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Article Excerpt
Last spring, in three decisions arising from the Utah and Kentucky Supreme Courts and the California Court of Appeals--State Farm Mutual Automobile Insurance Co. v. Campbell, (1) Ford Motor Co. v. Smith, (2) and Ford Motor Co. v. Romo, (3) respectively--the U.S. Supreme Court completely revolutionized the law of punitive damages, sending a clear message that these awards, sometimes called "smart money," are a truly dumb idea. Or so the corporate defendants in those cases and their numerous tort "reform" allies would have you, the public, the media, and the lower courts believe.
For example, the National Association of Manufacturers hailed Campbell as "an important breakthrough in our continuing efforts to make judges more aware of the fact that elements of our judicial system are out of control." (4) The U.S. Chamber of Commerce extolled it as "a major victory for the business community's long-standing concern over unfair ... punitive damages awards." (5) The American Insurance Association celebrated, saying that Smith and Romo "broadened the application of [Campbell] ... by applying the same rules for determining the amount and basis for a punitive damages award to cases involving personal injuries." (6) And the American Tort Reform Association boasted that Campbell, Romo, and Smith collectively show that the "plaintiffs' lawyers' golden goose for punitive damages is now dead." (7)
Although none of the three cases can be fairly described as a plaintiffs' victory, they certainly should not be regarded as cataclysmic defeats, let alone revolutionary "breakthroughs," especially because they merely applied rather than fundamentally altered the standards that the Supreme Court established seven years ago in BMW of North America, Inc. v. Gore. (8) In fact, as the Campbell Court emphasized, "under the principles outlined in BMW, this case is neither close nor difficult." (9)
More important, the Court declined to entertain the truly novel and radical arguments Ford advanced in its certiorari petitions in Smith and Romo, such as the notion that a manufacturer's "good faith" compliance with industry standards or government regulations creates an irrebuttable presumption that its actions were reasonable rather than reprehensible and, thus, that punitive damages cannot be had. Instead, in each case, the Court simply issued curt, identical "GVR" orders, "G"ranting Ford's petitions for certiorari, "V"acating the decisions below, and "R"emanding each case to the court from which it came "for further consideration in light of Campbell."
Contrary to tort "reformers'" inflated claims, the Court's routine housekeeping, docket-clearing rulings in Smith and Romo have absolutely no precedential value. (10) Indeed, contrary to tort "reformers'" assertions, these three cases do not portend the end of punitive damages; rather, the "reformers'" exaggerated claims signal nothing more than their plan to "spin" the Court's fact-bound application of existing precedent into a "landmark" ruling and thus to win in the court of public opinion what they have been unable to achieve in the High Court.
The Court and punitive damages
Punitive damages date back nearly four millennia to Hammurabi's Code (and, indeed, existed in some form in most ancient legal systems), (11) and the U.S. Supreme Court first addressed the general propriety of those awards nearly 200 years ago. (12) Yet until 15 years ago, the Court never considered whether a punitive damages award violated the Constitution, as opposed to whether a particular award ran afoul of common law or admiralty standards. (13) This hands-off approach ended in the mid-1980s, when corporate defendants, abetted by trade associations and industry-funded tort "reform" groups, began an enormous public relations campaign to convince the bench, the bar, and the public that punitive damages awards were "skyrocketing" in number and "exploding" in size, and therefore needed to be "reined in" by the Court. (14)
This campaign did not initially succeed, in large part because empirical studies by disinterested scholars consistently demonstrated that there was then, as now, no truth to those claims. (15) But by the end of the 1980s, the Court started to succumb to corporations' endless entreaties to bring the punitive damages "monster" to heel: It began to grant certiorari in a series of cases to review the constitutionality of punitive damages awards.
Thus, beginning in 1988, the Court issued a string of rulings that together established that punitive damages awards can be upheld only if trial and appellate courts minimize the risk of unwarranted or excessive awards by using safeguards designed to protect defendants' rights to procedural due process. These include adequate instructions to jurors to guide their discretion, trial court review of punitive awards to ensure their reasonableness, and appellate review of any awards that manage to surmount both hurdles. Significantly, it was not until seven years ago that the BMW Court held that a "grossly excessive" award violates defendants' rights to substantive due process.
The cases:
* First, in Bankers Life & Casualty Co. v. Crenshaw, (16) an insurer sought to have the Court overturn $1.6 million in punitive damages (representing 80 times the plaintiff's actual damages) that had been awarded against it for its bad-faith refusal to pay an insured's claim. The defendant contended that the award was so "disproportionate" as to violate the Due Process Clause, the Contract Clause, and the Eighth Amendment's Excessive Fines Clause. Although the Court found the case sufficiently tempting to grant certiorari, it never reached the merits of the petitioner's constitutional claims, as it ultimately recognized that they had not been adequately raised in the lower courts.
* Thirteen months later, an antitrust defendant beseeched the Court to revisit the same questions. It did, with virtually the same results. In Browning-Ferris Industries, Inc. v. Kelco Disposal, Inc., (17) the Court was asked to void a $6 million punitive damages award, again on both excessive fines and procedural due process grounds. The Court...
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