Brief Fact Summary.
In overtaking six vans on a two-lane highway, Campbell caused the death of one man and the permanent disability of another. State Farm, his insurance company, persuaded him to go to trial, where they lost and received a judgment that was $135,849 more than the settlement offer. State Farm initially refused to pay the excess, so Campbell joined forces with the two injured men to pursue a bad faith action against State Farm in which the two injured men would receive 90% of any verdict against State Farm. State Farm then paid the judgment, but Campbell still sued.
Synopsis of Rule of Law.
An award of punitive damages is grossly excessive when it furthers no legitimate purpose and constitutes an arbitrary deprivation of property.
Moreover, evidence of other acts need not be identical to have relevance in the calculation of punitive damages.View Full Point of Law
Curtis Campbell overtook six vans on a two-lane highway, resulting in the death of one man and the permanent disability of another who were driving on the opposite side of the road.
State Farm, Campbell’s insurance company, rejected offers to settle the claims for $50,000 and went to trial, ignoring the advice of its own investigators. State Farm assured Campbell that no separate counsel was necessary and that his assets would be safe.
At trial, a jury determined Campbell was 100% at fault, resulting in a $185,849 judgment.
State Farm refused to cover the $135,849 in excess liability and blocked Campbell’s ability to appeal the judgment. Campbell then obtained separate counsel to appeal the verdict, joining forces with those men who had originally sued him to pursue a joint bad faith action against State Farm by which each man had a right to approve the settlement and the two injured men would receive 90% of any verdict against State Farm.
State Farm then paid the entire judgment, but Campbell still filed a complaint alleging bad faith, fraud, and intentional infliction of emotional distress.
Was an award of $145 million in punitive damages excessive and in violation of the Due Process Clause of the Fourteenth Amendment?
Reversed and remanded.
Yes, $145 million in punitive damages is excessive and in violation of the Due Process Clause of the Fourteenth Amendment.
The Due Process Clause provides no substantial protections against excessive or unreasonable awards of punitive damages.
The large damage award here indicates why damage-capping legislation may be proper. However, neither the amount of the award nor the trial record justifies this Court’s substitution of its judgment for Utah’s.
The majority ignores a great deal of facts from the lower courts that exposes how reprehensible State Farm’s conduct was (e.g., State Farm’s policies were responsible for injuring many other Utah consumers during the past two decades).
Compensatory damages intend to bring the injured plaintiff back to their original position before the defendant’s wrongful conduct, while punitive damages are aimed at deterrence and retribution. States have discretion over the award of punitive damages within procedural and substantive constitutional confines—namely, the Due Process Clause of the Fourteenth Amendment, which prohibits grossly excessive or arbitrator punishment on a tortfeasor.
In Gore, the Court provided three guideposts for reviewing punitive damages, the most important of which is the degree of reprehensibility of defendant’s misconduct. Within this guidepost, we consider, in the totality of the circumstances, whether:
The harm was physical or economic;
The conduct was indifferent or recklessly disregarded the health and safety of others;
The victim was financially vulnerable;
The conduct was repeated or an isolated incident; and
The harm was the result of intentional malice, trickery, or deceit; or mere accident.
Here, State Farm altered company records to make Campbell look less culpable and disregarded the almost certain probability of an excess verdict. State Farm amplified the harm by reassuring Campbell to go to trial. This reprehensible conduct should result in punitive damages, but a more modest punishment could have satisfied the State’s legitimate objective.
Instead, Utah used the case to shame State Farm for its nationwide policy instead of the specific harm done to Campbell. Campbell’s evidence of State Farm’s out-of-state conduct is not probative because it does not have a nexus to the specific harm suffered by Campbell and was lawful in the states in which it occurred. Punishing State Farm on this evidence would open the door to multiple punitive damages awards for the same conduct across states.
Gore‘s second guidepost concerns the disparity between actual or potential harm suffered by a plaintiff and the punitive damages award. While the Court refused to provide a bright-line ratio, it noted that awards that exceed a single-digit ratio are unlikely to satisfy due process. Ultimately, courts must ensure that the measure of punishment is reasonable and proportionate to the amount of harm to the plaintiff and to the general damages recovered.
Here, the ratio was 145-to-1. The compensatory award was already substantial and includes emotional distress such as humiliation or indignation (as per Restatement (Second) of Torts § 908, Comment c). The harm was totally economic in nature, and State Farm paid the excess verdict before the complaint was filed. That State Farm is only punished in rare cases or that State Farm is wealthy do not justify an otherwise unconstitutional punitive damages award.
Gore‘s third and final guidepost is the disparity between the punitive damages award and the civil penalties authorized or imposed in comparable cases. The Court emphasized, however, that punitive damages are not a replacement for criminal proceedings. The existence of a criminal penalty should not be used in comparison, as such penalties occur under the heightened protections of a criminal trial, including higher standards of proof.
Here, the civil sanction under Utah state law for similar misconduct was a $10,000 fine.