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.
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.
The fear of damage awards may be markedly more inhibiting than the fear of prosecution under a criminal statute.View Full Point of Law