive damages must be decided by a jury in a separate "mini-trial" only after that same jury finds that the defendant is liable for the actions alleged in the lawsuit. This new legislation also places a cap on punitive damages awards of $500,000.00 or three times the compensatory damages awarded to each claimant, whichever is greater. However, there are exceptions to this cap.
The first exception is that a punitive damages award can be the greater of 2 million dollars or four times the compensatory damages awarded if a court finds: (1) the wrongful conduct was "motivated primarily by unreasonable financial gain" or the "dangerous nature of the conduct [and] likelihood of injury" was known to "person[s] responsible for making policy decisions on behalf of the defendant;" or (2) the "defendant's actions could subject the defendant to conviction of a felony" and those actions are the cause of the plaintiff's injuries. The second exception is that there is no cap on punitive damages if a court finds: (1) "the defendant had an intent to harm" plaintiff; (2) "the defendant has plead guilty or been convicted of a felony arising out of" the conduct at issue and that conduct was the cause of plaintiff's injuries; or (3) "the defendant acted or failed to act while under the influence of alcohol [or] drugs . . . to the degree that the defendant's judgment is substantially impaired." We anticipate that in appopriate cases, plaintiffs will strive to convince the court that the evidence justifies findings that the baseline limits do not apply. In business-related cases, the exception we believe may be argued most often is the first one -- that the wrongful conduct was "motivated primarily by unreasonable financial gain" or the "dangerous nature of the conduct [and] likelihood of injury" was known to "person[s] responsible for making policy decisions on behalf of the defendant."
This legislation applies to actions that accrue on or after January 1, 2012. Therefore, if your business is sued and the plaintiff seeks punitive damages, the protections of this law apply if the conduct complained of occurred on or after January 1, 2012. The tort reform bill is favorable to both companies now doing business in South Carolina and those that may want to do business in South Carolina in the future. Prior to this legislation, South Carolina was the only state in the Southeast without a limitation on punitive damages. Now, South Carolina business leaders are hopeful that this legislation may serve as a recruiting incentive for new businesses seeking to relocate or expand into South Carolina.
GWB represents all types of businesses in litigation-related matters and can further discuss the impact of this legislation with you with respect to your specific company and any future litigation concerns.