Civil Justice Reform

Limits recovery for all noneconomic damages in tort actions to
$500,000.  Codifies court rule relating to offers of judgment.
Requires payment of reasonable attorneys' fees and court costs to
encourage pre-trial settlements.  Limits punitive damages awards. 

HOUSE OF REPRESENTATIVES                H.B. NO.67         
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                     A BILL FOR AN ACT



 1      SECTION 1.  The legislature finds that noneconomic damages
 2 generally include such claims as pain and suffering, mental
 3 anguish, disfigurement, loss of enjoyment of life, loss of
 4 consortium, and other nonpecuniary losses.  Under current law,
 5 the maximum limit on damages recoverable for only one type of
 6 noneconomic damage--pain and suffering--is $375,000.  However,
 7 there is no upper limit on maximum damages with respect to other
 8 types of noneconomic damages.  The legislature finds that placing
 9 a realistic cap on all noneconomic damages in tort actions,
10 rather than only for pain and suffering, will help to lower the
11 costs of liability insurance for Hawaii's consumers.
12      Under current law, when a frivolous claim or defense is made
13 by a party in a civil action, for a court to make an award of
14 attorneys' fees in that action, the court must first find in
15 writing that "all" of the claims or defenses made by a party are
16 frivolous and are not reasonably supported by the facts and the
17 law in the civil action.  The legislature finds, however, that it
18 is often the case that only a portion, but not all, of the claims
19 or defenses made by a party may be found to be frivolous.  In

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 1 these cases, however, the court would be prohibited from awarding
 2 attorneys' fees to the other party since not "all" of the claims
 3 or defenses were found to be frivolous.
 4      The legislature further finds that there is a need to codify
 5 rule 68 of the Hawaii Rules of Civil Procedure relating to offers
 6 of judgment.  That rule permits the recovery of costs by either
 7 party contingent on that party's having made an offer of
 8 settlement that was not accepted and which was at least as
 9 favorable to the offeree as the final judgment in the case.  In
10 addition to codifying rule 68, this Act also requires the payment
11 of reasonable attorneys' fees as well as court costs to encourage
12 pre-trial settlements.
13      The legislature further finds that there is an immediate
14 need to reform Hawaii's laws providing for the award of punitive
15 damages.  Punitive damages, also known as exemplary damages, are
16 intended to punish the defendant and deter both the defendant and
17 others from engaging in similar acts of wrongdoing in the future.
18 Punitive damages are distinguishable from compensatory damages,
19 which are the primary form of damages awarded under tort law and
20 are designed to "make the plaintiff whole".  Compensatory damages
21 compensate tort victims for damages including payment for out-of-
22 pocket expenses, such as lost wages and medical costs, and awards
23 for pain and suffering.  In contrast, punitive damages were

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 1 developed as an auxiliary to criminal law to impose a public
 2 sanction on conduct that might not be pursued by criminal law
 3 enforcement.
 4      The legislature finds that in recent years, the number of
 5 punitive damages claims asserted have increased dramatically.
 6 While large punitive damages awards can be reduced on appeal as
 7 being excessive, the effect of the assertion of these claims is
 8 to raise the cost of litigation, undermine confidence in the
 9 civil justice system, handicap Hawaii's businesses in competition
10 with foreign enterprises, and generally increase the costs of
11 doing business in the State.
12      The purpose of this Act is to:
13      (1)  Limit recovery for all noneconomic damages in tort
14           actions to $500,000;
15      (2)  Allow the court to award attorneys' fees where the
16           court finds that less than all of the claims or
17           defenses are determined to be frivolous.  If the court
18           finds that only a portion of the claims or defenses are
19           frivolous, it must determine the amount of the award of
20           attorneys' fees and costs based on the percentage of
21           the claims or defenses deemed to be frivolous.  The
22           amount of the award is to be allocated in direct
23           proportion to the percentage of frivolous claims or

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 1           defenses.  In addition, this Act further allows the
 2           court to award courts costs as well as attorneys' fees
 3           in the event that a party makes frivolous claims or
 4           defenses in civil actions;
 5      (3)  Limit punitive damages awards to three times the amount
 6           of compensatory damages; and
 7      (4)  Require a judge to determine the dollar amount of any
 8           award of punitive damages, rather than the jury, to
 9           ensure that the amount of these awards is determined in
10           a fair and constitutional manner and will be less
11           likely to be overturned or reduced on appeal.  The
12           determination as to whether punitive damages should be
13           awarded will continue to be made by juries or judges in
14           jury-waived trials.
15      SECTION 2.  Chapter 607, Hawaii Revised Statutes, is amended
16 by adding a new section to be appropriately designated and to
17 read as follows:
18      "607-    Offer of judgment.  (a)  At any time more than ten
19 days before the trial begins, a party defending against a claim
20 may serve upon the adverse party an offer to allow judgment to be
21 taken against the offeror for the money or property or to the
22 effect specified in that offer, with costs then accrued.

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 1      (b)  If within ten days after the service of the offer the
 2 adverse party serves written notice that the offer is accepted,
 3 either party may then file the offer and notice of acceptance
 4 together with proof of service and thereupon the clerk shall
 5 enter judgment.
 6      (c)  An offer not accepted shall be deemed withdrawn and
 7 evidence thereof shall not be admissible except in a proceeding
 8 to determine costs.
 9      (d)  If the judgment finally obtained by the offeree is not
10 more favorable than the offer, the offeree shall pay the costs
11 incurred after the making of the offer.
12      (e)  The fact that an offer is made but not accepted shall
13 not preclude a subsequent offer.
14      (f)  When the liability of one party to another has been
15 determined by verdict or order or judgment, but the amount or
16 extent of the liability remains to be determined by further
17 proceedings, the party adjudged liable may make an offer of
18 judgment, which shall have the same effect as an offer made
19 before trial if it is served within a reasonable time not fewer
20 than ten days prior to the commencement of hearings to determine
21 the amount or extent of liability.
22      (g)  As used in this section, "costs" include both court
23 costs and reasonable attorneys' fees."

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 1      SECTION 3.  Chapter 663, Hawaii Revised Statutes, is amended
 2 by adding a new section to be appropriately designated and to
 3 read as follows:
 4      "663-    Punitive damages.  (a)  Except as otherwise
 5 provided by law, no award of punitive damages may be made in any
 6 court of competent jurisdiction in this State except as provided
 7 in this section.
 8      (b)  The dollar amount of any punitive damages awarded in
 9 any case shall be determined only by the judge in the judge's
10 discretion, and not the jury.
11      (c)  Punitive damages imposed against a defendant in any
12 case shall not exceed three times the amount of compensatory
13 damages."
14      SECTION 4.  Section 607-14.5, Hawaii Revised Statutes, is
15 amended to read as follows:
16      "607-14.5  Attorneys' fees and costs in civil actions.(a)
17 In any civil action in this State where a party seeks money
18 damages or injunctive relief, or both, against another party, and
19 the case is subsequently decided, the court may, as it deems
20 just, assess against either party, and enter as part of its
21 order, for which execution may issue, a reasonable sum for
22 attorneys' fees[,] and costs, in an amount to be determined by

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 1 the court upon a specific finding that all or a portion of the
 2 party's claim or defense was frivolous[.] as provided in
 3 subsection (b).
 4      (b)  In determining the award of attorneys' fees and costs
 5 and the amounts to be awarded, the court must find in writing
 6 that all or a portion of the claims or defenses made by the party
 7 are frivolous and are not reasonably supported by the facts and
 8 the law in the civil action.  If the court determines that only a
 9 portion of the claims or defenses made by the party are
10 frivolous, the court shall determine the amount of the award of
11 attorneys' fees and costs based on the percentage of the claims
12 or defenses deemed to be frivolous.  The amount of the award
13 shall be allocated in direct proportion to the percentage of
14 frivolous claims or defenses."
15      SECTION 5.  Section 663-8.7, Hawaii Revised Statutes, is
16 amended to read as follows:
17      "[[]663-8.7[]]  Limitation on [pain and suffering.]
18 noneconomic damages.  (a)  Damages recoverable for [pain and
19 suffering] all noneconomic damages as defined in section 663-8.5
20 shall be limited to a maximum award of [$375,000; provided that
21 this limitation shall not apply to tort actions enumerated in
22 section 663-10.9(2).] $500,000 with respect to any tort action."

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 1      SECTION 6.  Section 4 shall apply only to civil actions
 2 filed on or after the effective date of this Act.
 3      SECTION 7.  This section 5 shall apply only to causes of
 4 action based upon acts or omissions occurring on or after its
 5 effective date.
 6      SECTION 8.  This Act does not affect the rights and duties
 7 that matured, penalties that were incurred, and proceedings that
 8 were begun, before its effective date.
 9      SECTION 9.  If any provision of this Act, or the application
10 thereof to any person or circumstance is held invalid, the
11 invalidity does not affect other provisions or applications of
12 the Act which can be given effect without the invalid provision
13 or application, and to this end the provisions of this Act are
14 severable.
15      SECTION 10.  Statutory material to be repealed is bracketed.
16 New statutory material is underscored.
17      SECTION 11.  This Act shall take effect upon its approval.
19                           INTRODUCED BY:  _______________________