Opinion ID: 2045157
Heading Depth: 3
Heading Rank: 2

Heading: Development of United States Supreme Court Decisions

Text: Although neither party mounts a constitutional challenge to the award, we are now obligated as a matter of constitutional law to assume the responsibility for reviewing the appropriateness of the size of punitive damage awards. Ezzone v. Riccardi, 525 N.W.2d 388, 398-99 (Iowa 1994). Citing Honda Motor Co., we took as a directive in Ezzone to order a remittitur if appropriate. Id. at 399 (citing Honda Motor Co. v. Oberg, 512 U.S. 415, ___ _ ___, 114 S.Ct. 2331, 2338-41, 129 L.Ed.2d 336, 346-51 (1994)); see also Atlas Food Sys. & Servs., Inc. v. Crane Nat'l Vendors, Inc., 99 F.3d 587, 593 (4th Cir.1996). In recent years the United States Supreme Court has decided several cases giving guidance to the courts on punitive damage issues. In Pacific Mutual Life Insurance Co. v. Haslip, 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991), insureds brought an action against a life insurance company and its agent for fraud. The Supreme Court affirmed a judgment against the agent and company for $200,000 in compensatory and over $840,000 in punitive damages. The Court held that imposing liability on the insurer based on the doctrine of respondeat superior did not violate the insurer's due process rights under the Fourteenth Amendment to the United States Constitution. The Court noted that punitive damages have long been a part of traditional state tort law. Blackstone noted their use in 3W. Blackstone, Commentaries 137-138. See also Wilkes v. Wood, Lofft 1, 98 Eng. Rep. 489 (C.P.1763) (the Lord Chief Justice validating exemplary damages as compensation, punishment and deterrence). In determining that the common law method of assessing punitive damages met constitutional muster, the Court said: If a thing has been practiced for two hundred years by common consent, it will need a strong case for the Fourteenth Amendment to affect it. Haslip, 499 U.S. at 17, 111 S.Ct. at 1043, 113 L.Ed.2d at 19. Nevertheless, the Court warned that unlimited jury or judicial discretion in fixing punitive damages may invite extreme results that jar one's constitutional sensibilities. Id. No mathematical bright line can be drawn between the constitutionally acceptable and the constitutionally unacceptable that would fit every case. Id. General concerns of reasonableness and adequate guidance from the court when a case is tried to a jury, however, do enter into the constitutional calculus. Id. A jury must take into consideration the character and the degree of the wrong as shown by the evidence and necessity of preventing similar wrong. Id. at 19, 111 S.Ct. at 1044, 113 L.Ed.2d at 21. As long as the discretion is exercised within reasonable constraints, due process is satisfied. Id. Answering the charge that too little structure is given by a trial court to a jury in these general maxims, the Supreme Court said: The discretion allowed under Alabama law in determining punitive damages is no greater than that preserved in many familiar areas of the law as for example, deciding best interests of the child, or reasonable care, or due diligence, or appropriate compensation for pain and suffering or mental anguish. Id. The Supreme Court also requires additional checks by an appellate court. Id. These were satisfied by the Alabama Supreme Court that undertook comparative analysis, applied detailed substantive standards and ensured that the award does not exceed an amount that will accomplish society's goal of punishment and deterrence. Id. Constitutional impropriety was held not to have been crossed in Haslip, though the punitive award was four times the amount of compensatory damages, 200 times more than the insured's out-of-pocket expenses, and much in excess of any fine for insurance fraud that could be imposed. A $19,000 actual damage and $10 million punitive award was affirmed by the Supreme Court in TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 113 S.Ct. 2711, 125 L.Ed.2d 366 (1993). The lawsuit was based on a common law action for slander of title. Quoting the Haslip guides, the Court concluded that the punitive damage award was not so grossly excessive as to be beyond the power of West Virginia and was consistent with the Due Process Clause. Id. at 462, 113 S.Ct. at 2722, 125 L.Ed.2d at 382. On the disparity between the actual and punitive damages, the Court observed that both state supreme courts and the United States Supreme Court have eschewed an approach that concentrates entirely on the relationship between them. Id. at 460, 113 S.Ct. at 2721, 125 L.Ed.2d at 380-81. The Supreme Court also observed that in calculating punitive damages it is appropriate to consider whether there is a reasonable relationship between the punitive damages award and the harm likely to result from defendant's conduct as well as the harm that actually has occurred. Id. at 460, 113 S.Ct. at 2721, 125 L.Ed.2d at 381. See also BMW of North America, Inc. v. Gore, ___ U.S. ___, ___, 116 S.Ct. 1589, 1602, 134 L.Ed.2d 809, 830 (1996). Reiterating that meaningful judicial review of punitive damage awards is required by the Due Process Clause, the Supreme Court reversed an award as unconstitutionally obtained in Honda Motor Co. v. Oberg, 512 U.S. 415, 114 S.Ct. 2331, 129 L.Ed.2d 336 (1994). There, the Court held an amendment to the Oregon constitution that limited judicial review violated the Due Process Clause of the Fourteenth Amendment. Honda Motor Co., 512 U.S. at 434-36, 114 S.Ct. at 2342-43, 129 L.Ed.2d at 350-53. In BMW, a punitive damage award of $2 million was reversed as violative of the Due Process Clause because of the low level of reprehensibility of conduct and a 500:1 ratio between the award and actual harm done to the purchaser. BMW, ___ U.S. at ___, 116 S.Ct. at 1598-99, 134 L.Ed.2d at 825-27. The actual harm arose from the purchase of a new BMW car that had been repainted without the knowledge of the purchaser. The Court noted that none of the aggravating factors associated with particularly reprehensible conduct was present. Id. at ___, 116 S.Ct. at 1599, 134 L.Ed.2d at 826. The harm done to plaintiff Gore was purely economic in nature. Stressing the degree of reprehensibility the Court said: Perhaps the most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant's conduct. As the Court stated nearly 150 years ago, exemplary damages imposed on a defendant should reflect the enormity of the offense. Id. at ___, 116 S.Ct. at 1599, 134 L.Ed.2d at 826. Comparing this ratio of actual damages to punitive damages, the Court found the disparity to be dramatically greater in BMW than in the Haslip and TXO cases. Expanding on this factor, the Court said: Indeed, low awards of compensatory damages may properly support a higher ratio than high compensatory awards, if, for example, a particularly egregious act has resulted in only a small amount of economic damages. A higher ratio may also be justified in cases in which the injury is hard to detect or the monetary value of noneconomic harm might have been difficult to determine. Id. at ___, 116 S.Ct. at 1602, 134 L.Ed.2d at 831. In a case decided while BMW was pending, the Eighth Circuit found that a 250,000:1 ratio between punitive and actual damages was excessive and violative of due process. Pulla v. Amoco Oil Co., 72 F.3d 648 (8th Cir.1995). The case involved Amoco's intrusion on the privacy of its employees by accessing their credit card records to check on use of sick leave. The $500,000 punitive damage award was reversed, the court viewing the event as a one-time occurrence that justified a limited award of punitive damages. The touchstone, the court emphasized, is the potential harm that would have likely resulted from the dangerousness inherent in defendant's actual conduct. Id. at 659. A federal district court has since followed the rationale of BMW in Schimizzi v. Illinois Farmers Insurance Co., 928 F.Supp. 760 (N.D.Ind.1996). It found a punitive award of $600,000 was excessive where the actual damages were $45,000 and that Farmer's conduct did not rank high on the reprehensibility scale. Even so, the court found that the jury intended to award a significant amount in punitive damages, and fixed punitive damages at $135,000. Recently, the United States Court of Appeals, Fourth Circuit, commented on the relationship between the jury's verdict and the trial court's judgment in assessing punitive damages. See Atlas Food Sys. & Servs., Inc., 99 F.3d at 595. In the first trial, the jury's award of $3 million in punitive damages was reduced by the trial judge to $1 million by a remittitur order or a new trial would be granted. Id. at 591. On rejection by the plaintiff, a second trial was ordered which resulted in a jury verdict of $4 million in punitive damages, which was again reduced by the trial judge who entered a remittitur order setting the punitive damages award at $1 million or a new trial would be granted. Id. The federal circuit court held that the trial court had not abused its discretion, stating: The court's review of the amount of a punitive damages award should involve comparison of the court's independent judgment on the appropriate amount with the jury's award to determine whether the jury's award is so excessive as to work an injustice. Id. at 595.