Montana Company Seeks to Strike State Cap on Punitive Damage Awards

April 22, 2014

A Butte-based office supply company is asking the Montana Supreme Court to uphold a lower judge’s ruling that the state’s cap on punitive damage awards is unconstitutional.

The constitutional challenge filed by Masters Group International Inc. comes after a Butte-Silver Bow judge affirmed a $52 million jury award in its favor earlier this month.

Montana law caps punitive damages at $10 million or 3 percent of a defendant’s net worth, whichever is less. Punitive damages are awarded by a judge or jury to set an example and punish a defendant.

The jury awarded Masters $41.5 million in compensatory damages and $10.5 million in punitive damages in January after finding that Comerica Inc. reneged on a 2008 agreement with the office supply company.

District Judge Kurt Krueger reviewed and upheld the award on April 4, saying the state’s cap on punitive damages likely provides a minimal deterrent to a large company such as Comerica.

Masters is now seeking an order from the state Supreme Court, which is the final authority and whose ruling will be applicable statewide, that declares the punitive damages cap is unconstitutional.

“We have been given official notice of a constitutional challenge and are in the process of evaluating the case,” state Department of Justice spokesman John Barnes said Friday.

Comerica, which denied any wrongdoing, is appealing both the verdict and the award.

Comerica gave the startup company a $9.5 million line of credit in 2006 and later lent Masters another $1 million. Comerica initially said it would renew the loan in 2008 but then refused when the recession hit, attorney Timothy Strauch previously told the Missoulian.

Comerica also refused Masters’ request to use part of the $2.25 billion the bank received in federal bailout funds to help it stay afloat.

Masters negotiated another line of credit with Wells Fargo that required the company not be in default with Comerica. But Comerica seized $9 million from Masters’ accounts in December 2008 and effectively putting the company out of business, Strauch said.

Masters sued Comerica, saying the bank reneged on its agreement to delay collection while Masters negotiated the new credit line.

Masters had planned to open a manufacturing and distribution center in Butte.

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