Opinion ID: 2625838
Heading Depth: 4
Heading Rank: 1

Heading: The Relative Wealth of State Farm

Text: ¶ 23 The defendant's wealth is the first factor for consideration. Punitive damages... should be sufficient to discourage... [the defendant], or anyone similarly situated, from repeating such conduct in the future. Cruz v. Montoya, 660 P.2d 723, 727 (Utah 1983), superceded by statute on other grounds. To calculate an award sufficient to punish and deter companies from future egregious behavior, some courts have compared the amount of punitive damages to the company's net worth. For example, the Seventh Circuit Court of Appeals has held that a typical punitive damage award may be around one percent of the defendant's net worth. Cash v. Beltmann N. Am. Co., 900 F.2d 109, 111 n. 3 (7th Cir.1990). Although such guidelines are helpful in reviewing punitive damage awards, we emphasize that in Utah there is no pre-established mathematical formula for such awards. ¶ 24 State Farm argues that Utah courts have considered a corporation's wealth only to mitigate large punitive awards, and that it is not aware of any Utah appellate decision upholding a presumptively excessive punitive exaction on the ground that the defendant happened to be wealthy. In defense of this proposition, State Farm cites to Cruz and VanDyke v. Mountain Coin Machine Distrib., Inc., 758 P.2d 962 (Utah Ct.App.1988), two cases in which the appellate courts did in fact reduce the punitive damage award based on the defendant's wealth. However, neither of these cases holds that the wealth of a company can be considered only to mitigate a punitive damage award. To the contrary, they indicate that a fact finder should consider the defendant's relative wealth when calculating a punitive damage award, and that such awards should have a proportional relationship to the defendant's wealth. See Cruz, 660 P.2d at 726-27; VanDyke, 758 P.2d at 965-66. ¶ 25 Additionally, State Farm relies on two federal court cases, Continental Trend Resources, Inc. v. OXY USA, Inc., 101 F.3d 634, 641 (10th Cir.1996), cert. denied, 520 U.S. 1241, 117 S.Ct. 1846, 137 L.Ed.2d 1049 (1997), and Utah Foam Prod. Co. v. Upjohn Co., 930 F.Supp. 513, 531 (D.Utah 1996). These cases likewise do not support State Farm's position. In particular, while stating that a defendant's wealth cannot alone justify a large punitive damage award, Utah Foam indicates that a defendant's wealth may be taken into account. Utah Foam, 930 F.Supp. at 531 (internal quotation marks omitted). Moreover, Continental Trend specifically states that wealth must remain relevant when determining punitive damage awards. Cont'l Trend, 101 F.3d at 641. ¶ 26 State Farm's wealth is enormous. As the trial court found, [t]he evidence indicates that State Farm's surplus increased from $2.65 billion in 1977 to $25 billion in 1995. Its assets increased from $6.3 billion in 1977 to $54.75 billion in 1995, at an average increase of $4.3 million per working day in surplus, and $9.3 million per working day in assets.... A punitive damages award equal to one percent of State Farm's wealth would be $547.5 million. The remitted amount of $25 million in punitive damages represents less that 1/20th of one percent of State Farm's wealth (.0457 per cent). Moreover, the jury's punitive damage award of $145 million is only 0.26 of one percent of State Farm's wealth as computed by the trial court, to whose judgment on this factual matter we defer. In our view, neither percentage is unreasonable, given the need to sufficiently deter and punish State Farm. See Crookston II, 860 P.2d at 940-41 (upholding punitive damage award that was 0.5 of one percent of defendant's net worth). Furthermore, the evidence showed that a larger than normal punitive damage award is necessary to attract the attention of State Farm officials and deter the company from further bad conduct because, as the trial court specifically found: (1) State Farm's corporate headquarters had never learned of, much less acted upon, a punitive damage award of $100 million in a previous case; and (2) State Farm's Regional vice-president for Utah testified that there was no system in place to inform the company's national headquarters of any punitive damage award, and that he did not plan to report the award in this case.