BMW v. Gore:
Te n Ye a r s
BY ROBERT L. MCFARLAND
his term, the United States Supreme Court re-enters the punitive damages fray
in yet another case involving a headline-grabbing punitive verdict. In Philip
Morris USA v. Williams, an Oregon jury awarded $821,485 in compensatory
damages and $79,500,000 in punitive damages. The punitive award resulted from the
cigarette manufacturer’s fraudulent conduct (misrepresenting and concealing the dan-
gers of Marlboros). The Court granted certiorari to determine whether the punitive
award exceeds the constitutional limit it recognized ten years ago in BMW of North
America v. Gore.1
Many are hoping that the Court will use this opportunity to clarify its punitive dam-
ages jurisprudence. If oral arguments in the case are any indication, we should not hold
our breath. In his questioning of Philip Morris’s counsel, Justice Breyer worried that the
Court was “in a kind of bog of mixtures of constitutional law, unclear Oregon
state law, not certain exactly what was meant by whom in the context of the
trial, et cetera.” 2 Although they remained silent, Justices Ginsberg, Scalia
and Thomas, who have consistently referred to the Court’s punitive dam-
ages jurisprudence as unwarranted and unworkable, had every right to say
“we told you so.”
This article wades through the punitive damages bog, starting with a sum-
mary of the constitutional test announced in Gore.
126 MARCH 2007
… “g ro s s l y e xce s s ive” p u n i t ive aw a rd s v i o l a te t h e
Due Process Clause of the Fourteenth Amendment.
The Gore Guideposts Criticism of Gore
Punitive damages are deeply rooted in common law and for The Gore guideposts, much like the infamous three-pronged
more than 100 years the Supreme Court refused to interfere Lemon test5, possess the deceptive appearance of utility. It is easy
with state determinations regarding the availability and amount to memorize the three factors, but difficult to know what they
of punitive awards. A little over ten years ago, the Court depart- mean. In his dissent to Gore, Justice Scalia, joined by Justice
ed from this historic deference. In BMW of America v. Gore, the Thomas, noted “[o]f course it will not be easy for the States to
Court held that “grossly excessive” punitive awards violate the comply with this new federal law of damages, no matter how
Due Process Clause of the Fourteenth Amendment.3 Now, every willing they are to do so. In truth, the ‘guideposts’ mark a road
punitive award is subject to a constitutional “federal excessive- to nowhere; they provide no real guidance at all.” 6 In her dis-
ness inquiry.” The federal remittitur review of punitive awards sent, Justice Ginsberg, joined by Chief Justice Rehnquist, also
begins with identification of a state’s legitimate interests. Two criticized the ambiguity of the guideposts: “[The majority] only
state interests approved by the Court are punishment of miscon- has a vague concept of substantive due process, a ‘raised eye-
duct and deterrence of future misconduct. Punitive awards are brow’ test, as its ultimate guide.”7
grossly excessive when they are not reasonably related to these Gore has generated many difficult questions. The most obvious
legitimate state interests. question relates to the second guidepost: What ratio between
Gore held that due process regulates “the severity of the penalty actual harm and the punitive award is acceptable? The Court has
that a State may impose.” The Court announced three now famil- consistently refused to adopt a specific ratio. Instead, courts must
iar guideposts to determine when punitive awards are too big: (1) evaluate punitive awards by applying a vague reasonableness
the degree of reprehensibility of the defendant’s conduct; (2) the standard. “In most cases,” the majority explained, “the ratio will
ratio between the actual harm and the punitive award; and (3) a be within a constitutionally acceptable range, and remittitur will
comparison of civil or criminal penalties for comparable miscon- not be justified on this basis. When the ratio is a breathtaking
duct.4 Courts must apply these guideposts to determine whether 500 to 1, however, the award must surely ‘raise a suspicious judi-
the punitive award exceeds the due process limit. cial eyebrow.’” 8 Perhaps recognizing that this judicial eyebrow
T H E A L A B A M A L AW Y E R 127
test lacked clarity, the Court in State Farm v. Campbell suggested, Gore Revised?
but did not hold, that punitive damages should normally fall
Despite Gore’s explicit approval of consideration of “likely”
within a single-digit ratio to the actual harm.9
harm, the Court took a significant step back in State Farm v.
Even if the proper ratio were ascertainable, litigants and
Campbell.14 There the Court struck down a punitive award
reviewing state courts face an even more difficult question: To
because the jury “awarded punitive damages to punish and deter
what harm should the punitive damages be compared? The Gore
conduct that bore no relation to the [Plaintiffs’] harm. . . . Due
majority initially explains that the punitive award must bear rea-
Process does not permit courts, in the calculation of punitive
sonable “ratio to the actual harm inflicted on the plaintiff.”10
damages, to adjudicate the merits of other parties’ hypothetical
This suggests a simple comparison of the compensatory dam-
claims against a defendant in the context of reprehensibility
ages to the punitive award. Of course it is not that simple. Just
analysis.”15 This reasoning narrows the most important variable
two years prior to its decision in Gore, the Court approved a
in the Court’s ratio analysis–the scope of relevant harm. After
punitive award of $10,000,000 where the compensatory damages
Gore it appeared that states were permitted to consider harm to
were only $19,000; a ratio of 521 to 1.11 In light of that case, the
others in the state when examining the propriety of the punitive
Gore majority explained that it is appropriate to consider “harm
award. Campbell narrows Gore by requiring courts to compare
likely to result from the defendant’s conduct as well as the harm
the punitive award “to the amount of harm to the plaintiff and
that actually has occurred.”12
to the general damages recovered.”16
Comparing proven compensatory damages to punitive dam-
Applying Campbell literally, courts are limited to comparison
ages is obviously much easier than comparing what future harm
of the punitive award to the plaintiff ’s general damages. If the
might occur to punitive damages. Juries make no factual find-
punitive award is more than nine times the damages then the
ings regarding future harm. Without such findings, how is a
court should remit unless “a particularly egregious act has
reviewing court to determine the scope of likely harm?
resulted in only a small amount of economic damages.”17
And what about harms unrelated to plaintiff ’s compensatory
While such analysis simplifies the math (and results in lower
award? Are state courts prohibited from considering the effects
punitive awards) it complicated the relationship between the
of defendant’s wrongful conduct on citizens not before the court
Supreme Court and the states by ignoring the legitimate purpos-
in setting the amount of the punitive award? Gore explains that
es of punitive awards. The Court has repeatedly acknowledged
a punitive award should reflect “the enormity of [the] offense.”13
that states are legitimately interested in punishing wrongful con-
At first, many assumed that states could continue to assess the
duct. Why must a state ignore the impact of defendant’s mali-
enormity of defendant’s offense by considering the effect of
cious conduct on citizens beyond the particular plaintiff in the
defendant’s conduct on others within the state’s borders. It now
case? An individual plaintiff ’s compensatory damages are not
appears that this assumption was incorrect.
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128 MARCH 2007
based on the scope of the defendant’s wrongful conduct. Instead, Endnotes
damages are based on the plaintiff ’s rightful position. How can a 1. 517 U.S. 559 (1996).
state effectively punish a defendant for the defendant’s wrong if
2. Transcript of Oral Argument at 19, Morris, available at 2006 WL 3085628 *19.
the state is constrained to the plaintiff ’s proof of actual damages?
3. 517 U.S. at 568.
Is the defendant’s financial position irrelevant because his wealth
4. See id. at 574-85.
is unrelated to plaintiff ’s compensatory damages? Can a state
effectively deter wrongful conduct without considering defen- 5. See Lemon v. Kurtzman, 403 U.S. 602 (1971).
dant’s wealth? These questions remain unanswered. 6. Id. at 605 (Scalia, J., dissenting).
7. Id. at 613 (Ginsberg, J., dissenting).
8. 517 U.S. at 583.
9. 538 U.S. 408, 425 (2003).
After Campbell one thing is clear–the Court has significantly
10. 517 U.S. at 580.
restricted state power to punish and deter malicious conduct.
11. See TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443 (1993).
The severity of this restriction may be revealed in the Court’s
12. 517 U.S. at 582 (citation omitted).
decision in Philip Morris. One of the issues before the Court is
whether the Oregon courts erred by permitting the jury to con- 13. Id. at 575.
sider harm to others. The Oregon Supreme Court determined 14. 538 U.S. 408.
that a 97-to-1 ratio of punitive damages to general damages in 15. 538 U.S. at 422.
that case was warranted, in part, because the defendant “used 16. Id. at 426.
fraudulent means to continue a highly profitable business know- 17. Id. at 425.
ing that, as a result, it would cause death and injury to large 18. Williams v. Philip Morris Inc., 92 P.2d 126, 143 (Or. 2004).
numbers of Oregonians.”18 If the Supreme Court strikes down
the punitive award and instructs Oregon courts to turn a blind
eye to statewide scope of the cigarette manufacturer’s wrongs we
should all raise our eyebrows. Such a holding removes impor- Robert L. McFarland
tant powers from the hands of state courts and marks a signifi- Robert L. McFarland is an assistant professor of law and director of advocacy
cant and dangerous shift in the traditional federal respect for Programs at Faulkner University, Thomas Goode Jones School of Law, in
state common law. What’s next? “Federal excessiveness” review Montgomery.
of state compensatory awards? ■
Otis Stewart, Jr.
Certified Public Accountant
Licensed in Alabama and Mississippi
Alabama License #8935, Mississippi License #R3212
Former Vice Chairman, Alabama Real Estate Appraisers Board
Licensed Real Estate Appraiser
B.S. Murray State University, M.B.A. Rutgers University
Adjunct Professor, University of Montevallo
Phone 205/980-9777 Fax 205/981-1889
The Stewart Group, LLC
T H E A L A B A M A L AW Y E R 129