Explain how the U.S. Supreme Court determines whether a punitive damages award is so excessive as to violate the due process. How did it clarify this in the State Farm v. Campbell case?

Question

What will be an ideal response?

Answer 1

In the 1995 case of Gore v. BMW, the Supreme Court set forth a workable test to determine if punitive damages awarded are so excessive as to violate due process. The so-called BMW guideposts require courts to look at three factors to determine whether a punitive damages award is so excessive as to violate due process: 1. the reprehensibility of the conduct, 2. the ratio of punitive damages to compensatory damages, and 3 . comparable civil and criminal penalties for the same crime.
In the State Farm v. Campbell case, the Utah Supreme Court reinstated the $145 million in punitive damages awarded by the jury. The U.S. Supreme Court granted review of whether the punitive damages award violated the standards of Gore v. BMW by a constitutionally excessive ratio to compensatory damages and by punishing the defendant in part for out-of-state conduct not directly affecting the plaintiffs. The Supreme Court reiterated from Gore v. BMW that the most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant's conduct, and noted that the reprehensibility of a defendant is determined by considering whether "the harm caused was physical as opposed to economic; the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; the target of the conduct had financial vulnerability; the conduct involved repeated actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident." The Court also noted that punitive damages should be awarded only if the defendant's culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or deterrence. In applying the first prong of the BMW case, the high court found that although the defendant's direct conduct against the plaintiff was reprehensible enough to warrant some modest punitive damages, the trial court erred in allowing the jury to consider the defendant's out-of-court conduct toward other policyholders, and without this improperly considered evidence of out-of-state conduct, the defendant's conduct in failing to settle the claim within its policy limits was not sufficiently reprehensible to warrant such a large punitive damages award.