The Texas Supreme Court recently resolved a split of authority among Texas courts of appeals regarding whether the exemplary damages cap in Section 41.008 of the Texas Civil Practice and Remedies Code needs to be pleaded as an affirmative defense or is simply applied as a matter of law.  Some courts (2nd, 13th, 14th) had held that the caps are in the nature of avoidance and must be pleaded under Texas Rule of Civil Procedure 94. Other courts (4th, 7th, 14th) had held that the cap need not be pleaded because the statute applies automatically to awards without the necessity of additional facts.  In an unanimous opinion authored by Justice Eva Guzman, the Court held that the exemplary damage cap need not be pleaded.

The decision turned on construction of the phrase in Rule 94 that requires “any other matter constituting an avoidance or affirmative defense” to be affirmatively pleaded. This is important because failure to comply with Rule 94 results in waiver. The Court first rejected the plaintiff’s argument that a matter in avoidance was broad and includes “new matters of law or fact outside of the plaintiff’s pleadings.” The Court reasoned that “avoidance” as used in Rule 94 was akin to “confession and avoidance.” The Court then distinguished “affirmative defense” from “confession and avoidance”:

[S]tatute of limitations is an affirmative defense, rather than a plea in confession and avoidance, 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.

The Court noted that in either case, “the hallmark characteristic of both categories of defenses is that the burden of proof is on the defendant to present sufficient evidence to establish the defense and obtain the requisite jury findings.” Applying this rationale, the Court observed that the cap “does not require proof of any additional fact to establish its applicability; moreover, there is no defense to it.” The Court further observed “the defendant bears no burden of establishing the cap’s applicability; it either applies or it does not.” In other words, “the statutory cap applies automatically to claims not expressly excepted.”

The Court was not convinced by the plaintiff’s argument that pleading should be required to put plaintiffs on notice and allow plaintiff to invoke a statutory exception. The Court held that the statute “in and of itself, provides sufficient notice of the types of claims that are excluded from the cap, allowing plaintiffs to structure their cases to avoid the cap when desired and possible.” Accordingly, the Court rendered judgment capping the exemplary damages at $200,000. The Court’s opinion in Zorilla v. Aypco Constr,. II, LLC can be found here.