State Farm v. Campbell

Brief Fact Summary.

Campbell brought a bad faith action against its insurance company, State Farm. The jury awarded Campbell $145 million in punitive damages but the trial court reduced to $25 million.

Synopsis of Rule of Law.

By means of punitive damages, a State may impose upon a defendant in a civil case. While States possess discretion over the imposition of punitive damages, there are procedural and substantive constitutional limitations on these awards.

Facts.

In 1981, Curtis Campbell was driving with his wife in Utah. He decided to pass six vans traveling ahead of them on a two-lane highway. Todd Ospital was driving a small car approaching from the opposite direction. They crashed and Ospital was killed. Campbell escaped unscathed. The investigators and witnesses agreed that Campbell’s unsafe pass had caused the crash. Campbell’s insurance company contested liability and refused to cover the amount in excess liability. Campbell obtained his own counsel to appeal the verdict and pursued a bad faith action against State Farm. The jury awarded Campbell $145 million in punitive damages.

Issue.

Does an award of $145 million in punitive damages, where full compensatory damages are $1 million, in excessive and in violation of the Due Process Clause of the Fourteenth Amendment, violate the Constitution?

Held.

Does an award of $145 million in punitive damages, where full compensatory damages are $1 million, in excessive and in violation of the Due Process Clause of the Fourteenth Amendment, violate the Constitution?

Dissent.

Justice Scalia

The large size of the award upheld by the Utah Supreme Court indicates why damage-capping legislation may be altogether fitting and proper. Neither the amount of the award nor the trial record, however, justifies the Court’s substitution of its judgment for that of Utah’s competent decisionmakers. State Farm’s policies and practices were responsible for the injuries suffered by Campbell and the means used to implement those policies could be found callous, fraudulent, and dishonest. In a legislative scheme or a state high court’s design to cap punitive damages, the handiwork in setting single-digit and 1-to-1 benchmarks could hardly be questioned.

Discussion.

The most important factor in considering of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant’s conduct. Several factors must be considered and the existence of any one of these factors weighing in favor of a plaintiff may not be sufficient to sustain a punitive damages award. State Farm’s employees altered the company’s records to make Campbell appear less culpable. State Farm disregarded the overwhelming likelihood of liability and amplified the harm by assuring Campbell his assets would be safe from any verdict and by later telling them to put a for-sale sign on their house. However, a more moderate punishment for this reprehensible conduct could have satisfied the State’s legitimate objectives. Moreover, a State cannot punish a defendant for conduct that may have been lawful where it occurred nor can State have a legitimate concern in imposing punitive damages to punish a defendant for unlawful acts committed outside of the State’s jurisdiction. Any proper adjudication of conduct that occurred outside Utah to other persons would require their inclusion and the Utah courts would need to apply the laws of their relevant jurisdiction. The Utah courts, however, awarded punitive damages to punish and deter conduct that bear no relation to Campbell’s harm.