Opinion ID: 1201234
Heading Depth: 3
Heading Rank: 1

Heading: The History of Due Process Limitations on Punitive Damages Awards

Text: The practice of awarding punitive damages originated in principles of common law to deter the wrongdoer and others from committing like offenses in the future. Laird v. Nationwide Ins. Co., 243 S.C. 388, 393, 134 S.E.2d 206, 210 (1964). Punitive damages may properly be imposed to further a state's legitimate interests in punishing unlawful conduct and deterring its repetition. Gore, 517 U.S. at 568, 116 S.Ct. 1589. The state's interests in awarding punitive damages must remain consistent with the principle of penal theory that the punishment should fit the crime. Atkinson v. Orkin Exterminating Co., Inc., 361 S.C. 156, 164, 604 S.E.2d 385, 389 (2004) (quoting Mathias v. Accor Economy Lodging Inc. and Motel 6 Operating L.P., 347 F.3d 672, 676 (7th Cir.2003)). Nevertheless, while states possess discretion over the imposition of punitive damages, it is well established that there are procedural and substantive constitutional limitations on these awards. State Farm v. Campbell, 538 U.S. 408, 416, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003). To the extent an award is grossly excessive, it furthers no legitimate purpose and constitutes an arbitrary deprivation of property. Id. at 417, 123 S.Ct. 1513. Prior to Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991), the United States Supreme Court had never directly considered the matter of whether a punitive damage award could be so excessive as to violate due process. In Haslip, the Court held that a punitive damages award more than four times the amount of compensatory damages did not violate the defendant's due process rights. However, the Court acknowledged that unlimited discretion in the fixing of punitive damages may invite extreme results that violate due process. The Court noted that general concerns of reasonableness and adequate guidance from the court when the case is tried to a jury properly enter into the constitutional calculus. Id. at 18, 111 S.Ct. 1032. Since Haslip, the Court has built a healthy body of jurisprudence that adds substance and context to this area of law. See TXO Production Corp. v. Alliance Resources, 509 U.S. 443, 113 S.Ct. 2711, 125 L.Ed.2d 366 (1993) (holding that the harm likely to occur from a defendant's conduct was relevant to the due process inquiry); Honda Motor Co., Ltd. v. Oberg, 512 U.S. 415, 114 S.Ct. 2331, 129 L.Ed.2d 336 (1994) (holding that due process requires post-judgment review of a punitive damages award); Gore, 517 U.S. 559, 116 S.Ct. 1589 (identifying three guideposts that assist a due process analysis); Cooper Industries v. Leatherman Tool Grp., Inc., 532 U.S. 424, 121 S.Ct. 1678, 149 L.Ed.2d 674 (2001) (adopting a de novo standard of review for determining the constitutionality of punitive damages awards); Campbell, 538 U.S. 408, 123 S.Ct. 1513 (identifying evidence that, if used to support a punitive damages award, will violate due process); Philip Morris USA v. Williams, 549 U.S. 346, 127 S.Ct. 1057, 166 L.Ed.2d 940 (2007) (holding that a punitive damages award that is based on harm to others violates due process). The Supreme Court expounded upon Haslip 's due process standard in Gore, where it held that [e]lementary notions of fairness enshrined in our constitutional jurisprudence dictate that a person receive fair notice not only of the conduct that will subject him to punishment, but also of the severity of the penalty that a state may impose. Gore, 517 U.S. at 575, 116 S.Ct. 1589. In Gore, the Court first adopted a specific test by which to conduct a due process analysis. The Court established three guideposts that indicate whether the due process requirement of fair notice has been met. In determining the constitutionality of a punitive damages award, Gore directed that courts consider: (1) the degree of reprehensibility of the defendant's conduct; (2) the disparity between the actual and potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases. Id. at 575, 116 S.Ct. 1589. Since Gore, much of the Supreme Court's punitive damages jurisprudence has focused on the type of evidence that may be used to support a punitive damages award. In Campbell, the Supreme Court held that punitive damages awards may not be based on out-of-state conduct and must be related to the plaintiff's injury or damage. A State cannot punish a defendant for conduct that may have been lawful where it occurred. . . . Nor, as a general rule, does a State have a legitimate concern in imposing punitive damages to punish a defendant for unlawful acts committed outside of the State's jurisdiction. Campbell, 538 U.S. at 421-22, 123 S.Ct. 1513. Furthermore, [a] defendant should be punished for the conduct that harmed the plaintiff, not for being an unsavory individual or business. Id. at 423, 123 S.Ct. 1513. Similarly, in Philip Morris USA v. Williams, 549 U.S. 346, 127 S.Ct. 1057, 166 L.Ed.2d 940 (2007), the Court held that a punitive damages award that is based on evidence of harm to persons other than the plaintiff or plaintiffs will violate due process. The Court noted that harm to others may be considered to help show that the conduct that caused the plaintiffs harm also posed a risk to the public, but the jury may not go further and base a punitive damages award on that evidence. In these cases, the Supreme Court has continued to uphold Haslip and further delineate the contours of punitive damages awards that run wild. Haslip, 499 U.S. at 19, 111 S.Ct. 1032. Nevertheless, the Court has consistently declined to draw a mathematical bright line between the constitutionally acceptable and the constitutionally unacceptable that would fit every case. Id. at 18, 111 S.Ct. 1032.