Changes to the Missouri Merchandising Practices Act and Claims for Punitive Damages

Governor Mike Parson recently signed Missouri SB 591, which brings significant changes to the Missouri Merchandising Practices Act (MMPA) and claims for punitive damages. The statute also adds new evidentiary and pleading requirements that will make it more difficult to prevail on a claim under the MMPA and to obtain punitive damages generally. The changes apply to lawsuits filed on or after August 28, 2020.

Changes to the Missouri Merchandising Practices Act

The MMPA (Section 407.010 RSMo., et seq.) is a broad consumer protection statute designed to safeguard the public against dishonest business practices. Under the MMPA, it is unlawful to engage in any deception, fraud, misrepresentation, or unfair practice in connection with the sale or advertisement of any merchandise in commerce, or solicitation of funds for a charitable purpose. While the act charges the attorney general to police the marketplace, it also provides for a private cause of action for those who have been victimized. Attorneys’ fees are recoverable under the statute, and it has proven to be a popular tool in suits against businesses. However, SB 591 adds several new requirements that a plaintiff must satisfy to prevail on an MMPA claim.

• Reasonableness is Required

SB 591 introduces a new reasonableness requirement on victims under the act. A person seeking recovery under the MMPA must show that the plaintiff acted reasonably under the circumstances. In other words, even if a business practice is unfair, a plaintiff cannot recover unless the deceptive practice would cause a reasonable person to enter into the transaction. Where the claim fails to show that the unlawful act or practice would mislead a reasonable person, a court may dismiss it as a matter of law.

• Damages Must Be Sufficiently Certain, Including Class Representatives

Generally, under common law, damages which are too speculative cannot be recovered. SB 591 seeks to reduce MMPA claims for vague or hypothetical damages by heightening the certainty requirement. The bill requires damages to be proven with “definitive and objective evidence” sufficient to allow the loss to be calculated with a reasonable degree of certainty. SB 591 also extends this standard to class representatives in class actions. On the other hand, class members may establish individual damages “in a manner determined by the court.”

• No Longer Applies to Purchase of a Newly Constructed Home

The MMPA no longer applies to the purchase of a new residence. This includes single family homes as well as residences in a multi-unit structure. However, for this exception to apply, the buyer must accept an express warranty from the builder (or third-party warranty company paid for by the builder), and the sale contract must contain explicit language notifying the buyer that the transaction is excluded from the MMPA.

Changes to Claims for Punitive Damages

The Missouri legislature has previously sought to place restrictions on punitive damages (also called aggravated damages in Missouri). In 2005, the legislature imposed a hard cap on punitive damage awards, but the Missouri Supreme Court struck down the law in 2014 as an unconstitutional infringement on the role of the jury to determine damages. Instead of a cap, SB 591 restricts punitive damages by changing the evidentiary requirement and prohibiting plaintiffs from bringing a claim for punitive damages without the court’s permission.

• Pleading Punitive Damages Requires Court Approval

Under current Missouri rules, a plaintiff may plead a claim for punitive damages at the outset of the case in the initial petition. Under SB 591, this is no longer be allowed. Instead, a plaintiff must move for leave of a court to add a claim for punitive damages. The plaintiff must provide sufficient supporting evidence before the court will allow the claim for punitive damages to proceed. This change will make Missouri similar to Illinois, which already requires court permission before bringing a claim for punitive damages.

• Clear and Convincing Evidence of Intent Required

SB 591 codifies the requirement already existing in Missouri caselaw that a plaintiff must prove entitlement to punitive damages by “clear and convincing” evidence. “Clear and convincing” is a heightened standard of proof beyond the mere “preponderance of the evidence” standard that is the norm in civil cases.

The bill goes further by reserving punitive damages only for cases of particularly egregious conduct. Under current Missouri law, a plaintiff must prove that the defendant acted with an “evil motive” or “recklessness” to recover punitive damages. However, under SB 591, the plaintiff must show that the defendant intentionally harmed the plaintiff or acted with deliberate and flagrant disregard for the safety of others. This heightened standard of intent will be more difficult for plaintiffs to meet and likely will make punitive damages available in fewer cases.

• Requirements for Punitive Damages to be Available Against Employers

SB 591 changes when punitive damages are available against an employer for acts of an employee. Punitive damages will not be available against the employer for the actions of a rogue employee acting outside the scope of his employment. Instead, punitive damages can be awarded against an employer for the employee’s acts only if the employer authorized or ratified the employee’s actions, the employee was in a managerial position, or the employee was so “unfit” for the job that hiring or retaining the employee was “reckless.”

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