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

Heading: Determining the Maximum Constitutionally Permissible Punitive Damages Award

Text: In Gore and Campbell, the Supreme Court has provided some guidance for determining when a jury's punitive damages award is so grossly excessive as to violate the Due Process Clause. But, thus far, the Court has avoided the more difficult question that due process challenges often present, viz., how to determine the maximum constitutionally permissible punitive damages award that may be allowed in a particular set of circumstances. In Gore and Campbell  the only two cases in which the Court struck down punitive damages awards as grossly excessivethe Court left it to the state courts to determine on remand what amount of punitive damages would be constitutional. See Campbell, 538 U.S. at 429, 123 S.Ct. 1513 (the proper calculation of punitive damages under the principles we have discussed should be resolved, in the first instance, by the Utah courts); Gore, 517 U.S. at 586, 116 S.Ct. 1589 ([w]hether the appropriate remedy requires a new trial or merely an independent determination by the Alabama Supreme Court of the award necessary to vindicate the economic interests of Alabama consumers is a matter that should be addressed by the state court in the first instance). Thus, for purposes of civil actions arising in the courts of this state, it falls to this court to answer that questionthat is, to refine the Court's guideposts in a way that yield[s]    real answers in    real cases. Gore, 517 U.S. at 606, 116 S.Ct. 1589 (Scalia, J., dissenting). Of course, in doing so, we remain mindful of the fact that we are dealing with a federal challenge and must rely entirely on federal due process considerations. As we previously have observed, [t]here is    no `state law excessiveness challenge' under the Oregon Constitution. Parrott v. Carr Chevrolet, Inc., 331 Or. 537, 551, 17 P.3d 473 (2001) (footnote, quotation marks, and citations omitted). It is clear that analysis must begin, at least, with the aforementioned guideposts from Gore and Campbell. It is less clear how those guideposts can yield a specific numerical figure that represents the maximum constitutionally permissible award. In that regard, we note that the first guidepost, reprehensibility, does not generate numerical answers at all, because the guidepost itself, and the subfactors that go into it, are all qualitative, not quantitative. Still, we may compare the level of reprehensibility exhibited in various cases, and that comparison may lead us to a conclusion that the constitutionally permissible limit in a particular case is high or low, relative to the limit in another case. The third guidepost, which examines comparable sanctions, also fails to provide a quantitative measuring stick. In Williams, this court discussed how Campbell had applied the third guidepost: There, the most relevant civil sanction was $10,000; the Court found that civil sanction was `dwarfed' by the $145 million punitive damage award. Yet the Court approved a punitive damage award `at or near the amount of compensatory damages,' i.e., an award somewhere around $1 million. And a $1 million punitive damage award was still 100 times the comparable sanction. 340 Or. at 58, 127 P.3d 1165 (citations omitted). Ultimately, we concluded that the Court must have intended that a pertinent civil sanction be used as a basis for comparing one punitive damages award to another, and not as a direct predictor of the constitutional limits of an individual punitive damages award: The guidepost may militate against a significant punitive damage award if the state's comparable sanctions are mild, trivial, or nonexistent. However, the guidepost will support a more significant punitive damage award when the state's comparable sanctions are severe. Id. at 58, 127 P.3d 1165. We conclude that the second guidepost, i.e., the ratio between punitive damages and actual or potential harm to the plaintiff, comes closest to providing numerical limits. Although the Court has professed its reluctance to identify concrete constitutional limits on the ratio between harm, or potential harm, to the plaintiff and the punitive damages award, Campbell, 538 U.S. at 424, 123 S.Ct. 1513, it has also, at various times, alluded to specific numerical ratios. In Haslip, 499 U.S. at 23-24, 111 S.Ct. 1032, for example, the Court stated that a punitive damages award that is more than four times the compensatory damages award may be close to the [constitutional] line. In Gore, 517 U.S. at 581, 116 S.Ct. 1589, the court interpreted a prior decision, TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 113 S.Ct. 2711, 125 L.Ed.2d 366 (1993), as suggesting that the ratio could not exceed ten to one. In Campbell, 538 U.S. at 425, 123 S.Ct. 1513, the Court suggested that, although a higher ratio may be justified when compensatory damages are small, [w]hen compensatory damages are substantial,    a    ratio [that is] perhaps only equal to compensatory damages    can reach the outermost limit of the due process guarantee. And, in the same opinion, the Court indicated that due process may be violated by exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree. Id. at 425, 123 S.Ct. 1513. But the Court also has conceded that the single-digit ratio may be exceeded in certain circumstances. It has indicated, for example, that higher ratios may be appropriate if a particularly egregious act has resulted in only a small amount of economic damages, and in cases in which the injury is hard to detect or the monetary value of noneconomic harm might have been difficult to determine. Gore, 517 U.S. at 582, 116 S.Ct. 1589. This court has identified one other circumstance in which an award that exceeds a single-digit ratio between punitive and compensatory damages might satisfy due process. In Williams, we held that extraordinarily reprehensible conduct on the part of the defendant may provide a basis for overriding concerns that may arise from an award that exceeds a single-digit ratio. [3] 340 Or. at 63, 127 P.3d 1165. In sum, the second guidepost, although far from perfect, does provide at least a rough numerical baseline for calculating a maximum constitutionally permissible punitive damages award in a given case. Specifically, it suggests that due process normally will not permit a punitive damages award in excess of a single-digit ratio to the compensatory damages award. Once that rough numerical reference point is established, the other guideposts come into play. As we have suggested, the first (reprehensibility) guidepost primarily is a comparative tool: If the level of reprehensibility exhibited in a case is high relative to other cases, then so will be the constitutionally permissible punitive damages award. The third guidepost also is comparative: If the comparable civil sanctions for certain conduct is high relative to other civil sanctions, then that fact may justify an upward adjustment in the constitutionally permissible amount of punitive damages. Such comparisons can be made to fit, albeit only approximately, into the numerical baseline that the second guidepost has established (which is based on the ratio between compensatory and punitive damages). Thus, punitive damages at what normally is the highest constitutionally permissible level ( i.e., a nine-to-one ratio between punitive and compensatory damages) are justified only when the conduct at issue is highly reprehensible (based on the subfactors that make up the reprehensibility analysis) and, if relevant, when that conduct subjects the actor to civil sanctions that are high relative to other civil sanctions that the state may impose. Of course, the foregoing framework is still amorphous. We offer one refinement in the hope of making it less so. [4] By long tradition, and reinforced by existing legal standards at all levels of government, conduct that causes or creates a risk of physical harm to persons is punished more harshly than conduct that causes or potentially causes economic harm. The Supreme Court has recognized that distinction in two of the subfactors that contribute to the analysis of reprehensibility (the first of the three Gore guideposts). As we already have observed, reprehensibility depends, to a large degree, on whether the harm caused was physical as opposed to economic and on whether the tortious conduct evidenced an indifference to or a reckless disregard of the health or safety of others. Campbell, 538 U.S. at 419, 123 S.Ct. 1513. We would expect that distinction to be strongly reflected in the punitive damages awards that attach to the two kinds of harms/risks, as well as in assessments by appellate courts of the level at which such awards become excessive. In fact, we think that, if a nine-to-one ratio between punitive and compensatory damages is at the limit of what the Due Process Clause normally will allow a court to impose on any tortious conduct, then the limit must be significantly lower for conduct that causes or risks only economic injury. But what is that limit? With respect to cases (like this one) involving injury to economic interests, our best estimate points to the four-to-one ratio between punitive and compensatory damages that the Supreme Court sometimes has identified as bordering on excessiveness. See Haslip, 499 U.S. at 22-23, 111 S.Ct. 1032 (stating that four-to-one ratio between punitive and compensatory damages was close to, but did not cross, the line of constitutional impropriety). See also Gore, 517 U.S. at 581, 116 S.Ct. 1589 (referring to four-to-one ratio discussed in Haslip ). As the Court has observed, that ratio is consistent with the double, triple, and quadruple damages that English and American statutes have imposed for various analogous civil violations. Gore, 517 U.S. at 581, 116 S.Ct. 1589. We conclude that, as a very general rule of thumb, the federal constitution prohibits any punitive damages award that significantly exceeds four times the amount of the injured party's compensatory damages, as long as the injuries caused by the defendant were economic, not physical. Of course, as with the single-digit ratio discussed above, 344 Or. at 258-59, 179 P.3d at 660-61, a higher ratio might be appropriate in unusual circumstances, such as when the economic damages are relatively small in relation to the theoretical injury, where the injury is difficult to detect, where the conduct causes noneconomic harm that is hard to value, or where the conduct is extraordinarily reprehensible.