Opinion ID: 835320
Heading Depth: 2
Heading Rank: 5

Heading: What is the Maximum Constitutionally Permissible Award in this Case?

Text: That leaves us to decide the remaining issue: What is the highest amount of punitive damages that may be awarded in this case, without violating defendant's rights under the Due Process Clause? The Court of Appeals, after following much of the same tortuous path that we have reviewed here, reached the following conclusions respecting the appropriate ratio between the actual or potential damages suffered by Munson and the punitive damages award: Beyond [ Campbell 's] admonition that a ratio exceeding single digits is constitutionally permissible only in extraordinary cases and Gore 's earlier caution that a ratio of 4:1 might approach constitutional limits, there is a certain circularity to [the guidance offered by the Supreme Court's cases]   . Presumably, the constitutionality of any award of punitive damages within the presumptive single-digit ratio range will depend on the application of the first (reprehensibility) and third (comparable civil penalties) guideposts. Beyond that, the only ratio-specific variable appears to be [ Campbell 's] instruction that, in some cases involving relatively small amounts of compensatory damages, proportionately greater awards of punitive damages may be appropriate to effectuate the general purposes of punitive damages, with the obverse being true in some cases involving relatively large awards of compensatory damages. [ Campbell ], 538 U.S. at 426, 123 S.Ct. 1513. Ultimately, as a practical matter, the `ratio' guidepost serves as a sort of benchmark. Although fact-matching can be a fool's errand, cases involving roughly analogous circumstances, particularly with respect to the `reprehensibility' variables, should yield roughly similar ratios of compensatory and punitive damage awards. In that regard, it is instructive, although by no means conclusive, that, in [ Campbell ], which also involved a bad faith refusal to settle a clear liability third-party auto death claim, the Supreme Court suggested that a 1:1 ratio on a $1,000,000 compensatory award would comport with due process. 538 U.S. at 429, 123 S.Ct. 1513. Still, we hasten to emphasize that defendant's course of conduct in this case was considerably more protracted and, in our view, much more malicious than was the insurer's conduct in [ Campbell ].      We return to the application of the Gore /[ Campbell ] guideposts in this case. Any such application, albeit `as a matter of law,' is necessarily imprecise  even, at least arguably, impressionistic. Nevertheless, given the guidance of [ Campbell ], the distinctions of this case from [ Campbell ], and the analysis of our post-[ Campbell ] decisions, we conclude that the maximum constitutionally permissible award of punitive damages in this case is three times the compensatory damage award. Our reasoning is at least implicit from our foregoing discussion: Although the injury here was purely economic, without any threat to public health or safety, defendant's conduct was far more reprehensible  a calculated and repeated course of cynical and malicious betrayal of its insured's trust  than the Court found to be the case in [ Campbell ]. Nor was this an `isolated incident.' Although certain features of defendant's conduct here may have been `isolated' or unique, there can be no question, viewing the evidence most favorably to plaintiff, that the `stonewalling,' the `low-balling,' the pressured manipulation of claims evaluations and the like, are all typical of how defendant did business: Defendant's interests came first. On balance, the egregiously unethical character of defendant's conduct justifies a proportionately, greater award of punitive damages than the 1:1 ratio suggested by the Court in [ Campbell ]. Conversely, the lack of serious physical injury or disregard for the health and safety of the consuming public dictates a proportionally lower award of punitive damages than in Waddill [v. Anchor Hocking, Inc. 190 Or.App. 172, 78 P.3d 570 (2003) (involving personal injuries resulting from sale of dangerous product)]. Accordingly, a 3:1 ratio of punitive damages to compensatory damages in this case comports with due process. Goddard, 202 Or.App. at 119-22, 120 P.3d 1260. As is apparent, the Court of Appeals reached its determination by employing the Gore guideposts. We already have performed much of that same analysis. What remains is to synthesize what seem to us to be the relevant conclusions. With respect to the reprehensibility guidepost, we, like the Court of Appeals, have concluded that, because defendant's conduct only caused economic harm and did not reflect indifference to the physical health or safety of others, it would not justify an award at or approaching the Gore (nine-to-one) ratio limit that we have discussed. Still, we acknowledge that, under certain of the relevant aggravating factors, defendant's conduct was very reprehensible. Specifically, the jury could infer that the person injured by defendant's conduct (Munson) was financially vulnerable and defendant knew it, that defendant's tortious conduct was not an isolated incident but, instead, was a deliberate pattern and practice, and that defendant acted deceitfully and with malice. With respect to the third guidepost, which looks at civil sanctions for comparable conduct, we concluded that, in the universe of civil penalties, the $10,000 civil penalties that applied to conduct like that at issue here all were relatively severe. Moreover, defendant's acts were repeated, and the civil penalties could have been imposed for each separate illegal act. Those facts suggest that due process would permit a relatively high punitive damages award. In that regard, too, our view agrees with that of the Court of Appeals. But, as we already have noted above, 344 Or. at 258-59, 179 P.3d at 660-61, it is only the second Gore guidepost that offers any hard numerical guidance. Campbell suggests that, except in extraordinary circumstances, a punitive damages award that is more than nine times the amount awarded in compensatory damages violates due process, no matter what the tort. 538 U.S. at 425, 123 S.Ct. 1513. Gore, in our view, added another line of demarcation  that, when the conduct has solely economic effects and does not cause or risk physical harm to another, the ratio between the punitive damages award and compensatory damages normally cannot exceed four to one. Because, in this case, there is no basis for concluding that defendant caused or created a risk of physical harm to Munson, that four-to-one ratio is the relevant constitutional limit on punitive damages awards. In the end, we are persuaded that those factors demonstrate that requiring a one-to-one ratio, like that commended in Campbell, would exceed our constitutional role. On the other hand, we believe that approving an award at the outside limits (four-to-one, under Gore ) would be permissible. Several reasons influence our choice, but the primary one is the degree of defendant's betrayal of its obligation to protect Munson. The drumbeat march of defendant's disregard for Munson's interests began with Munson's initial claim and persisted, despite the most obvious reasons that it should end, through the calamitous verdict against him. There may be possible courses of behavior in the area of economic wrong that would be even worse, but none leaps to mind. This case fully justifies the highest permissible award, viz., an award that is four times the amount of plaintiff's actual and potential harm (which, as we have discussed, is $690,619.20 plus prejudgment interest). [11] We therefore modify the Court of Appeals opinion to that effect. On remand, the trial court should finally calculate the amount of prejudgment interest  and, thus, precisely calculate the maximum permissible punitive damages award  and present that amount to plaintiff as the maximum punitive damages award that, on this record, the Due Process Clause will bear. Then, the court should grant defendant's motion for a new trial, unless plaintiff agrees to entry of an amended judgment that reduces the punitive damages award to that amount. The decision of the Court of Appeals is affirmed as modified by this opinion. The judgment of the circuit court is vacated and remanded with instructions to grant defendant's motion for new trial, limited to punitive damages, unless plaintiff agrees to remittitur of punitive damages to four times compensatory damages award.