Opinion ID: 895240
Heading Depth: 5
Heading Rank: 2

Heading: Ratio Between Exemplary and Compensatory Damages

Text: In State Farm , the Court decline[d] again to impose a bright-line ratio of exemplary to actual damages, but stated that in practice, few awards exceeding a single-digit ratio ... will satisfy due process and that an award of more than four times the amount of compensatory damages might be close to the line of constitutional impropriety. [47] Drawing on State Farm and other authority, we held, in Tony Gullo Motors I, L.P. v. Chapa, [48] that a ratio of 4.33 to 1 exceeded constitutional limits where only the fifth of the five reprehensibility factors favored exemplary damages. In that case, the plaintiff claimed that an automobile dealer had committed fraud by promising to deliver a certain model and delivering instead a less-luxurious model. The dealer's bait-and-switch included various deceptions, including forged signatures of the plaintiff and her deceased husband. The jury awarded economic damages of $7,213, the difference in the values of the two models, and mental-anguish damages of $21,639 (three times economic damages). Considering the first four reprehensibility factors, we concluded that the defendant's conduct did not cause physical harm, did not threaten the health or safety of others, did not involve repeated actions, and did not threaten financial ruin. [49] Only the fifth factor favored exemplary damages because the conduct was deceitful rather than accidental. [50] We then stressed State Farm's admonition that any ratio above 4:1 might be close to the line of constitutional impropriety. [51] Noting that a 4.33 multiplier at least pushes against, if not exceeds, the constitutional limits, [52] we ultimately held: Pushing exemplary damages to the absolute constitutional limit in a case like this leaves no room for greater punishment in cases involving death, grievous physical injury, financial ruin, or actions that endanger a large segment of the public. On this record, Gullo Motors' conduct merited exemplary damages, but the amount assessed by the court of appeals exceeds constitutional limits. [53] In short, 4.33 times actual damages was constitutionally excessive. The facts of today's case are not meaningfully distinguishable from those in Gullo Motors. Under the first four reprehensibility factors, as interpreted in Gullo Motors, Bennett's conduct did not cause physical harm, did not endanger the health or safety of others, [54] did not involve repeated actions, [55] and did not threaten financial ruin. Only the fifth factor favors exemplary damages, in that Bennett's conduct was the result of intentional malice rather than mere accident. We are bound by Gullo Motors and accordingly hold that both ratios in this case were excessive. However, we pause to note that rigid application of a 4:1 ratio is not universally required. State Farm recognized that ratios greater than those we have previously upheld may comport with due process where `a particularly egregious act has resulted in only a small amount of economic damages.' [56] Reynolds insists this case fits that upward-departure exception. The court of appeals agreed, acknowledging these ratios appear superficially dramatic, [57] but concluding this was a case where especially abhorrent conduct inflicted only modest economic harm. [58] We disagree. As discussed above with respect to the statutory malice requirement, the economic damages of $5,327.11 were substantial and cannot fairly be characterized as nominal or trivial. Reynolds cannot successfully argue that actual damages were substantial for state statutory purposes (thus allowing exemplary damages) but were insubstantial for federal constitutional purposes (thus allowing large exemplary damages). Though dwarfed by the punitive damages, $5,327.11 is not trivial; it is the amount the jury believed would redress the concrete loss that Reynolds suffered. Even assuming that $5,327.11 is small, the other part of the exceptiona particularly egregious act [59] is absent here just as in Gore , where the Court rejected $2 million in exemplary damages on $4,000 in actual damages. We cannot characterize the conversion here as qualitatively or quantitatively more egregious that the fraud in Gullo Motors. By one objective measure, Bennett's misconduct was less egregious: Reynolds sought no damages for mental anguish, unlike the plaintiff in Gullo Motors, whose mental-anguish damages were three times her economic damages. The only actual harm Reynolds pled and proved were economic damages. If courts fail to diligently police the particularly egregious exception, they insulate from due-process review precisely those cases where judicial review matters most: those involving unsympathetic defendants where juries are most likely to grant arbitrary and excessive awards. [60] Allowing a freewheeling reprehensibility exception would subvert the constraining power of the ratio guidepost. The Fifth Circuit has twice upheld triple-digit ratios post- State Farm : (1) 110:1 in a housing-discrimination case where compensatory damages were only $500; [61] and (2) 150:1 in a civil-rights case where nominal damages were only $100. [62] Both cases are distinguishable. The former turned on two key facts not present here: (1) there were inherently low or hard-to-determine actual injuries [63] ( Gore's other upward-departure exception), [64] and, (2) there was a $55,000 statutory maximum civil penalty for a comparable first-time offense, which the court held offers the appropriate award on this record. [65] The latter case is also inapposite given its civil-rights nature: Because actions seeking vindication of constitutional rights are more likely to result only in nominal damages, strict proportionality would defeat the ability to award punitive damages at all. [66] In sum, Bennett's wrongdoing is blameworthy enough to warrant exemplary damages, but under federal law a more modest punishment for this reprehensible conduct could have satisfied the State's legitimate objectives. [67] We commend the court of appeals' careful and extensive analysis, but we disagree that this case falls within the Gore / State Farm exception that leaves room for a higher multiplier. [68] Following our analysis in Gullo Motors, the exemplary damages here were unconstitutionally excessive. As the amount of a suggested remittitur is in the first instance a matter for the courts of appeals, [69] we remand to that court.