South-Western Legal Studies in Business

State Law Taking Half of Punitive Damage Awards Held Unconstitutional
Description

Utah high court held that a state statute that gives the state a claim on half of punitive damage awards is an unconstitutional taking of private property without compensation.

Topic Constitutional Law
Key Words

Takings; Split Recovery Law; State Interest; Punitive Damages

C A S E   S U M M A R Y
Facts

Smith sued Fairfax in Utah state court and was awarded $410,000 compensatory damages and $5.5 million punitive damages. The verdict was upheld on appeal. The state then moved to collect half of the punitive damages award under a state law that gives the state the right to half of punitive damages over $20,000. Smith asserted that the split recovery law was unconstitutional. The district court agreed. The state appealed.

Decision

Affirmed. The split recovery law is unconstitutional. It effected a taking of property without just compensation. Smith had an interest in the judgment that was created by the ruling at trial. The state had no interest in the litigation or the judgment until the time the judgment was paid. The interest Smith had in the judgment is protected by the takings clause of the U.S. and the Utah constitutions.

Citation

Smith v. Price Development Co., 125 P.3d 945 (Sup. Ct., Utah, 2005)

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