Punitive damages cap challenged in home loan case

CARSON CITY — In a case that could have widespread significance in future court decisions, a Las Vegas lawyer argued today that a state law limiting punitive damages to $300,000 should not apply to his client’s case.

Lawyer Dennis Kennedy said his client, Steven Betsinger, was entitled to the $1.54 million in punitive damages a Clark County jury awarded him in 2007, not just the $300,000 that a district judge later said was the maximum he could receive under a state law.

The law did not include all the criteria that state and U.S. Supreme Court decisions found must be considered in setting punitive damages, Kennedy said.

“The Legislature has the right to establish guideposts,” Kennedy said, but noted that those guideposts must follow past court decisions.

The state law, passed in 1989, limits punitive damages to $300,000 if the amount of compensatory damages awarded is less than $100,000. The law applies in cases involving breaches of obligations not arising from contracts.

Justices gave no opinions as to their leanings during the 30-minute oral argument. A decision is not expected for several months.

But Justice James Hardesty questioned Kennedy’s contention that the Legislature can’t set the “outer limits” in punitive damage cases. Another state law places a $350,000 limit on the amount of punitive damages a patient can recover in medical malpractice cases.

Betsinger had secured a $300,000 mortgage loan in 2003 from CH Mortgage, a subsidiary of D.R. Horton Inc., at a 4.5 percent interest rate to buy a home in North Las Vegas.

But as he was about to close on the property, the company increased the interest rate to 6.5 percent, claiming the home was not Betsinger’s primary residence, but a second home with a higher risk factor.

Betsinger at the time was living in Minnesota and planned to move to Clark County, but his employer would not let him out of an employment contract.

He sued D.R. Horton, claiming fraud, and was awarded about $58,000 in regular damages, along with the $1.54 million in punitive damages.

District Judge Sally Loehrer reduced the award, contending a state law limits punitive damages to $300,000 in these types of cases.

According to brief in the case, Loehrer said it did not matter whether the jury knew of the $300,000 limit because the law was the law.

“Let’s say they end up with $100 million,” Loehrer was quoted as saying. “It’s meaningless because the cap is three hundred (thousand dollars).”

David Frederick, representing D.R. Horton, contended Kennedy argued in initial briefs that the law was unconstitutional, but then changed his view in subsequent documents.

When questioned by justices, Kennedy said the law was not unconstitutional, but added it did not consider two other criteria required by the U.S. Supreme Court in setting punitive damages — how reprehensible the action was and other types of punishment that could be imposed.

“There may be cases where the actual damage is small, but the conduct was so reprehensible that a larger multiplier should be imposed,” Kennedy said.

Contact reporter Ed Vogel at evogel@reviewjournal.com or 775-687-3901.