Punitive Damages Revisited: May a State Jury Impose Punitive Damages for Out-of-State Conduct and What Punitive Damages Are Excessive?

Abstract

This article previews the issues and arguments in BMW v. Gore, on the Supreme Court’s 1995-96 appellate docket. The Court will focus on two primary issues: (1) May a state jury constitutionally award punitive damages against a wrongdoer for the wrongdoer's instate as well as out-of-state conduct? If this basis for a punitive damage award violates the Constitution, must a state appellate court relieve the wrongdoer of such a mistaken award?, and (2) Is a state supreme court's reduction of a jury's $4-million dollar punitive damage award to $2 million ― rather than sending the case back to the jury for recalculation of the award ― constitutionally permissible, or is the award still so excessive that it violates the Fourteenth Amendment's Due Process Clause or the Eighth Amendment's Excessive Fines Clause?

Some states permit juries to award damages to punish egregious wrongdoing, provided the award is consistent with due process. With this case, the Supreme Court, for the fifth time in six years, revisits the constitutional requirements of punitive damages. The Court will decide if a state may assess punitive damages for a corporation's in-state and out-of-state conduct. Also the Court is asked to articulate standards for excessive punitive damages.

Punitive damages are a special kind of damages that a jury may award in a civil case to punish a wrongdoer for egregious misbehavior and to deter future pernicious conduct. These damages are distinct from compensatory damages that repay an injured person for actual harm suffered as a consequence of a wrongdoer's actions. Most states ― but not all ― permit juries to award punitive damages according to various standards relating both to the misconduct and the permissible scope of the punitive damage award. These standards vary from state to state, with some states not permitting punitive damage awards at all.

In the Court’s recent decisions relating to punitive damages, the Court chiefly has grappled with the Fourteenth Amendment due process requirements for such awards. To date, however, the Court has not indicated precisely what constitutes an excessive punitive damage award or addressed the constitutional implications of a wrongdoer's potential exposure to multiple, successive punitive damage awards. Moreover, the Court has not yet examined whether or not a state jury may award punitive damages for misconduct that occurred inside as well as outside the state. In BMW of North America, Inc. v. Gore, the litigants have asked the Supreme Court to again revisit the constitutional limits on award of punitive damages. Because of the wide variation in state punitive damage standards as well as huge punitive damage awards in recent highly publicized cases, i.e., issues relating to these awards have become the focus of heated public debate and congressional scrutiny.

Against this backdrop, the Supreme Court has decided four cases relating to punitive damages during the past five years. Given the reform initiatives currently before Congress and state legislatures - all including provisions to limit punitive damage awards – the Supreme Court's decision to revisit the punitive damages issues presented in this case obviously is highly significant. Public outrage and debate over punitive damages continue to command center stage and media attention. The heated nature of the debate also is measured by the large number of friend-of-the-court briefs filed in this case. With this degree of legislative activity and with legislative reforms pending, it is difficult to assess the meaning of the Court's action in taking yet another punitive damage case.

It is equally difficult to forecast what tack the Supreme Court might take with regard to the principal issues presented in this case. It is unclear whether or how a defendant's out-of-state misconduct ― to the extent such misconduct provides a basis for a jury's assessment of punitive damages ― is a relevant constitutional consideration.Moreover, the Court may resist the opportunity to address the issue of multiple, successive punitive damages because BMW of North America has not yet suffered such a penalty. In other words, the repetitive damage issue is more theoretical than actual and, hence, is not yet the source of a concrete dispute. If the repetitive punitive damage issue is indeed premature, that leaves the Court with the company's claim that the award in this case is excessive. While this argument has not worked in the Court's recent punitive damage cases, perhaps the Court, now with several new members, is ready to set forth some brighter lines for determining what is and is not an excessive punitive damage award either as a matter of the Due Process Clause or the Excessive Fines Clause.