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F I S C A L I M P A C T R E P O R T

SPONSOR Komadina

DATE TYPED 3/4/05

HB

SHORT TITLE Punitive Damages Act

SB 860

ANALYST Medina

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

Unknown

Same Recurring

General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Attorney General (AG)

Responses Received From

Administrative Office of the Courts (AOC)

Corrections Department (CD)

SUMMARY

Synopsis of Bill

Senate Bill 860 enacts the Punitive Damages Act, which requires that a court, when entering a

judgment for punitive damages, direct in the judgment that payment of all punitive damages

awarded are to be made to the state general fund. The bill further prohibits the state from seeking

an award of punitive damages in a tort action to which it is a party.

Senate Bill 860 -- Page 2

Significant Issues

The AG states that eight other states (Alaska, Georgia, Illinois, Iowa, Indiana, Missouri, Oregon

and Utah) have statutes directing a portion of punitive damages awards into the state treasury.

Utah’s statute was recently held to be unconstitutional by a lower court.

According to the AG, the majority of these eight states require a fixed percentage (ranging from

50% to 75%) of the punitive damage awards to be allocated to the state. States differ as to which

cases such statutes affect. For example, Georgia applies its split-recovery statute only to products

liability cases, and Iowa applies it only where the jury determines that the defendant's miscon-

duct was not directed specifically at the individual plaintiff. States’ statutes also differ with re-

spect to contingency fees for attorneys and whether they are based upon the entire award, or are

calculated after the state’s portion is directed into the treasury. The AG is unaware of any state

that has adopted a split-recovery statute allowing the state to take 100% of a punitive damages

award as this bill proposes.

States have split on whether those so-called “split-recovery” statutes violate the provisions of the

constitution regarding due process, excessive fines, double jeopardy, or “takings”. In DeMen-

doza v. Huffman, 2002 WL 1827841 (Or. Aug. 8, 2002), the Oregon Supreme Court held that

state’s split-recovery statute allocating 60% of punitive damages award to the state did not vio-

late the right to a remedy, the right to a jury trial, the takings or tax provisions, or the separation

of powers under the State Constitution. However, the Colorado Supreme Court struck down its

“split-recovery” statute as being an impermissible “taking” of the plaintiff’s property. Kirk v.

Denver Publishing Co., 818 P.2d 262, 264 (Colo. 1991).

The AG also notes that aside from legal arguments, opponents allege that such statutes reduce

incentive to sue or settle.

FISCAL IMPLICATIONS

The actual amount which would be directed to the general fund under the provisions of this bill

is unclear.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL.

Punitive damages awards will not be directed to the general fund.

DXM/yr