South-Western Legal Studies in Business

Excessive Punitive Damages Violate Due Process
Description The Supreme Court held that to award punitive damages that are 145 times higher than compensatory damages, in the absence of special factors that might justify such a high award, violates due process as an excessive or arbitrary punishment.
Topic Constitutional Law
Key Words Due Process; Torts; Punitive Damages; Insurance
C A S E   S U M M A R Y
Facts Investigators concluded that Curtis Campbell caused an accident in which one person was killed and another disabled. His insurer, State Farm, ignored its own investigators and refused to settle the claims for the $50,000 policy limit, so the case went to trial. State Farm told the Campbells they did not need their own attorney, as State Farm would represent their interests. The jury found against State Farm and the Campbells for more than $150,000. State Farm paid the entire judgment. The Campbells then sued State Farm for bad faith, fraud, and emotional distress. The jury awarded the Campbells $2.6 million in compensatory damages and $145 million in punitive damages. The trial court reduced that to $1 million and $25 million respectively. The Utah high court reinstated the $145 million award. State Farm appealed.
Decision

Reversed. Punitive damages of $145 million, where compensatory damages are $1 million, are excessive. Punitive damages are aimed at deterrence and retribution. The Due Process Clause prohibits the imposition of grossly excessive or arbitrary punishments on a tortfeasor. Because civil defendants are not due the same protections afforded criminal defendants, punitive damages pose an acute danger of arbitrary deprivation of property. The guides in punitive damages are: 1) the degree of reprehensibility of the defendant’s misconduct, 2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damage award, and 3) the difference between the punitive damages awarded and the civil penalties authorized or imposes in comparable cases.

Citation State Farm Mutual v. Campbell, 123 S.Ct. 1513 (Sup. Ct., 2003)

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