As long as your business is in great financial condition, due process doesn’t really apply to you, so says a California appellate court this week. In Bullock v. Philip Morris, the court upheld a punitive damage award which was sixteen times larger than the compensatory award. The court found that the reprehensibility of the tobacco company’s conduct in the 1950s, coupled with their relative financial resources, permitted the trial court to determine that in addition to $850,000 in compensatory damages, the plaintiff would recover $13.8 million in punitive damages. To say this is excessive would be an understatement, but it’s also in direct contradiction to existing U. S. Supreme Court precedent.
In almost every instance, punitive damages cannot exceed compensatory damages by more than a single digit ratio, the Supreme Court declared in State Farm Mut. Automobile Ins. Co. v. Campbell, 538 U.S. 408 (2003). While declining to create an artificial, specific bright-line rule, the Court held in that case that a key part of analyzing any punitive damage award is the ratio between the compensatory damages and the punitive damages, and that “in practice, few awards exceeding a single-digit ratio…will satisfy due process.” Id. at 425. In addition, two other guideposts are relevant: the reprehensibility of the defendant’s misconduct and the difference between punitive damages and civil penalties authorized or imposed in comparable cases. The dissenting judge in Bullock did not take issue with the majority’s determination that the misconduct was reprehensible compared to other cases, and there are no comparable penalties or cases on point. Continue reading “California Court: Excessive Punitive Damages are Fine if You’re Wealthy Enough”