While most people were on break for the holidays, the Sixth Circuit United States Court of Appeals (Sixth Circuit) released a decision that is interesting in both substance and application.  In Lindenberg v. Jackson National Life Insurance Company, a bad-faith insurance claim where the federal trial court jury awarded $3,000,000 in punitive damages but the trial court reduced the punitive damages award to $700,000 by operation of Tenn. Code Ann. §29-39-104, the Sixth Circuit overturned the trial court’s application of Tennessee’s cap on punitive damages.  The federal trial court submitted certified questions regarding the issue to the Tennessee Supreme Court, which acknowledged the issues of first impression but declined to provide opinions.

As such, consistent with principles of a federal court interpreting a state’s laws, the Sixth Circuit examined available data to predict how the Tennessee Supreme Court would likely decide the issue.  After an exhaustive discussion regarding the meaning of a right to jury trial guaranteed by Article 1, Section 6 of the Tennessee Constitution, including a discussion of a case decided in North Carolina the year after Tennessee adopted its Constitution that was based on North Carolina’s Constitution, the Sixth Circuit concluded that punitive damages were part of a proper jury trial and that the proper measure of punitive damages are part of the findings of fact within the exclusive province of a jury.  Consequently, the Sixth Circuit held that the Tennessee General Assembly’s legislative attempt to limit the amount of recoverable punitive damages constitutes an unconstitutional invasion upon the right to trial by jury guaranteed by the Tennessee Constitution.

While this decision is binding, for now, upon the federal district courts in Tennessee, it is important to note that the federal courts and state courts run parallel to one another.  As such, a federal court’s interpretation of state law is not binding on Tennessee state courts.  Thus, the legislative cap on punitive damages remains controlling in Tennessee state courts — and if the cap is ultimately upheld as constitutional by the Tennessee Supreme Court (or if the Defendant in Lindenberg appeals and the United States Supreme Court accepts the case and interprets Tennessee’s Constitution differently), the decision in Lindenberg would effectively be overruled and rendered moot.