The Supreme Court’s Evolving View on Punitive Damages

Supreme Court jurisprudence relating to punitive damages, also called exemplary damages, has evolved slowly. In 1989, the court began to review and clarify punitive damages compensation. Over three decades and more than a half dozen cases later, states now have some guidance for deciding these types of claims.

However, some questions remain unanswered on Supreme Court punitive damages decisions. Here is a look at the court’s timeline and how some landmark cases have brought about changes.

Supreme Court Decisions About Punitive Damages

1. Browning-Ferris v. Kelco, 492 U.S. 257 (1989)

The first Supreme Court decision interpreting punitive damages laws is Browning-Ferris v. Kelco¹. A jury awarded $51,000 in compensatory damages and $6 million in exemplary damages. The case was based on unfair business practices.

The defendant challenged the award of exemplary damages based on the Eighth Amendment to the U.S. Constitution². The Amendment prohibits excessive, cruel, and unusual punishment.

The court refused the challenge. They said that the Eighth Amendment prohibits inappropriate punishments by government prosecution. When the government is not a party, the Eighth Amendment does not apply.

2. Pacific Mutual Life Insurance Co. v. Haslip, 499 U.S. 1 (1991)

The court next took up the issue of exemplary damages in Pacific Mutual Life Insurance Co. v. Haslip³. The court answered the question of whether punitive damages laws in and of themselves violate Fourteenth Amendment⁴ due process requirements. The court said no. 

In their ruling, the court said that it is possible for an exemplary damages award to violate due process protections. However, there is no mathematical formula to determine whether an award is unconstitutional. The court upheld an award of punitive damages in the amount of four times compensatory damages where the jury was instructed that the award was optional and that they were to consider retribution and deterrence when considering the award.

3. TXO Production Corp. v Alliance Resources Corp, 509 U.S. 443 (1993)

In TXO Production Corp. v Alliance Resources Corp⁵, the court added a “reasonable relationship” test to jury consideration of punitive damages. The court said that guidance is needed for the jury, because a lack of guidance may invite extreme results. A jury should consider the potential harm of the defendant’s conduct, the maliciousness of their actions, and the need to discourage future actions.

The jury made a $10 million award of exemplary damages following an award of $19,000 in compensatory damages. Ultimately, the court upheld the award, saying that state procedures allowed for sufficient post-trial review to ensure the appropriateness of the award.

4. Honda Motor Co. v. Oberg, 512 U.S. 415 (1994)

The Honda Motor Co. v. Oberg⁶ court threw out an Oregon law that disallowed judicial review of punitive damages. The court said that there is a substantive limit to exemplary damages awards. Courts must be able to review an award to determine its constitutionality.

A jury awarded a $5 million exemplary damages award that was five times the compensatory award. The Supreme Court didn’t specifically decide whether the award violated due process, just that a court must be able to consider the issue.

5. BMW of North America Inc. v. Gore, 517 U.S. 559 (1996)

BMW of North America Inc. v. Gore⁷ struck down a $2 million punitive damages award where compensatory damages were a mere $4,000. The court outlined a three-part test for evaluating a compensatory damages award:

1. How bad the defendant’s conduct was
2. The ratio of punitive damages to actual harm
3. The size of the award compared to statutory sanctions for similar conduct

The facts of the case surrounded failing to disclose the repainting of a vehicle that was sold as new.

6. Cooper v. Leatherman Tool Group, 532 U.S. 424 (2001)

In Cooper v. Leatherman Tool Group⁸, the standard of review for a punitive damages award is de novo. It is not abuse of discretion.

7. State Farm Mutual Insurance Co. v. Campbell, 538 U.S. 408 (2003) 

A punitive damages award should have a single-digit ratio to the compensatory damages award. In other words, a ratio of 9:1 is the maximum acceptable. In addition, the court may not consider the defendant’s assets to justify an excessive award.

In State Farm Mutual Insurance Co. v. Campbell⁹, the court struck down an award of 145:1. The compensatory damages award was $1 million, and the exemplary damages award was $145 million.

8. Philip Morris USA v. Williams, 549 U.S. 346 (2007)

After the Philip Morris USA v. Williams¹⁰ case, the court may not award punitive damages for conduct against people who are not a party to the suit. Only harm to named victims may be considered.

9. Exxon Shipping Co. v. Baker, 554 U.S. 471 (2008)

Exemplary damages cannot be used to address uncompensated harms. The court rejected $2.5 billion in punitive damages following a $500 million compensatory award in Exxon Shipping Co. v. Baker¹¹. The case was decided on maritime law and not due process protections.

10. Johnson & Johnson v. Gail Ingham, 20-1223 (2021)

In Johnson & Johnson v. Gail Ingham¹², the court declined to hear a case asking whether an exemplary damages award violates due process. The case also asked questions about punitive damages calculations when there are joint and severally liable defendants.

Summary of Supreme Court Punitive Damages Evolution

The Supreme Court continues to develop case law regarding punitive damages. A few commonalities are clear:

1. Awards must be reasonable. This probably means not more than a ratio of 9:1 of the compensatory damages award.
2. The jury must be given guidelines for how to evaluate the award. They may not consider harm to victims who are not named in the claim. The offensiveness of the defendant’s conduct may be considered.
3. Courts must be allowed to review the jury’s decision. A reviewing court examines the issues de novo.

Awards for Punitive Damages in Colorado

Colorado law § 13-21-102¹³ is the state law for punitive damages in personal injury claims. These exemplary damages may not exceed an actual damages award. The statute allows for judicial review.

Because state law falls well within Supreme Court jurisprudence to date, it is unlikely that a Colorado case will be the next landmark on the issue of a punitive damages award, although other issues may be raised.

Attorneys for Personal Injury Claims Involving Punitive Damages

Understanding the current state of exemplary damages, punitive damages limit Supreme Court decisions, and the potential for any developments is crucial to pursuing any personal injury claim.

Our experienced personal injury lawyers are well-versed in complex legal issues, including exemplary damages claims. Contact us today to talk about your case and see what your claim may be worth.

Sources:

¹Browning-Ferris v. Kelco, 492 U.S. 257 (1989)

²U.S. Const. Amend. VIII

³Pacific Mutual Life Insurance Co. v. Haslip, 499 U.S. 1 (1991)

⁴U.S. Const. Amend. XIV

⁵TXO Production Corp. v Alliance Resources Corp, 509 U.S. 443 (1993)

⁶Honda Motor Co. v. Oberg, 512 U.S. 415 (1994)

⁷BMW of North America Inc. v. Gore, 517 U.S. 559 (1996)

⁸Cooper v. Leatherman Tool Group, 532 U.S. 424 (2001)

⁹State Farm Mutual Insurance Co. v. Campbell, 538 U.S. 408 (2003)

¹⁰Philip Morris USA v. Williams, 549 U.S. 346 (2007)

¹¹Exxon Shipping Co. v. Baker, 554 U.S. 471 (2008)

¹²Johnson & Johnson v. Gail Ingham, 20-1223 (2021)

¹³C.R.S. 13-21-102 (2016)