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By: Curt Graham
In cases involving punitive damages, courts often look to the ratio between punitive damages and compensatory damages when evaluating the constitutionality of the punitive damage award. This ratio is called the punitive damage “multiplier.” In a case of first impression, Kentucky’s Supreme Court recently determined that the punitive damage multiplier should be applied to the pre-apportionment compensatory damage amount, rather than the post-apportionment amount.
In the tragic case of Louisville SW Hotel, LLC v. Charlestine Lindsey, et al., a five-year-old drowned at a hotel pool while attending a birthday party. A jury found the child’s parent to be 65% responsible and the hotel to be 35% responsible. Approximately $75,000 was awarded against the hotel as compensatory damages (which was 35% of the total compensatory award). However, the jury also found the hotel acted with gross negligence and awarded $3,000,000 in punitive damages.
In reviewing the jury’s punitive damage award, the trial court determined that a 5-1 ratio between punitive and compensatory damages should be used, and the court applied that multiplier to the pre-apportionment compensatory damages award. This reduced the plaintiff’s punitive damage award to approximately $1,000,000. On appeal, the hotel argued that punitive damages should have been calculated using the amount of compensatory damages assessed to the hotel after apportionment of fault, which would have resulted in a significantly lower punitive award.
Kentucky’s Supreme Court observed that most states do not consider comparative fault in their analysis of punitive damages because the concepts of comparative fault and punitive damages “seek different ends.” The Court ultimately ruled that a reviewing court “must assess the adequacy of a punitive damage award by reference to the gross compensatory damage award without application of comparative fault.”
This is a significant case, particularly in a pure comparative fault jurisdiction like Kentucky. In such a jurisdiction, a plaintiff can recover even if the plaintiff’s fault was greater than the defendant’s fault. We will continue to monitor for significant developments in this area.