Opinion ID: 3040089
Heading Depth: 3
Heading Rank: 3

Heading: The Supreme Court’s Decision in BMW v. Gore.

Text: As the parties were beginning their preparation for the first appeal of the $5 billion punitive damages award, the Supreme Court issued its first major due process/punitive damages decision after TXO. In 1996, it decided BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996). This was the Supreme Court’s first attempt to describe specific factors that a court should consider in reviewing a jury’s award of punitive damages. See id. at 575. The Court invoked the traditional concepts of due process to describe the purpose of the review as an assurance of fair notice to the defendant of the consequences of its conduct. Id. at 574. The Court described three factors to be considered. Id. at 575. The first was the reprehensibility of the conduct. Id. The Court explained that reprehensibility is “[p]erhaps the most important indicium of the reasonableness of a punitive damages award,” and said that an award should reflect “the enormity” of the offense. Id. (citations omitted). The second factor was the disparity between the actual or potential harm to the plaintiffs flowing from that conduct, and the punitive damages assessed by the jury. The Court said that the disparity factor was the most commonly cited. Id. at 580. The Court reasoned this factor is important because it “has a long pedigree” extending back to English statutes from 1275 to 1753 providing for double, treble or quadruple damages. Id. at 580-81. Thus the critical measure here is the ratio between the punitive award and the amount of harm inflicted on the plaintiff, or plaintiffs, before the court. IN RE: THE EXXON VALDEZ 19709 The third factor was the difference between the punitives and the civil and criminal penalties authorized by the state for that conduct. Id. at 583. The Court indicated that reviewing courts should use this factor to “accord substantial deference to legislative judgments concerning appropriate sanctions for the conduct at issue.” Id. at 583 (internal quotations omitted). In BMW v. Gore, the defendant had engaged in a practice of repainting damaged cars and passing them off as neverdamaged cars with their original paint. Id. at 563-64. The plaintiff who had purchased one of these cars was awarded $4,000 in compensatory damages and $4 million in punitives. Id. at 565. The Alabama Supreme Court reduced the punitives to $2 million, and the defendant petitioned for certiorari review. Id. at 567. The Supreme Court held the punitives were excessive. Id. at 585. In examining the reprehensibility of the conduct, the Supreme Court in BMW v. Gore stressed that the only harm inflicted by the defendant was economic and not physical. Id. at 576. The Court also emphasized that the conduct to be considered was only the conduct of the defendant towards the plaintiff in the Alabama case and not other conduct that might be a part of a nationwide practice. Id. at 572. Justice Breyer’s concurring opinion noted the danger in subjecting a defendant to punishment multiple times for the same conduct. Id. at 593 (Breyer, J., concurring). Thus, in looking at the ratio between the punitives and the harm, and in stressing that the ratio must be a reasonable one, the Court was holding that the ratio must be measured by the ratio of punitive damages to the harm suffered by the plaintiff in that case, without regard to harm that might have been experienced by others and for which the defendant might also be responsible. Id. at 580. It concluded that a ratio of 500 to 1 was grossly excessive. Id. at 583. Such an excessive ratio resulted from the jury’s improperly measuring the punitives in relation to the damage inflicted on a nation of potential plain19710 IN RE: THE EXXON VALDEZ tiffs rather than the damage to the plaintiff before that jury. Id. at 573. With respect to the third factor, the relationship between the punitive damages and the comparable penalties under state law, BMW v. Gore looked to the Court’s federalism jurisprudence. The Court’s opinion stressed that reviewing courts should be mindful of the need to pay due deference to the legislative judgments of states in assessing the reprehensibility of conduct. Id. at 583 (“[A] reviewing court engaged in determining whether an award of punitive damages is excessive should ‘accord ‘substantial deference’ to legislative judgments concerning appropriate sanctions for the conduct at issue.’ ”) (quoting Browning-Ferris, 492 U.S. at 301 (O’Connor, J., concurring in part, dissenting in part)). Again refusing to draw any kind of mathematical bright line between acceptable and unacceptable ratios, the Court described the 500 to 1 ratio in BMW v. Gore as “breathtaking.” Id. It remanded for further, not inconsistent, proceedings, because, unlike Haslip, where the Court affirmed a questionable award, the Court in BMW was “fully convinced” that this award was “grossly excessive.” Id. at 585-86.