BMW of North America, Inc. v. Gore

Brief Fact Summary. The Respondent, Ira Gore, Jr. (Respondent), purchased a new BMW and later learned that the car had been repainted. In a suit for suppression of a material fact, the Respondent was awarded $2 million in punitive damages. The Petitioner, BMW of North America, Inc. (Petitioner), appeals, claiming the punitive damages award is grossly excessive.

Synopsis of Rule of Law. The Due Process Clause of the 14th Amendment of the United States Constitution (Constitution) limits the amount recoverable in punitive damages when the damages constitute grossly excessive punishment for a tortfeasor.

Facts. The Respondent purchased a BMW sports sedan from an authorized BMW dealer in Birmingham, Alabama. After approximately nine months, Respondent took the car to an independent detailer to have the car detailed. The proprietor of the independent detailer detected evidence that the car had been repainted. The repainting was done by BMW to repair acid rain damage that occurred when the car was in transit from Germany. Respondent brought suit against the Petitioner alleging that the failure to disclose the fact that the car had been repainted constituted suppression of a material fact. At trial, Petitioner acknowledged it had adopted a nationwide policy of selling cars as new without advising the dealer that any repairs had been made when the repair cost did not exceed three percent of the suggested retail price. At trial, Respondent introduced evidence that his repainted car was worth less than a car that had not been refinished. In support of a punitive damages claim, he introduced
evidence that since 1983 Petitioner had sold nine hundred eighty three refinished cars as new, including fourteen in Alabama. Petitioner disputed evidence that refinished cars were worth less, argued that its good-faith belief made punitive damages inappropriate and that transactions other than Alabama had no relevance to respondent’s claim. The jury found Petitioner liable for $4,000 in compensatory damages and $4 million in punitive damages. The trial judge denied Petitioner’s motion to set aside the punitive damages, finding that it was not grossly excessive, and therefore did not violate the Due Process Clause of the 14th Amendment of the Constitution. After post-trial motions, the Alabama Supreme Court reduced the award to $2 million on the ground that the jury improperly multiplied Gore’s compensatory damages by the number of similar sales in all States.

Issue. Was the $2 million punitive damages award to the purchaser of a refinished car grossly excessive, so as to violate the Due Process Clause of the 14th Amendment of the Constitution?

Held. Yes. Judgment reversed and case remanded.
* Punitive damages may be imposed to further a State’s legitimate interests in punishing unlawful conduct and deterring its repetition. States have considerable flexibility to protect its citizens by prohibiting deceptive trade practices. State sovereignty, however, prevents states from imposing economic sanctions with the intent of changing the tortfeasors’ lawful conduct in other States. Alabama does not have the power to punish petitioner for conduct that was lawful where it occurred and had no impact on Alabama.
* Three guideposts lead the Supreme Court of the United States (Supreme Court) to the determination that the $2 million award against Petitioner is grossly excessive: (i) the degree of reprehensibility; (ii) the disparity between the harm suffered and the punitive damage award; and (iii) the difference between this remedy and civil penalties authorized in comparable cases.
* First, the degree of reprehensibility. Nonviolent crimes are less serious than violent crimes. Trickery and deceit is more reprehensible than negligence. The harm Petitioner inflicted was purely economic in nature. There is no evidence Petitioner acted in bad faith. Petitioner reasonably relied on state disclosure statutes, allowing the car sales in this case in most states. Based on these facts, Petitioner’s conduct was not sufficiently reprehensible to warrant a $2 million exemplary damages award.
* Second, the ratio between the harm suffered and the punitive damage award. There must be a reasonable relationship between the punitive damages award and the compensatory damages. Although the Supreme Court refuses to draw a mathematical bright line, this punitive damages award is 500 times the amount of the actual harm determined by the jury. This exceptional difference raises suspicions.
* Third, sanctions for comparable misconduct. Substantial deference should be given to legislative judgments concerning appropriate sanctions for the conduct at issue. In this case, the punitive damages were tantamount to that of a severe criminal penalty. This Court believes that based on these three guidelines, the punitive damage award imposed, violates the constitutional limit of the 14th Amendment of the Constitution.

Dissent. Justice Antonin Scalia’s (J. Scalia) dissent, in which Justice Clarence Thomas (J. Thomas) joined, is omitted. Justice Ruth Bader Ginsburg’s (J. Ginsburg) dissent, in which the Chief Justice joined, is omitted.
Concurrence. Justice Stephen Breyer’s (J. Breyer) concurrence, in which Justice Sandra Day O’Conner (J. O’Connor) and Justice David Souter (J. Souter) joined, is omitted.

Discussion. On remand, the Alabama Supreme Court ordered a remittitur of the punitive damages award to $50,000 and Respondent accepted.