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Arkansas Supreme Court sides with farmers, strikes down punitive damages cap

In a decision handed down on December 8, 2011, the Arkansas Supreme Court struck down the punitive damages cap found in the Civil Justice Reform Act of 2003. The Court ruled that this legislative enactment directly violated a separate part of the Arkansas Constitution. UPDATE: Watch coverage of this ruling here:

The case arose out of two genetically modified strands of rice that contaminated the US long-grain rice supply. Arkansas is the leading producer of long-grain rice, and 52% long grain rice grown in the US was exported to other countries prior to 2006. The USDA had not granted regulatory approval of genetically modified rice, and no foreign government had authorized its use for human consumption. The world wide reaction to the contamination of the US long-grain rice supply was profoundly negative, which resulted in the decrease of in exports of 622,972 metric tons of American rice to other countries from 2005-2008.

On April 15, 2010, a Lonoke County jury found that the producer of the genetically modified rice, Bayer Cropscience, was negligent in allowing the genetically modified rice to contaminate the American rice supply. The jury awarded a group of Arkansas rice farmers a total of $8 million in compensatory damages, and $42 million in punitive damages. Bayer appealed to the Arkansas Supreme Court, arguing that the punitive damages cap was constitutional. The Supreme Court disagreed, and held that the trial court was correct because the cap "limit[ed] the amount to be recovered for injuries resulting in ... injuries to persons or property" in violation of the Arkansas Constitution.

Punitive damages cannot be awarded unless there is evidence of conduct that shows a deliberate intent to injure, or a conscious indifference that shows a reckless disregard of the consequences of one's actions. The purpose of punitive damages is to serve as a warning or example to defendants and others. Before the trial began on March 23, 2010, the trial court declared the punitive damages cap was unconstitutional, and that there was sufficient proof that Bayer's conduct was recklessly indiffierent to the dire consequences of contamination for the trial to move forward on punitive damages.

Several proponents of tort reform have been critical of the Court's decision. According to one state senator, "the democratic process is the major casualty in this legal ruling. I understand the constitutional necessity of separation of powers, but at some point the will of the people comes into play." There are two flaws in this argument: First, each justice on the Arkansas Supreme Court is democratically elected, and the vote of the Supreme Court was unanimous in this case. Second, the writing of our constitution is a very important part of the democratic process, and our constitution trumps contrary laws written by legislators — only the people can amend the constitution by popular vote. That is just how a constitutional system works.

Similarly, the Arkansas State Chamber of Commerce responded by saying that the ruling is a "setback in efforts to create an environment that is encouraging to job-creating entrepreneurs and business leaders," because "the uncertainty presented by the potential for unlimited damage assessments will discourage growth and expansion of Arkansas business." However, this group apparently discounts the fact that rice farmers are small business owners, too. Furthermore, rice farming is a major industry in Arkansas, and Bayer's actions caused serious harm to one of East Arkansas' largest employers, Riceland Foods.

The reaction to this ruling by the State Chamber of Commerce is curious — why is it so afraid of having Arkansas citizens sitting on a jury, as the voice of the community, deciding the appropriate punishment for people that harm Arkansas citizens and businesses?

Several representatives from trade groups in favor of the 2003 law have suggested an initiative to amend the constitution, by citizen petition or through legislative referral in 2012 or 2013. The danger to our State is that punitive damages caps mean that irresponsible companies can recklessly disregard the consequences of their actions and get away with it.

At the Chaney Law Firm, we believe that juries should decide what actions should be punished, what actions are safe and unsafe, and what it will take to fix what can be fixed, to help what can't be fixed, and to make up for what went wrong.