Pennsylvania Supreme Court To Consider Constitutionality Of Excessive Punitive Damages

• Published date: 18 May 2022
• Subject Matter: Litigation, Mediation & Arbitration
• Law Firm: Duane Morris LLP
• Author: Mr Robert Byer and Ryan F. Monahan

The Supreme Court of Pennsylvania recently granted review in The Bert Company d/b/a Northwest Insurance Services v. Matthew Turk, et al., 14 WAP 2022, which presents important and unresolved questions regarding the constitutionality of excessive punitive damages. Although the Supreme Court of the United States has stated that "few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process,"¹ this case involves a punitive damages award over 11 times greater than the compensatory damages award. A major question that the Supreme Court of Pennsylvania will resolve is how to determine the ratio when there are multiple defendants: per defendant or per judgment?

Defendant-petitioner Matthew Turk was an employee of plaintiff-respondent Northwest Insurance (NWI, aka the Bert Company) until 2017, when he joined NWI's competitor, defendant-petitioner First National Family (comprised of First National Insurance Agency LLC, First National Bank and FNB Corporation). Turk joined First National Family through a "lift out," the practice of hiring a group of individuals from the same employer in a short time period. NWI sued Turk, First National Family and four former employees of NWI who also left for First National Family. Although the claims against the four former employees were dismissed, NWI won a verdict against Turk and First National Family of $250,000 in compensatory damages on claims of breach of contract and tort. NWI was also awarded $2.8 million in punitive damages against Turk and First National Family, broken down by defendant as follows:

Matthew Turk: $300,000 (and $361,093.74 for NWI's attorney fees);

First National Insurance Agency, LLC: $1.5 million;

First National Bank: $500,000;

FNB Corporation: $500,000.

On appeal to the Superior Court of Pennsylvania, Turk and the First National Family challenged the constitutionality of the excessive punitive damages, citing the U.S. Supreme Court's decisions in BMW of N.A., Inc. v. Gore, 517 U.S. 449 (1996) and State Farm Mutual Automobile, Ins. Co. v. Campbell, 538 U.S. 408(2003). In Gore, the Supreme Court recognized three factors for courts to consider when determining whether a punitive damages award is grossly excessive: "(1) the degree of reprehensibility of defendant's conduct, (2) the relationship of the punitive verdict to the harm or potential harm suffered by the victim, and (3) any sanctions for comparable misconduct in statutory...