Constitutional limits on power to award punitive damages

Compensatory damages, as the name indicates, are awarded to compensate an injured party in a civil case for actual losses.  Punitive damages, by contrast, do not compensate a plaintiff for losses, but are additional amounts awarded to punish the defendant for unacceptable conduct.  Most winning plaintiffs in civil cases are awarded compensatory damages, but relatively few are awarded punitive damages.  Nonetheless, punitive damages awards that are viewed as “excessive” have loomed large in the public consciousness in recent decades.

Beginning in 1991, the Supreme Court has decided a line of cases holding that there are some due process limits on jury power to award punitive damages.  These holdings apply both in federal cases under the Due Process Clause of the Fifth Amendment, and in state cases under the Due Process Clause of the Fourteenth Amendment:

• Pacific Mutual Life Insurance Co. v. Haslip,  499 U.S. 1 (1991) held that there is a procedural component of due process that requires proper jury instructions on the purposes of punitive damages and what factors to consider in whether to impose them and in what amount; and a substantive component that requires the award to be reasonable and not grossly excessive or disproportionate.

• TXO Production Corp. Alliance Resources Corp,  509 U.S. 443 (1993) held that there is no test for excessive punitive damages based on objective criteria.

• BMW of North America, Inc. v. Gore,  517 U.S. 559 (1996), in contrast to TXO Production, identified three guideposts for assessing whether a punitive damages award violates substantive due process:

1. The degree of reprehensibility of the defendant’s conduct.

2. The reasonableness of the ratio between the compensatory and punitive damages awards.

3. The civil and criminal penalties (if any) a defendant could have faced from the government for the same conduct.

• Cooper Industries v. Leatherman Tool Group,  532 U.S. 424 (2001) held that federal appellate courts should review the constitutionality of punitive damages awards under a de novo standard of review, not an abuse of discretion standard (which would uphold more such awards).

• State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003) gave some guidance on the reasonableness of the ratio between compensatory and punitive damages with the Court stating that few punitive awards that were more than single-digit multiples of the compensatory award would be constitutional.
   

Further reading on constitutional limits on punitive damages

John Gibeaut, Punitive Precision, 90 ABA Journal 44, (June 2004).

Pamela S. Karlan, “Pricking the Lines:” The Due Process Clause, Punitive Damages, and Criminal Punishment, 88 Minn. L. Rev. 880 (2004).

Anthony J. Franze & Sheila B. Scheuerman, Instructing Juries on Punitive Damages: Due Process Revisited After State Farm, 6 U. Pa. J. Const. L. 423 (2004).

Martin H. Redish & Andrew L. Mathews, Why Punitive Damages Are Unconstitutional, 53 Emory L. J. 1 (2004).

Steven L Chanenson & John Y. Gotanda, The Foggy Road for Evaluating Punitive Damages: Lifting the Haze from BMW/State Farm Guideposts, 37 U. Mich. J. L. Reform 441 (2004).

Laura J. Hines, Due Process Limitations on Punitive Damages: Why State Farm Won’t Last, 37 Akron L. Rev. 779 (2004).