Punitive damages are designed to punish certain behavior and ensure deterrence of that behavior.
Ds are protected against unfairly large punitive damages by the due process clause since the D should have sufficient notice of the sanctions that might be imposed.
Gore v. BMW test for unfair punitive damages…
Degree of Reprehensibility - How bad was the conduct really?
Impact on health or safety or just monetary damages?
Is the conduct illegal in all states? (issue in Gore)
Recidivism?
Ratio - What was the comparative amount as between the actual damages and the punitive damages? (single digits, State Farm)
While there is no "bright line" test, does the ratio "raise a suspicious judicial eyebrow"?
If compensatory damages are very low, might additional harm have occurred? (as in TXO)
Sanctions for Comparable Misconduct - Is the punitive damage award "in line" with what criminal or other sanctions might have been?
Are there judicial decisions that would put the D on notice that their conduct would result in severe sanctions
**Full Punitive Damages**
Purposes of Punitive Damages
To punish particularly egregious behavior (gross negligence or "wanton" misconduct)
To ensure deterrence of wrong conduct
Goal is to NOT to compensate the P who will already be receiving compensatory damages
Protections for D from Punitive Damages (mainly Due Process Clause - sufficient notice of the magnitude of the sanction the state might impose)
Jury screening and preemptory challenges
The opportunity to present evidence during trial against punitive damages
The judge can reduce punitive damages through remittitur after the verdict
Pacific Life Insurance v. Haslip (local life insurance agent never forwarded premiums to company, coverage lapsed for consumer, then consumer injured) gave $240k compensatory, $800k punitive.
SCOTUS allowed punitive damages award to stand, noted that there were procedural safeguards in place (refusal to admit evidence of D's wealth and proper jury instructions about the function of punitive damages).
Ratio of > 4x "might be close to the line," but it did not "cross the line into the area of constitutional impropriety"
TXO v. Alliance (slander case involving effort to swindle P out of substantial sums) gave $19k compensatory, $10M punitive.
SCOTUS allowed punitive damages award to stand since compensatory damages were so low, and the D's scheme would have stolen substantial sums of money from lots of people if it had worked.
SCOTUS said the proper inquiry is "whether there is a reasonable relationship between the punitive damages award and the harm likely to result from the D's conduct ."
Honda Motor Corp v. Oberg (P injured by D's ATV) gave ~$1M compensatory, $5M punitive.
OR appellate and supreme courts held that OR courts had no power to correct excessive verdicts
SCOTUS reversed, Constitution requires a substantive limit on punitive damages, and judicial review of awards is critical because juries are given such wide discretion in awarding punitive damages.
BMW v. Gore (nondisclosure of repairs before sale of new cars) gave $4k compensatory, $4M punitive (reduced to $2M by appellate court)
SCOTUS reversed punitive damages award, gave three factors to consider when reviewing punitive damages…
Degree of Reprehensibility - How bad was the conduct really?
Impact on health or safety or just monetary damages?
Is the conduct illegal in all states?
Recidivism?
Ratio - What was the comparative amount as between the actual damages and the punitive damages?
While there is no "bright line" test, does the ratio "raise a suspicious judicial eyebrow"?
If compensatory damages are very low, might additional harm have occurred? (as in TXO)
Sanctions for Comparable Misconduct - Is the punitive damage award "in line" with what criminal or other sanctions might have been?
Are there judicial decisions that would put the D on notice that their conduct would result in severe sanctions?
State Farm v. Campbell (ins company refused to settle a claim based on a terrible nationwide policy, opened client up to liability) gave $2.6M compensatory, $145M punitive
Application of the Gore test. (Reprehensibility cannot look at policies, ratio too high, sanctions not even close to $145M)
SCOTUS reversed punitive damages award, said jury should only look at the actions that directly impacted P, not nationwide policies ("conduct independent and dissimilar from the cause of action").
Phillip Morris v. Williams (tobacco litigation)
SCOTUS said D cannot be directly punished through punitive damages for harm done to nonparty victims.
