Is the exemplary damages cap a matter constituting an avoidance or affirmative defense so that it must be pleaded or it is waived?
The answer to that question used to depend on where you were. Courts of appeals in Fort Worth, Corpus Christi, and Houston held that the exemplary damages cap was an affirmative defense that must be pleaded. In contrast, courts in San Antonio and Amarillo held that the statutory damage cap was not an affirmative defense.
The Supreme Court resolved the conflict on June 12, 2015. It held that the exemplary damages cap is not a matter constituting an avoidance or affirmative defense and need not be affirmatively pleaded; it applies automatically and does not require proof of additional facts. Zorrilla v. Aypco Constr., II, LLC, 58 Tex. S.Ct.J. 1140 (Tex. June 12, 2015).
The case arose when a homeowner refused to pay a construction company for work done. The construction company sued the homeowner for breach of contract and fraud. The jury found that the homeowner had defrauded the construction company and awarded $56,654 in economic damages and $250,000 in exemplary damages. In her motion for new trial, the homeowner challenged the award of exemplary damages, arguing that she was not required to plead the statutory cap and that an exemplary damages award of $250,000 on $56,654 in economic damages exceeded the statutory cap and should be reduced.
The Texas Rules of Civil Procedure require that specific defenses in any matter "constituting an avoidance or affirmative defense" shall be set forth affirmatively in a responsive pleading. Tex. R. Civ. P. 94. If an affirmative defense or avoidance is not expressly pleaded, the party cannot rely on the defense as a bar to liability. So the court had to decide whether the damages cap in Section 41.008 of the Texas Civil Practice and Remedies Code was an affirmative defense or an avoidance.
The court began by explaining the difference between an affirmative defense and an avoidance. An "affirmative defense" is "[a] defendant's assertion of facts and arguments that, if true, will defeat the plaintiff's or prosecution's claim, even if all the allegations in the complaint are true." In contrast, a "confession and avoidance" is "a plea in which a defendant admits allegations but pleads additional facts that deprive the admitted facts of an adverse legal effect." For example, a statute of limitations is an affirmative defense because limitations defeats the plaintiff's claim without regard to the truth of the plaintiff's assertions. In contrast, self-defense is a confession-and-avoidance plea because the defendant admits the conduct but seeks to avoid the legal effect by justifying an otherwise impermissible act.
Whether classified as an affirmative defense or an avoidance, the hallmark characteristic of both is that the defendant carries the burden of proof to produce sufficient evidence to establish the defense and obtain the requisite jury findings.
Because the exemplary damage cap does not impose a burden of proof on the defendant and applies automatically, the court held that it is neither an affirmative defense nor an avoidance subject to Rule 94's affirmative pleading requirement.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
