Stipulating To Cap On Compensatory Damages Limits - DD 3/06
Defense Digest
Stipulating To Cap On Compensatory Damages Limits Potential Delay Damages
By Kimberly A. Boyer-Cohen, Esq.*Under Rule 1311.1 of the Pennsylvania Rules of Civil Procedure, a plaintiff may stipulate to $15,000 as the maximum amount of damages recoverable upon the trial of an appeal from the award of arbitrators. In exchange for this stipulation, the plaintiff is allowed to enter into evidence certain documents, including business and medical records, without the need for testimony to authenticate them. This rule contributes to the overall goal of compulsory arbitration in Pennsylvania by reducing the time and costs associated with calling witnesses to authenticate documents that are introduced into evidence at the trial.
Recently, the Superior Court of Pennsylvania in LaRue v. McGuire, 885 A.2d 549 (Pa. Super. 2005), had the opportunity to examine the interplay between Rule 1311.1 and Rule 238 of the Pennsylvania Rules of Civil Procedure relating to damages for delay. After a panel of arbitrators entered an award in favor of the defendants, the plaintiff filed an appeal, and the case was listed for trial. The parties also entered into a written stipulation that if the jury returned a verdict in favor of the plaintiff, he would limit the amount of damages to $15,000 in exchange for which he would be able to enter his medical reports without the expense of testimony to authenticate the reports.
Following a jury trial, the jury entered a verdict in favor of the plaintiff in the amount of $600,000. The trial court molded the verdict to reflect the $15,000 maximum to which the parties stipulated, and, thereafter, the plaintiff filed a motion for delay damages. The trial court denied the plaintiff's motion, finding that the parties' stipulation to limit damages precluded the plaintiff from receiving any amount in excess of $15,000; therefore, because the plaintiff received $15,000 in compensatory damages as a result of the verdict, he could not collect any delay damages.
On appeal, the Superior Court first determined that the trial court erred when it refused to award any delay damages. Looking at analogous situations in which delay damages have been permitted, despite the existence of a cap on compensatory damages, the court explained that Rule 1311.1 does not shield a defendant from the consequences of his or her failure to consider settling the case or eliminate the risk of delay damages. The policy concerns behind Rule 238 – motivating defendants to make serious written offers to settle or to face the imposition of additional expenses in the event the plaintiff receives a verdict in his favor – also clearly allow delay damages in connection with a cap on compensatory damages. In fact, the court noted that both Rule 238 and Rule 1311.1 address some of the same policy concerns, including reducing time-and-expense consuming litigation, that siphons off scarce judicial resources and drains the plaintiffs' pockets.
Having found trial court error in denying any delay damages, the court was faced with deciding on what basis the delay damages were to be calculated: the jury's verdict or the stipulated award of $15,000. The court first looked to the plain language of Rule 238, which provides that "damages for delay shall be added to the amount of compensatory damages awarded against each defendant or additional defendant found liable to the plaintiff in the verdict of a jury…decision of the court…or award of arbitrators…and shall become part of the verdict, decision or award." Relying on the Pennsylvania Supreme Court's opinion in Allen v. Mellinger, 784 A.2d 762 (Pa. 2001), the Superior Court observed that since the purpose of Rule 238 is to compensate the plaintiff for delay in receiving his recovery, it defies reason to suggest that the basis for calculating that compensation could be anything other than the amount the defendant could actually be responsible for paying to the plaintiff. Because the plaintiff's compensatory damages could not, by his own choice, exceed the $15,000 stipulation, there could be no delay in receiving amounts in excess of that cap. Accordingly, the court held that when a plaintiff opts to limit his compensatory damages to $15,000 pursuant to Rule 1311.1, delay damages are to be calculated on the $15,000 cap to which the plaintiff has agreed. In reaching this decision, the court also rejected the plaintiff's argument that computing delay damages based solely on the stipulated cap would remove the defendant's incentive and motivation to seek settlement. To the contrary, the Superior Court indicated that the effect of the plaintiff's voluntary choice is that he is not a private litigant who is not subject to limitations on liability, but rather his own choice removed the uncertainty of outcome, which may motivate settlment.
This decision may reduce the incentive for plaintiffs to stipulate to a limit of $15,000 in damages on appeal from an arbitration, and it remains to be seen whether it will result in fewer plaintiffs opting to take advantage of the cost-saving benefit offered by Rule 1311.1. However, in cases where the plaintiff does agree to limit his damages to $15,000, the LaRue decision eliminates one unknown component of the verdict by allowing delay damages to be based upon a predictable constant. Where potential delay damages are a factor in contemplating whether to settle a case, defense attorneys and claims professionals should be alert to the applicability of the LaRue decision in cases on appeal from compulsory arbitration.
*Kimberly is an associate in our Philadelphia, PA office and is a member of the Appellate Practice and Post-Trial Advocacy Group. She can be reached at (215) 575-2707 or kaboyer@mdwcg.com.
