April 7, 2003

Supreme Court Limits Size & Appropriateness of Punitive Damage Awards
$145 Million Utah Ruling Held Unconstitutional

 State Farm v. Campbell

In a major victory for the business community's long-standing concern over unfair, unrealistic, and excessive punitive damages awards, the Supreme Court – agreeing with an amicus brief filed by the National Chamber Litigation Center (NCLC), the public policy legal arm of the Chamber of Commerce of the United States – today overturned a punitive damage award that was 145 times greater than the compensatory damages in the case.
 
After being presented evidence of the company's national claims settlement policies and practices, previous litigation against the company in other jurisdictions involving dissimilar conduct, and various other allegedly illegal or bad faith actions by State Farm occurring outside of Utah, a trial court jury awarded Curtis Campbell $2.6 million in compensatory damages and $145 million in punitive damages.  A state court of appeals reduced the compensatory damages to $1 million, and upon appeal the Utah Supreme Court upheld the original $145 million punitive damage award.

In holding that the Utah Supreme Court's decision in State Farm Mutual Automobile Insurance Company v. Campbell to reinstate the $145 million punitive damages award was excessive and in violation of the Due Process Clause of the Fourteenth Amendment, the U. S. Supreme Court noted that under the guidelines established in NCLC's 1996 landmark victory in BMW v. Gore, "this case is neither close nor difficult."  Rather than using the principals established in Gore that an award of punitive damages must be reasonably related to the actual and potential harm at issue in a case, the high court held in today's ruling that "this case was used as a platform to expose, and punish, the perceived deficiencies of State Farm's operations throughout the country.  However, a State cannot punish a defendant for conduct that may have been lawful where it occurred. . . .Nor does the State have a legitimate concern in imposing punitive damages to punish a defendant for unlawful acts committed outside of its jurisdiction."  Citing the 4 – 1 ratio outlined in Gore, Justice Anthony M. Kennedy wrote in the Court's majority opinion that "single-digit multipliers are more likely to comport with due process, while still achieving the State's goals of deterrence and retribution, than awards with ratios in the range of, [as] in this case . . . 145 to 1."  The high court also noted that the Utah courts erred in relying on any evidence beyond the scope of this particular case by awarding punitive damages bearing no relation to the Campbell's harm.  "Due process does not permit courts, in the calculation of punitive damages, to adjudicate the merits of other parties' hypothetical claims," wrote Justice Kennedy. 

NCLC Senior Vice President Robin S. Conrad hailed the Court's holding, noting "that it should be presumed that plaintiffs are made whole by compensatory damages, and that punitive damages should only be awarded in extraordinary circumstances when necessary to achieve punishment or deterrence."