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Supreme Court of the United States - 517 U.S. 559
Tags: Torts, Excessive damages, Due process
tl;dr:
BMW was ordered to pay $4M in punitive damages for the fraudulent sale of a car with a cheaper paint job to Plaintiff; SCOTUS holds that the punitive damage award was so excessive as to be unconstitutional.Video Summary
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In BMW of North America, Inc. v. Gore, the Supreme Court ruled that punitive damages must be proportionate to the severity of the offense and that the degree of reprehensibility of a defendant's conduct is a crucial factor in determining the reasonableness of a punitive damages award. The court found that the $2 million award against BMW was excessive due to the lack of harm caused to the plaintiff, the absence of aggravating factors, and the difference between the remedy and civil penalties in comparable cases. BMW's failure to disclose repairs to the plaintiff's car did not show any indifference or reckless disregard for the health and safety of others, and there was no evidence to support the argument that BMW's conduct was part of a nationwide pattern of tortious conduct. The court recognized that only state courts can interpret state statutes, and BMW's decision to follow a disclosure policy that coincided with the strictest state statute was not sufficiently reprehensible to justify the punitive damages award. The $2 million exemplary damages award imposed on BMW was not warranted as it did not bear a reasonable relationship to the compensatory damages. The Supreme Court emphasizes the need for a general concern of reasonableness in determining the constitutionality of a punitive damages award and legislative judgments concerning appropriate sanctions for the conduct at issue should be given substantial deference.
The Alabama statute allowing punitive damages lacks clear standards, leading to vague and arbitrary results. The Supreme Court found a $2 million punitive damages award against BMW to be "grossly excessive" and a violation of the Due Process Clause. The court's interpretation of the Green Oil factors did not effectively limit the court's ability to give extremely high awards. Dr. Gore argued an economic theory to the jury that could have provided a significant constraint on arbitrary awards by calculating punitive damages based on the total cost of harm caused. Clear legal standards are necessary to ensure reasonable and rational punitive damages awards that punish and deter, rather than being based on whim or bias.
Justice Scalia dissents from the Court's decision, arguing that concerns about punitive damages exceeding constitutional limits are an unwarranted intrusion into state authority. He believes that the Fourteenth Amendment's Due Process Clause does not provide substantive guarantees against unfairness in civil awards, including excessive compensatory or punitive damages. Justice Scalia disagrees with the Court's punitive damages jurisprudence, arguing that the Constitution does not authorize federalizing this aspect of the legal system. He contends that the Court's new rule of constitutional law lacks principled application and is based solely on the subjective assessment of the Justices. Instead, he advocates following the longstanding practice regarding exemplary awards.
The legal case involved BMW's nondisclosure policy of paint repairs costing at least $300 on new vehicles shipped to dealers. The Alabama Supreme Court found evidence of sales nationwide admissible to establish a "pattern and practice" of such acts. The court limited the punitive damages award to $2 million as the jury had erroneously used acts in other states as a multiplier to arrive at a $4 million sum. The Supreme Court ruled that the punitive damages award of $2 million in Alabama is unconstitutional as it is grossly excessive. Justice Ginsburg dissented from the Court's decision, arguing that the Alabama Supreme Court's judgment should be left undisturbed, and unnecessary intrusion into an area dominantly of state concern should be avoided.
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