High Court Nullifies Punitive-Damage Award
The News & Observer Raleigh, NC
Copyright 1996
Tuesday, May 21, 1996
News
High court nullifies punitive-damage award
From Staff and Wire Reports
WASHINGTON – Businesses eager to cut the multimillion-dollar costs
of consumer lawsuits won a major victory Monday when, for the first
time, the Supreme Court invalidated a state punitive-damage award as
unconstitutionally excessive.
The justices, dividing 5-4, ruled that an Alabama doctor unhappy
with the undisclosed repainting job on his new BMW did not deserve a
$2 million punitive award from the manufacturer.
The award was so big – 500 times the value of the doctor’s actual
damages – that it violated constitutional limits of fairness, Justice
John Paul Stevens declared for the court.
When civil juries award damages to compensate injured people, they
sometimes add punitive damages to punish defendants for flagrant
misconduct and to deter similar behavior.
Highly publicized multimillion-dollar awards of punitive damages
in personal injury cases have spurred businesses to launch
legislative and courtroom campaigns to curb the size of the awards.
Although Stevens didn’t draw a clear dividing line between
excessive and non-excessive punitive awards, he furnished lower-court
judges with analytical guidelines for determining when juries
overstep constitutional bounds.
He said judges should weigh:
– How reprehensible the defendant’s conduct was.
– The relationship between the injured person’s actual loss and
the amount of the punitive damages.
– And the differences between the punitive damages and other legal
penalties for the same conduct.
In addition, he said, state juries may not impose penalties on
defendants for their conduct in other states.
The ruling might not have been the total victory business people
wanted, but it was a victory nonetheless, North Carolina lawyers
said.
“It’s at least a small victory for business because it shows the
Supreme Court will look into this area,” said James Blount Jr., a
partner at the Raleigh law firm Smith Anderson Blount Dorsett
Mitchell & Jernigan.
Cecil Harrison, a partner at Poyner & Spruill in Raleigh, noted
that the decision differed from several previous ones in which big
jury awards were upheld.
“It marks the first time in a number of years that the Supreme
Court has taken a different view of punitive damages by actually
finding them excessive,” he said.
Plaintiff’s lawyers didn’t like the decision. But one North
Carolina lawyer said it is too early to determine what effect the
ruling will have.
“You just don’t know how broadly to interpret it,” said Wade Byrd,
a Fayetteville lawyer who’s president-elect of the N.C. Academy of
Trial Lawyers. “It’s disturbing that the Supreme Court has
apparently taken a case which heretofore has been reserved for the
jury, trial judge and the state supreme courts.”
The case decided by the court, BMW of North America vs. Gore,
arose when Dr. Ira Gore of Birmingham complained that his new $40,000
BMW had been partly repainted to cover acid-rain damage that occurred
during transit.
He said he made the discovery when he drove his car into Slick
Finish in 1990 to get his BMW to look even “snazzier than it normally
would appear.” Leonard Slick, the owner of Slick Finish, told Gore
his car had been repainted. Gore, saying he felt “cheated and
misled,” sued.
His lawyer produced evidence that about 1,000 other BMWs were sold
with similar undisclosed paint jobs. In its defense, BMW said
refinished vehicles retain their value and cited its policy of not
disclosing repairs valued at less than 3 percent of the
manufacturer’s suggested retail price.
A jury awarded Gore $4,000 to compensate him for a 10 percent loss
of value – plus $4 million in punitive damages, an amount the Alabama
Supreme Court later reduced to $2 million.
Stevens’ opinion was joined by Sandra Day O’Connor, Anthony
Kennedy, David Souter and Stephen Breyer. The dissenters – Antonin
Scalia, Clarence Thomas, Ruth Bader Ginsburg and Chief Justice
William Rehnquist – said the court should have left the issue to the
states. Sixteen states, including North Carolina, have placed
ceilings on punitive awards.
Congress recently passed a measure limiting federal awards of
punitive damages to consumers injured by defective products. But
President Clinton vetoed it.