Supreme Court Tightens Limits On Punitive Damages

By Gregory A. Bibler and Robert H. Fitzgerald

This month the U.S. Supreme Court tightened constitutional constraints on the discretion of state courts to impose punitive damages in tort cases. In State Farm Mutual Automobile Insurance Co. v. Campbell,123 S.Ct. 1513 (2003), the Court reversed the Utah Supreme Court's holding that an award of punitive damages that was 145 times the compensatory damages award passed muster under the Due Process Clause of the Fourteenth Amendment. In so doing, the Court emphasized that due process does not permit courts to award one plaintiff punitive damages based on the merits of other parties' hypothetical claims. Evidence of a defendant's bad behavior toward others may not be presented unless there is a clear nexus between that behavior and a compensable injury to the plaintiff. The Court also stated that few awards exceeding a single-digit ratio between punitive and compensatory damages will satisfy due process.

The Latest Contribution to a Long-Running Debate

The Supreme Court has long acknowledged that punitive damages may properly be imposed to further a State's legitimate interests in punishing unlawful conduct and deterring its repetition. Particularly in cases of great disparity between the actual harm suffered by a plaintiff and the punitive damages awarded against a defendant, however, the Court also has observed that civil suits offer none of the heightened protections generally afforded a criminal defendant, and that due process demands some constraints to prevent grossly excessive or arbitrary punishments against a tort feasor. In 1996, the Court first instituted standards for measuring the constitutional propriety of particular punitive damage awards.

In BMW of North America v. Gore, 517 U.S. 559 (1996), the Court established "three guideposts" for assessing whether a particular award exceeds the constitutional limit: (1) the degree of reprehensibility of the defendant's misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases. Applying these guideposts in Gore, the Court set aside a $2 million punitive damage award as "grossly excessive" as compared to the $4,000 of harm suffered by the plaintiff. The dissenters criticized the Gore opinion as an unjustified intrusion on State judicial systems based on vague guidelines insusceptible of principled application.

Courts gave at least the appearance of adhering to Gore's "guideposts"...