I
105TH CONGRESS
2D SESSION
H. R. 4785
To provide for relief from excessive punitive damage awards in cases involving
primarily financial loss by establishing rules for proportionality between
the amount of punitive damages and the amount of economic loss.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 10, 1998
Mr. HYDE (for himself and Mr. MORAN of Virginia) introduced the following
bill; which was referred to the Committee on the Judiciary
A BILL
To provide for relief from excessive punitive damage awards
in cases involving primarily financial loss by establishing
rules for proportionality between the amount of punitive
damages and the amount of economic loss.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Fairness in Punitive
Damage Awards Act’’.
SEC. 2. FINDINGS.
Congress finds that—
(1) punitive damage awards in jury verdicts in
financial injury cases are a serious and growing
problem, and according to a Rand Institute for Civil
Justice study in 1997 of punitive damage verdicts
from calendar years 1985 through 1994 in States
that represent 25 percent of the United States popu-
lation—
(A) nearly 50 percent of all punitive dam-
age awards are made in financial injury cases
(those in which the plaintiff is alleging a finan-
cial injury only and is not alleging injuries to
either person or property);
(B) punitive damages are awarded in 1 in
every 7 financial injury verdicts overall and 1 in
every 5 financial injury cases in the State of
California;
(C) between calendar years 1985 through
1989 and calendar years 1990 through 1994,
the average punitive damage verdict in financial
injury cases increased from $3,400,000 to
$7,600,000;
(D) between calendar years 1985 through
1989 and calendar years 1990 through 1994,
the award of such damages at the 90th percent-
ile increased from $3,900,000 to $12,100,000;
(E) between calendar years 1985 through
1989 and calendar years 1990 through 1994,
the total amount of punitive damages awarded
increased 
from 
$1,200,000,000 
to
$2,300,000,000, 
for 
a 
10-year 
total 
of
$3,500,000,000;
(F) punitive damages represent a very
large percentage of total damages awarded in
all financial injury verdicts, increasing from 44
percent to 59 percent during the period ana-
lyzed; and
(G) in the State of Alabama, punitive dam-
ages represent 82 percent of all damages
awarded in financial injury cases;
(2) excessive, unpredictable, and often arbitrary
punitive damage awards have a direct and undesir-
able effect on interstate commerce by increasing the
cost and decreasing the availability of goods and
services;
(3) as a result of excessive, unpredictable, and
often arbitrary punitive damage awards, consumers
have been adversely affected through the withdrawal
of products, producers, services, and service provid-
ers from the marketplace, and from excessive liabil-
ity costs passed on to consumers through higher
prices;
(4) excessive, unpredictable, and often arbitrary
punitive damage awards jeopardize the financial
well-being of many individuals and companies, par-
ticularly the Nation’s small businesses, and ad-
versely affect government and taxpayers;
(5) individual State legislatures, 5 of whom
have banned punitive damages and 14 others of
whom have place limitations on the amount of such
awards, can create only a partial remedy to address
these problems because each State lacks the power
to control the imposition of punitive damages in
other States;
(6) it is the constitutional role of the national
Government to remove barriers to interstate com-
merce and to protect due process rights;
(7) there is a need to restore rationality, cer-
tainty, and fairness to the award of punitive dam-
ages in order to protect against excessive, arbitrary,
and uncertain awards;
(8) establishing a rule of proportionality, in
cases that primarily involve financial injury, between
the amount of punitive damages awarded and the
amount of economic damages would—
(A) be fair to both plaintiffs and defend-
ants; and
(B) address the constitutional objection of
the United States Supreme Court in BMW of
North America v. Gore 116 S. Ct. 1589 (1996)
to punitive damages that are grossly excessive
in relation to the harm suffered; and
(9) based upon the powers contained in Article
I, section 8, clause 3 and section 5 of the 14th
amendment of the United States Constitution, this
Act will—
(A) promote the free flow of goods and
services and lessen the burdens on interstate
commerce; and
(B) uphold constitutionally protected due
process rights by placing reasonable limits on
damages over and above the actual damages
suffered by a claimant.
SEC. 3. DEFINITIONS.
For purposes of this Act:
(1) ACT OF TERRORISM.—The term ‘‘act of ter-
rorism’’ means any activity that—
(A)(i) is a violation of the criminal laws of
the United States or any State; or
(ii) would be a criminal violation if com-
mitted within the jurisdiction of the United
States or any State; and
(B) appears to be intended to intimidate or
coerce a civilian population, to influence the
policy of a government by intimidation or coer-
cion, or to affect the conduct of a government
by assassination or kidnaping.
(2) CLAIMANT.—The term ‘‘claimant’’—
(A) means any person who brings a civil
action that is subject to this Act and any per-
son on whose behalf such an action is brought;
and
(B) includes—
(i) a claimant’s decedent if such ac-
tion is brought through or on behalf of an
estate; and
(ii) a claimant’s legal guardian if such
action is brought through or on behalf of
a minor or incompetent.
(3) 
COMPENSATORY
DAMAGES.—The 
term
‘‘compensatory damages’’ means damages awarded
for economic and non-economic loss.
(4) ECONOMIC
LOSS.—The term ‘‘economic
loss’’ means objectively verifiable monetary losses in-
cluding medical expenses, loss of earnings, burial
costs, loss of use of property, costs of repair or re-
placement, costs of obtaining substitute domestic
services, loss of employment, and loss of business or
employment opportunities, to the extent such recov-
ery is allowed under applicable Federal or State law.
(5) HARM.—The term ‘‘harm’’ means any le-
gally cognizable wrong or injury for which punitive
damages may be imposed.
(6) INTERSTATE COMMERCE.—The term ‘‘inter-
state commerce’’ means commerce among the several
States or with foreign nations, or in any territory of
the United States or in the District of Columbia, or
between any such territory and another, or between
any such territory and any State or foreign nation,
or between the District of Columbia and any State
or territory or foreign nation.
(7) PERSON.—The term ‘‘person’’ includes any
governmental entity.
(8) PUNITIVE DAMAGES.—The term ‘‘punitive
damages’’ means damage awarded against any per-
son to punish or deter such person, or others, from
engaging in similar behavior in the future.
SEC. 4. APPLICABILITY.
(a) GENERAL RULE.—
(1) CIVIL ACTIONS COVERED.—Except as pro-
vided in subsection (b), this Act applies to any civil
action brought in any Federal or State court where
such action affects interstate commerce or implicates
rights or interests that may be protected by Con-
gress under section 5 of the 14th amendment of the
United States Constitution and where the claimant
seeks to recover punitive damages under any theory
for harm. Punitive damages may, to the extent per-
mitted by applicable State law, be awarded against
a person in such an action only if the claimant es-
tablishes by clear and convincing evidence that con-
duct of such person was carried out with a con-
scious, flagrant indifference to the rights or safety of
others and was the proximate cause of the harm
that is the subject of the action.
(b) EXCEPTIONS.—
(1) IN GENERAL.—The provisions of this Act
shall not apply to any person in a civil action de-
scribed in subsection (a)(1) if the misconduct for
which punitive damages are awarded against that
person—
(A) caused harm that resulted in death, se-
rious and permanent physical scarring or dis-
figurement, loss of a limb or organ, or serious
and permanent physical impairment of an im-
portant bodily function;
(B) constitutes a crime of violence (as that
term is defined in section 16 of title 18, United
States Code) for which the defendant has been
convicted in any court;
(C) constitutes an act of terrorism for
which the defendant has been convicted in any
court;
(D) constitutes a hate crime referred to in
subsection (b)(1) of the first section of the
Hate Crime Statistics Act (28 U.S.C 534 note)
for which the defendant has been convicted in
any court;
(E) occurred at a time when the defendant
was under the influence (as determined pursu-
ant to applicable State law) of—
(i) intoxicating alcohol, or
(ii) any drug that may not lawfully be
sold without a prescription or had been
taken by the defendant other than in ac-
cordance with the terms of a lawful pre-
scription, and
if the defendant so being under the influence
caused the harm for which the civil action was
brought; or
(F) constitutes a felony sexual offense, as
defined by applicable Federal or State law, for
which the defendant has been convicted in any
court.
(2) QUESTION OF LAW.—The applicability of
this subsection and what constitutes death, serious
and permanent physical scarring or disfigurement,
loss of a limb or organ, or serious and permanent
physical impairment of an important bodily function
shall be a question of law for determination by the
court. The liability of any other person in such an
action shall be determined in accordance with this
Act.
SEC. 5. PROPORTIONAL AWARDS.
(a) AMOUNT.—
(1) IN
GENERAL.—The amount of punitive
damages that may be awarded to a claimant in any
civil action that is subject to this Act shall not ex-
ceed the greater of—
(A) 3 times the amount awarded to the
claimant for economic loss; or
(B) $250,000.
(2) SPECIAL RULE FOR SMALL BUSINESS AND
CERTAIN INDIVIDUALS.—
(A) IN GENERAL.—Notwithstanding para-
graph (1), in any civil action that is subject to
this Act against an individual whose net worth
does not exceed $500,000 or against an owner
of an unincorporated business, or any partner-
ship, corporation, association, unit of local gov-
ernment, or organization that has fewer than
25 full-time employees, the amount of punitive
damages shall not exceed the lesser of—
(i) 3 times the amount awarded to the
claimant for economic loss; or
(ii) $250,000.
(B) APPLICABILITY.—For purposes of de-
termining the applicability of this paragraph to
a corporation, the number of employees of a
subsidiary of a wholly owned corporation shall
include all employees of a parent corporation or
any subsidiary of that parent corporation.
(b) APPLICATION OF LIMITATIONS BY THE COURT.—
The limitations in subsection (a) shall be applied by the
court and shall not be disclosed to the jury.
(c) BIFURCATION AT REQUEST OF ANY PARTY.—
(1) IN GENERAL.—At the request of any party
the trier of fact in any action that is subject to this
section shall consider in a separate proceeding, held
subsequent to the determination of the amount of
compensatory damages, whether punitive damages
are to be awarded for the harm that is the subject
of the action and the amount of the award.
(2) INADMISSIBILITY OF EVIDENCE RELATIVE
ONLY TO A CLAIM OF PUNITIVE DAMAGES IN A PRO-
CEEDING CONCERNING COMPENSATORY DAMAGES.—
If any party requests a separate proceeding under
paragraph (1), in a proceeding to determine whether
the claimant may be awarded compensatory dam-
ages, any evidence, argument, or contention that is
relevant only to the claim of punitive damages, as
determined by applicable State law, shall be inadmis-
sible.
SEC. 6. PREEMPTION.
Nothing in this Act shall be construed to—
(1) create a cause of action for punitive dam-
ages;
(2) supersede or alter any Federal law;
(3) preempt or supersede any Federal or State
law to the extent such law would further limit the
award of punitive damages; or