Judicial Review of Punitive Damages

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					   Procedural Due Process – review pursuant to the 14th amendment to
    ensure appropriate procedural safeguards
     o Jury instructions must have sufficient guidance and there must be some sort
       of post verdict judicial review

   Substantive Due Process – review for excessiveness
     o BMW v. Gore’s three guideposts for determining whether punitive damages
       are excessive under the 14 th amendment:
         • Reprehensibility of D
         • Ratio of punitives damages to likely/actual harm caused by D
         • Other civil/criminal penalties available for D’s conduct
   State Farm majority held that the 1st Gore guidepost (D’s
    reprehensibility) was the most important indicium of whether punitive
    damages are reasonable.
       What are indicia of reprehensibility?

       How does the Court believe State Farm fared under these indicia? Do
        you agree?

     What role does the out-of-state conduct or dissimilar conduct play in
      the Court’s decision that punitive damages are excessive? Do you
   Regarding Gore’s 2nd guidepost – what presumption regarding the ratio
    between punitive and compensatory damages does the Court

          When is this Court likely to see deviation from single digit multipliers as

          Is D’s wealth a legitimate consideration?

   What is the relevance of the 3 rd guidepost – other fines/penalties?
       P’s husband died of lung cancer after smoking. P sued D for fraud claiming D
        had known for 40 years that cigarettes caused cancer but concealed
        information from the public and/or lied about it (decedent relied on those lies to
        continue smoking). Jury awarded $525,000 in compensatories (after
        remittance) and $79.5 million in punitives. Oregon SCT upheld award after
        applying Gore’s guideposts. D challenged the lower court’s jury instructions.

       P’s attorney told jury to “think about how many other Jesse Williams in the last
        40 years in the State of Oregon there have been….”
        Jury instruction: “Punitive damages are awarded against a D to punish misconduct and
         to deter misconduct” and “are not intended to compensate P or anyone else for
         damages caused by the D’s conduct.”

        State court rejected D’s request for a different instruction telling jury they could
         consider harm suffered by others in determining relationship of D’s conduct to P’s harm
         BUT that it could not punish D for the impact of its alleged misconduct on other persons
         who may bring lawsuits of their own
   Why does the SCT reverse the award – i.e., what does the jury
    instruction allow the jury to do?

   Is this a procedural due process (lack of adequate safeguards)
    problem or a substantive due process (direct review of excessiveness)

   After Williams, can juries still take into account the harm D has
    caused to other people D in determining the reprehensibility of D’s
    conduct (Gore guidepost #1)?

   What must lower courts do to ensure that juries seek “simply to
    determine reprehensibility ” but not “punish for harm caused
     o   http://www.courts.mo.gov/file.jsp?id=7659
   General Rule: No punitive damages for breach of contract unless there
    is an independent tort in the contract setting that can be the basis of
    the punitive damages award.

   WHY this general hostility to punitive damages in breach of contract?
     o Tradition – forms of action are separate
     o Hostility to punitive damages – courts don’t want to extend beyond torts
       and “open the floodgates” of litigation
     o Deterrent effect on entering contracts could be too significant
   Fraud
     o   Examples – Formosa, Haslip, State Farm, Gore

   Conversion (theft)
     o   Haslip (alternative theory)

   Bad-Faith Breach (insurance only?)
     o   State Farm – excellent example

   Tortious Interference with contract/business relations
     o   Courts usually require that D’s breach of contract w/ P have the purpose of
         interfering w/ P’s other relationships – NOT enough that D knew could hurt other

   Gross Negligence (?)
     o Usually not a basis for punitives in breach of contract UNLESS there is some physical
       harm to person or property other than that under the contract
     o Ordinary negligence is never the basis for punitives (contract or not)
   Formosa invited Presidio to bid on a construction project for concrete foundations. Sent a
    bid package w/ representations re each parties’ obligations on (1) ordering & delivery of
    material, (2) work schedule, (3) beginning/end dates.
     o Presidio relied on these representations to enter a bid, which was accepted.
     o Job was substantially delayed, ended up costing far more than estimated.
     o Presidio discovered that Formosa intentionally lied about the bid package & ran a scheme
         to induce contractors to make low bids & then stay in the game even after the Formosa
         breached its obligations
     o Jury found fraud and awarded punitive damages. Texas SCT upheld despite Formosa’s
         argument that this was merely breach of K. Fraud was an independent tort.

   Doesn’t most of Presidio’s damage come from breach of contract? What is it about
    fraudulent inducement that makes us so willing to award punitives?

   What if D intentionally began scheduling deliveries or multiple workmen after the project
    began? Is that fraud or just intentional breach? Is timing everything on these sorts of
    claims for punitive damages? Why?

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