Opinion ID: 783131
Heading Depth: 3
Heading Rank: 3

Heading: Constitutionality of the punitive damages award

Text: 91 Even though the jury's decision to award punitive damages was supported by substantial evidence, we must also determine whether the amount of the award is unconstitutionally excessive. In recent years, the Supreme Court has recognized a due process right to be free from excessive punitive damages. The appellants argue that the $2,600,000 award here was excessive and should be reduced to some unspecified amount. Even though the appellants only raised this issue in post-trial motions, the Supreme Court has ruled that the appellate courts should review the district court's denial of remittitur of the award de novo. Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 431, 121 S.Ct. 1678, 149 L.Ed.2d 674 (2001). 92 In BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996), the Supreme Court first announced [t]hree guideposts for assessing the constitutionality of punitive damage awards: the degree of reprehensibility of the[defendant's conduct]; the disparity between the harm or potential harm suffered by [the plaintiff] and his punitive damages award; and the difference between this remedy and the civil penalties authorized or imposed in comparable cases. Id. at 574-75, 116 S.Ct. 1589. BMW was the first time the Court had ever struck down a punitive damages award as unconstitutionally excessive; the Court reaffirmed BMW in questioning the size of a punitive damages award in Cooper Industries, 532 U.S. at 440-43, 121 S.Ct. 1678, and recently followed BMW in striking down another punitive damages award in State Farm Mutual Insurance Co. v. Campbell, ___ U.S. ___, ___ - ___, 123 S.Ct. 1513, 1521-26, 155 L.Ed.2d 585 (2003). In addition to these Supreme Court precedents, our analysis herein is guided by our decision in Swinton v. Potomac Corp., 270 F.3d 794 (9th Cir.2001), cert. denied, 535 U.S. 1018, 122 S.Ct. 1609, 152 L.Ed.2d 623 (2002), in which we applied the BMW guideposts to a § 1981 discrimination case. Id. at 817-20, 116 S.Ct. 1589.
93 Perhaps the most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant's conduct. BMW, 517 U.S. at 575, 116 S.Ct. 1589. The appellants rest their constitutional challenge entirely on the reprehensibility guidepost, relying on the BMW Court's statement, made even before analyzing the other two factors, that BMW's conduct was not sufficiently reprehensible to warrant imposition of a $2 million exemplary damages award. 517 U.S. at 580, 116 S.Ct. 1589. 94 The gulf between the reprehensibility of the corporate defendants' actions here and the conduct at issue in BMW, Cooper Industries, and State Farm, however, is substantial. In BMW, the defendant automaker had fraudulently failed to disclose its practice of selling cars as new after repairing minor predelivery damage. 517 U.S. at 563-64, 116 S.Ct. 1589. In Cooper Industries, the defendant had been found liable for falsely advertising another competitor's product as its own. 532 U.S. at 427-29, 121 S.Ct. 1678. In State Farm, the defendant insurance company had implemented a fraudulent policy of limiting costs by refusing to settle insurance claims and then capping claims payments after losing at trial. ___ U.S. at ___ - ___, 123 S.Ct. at 1517-19. Although the plaintiffs in State Farm did allege emotional distress, id. at 1518, the reprehensibility of the fraudulent business practices at issue in these Supreme Court cases is different in kind from the reprehensibility of intentional discrimination on the basis of race or ethnicity. 95 Although BMW held that purely economic harms are less likely to warrant substantial punitive damages awards, 517 U.S. at 576, 116 S.Ct. 1589, intentional discrimination is a different kind of harm, a serious affront to personal liberty. See Romano v. U-Haul Int'l, Inc., 233 F.3d 655, 673 (1st Cir.2000), cert. denied, 534 U.S. 815, 122 S.Ct. 41, 151 L.Ed.2d 14 (2001) (finding that a plaintiff's termination on the basis of her sex was more reprehensible than would appear in a case involving economic harms only). There can be no question of the importance of our society's interest in combating discrimination; this nation fought the bloodiest war in its history in part to advance the goal of racial equality, adding several amendments to the Constitution to cement the battlefield victory. See U.S. Const. amends. XIII, XIV, XV. Freedom from discrimination on the basis of race or ethnicity is a fundamental human right recognized in international instruments to which the United States is a party, see, e.g., International Convention on the Elimination of All Forms of Racial Discrimination, adopted by the U.N. General Assembly Dec. 21, 1965, 660 U.N.T.S. 195 ( entered into force for the United States Nov. 20, 1994), and the intentional deprivation of that freedom is highly reprehensible conduct. 14 96 Racial discrimination often results in large punitive damage awards. See Swinton, 270 F.3d at 817-18 (finding that an employer's failure to address a pattern of racial slurs and harassment was sufficiently reprehensible to support a $1 million punitive damage award); Pavon v. Swift Transp. Co., 192 F.3d 902, 909 (9th Cir.1999) (finding that an employer's toleration of racial slurs and termination of an employee who complained of them was sufficiently reprehensible to justify a $300,000 punitive damage award); Hampton v. Dillard Dep't Stores, Inc., 247 F.3d 1091, 1116 (10th Cir.2001), cert. denied, 534 U.S. 1131, 122 S.Ct. 1071, 151 L.Ed.2d 973 (2002) (finding that where two African-American women had been suspected of shoplifting and briefly detained on the basis of their race, the store's conduct was sufficiently reprehensible to support the award of $1.1 million in punitive damages). We have no trouble concluding that the corporate defendants' discrimination against Zhang was sufficiently reprehensible to justify a substantial punitive damages award. 97
98 The second and perhaps most commonly cited indicium of an unreasonable or excessive punitive damages award is its ratio to the actual harm inflicted on the plaintiff. BMW, 517 U.S. at 580, 116 S.Ct. 1589. This guidepost is generally analyzed by comparing punitive and compensatory damages. Id. at 581, 116 S.Ct. 1589. 99 In most cases, the ratio will be within a constitutionally acceptable range, and remittitur will not be justified on this basis. Id. at 573, 116 S.Ct. 1589. The Court has refused to give a precise mathematical guideline for the constitutionally acceptable range, but the two cases in which the Court struck down punitive damages awards both involved rather large ratios of punitive to compensatory damages: in BMW, the ratio was a breathtaking 500 to 1, id.; in State Farm, the ratio was 145 to one, ___ U.S. at ___, 123 S.Ct. at 1524. Likewise, in Cooper Industries, where the Court questioned the size of the award but declined to rule on its constitutionality, the ratio was ninety to one. 532 U.S. at 429, 121 S.Ct. 1678. 100 Despite its refusal to establish a firm numerical limit to the ratio, the BMW Court noted that precedent suggested that the relevant ratio was not more than 10 to 1, 517 U.S. at 559, 116 S.Ct. 1589. In State Farm, the Court decline[d] again to impose a brightline ratio which a punitive damage award cannot exceed, ___ U.S. at ___, 123 S.Ct. at 1524, but offered similar guidance on the general limits to an acceptable ratio: [I]n practice, few awards exceeding a single-digit ratio ... will satisfy due process. Id. Single-digit multipliers are more likely to comport with due process than the extreme ratios found in BMW or State Farm. Id. 101 In this case, the ratio of the $2.6 million punitive damage award to the $360,000 compensatory damage award is slightly more than seven to one. This is of course a single-digit ratio, far below the ratios at issue in BMW, Cooper Industries, and State Farm. We are aware of no Supreme Court or Ninth Circuit case disapproving of a single-digit ratio between punitive and compensatory damages, and we decline to extend the law in this case. The ratio here is not constitutionally excessive.
102 Comparing the punitive damages award and the civil or criminal penalties that could be imposed for comparable misconduct provides a third indicium of excessiveness. BMW, 517 U.S. at 583, 116 S.Ct. 1589. In both BMW and State Farm, the Court concluded that the maximum fine that could be imposed for the conduct at issue was $10,000. 517 U.S. at 584, 116 S.Ct. 1589,. The Court found that the $2 million award in BMW was substantially greater than the statutory fines available, 517 U.S. at 584, 116 S.Ct. 1589, and that the civil fine in State Farm was dwarfed by the $145 million punitive damages award, ___ U.S. at ___, 123 S.Ct. at 1526. 103 As we held in Swinton, however, [t]here are no `civil penalties' for the type of conduct for which [the appellants were] held liable in this case. 270 F.3d at 820. In assessing the punitive damage award at issue in Swinton, we noted that Congress had imposed a $300,000 punitive damage cap for violations of Title VII, reasoning that this damage cap represented a legislative judgment similar to the imposition of a civil fine. Id. at 820. 104 The discrepancy between the $10,000 fines and multimillion dollar awards at issue in BMW and State Farm is far greater than that between the $300,000 Title VII cap and the $2,600,000 award at issue here. In addition, as we underscored in Swinton, Congress has not seen fit to impose any recovery caps in cases under § 1981 ..., although it has ample opportunity to do so. Id. And, as we noted in Swinton, that one BMW guidepost may indicate that a particular award raises BMW -type concerns does not prove that award to be constitutionally excessive. Thus, as we did in Swinton, see id., we hold that, on balance, the punitive damages award here did not violate due process. The conduct of the corporate defendants was highly reprehensible, and the punitive award exceeded the compensatory award only by a single-digit multiplier. Thus, although the punitive damages cap established for an analogous statute, Title VII, is substantially lower than the award here, the discrepancy is not nearly so great as in BMW or State Farm. Accordingly, we will not disturb the jury's award of punitive damages. 15